While all Performance Standards are applicable to this investment, IFCs environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

The nature of RG Brands’ operations includes manufacturing of UHT milk, soft drinks, juices, potato chips and tea bags for which there are effective mitigation measures for the potential environmental and social (E&S) impacts. Based on site visits to the plants in Kazakhstan, a review of documentation and discussions with the plants’ management, this project will have limited environmental and social impacts and these are mainly site specific, largely preventable and/or reversible, and can be addressed through the implementation of specific mitigation measures. Thus the project is categorized as B according to the IFC’s Environmental and Social Review Procedure.

PS5: Land Acquisition and Involuntary Resettlement is not applicable as RG Brands’ premises in Kostanay and in and around Almaty are located in an industrial area, and has been in operation for many years; the premises around Almaty are located on a specially designated land, where there were no previous owners. The plant in Aksengir was built on the land, which belongs to the company, and the area is capable to host the possible extension of production into UHT milk production and transfer of the current tea bags and potato chips production located respectively in Almaty and near Almaty. Since all facilities are in industrial areas, PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources are also not applicable. PS7: Indigenous Peoples does not apply as no impacts on such individuals or groups are expected, and PS8: Cultural Heritage is not expected to apply as there are no known cultural heritage sites associated with the existing premises.

The potential environmental, social, occupational health and safety risks associated with this project relate to: environmental assessment and management in line with Kazakhstan law and IFC requirements; food hygiene and safety procedures, including Hazard Assessment and Critical Control Point (HACCP) Principles; management of labor and working conditions, including occupational health and safety measures; resource (water and energy) efficiency; monitoring and reduction of green-house gases (GHG) emissions; waste and effluents management and monitoring; design and construction of new facilities in accordance with internationally recognized building standards, including those related to life and fire safety; management of supply chain; life and fire safety in production areas and warehouses; contractor''s management; and operation of the trucking fleet.
RG Brands has presented plans to address these potential environmental and social impacts to ensure that upon the implementation of the specific agreed mitigation measures, the Project is expected to be in line with the applicable Kazakhstan laws and regulations, IFC’s Performance Standards and World Bank Group (WBG) general and sector-specific (Food and Beverage, Dairy) Environmental, Health and Safety (EHS) Guidelines. Information on how these potential impacts are addressed is contained in the following paragraphs and in the attached Environmental and Social Action Plan (ESAP).

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

Environmental and Social Assessment and Identification of Risks and Impacts: To identify risks and impacts associated with its operations and develop measures to manage those, RG Brands contracted a third party to perform environmental impact assessment (EIA) of its operations in all four plants. The assessments are also a legal requirement under the Kazakh law and, as such, shall be renewed every 5 years or in case if there are any changes in operation, which might cause a change in impact. RG Brands regularly updates the EIA, as required. All facilities have successfully obtained required certificates, permits and licenses. Copies of these have been reviewed during the due diligence. Japanese 5S concept (sorting, straightening, systematic cleaning, standardizing and sustaining) is applied at all sites and regularly audited and monitored by heads of production. In case the construction of new premises to host new milk processing and tea and chips production lines is implemented, RG Brands will make sure the design and construction of the premises is done in accordance with internationally recognized building standards, including those related to life and fire safety and in line with the Kazakhstan building codes.



Organizational Capacity and Competency: RG Brands has a person appointed to be responsible for occupational health and safety and environmental and social matters at the corporate level. This is the OHS and E&S officer reporting to the Technical Director, who is in the Manufacturing Department, which in turn reports to the Chief Operations Officer. The OHS and E&S officer works in close cooperation with the similar officers appointed in each of RG Brands’ four plants and supervises their work. All officers have been sufficiently trained to perform their duties. RG Brands will make sure the chief OHS and E&S officer is to report and have access directly to Chief Executive Officer. The corresponding change in the organizational structure is part of the ESAP.



Management Programs: In its operations the company is guided by national law of Kazakhstan in the area of environmental, social, occupational health and safety, labor code of Kazakhstan and voluntary certifications. Certifications are done separately for each of its four plants. The Kosmis plant in Kostanay holds certifications with ISO 9001, a quality management system, and ISO 22000, an international standard specifying the requirements for a food safety management system, which integrates the principles of the Hazard Analysis and Critical Control Point (HACCP) system, a system aimed at prevention of biological, chemical and physical hazards in production processes to ensure safety of the finished products, and application steps developed by the Codex Alimentarious Commission, the World Trade Organization body responsible for setting food safety. The Aksengir plant near Almaty in addition to the two above certifications have passed the certification audit for OHSAS 18001, an
internationally-recognized standard for occupational health and safety management systems. Tea Land and Almaty Snack Food are not officially certified with any of the standards; however they have all the corresponding procedures developed and do maintain the practices required by the above standards as part of the company-wide strategy. RG Brands plan to relocate those two production facilities to the Aksengir facility, and have all its four production units certified with ISO 9001, ISO 22000, OHSAS 18001, as well as has plans to additionally obtain certification with ISO 14001, a standard setting up requirements for an Environmental Management System (EMS) and assisting companies in continuous improvement of their environmental performance, while complying with any applicable legislation, and ISO 50001:2001, an Energy Management System, in 2015.



Monitoring and Review, Reporting: RG Brands has a program of environmental control of production, which allows monitoring atmospheric emissions, soil contamination, and hazardous waste management. The program is set up by the results of the EIA and is required by law. The corresponding report on hazardous waste is submitted annually, and reports on atmospheric emissions and implementation of nature protection measures are submitted quarterly to the Ministry of Environmental Protection. Monitoring of environmental and OHS issues is exercised through regular measurements performed by the corresponding supervising state agencies. The results of measurements are recorded in dedicated logs and, if any corrective actions are required, those are implemented. The reports and logs were presented and reviewed during the visit. The records were found to be in line with the monitoring levels set in the EIA and by Kazakh law. The action plans are adjusted on a quarterly basis and the implementation outcomes are reported to the management. The plans and reports were reviewed during the visit and found to be of good quality. The OHS and E&S officer conducts weekly visits to the company’s facilities to supervise and monitor the work.



Emergency preparedness and response: RG Brands maintains emergency preparedness and response system, which includes trained emergency response teams, specific emergency response procedures, procedures for interaction with government authorities, emergency contacts and communication systems, and clear identification of designated meeting place.



External Communications and Grievance Mechanisms: RG Brands has established the Procedure on Complaints and Review of Nonconforming Products. According to the company, there were no complaints received through it. There are no directly affected communities as RG Brands’ plants are located in industrial zones.

Human Resources Policy and Management: RG Brands’ employs 1,821 people. RG Brands in its structure has the Department of Organizational Development and Human Resources, which deals with HR issues and covers all company facilities. The company has a uniform HR Policy, which is available to workers through the intranet. The HR Policy defines hiring and dismissal procedures, rights and responsibilities of employees and employer (including the OHS and LFS issues), working hours, overtime work, holidays and day-offs, bonuses and disciplinary measures. The HR policy and procedures are in line with the national Labor Code, which is compatible with the requirements of the International Labor Organization and this Performance Standard, and are agreed with the worker representative before approval. There is also an HR committee under the Board of Directors. The company is regularly assessed by the State Labor Inspectorate on implementation of the labor law.



Working Conditions and Terms of Engagement, Worker’s Organization: HR Policy requires all workers to have written contracts attached with the corresponding terms of reference. HR Policy defines worker rights, among others, to a safe working environment, provision for personal protective equipment (PPE) and filing complaints against the employer in case of non-observation of OHS requirements, equal and timely pay for work, implementation of conditions of labor and collective agreements, participation in development of collective agreement, association rights, including establishment and/or participation in worker organizations.



Non-Discrimination and Equal Opportunity: Provisions on non-discrimination and equal opportunity are documented in the company’s HR policy and in the Corporate Governance Code in its section on HR Policy.



Retrenchment: RG Brands does not intend any retrenchments in the near future and rather plans to hire new personnel due to growing its operations. The retrenchment procedure is well regulated by the labor legislation, and will be precisely followed by the company should retrenchments occur. Equally, in such an event the company will develop and implement a retrenchment plan aligned with the requirements of this Performance Standard.



Grievance Mechanism: Workers can address complaints to the HR Department and to managers directly. The workers are informed about the available channels for communicating their grievances at the time they are hired and inducted by the HR officer. According to legislation, the anonymous complaints are not compulsory for review and the corresponding measures to be undertaken by the company. However, RG Brands provides for the opportunity to raise anonymous complaints to workers via ‘boxes of complaints and proposals’, where workers can note such. These are periodically reviewed by the HR Department, and corresponding measures implemented where need be. All workers are made familiar with the Labor Code of Kazakhstan at the time of being
hired by the company, and informed on the ways to file official complaints under law.



Occupational Health and Safety

RG Brands provides for a safe and healthy work environment for both employees and visitors. As required by Kazakhstan law, RG Brands carries out regular assessments of occupational risks and hazards, which include assessment of chemical, biological, physical parameters, noise, vibration, radiation, lighting, air quality, workload, PPE availability and trauma hazards, and develops corresponding mitigation measures. RG Brands maintains an occupational health and safety management system in line with the OHSAS 18001 requirements. This was confirmed during the visit; however, some deficiencies were observed in the warehousing premises. RG Brands will make sure the warehousing is brought under the OHSAS 18001 system accordingly, which is a part of the ESAP. All workers are regularly trained on OHS risks and protection measures, and the corresponding training records have been reviewed and appear to be well maintained. As part of OHSAS requirements the company has developed additional trainings on safe operation of forklifts; fire safety; injury prevention; safe use of chemicals; labor legislation; and electrical safety. There is a system allowing for documentation and reporting of occupational accidents, diseases and incidents. This information is annually reported to the state statistics agency. According to the information provided by the company, there were no any lost time accidents in any of the four plants of RG Groups.



The OHS and E&S officers perform regular visits to all production areas to make sure the hazards identified are sufficiently mitigated. The company has developed an induction program and training program on occupational health and safety and safety instructions for employees, as well as a Memo for visitors and contractors on OHS and protection of environment. All workers are provided with PPE, and their use is strictly enforced. Observations during the visit conclude that the OHS system is properly applied and effective.

Workers Engaged by Third Parties. RG Group outsources some services to third parties, such as, for example, warehouse management (partially). To address potential risks RG Group has developed labor management system, which sets out requirements for managing contractors and suppliers. The general requirements are also incorporated into contractual agreements with third parties. All third party workers go through OHS and other appropriate training before they are admitted to work within the company’s area. RG Brand’s supervisors appointed exercise visual inspections over third party workers working within the company’s premises to make sure the OHS and other requirements are observed. The contracted workers, similarly to directly employed workers, have access to a grievance mechanism. Contractors associated with construction should such be required will be required to align with the com
pany''s OHS management system who will equally provide oversight to ensure compliance by the contractors.

Supply Chain. Fruit juices and carbonated beverages are manufactured from concentrates imported from European suppliers; as such there are no supply chain concerns. UHT milk is manufactured from local fresh milk supplied from large farms. RG Brands is very selective in choosing its milk suppliers and works with the largest farms in Kostanay region, which use modern technologies, such as, for example, a rotary milking parlour, which minimizes the use of workforce. The quality of milk is thoroughly checked by RG Brands’ laboratory. Since the milk suppliers are permanent and are well familiar with the company’s requirements, there are no incidents of non-compliance. Laboratory tests results were checked during the visit and all found to be sufficient. The relationships are guided by the standard operating procedures established. Potato for chips production is grown for RG Brands against orders placed to farmers. RG Brands supplies farmers with seeds and sets up all conditions. The supply chains are closely monitored.

Resource Efficiency



Water usage: In 2015 RG Brands plan to get certified under ISO 14001, and as part of this standard’s requirements the company will be operating a program for monitoring and reduction of use of natural resources, including water, energy and raw materials. Currently the water to Kosmis, Almaty Snack Food and Tea Land is supplied from the municipal water supply system; and Aksengir gets it from own wells. There are three artesian wells owned by the company: two are operational and one is a back-up. RG Brands holds a permit from the Balhash-Alakol basin inspectorate to utilize underground water from that water basin. The water is utilized for hygienic and sanitation needs, watering plants, production (steam generation, products manufacturing, washing and disinfecting equipment and premises, refilling the circulating water systems, cooking in a canteen for workers and dish washing). RG Brands utilizes circulating water systems to reduce water consumption. Water meters are installed in all facilities. Water wells are operated in accordance with the Kazakhstan laws and regulations on conservation of resources, health and safety of population, rational and comprehensive use of underground waters. To monitor underground waters RG Brands is required to perform measurements and monitoring of water level, temperature, chemical and bacteriological composition and water intake volumes. The data are reported to the authorities, which issued the water use permit.



Energy usage: GR Brands in its operations consumes electricity, gas, diesel, and gasoline. The total electricity consumption is 15,673,159 kW/h (or approximately 0.01 kW/h per liter of production, which is within industry norms and WBG EHS Guidelines), and with the project expansion it is expected to increase to 20,854,467 kW/h. The electricity is supplied from the national grid, and several back-up diesel-powered generators are available to ensure uninterrupted supply in case of power cuts. Energy saving considerations are accounted for in the company’s operations.



Cooling equipment: RG Brands has a refrigerating unit for СО2 liquefaction (55kW),KRAUS chiller for cooling the blow molding machine (53kW), ice maker (750kW); refrigerators of different kinds in the main office and the distribution network, compressors. Refrigerating agents used are R407, R134A, R404, R290 and smaller amounts of R22. No evidences of leakage of coolants were observed during the site visit. Nonetheless RG Brands will try to minimize the use of ozone-depleting refrigerants and design a gradual phase-out/substitution plan, which is a part of ESAP.



GHG: GHG emissions are estimated at the level of 50,228 tons of CO2 equivalent per year. Following the project expansion RG Brands plans to increase its energy consumption by around 10% as well as purchase additional refrigerators for the distribution network. These will result in increased GHG emissions, which will be monitored by the company. RG
Brands will devise a system to assess and monitor gross GHG emissions from all its operations, including manufacturing, transportation of goods and distribution network. This activity is part of the ESAP.



Pollution Prevention

Air Quality: RG Brands’ air emissions are assessed in details in the EIA documentation available for all its manufacturing facilities, which have been reviewed during site visit and were found compliant with the WBG EHS Guidelines. The corresponding mitigation and monitoring measures are provided therein. RG Brands follows the recommendations and, as part of those; (i) monitors emission to make sure those are within the admissible limits calculated for the facilities; (ii) monitors the work of technological equipment; (iii) uses diesel generator only as back-up sources of electricity; (iv) strictly observes technological processes; (v) uses diesel fuel, which meets certain quality parameters; (vi) regularly monitors technical conditions of air filters, ventilation and aspiration systems; and (vii) regularly waters its sites to ensure reduction of dust. These measures are accounted in company’s action plans and regularly reported internally and to the state supervisory agencies.



Waste management: Waste generated by the company includes raw materials packaging (metal containers, cardboard boxes, bags), process and other waste (PET bottles, polyethylene film, waste paper, broken wooden pallets, empty containers from paint and varnish materials, metal scrap (including electrodes), oil filters, oily rags, contaminated sawdust, used oil, vehicles batteries, used tires, cartridges and monitors, waste from a medical facility, etc.) RG Brands has contracts with specialized companies which re-use, process or treat the different types of waste accordingly. The contracts were presented for review during the visit. The waste separation at the temporary storage places for further pick-up and processing was observed at all sites. The non-recyclable waste is collected in metal containers and regularly picked up to the municipal landfill according to the agreement with the garbage pick-up company. However, during the site visit to Almaty Snack Food company improper temporary waste storage was observed – the waste was burned on site with no containment. The waste management in that facility will be improved according to the company-wide standards and in line with local regulatory requirements. This action is part of ESAP. The company does not generate any hazardous waste. Luminescent lamps are utilized in accordance with the contract (sent for demercurization), and appropriate temporary storage (metal containers with lids) are ensured on all sites.



Liquid waste: Waste waters are mainly generated from cleaning-in-place (CIP), floor and machine cleaning at all facilities, and potato cleaning in Almaty Snack Food. Process wastewaters from all four plants are discharged into municipal or centralized wastewater treatment systems that
have adequate capacity to meet local regulatory requirements for treatment of wastewater generated from the project. There are no additional filtering facilities installed. The milk production process does not result in discharge of any grease containing substances as all milk is used in processing. There are no other milk products except for UHT milk produced at the plant. Pretreatment of wastewater before discharge from the project site is not required since the municipal wastewater treatment system receiving wastewater from the project has adequate capacity to maintain regulatory compliance. The company has a permission to discharge waste waters directly to the municipal sewage system. The wastewater quality is regularly checked by state supervisory agency, and the agency’s reports presented during the visit indicate that the quality is up to the acceptable limits. RG Brands presented waste water measurements reports for all plants, and it was observed that recording was appropriate. Rain and surface run-off waters are collected in sedimentation wells, and then used for watering plants. In case if RG Brands introduces new production lines to manufacture value added milk products (for examples, yogurts), the appropriate pretreatment facilities will be designed to ensure that the process wastewater is within the admissible limits prescribed by law and as defined in the WBG EHS Guidelines; this action is included in the ESAP.



Hazardous Materials: A minimal amount of chemicals is used. Those are mainly cleaning chemicals and water treatment chemicals, which are not considered hazardous; used oils and used reagents from laboratory’s product analysis. All chemicals are stored in special storage facilities appropriately marked. RG Brands maintains Material Safety Data Sheets (MSDS) for chemicals. Those have been presented during the visit.

Possible threats to community health and safety from RG Brands’ operations may result from fire, road accidents with the company’s vehicles, and pathogens or microbial contaminants associated with processed dairy products and beverages. RG Brands’ plants are located in industrial areas far from communities; hence the possible negative impacts are minimal. The company has strict procedures to avoid potential road accidents, which include hiring only professional drivers with the corresponding driving permit (e.g. for operating track or special vehicles), testing drivers for alcohol and their health status by the company doctor before they leave the site every morning. The company ensures that vehicles are well maintained. According to the company, there were no accidents associated with its vehicles in the past.



RG Brands has a well-documented life and fire safety system, which consist of written procedures, a designated on-site fire-fighting team, and fire-fighting equipment. However the system requires stricter enforcement: during the visit many places with blocked access to fire safety equipment were observed. Especially weak is the LFS enforcement in warehouses, which are under company’s operations management. The company faces the lack of warehouse space, and, as a result, often neglects the safety measures, such as providing sufficient space between the pallets of goods stored, ensuring access to firefighting equipment, making sure the routes are not blocked, fire exits are not locked, and all staff is trained on and strictly follows warehouse procedures. RG Brands will improve LFS in warehouses operated by it through an external review by a LFS specialist of the LFS procedures as applicable to those premises, appropriate training of staff working in warehouses and ensure regular inspections of facilities by the OHS and E&S officer. The Corrective Action Plan will be prepared and submitted to IFC by the results of external review and included in the OHSAS 18001 system and the Annual Monitoring Reports for IFC. These activities are part of the ESAP.



RG Brands outsources security services from private security firms, which are licensed by state authorities to provide security services. Some guards are armed and to act in such a capacity receive permission from the Ministry of Interior which is reviewed on annual basis, Security personnel are trained to handle incidents in a professional and non-violent manner, and there have been no incidents to date. As necessary the security department acts in collaboration with the city police.

RG Brands supports people with disabilities and orphanages supplying them with the company’s produce. RG Brands provides school supplies to children from low-income families at the beginning of each academic year, and supports various kinds of sport events.

RG Brands will make the current ESRS/ESAP locally available, in Russian language, at the company’s office in Almaty, and inquiries can be addressed to: 212 b, Raimbek Ave., Almaty, Republic of Kazakhstan, 050034, Mr. Askat Agybaev, Chief Finance Officer, tel.: +7 (727) 250 69 98 (ext. 4095), +7 777 242 23 30, email: mailto:askhat.agybayev@brands.kz and Mr. Alibek Ungarbaev, Finance Director, tel.: +7 (727) 250 69 98 (ext. 4007), +7 777 002 11 89 mailto:alibek.ungarbaev@brands.kz.

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
Amend it’s organizational structure to ensure the occupational health and safety (OHS) and Environmental and Social (E&S) officer reports and has access directly to the Chief Executive Officer.	11/01/2014
Apply the existing OHSAS 18001 system at all facilities to the warehousing activities.	12/31/2014
Develop a system to assess and monitor gross GHG emissions from all its operations, including manufacturing, transportation of goods and distribution network. As part of this exercise, RG Brands will design and implement a phase out plan for ozone-depleting refrigerants against an agreed time-frame with IFC.	03/01/2015
Establish a system of regular monitoring of waste water against the parameters in line with the standards as defined by national legislation and the World Bank Group (WBG) Environmental, Health and Safety (EHS) General and sector specific Guidelines. If applicable, implement corrective actions to ensure compliance with the above mentioned standards.	12/31/2014
Incorporate waste water pretreatment into the design of the product line on any new manufacturing for value added milk products (like, for example, yogurts, or others). In doing so ensure that treated process waste waters from these lines meet the national regulatory requirements and WBG General EHS and sector specific guidelines.	12/31/2016
Temporary storage of solid waste on site of the Almaty Snack Food to be revised and improved to ensure the waste accumulation areas are properly marked; waste containers are mounted on hard standing material , covered and waste is not burned, but rather regularly removed to the landfill.	11/01/2014
Undertake an external review by a life and fire safety (LFS) specialist acceptable to IFC of the warehousing operations including the associated LFS as applicable to those premises against the requirements of the WBG EHS Guidelines. Based on the findings implement corrective action plans against an agreed time-based schedule. In addition, training of staff working in warehouse in application of the LFS procedures must be regularly undertaken and regularly inspections undertaken by the OHS and E&S officer of such facilities. To achieve this RG Brands will:	12/31/2014
Select an appropriate external LFS reviewer agreed upon by IFC and sign the contract to undertake the review against the LFS requirements for such.	12/01/2014
Undertake the LFS audit of warehousing facilities of all RG Brands’ production sites and agree with IFC on corrective actions plans where applicable.	03/01/2015