PS6 is triggered for sustainable management of living natural resources. All farms are considered Modified Habitat at the time of acquisition by Subati. PS5 is not applicable because land for the investment was acquired on a willing-buyer, willing-seller basis and expropriation or other compulsory procedures were not an option for the client. The land acquisition process is described under PS1 section of the ESRS. PS 7 is not applicable as there are no communities present which meet criteria for Indigenous Peoples. PS 8 is not applicable as no adverse impacts on cultural heritage are not known to have occurred; and/or the risk and impact identification process has not established the likelihood of such impacts (e.g., destruction of physical culture or exploitation of cultural knowledge).

This investment is classified as a Category B project in accordance with IFC’s Policy on Environment and Social Sustainability. Based on information reviewed by IFC, the proposed Project will have limited adverse environmental and social (E&S) impacts that are few in number, site specific, largely reversible and readily addressed through mitigation measures, as outlined in the Environmental and Social Action Plan (ESAP) attached to this Environmental and Social Review Summary document (ESRS). The main E&S risks and issues are related to: (i) High stakeholder concerns over contextual water use in Lake Naivasha (Naivasha farm) and potential concerns on adjacency to Tsavo East National Park (Kibwezi farm);; (ii) water abstraction for irrigation in water-scarce areas and need for efficiency; (iii) management of effluent, such as fertilizers and pesticides, to avoid impact to adjacent natural water bodies; and, (iv) gender-related considerations for labor and working conditions given that a majority of the workforce is female.

Subati has 1098 staff (580 female) at Subukia and 646 staff (352 female) at Naivasha. Of these, seasonal staff consist of 187 (87 female) at Subukia and 102 (51 female) at Naivasha. Kibwezi currently has 236 staff (95 women), with 500 total staff expected once full operation is achieved. Female workers constitute at least half of the workforce at established farms (Subukia and Naivasha), with the majority of these working in the greenhouses. Kibwezi currently has a higher proportion of men, due to ongoing construction, but a similar ratio is expected once full operation is achieved. Average staff turnover rate is reported at 2-3% per annum. The majority of staff are believed to be from neighboring communities but this is not formally tracked. Subati also employs third-party workers via contractors for security services, construction and land preparation, waste removal and greenhouse building operations. Subati hires day laborers 2-3 times a year at their gate on as needed basis, estimated at 10-15 laborers a year.

Human Resources Policies and Procedures: Human Resources managers exist at all farms. There is currently no group-level Human Resources (HR) lead, but the HR Manager at Subukia, the most established of the 3 farms, fills this role in practice to ensure all farms are aligned in their approaches regarding HR matters. The Human Resources staff rules and regulations handbook outlines Subati’s policies on the management of its human resources, including policies for hiring, selection, age verification, disciplinary practices and termination, terms of employment (wages, benefits, working hours, overtime, rest days, breaks, and leave), and for combating discrimination, and sexual harassment. 

Working Conditions and Terms of Employment: Working conditions and terms of employment are specified in the written contracts signed by employees, provided and communicated to employees during induction. Subati complies with all limits and requirements established by national legislation and the Agricultural Employers Association (AEA) and Kenya Plantations and Agricultural Workers Union (KPAWU) Collective Bargaining Agreement as periodically negotiated. These requirements are related to working days per week, rest days, leave, minimum wages, health care, transport benefit, retrenchment, and other agreed upon worker’s rights. Subati provides a canteen with free lunch, access to drinking water and sanitary facilities at all farms. Canteen services are outsourced at Naivasha and Kibwezi but it is intended that equivalent facilities will be established. Some core staff (e.g. management) and temporary workers are housed on site, but the majority of staff live in neighboring communities off-site. On site-housing includes electricity, access to water, adequate space and other facilities. An annual regulated risk assessment as well as certification audits include reviews of worker conditions. Allowances have been made for gender-segregated shower and toilet facilities at all farms. Due to strict hygiene guidelines related to greenhouse horticulture and flower/herb processing, sanitation is kept to high standards as described in certification requirements.

Workers’ Organizations: National legislation provides the right to organize and bargain collectively. On average, 42% of workers at each farm are part of a union (Kenya Plantation & Agricultural Workers Union). The union at the shop’s floor communicates to the management through respective departmental shop stewards. Most of the cases are minor, and are dealt with by the supervisors in their place of work. Farm management holds meetings as requested by the union committee to discuss issues. The union committee is made up of the shop steward and elected 10-15 members, of which variable numbers are women depending on election results. All action items are captured in summary minutes and one of the key functions of the union committee is to verbally communicate to employees the working conditions and terms of employment specified under the collective bargaining agreement; the last agreement was signed in 2016. External union representatives also schedule meetings as needed. In general, Subati reports positive relations with union representatives. Union representatives are elected every 3 years, with the next election scheduled for 2018. Subati has no grievances or lawsuits pending due to labor issues. Subati has supported establishment of Gender Committees (3-4 elected workers) at Naivasha and Subukia farm to support female staff on various issues. Meetings are held as required and minutes recorded. Kibwezi currently has no union or gender committee; establishment of these is dependent upon requests from workers.

Non-discrimination and Equal Opportunity: Subati has a policy for protection from discrimination, as well as a sexual harassment policy. Subati management’s stated position is that sexual harassment is unacceptable and will not be tolerated. Workers are able to report instances via various methods including the Gender Committee, HR manager, appointed representatives, or directly to the police.

Grievance Mechanism: Subati has a formal grievance mechanism for worker complaints. Union members raise issues via their representative shop steward who, as needed, escalate issues to management. Non-union staff can escalate their issues via their management chain of command. HR managers maintain a register of all grievances, of which few have been recorded. Records indicate all have been addressed and no grievances are outstanding (e.g.  Sexual harassment claims which were unsubstantiated but training was conducted on the sexual harassment policy including reporting requirements and existence of zero tolerance policy). There is however no evidence of final sign off by the worker with regards to satisfactory closure of grievances. Subati shall integrate requirements for sign-off on closure of a grievance case into its group-level policy and develop and implement supporting procedures (ESAP #1).

Protecting the Workforce: Subati has implemented an age verification procedure in the hiring process and specifies the minimum hiring age to be 18 years or above

Occupational Health and Safety: Subati manages OHS risks and impacts per OHS requirements found within its existing certification schemes and national regulatory requirements. These regulatory requirements include annual risk assessments of each farm. Subati has also established am EHS policy, which includes OHS issues relating to the proper handling of pesticides and chemicals. OHS management structures extend to teams working in sections of each greenhouse. Each team includes a trained first-aid lead with keys to first aid materials established in each building to address minor incidents. Subati has implemented an Integrated Pest Management system in order to reduce its use of pesticides and chemicals. When pesticides are applied, a notification system is in place to prevent access by unauthorized personnel. Appropriate personal protective equipment (PPE) is provided to all employees according to different activities and monitored by team leads at each greenhouse. OHS briefs are issued monthly (on average) as managers circulate through greenhouse teams, refreshers are conducted by internal leads every 3 months, and external trainers are present every 6 months to a year. Clinic records indicate the main injuries suffered by workers while on the job are small cuts. No fatalities have been recorded since Subati operations began. Records of injuries are maintained by on-site medical staff.

Workers Engaged by Third Parties: Subati has a number of contractors, providing security, greenhouse construction, irrigation construction, and land preparation services. Subati policies apply to these contractors but they are not actively monitored while on site. Subati has not incorporated into contracts the requirement for contractors to comply with relevant national legislation or Subati policies on labor standards; instead, it is reported that this is informally requested of contractors. Temporary contractors are housed on site. Subati shall therefore develop an appropriate mechanism for ensuring contractors comply with national legislation and relevant Subati policies (ESAP #4).

Energy and Resource Efficiency: Energy audits exist for Subukia and Naivasha, conducted in 2013/2014, and audits for all farms are being planned in 2018, as per regulatory requirements. Electricity consumption was reported as 1,559,148kWh/year at Subukia and 603,186kWh/year at Naivasha. Approximately half of this is supplied by national grid, supported by 2 back-up generators at each farm (1 x 250KW, 3 x 350 KW). Electricity is consumed in cold rooms (50-70% of demand), by borehole and irrigation pumps (9-11% of demand), and other miscellaneous uses, including some additional pumps for on-site water transfer. Electricity consumption at Kibwezi is being monitored during the construction phase but no estimate as to the amount to be consumed during operations is currently available. Energy is provided by on-site rooftop solar (250KW) and:  2 back-up generators (1 x250KW, 1 x 400KW). Space for an additional 250KW of rooftop solar is available. Potential for expansion at Kibwezi, as well as installation at Subukia and Naivasha, is being considered subject to how the current solar installations perform. Primary uses of electrical energy at Kibwezi are the same as Subukia and Naivasha. Energy conservation measures have been identified via energy audits (e.g. jacketing of cold rooms, establishing an energy efficiency monitoring system); some are already in place (e.g. LED and solar lighting). Subati will continue to maximize energy efficiency and implement such recommendations at all farms wherever feasible.

Water Consumption: Subukia farm is in the catchment for Lake Bogoria, and situated 30km south of that lake. Naivasha farm is within the catchment area for Lake Naivasha, situated 10km east of that lake. High stakeholder concerns exist over low water levels and nutrient loading, associated with floriculture and agriculture in general, which have impacted hydrology and biodiversity at Lake Naivasha. A Lake Naivasha Basin Integrated Management Plan (LNBIMP), covering 2012-2022 has been developed by key stakeholders, including government, NGOs, and local community bodies. The objective is to improve environmental conservation, sustainable development, and livelihoods for all users within the catchment. While the plan covers all areas of the catchment, areas of highest concern and risk are noted as being within the riparian zone immediately adjacent to the lake. Subati shall align its ESMS (ESAP #1) and Naivasha farm ESMP (ESAP #2) with relevant recommendations made in the LNBIMP and equivalent government-supported plans. Subati shall engage the stakeholders who developed the LNBIMP as part of its stakeholder engagement plan to promote alignment of Subati activities with catchment-wide efforts for sustainable development, where feasible (ESAP #3).

Water at Subukia and Naivasha is provided via licensed boreholes (70-80% of water input, 3 bores at Subukia, 4 bores at Naivasha) and rainwater capture (20-30% of water inputs), depending on rainfall patterns. No water is abstracted from, or discharged back to, Lake Naivasha or any associated surface water bodies (e.g. rivers). Excess water is stored on-site in a system of artificial reservoirs, with 3 (2 storage and 1 operating) at Subukia and 3 (2 storage and 1 operating) at Naivasha. Additional reservoirs for rainwater capture are planned at Subukia and Naivasha. Primary water use is focused on drip-irrigation, with fertilizer, of greenhouse roses, requiring approximately 4 l/m2/day. This equates to 308 000 l/day (308 m3/day and 112,420m3/year) across the 77 ha of greenhouses at both Subukia and Naivasha. These flowers are grown directly in the soil using 25% less water than equivalent hydroponic operations. Water inputs to flowers are monitored daily and use is kept to a minimum to reduce costs. This includes use of collection systems for any excess water in the drip irrigation system, which is recycled for 3 days before it is sent for waste treatment. Additional water is used for wash down and work showers, and staff sanitation needs. Initial review by IFC indicates further efficiencies of up to 25% are possible. Subati shall further review these possibilities and implement such efficiencies wherever feasible to reduce any potential or perceived water abstraction pressure on Lake Naivasha, Lake Bogoria and associated surface water bodies (ESAP #5).

Kibwezi is within the Athi /Galana/Subaki catchment. The catchment comprises the southern part of Kenya and considered to have high potential in terms of agricultural and industrial enterprises. It includes the primary water sources for Kenya’s capital, Nairobi. The Galana River is one of the few perennial streams in the arid to semi-arid landscapes around Kibwezi, and drains into the Indian Ocean via the Subaki Estuary, north of Malindi. River discharge quality and quantity is monitored by government agencies. River discharge varies between 0.5m3/second to 758m3/second, based on average discharge between 1959-1977. The catchment supported 47 100 ha of irrigated lands in 2013. Water at Kibwezi will be provided via abstraction from the Galana River (90 %), boreholes (10 %) and rainwater collection when possible. An application for an abstraction permit from the Galana River was been submitted to the Water Resource Management Authority (WRMA) in July 2017 and is being processed. The permit will not specify any limits but use will be metered and subject to agreed charges. Though permit is still in process, Kibwezi is being charged for water use and is making payments to WRMA. Subati shall submit the final abstraction permit to IFC on approval from the Water Resource Management Authority (WRMA) (ESAP #6). Primary water use is for drip irrigation, currently estimated at 3 l/m2/day on average, equating to 600 000 l/day across 20 ha of greenhouses. Full production of 100 ha of greenhouses would require 3 million l/day (3,000 m3/day and 1,095,000m3/year). Additional experimental plots of tree crops use 20-30m3/week from a bowser with water taken from the river. Additional water is used for wash down and work showers, and staff sanitation needs. Initial IFC analysis suggests daily water demand at full production is estimated at 6.9% of minimum and 0.7% of mean annual discharge, assuming all water is taken from the river, and equates to 0.02% of all irrigated lands within the catchment. IFC will commission an independent assessment of the catchment-wide context for water resources (availability, competing users, minimum environmental flows). On completion of this independent assessment, Subati shall consider findings of this independent assessment as part of its risk assessment to inform farm-level ESMPs (as part of ESAP #2); and update ESMPs as applicable, to describe measures to ensure use remains within acceptable limits, including environmental flows for surface waters (ESAP #5). Such measures will include monitoring of water quality above and below the abstraction point, consideration of abstraction cut-off thresholds based on minimum environmental flow requirements, and establishment of a closed-loop system for all water.

Air Emissions: The main source of air emissions is currently from the vehicle fleet (6 trucks + a number of cars), and operation of generators (reported to be more than 500 hrs per year) during power outages (Subukia and Naivasha) and when solar power is unavailable (Kibwezi). There is currently no process for monitoring emissions. Maintenance plans for generator exist to ensure adequate servicing. Subati shall review, and where needed update, its generator maintenance plans to ensure compliance with WBG guidelines for point source emissions to air as part of its updated ESMS (ESAP #1).

Wastewater Treatment: Wastewater sources at all Subukia and Naivasha farms include (i) drip-irrigation waste water, which is kept close to zero excess (ii) water from staff showers, toilets, and wash-down areas which collectively are drained into a sequence of three soak pits, consisting of boulders, charcoal, and sand, followed by an artificial wetland which releases into the surrounding landscape. All toilets at all farms are run via bio-digesters. Wastewater sources and management at Kibwezi is similar to other farms, except that the role of the soak pit/wetland system will be filled by a gravity fed sequence of 3 artificial wetlands with outputs running via a final filtration facility that will produce water which meets requirements for irrigating crops for human consumption. This water will be used for irrigating uncovered crops and trees. This wetland and filtration system is under construction. Wastewater management facilities at Kibwezi are being built to meet or exceed expected demands at full operation (e.g. installed bio-digester capacity is for 600 people). 

Solid Waste Management: The main solid waste sources and their management include the following: plants (e.g. leaves, stems) and food waste (a zero food waste policy exists) which is composted on site and used in greenhouses; and spent greenhouse plastic coverings which are offered to workers for their construction needs. An internal waste management audit is conducted a few times a year at Subukia and Naivasha, to assess waste flows and identify opportunities to improve management. This is also planned for Kibwezi.

Hazardous Materials Management: Subati uses hazardous materials such as diesel for vehicles and generators, pesticides, and fertilizers. Materials are stored in restricted access areas with lined concrete floors, bunding and moats to control any overspill. Only authorized staff with approved PPE are allowed access to such areas. Material Safety Data Sheets of the chemicals are available on-site with most on display in the chemical storage area. Subati maintains a small fleet of trucks for deliveries and a few other vehicles and each farm has its own dedicated workshop areas for emergency maintenance, and these areas are cement lined to prevent spills. Hazardous wastes are removed from site and managed by a NEMA-certified company specializing in hazardous waste solutions. Medical wastes from on-site clinics are transported to a NEMA-approved facility for incineration as per regulatory requirements.

Pesticide Use and Management: Subati applies Integrated Pest Management (IPM) at all its farms based on use of predatory mites approved by Kenyan regulators. All workers monitor pests daily, and escalate to scout teams who conduct regular assessments and identify the need for further action. IPM-compatible spot-spraying is also used as needed, to reduce costs, supported by preventative spraying on a 7-10 day cycle. Pest audits are conducted 3-4 times a year at Subukia and Naivasha, as well as random checks prior to shipping at the airport, as required by certification and buyers. No IPM approaches are currently available for herbs but all pesticide use at the herb farm will need to meet food-grade requirements for toxicity and quantity as described in GlobalGAP and British Retail Council (BRC) certification schemes. All processing facilities are also kept to required standards for pest-free environments, particularly at Kibwezi where food-grade hygiene will be enforced. 

Fertilizers and Nutrient use: Inputs are managed via a centralized computerized mixing system and monitored daily at all farms, with the intention to tailor inputs to current crop needs and keep production costs to an absolute minimum. Inputs are informed by soil testing as needed based on advice from a consultant who visits once a month. This testing, usually every 2 months for soil and every 3 months for water, is conducted by labs in Kenya. Irrigation effluent which is described as close to zero is subject to treatment and reuse in a near closed loop system. Water discharges are not currently tested prior to release into wastewater management systems (soak pits, artificial wetlands) due to difficulties in getting sufficient quantities of effluent for testing Subati shall implement an effluent monitoring system to ensure compliance with WBG Guidelines for effluent discharge (ESAP #7). This shall include monitoring of water quality above and below abstraction and discharge points along the Galana River to confirm that Subati is not impacting baseline water quality. 

Greenhouse Gas Emissions: GHG emissions are estimated at 7800 tonnes of CO2 equivalent per year.

 Transportation Safety: Subati currently operates a small fleet of trucks to transport fresh-cut roses from each of its Subukia and Naivasha farms to Jomo Kenyatta International Airport in Nairobi every night, departing 2300-0200 and returning 1100-1200, with an average roundtrip time of 5 hrs. Travel at these times during the day are likely to be lowest risk from a community risk point of view as traffic is light. A policy on product delivery to the airport exists, which includes requirements for a vehicle tracking system, but there is currently little mention of safety protocols. As part of its ESMS update, Subati shall update the Product Delivery to the Airport Policy to document existing good practices being implemented by Subati (e.g. driver rest periods and duty rosters, avoidance of high-risk times, truck maintenance) and include consideration of driver safety training, and speed limits (ESAP # 1).

Security: Subati has out-sourced security to third party contractors, who provide guards at all farms to conduct routine visitor screening and farm monitoring, and is supported by a security policy. Subati shall, as part of its update to its ESMS, update its security policy to align with IFC requirements (e.g. reasonable background checks, rules of engagement etc.) (ESAP #1).

Sustainable Management of Living Natural Resources: Subukia farm has been certified to the Silver Standard by the Kenyan Flower Council (KFC) since 2008.  KFC undertakes annual audits, and certification is valid until September 2017 for Subukia. Naivasha will be seeking KFC certification in 2018. The KFC certification is acceptable to IFC requirements for a recognized sustainability certification standard. In addition, KFC Silver Standard has also been included (as of July 2017) as an accepted scheme within Dutch markets thanks to benchmarking by the Flower Sustainability Initiative (FSI) against other international standards via Global Social Compliance Program (GSCP) Reference Code, Audit Process and Methodology Criteria. Kibwezi farm is currently seeking GlobalGAP and British Retail Council (BRC) certification in order to sell food-grade products to European markets. BRC overlaps with GlobalGAP but includes a greater focus on food safety. These certifications will be required before produce can be sold. According to certification policies, formal certification process can only be initiated after 3 months of operation. An independent local consultant has been retained to advise and conduct pre-compliance audits in preparation for formal audit and certification. Certification is expected by December 2017. Subati shall submit evidence of successful certification at Kibwezi and Naivasha as soon as this is achieved (ESAP #8).

Supply Chain: Subati does not currently source any external primary production at any of this project sites and so these requirements do not apply. Potential use of outgrowers has however not been excluded from future development plans and, if this is pursued, will be subject to assessment of risks and impacts against IFC PSs.

Contact Person: Mr. Ravi Patel

Company Name: Subati group Limited

Address: 9th floor, Crescent Business Centre, Nairobi, Kenya

Email: ravi@subatigroup.com

Phone/Facsimile: +254 20 2048483