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
PSs 5-8 were not found of direct relevance to the project for the following reasons: Kaufland Bulgaria (“the company”) follows internal procedures and acquires land via willing seller/willing buyer negotiations within urban areas where there is no presence of natural and critical habitats, indigenous peoples or cultural heritage.

This investment is a Category B project according to IFC’s Environmental and Social Sustainability Policy because IFC’s review and supervision of the company’s activities indicate that the associated E&S risks and impacts are few in number, generally site-specific and readily addressable through mitigation measures.

Key E&S aspects for this new investment are essentially the same as those identified under previous projects and relate to the company’s management of ongoing environmental, health, safety and labor issues associated with the construction and operation of its stores, with particular focus on environmental assessment and planning requirements, human resources, labor conditions and occupational health and safety, management of greenhouse gas emissions arising from energy use and release of refrigerant, life and fire safety matters and supply chain. Key risks and impacts related to the operation of stores and the distribution center are addressed throughout Kaufland robust operational management system which covers environmental, human resources, occupational health and safety, life and fire safety, energy and material efficiency, waste and wastewater management matters.

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, Identification of Risks and Impacts



The company follows local regulations which stipulate conditions and procedures for E&S impact assessments (ESIAs) including a definition of projects that are subject to ESIAs. In case of Kaufland stores, local authorities typically identify that E&S impacts are limited, short-term, site specific and reversible, and made a conclusion that a formal ESIA is not needed. The company examines site conditions for allocation of a new store including availability of space for buildings and parking area, traffic and logistics conditions, and analysis of possible land contamination. If prior contamination is identified, then remediation plans are included in the store development plans if this is economic, or an alternative site is chosen, depending upon the severity of contamination.



Before construction, the company submits to local municipalities and agencies design documentation including data on water supply, wastewater and storm water management, as well as interconnection with the public road system and access to the stores and gets approvals for construction. Following Bulgarian legal requirements the company, prior to construction, notifies affected communities on investment plans and informs authorities through an official letter on enquiries and concerns received from communities, if any. Store designs are based on Kaufland standards and applicable legislative requirements. Typical designs are adapted to account site-specific conditions as well as change in regulations or engineering and technology improvements.



Environmental and Social Management



The overall operational management system incorporates environmental, health, safety and social (“EHS”) functions starting with planning process for selection of sites for the new stores and throughout the store operations. The operational system is based on the Kaufland standards and adapted to the Bulgarian legal framework, including EHS matters.



At the construction phase, EHS matters are delegated to contractors selected through tender procedures. Selection criteria secure commission of a reliable contractor in terms of quality of works and materials. Requirements for quality of construction works and materials are detailed in the comprehensive construction code. For the supervision of each construction site the company hires a qualified independent consultancy company to verify the work done by the construction contractors, and provide weekly monitoring reports to the company.



Management of EHS matters during the operation is responsibility of a maintenance department which controls over technical conditions of buildings, heating, ventilation, air conditioning refrigerating (HVAC) equipment, engineering, life and fire safety, gas-fired boilers and other systems.



Internal auditing services (i.e. Revision Department) report on non-compliances including EHS and life and fire safety to the respective hea
d of the department where non-compliance has been identified. Summarized reports are provided to the company’s senior management as well. These services are distinguished from other departments.



External Communications and Grievance Mechanism



Prior to construction the company notifies municipalities and communities about its investment plans to build a new store. Following local regulations the Company makes consolidated information about future buildings and infrastructure available for public review. Opinions and concerns, if any were received, are reported to authorities in an official letter.



Various communication channels are available for Kaufland customers during the store operation. Questions and opinions about products and services quality may be presented via website, call center, surveys or via store information/ guest desks in a written form.

Human Resources (HR) Policies and Procedures, Non-discrimination and Equal Opportunity



The company’s HR policies and extensive procedures are based on local labor laws and the Kaufland HR framework. The policies are accessible on the Intranet and the Document Management System. They are communicated to employees through training and induction (upon the appointment of new employees the latter are acquainted with the basic company documents and consequently they sign a declaration confirming the above), notice boards in stores, regular meeting and in certain cases (explaining any changes to existing policies) through written materials.



Working Conditions and Terms of Employment



The need for workforce is assessed in line with the expansion plans for new stores. Currently the company employs around 8,500 staff and about 400 new jobs will be created this year. A software SAP system is used for accounting work hours. The lowest salary established on the basis of labor market conditions is higher than the country minimum wages and those by the company local competitors in order to attract and retain high quality staff. The company enforces principles of payment for each minute worked and a proper work-life balance. The normal shift duration is 8 hours with two mandatory short breaks, the longest shift duration is 10 hours with three mandatory short breaks. Written contracts with employees refer to local labor laws in relation to common working conditions and describes duties, salary, duration of work, place of work, and compensations. Workers hired to meet demand peaks are provided with written short-term contracts documenting terms of employment.



Upon employment, employees are given induction and update safety training. After successful probation period employees are included in the company training programs.



All employees are provided with voluntary medical insurance including annual medical checks and are given an option to have an insurance for family members at corporate discount prices.



Workers’ Organizations



In Bulgaria, the rights of freedom of association and collective bargaining are provided by the Labor Code. The company builds its internal procedures in line with national legislation. Importantly, the company makes an explicit reference to workers’ rights to freedom of associations in its internal policy.



Grievance Mechanism



The company employs different communication channels for employees to raise their concerns on workplace and labor issues. An existing grievance process provides opportunities to employees to raise concerns other than to immediate supervisors including an option for anonymous reporting. Employees are aware of these mechanisms. The company launched a Card for Employee Opinion program. Personnel and contracted workers may submit ideas, compliments or criticism relating to customers’ satisfaction, staff satisfaction, process optimization and others. Responses are provided within eight days. In
the event an intermediate answer is necessary, response may be provided within up to four weeks.



Protecting the Work Force



Individuals below the age of 18 years are not employed and no forced labor is used by the company.



Supply chain



Bulgarian legal framework sets the minimum age for employment at 16 years. Children under 18 are permitted to work only on reduced hours and are prohibited from hazardous, overtime, and night work. Suppliers contractually are obliged to respect the legal requirements, including relevant provisions for labor and OHS management. Among others, TÜV, a global leader in independent testing and assessment services, conducts supplier audits. A supplier self-assessment procedure on labor practices, covering forced and child labor concerns among others, has been established.



Occupational Health and Safety



An occupational health and safety (OHS) coordinator and an OHS- responsible staff representative is appointed at the country and store level correspondingly. The company monitors changes in national legislation and implements corresponding measures to comply with the new requirements including monitoring of workplace microclimate parameters. Special emergency response teams are organized at each store. Compliance with OHS requirements is systematically supervised and even enhanced by introduction of quarterly OHS internal inspections in addition to safety, security and hygiene audits are conducted by the supervision department to verify compliance with Kaufland regulations and procedures including OHS.



In addition, state supervisory authorities inspect the stores to verify compliance in the areas of labor conditions, fire safety, civil defense, public health, environmental matters. The Company registers prescription and if necessary develops and implements corrective actions where applicable.



Safety statistics are collected and reported quarterly on work-related and reportable accidents, in addition to a summary of general performance in terms of labor related costs (salaries, training etc.). The accident rates are registered in a corporate database. The company identifies and analyzes occupational risks and specific classes of hazards for each work area and function. Relevant OHS training is provided to each employee. Documentation and reporting of occupational accidents, diseases and incidents, accident investigation and corrective action identification are conducted consistently with good practice. Emergency response plans have been developed and are available for each store, including response measures for both internal and external emergencies.



Lost time injury frequency rate per million hours worked in 2014 is below industry standard benchmark for grocery stores and supermarkets.



Contracts with all contractors including that related to construction, logistics, and personnel leasing have relevant and standard clauses that require compliance with the applicable legislation in terms o
f labor management and OHS protection and management.

Pollution prevention



In 2014 for the second consecutive year the company won a first prize – Green Oscar – in the national competition “The Best Green Companies in Bulgaria” in the category of food industry, services sectors, commerce and agriculture. The company was focusing on the efforts to improve further segregation of wastes by types, waste recycling, energy saving equipment and lighting, investments in green building concept. Mandatory use of recycled paper was introduced in the company offices.



Energy Efficiency and Greenhouse Gas Emissions



The company employs energy-conscious design with high level of building insulation. Utility systems are specified to be energy-efficient, for example condensed gas-fired boilers and modern control systems are used for space heating, and heat is recovered from refrigeration systems for hot water heating in stores where wash-down water is required.



The company adheres to energy efficiency and employs a wide range of measures aiming to reduce use of natural resources and undertake waste recycling during store operations. Data on energy and resources consumption are summarized and reported to management for analysis and further improvement actions. For instance, total annual consumption of energy by stores - Energy Use Intensity (EUI) - per unit area is within the Green Building concept for shopping malls and the US Environmental Protection Agency, EnergyStar Data Trends. In 2014, total EUI was reduced by 26 % in comparison with 2013 and stores’ electricity consumption was reduced by 9.5% correspondingly. The Hristo Smimenski store in Plovdiv has achieved IFC’s EDGE (Excellence in Design for Greater Efficiencies) certification for green buildings which demonstrates design achievements in energy reduction by 37%, water reduction by 53%, and materials’ energy reduction by 30% compared to Bulgarian baseline data.



The newest stores are rated in terms of energy efficiency according to the EU directives. For instance, a store in Asenovgrad was granted a certificate confirming an energy efficiency class B on energy consumption parameters; greenhouse gas emissions from this store are 2,028 t/y of carbon dioxide equivalent. Utility consumption is monitored, and corrective actions taken as necessary.



The newer stores utilize a building management system which provides monitoring from a single point.



Liquid effluents



Liquid effluents are limited to sanitary wastewaters, process effluent arising from store operations and storm water run-off from paved areas. Process effluents from store operations are discharged via grease traps and are discharged to the municipal sewage systems; this also applies to sanitary water. Storm water from paved and parking areas are also discharged to the municipal sewage systems via oil-water separators. Waste water discharge criteria are specified in the relevant store permit. Liquid effluents are discharged to municipal sewage systems capable to process the
stores’ wastewaters to meet national requirements.



Refrigerant Selection and Use



The company has standardized its refrigerant use on R404a, a non-ozone depleting HFC refrigerant. Refrigerant consumption is minimized through loss prevention, supported by an up to date loss monitoring system, including installation of refrigerant detectors to detect losses around the compressors and monitoring of refrigerant added in servicing.



Solid and Hazardous Waste Management



The company has a policy committing to avoid and minimize waste generation, and implementing recycling of all recyclable materials, including glass, metal, paper/cardboard, and wood, following the provisions of the EU Council Directive on packaging and packaging waste. Batteries and electric and electronic appliances are recycled through authorized centers. Waste generation is adequately monitored and recorded and all generated waste is disposed of at authorized facilities and using reputable and licensed contractors.

Store design, construction and operation



Store design is based on German and Bulgarian standards including safety requirements for public buildings.



EHS impacts associated with the construction phase are managed by contractors in line with local regulations and specific conditions stipulated by municipal authorities during getting permits for construction.



Concerning store operation, public safety is secured by the following key measures. Visited stores had unlocked, unobstructed exits with anti-panic devices. Emergency exits and “emergency exit” signs were indicated and well visible. Emergency response plans have been developed and are available for each store, including response measures for both internal and external emergencies. Fire alarm system, smoke detectors and automatic fire-fighting sprinkler systems were installed in retail areas. Emergency response and evacuation plans were in place. Personnel were also trained in life and fire safety matters. The company has regular internal auditing of life and fire safety (L&FS) provision by its internal supervisor; and this is supplemented by audits of insurance agency. Audit findings are documented, as well corrective actions, if needed. Store outdoor and parking areas have detached underground fire water tanks and hydrants for connection of fire-fighting municipal brigades. The same approach to public safety including L&FS systems corresponding with the EU and national standards will be implemented at the new stores. Potential traffic increase due to customers and goods delivery flows during store operation is addressed by implementation of mitigation measures conditioned by municipalities including construction of road intersections and new infrastructure, if needed.



Community Health



The company promotes customers’ awareness of the goods labeled for sustainable farming including UTZ certified cocoa and coffee, Forest Stewardship Council certified goods made of wood.



Measures to ensure food safety throughout the product life cycle are implemented starting with the selection of suppliers. The company requires the suppliers of Kaufland-brand food products to implement food safety standards, such as the FSSC 22000 Food Safety Management System. This is supported by independent audits conducted by recognized companies (TUV, SGS) at the suppliers’ production facilities. In addition, the company provides technical advices and training to local farmers related to food safety and processing of meat, vegetables, and fruits. In 2014, the Company joined the Supply Chain Initiative aiming to the implementation of good commerce practice in the food supply.

The company established various formats for disclosure of information about services to its key stakeholders – customers and personnel – including surveys, website links, phone lines, meetings, etc. The most popular channel for customers is a call center which provides answers during the shortest possible period of time. A new channel launched in 2014 and being improved over the year is customer satisfaction cards available at the cash desks. Opinions are processed by the store manager and the headquarters customer marketing department.

In addition, the company will carry out a local disclosure of this Environmental and Social Review Summary (ESRS) in parallel to IFC’s disclosure.

For more information about the project and local access of documentation, please contact:

Kaufland Bulgaria EOOD & Co. KD,
Telephone Number: +359 2 81 25 000
Website: http://www. kaufland.bg
Address: 1A Skopie str., Sofia, Bulgaria

Broad Community Support is not applicable for this project