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 

HMH/WFIL is a global fruit production and marketing group that procures fruits, primarily avocado, following environmental and ethical standards, for distribution in developed markets in Europe and North America, in addition to supplying local markets. Based on its ethical principles of operation and adherence to certification standards, the following Performance Standards do not currently apply. 

Performance Standard 5 is not applicable as the company is only acquiring assets and land through willing buyer/willing seller transactions. 

Performance Standard 7 is not applicable for this investment as HMH/WFIL does not have assets or land negatively impacting indigenous peoples, nor purchase fruits from indigenous peoples.

Performance Standard 8 is not applicable to this investment, since the project does not affect any cultural assets.     

Key E&S issues and risks associated with the project include: (i) functionality of the company’s E&S management and monitoring systems, (ii) management of labor and provision of adequate working conditions, and operational health and safety (OHS) programs, and (iii) monitoring and management of air emissions, waste, wastewater and hazardous materials. 

This project involves an expansion of IFC’s current financing for HMH and its subsidiaries through WFIL’s expansion of activities in Colombia, where a new nursery providing seedlings for internal and out grower use is planned; and, acquisition of a Latin American avocado producer that until now has worked as an independent supplier to WFIL. 

This is a category B project, according to IFC’s Policy on Social and Environmental Sustainability, because limited, specific environmental and social impacts that may result can be avoided or mitigated by adhering to generally recognized performance standards, good international industry practices, environmental, health and safety (EHS) practices, and  design criteria as described in the following sections.  

Environmental and Social Assessment and Management System and Policies: 

HMH, the parent company of WFIL, adheres to GlobalGAP principles and practices as well as local legal requirements. HMH/WFIL has an overarching environmental & social (E&S) policy that defines the environmental and social objectives and policies that guide company operations to achieve sound E&S performance. HMH/WFIL’s policy includes information about general business provisions, and environmental sustainability, and social responsibility commitments.

HMH/WFIL avocado orchards and processing facilities are certified according to specific market demands. These include Global Good Agricultural Practices (GlobalGAP), a food safety program for raw materials; British Retail Consortium (BRC) organic farming and processing requirements; hazard analysis and critical control points (HACCP) for processing food safety; Ethical Trade Initiative (ETI ) accreditation; Linking Environment and Farming (LEAF) a sustainable farming program; Nature’s Choice South Africa, Social Initiative South Africa (SIZA ); Waitrose and Ahold Foundations accreditation; Tesco Nurture (TN10); Woolworth Farming for the Future accreditation; and Fair Trade accreditation. GlobalGAP is a basic requirement of all HMH/WFIL fruit products/operations. 

HMH/WFIL operations have comprehensive EHS management systems in place that include a Policy Statement and standard operating procedures (SOPs) providing guidance on organizational capacity and competence; Environmental and Social Assessment; Management Programs; Training; Monitoring; and Stakeholder Engagement that are consistent with IFC PS1 requirements.

HMH/WFIL’s management system include site management plans that establish strategies to minimize E&S risks and impacts. HMH/WFIL has formal, written SOPs to conduct farming and processing work that includes EHS provisions. Existing HMH/WFIL farms have specific waste, biodiversity, OHS and energy efficiency management plans and programs.

Organizational Capacity and Competency:

HMH/WFIL has been among leading avocado producers since its participation in the development of the Hass avocado, the most commercially popular avocado worldwide. This forward-looking approach together with HMH/WFIL’s desire to be the lead avocado importer for highly developed and demanding North American and European markets has transformed the company. This objective in turn has lead HMH/WFIL to develop a high sensitivity for the end consumers’ expectations for integrated supply chain sustainability and traceability. HMH/WFIL has therefore developed strong internal capacity in production and supply chain management and certification; good agricultural practices; integrated pest management; water management; occupational health and safety; food safety; and, corporate social responsibility. These companywide capabilities are further supplemented with receiver market capacities through the certification process such as, for example the ETI certification requirements in the United Kingdom. Specific E&S aspects are managed by at country level through a dedicated team that based on HMH/WFIL’s overall commitments, like the GlobalGAP and Fairtrade will add any additional local requirements, like the ETI in England. IFC has agreed with the company that as part of this expansion it will also strengthen its cross-market benchmarking, thereby creating an even stronger brand.  Benchmarking activity is included in the Environmental and Social Action Plan (ESAP action item 1), as well as do a comprehensive review of the target company’s systems to align them with the rest of the HMH/WFIL organization (ESAP action item 2).

Emergency Preparedness and Response:

All HMH/WFIL’s fruit production sites, as well as its processing and marketing sites have emergency preparedness and response plans in line with the risks presented at each location. In most locations, this process is done as part of the licensing process and reviewed and updated on an annual basis.

Monitoring and Review:

HMH/WFIL has a robust internal monitoring program which supports compliance with all certification requirements. For example, monitoring and recording is a critical component of GlobalGAP. HMH/WFIL monitors inputs’ consumption and efficiency in areas including water consumption, OHS accident rates, fertilizers and agro-chemical use, as well as work efficiency. WFIL conducts periodic internal and external risk and impact identification cycles and prepares action plans to correct deficiencies according to GlobalGAP requirements and to fulfill the requirements of applicable HMH/WFIL market driven certifications.  

Key E&S indicators are incorporated into managerial reports and disclosed internally, as needed. HMH discloses some E&S indicators to investors in its annual report. HMH is developing an annual sustainability report, with relevant E&S information and indicators, for all stakeholders using the international reporting standard format Global Reporting Initiative (GRI), which will be available on their website by 2018.

In Africa, HMH/WFIL employs nearly 5500 people on a permanent basis across fruit production, packaging, transport and distribution operations in 12 countries. In addition, there are an estimated 1000 thousand temporary workers during harvest seasons across the globe. Most of these temporary workers are hired directly by HMH/WFIL following national labor regulations.  WFIL agricultural and packaging operations in Peru and Colombia employ 181 people permanently and about 152 on a seasonal basis. 

The acquisition target fruit export company in Chile employs 440 people permanently, and an additional 1,236 people are hired on a temporary basis. In Mexico, it employs 530 people permanently and no seasonal workers. WFIL will review the nature of task-based temporary employment agreements in the target company to ensure that all terms of employment are clear to workers, in compliance with national labor regulations, and temporary agreements are not unjustifiably used as a substitute for a permanent workforce (ESAP action item 3). 

Of HMH/WFIL’s total permanent staff approximately 40% are female, working in all   operations. On the contrary, most of temporary workers are male. 

Human Resources Policies and Procedures: 

HMH/WFIL complies with local labour laws of each jurisdiction in which it operates.  HMH has adopted a formal Corporate HR policy and a Code of Ethics, which is extended to all operations (including WFIL). This policy covers terms of employment, such as wages and benefits, hours of work, overtime arrangements and overtime compensation, annual and sick leave, maternity, vacation or holiday, non-discrimination, sexual/moral harassment, work/life balance, hiring period, compensation, leave, promotions, salary increases and termination of contract procedures, and conflict of interest. All workers are provided with a copy of the terms of employment, in which all relevant information is described. HMH refers in its policy to the  ILO core labour standards, and has adapted IFC’s Performance Standard 2 requirements since IFC became a shareholder in the company in 2012. IFC has, as an investor in the company, monitored HMH/WFIL’s operations over several years and the monitoring activities have at no point in time revealed inconsistency between the principles of the IFC Performance Standards and HMH/WFIL operations. WFIL will extend its HR policies to the operations of the target acquisition company in Latin America (ESAP action item 4).

Working Conditions and Terms of Employment:

At South African operations the terms of employment and working conditions are in accordance with the local BEE (Black Economic Empowerment) rules, PS2 compliant national labor laws, and agreements with relevant trade unions. Accordingly, each employee receives a contract clearly indicating  i) the terms and conditions of employment; ii) compensation to be expected; iii) benefits included, and iv) requirements for following the Company’s EHS standards.  These are written contracts and  stay in force until terminated by either party .  Similar systems are used worldwide, with local adjustments to comply with national labor regulations.  WFIL will ensure that all permanent and temporary workers at its Latin American operations receive written contracts in line with national labor regulations (ESAP action item 5). 

Workers’ Organization:

HMH/WFIL respects workers’ right to freedom of association to bargain collectively. Worldwide, unionized workers are represented by their respective trade unions in collective bargaining negotiations. At a corporate level, 81% of HMH workforce and 40% of WFIL’s is unionized.  Collective bargaining agreements are extended to cover non-unionized workers as well. IFC has not seen any indication that the group restricts freedom of association. At the target acquisition company in Chile, about 25% of the permanent employees are unionized. Collective agreements are negotiated on a two-year basis.

Non-discrimination and Equal Opportunity:

HMH/WFIL, with its headquarters in South Africa follows South African regulations and has strong practices to support equal opportunity and diversity in the workforce.  The company policy has clear requirements to not take decisions based on race, colour, religion, age, gender, sexual orientation, national origin, disability, union membership, or political affiliation. Disciplinary practices are implemented to avoid non-discriminatory practices.

Retrenchment:

HMH/WFIL has been a continuous growing company for decades and has not experienced significant retrenchment so far.  In general, HMH/WFIL directly employs personnel needed for its daily routine operations, while peak needs, like harvest operations are handled by hiring of temporary and seasonal workers. HMH/WFIL is not envisaging any retrenchment and the company is commitment to follow the retrenchment requirements under Performance Standard 2.

Grievance Mechanism:

HMH/WFIL relies on a formal internal grievance procedure, which is part of its HR policy and includes periodical communication with workers’ committees (OHS, accommodation, industrial). There are also open channels for workers to express their grievances in person or through a grievance form, or an external phone line. This line also allows workers to raise complaints regarding the company code of ethics. The Chief Executive Officer and the Group Company Secretary are responsible to review all complaints raised and decide which corrective measures are required. Grievances resolutions are communicated back to the Audit and Risk Committee. 

Protecting the Work Force:

HMH/WFIL has a policy statement against the use of both child labor and forced labor at its operations. For South Africa, as well as most of its operational countries, these principles are also enforced through local regulation and monitoring of the labor authority.  A good example of HMH/WFIL’s local policy implementation is how its operation in Mozambique, where child labor remains a problem, ensures against the use of child labor at small scale litchi subsistence farmers. These small farmers had no access to the international market until the group began sourcing from them. The Mozambique operation wanted to source form smallholders, but to ensure good product quality and traceability it had to agree with farmers that the company was going to be responsible for fruit picking, sorting, weighing, and transporting of fruits at the farmers’ premises. This practice allows full transparency of the supply chain, fair payment for the product, and no risk of child labor nor forced labor in the supply chain. 

Occupational Health and Safety:

Through IFC’s current investments, OHS practices and statistics have been monitoring over a period of years.  OHS programs at the avocado orchard operations are in place and include comprehensive operational procedures with clear OHS guidelines, management programs and means of protection consistent with the local legal requirements, WBG’s EHS sector guidelines and GlobalGAP requirements. In general, lost time injury frequency rate (LTIFR) are at around 5.04 (year 2015 for HMH) which is significantly below the rate of 15.0 as an industry benchmark for the USA for the period 2014-2015 according to  The National Institute for Occupational Safety and Health (NIOSH).

Workers Engaged by Third Parties:

Third party workers at any of the HMH/WFIL operations worldwide have to sign an agreement with the company which includes labor requirements. These requirements are to respect and follow national labour regulations, and any additional certification requirement.  Accidents or incidents of third party workers will be recorded in the general recording system and included in the overall OHS statistics. Third party workers have access to the company grievance mechanism.

Supply Chain:

HMH/WFIL orchards and processing facilities are currently certified according to specific market demands to a mix of GlobalGAP, BRC Food Safety, HACCP, Nature’s Choice and Fair Trade Standards. GlobalGAP is a basic requirement at all products and operations. Although GlobalGAP does not have specific requirements addressing terms of employment or child/forced labor issues, the certification process is characterized by a high level of formalization of business activities and work relationships. As described under Performance Standard 1, with the Mozambique operations cited as an example, HMH/WFIL are incorporating strict protections against child/forced labor into HR policies and procedures, whenever they operate in markets where such a risk exists. Going forward, WFIL will fully integrate the acquisition target in Latin America under its supply chain and certification/accreditation umbrella. 

Resource Efficiency and Pollution Prevention: 

HMH/WFIL operates, in general a low energy operation, which builds up rather than degrading biomass. Nevertheless, energy efficiency of equipment and transport is being considered at all operations.  The most important resource for HMH/WFIL is water. Preparation an implementation of water management plans to ensure continuous reduction of water demand in the orchards are adjusted through ongoing research and development.  This means that the orchards have moved away from old fashion water intensive irrigation schemes and are increasingly using drip irrigation and also slow-drip irrigation.

Water and Wastewater:

Management of water consumption for the orchards is at the core of successful operation as water becomes an increasingly scarce resource in many places.  HMH/WFIL therefore has water management plans for all its orchards, and is participating in research to find new ways of reducing the water consumption per unit produced. In 2013, the water footprint of the target company in Chile was measured at 0.72 m 3  per kilogram of fruit (87 gallons per pound).

Wastewater is generated in minimal quantities at HMH/WFIL’s operations and most of it is generated at the pack house and import facilities.  These facilities are typically located in developed urban areas with community or regional wastewater treatment facilities.  Where HMH/WFIL generates wastewater, but there is no access to off-site wastewater treatment facilities, the company has constructed local treatment systems, typically utilizing septic tanks and subsurface disposal systems s. At the Chile operations, processed wastewater from packing plants is treated and reused for irrigation. 

Air Emissions and Ambient Air Quality:

HMH/WFIL’s operations do not generate air emissions except for those related to machinery and building heating where needed.

GHG Emissions:

HMH determines its carbon footprint annually. The orchards, both conventional and organic, function to sequestrate (fix) carbon that helps to off-set the company carbon emissions. The HMH Group is currently considered carbon positive, and HMH/WFIL continues to undertake specific interventions, such as the use of clean energy where possible eg solar power, aimed at reducing its carbon footprint. 

Solid Waste Management:

S olid organic waste from HMH/WFIL operations follow GlobalGAP  requirements and are managed according to a detailed waste and pollution control protocol.  Organic plantation waste is composted and used in orchards as a fertilizer and soil amendment. Other solid waste is segregated and empty chemical/pesticides containers are rinsed and returned to suppliers for proper disposal/recycling; used oil is delivered to recycling operations; used tires are returned to suppliers for recycling. Non-recyclable domestic waste is collected and handed over to the local municipal treatment systems and facility. 

Pesticide Use and Management:

Orchards are monitored and control decisions are made considering field infestation rates, significant economic impact, and the level of control desired to reduce economic significance. Control methodologies are defined by qualified agronomists.  HMH/WFIL relies on a small number of chemical products to control fruit pests, disease and weeds. HMH/WFIL does not use pesticides classified by the World Health Organization (WHO) as class I(a) (Extremely Hazardous) or I(b) (Highly Hazardous). The target company in Chile utilizes an integrated pest management approach including, field scouting, traps, and breeding of natural enemies, for pest control to reduce the use of agrochemicals.  Neither company uses pesticides that fall in WHO pesticides hazard classification system class I(a) or I(b). 

Hazardous Materials:

C hemical stores are available at  all orchards  and  they  are  constructed and operated in accordance with WBG EHS Guideline   requirements and GlobalGAP.  Facilities are equipped for dealing with spillages and the appropriate personal protective equipment is available when chemicals are used.   Diesel fuel storage tanks have secondary containment to contain and avoid spills; and empty chemicals  containers, liquid and solid non-organic wastes, including fuel and oil  are  disposed in an environmentally appropriate manner at permitted off-site locations.

Following GlobalGAP requirements, HMH/WFIL sites have emergency plans, covering possible unplanned scenarios such as fires, chemical spills, medical emergencies as well as emergency contact information and communication procedures, emergency equipment and employee training and periodic drills to test readiness and capability to execute emergency response procedures.

HMH/WFIL in Africa relies on own non-armed security personnel to watch its properties/assets and to prevent wood/fruits robbery in the fields. The security strategy is based on a risk assessment and monitoring (cameras) and communication technology is used. Additional public security forces are contacted as needed. HMH/WFIL conducts periodical meetings, with communities’ representatives as well as with workers to discuss grievances related to impacts on communities or security forces. Where operations rely on armed security personnel, the client will conduct a security risk assessment to inform the decision of whether guards should be armed. Where the client elects to rely on armed private security, the company will have strict oversight procedures for security personnel to ensure they are properly vetted and regularly trained on site-specific rules for the use of force including firearms and other weapons, and appropriate conduct focused on reinforcing respectful behaviour toward workers and affected communities (ESAP action item 6).

The fruits produced and processed at HMH/WFIL facilities are intended for export to Europe and North America. They are packaged at dedicated pack houses and transported in refrigerated containers using a combination of trucks and ocean vessels. HMH/WFIL contracts trucking operators with high-quality vehicles and trained drivers to minimize transport risks to host and local communities.

Since HMH/WFIL’s fruit plantations and packing/processing facilities are certified under GlobalGAP, the client is required to identify and assess threats to food safety in all phases of operations, and assure that all inputs are suitable for food products and are from licensed sources.

All HMH/WFIL’s operations are located in modified habitats. HMH/WFIL does not promote the conversion of habitats. Further, HMH/WFIL  manages its plantations in a sustainable manner following agribusiness/food safety and industry good management practices, and international production standards such as GlobalGAP, ETI (Ethical Trade Initiative), Nature’s Choice, SIZA (Social Initiative ZA) and Fair Trade Standards.

Soil-conservation practices include a ‘no-clean cultivation’ policy, so that the soil between avocado trees remains covered with vegetation at all times. Where this is not possible, winter and summer cover crops such as velvet beans, desmodium (inconspicuous legumes), oats and ryegrass are planted to increase organic matter content, maintain soil moisture and protect the soil against erosion.

In order to minimise chemical use and associated pollution, pests infestations and the presence of plant diseases are constantly monitored. Protocols have been designed to define the threshold levels at which control methods and as a last resort spraying of agrochemicals should commence. Most insects are managed through biological controls in HMH/WFIL’s orchards and therefore very little chemical control is necessary.

HMH and WFIL’s stakeholder engagements are implemented according to country specifics. At the corporate level , HMH has a Corporate Sustainability Manager as well as a Corporate Social Responsibility Manager. These officers coordinate with local operations to define what initiatives are needed to maintain HMH and WFIL as globally sustainable and socially responsible organizations including maintaining the ability to maintain certifications and accreditationsas described in previous sections. As a Fairtrade-accredited avocado exporter, WFIL has a comprehensive community development strategy that includes investments in education and health. More information on WFIL community investments can be found at  http://www.westfaliafruit.com/en-za/About-Us/Pages/Community.aspx. Contacts of all country operations managers are available at WFIL’s website (see http://www.westfaliafruit.com/en-za/Contact/Pages/default.aspx).