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 company confirms that they are not acquiring or leasing new land parcels and plan to use fallow lands for increasing production of tomatoes and other crops. Thus PS5: Land Acquisition and Involuntary Resettlement is not considered applicable. The existing facilities and farms are not located in the vicinity of sensitive environmental areas, nor within known historical and/or cultural heritage areas. Therefore PS6: Biodiversity Conservation and Sustainable Management of Living Resources and PS8: Cultural Heritage, are not applicable. There are no indigenous people in the project area, thus PS7: Indigenous Peoples, is not triggered.

Other PS may become applicable in the future should any new IFC investment in this project have impacts beyond the ones hereby identified.

This project has been classified as a Category B project in accordance with IFC’s Policy of Environmental and Social Sustainability as the environmental and social (E&S) risks and potential impacts are expected to be limited, generally site specific, and can be avoided or mitigated by adhering to generally recognized performance standards, procedures, guidelines or design criteria. Key E&S issues include Agrofusion’s implementation of quality, environmental, health and safety management systems, pesticide and fertilizer management, implementation of food safety programs; water and energy use efficiency programs; labor and working conditions. Air emission control and waste/wastewater management are of lesser concern and no major issues involving agricultural operation aspects are to be expected.

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 Management System:

Environmental assessment is limited in scope due to the nature of impacts relevant to the farming and associated food production activities of Agrofusion. As explained in detail below, the company has appropriate existing procedures, organization and equipment in place to avoid, manage or mitigate actual or potential project-related impacts related to environmental, occupational health and safety and social/community issues. Agrofusion have acquired relevant operational licenses and environmental permits for their existing facilities from the Ukrainian regulatory authorities. The company undergoes international customer audits on a regular basis to demonstrate compliance with their respective responsible sourcing criteria and in 2013 has successfully passed the Sedex audit; the next audit is scheduled for 2016. Each year, the company confirms the status of Sustainable supplier to Unilever in accordance with the Unilever Sustainable Agriculture Code and Scheme Rules.



Agrofusion has a documented environmental health and safety (EHS) management system aligned with IFC PS1 requirements and consisting of a corporate level EHS policy and site level procedures for the identification and management of environmental, social, occupational health and safety risks and impacts; emergency preparedness and response; and monitoring and reporting of EHS performance. Both processing plants, including greenhouse complexes, have quality assurance management systems certifications compliant with FSSC 22000 (food safety) and ISO9001 (quality) management systems. The existing management system has been enhanced since IFC’s first investment in the company. Agrofusion acquired certification of compliance with ISO 14001 (environmental management) and OHSAS 18001 (occupational safety and health) management systems for both farming operations and processing and storage facilities in 2013. The company also has a GMO policy which is in compliance with the local legislation and the Cartagena Protocol for Biosafety.









Organizational Capacity and Competency

The company has experienced and well qualified Quality, OHS and Environment Managers in headquarters and respective technical personnel and agronomists in each of the processing and farming facilities, responsible for EHS performance. In addition, the Project Coordinator’s job description includes environmental duties at the corporate level.



Agrofusion has established a training program to provide necessary induction and periodic training on EHS issues for all direct and contractor employees. The training program is designed based on the skills matrix and requirements of GMP (Good Manufacturing Practices) principles. Training subjects include PPE (Personal Protective Equipment) usage, job-specific trainings, food safety and hygiene trainings. The company records and reports all training activities, including participants, and revises the plan accordin
g to the training needs analysis and according to the outcomes of the training evaluation mechanism. A well prepared safety rules booklet is given to all employees and safety rules explained to any visitor/ contractor before entering to the plant site.





Emergency Preparedness and Response

Agrofusion has developed a documented emergency preparedness and response plan appropriate to the operational risks and implemented at each facility including periodic trainings, and evacuation and fire drills.



Monitoring and Review

As part of the environmental and safety management system, monitoring, supervising and auditing activities inform the management review of the E&S procedures and performance. Both factories regularly monitor effluent discharge, air emissions, solid waste generation, energy and water consumption, lost time accidents, customer complaints, in compliance with the EHS management system and Ukrainian regulatory requirements.



Reporting of EHS key performance indicators is done as per the requirements in the corporate environmental and safety management system. Agrofusion facilities undergo regular audits within the context of the environmental licensing process and external reporting with regards to EHS monitoring is provided to relevant national regulatory agencies. The company regularly submits to IFC an Annual Monitoring Report on Environmental and Social Performance prepared in accordance with the IFC’s Performance Standards and WBG EHS guidelines

Working Conditions and Management of Worker Relationship



As of end of 2015, Agrofusion employed approximately 2,300 workers including administrative, technical (processing plants) and support (contracted) staff. The nature of agricultural production results in the need for additional staff at certain times of the year. The company hires additional workforce on a limited term contract between July and October (4 months) which constitutes approximately 70% of the total plant and field staff. These term contract workers are subject to the same working conditions as direct employees as stipulated by the labor legislation and the collective bargaining agreement and receive OHS training periodically. Agrofusion has also implemented a grievance mechanism that applies to direct and contract employees.

Total workforce consists of approximately 85% blue collar and 33% of women employees; between the ages of 36-50 and under 35 represent respectively 58% and 37% of the total workforce. Agrofusion employees work in three shifts during two months processing period and overtime work is paid in accordance with the local legislation. For workers at all levels Agrofusion guarantees more than the minimum wage – 1,378 Ukrainian hryvnias (~55 USD) per month, and pays more than the average of the regional salaries for the industry. The company also provides other benefits including employee housing, education and health support



Human Resources Policies and Procedures

There is a Human Resources (HR) policy at the corporate level aligned with IFC PS2 requirements and each factory has its own human resources procedures in place. Agrofusion operates in accordance with the Ukrainian Labor Code, which covers workers’ working conditions, worker and employer rights, working hours and overtime, benefits, retrenchment, leave, minimum wages, disciplinary practices, the relationships between workers, companies and unions, and other labor issues.



Workers’ Organization

Agrofusion management has stated that there is no prohibition or discouragement of freedom of association and although currently there are no unionized employees; worker’s representatives are selected and a collective bargaining agreement is implemented for all facilities.



Non-discrimination and Equal Opportunity

Agrofusion is an equal opportunity employer, and does not make employment decisions on the basis of personal characteristics unrelated to inherent job requirements. The company also complies with the national labor law requirements for non-discrimination and employs a certain number of disabled people as required by the law.



Retrenchment

There are no current plans for retrenchment in Agrofusion facilities, however if it becomes unavoidable, the company will share a retrenchment plan acceptable to IFC, which will be developed in line with IFC’s Good Practice Note on Managing Retrenchment and PS2 requirements.



Grievance Mechanism

The company has adopted an open door policy and, as re
ported; employees can directly communicate their concerns to their respective supervisors and managers. Employee representatives are periodically elected by the entire worker force; these representatives also have established a systematic communication mechanism. The company has placed a number of suggestion boxes at locations throughout the facilities, to allow employees to submit suggestions or complaints. Grievances are reviewed by the HR department and the worker representatives and follow up is provided for each case. In addition to these internal grievance mechanisms, external worker protection mechanisms are ensured by the national labor laws.



Protecting the Work Force

Agrofusion’s HR policies prohibit the use of forced or child labor. The minimum age of employment is 18 at all plants and agricultural divisions.



Occupational Health and Safety

The company has an a functional Occupational Health and Safety system; which is integrated into the quality management system and certified in line with OHSAS 18001 management system.



The company keeps records of incidents in their accident log system and a root cause identification system is in place to take relevant corrective actions effectively when needed. Risk analysis studies have been completed and a risk analysis document is available and was reviewed by IFC during appraisal. A Permit to Work system has been implemented and is functional for hot works and working at heights and will be extended to electrical works and confined spaces working. The company has posted warning signs and implemented other effective means to inform employees of areas defined as confined spaces. External service providers monitor workplace conditions specific to dust, noise (at pump and welder station) and other potential employee exposures to ensure compliance with national and WBG EHS guideline requirements.



Agrofusion’s facilities have detailed maintenance programs for production lines as well as equipment such as forklifts, pressurized vessels, and boilers. Preventive maintenance programs are in place and regularly tracked. Agrofusion has improved machine guarding for rotating parts at each drip irrigation pumping station in the fields. All chemicals and hazardous materials are labeled and stored appropriately with relevant material safety data sheets (MSDSs).



The company has its own fire department and a fire safety plan has been established according to national legislation. Well trained fire-fighting teams are accessible in every shift. Smoke detectors and fire extinguishers are adequately available. Emergency exits are specified throughout each site and fire drills are performed once a year.



OHS and fire safety trainings are provided to all employees periodically. The company also holds specific seminars on safe handling and use of crop protection products for its suppliers. Outsourced truck drivers receive training for safe driving, speed limits, safe loading/ unloading and safety r
ules.



Medical examinations of the employees are carried out at intervals defined by Ukrainian state legislations. There were no lost time accidents in the past year. A near miss and minor accident reporting and investigation system has been put in place in February 2016. The company will start reporting relevant information in the next IFC Annual Monitoring Report.



Supply Chain





Agrofusion cultivates approximately 20,496ha of irrigated land. The land is leased either from the government (29%) or individual farmers on a long term basis. At present the company has approximately 3,500 signed agreements with individual small farmers; rental prices are set by the relevant state legislative authorities. Approximately 70% of the lands are within a 30-50 km perimeter of the processing plants and nearby the irrigation channels.



Agrofusion has started the process of implementation of the formal internationally accepted Good Agricultural Practices (Global GAP) program for its fields within a scheduled time period. Trainings and workshops on the relevant international standards have already been provided to employees. The company has indicated the timeline to complete all verification, compliance and procedure development activities targeting the certification audit in fall 2017.

Resource Efficiency



All facilities have measuring systems to facilitate benchmarking of energy and water use. The company has executed water studies to identify options for diminishing water consumption in processing, considering water reuse and recirculation opportunities. As a result of these efforts it consumes about 1 liter of water per kg of tomato, which is acceptable within the industry benchmark. Water used in the process is obtained from the municipal network and wells (on one of the processing factories) and treated with reverse osmoses and ultraviolet filtration systems.



Drip irrigation systems have been installed for 100% of the tomato fields. Water is directly delivered to the root system of the plants to provide maximum water update and efficiency by minimizing run off and evaporation. Irrigation water volumes fluctuate between 4000-5000 m3/ ha depending on the soil conditions and rainfall, which are measured and analyzed regularly.



Energy Use

The company consumes about 185 kWh per /ton of product, which also accounts for agricultural activities. Agrofusion aims to have a continuous improvement on energy consumptions with the projects like installing frequency converters, steam use efficiency with state of art equipment, using LED lamps for outdoor lightning. The company will continue to research potential opportunities for both factories to further reduce its specific consumption.



GHG Emissions

Agrofusion uses the Cool Farm Tool, a tool developed by the Cool Farm Alliance and corporate entities such as Unilever, to estimate the GHG from its operations. Based on the data provided by the company, Agrofusion operations generated in 2015 an approximate total of 42,000 tons of equivalent CO2 from the following sources: electricity, and fuel consumption for transportation.



Air Emissions

The company operates four well maintained natural gas fired steam boilers for both facilities. NOx measurements are compliant with both Ukranian regulatory limits and WBG EHS guideline requirements (Maximum measured NOx= 219 Nmg/m3). Emissions measurements are performed every five years according to local legislation.



Wastewater Treatment

Both Northern and Southern facilities have state of the art biological waste water treatment plants and treat domestic waste water and industrial waste water separately. All parameters are in compliance with both Ukranian regulatory limits and WBG EHS guideline requirements. The treated process waste water is used for irrigation of the fields.





Solid Waste Management

Solid non-hazardous waste and hazardous waste management at both Agrofusion factories visited are in general adequate, involving waste segregation and reduction. Non-recyclable waste produced on site is temporarily stored by type, capacity and physical state in the appropriate containers or barrels and treated in accordance with the provisions set under the regulations on the disposal of waste from production processes. Tom
ato residue is used as fertilizer in the fields.



Hazardous waste includes used accumulators, fluorescent lamps and waste oil (0,09; 0,73 and  6,7 kg  per ton production respectively)  which are managed separately to non-hazardous waste and temporarily stored in containment basins before being transferred by licensed companies for disposal.





Pesticide Use and Management

The company has a well-managed Pesticide Management Plan for field operations which covers areas of pesticide selection and handling, application and storage, staff training, safety requirements, and disposal, consistent with national laws and regulations and World Health Organization (WHO) technical guidelines. Pesticides classified as WHO Class 1a (extremely hazardous) and 1b (highly hazardous) are not used in any of the company’s fields. During the irrigation process, mineral fertilizers are applied through the irrigation system (fertigation) choosing the optimum rate of fertilizers depending on the soil and growth conditions. In addition to online weather/ soil communication devices, the company started to install pilot weather observers to improve field management capacity.

Community Health and Safety

There are no immediate households or neighbors in the vicinity of either of the facilities. The potential community health and safety impacts associated with Agrofusion’s operations include food safety, emergency preparedness and response. Aspects related to food safety management and emergency response and preparedness plan have been discussed under PS1.



Security Personnel

The Company employs licensed and unarmed security personnel at all sites contracted from a private company, who are regularly trained and certified as per the Ukranian requirements.

Agrofusion participates in several community engagement activities, one of which is Social Partnership Program for the Community which is a voluntary agreement with community members in the project locations. Within the scope of this program, the company financially supports local communities and land owners (from whom plots are leased) in case of a family health emergency or specific scholarship needs. Furthermore, the Company has plans to support NGOs for protection of endangered birds

Agrofusion, in line with the ESAP will develop and formalize its current activities in a Stakeholder Engagement Plan (SEP). This SEP will support Agrofusion’s strategic engagement with relevant stakeholders through the identification of key stakeholders and more proactive communication. The SEP will also include the readily available external grievance mechanism mentioned below. The SEP will be reviewed periodically during implementation and will be updated as necessary to ensure effective ongoing engagement.

External Communications and Grievance Mechanisms
Agrofusion has an active grievance mechanism for customer complaints and regularly monitors the number and root cause of complaints and under the scope of GMP and food safety management system. Traceability practices and product recall procedures are available in case of any need. As stated in the ESAP (action # 1), the company will broaden the scope of this grievance mechanism to allow communication with other relevant stakeholders.

Farm Enterprise “Integrated Agrosystems”

25 Moskovskaya Street., Gola Prystan
Goloprystansky region, Khersonska oblast
75600, Ukraine
Anna MarkovskayaProject Coordinator, Agrofusionmailto:a.markovskaya@inagro.uaT/F:+380512 587901 (1118)
http://www.inagro.ua

Broad Community Support is not applicable for this project

Title

Anticipated completion Date

Agrofusion, will develop and formalize its current activities in a Stakeholder Engagement Plan (SEP) scaled to the project risks and possible impacts. This SEP will support Agrofusion’s strategic engagement with relevant stakeholders through the identification of key stakeholders and more proactive communication. The SEP will also include the readily available external grievance mechanism mentioned below.

12/31/2016