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
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
PS4: Community Health, Safety and Security is not applicable given both the brownfield and greenfield developments are both located in areas zoned for light industrial use and no impacts on communities are envisaged. PS 5: Land Acquisition and Involuntary Resettlement does not apply as the brownfield plant is located on a site previously used as bakery and is being rented from the owner. In respect of the greenfield plant this will be located on land allocated to the Technological Industrial Development Zone acquired and zoned as such by the Government in 2003; thus PS5 does equally not apply to this site. PS 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources is not applicable given the location of the brownfield site on an established site and the Zone is being established on an area previously used for agriculture. PS 7: Indigenous Peoples does not apply as there are no such individuals classified in the project vicinity and PS 8: Cultural Heritage also does also not apply given the historical use of both sites. However as per the local requirements, KSS will develop and implement a chance find protocol to be applied to the greenfield development and this will be included in the Environmental Management Plan for the construction phase as outlined below.

The project has been classified as category B according to IFC’s Environmental and Social Review Procedure. Such projects are defined as those which have business activities with potential limited adverse environmental or social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures.
Based on a review of available project information, key project related environmental health and safety (EHS) aspects were identified as being related to structural design of facilities, management of EHS risks and impacts including contractor EHS management during construction, labor and working conditions including Occupational Health and Safety (OHS) during construction and operations, life and fire safety, resource efficiency and waste management practices during operational phases.

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.

Policy

KSS’s overarching corporate HSE policy is based on ISO14001, a certifiable environmental management system, and emphasizes the importance of product development and processes which protect the health and safety or workers, conserve resources and energy and prevents pollution. This allied to KSS’s Code of Basic Working Conditions commits the company to protecting the environment and striving to operate its facilities in a manner that is environmentally responsible and adheres to local regulations. These policies apply to all company operations and will equally apply to the new investments.

Identification of Risks and Impacts

KSS’s identification of risks and impacts is directed by the requirements of local law and by the HSE policy referenced above. The company commits that similar processes will be applied for construction and operation of both the greenfield and brownfield operations in Kichevo.

The municipality of Kichevo retained a local environmental consulting firm (Dekons-Ema) to undertake an environmental and social impact (ESIA) assessment, termed locally the “Strategic Grading of Environmental Impacts” for the Technological Industrial Development Zone. This document provides guidance to businesses which will be built and operated in the Zone. It defines standards and design to be applied to structures, landscaping, liquid and solid waste management, emissions to air and water, noise control, fuel storage and usage of ground water. The document also addresses the high seismic risk of the area and requires the buildings to be designed according to related local building code. It also requires the businesses to follow local legal chance find procedures during the construction periods and such a procedure will be included in the Environmental Management Plan (EMP) referenced below. All businesses including the KSS greenfield development to constructed and operated in this Zone will need to align with these specifications. In respect of the local regulations, no ESIA was required for the brownfield development and given the facility’s location, an assessment independent of the local requirement is not considered necessary.

Management Programs

KSS is certified against ISO/TS 16949:2009, a quality management system which defines the standards to be applied to design, development and production and, when relevant, installation and service of automotive related products. At the corporate level, KSS’s approach to HSE management is underpinned by the KSS Code of Working Conditions issued in 2011 and the HSE Policy statement. The management teams at production sites are expected to implement and ensure compliance to these documents.

KSS Arad facility in Romania is certified against ISO 14001 in 2011 related HSE implementation procedures have been developed and include that related to legal and other requirements and compliance evaluation records; emergency preparedness and response; monitoring and measurement; health and safety ris
k assessments; environmental aspect and impact determination and evaluation of impacts procedure; and hazard determination and risk assessment. Procedures and instructions are communicated to personnel and appropriate training is provided. The company commits to replicate the same procedures in the KSS Kichevo operations i.e., both at the brownfield and greenfield plants. In addition and as defined in the ESAP, KSS will ensure the EHS management systems implemented at the facilities in Macedonia are aligned with the requirements of ISO 14001, OHSAS 18001 and the requirements of this Performance Standard.

KSS Arad in Romania is aligned with the KAIZEN system which provides continuous improvement in quality, technology, process, company culture, productivity, safety and leadership. The plant is annually assessed with this program and the results are available to all staff through the noticeboard. A similar approach will be applied to the facilities in Macedonia.

Organizational Capacity and Competency

KSS has an EHS Department at the corporate level with a dedicated manager. At KSS Arad the Quality Manager is responsible for EHS management together with an EHS coordinator. The management at the new plants in Kichevo will be sourced from KSS Arad in Romania. The visit to the KSS Arad plant indicated that the facility is operated in accordance with the global best practices for such operations which will be replicated in Kichevo. In respect of EHS management the KSS Arad plant demonstrated effective implementation and enforcement of the associated procedures including that related to housekeeping within production areas; appropriate signage throughout the facility (e.g. for hazards); procedural information available at point of use (e.g. next to the machine for which the procedure applies); appropriate segregation of waste streams and no observed violations of EHS requirements with plant level monitoring data being readily available for review.

KSS has already assigned a plant manager for the brownfield and greenfield plants, including the construction of the latter. As per the ESAP, KSS will ensure that the corporate level EHS policy and associated management system is implemented at both the KSS Kichevo sites in Macedonia, and incorporates reference to IFC’s Performance Standards and the applicable World Bank Group EHS Guidelines. Considering the immediate need of overseeing both sites in Kichovo, as per the ESAP KSS will be required to appoint an EHS coordinator at each plant and ensure sufficient support for the associated function to be adequately addressed.

Monitoring and Review

Regular monitoring of EHS issues at KSS Arad related to the workplace environment, incidents, solid and liquid waste management and liquid effluent; this is undertaken under the responsibility of Quality Manager and EHS coordinator. This information is reported to the related government agencies as per the related local regulations. KSS Arad also benefits from a
n annual external EHS audit by an independent company. A similar approach to that outlined above will be applied to KSS Kichevo operations and KSS will be required to report to IFC annually on the environmental performance of the operations via an Annual Monitoring Report.

Emergency Preparedness and Response

As was observed at KSS Arad, site specific emergency preparedness and response systems are developed as part of management system components for ISO 14001 certification, together with local regulatory requirements. Emergency response plan and related procedures were posted in operational areas for ease of reference and appropriate fire control infrastructure (sprinklers, hand held extinguishers). Periodic test drills are undertaken and continues employee training is provided. As per the ESAP, KSS will be required to develop and implement similar emergency preparedness and response programs for the two new developments.

KSS employs around 9,500 employees internationally. At the time of the appraisal, the brownfield plant was under establishment and had no active office. This plant is expected to employ 100 workers when operation starts at the end of January 2015, while 200 workers will be employed when the operation reaches to full capacity. These workers will transition to the greenfield development once operational.

At the greenfield plant the numbers of workers during construction is still to be confirmed though it is expected to be a relatively large number. During the operational phase is anticipated to be approximately 1,000 in total. In general, usage of third party / contract labor in KSS’s routine production operations is typically limited with a few people for logistic services. That said, during periods of high demand the number of short term contract laborers can increase.

The workforce for construction and operation phases will be recruited locally, including local subcontractors.

Human Resources Policies and Procedures

At a corporate level KSS has an established Code of Basic Working Conditions and has devolved responsibility for human resource management to the production site level. As observed at KSS Arad, all HR policy related relevant procedures have been developed and employees are provided with documented information about their employment including key terms, their rights, benefits and grievance channels. A similar approach will be taken at the KSS Kichevo operations and as defined in the ESAP, the company will be required to submit its HR documentation to IFC to confirm alignment with this Performance Standard; the latter will similarly apply to those requirements related to contract labor employed during operations.

Workers’ Organizations and Collective Bargaining

In accordance with it’s the Code of Basic Working Conditions KSS recognizes and respects employee rights to join a lawful organization of their own choosing and is committed to comply with the laws pertaining to freedom of association, privacy and collective bargaining. Further, in Macedonia workers are allowed to join unions or not as they may propose.

Non-Discrimination and Equal Opportunity

The Code of Basic Working Conditions has a clear policy statement on non-tolerance of verbal, non-verbal, or physical acts which have the purpose or effect of harassing or discriminating against individuals or groups based on gender, race, national origin, sexual orientation, age, religion, disability, or other protected group status. This policy is applied in all phases of the employment relationship and interpreted consistently with local laws prohibiting harassment and discrimination in the workplace.

In terms of job opportunities for women, it is observed at KSS Arad that the gender balance was approximately equal. However, at KSS Kichevo, more women are expected to be employed.

Retrenchment

For the production site where IFC finance will be deployed, there will be new recr
uitment and there will be no retrenchment at the operations in KSS Romania and Mexico as the areas to be made available at these two sites will be utilized for the production of airbags.

Grievance Mechanism

At a corporate level a workplace grievance policy has been developed which is in compliance with IFC PS2 requirements. As per the requirements of related ISO and the collective bargaining agreement, KSS Arad has a work place grievance mechanism.

Child Labor and Forced Labor

KSS’s Code of Basic Working Relations commits to not using child and forced labor in any of its global facilities. Although the Code identifies the term child as any person being under the age of 15, KSS Arad does not employ individuals below the age of 18 years. However, since the Macedonian local legal regulations allows children between the ages of 15 – 17 years to be employed, KSS will be required to review and retain copies of verifiable documentation concerning the age and employment profile of all people under the age of 18 working in the KSS Kichevo plants. In addition and as defined in the ESAP, KSS will develop and implement a risk assessment and monitoring procedure of health, working conditions and hours of work for such workers to ensure that they are allowed to work a maximum of 40 hours per week subject to the work being age appropriate, i.e. nonhazardous works, as per the requirements of IFC’s PS2 KSS will also be required to integrate these procedures into its OHS management procedures.

Occupational Health and Safety

Direct observation of occupational health and safety at KSS Arad production facility visited demonstrated effective implementation of associated principles, with clear signage and instruction (including risk assessments and material safety data sheets), provision of adequate infrastructure to safeguard worker health (e.g., local exhaust ventilation, automated illumination, static electricity ground mat, machinery equipped with high sensitivity photo-electronic safety devices and emergency push buttons), provision of appropriate personal protective equipment to the workforce and visitors. As per the local legal regulations, workplace noise and air quality were monitored by related government authorities and workers have periodic eye and ear checks. The medical check and travel insurance services for the workers are provided by a contracted health service company.

At KSS Arad the EHS coordinator is responsible for OHS related matters. A committee in which the EHS coordinator is a member and the workers are represented monitors the OHS related matters. KSS Arad management stated that there have been no fatalities or serious injuries, nor any claims for industrial disease or injury. The previous year’s Lost Time Incident Frequency Rate is 0 at this facility.

As per the ESAP KSS develop and implement similar OHS systems at the KSS Kichevo facilities similar to that at KSS Arad and aligned with the requirements of this Performance Standar
d including the development and implementation of appropriate procedures for contractor OHS performance management and monitoring.

Workers Engaged by Third Parties

For the greenfield production site in Kichevo there is a contractual requirement for the construction contractor to comply with the local legal requirements including that related to OHS; these are considered aligned with the Performance Standard requirements. In addition, KSS will include in the EMP referenced below a procedure for monitoring contractor compliance with the contractual requirements. As noted above, the approach to contract labor during operations will be aligned with this Performance Standard.

Supply Chain

The main suppliers of materials for airbag cushion production are US and China based. KSS has a supplier audit procedure publicly available at its website and it includes verification of employment terms and working conditions focusing on housekeeping (offices, plant, labs warehouse, outside building, yard trailers), OHS (such as safety, health and environment, enough light for visual checks, noise inspection in quiet areas), job descriptions for all positions, required skill levels identified and comprehensive training program for employees by job classification. As defined in the ESAP, KSS will be required to ensure that a similar approach is applied to the primary suppliers within the supply chain for the operations in Macedonia.

KSS will manage environmental impacts during the construction and operation phases of the plants in Kichevo as per its new established environment, health and safety management system to be established.

Resource Conservation

KSS Kichevo operations will have only one business line which is airbag cushion production composed of mainly material cutting and sewing processes. This operation will not include any raw material manufacturing. Therefore, the energy and water usage of the KSS plants in Macedonia will be limited. In addition, according to the provisions of Strategic Grading of the Environmental Impact prepared for Technological Industrial Development Zone, each plant in the Zone needs to be equipped with solar power for water heating purposes.

Construction Risks and Management

Pollution risks will occur during construction of greenfield plant. Construction activities are typically civil works, involving site clearance, excavation and earthmoving, quarrying, concrete batching, concreting and structure/building erection. Pollution risks associated with these activities included noise, dust, erosion and sedimentation, water quality decline, waste disposal and spoil disposal. As defined in the ESAP, KSS must ensure on its own or assign responsibility to the construction company for environmental protection, safe working conditions and overall adherence and compliance to all regulatory and legal requirements concerning the performance of the construction work.

Energy Usage

The electricity needs for both the brown field and greenfield plants will be provided by the municipality.

Potable Water

Potable water to each plant in Kichevo, i.e. both brownfield and greenfield will be provided from the city water network.

Greenhouse Gas Emissions

Since the design specifications of both brownfield and greenfield plants are not complete, it is not feasible to calculate metric tonnage of CO2 emissions at this stage. However, as was observed at KSS Arad, records of use of electricity and natural gas are reported to related government authorities for the purpose of monitoring CO2 emissions produced by the plant.

As per the ESAP, KSS will be required to quantify CO2 generated though given the nature of the operations it is unlikely such emissions will exceed 25,000mtpa CO2e.

Pollution Prevention

At the KSS Arad site visited in Romania, pollution prevention measures are primarily driven by the requirements of local law. Limited water is used in production or testing and the majority of wastewater produced is domestic/sanitary in nature and discharged to municipal systems. Initiatives to reduce solid waste, increase the degree of recycling (e.g. of transportation packaging – the major component of solid waste) and appropriately store, contain, label and monitor other raw materials and wastes were evident.

As production is dominated by assembly processes rather than primary manufacturing, the volume of pollutants produced is expected to be low. Wa
stewater which will be domestic/sanitary in nature will be discharged from the brownfield plant directly to the municipal sewage system, whereas at the greenfield plant this will be discharged to the Treska River following treatment at a plant to be constructed and managed by the Technological Industrial Development Zone.

Given the nature of operations there are no hazardous materials required on site in any quantity other than small amounts of grease, oils and paints used in day to day maintenance operations.

The brownfield site has a storm water collection system which discharges directly to municipality sewage system. According to the strategic grading of environmental impacts report, the greenfield site will have a similar collection system discharging to the Treska River.

Stakeholder Engagement / External Communications and Grievance Mechanism
Both sites in Kichevo are not located in populated area and have good access to nearly highways. The KSS Code of Basic Working Conditions includes a section on community relations, stating: “We make every effort to be a good corporate citizen in each of the communities where our facilities are located and encourage our employees to do likewise”. Procedures for external communication and grievance mechanism are integrated into the EHS management system at KSS Arad. KSS Arad management stated that there have been no grievances raised by communities in relation to KSS operations in Romania since its establishment four and a half years previously. As per the ESAP and while noting that there are communities located in the broader environment in which the company will operate in Macedonia, KSS will develop and implement a grievance mechanisms for both new facilities. The KSS Arad plant use unarmed security staff and this will equally apply at the new operations.
As with other areas described in this document, responsibility for stakeholder engagement is devolved to the production site level and each facility will develop and implement a grievance mechanism.

This Environmental and Social Review Summary document and companion will be disclosed at the administration offices of the KSS Kichevo brownfield plant in Macedonia, at the following address:Key Safety Systems Macedonia Dooel Magistralen pat bb Kichevo
Macedonia
Contact: Mr. Bogdan PetrutaPlant Manager
98 Orce Nikolov Street
Skopje / Macedonia
Phone: +389 45 273 900
Mobile: +40 720 444 893 / +389 71  313 514
Fax:      +389 45 273 967
E-mail: mailto:petrutb@keysafetyinc.com
Web: http://www.keysafetyinc.com

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
1a) For brownfield development: Develop and implement an Environmental, Health and Safety system aligned with the KSS, corporate system, KSS Arad and the requirements of ISO 14001, OHSAS 18001 and IFC’s Performance Standard. These systems are to include: i) emergency preparedness and response programs similar to the ones implemented in KSS Arad in Romania; and ii) a grievance mechanism;	03/31/2015
1b) For greenfield development: Develop and implement an Environmental, Health and Safety system aligned with the KSS, corporate system, KSS Arad and the requirements of ISO 14001, OHSAS 18001 and IFC’s Performance Standard. These systems are to include: i) emergency preparedness and response programs similar to the ones implemented in KSS Arad in Romania; and ii) a grievance mechanism;	03/31/2016
2a) For brownfield development: Appointed an experienced EHS coordinator at brownfield facility in Macedonia and ensure sufficient internal capacity and support to such co-coordinators so as to be able to fulfil their functions effectively.	03/31/2015
2b) For greenfield development: Appointed an experienced, EHS coordinator at greenfield facility in Macedonia and ensure sufficient internal capacity and support to such co-coordinators so as to be able to fulfil their functions effectively.	03/31/2016
3a) For broenfield development: Develop and implement human resource documentation aligned with the Code of Basic Working Conditions and the requirements of Performance Standard 2: Labor and Working Conditions; the latter applies similarly to contract labor employed during operations.	03/31/2015
3b) For greenfield development: Develop and implement human resource documentation aligned with the Code of Basic Working Conditions and the requirements of Performance Standard 2: Labor and Working Conditions; the latter applies similarly to contract labor employed during operations.	03/31/2016
4) Develop and implement a risk assessment and monitoring procedure of health, working conditions and hours of work for the workers between the ages 15-18 years to ensure that they are only allowed to work maximum of 40 hours per week subject to the work being age appropriate, i.e. nonhazardous works as per the requirements of Performance Standard 2: Labor and Working Conditions.	03/31/2015
5) Develop and implement appropriate procedures to ensure alignment of contractor occupational health and safety (OHS) performance management and monitoring with the requirements of Performance Standard 2.	03/31/2015
6) Apply the corporate level KSS OHS management and supply chain audit procedures to primary suppliers within the KSS global supply chain. KSS will continuously apply high levels of ethical standards and conduct new audits of its supply chain from time to time.	03/31/2015
7) KSS must ensure on its own or assign responsibility to the construction company for environmental protection, safe working conditions and overall adherence and compliance to all regulatory and legal requirements concerning the performance of the construction work.	03/31/2015