While all Performance Standards are applicable to this investment, IFC’s 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

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
PS 6 - Biodiversity Conservation and Sustainable Management of Living Natural Resources

PS-5: Land Acquisition and Involuntary Resettlement is not applicable.  At this time, Alqueria is not involved in any land acquisition as part of this project; The latest corporate acquisitions DASA and Freskaleche’s plants were acquired on a “willing-buyer, willing- seller” basis. The plants are located at industrial sites and have been in operation for several years– Therefore, there is currently no concern related to land acquisition or involuntary resettlement in the company operations. 

PS-7: Indigenous Peoples is not applicable. The company does purchase milk from farmers identified as Indigenous Peoples (IP), but no land transaction nor use is involved. IP farmers are treated and compensated in the same manner as other suppliers. 

PS-8: Cultural Heritage is not applicable. Company operations are located in industrial sites and company milk suppliers are located in areas where no impacts to cultural heritage are expected.                                                    

This is a category B project according to IFC’s Policy on Environmental and Social Sustainability, because it will create limited adverse environmental and social risks and/or impacts that are few in number,  site-specific, largely reversible that  can be minimized, avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria.  

Key E&S risks associated with this project include food safety, occupational health and safety, effluents from industrial sites, solid waste management, energy and water consumption, vehicular accidents linked to raw milk collection and finished products distribution network, potential biodiversity, and risks in the milk supply chain in frontier regions.

IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s 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 implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.

The company has undertaken the necessary E&S assessment processes in adherence with Colombian regulatory requirements to obtain the necessary operating permits and licenses.   

Company operations  are undertaken according to internationally recognized standards consistent with the principles and practices of Hazard Analysis and Critical Control Points  (HACCP) for food safety, Quality Check for food safety, ISO 9001 for quality, and ISO 14001 for environmental management. Procedures aligned with these standards have been implemented at all operations and are routinely reviewed and updated as part of Alqueria’s management system.    

Alqueria has actively incorporated IFC Performance Standards requirements into its Environmental and Social Management System (ESMS) and day to day operations, and overall its ESMS is in line with the requirements under PS1. Since IFC’s first investment in 2010, the company has assigned adequate resources to improve environmental and social performance. Alqueria developed a set of corporate environmental and social policies and procedures, addressing all E&S risks and impacts of its operations, which have been implemented at all plants.    In addition, as part of its sustainability policies, Alqueria follows the United Nations (UN) Global Compact, an initiative that encourages businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. On an annual basis Alqueria publishes and discloses a sustainability report, the report can be found in this link   http://www.alqueria.com.co/InformeAlqueria2016  

In 2014, Alqueria leased Miraka, a 2,300-hectare dairy farm located in the state of Meta. Currently the farm produces 460 liters per day, it is estimated that the farm will double its dairy production in 2018. IFC reviewed Miraka’s information the company has implemented water, soil, manure and habitat conservation programs at the farm. However, these programs and procedures are not structured as part of an ESMS. As part of this investment and as set forth in the ESAP #1, Alqueria shall develop and implement an environmental and social management system for the Miraka farm consistent with PS1 provisions.

In relation to its milk supply chain,  Alqueria sources daily approximately 845 thousand liters of milk from 13,000 suppliers.  Approximately 65% of the milk sourced comes from the Sabana and coastal regions, where average milk production is 15 liters per day. 57% of the raw milk is sourced directly from farmers and 43% indirectly, through 21 collection centers across Colombia.

As indicated in the ESAP #2, Alqueria shall develop and implement a group level   supply chain policy defining its commitment to comply with specific E&S requirements based on supplier risk, and as part of the ESMS, shall implement a procedure to manage potential environmental and social risks of its direct suppliers, additional information is included in the review of PS2 and PS6. 

Identification of Risks and Impacts 

As part of Alqueria’s ESMS, identification of risks and impacts and management plans to ensure that gaps are closed will be regularly carried out at a minimum annually, and, when there are significant changes to operations, and, in cases of new acquisitions. All identified actions are assigned to specific staff along with a required implementation schedule.  ESAP # 3 For future leases and acquisitions, Alqueria shall develop a land acquisition and leasing procedure in compliance with IFC P5 and PS 6.  Since IFC’s first investment in Alqueria, the company has acquired two former Freskaleche industrial plants in the Santander region and DASA’s plant in Cajica. Both acquisitions were acquired on a “willing-buyer, willing seller” basis. The acquisition process included an analysis of legal documentation, including verification of operational permits. Furthermore, in 2014, Alqueria leased Miraka, a 2,300-hectare dairy farm located in the state of Meta.  Currently the farm produces 460 liters per day, it is estimated that the farm will double its dairy production in 2018.  IFC assessed the Miraka farm using the Integrated Biodiversity Assessment Tool (IBAT) and confirmed that the farm is located in modified habitat as defined by PS6.As set forth in the ESAP # 3, Alqueria shall develop a land acquisition and leasing procedure aligned with PS1 and PS5 provisions. 

Management Programs 

Alqueria’s industrial facilities have been designed with infrastructure and equipment to avoid and minimize potential E&S impacts and risks associated with its production processes. The company has developed and implemented procedures and work instructions for labor and working conditions, occupational health and safety, human resources, food safety, product recall, traceability, and emergency management in compliance with applicable regulatory requirements. 

In order to address additional operational E&S risks and impacts and to achieve its policy commitments, Alqueria developed and implemented the following procedures and programs: (i) safety transportation manual; (ii) water quality program; (iii) crisis management procedures; (iv) security personnel protocol; (v) investigation of environmental incidents; (vi) product quality audits; (vii) chemical and hazardous materials management programs; and (viii) emergency preparedness and response programs. 

Organizational Capacity and Competency 

Alqueria’s senior management is commitment improve E&S performance and has nominated a dedicated E&S function at corporate level, and assigned skilled staff to implement E&S policies and procedures at all facilities. These E&S functions manage all the aspects related to the identified E&S risks and impacts with special focus on food safety, quality management, operational health and safety, farmer extension services, and human resources. The human resources function is managed centrally at headquarters, with a HR supervisor at each facility. Each processing and milk collection plant have dedicated environmental engineers, industrial occupational health & safety, and social affairs staff that reports directly to the senior environmental manager at the corporate level. All staff met at headquarters and in Bucaramanga are well trained, competent, and have the necessary resources to carry out their functions. The company invests in employee and contractor capacity building programs as well.

Emergency Preparedness and Response 

Alqueria has developed detailed emergency preparedness and response procedures. In 2016, the company undertook a hazard assessment and identified more than 45 potential risk scenarios, including milk tanker accidents, fires, ammonia leaks, food recall, traceability gaps, contagious diseases and natural disasters. Based on these scenarios, the company developed procedures to address these identified emergency situations that clearly explained actions to be taken.

Communication and specific training of these procedures has been provided to all Alqueria workers. In relation to fire risks, the company has installed the necessary fire equipment and plant operational equipment which is inspected on a regular basis internally and by the relevant government agency. The company has established a fire and emergency brigade at all plants and collection centers, including Freskaleche’s plants in Santander.

Monitoring and Review 

Alqueria has monitoring programs in place, with inspection and supervision activities, to track environmental and social aspects at its operations. These programs and activities  are routinely reviewed and updated by management.  As part of the monitoring programs, Alqueria established specific E&S key performance indicators (KPI’s) to measure performance and evaluate against targets.  Monitoring frequencies are defined by local and corporate reporting requirements. The human resources team continually tracks occupational health & safety statistics describing lost time accidents and incident rates, see below for frequency rates under PS 2.

 As of August 2017, Alqueria’s workforce comprises a total of 4011 employees, including the recently acquired DASA and Freskaleche’s plants. The workforce distribution includes 34% women, 21% of contractors, and 7 handicap employees. 

Human resources policies and procedures are managed centrally at corporate headquarters. Labor policies and procedures are consistent with IFC’s PS 2 provisions and in compliance with local labor law. The Company has implemented policies that govern all human resources aspects (e.g., employee selection, induction, development, use of illicit substances, gender strategy, compensation packages tailored individually to employee needs, working hours and overtime, and disciplinary practices). Workers, and contractors engaged by the company are made aware of their terms of employment, rights and responsibilities at the time of hiring, through the contract provisions, the human resources manual and the Alqueria’s ethic code (“Carta Etica”).

The company conducts several events geared to have open and unstructured channels for employee engagement, these events include annual meetings, invitation of motivational speakers and festival celebrations where employees come together to interact in an informal setup.

Workers’ Organizations 

In 2015, the company implemented an employee program known as “The Art of Living.” As a result of this program, Alqueria  developed a compensation package, (Plan General de Beneficios), with 50% of the workforce receiving benefits through this package and employees allowed to design their compensation benefits based on a menu of options. The other 50% of workers have compensation packages as follows: 44% of employees belong to the Pacto Colectivo (collective pact), 3% to a Convencion Colectiva (collective convention), and the remaining 3% to the Sistema de Beneficios, a benefit system. The Collective Convention, agreement with the Union, and the Collective Pact, agreement with non-union workers) has a validity period of two years. The last Collective Pacts were signed for the period of 2017-2019.

Non-discrimination and equal opportunity 

Discriminatory practices are prohibited and equal opportunity is included as part of the company’s working philosophy. The company has developed a comprehensive manual that includes job descriptions and capacity needed for each post. Hiring decisions are based on competence and experience. In 2016, Alqueria developed and implemented a gender and diversity policy to ensure equal access to professional development opportunities across the company. The human resources department has established a gender and diversity committee to lead implementation of this program. 

Protecting the workforce 

The company policy includes the prohibition of child labor and, all employees and contractors must be above the age of 18 years.

Grievance Mechanism 

Alqueria conducts several employee meetings during the year in which employees can raise their grievances. There are also open channels for workers to express their grievances in person or using a corporate ethics line. The ethics line is managed by a third-party provider and includes two routes for raising grievances, a toll-free phone number and an e-mail address,  lineaetica@alqueria.com.co   . This service is also available for contractors and stakeholders in general. The company’s ethic code available on-line clearly describes the policies and procedures by which the company will handle all cases. 

Occupational health and safety 

OHS programs are in place and include identification of occupational health & safety risks, job hazard analysis, implementation of controls, and monitoring of working conditions and accident statistics. In general, injury rates have demonstrated a downward trend since 2010 from 38.03 at investment to 12.53 for Alqueria. Freskaleche 19 injuries per million hours worked are considered high compared to a rate of 9 as an industry benchmark. Although improvement on lost time injury frequency rate (LTIFR). At the corporate level, both Alqueria and Freskaleche should continue to improve their OHS performance.  The company has also developed and implemented procedures to manage occupational health & safety risks and monitor contractor compliance with contract requirements. As set for in ESAP #4 Freskaleche will conduct an ergonomic injury prevention training. 

As part of its occupational, health and safety monitoring and review, Alqueria conducts annual workplace audits for noise (dBA), light levels (lux), temperature, ammonia concentration (NH 3  ), and concentration of hydrogen peroxide (H 2  O 2  ). Alqueria is currently implementing a pilot program to reduce peroxide emissions at all plants. As set forth in the ESAP #5, the company will implement a corporate wide program to reduce peroxide emissions. To minimize OHS risks and incidents, Alqueria conducts job hazard analyses and provides as needed necessary Personal Protective Equipment (PPE).  Training campaigns regarding the company policy of mandatory use of protective equipment are conducted at all plants. During the Freskaleche’s plant site visit, employees were observed wearing protective equipment, including boots, eye protectors, gloves, and earmuffs. 

Supply Chain 

Currently, Alqueria does not have a supply chain policy and procedures to assess potential social risks such as child labor, forced labor, or life-threatening OHS conditions. IFC initial risk screening of different information sources including United States Department of Labor (USDOL) site, conclude that potential for child labor risk in the current supply chain is limited.  USDOL identifies as high risk sectors for child labor in Colombia the following: coffee, cotton, rice, and sugarcane. During site visits to the farms in the Santander region, no child labor was observed at any of the sites. As set forth in the ESAP #2, Alqueria will develop a supply chain policy and procedures that define: (i) process for selection of supplier and supplier mapping; (ii) process of evaluation suppliers; (iii) process of reviewing suppliers E&S risks and impacts (child labor, forced labor, OHS); (iv) process for monitoring and taking actions on suppliers.    Should harmful child labor be found, Alqueria will apply commercial influence to modify behavior. 

  Resource efficiency 

Resource consumption objectives and performance indicators are part of the company’s operating procedures and commitment to sustainability. Alqueria’s industrial plants and milk collection centers run on power provided by the national grid which relies on hydro generated power (approximately 2/3). Steam used at the plants is generated by boilers (oil and gas), except for the plant in Cajica that has a coal-fired boiler.  Approximately 33 million kWh of electricity and 262 thousand gallons LPG are consumed annually. Water supply at the industrial sites comes either from the municipality agency or underground sources, or a combination of both. Total water consumption in 2016 was 925 thousand m 3 . 

As a result of IFC advisory services, Alqueria has implemented corporate wide programs to reduce its water and energy footprint. In 2015, in Cajica the company achieved a 1.8 m 3  reduction per ton of processed product, current benchmark at the plant is 2 m 3 /ton of product.  The Santa Marta plant has reduced water consumption from 2,36 m 3  /ton of product to 1,63 m 3 /ton of product. The company has also invested in best available technologies to further reduce resource consumption. At the Freskaleche plant, IFC identified water reduction opportunities from refrigeration condensate and other waste streams . As set forth in the ESAP #6, both Freskaleche’s plants in Santander will undertake a  clean production audit to reduce facility effluent generation and discharge. 

Greenhouse emissions 

Based on data supplied by the company, Alqueria’s operations generate 27,000 tonnes of CO 2  equivalent per year (fuel consumption and electricity consumption).  (Approximately 86% of the emissions comes from fuel consumption used at plant boilers. Electricity consumption is not a large contributor to GHG emissions due to the prevalence of hydropower generation in Colombia. The company’s truck services are provided by a third-party transportation provider; therefore, truck emissions were not included as part of the carbon footprint analysis. As part of its annual report, Alqueria will be required to report annual carbon footprint emissions to IFC.  

Wastewater

 All of Alqueria’s dairy industrial plants have wastewater treatment plants.  Dairy industry wastes are characterized by high organic content. Parameters of concern will be pH, fats, suspended solids, dissolved solids, BOD and COD. Industrial effluents from dairy plants range between 1200 to 250 m 3 /day.  For most plants, treated effluents are discharged into the municipal sewer system, meeting municipal discharge parameters and requirements. The plants of Cajica, Palmira, and the Freskaleche plant in Aguachica have wastewater treatment plants and discharge to surface water. In 2015, Cajica finished the expansion of its plant, achieving compliance with IFC EHS Guidelines and Colombia effluents parameter levels. The wastewater treatment plant for Fuquene’s milk collection center, designed to comply with IFC’s wastewater parameters, is currently under construction. The company is planning to add secondary treatment to the wastewater treatment plant in Palmira and improve wastewater treatment at Aguachica to ensure compliance with IFC EHS Guidelines. As set forth in the ESAP #7, the company will implement a program to bring these plants into compliance with IFC performance standards. 

Air Emissions

Main source of air emissions  are the oil, gas, coal and fuel-fired boilers.  Boilers undergo monthly maintenance inspections to optimize efficiency.  NOx, SO 2  and PM levels of all boilers are monitored and results confirm compliance with Colombian regulations and IFC performance standards. 

Waste

The company has implemented corporate wide objectives including key performance indicators for waste minimization. Solid waste is composed of organic waste, including sludge from wastewater treatment facilities, paper and paperboard. Sludge from the wastewater treatment plants is dehydrated and collected by registered composting companies. In 2016, the company reported a 26.6% reduction of solid waste compared to 2015. The company has also reduced the consumption of plastic containers by 13% in Cajica plant and 90% in the Antioquia plant.

Hazardous Materials Management

Hazardous materials used in Alqueria include paints, oils, ammonia, cleaning agents such as nitric acid, hydrochloric acid and sodium hydroxide. Hazardous waste is stored onsite in separate, locked facilities with appropriate signage warning. This waste is collected by specialized companies that have the required permits for proper disposal. During the inspection visit conducted at the Freskaleche plant, on-site waste storage conditions were found to be adequate. The company keeps records for the disposal of these waste streams and develops annual indicators. 

The company’s operations do not pose serious risks to health and safety across the communities where it operates. The company has developed and implemented comprehensive procedures to manage potential operational risks, including a risk scenario manual. There are several mechanisms in place that may be employed to receive and to manage external grievances, including the ethics toll-free line and e-mail. Potential risks to communities across the company’s industrial plants and milk collection centers are primarily associated with the milk transportation and product distribution processes. 

Alqueria has developed a comprehensive road safety manual and procedures for its contractors (“Manual de Seguridad Vial en Nuestras Vias”). This manual is consistent with the National Transit Code, the National Road Safety Plan, and other legal requirements included in the Colombian national laws for transportation. In 2016, the company submitted its Road Safety strategic plan to the Secretary of Transit and Transportation. In addition, the company provided the following training on: (i) driving procedures; (ii) driver training; (iii) traffic rules; (iv) driver responsibilities; (v) company driving policies; and (vi) road first aid emergency procedures. 

Food Safety 

The essential requirement for a food manufacturing company is a food safety management system and associated product traceability. As indicated above, Alqueria has implemented food safety (HACCP), quality (ISO 9001) and laboratory quality programs (ISO 17025) to guarantee the quality and safety of its products. On a yearly basis Alqueria’s quality food safety management system is audited by Quality Checkd. Alqueria is member of Quality Checkd Dairies Inc., a private organization of 26 independent dairy processors. In 2016, the audit results for the plants of Cajica, Palmira, Medellin, Santa Marta and both Freskaleche’s plants in Bucaramanga were excellent, with an average of 96 points out of a 100 points scale. As set forth in the ESAP #9, Freskaleche’s industrial plants in Bucaramanga and Aguachica, will implement the action plan of the 2017 audit related to the food laboratory activities. 

Emergency Preparedness and Response 

Alqueria has an emergency response and preparedness plan including identification of emergency scenarios and risks, internal and external communication procedures, emergency brigades, and emergency response. The company periodically conducts emergency drills at the industrial plants and milk collection centers. 

Security Personnel Requirements 

Security for physical assets and access control are provided by third party-service providers. Most of these personnel is armed and Alqueria has developed security policies regarding appropriate conduct and rules of engagement. These requirements are included in third-party contracts. The plant in Bucaramanga is located at an industrial park, where security services at the entrance of the park are provided as part of the general park operations.

Alqueria does not own large dairy farms; however, in 2014 Alqueria leased a 2,300-hectare dairy farm, Miraka, in the state of Meta.  The Miraka Farm is located within modified habitat as defined by PS6 and IBAT map results. The farm has set aside 600 hectares for conservation purposes, including 100 meter bands of forest along all riparian areas. The farm plans to conserve a total of 900 ha which accounts to 40% of the farm area. As part of these conservation efforts, the company has planted 5000 trees and undertaken feasibility studies for solar and biogas energy production on the farm. The farm currently has 1100 heads of dual system cattle for milk and beef production. Requirements for the Miraka Farm are included under the PS 1 section.

Alqueria’s aim is to work with farmers directly or with associations of farmers. While milk sourcing comes mostly from traditional dairy areas, in recent years the company has started sourcing milk from agricultural frontiers areas like the Orinoquia region, and more recently, from post-conflict zones like the south of the Bolivar region, where the company is supporting a farmer capacity pilot program. With peace agreements signed and plans for infrastructure development in Orinoquia, this area is at risk of becoming the next agricultural expansion area. 

In 2016, the company participated in a project led by the World Wildlife Fund (WWF), Colombia’s International Cooperation Agency, and the GIZ to support sustainable dairy landscapes in the Putumayo and Meta regions, both suffering major deforestation impacts in recent decades. The project, with a footprint covering approximately 3430 hectares, aims to develop farm conservation and management practices linking the private sector, farmers and milk collection associations. In total, 60 families have benefited from this initiative, including four milk collection centers and 336 indirect beneficiaries.  Another pilot project supported by the company is the government’s Post-Conflict Dairy Project, developed to support farmer livelihoods in post-conflict areas. This project, which Alqueria is implementing in the south of the Bolivar region with  21 farms, and where average milk production is very low (approximately 3 liters per cow compared to Bogota’s 15 liters per day average), is comprised of four components: (i) capital to support small farmers purchase of cooling equipment and farm supplies, (ii) capacity building and implementation of best farm practices,  including soil management and food safety components, (iii) financial capacity building to support associations, and (iv) integration of farmers in the dairy value chain. 

Alqueria sources daily approximately 845 thousand liters of milk from 13,000 suppliers.  Approximately 65% of the milk sourced comes from the Sabana and coastal regions, where average milk production is 15 liters per day. 57% of the raw milk sourced comes directly from farmers and 43% indirectly, through 21 collection centers across Colombia. Sourcing areas are: (i) Northeast basin (Santander region), (ii) South basin, including Bogota/savannah, (iii) Cundinamarca/Boyaca, and (v) Oriental (Orinoquia region), including, El Meta and Guaviare. The company has a team of 22 zootechnic specialists working on farmer development providing feedback to suppliers on milk quality, conducting farm visits, and providing advice on projects such as deploying cooling tanks in rural regions. Alqueria also provides technical assistance to farmers through a network of educational centers nationwide, e.g., Plan Finca, Escuelas de Campo Agropecuarias, PRODECO. The Company also supports the national technical capacity provider (SENA) that provides training opportunities for farmers and high school graduates in animal husbandry and farm management practices. 

Moving forward, as set forth in the ESAP #2, the company will develop and implement a supply chain management system as described under PS1/PS2 and include specific procedures to ensure that milk suppliers are not impacting natural and/or critical habitat.

The company’s approach to community engagement is defined by local needs. As part of the company’s corporate social responsibility (CSR) program, Alqueria identified its key stakeholders and decided to support the following initiatives: (i) farmer capacity-building programs; (ii) donation of milk-based products to foodbanks; and, (iii) other initiatives such as financing sport events and community activities.  The company has developed and implemented an ethics code (“Carta Etica”) and procedures to handle community and other stakeholder grievances.  Procedures are consistent with IFC requirements: (i) receive and register external communications from the public; (ii) screen and assess the issues raised and determine how do address them; (iii) provide, track, and document responses, if any; and (iv) adjust the management program, as appropriate.  

In April 2013, a complaint against Alqueria was lodged at the IFC Compliance Advisor Ombudsmen (CAO) office by the owner of a farm adjacent to the company’s dairy plant in Cajica. The activities are being carried out in accordance with the implementation agreement signed by the parties on June 2017.

Contact Person: Karol Villamil

Address: Km 5 Via Cajica-Tabio

Email:  Kvillamil@alqueria.com.co  

Phone:  + 57 1 488 7000

Country: Colombia