The Project does not include any new greenfield or brownfield development and therefore, no new land acquisition is expected. The injectables plant in Psicofarma DN is under construction reutilizing an existing storage building that was modified to accept the new layout, also, the API plant NeolSym has enough free land to accept the future new expansion planned in 4Q/2019. PS5 (Land Acquisition and Involuntary Resettlement) will therefore be not applicable to the Project. The current operations are located in industrial zones or highly urbanized areas, considered modified habitats without significant biodiversity values, with no known historical and/or cultural heritage sites; and the Project and its activities will not impact any indigenous people/community. Therefore PS6: Biodiversity Conservation and Sustainable Management of Living Resources, PS7: Indigenous Peoples and PS8: Cultural Heritage, are not applicable.                                                  

This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability because a limited number of specific environmental and social (E&S) impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards and guidelines. 

Key E&S issues associated with this Project include Neolpharma’s environmental, occupational health and safety, and HR policies and the way these will be implemented in newly acquired production plants as well as to manage construction contractors. The Company’s manufacturing operations have impacts related to water and energy consumption; management of hazardous materials and wastes; air emissions from boilers and generators; and liquid effluents from cleaning processes. Other E&S issues include emergency preparedness and response; community engagement and security services; worker’s access to grievance mechanisms; and road safety provision for manufacturing operations as well as for the sales workforce.                                                                                                

Environmental and Social Assessment and Management System: Neolpharma hold the required environmental, OHS and operational permits for its plants. All facilities are approved as per Good Manufacturing Practices (GMP) requirements of the Federal Commission for Protection Against Health Risks COFEPRIS of Mexico, as well as similar certifications in other countries (INVIMA in Colombia, DIGEMID in Peru, among others). Also, the Company has obtained, for some of their facilities, special recognition as a company with good Corporate Social Responsibility (CEMEFI in Mexico) in line with ISO-26000. The production plant Neolpharma P.R. has obtained several additional certifications, including FDA approval, and controlled substances licenses by the DEA and AMSSCA.  

Neolpharma has implemented functional environmental, Occupational Health and Safety (OHS) and Human Resources (HR) management systems in the existing operations. In the past, the Company had received third party certification as per ISO 9001, 14001 from IMNC of Mexico; although the current management systems are operational, the Company decided not to renew the ISO certifications after year 2018 for their production plants. The Company is in the process of reviewing the Corporate Integral Management System (SGI), that includes operational environmental, health and safety (EHS) provisions and separate Corporate Social Responsibility (CSR) sub-system. Also, it has developed the related corporate policies which are operationalized, through standard operating procedures (SOPs) and work instructions. It was observed that the systems are functional; nevertheless, monitoring and reporting could be strengthened through better key performance indicators for EHS aspects and further promotion of continuous improvement mechanisms throughout the operations.

The Company’s formal Integral and Quality Management System is currently under review and implementation, aligned with Good International Industry Practices (GIIP), mostly in the context of GMP applied in the pharma industry and clean industry. The EHS management system is integral part of the SGI, with well-developed elements and several monitoring programs, like, OHS, chemical management system, air and water emissions monitoring, hazmat handling and management system, and emergency planning, that are applied at site level. The Company, in parallel, is developing the corporate social responsibility CSR system that together with the EHS portion of the SGI will conform the operational Corporate Environmental and Social Management System (ESMS). 

Further, building upon its E&S policy and the management system, Neolpharma, as per the E&S Action Plan (ESAP) item #1, will complete the review and implementation of the EHS and CSR management system for the operations of all subsidiaries, to ensure alignment with the requirements of IFC Performance Standards within the corporate SGI; this will be based on a gap analysis to be performed by Neolpharma. This will include an EHS monitoring program at corporate level aligned with IFC PSs, which will specify minimum parameters to be monitored, frequencies and the definition of thresholds for corrective actions. The monitoring program will consider the parameters (particularly for water effluent quality) indicated in the World Bank Group (WBG) General EHS Guidelines and EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing.

Identification of Risks and Impacts and Management Programs: The proposed Project does not include any greenfield development; therefore, new Environmental and Social Impact Assessments (ESIA) are not required, but only modifications to the existing environmental permits for the future (under construction) Injectables Plant in Neolpharma DN and for the expansion of NeolSym (API Plant). Environmental impacts and OHS risks of the operations have been identified through the environmental plans as required in the countries of operation and are updated periodically. Accordingly, the Company has developed and implemented SOPs to manage the risks and impacts identified. The SOPs incorporate OHS and environmental work instructions and cover issues such as effluents, emissions, solid waste, accident investigation and control of individual OHS risks (physical, chemical and biological).

For new construction and renovation projects, the Company together with their consultants and design team prepare an initial hazard identification and risk analysis, check  the required permits with compliance with applicable local environmental requirements (permits, EIA when necessary, other), and later the selected contractor provides additional detail analysis on OHS provisions (personal protection equipment, work permits, safety inspectors, transportation safety), environmental protection, waste management, and management of hazardous materials.  

Recently, Neolpharma completed the acquisition of a Production Plant in Toluca (Psicofarma Toluca) that was owned by Roche. During the acquisition process, the Company completed a detailed environmental and social due diligence (ESDD) on the plant, aligned with IFC PS’s, and has confirmed that there are no environmental or labor liabilities and the plant was suitable for business combination, after been GMP certified. The Company has started operations in this plant (first semester of 2019), initially at 40% of the design capacity and will ramp up operations as some of product lines from other sites are relocated to this plant in Toluca. 

Organizational Capacity and Competency: Neolpharma has an EHS unit with 20 professionals, led by the EHS (PASH) Corporate Manager, reporting to the Corporate HR Director. Each plant has a dedicated EHS team that reports locally to the respective Plant Manager and, autonomously, to the EHS Manager for corporate guidelines. Neopharma has local OHS committees (i.e. Comité de PASH in Spanish), as required by the local law, whose role is to identify and support implementation of OHS aspects and environmental protection. In addition, well-developed emergency brigades are in place to respond in case of emergencies on each plant. Labor aspects are managed by the HR and Quality departments. There are medical doctors and nurses providing support to all employees in all production plants and main offices. Training is provided to the employees on EHS topics at all locations.  

Emergency Preparedness and Response: Neolpharma has developed detailed emergency response plans for its operations, aligned with local legal requirements and GIIP. Training for emergency preparedness and response and first aid is provided to all employees. Fire, earthquake, spills and personal accident related emergency drills have been conducted more than twice a year in some facilities, based on risks identified.  Neolpharma’s plants are located in a mixed used area with commercial communities nearby or are located in an industrial zone, with no residential communities in the nearby vicinity; other industries in the parks were the plants are located have limited risks and the local emergency response plans has considered the potential impacts on and from the communities.

Monitoring and Review: Monitoring is guided by the applicable legal requirements; and could vary by country of operations. The Neolpharma plants in Mexico conduct regular environmental monitoring including ambient air quality, stack emissions, effluent quality, ambient noise, water quality, workplace exposure to noise, chemicals and aspects aligned with its specific permit conditions. The EHS monitoring in the Neolpharma plant in P.R.  has similar items regulated by OSHA, EPA and FDA of the USA.

Internal and external audits and annual reviews on EHS management and performance are conducted. As is common in the pharma sector, third party certification and regulatory bodies audit the facilities periodically as part of surveillance protocols and GMP audits.                                                   

Human Resources Policies and Procedures: Neolpharma has HR policies and procedures that cover all the key aspects, including working conditions, hours of work, recruitment policies, performance and promotion, violence at work policy, disciplinary actions and staff training policy.  Presently, Neolpharma is in the process of reviewing and documenting, both, the HR Policy and the Handbook of Ethics and Code of Conduct, which describes core values, and will guide the behaviors across the corporation.

During the induction program, Neolpharma policies are provided to the new staff and all procedures are readily available to staff. Neolpharma’s HR policies and procedures were generally aligned with PS2 requirements, however, there are aspects that are operational but not indicated in the current HR policy, based on PS2 and new regulations in Mexico. For this, as part of the ESAP, item # 2, Neolpharma will include the current HR policy and Handbook of Ethics and Code of Conduct with these provisions and proceed with the implementation of the policy at corporate level, to include freedom of association, grievance mechanisms, retrenchment process and psychosocial risk factors (as detailed below in next points).

As part of the management system and the GMP, Neolpharma audits its third-party manufacturers and key suppliers on EHS performance, such evaluation system will be expanded in the end of 2019 as part of the implementation of the corporate SGI.

Working Conditions and Terms of Employment: Neolpharma provides employees with clear terms of employment, and provides information regarding industrial relations, disciplinary procedures, and roles and responsibilities within the organization. Neolpharma pays wages levels required by local law. Recently, a collective bargaining agreement was signed by Neolpharma with a national union. Overtime is paid per local law and the large sales representative workforce is compensated based on a combination of fixed salary plus commission; minimum income is guaranteed, and terms of compensation are well described in the contracts. Sub-contracting is very limited within the Company; only catering, general housekeeping, work for small renovations and external security are contracted to third party companies.

Turnover has averaged 18% in the past 3 years, mainly attributable to voluntary movements by workers for family and career reasons, and primarily observed in workers of production plants or sales positions. The Company has developed several programs to reduce the turnover, including, better recruitment strategies, working climate assessments, onboarding, surveys, performance evaluations, welfare talks and emotional and medical support, among others, all aligned to improve the work environment and retain employees.

Protecting the Work Force, Non-Discrimination and Equal Opportunity: Neolpharma is an equal opportunity employer, promoting fair and equitable treatment of employees, including processes of hiring, promotion and termination of employment. There is no evidence of discrimination based on personal characteristics or gender. The Company complies with relevant legislative requirements. In compliance with local law some young trainees are retained to improve their technical skills. No child labor or forced labor is used by the Company. Neolpharma’s workforce is about 2,485 employees, of which 49% are female employees (approximately 45% held supervisory positions in manufacturing plants).

The Company and all subsidiaries follow the related Federal Labor Laws on “Work Equality and Non-Discrimination”, “Law to Prevent and Eliminate Discrimination”, “Psychosocial Risk Factors at Work”, “Work-Identification, Analysis and Prevention” and the “Law on Women's Access to a Life Free of Violence”, that fully cover the requirements of PS2 with respect to non-discrimination, Gender-based Violence (GBV) and equal opportunities. The Company is working towards mechanisms to ensure that the workers manage their occupational changes and possible health disturbances from exposure to psychosocial factors. 

Correspondingly, as part of ESAP # 2 (ref. HR policy), Neolpharma will ensure that the HR policy covers the following aspects: (i) corporate commitment to the prevention of psychosocial risk factors and prevention of labor violence within a favorable organizational environment; (ii) constant information strategy to all employees (direct and indirect workers); (iii) results are measured to ensure the establishment of an appropriate organizational environment to prevent acts of violence; (iv) promotion of the prevention of actions for psycho-social risks, and (v) effective mechanisms for filing and respond to complaints on social violence.

Retrenchment: During the acquisition by Neolpharma of the production plant Psicofarma in Toluca (formerly owned by Roche), the Company performed an extensive ESDD, including labor audits and reviews. The approach taken by Roche during the offer, was that they would transfer the plant with no employees and no labor liabilities. Therefore, at this time, with no future acquisitions planned, retrenchment is not expected on this Project. In case Neolpharma identifies the need to undergo retrenchment in the future, it will be carried out as per the requirements of IFC’s Performance Standard 2.

Workers’ Organizations: There is no evidence of any obstacles hindering Neolpharma staff from forming or joining a labor union. and adheres to collective bargaining agreements with different workers’ organizations. Currently the Company has signed an agreement with a national union covering plant employees, administrative personnel and the sales workforce. The Company reports a stable industrial relations climate.

Grievance Mechanism: Neolpharma’s employees can raise their grievances through various forms provided by the Company. The Company follows an “open door” policy and, if required, the employees can approach human resources to raise grievances. Productions and sales meetings are considered as points to obtain feedback from employees. However, there is no a formal procedure to process the grievances, both internal and external complaints. As set forth in ESAP, item # 3, the Company will document an internal corporate grievance mechanism which will include identification of effective means to report grievances and resolve them in a timely manner, with necessary feedback to the concerned staff; in accordance with PS2 requirements. The same will be communicated to all employees. Such mechanism should be available to third party workers.

Occupational health and safety (OHS): Neolpharma’s main production facilities have implemented OHS management systems, overall aligned with the requirements of the Mexican law and local laws of other countries of operation. This includes, Workplace Risks Prevention Programs, Occupational Health Control Program and implementation of accident prevention committees. The Company has identified key OHS risks and has defined operational procedures and programs. OHS programs are detailed and there is a comprehensive workplace monitoring program in Neolpharma.

Periodic medical exams are conducted for the employees based on their work areas, and specific identified risks. Monitoring results show overall compliance with the local Threshold Limit Values (TLVs) in the Company. Adequate engineering and administrative controls are implemented, and personal protective equipment is provided to employees.

In addition, the Company has adopted a joint-responsibility system comprising key practice that organizes OHS teams of the various plants and facilities and every year these teams are scheduled to undertake safety inspection at other facilities, with results shared across the whole Company to highlight areas of strong performance and of required improvements for all staff to see. The Company uses this practice to promote mutual OHS supervision and shared-responsibilities across its facilities.

Neolpharma has a system to report and investigate accidents, with a centralized system to report and identify causes and record the statistics. Injury rates in the Company is low compared to the industry benchmark, both national and international statistics.

The Company’s sale workforce has available a fleet of 400 vehicles. These vehicles are to be used by the sale representative only and are maintained by the Company in their centralized mechanical shop or by authorized dealers. A very low index of yearly traffic accidents is recorded with detailed assessment of causes and corrective actions are implemented. Information is provided to sale representatives on safe driving through internal mail and bulletin boards; also, the Company has developed road safety programs targeting sale representatives, which will also include preventive measures such as defensive driving training.

For new construction and renovation projects, the Company implements a contractor’s management plan with the necessary OHS provisions (personal protection equipment, work permits, safety inspectors, transportation safety), environmental protection, waste management, use and management of hazardous materials and strict requirements for security service personnel of the contractor. The contractors’ employees are required to be enrolled and affiliated in the IMSS, and during their work within the Company’s facilities they are required to adhere to internal labor regulations and policies.  

Resource Efficiency: Neolpharma has implemented some basic initiatives on resource efficiency (e.g. change of lighting systems, improvement of HVAC system, etc.) and has over time replaced equipment such as back-up generators and boilers to more efficient ones. In addition to reduce the electricity consumption, the Company uses natural gas for its boilers to support its energy demand.                                                                                                                                                                                                                                        Presently, Neolpharma relies mostly on electricity from the grid; the annual consumption for all plants is approximately 14,158 MWh/yr and an estimated natural gas consumption of 3,869,000 m3/yr. The Company has developed several additional programs to reduce energy and water consumption, including cogeneration, rain water harvesting and recovery systems, low and zero flow fixtures, among others. 

Greenhouse Gas Emissions (GHG):  Current greenhouse emissions from the manufacturing plants (electricity and fuels) and those from fuels used for transportation of the sales force, have been estimated to approximately 45,213 tons CO2-equivalent per year (Facilities in Mexico and P.R.) from acquired electricity from the network, natural gas in cogeneration units and small amount of diesel. Additional GHG emissions from other sources and small facilities are not expected to be significant. The new injectables facility and the expansion of NeolSym is expected to increase GHG emissions by 1,200 tons CO2-equivalent per year for a total corporate of 46,000 tons CO2 equivalent per year; nevertheless, Neolpharma plans to reduce electricity consumption, for example, by  the use of cogeneration units for the production Plants (project that has been already contracted to a local ESCOS firm in 2019) with gas generation units and replacement of electric chillers with heat recovery (cogeneration) units.  From this project, it has estimated a GHG reduction of 14,000 tons CO2-equivalent per year (-31%); for a final estimated emission of 31,200 tons CO2-equivalent per year, after year 2020. 

The Company will report annual greenhouse gas emission levels arising from its operations and all sources in accordance with PS3, utilizing an internationally recognized methodology to estimate and record GHG’s. 

Air Emissions: To ensure integrity of the products and to control emissions, high efficiency particulate air (HEPA) filters and local exhaust ventilation are provided as part of the heating ventilation and air conditioning (HVAC) system in all production plants. Neolpharma has an annual plan for monitoring air emissions from process units and combustion sources. Results shared during appraisal confirm that air emissions in all production plants are in compliance with the local laws and WBG EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing (Table 1). In addition, process filters have efficiencies of above 98% and they are always properly maintained or replaced to be operational. Additionally, specialty high-performance filtering systems are provided for areas processing controlled substances. The filtered waste from the controlled areas is carefully handled, removed and stored in special locations to be audited by the local authorities. This controlled waste is later been accounted for and disposed by government authorized certified contractors.

Emissions from vehicles used for sales representatives, although important in number, are well managed through periodic maintenance programs and frequent renewal of the vehicles.

Water Consumption and Wastewater Treatment: Water is sourced from the municipality and water wells in most plants. Water for production undergoes extensive treatment depending on the use and quality required for the water (potable, purified or highly purified water, water for injection, etc.)

Effluents from the production plants are treated through physicochemical and biological treatments, in several locations and instances of the process. For example, the water used for washing containers and production equipment during the manufacturing of medicines is locally filtered and treated to ensure that the liquid waste is free of active ingredients or other chemicals and neutralized, before it is sent to the WWTP’s.   

In the production plants, water effluents, after treatment, are discharged to the municipal sewage system in most cases or to nearby creeks and other minor water bodies near the plants (NeolSym and Psicofarma-DN in Mexico and Psicofarma in Toluca) that is done in compliance with local regulations; periodic monitoring is performed by the Company and by certified laboratories more than twice a year. At appraisal, results showed compliance with local law and most parameters in the applicable WBG EHS Guideline limits, however, basic parameters (COD, BOD, TSS and Oil/grease limit values) in local regulation differ from those stated on the WBG EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing and the test readings for these parameters are above the defined limits at this time. The Company is planning improvements in the performance and capacity of some of the WWTP in Plants NeolSym (work to improve efficiency and reduce resources consumption, since the WWTP was originally overdesigned) and Psicofarma DN, with additional unit(s) to accommodate future requirements of the new injectables facility in the plant.

For this, as per ESAP #4, Neolpharma will evaluate its current projects on the industrial effluents - WWTP’s - that will be modified under future projects, on the various production plants, and will identify alternatives to achieve compliance with the applicable WBG EHS Guideline limits, considering the final discharge point (water, soil, or city sewage) and additional treatment as needed (requirements as listed in table 2 of the WBG EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing).  Neolpharma will implement the recommended measures/treatment defined and will confirm compliance with applicable parameters. As part of the ESMS procedures, the Company will establish the protocols to monitor effluents and verify the chain of custody documentation for the waste derived from effluents treatment (sludge, other) which is currently disposed by their licensed contractors.

Solid Waste Management: Neolpharma has a robust and adequate solid waste management plan, involving waste reduction, segregation and disposal through authorized companies. Waste is segregated between recyclable, packaging and hazardous materials. Waste is stored in well ventilated, gated areas which were observed clean and well managed. Waste generation is adequately monitored, including a proper chain of custody for hazardous materials. Authorized vendors are audited by Neolpharma to ensure proper management of waste.

Hazardous Materials Management: Raw materials and active pharmaceutical ingredients are segregated and stored in warehouses in accordance with GMP requirements. In principle, there is a designated area for flammable materials, which is well designed. Also, materials requiring special controlled temperature and relative humidity are segregated and stored in designated special areas, with proper ventilation and containment, for these materials within the controlled areas or controlled substances.

There is an accessible database with Safety Data Sheets (SDS), with ease of access and information is readily available or locally at each lab or production area.  Neolpharma, has implemented programs to manage hazardous substances, including identifying effective mechanisms to access safety information for incompatibility and emissions in case of emergency.                                                   

Community Health and Safety: The manufacturing plants of Neolpharma are located in Mexico and P.R.. are located within a commercial and industrial area; households are not in the immediate proximity of the property, but only commercial or industrial facilities. The risk analysis developed for the Emergency Response Plans (ERPs) for the production plants and distribution centers included the review of hazmat release, fire and explosions effects from the Company’s facilities to the vicinities and vice versa, evaluating the impact on the communities and detailing clear emergency control measures for these risk scenarios. Neolpharma has proactively engaged the communities to address any potential concerns and has developed social activities to generate awareness, improving means of communication, support local community, and mutual aid with other industries during emergencies.

Transportation of raw materials and products at all operations is sub-contracted to specialized companies with safety and verification protocols. Trucks are normally allowed to perform loading/unloading operations during daylight hours and in designated areas.

Presently, all the facilities had passed the local “Proteccion Civil” assessments. All fire protection systems in the production plants have been designed to current local Mexican regulations and based on GIIP. The production plants maintain close contact with the local fire department that has issued the respective building fire permits for all existing plants and buildings. During the appraisal visit, it was observed that the fire protection systems were well maintained and in good operational conditions. Presently, the Company is working to improve the service contracts with specialized companies to ensure better response from the contractor during faults in the fire alarm and fire-water pump systems, and general improvements in their corporate program for inspection, testing and maintenance (ITM) of all fire protection systems.  

Security Personnel: Security service functions is managed by Neolpharma with a subcontracted specialized firm which is registered to the national authorities with unarmed personnel, and, also the Company contracts the services of the Mexican Federal Police for Banks and Industries (Policia Bancaria e Industrial – PBI) that includes rounds and verification of the perimeter of the plants, access control in the production plants, intelligence, with the use of PBI personnel with proper management of firearms. The contracts for these security services are in line with the requirements of PS4, stablishing a formal manual for management of security personnel covering their functions, public engagement procedures, documentation, obligations, prohibitions, duties and code of conduct and management of equipment. Particularly, even though the security guards rotate frequently, they are regarded as a Company’s employee, and in a way to promotor their integration with other workers, they are assigned as active members of the emergency response teams (fire brigades) to make them well-aware of their role, participating in scheduled emergency training sessions and drills.

The Company has undertaken security risk assessments and has developed a security management plan, for threats from and to the community and has developed appropriate policies and procedures (e.g., a written code of conduct; training; procedures in the event of any incident, community unrest, community requests, crime identification, etc.) to ensure effective oversight and accountability for the security personnel. The Company will ensure alignment with its E&S Management System, Emergency Response Plan and Community Management Plan. The specialized security companies and PBI are periodically audited by the Company, local authorities and federal government.                                                   

The Company has a “centralized call center” to collect commercial information related to products (side effects, allergies, etc.). However, NeolPharma has not defined clear mechanisms to receive and address specific E&S complaints or concerns from the community. For this, as per ESAP #5, Neolpharma will develop an external grievance mechanism and respective procedures to collect, record and respond to those grievances. No significant footprint expansion has occurred in recent years; therefore, no formal consultation processes has taken place

The Company recognizes corporate social responsibility (CSR) as an essential part of the Company’s identity and therefore supports, through various activities, targeted initiatives for identified stakeholders. Relations with local communities are well established through formal channels such as periodic meetings with the community leaders and provision of vocational programs covering those communities. In addition, the Company actively participates in health campaigns in collaboration with the public and private entities. For example, Neolpharma supported programs, like, Medicine Donation; Reforestation; Innovation Award in Bionano Technology; corporate volunteering for toy donation for the benefit of schools and hospitals; donation of computer equipment for low-income schools; donation of equipment and laboratory supplies to Universities and Research Centers; collaboration agreements with Universities and other Private and Public Research Centre’s; Agreement with ANIQ (National Chemistry Industry Association); sponsorships at scientific and educational events (science dissemination); recovery of spaces for operations or recreation; involvement in committees with the City Mayor of Civil Protection, Security and Economic Development and Sustainability, for a total annual investment of US$370k.                        

Diego Ocampo Gutierrez

Dirección:  Calzada de Tlalpan #4369, Col. Toriello Guerra, Del. Tlalpan, México, D.F. C.P. 14050

Email:  diego.ocampo@neolpharma.com

Teléfono: +52 55 4124-7400