The project does not include any new greenfield or brownfield development and therefore, no new land acquisition is expected. 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 value, 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 Farmoquimica’s environmental, occupational health and safety, and HR policies and the manner in which these will be implemented in newly acquired company (Divcom) as well as other third party manufacturers. Farmoquimica and Vidfarma’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; worker’s access to grievance mechanism; and road safety provision for manufacturing operations as well as for the sales workforce.

           Environmental and Social Assessment and Management System:  Both Farmoquimica and  Vidfarma  hold the required environmental, OHS and operational permits for its plants. Both facilities are approved as per Good Manufacturing Practices (GMP) requirements of the Brazilian Health Surveillance Agency (ANVISA).

Farmoquimica has implemented functional environmental, OHS and HR management systems in the existing operations. In the past, the company had received third party certification as per ISO 14001; although the management systems are operational, the company decided not to renew the same. Farmoquimica has developed 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 and further promotion of continuous improvement mechanisms throughout the operations. 

Vidfarma  has a less formal environmental, health and safety (EHS) management system; nevertheless, basic elements such as SOPs and monitoring programs are present, mostly in the context of GMP applied in the pharma industry. 

Further, building upon its E&S policy and the management system, Farmoquimica, as per the E&S Action Plan (ESAP) item #1, will implement an environmental, OHS and HR management system for the operations of Divcom (including Vidfarma), to ensure alignment with the requirements of IFC Performance Standards; this will be based on a gap analysis to be performed by Farmoquimica. 

Identification of Risks and Impacts and Management Programs:  The proposed project does not include any greenfield development, therefore an Environmental and Social Impact Assessment is not required. Environmental impacts and OHS risks of the operations have been identified through the environmental plans as required in Brazil (Programa de Monitoramiento Ambiental-PGMA) 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). Such procedures are expected, as described later, to be expanded to cover Divcom operations too.

Farmoquimica did not undertake a detailed environmental and social due diligence on Divcom for the acquisition. As described in the ESAP item # 1 Farmoquimica will perform the environmental, OHS and labor practices gap analysis against the requirements of IFC’s Performance Standards and will develop and implement a time-bound corrective action plan to address any identified gaps. 

Organizational Capacity and Competency:  Farmoquimica has an EHS unit, with 5 professionals, reporting to the engineering manager and the director of operations. In Divcom, there is also a small team (3 employees) who oversee EHS matters. There are OHS committees (accident prevention committees - CIPA), as required by the local law, whose role is to identify and support implementation of OHS aspects. In addition, safety brigades are in place to respond in case of emergencies. Labor aspects are managed by the HR department. There are medical doctors and nurses providing support in the production plants. Training is provided to the employees regarding EHS topics in both the plants; in addition to internal communications via intranet or mail to promote topics such as safe driving for sales representatives.

Emergency Preparedness and Response:  Farmoquimica has developed detailed emergency response plans for its operations, aligned with local legal requirements. Training for e mergency preparedness and response and first aid is provided to all employees.  Fire and emergency drills have been conducted.  Farmoquimica’s plant is located in a mixed used area with residential communities nearby, and the emergency response plan has considered the potential impacts on and from the communities.  Vidfarma  plant is located in an industrial zone, with no residential communities in the nearby vicinity; other industries in the park have limited risks and emergency plans consider the relevant potential scenarios.

Monitoring and Review:  Monitoring is guided by the applicable legal requirements; hence there are differences in parameters monitored between the two production facilities. The Farmoquimica plant conducts regular environmental monitoring including ambient air quality, stack emissions, effluent quality, ambient noise, water quality, workplace exposure to noise and other chemicals etc.; while monitoring in the Divcom plant is limited to fewer aspects aligned with its specific permit conditions. 

    Human Resources Policies and Procedures:  Farmoquimica has HR policies and procedures that cover all the key aspects, including recruitment, induction and training, performance evaluation, promotion, and disciplinary actions. Farmoquimica is in the process of formalizing and documenting a handbook (Guia do Colaborador) which describes core values, and will guide the behaviors across the company. 

During the induction program, Farmoquimica policies are provided to the new staff and all procedures are readily available to staff. Farmoquimica has developed a transition program for the employees of Divcom and has extended the benefits such as medical insurance to the Divcom’s employees. Farmoquimica’s HR policies and procedures were noted to be aligned with PS2 requirements and will be applied to Divcom.

Working Conditions and Terms of Employment:   Farmoquimica provides employees with clear terms of employment, and provides information regarding industrial relations, disciplinary procedures, and roles and responsibilities within the organization. Farmoquimica pays wages above the minimum levels required by local law and as agreed under the collective bargaining agreements. Sales representatives are compensated based on a combination of fixed salary plus commission; minimum income is guaranteed and terms of payment are well described in the contracts.  There  have been some cases of labor disputes in the past few years involving staff who disagreed with payment of overtime or other compensation agreements; these cases have been resolved using legal processes established under local law. Sub-contracting is very limited within the company; only catering, general housekeeping and external security are managed by third party companies. The proposed project does not require any new construction, therefore no additional third party employees will be engaged.

Protecting the Work Force,  Non-Discrimination and Equal Opportunity:  Farmoquimica is an equal opportunity employer, promoting fair and equitable treatment of employees,  including processes of hiring, promotion and termination of employment . Farmoquimica creates opportunities for promotion within the company.  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. N o child labor or forced labor is used by the company.  Farmoquimica’s workforce, together with Divcom is about 1360 employees, of which 45% are female employees and near half are sales representatives.

Retrenchment:  Farmoquimica has already enlarged the current workforce on Divcom, increasing the salesforce by 30 additional sales representatives and the current plan is to expand production in the existing facilities; therefore, retrenchment is not expected in this project. In case Farmoquimica identifies the need to undergo retrenchment in future, it will be carried out as per the requirements of IFC’s Performance Standard 2.

Workers’ Organizations:  Farmoquimica supports freedom of association among its workers and adheres to collective bargaining agreements with different workers’ organizations. Currently the company has agreements with more than 70 regional and national unions covering plant employees, administrative personnel and the sales workforce as is customary in Brazil. The company reports a stable industrial relations climate.

Grievance Mechanism:  Farmoquimica’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. Suggestion boxes are placed in different parts of the company and option to call anonymously is offered; however, these mechanisms are rarely used and there is not a formal record of grievances. As set forth in ESAP, item #3, the company will document a 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.

       Resource Efficiency:  Farmoquimica has implemented some basic initiatives on resource efficiency (e.g. change of lighting systems, pressurized washers and hoses, etc.) and has over time replaced equipment such as back-up generators and boilers to more efficient ones. In addition to reduce the consumption of electricity the company uses natural gas for its boilers to support its energy demand. The plant in Pombos is a modern facility with more up-to date auxiliary systems which are equipped with energy and water efficient features.  Farmoquimica relies mostly on electricity from the grid; the Rio plant’s annual consumption is approximately 10,800 MWh/yr and an estimated natural gas consumption of 450,000 m3/yr. Similar situation is at the  Vidfarma  plant, which  also uses electricity from the grid.

Greenhouse Gas Emissions:   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 3,900 tonnes CO2-equivalent per year. Additional GHG emissions are not expected to be significant. 

Air Emissions:  In order t o 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.    Farmoquimica has an annual plan for monitoring air emissions from process units and combustion sources. Results shared during appraisal confirm that emissions in the Rio plant 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 properly maintained to be operational at all times. There was no information available for the compliance of the  Vidfarma  plant in Pombos; therefore, as part of the gap assessment (ESAP #1) the company will confirm its compliance, and as needed, define necessary corrective measures.

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

Water Consumption and Wastewater Treatment:  Water is sourced from the municipality. Water for production undergoes extensive treatment including filtration and reverse osmosis. Effluents from the production plants are treated through physicochemical and biological treatments. 

In the Rio plant effluents, after treatment, are discharged to the municipal sewage system in compliance with local regulations; periodic monitoring is performed; at appraisal results showed compliance with the applicable WBG EHS Guideline limits. The  Vidfarma  plant also has a wastewater treatment plant and currently effluents are collected via vacuum trucks and disposed through an external authorized vendor.  Vidfarma  is in the process of obtaining final approvals to discharge the effluents in the municipal sewage. 

As per ESAP #5 Farmoquimica will evaluate its current management of industrial effluents at  Vidfarma  and will identify alternatives to achieve compliance with local law and the applicable WBG EHS Guideline limits, considering the discharge point and additional treatment as needed (applicable requirements might be those listed in table 2 of the  WBG EHS Guidelines  for Pharmaceuticals and Biotechnology Manufacturing) . As per ESAP #6 Farmoquimica will implement the recommended measures/treatment defined and will confirm compliance with applicable parameters.  As part of the ESMS procedures to be developed for  Vidfarma , the company will establish the protocols to monitor effluents and verify the chain of custody documentation for the effluents sent to the licensed contractors.

Solid Waste Management : Farmoquimica 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. There are concrete plans to enhance the destruction process of packaging materials. Waste generation is adequately monitored, including a proper chain of custody for hazardous materials. Authorized vendors are audited by Farmoquimica to ensure proper management of waste.  Vidfarma  plant follows similar approach to management of solid waste and also audits its vendors. 

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; however, materials requiring special controlled temperature and relative humidity are not segregated, which could be addressed easily by designating special areas (with proper ventilation and containment) for these materials within the controlled areas. 

Although there is an accessible database with Material Safety Data Sheets (MSDS), access is limited and information is not readily available.  Farmoquimica, as per ESAP #7 will review and improve the program to manage hazardous substances, including identifying effective mechanisms to access safety information in case of emergency.                                             

       Community Health and Safety : The manufacturing plant of Farmoquimica is located in Jacare, a neighborhood in Rio de Janeiro, which is a mixed residential, commercial and industrial area; households are in the immediate proximity of the property, and this has been the case since acquisition of the plant. Farmoquimica has proactively engaged the community’s local council to address any potential concerns and has developed social activities to support this local community, for example, through training and vocational programs. Transportation of raw materials and products at all operations is sub-contracted to specialized companies with safety and verification protocols. Trucks are only allowed to perform loading/unloading operations during daylight hours and in designated areas. The company has defined mechanisms to receive and address concerns from the community, either through communal leaders or the reception areas. The  Vidfarma  plant is located in an industrial park in Pombos, Pernambuco and there are no communities surrounding the plant.

Security Personnel : Security functions is subcontracted to a specialized firm which is registered to the national authorities, and includes the use and proper management of firearms. There is a formal manual for management of security personnel covering their functions, documentation, obligations, prohibitions, duties and code of conduct and management of equipment. As per ESAP #8 Farmoquimica will undertake a security risk assessment (particular focus for the Rio plant) and develop a security management plan, in accordance with PS4. The company will assess security risks from and to the community and will develop appropriate policies and procedures (e.g., a written code of conduct; training; procedures in the event of any incident, community unrest, community request, or alleged violation, 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 company is periodically audited by the local authorities.              

No significant footprint expansion has occurred in recent years; therefore, no formal consultation processes has taken place. 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, Farmoquimica supported a program to reduce prevalence of diseases related to gastrointestinal parasites by means of education (e.g. importance of washing hands) and by providing free samples of its pharma products to underserved communities in remote areas                                             

Contact Person: Marcelo Vieira de Freitas

Address:  St. Viúva Cláudio, 300, Jacaré, Rio de Janeiro, RJ – Zip Code: 20970-032

Email: mfreitas@fqm.com.br

Phone: +55 (21) 2122-6080