This is a Category B project according to IFC’s Environmental and Social Sustainability Policy 2012 because, on the basis of information reviewed by IFC, this investment will have limited adverse social and environmental impacts that are few in number and expected primarily to occur on site, with construction of livestock watering troughs and irrigation systems impacts mainly being short term and not significant. A hydrological and hydrogeological study has been carried out for the Abaya-Chamo-Chew Bahir sub-basin system that includes the project area. The study revealed the presence of adequate groundwater resources.  This was confirmed by the Environmental and Social Impact Assessment (ESIA) and hydrogeology studies conducted by the project in April 2022.

Operational impacts are expected to be generally site specific and can be avoided or mitigated by adhering to recognized performance standards, procedures, guidelines, and design criteria as described in the following sections. Fulfillment of the action items included in the attached E&S Action Plan (ESAP), adherence to the national laws and regulations, internationally recognized standards, the WBG/IFC EHS Guidelines for General Mammalian Livestock Production EHS Guidelines and Annual Crop Production, will facilitate the project implementation in a sustainable manner.

Environmental and Social Assessment and Management Systems: Luna has a corporate level Environmental and Social Policy statement strengthened by vision and mission statements required by ISO 22000 and ISO 14000 but is yet to develop an Environmental and Social Management System (ESMS).  As part of this investment, Luna will develop and implement a corporate level Environmental and Social Management System (ESMS) founded on corporate level policies and aligned with Performance Standard 1, the World Bank Group’s (WBG) General, Mammalian Livestock Production, and Annual Crop Production EHS Guidelines, and national requirements. Specifically, the ESMS will incorporate the nine (9) elements of an ESMS defined in Performance Standard 1. Therefore, it must include procedures addressing the identification of E&S Risks and Impacts and ensure that there is adequate organizational capacity and competence, including roles and responsibilities, and management plans.  Environmental and social management plans to be developed and implemented as part of the ESMS will include (i) Environmental Health and Safety (EHS) Management plan; (ii) Waste Management (WM) Plan; (iii) Emergency Preparedness and Response Plan (EPRP); (iv) Security Management Plan; (v) Stakeholder Engagement Plan (SEP); and (vii) External Communication and Grievance Mechanism (ESAP #1).

Identification of Risks and Impacts: Under Ethiopian Environmental Impact Assessment (EIA) Proclamation (No. 299/2002), Environmental Protection Authority (EPA) of Ethiopia requires an Environmental Impact Assessment (EIA) to be undertaken for a project of this scale. To meet this requirement, Luna appointed Beles Engineering Ltd to undertake an Environmental and Social Impact Assessment (ESIA) for the proposed Project in April 2022. The ESIA identified impacts during land clearing, land morphology modification, OHS and health issues related to migration of new work force and impacts on the mobility of fauna and air and water pollution that comes from any activity of a modern ranch.

Management Programs: Luna has ISO 14001 and ISO 22000 certifications (ISO 20000 integrates ISO 9001 and HACCP Food Safety principles) at the Luna Export Slaughterhouse; and GlobalGAP certification at the Luna Fruit Farm in Koka. Luna intends to implement management systems in the proposed operations using the foundation of the existing certified systems at the slaughterhouse and the Luna Fruit Farm. In addition, Luna will implement all proposed mitigation measures in the Environmental and Social Management Plan (ESMP) described in the ESIA (ESAP #2).

Organizational Capacity and Competency: The current organizational structure places the EHS responsibilities on the managers of the respective operations. While the managers have extensive experience, ESAP # 3, requires Luna to nominate individuals to be responsible for EHS performance and oversee ESMS implementation for the proposed fodder production, feedlot and outgrower operations in Enchete Kebele.  The selected persons will also ensure compliance with certification requirements and other management programs. In addition, Luna will ensure the selected persons are competent and receive regular EHS training based on Luna operations.

Emergency Preparedness and Response: Luna has an emergency preparedness and response procedure for the slaughterhouse in Modjo.  The procedure focuses on injuries. The Emergency Preparedness and Response Plan (EPRP) prepared as part of ESAP Item #1, will be updated for all operations including the feedlot and will include a driver safety program and vehicle monitoring to ensure that potential emergencies associated with transport and community interactions are minimized.

Monitoring and Review:  Luna conducts environmental audits every two years to be compliant with environmental agency requirements. In 2022, internal audits were conducted to identify noncompliance on environmental management laws, regulations, and standards. The findings, which are presented to the Environmental Protection Agency (EPA) were found to be compliant and there were no gaps identified.  In addition, Luna will develop Key Performance Indicators (KPIs) to monitor and review E&S performance and the Environmental and Social Management Plan (ESMP) prepared as part of the ESIA for the project.

Supply Chain Risk Assessment and Management: Currently, Luna obtains all goats and sheep from aggregators.  Luna uses 10-15 aggregators who buy goats and sheep from individual livestock herders and markets and transport them on trucks to the slaughterhouse. To reduce the dependency on aggregators, and as part of this project, Luna has initiated an outgrowers program targeting three groups: livestock suppliers, livestock and fodder suppliers, and commercial fodder suppliers. The program is paired with intensive training and coaching. With the help of IFC Advisory program, over 7,800 outgrowers consisting of smallholder farmers, pastoralists, and agro-pastoralists, have been trained and coached on best practices for animal health production. As part of the Advisory program, Luna has started tagging goats which will be aggregated at the feedlot and has developed a digital traceability and risk screening mapping platform. The company plans to fully transition from aggregators to outgrowers by year five (5) of the project.

In accordance with ESAP #4, the client will develop/enhance its supply chain management system (SCMS) to ensure that suppliers are assessed against PS2 and PS6 requirements before entering a commercial relationship and that their practices are aligned with PS2 requirements. The SCMS will include (i) a due diligence procedure including mapping and risk assessment of suppliers, (ii) a supplier code of conduct aligned with PS2 and PS6 requirements, (iii) contractual clauses requiring compliance with the code of conduct, (iv) an engagement and disengagement procedure when contractual obligations are breached and (v) a verification procedure to assess compliance with the code of conduct during the life of the project. The client will retain records of supplier screening and ongoing monitoring.

 At appraisal, Luna operations had approximately 700 employees of which approximately 50% are women.  Of these, 200 employees work at the slaughterhouse in Modjo, 70 employees at the Plum Gold farm in Makele, while the rest work for Tute farm (Luna Fruit Farm) in Koka and 14 retail outlets (Fresh Corner) in Addis Ababa.  In the first years of feedlot operations, Luna will require approximately 100 workers - professional, semi-skilled and casual workers; this number is projected to increase to 1240 by the 5th year of the project. During the construction phase, Luna will commission a contractor who will hire approximately 300 workers at peak of the construction phase.

Human Resources (HR) Policy, Working Conditions, and Terms of Employment: All workers are employed on a permanent basis and are issued employment contracts, which specify their terms of employment and working conditions including recruitment, training, remuneration, termination, hours of work, and benefits (e.g. salary advances and loans, and medical and life insurance). The contracts are consistent with the provisions of Ethiopia Labor Proclamation No. 377/2003 aligned in general with IFC PS 2. Ethiopia does not have a minimum wage set under national requirements. Luna conducts regular wage rates market surveys and ensures the lowest wage rate is above the market rate. Other benefits include health insurance, a daily hot meal and transport to and from work. Luna has policies and procedures in place that prohibit child labor or forced labor in its operations.

Luna has a Human Resources (HR) manual, which is aligned with Ethiopian labor law. Luna’s Human Resources Manager is responsible for the implementation of Luna’s HR Policy and all HR related activities. The HR Manager reports material HR related issues (disciplinary, promotion and training) to the General Manager.  The current HR manual does not recognize workers organizations and collective bargaining, workers’ grievance mechanisms, management of third-party workers, and sexual harassment. As per ESAP # 5, Luna will align the existing HR manual with Performance Standard 2 to include (i) non-discrimination and protection against retaliation for workers and their representatives for forming or joining workers organizations and engaging in collective bargaining, (ii) management of third-party workers; and (iii) prevention of sexual harassment. Aspects related to the company’s grievance mechanism are discussed below and included in ESAP #7. The new HR policy and procedures will be implemented for all Luna operations and cover all workers, including permanent, term, and contracted.

Workers’ Organizations: Ethiopia labor laws recognize workers’ rights to form and join workers organizations or unions of their choosing and to collective bargaining.  Workers at the Luna Export Slaughterhouse have joined a workers’ organization. There have been no major labor disputes or industrial actions in the company’s operations to date and the company views its relationship with its employees as harmonious.  The appraisal team spoke with workers in the abattoir regarding their relationship with the company and the workers’ organization.  All employees contacted stated their satisfaction with both the company and the organization.  For the new operations, Luna will recognize workers’ rights to form and join workers organizations or unions of their choosing and to collective bargaining.

Non-discrimination and Equal Opportunity: Luna provides equal employment opportunities for all employees and applicants without regard to race, color, religion, gender, national origin, age, disability, or marital status as stipulated in Ethiopia Labor Proclamation No. 377/2003.

Grievance mechanism: The HR Policy has a grievance mechanism that allows workers to raise workplace concerns.  Luna will apply this policy to new farm and outgrower operations. Workers are made aware of the grievance mechanism at the time of recruitment and how complaints are addressed, which is consistent national labor laws.  Currently, Luna does not collect data indicating the number of grievances over time, however Luna management is committed to providing that data in future.  The current grievance mechanism does not provide for anonymous reporting of complaints.  As part of (ESAP # 6) Luna will update its grievance mechanism for employees to raise grievances anonymously, including sexual harassment cases, without the risk of reprisals, and in accordance with other requirements of IFC’s Performance Standard 2. The grievance procedure will also articulate how the grievances will be handled and resolved, and outcomes communicated to all employees. The grievance mechanism will be adopted for all Luna operations and the procedure will be applicable to all existing and new employees, third-party staff, and out-growers. This mechanism shall form part of the HR policy and other relevant documents and shall be communicated extensively to all the beneficiaries.

Occupational Health and Safety (OHS). Luna is committed to provide a safe and productive work environment as documented in its HR policy. Luna slaughterhouse and Luna Fruit Farm provide and maintain proper infrastructure needed to achieve high standards of operational safety. At the slaughterhouse facilities, Luna has written safety operational manuals and standard operating procedures based upon the risk mitigation hierarchy of engineering controls. Personal Protective Equipment (PPE), designed for specific workplace hazards and OHS risks, are provided in support of operational safety protection measures.

OHS accidents are recorded in an injury registry logbook as required by Ethiopian law. In addition, annual OHS audits are undertaken by approved safety and health advisors registered with the directorate of occupational safety and health services, which falls under the Ethiopian Ministry of Labor. In the last two years, there have been no fatalities and few incidents.  In 2023, 74 incidents were recorded principally lacerations from knives used in processing at the slaughterhouse. The company conducts annual OHS training for all staff. The root causes of OHS incidents are assessed, and the results are used to undertake corrective and preventive measures and to provide enhanced training lessons for employees; and that are used to further develop safe and healthy workplace.

Luna has formed a culture of accident prevention based on training, communication, and continuous improvement procedures at the slaughterhouse. General OHS training is provided for all staff and specific training for selected first aiders and fire Marshals.

Luna will commission a contractor for the construction of the feedlots and other auxiliary infrastructure at the new facility. The company will screen the contractors to ascertain their reputation and performance on OHS.  Luna will support the contractor’s efforts to develop and implement the occupational health and safety component for the construction phase that will allow the contractor to operate in a manner consistent with PS2 requirements.  The program components will include protection of workers from injury and illness; training to enhance safety awareness; a mechanism for documenting and reporting of occupational injuries, illnesses, and fatalities; and overall provision of a safe and healthy work environment for contracted workers. (ESAP #7).

Workers engaged by third parties: Currently Luna has engaged security personnel through an approved contractor and will commission a contractor for the construction phase.  Luna will conduct a due diligence to ascertain the contractor has a reputable and legitimate enterprises and operate in a manner consistent with the requirements of Performance Standard 2, incorporate these requirements as per ESAP#8 into contractual agreements and supervise and monitor their implementation and ensure the workers engaged by third-party contractors have access to a grievance mechanism.

Water use Efficiency: The proposed fodder production will be six (6) 50ha center pivot irrigation system, starting with two pivots in year one of fodder planting. The capacity of the commercial ranch is 220,000 goats per annum at full capacity production, starting with 50% in the first year and reach its full capacity within five years. The farm requires large amounts of water for drinking of the stocks and fodder production which will be availed from the groundwater system.  Availability of groundwater around the farm has not been well studied in the past, as noted in the ESIA report. Luna commissioned a water sustainability study using Vertical Electrical Sounding (VES) method that indicated the availability of sufficient groundwater resources and recommended eight (8) boreholes of 250m depths for the water requirement of the farm at full production levels. The farm is surrounded by ridges. All surface runoff from these elevated areas converges towards the center of the farm, facilitating the recharge. To monitor the aquifer's response to groundwater abstractions and to recharge during the rainy season, Luna will drill three (3) separate piezometers, one at the northern and southern peripheries and one in the central area (ESAP#8).

Energy Efficiency: The project will source electric power from the national grid managed by Ethiopian Electric Power Corporation for its feedlot and associated operations.  IFC advisory is providing irrigation options, including required equipment, energy and cost implications and available options on use of renewable energy sources.  As demonstrated in the Luna Slaughterhouse, the project anticipates collecting animal manure from the feedlot operation for processing in an anaerobic digester and using the resulting biogas to generate electric power to reduce main grid electric power demand.

Solid Waste Management: The main solid waste for Luna feedlots will include waste feed, animal waste, and carcasses.  Luna is piloting the use of animal manure to produce gas and raring of black soldier flies (BSF) larvae for fish and chicken feed. As part of the solid waste management plan developed as part of the ESMS, Luna will design, construct, operate, and maintain waste management and storage facilities to contain all manure, litter, and process wastewater including runoff and direct precipitation to minimize the amount of manure produced, to facilitate handling of animal wastes, and to reduce migration of contaminants to surface water, groundwater, and air.  For example, manure and sludge removed from feedlot pens, drains, sedimentation and effluent ponds, and spilled or spoiled feedstuffs, will be stored within the designated stockpile area(s) of the feedlot complex; exported from the feedlot property; or applied immediately to crops or pastures on the feedlot property.

Liquid Waste Management: The proposed project is designed to utilize all its liquid effluent. Liquid manure and urine waste from the feedlot will be channeled to sedimentation basin(s), pretreated via biodigester and flow to a facultative effluent treatment pond, which will be used to irrigate nearby fodder crops.  Solids from the ponds will be scooped periodically, tested, and if feasible incorporated into soils as an organic fertilizer.

Air emissions: Air emissions from the operations of this project include ammonia from animal waste, methane and nitrous oxide from animal feed and waste management, odors from animal housing and waste management, bioaerosols, and dust from feed storage, and waste management activities.  Luna will implement measures to reduce impacts of ammonia and odors as stipulated in the WBG EHS Guidelines for mammalian livestock production, which include control of temperature, humidity, and other environmental factors of manure storage, composting of manure to reduce odor emissions, etc.

Pesticide Use and Management: Luna is familiar with rational and cautious use of pesticides from the Global GAP certification for Luna Fruit Farms (LFF) operation.  Luna will utilize LFF experience and will develop and implement an integrated pest management program for the feedlot, fodder crops growing and out-grower program to ensure continuation of food safety requirements, protection of local human health and environment as well as prevention of harm to wildlife in accordance with ESAP # 9.

GHG Emissions: The operation will use electricity as its main energy source which will come from hydropower plants. As a back-up energy source, a diesel generator will be used. Luna’s GHG emissions therefore are associated to fuel consumption by the company’s fleet of motor vehicles used for transportation of live animals to the slaughterhouse and carcasses to the overseas markets by air freight, and livestock production. Total annual consumption for this fleet in 2023 was approximately 241,600 liters of diesel corresponding to 652 tonnes of CO2-equivalent. The project design estimates a throughput of 84,500 goats and sheep per year. This amounts to emissions of about 10,967 tonnes CO2-equivalent per annum. The new project will double the size of Luna’s fleet however, project development plans include purchase of refrigerated freight containers for animal carcasses to be transported by rail to the Port of Djibouti and then by ship to the UAE and to Saudi Arabia.  This is expected to reduce both the cost of transport, and the CO2-equivalent emissions compared to truck and air transport.

To reduce GHG emissions from livestock production operations, Luna will (i) improve the productivity and efficiency of livestock production through improvements in nutrition and genetics, (ii) minimize the amount of manure production through the implementation of animal waste management approaches, and (iii) implement pasture /grazing management techniques to reduce nitrous oxide and methane emissions.

The potential risks related to the community from the feedlot and outgrower scheme operations are the potential for increased traffic-related incidents and accidents due to an increasing truck fleet used to transport live animals, distribution of carcasses for local markets, and finished export products to the airport for export.  In addition, food safety and spreading of animal diseases are also potential risks.

Food Safety: Luna is implementing a food safety system, (ISO 22000) at the slaughterhouse, and a Global GAP certification for the pack house and for fruits and vegetable production, demonstrating a commitment to ongoing improvement and compliance with food safety standards. As indicated in the management programs section, Luna will integrate these programs to the feedlot, and outgrower program in Enchete Kebele. The feedlot and outgrower program management systems will incorporate Standard Operating Procedures to institutionalize sanitation, good manufacturing practices, staff hygiene and training, a robust mechanism for receipt and analysis of customer complaints, traceability, etc. These procedures and, as needed, work instructions will be employed for employee training.

Traffic Management: Currently, Luna operates five trucks for transportation of livestock from various sourcing areas to the slaughterhouse. Once the project commences, Luna intends to double the number of trucks and the distance due to expanded operations in livestock transportation from the feedlot in Enchete Kebele to the slaughterhouse in Modjo. All vehicles will be fitted with speed governors, which limit vehicle speed to 80 km/hour as stipulated in the traffic act of Ethiopia. Servicing of the fleet and tire management will continue to be outsourced to a reputable garage and tire company, respectively.  All company drivers are licensed and trained in vehicle maintenance knowledge and skills. The drivers have and will continue to undergo defensive driving training in addition to vision and hearing testing to ensure continuing competence for commercial vehicle operations.  The company has not recorded any significant incidents associated with animal and materials transport since its inception. However, as noted under the OHS section above, the company will replicate its existing OHS practices, formalize operational procedures to systematically identify and address all OHS risks to reduce the number of incidents, near misses and accidents in its new operations at the feedlot and outgrower operations.

Project-induced immigration: Given the sparse population in the project area and the need for 300 construction workers and 1,000 operational staff, the project anticipates employ non-local labor from the neighboring Districts.  Majority of workers be housed in nearby towns such as Weyto (Berhale), located approximately 7 km away. The expected immigration might bring potential social impacts like communicable diseases, GBVH, strain on public services. To avoid or minimize risks and impacts of project induced influx, Luna will develop an influx management plan with appropriate programs including (i) pre-employment medical exams and/or regular health screening of influx labor, (ii) provision of awareness campaigns and training programs for labor force/contractors with a code of conduct for interacting with local/ communities, (iii) a monitoring program to measure the level of implementation of the influx management plan (ESAP # 10)

Security Personnel: Currently, Luna uses security guards for access control and protection of property. The security guards, who are employed by a contracted security company, are not armed.  At the proposed facilities, Luna will continue to use the services of a reputable private security firm, to be confirmed by a due diligence process. In addition, Luna will assess security-related risks and develop a Security Management Plan (SMP), as part of ESAP #1. The SMP will be aligned with the Voluntary Principles on Security and Human Rights and with the requirements of IFC Performance Standard 4 and will include training modules for the management and security personnel and provide a grievance mechanism for affected communities to express concerns about security arrangements and acts of security personnel.

Sustainable Management of Living Natural Resources. IFC’s scope of appraisal included verification of compliance of Luna’s animal welfare management practices with the World Organization for Animal Health (OIE) Guidelines. In accordance with the IFC Good Practice Note (GPN) on Improving Animal Welfare in Livestock Operations (2014), IFC shall only engage with clients that are compliant to OIE Guidelines. IFC’s Animal Welfare GPN recommends transport time not to exceed eight hours and only permitted with documented procedures and facilities for resting livestock. The company has a farm operation between the feedlot site and the slaughterhouse that will be used as a holding and staging facility. This facility will be ~ 431 km from the slaughterhouse. The holding facility procedures will be developed and will be adequate in meeting welfare requirements.

As part of goats and sheep husbandry at the feedlot, Luna will undergo a comprehensive IFC’s HACCP-methodology based Biosecurity, Animal Husbandry/Welfare and Use of Antibiotics (BAWA) Audit Protocol leading to the development of BAWA management system at farm-level and will certify its animal husbandry/welfare management practices against a recognized certification standard benchmarked against GIIP. (ESAP#12).

Biosafety. Luna has employed a veterinary doctor as the feedlot manager and is responsible for biosecurity. As part of the feedlot management, Luna will develop a biosecurity procedure that will include (i) a training plan for the site personnel responsible for the care and management of the different animals are continuously trained to identify normal health and recognize poor health and welfare; (ii) regular inspection of animals, at least daily, and more frequently during period of significant risk to health and welfare; (iii) geographical isolation of the farms, including a buffer zone; (iv) controlled site access and suitable infrastructures: entrance gates with vehicle disinfection areas, cleaning and disinfection procedures for visitors, materials, and tools (e.g., foot disinfection at the entrance of sites/houses), control of pathogen vectors (rodents, insects), and organic waste management. As part of the bio-security procedure, any sick or dead animal will be removed and reported to the veterinarian, for immediate postmortem. The company has initiated a process to establish compartments (based on management practices and biosecurity) in adjacent districts to facilitate international markets for its products.

 The ESIA initiated a community engagement process.  Relevant project information was disclosed to all stakeholders and closer engagement with communities neighboring the project, local government authorities and relevant non-government entities.  The consultations revealed communities are aware and broadly support the project.  However, since the land acquisition in 2022, a few households raised the issue of loss of the communal grazing area. As indicated under PS5 the LRP will address this issue, and its development will be based on close consultation with the affected households.  The findings of the ESIA were also presented to both the community and other stakeholders. Additionally, several project benefits have been discussed with the company in relation to potential employment opportunities, and selected community members being part of the company’s outgrowers program.  Going forward, and as part of ESAP Item #1, Luna will develop and implement a Stakeholder Engagement Plan (SEP) and  External Communication and Grievance Mechanism, which will include; (i) a mechanism to receive and register external communications and complaints from the public including any issues on land acquisition; (ii) screening process to determine how to address them; (iii) provide, track, and document responses, if any; and (iv) adjust the management program, as appropriate.

 Tesfalidet Hagos - General Manager

Luna Export Slaughterhouse

Tel +251-11-6627894/97

tlideth@gmail.com

Web: www.lunafarmexport.com