The project will be implemented within the existing industrial facilities of Ferrum and no new greenfield developments are planned under the project; nor any new land will be required. As such, there will be no involuntary physical or economic displacement; therefore PS5: Land Acquisition and Involuntary Resettlement is not applicable. Ferrum’s facilities are located within or near to well established industrial areas, in modified habitat and no impacts on biodiversity are expected. There are no indigenous peoples or areas of high cultural heritage value in the project’s area of influence. Therefore, PS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources; PS7: Indigenous Peoples and PS8: Cultural Heritage are not considered applicable to this project.    

  This is classified as a Category B project in accordance with IFC’s Policy on Environment and Social Sustainability. Based on information reviewed by IFC, the proposed project will have limited adverse environmental and social (E&S) impacts that are few, site specific, largely reversible and readily addressed through existing mitigation measures and good international industry practices (GIIP).

Key E&S issues associated with this project include Ferrum’s environmental, OHS, and HR policies and the way these are implemented across its facilities. Ferrum’s manufacturing operations have impacts related to water and energy consumption; air emissions from ovens and casting operations as well as liquid effluents from grinding and glazing. Other elements considered included activities related to emergency preparedness and response; community engagement; waste and hazardous materials management and OHS management.   

  Environmental and Social Assessment and Management System: Ferrum has implemented functional Environmental, OHS and HR management systems. At individual production facilities the company has achieved certifications under ISO 14001(Environmental Management System); and there are concrete plans to achieve ISO 9001 (Quality Management System); and OHSAS 18001 certification towards early 2019. Ferrum has corporate EHS policies which are linked to targets, and operationalized through management programs, procedures and key performance indicators. EHS information is communicated to the leadership team of the company who periodically review targets and performance on EHS topics. As per local requirement each plant has the mandatory environmental and operational permits, or is in the process of renewing them; including environmental permits (Certificado de Aptitud Ambiental), gaseous emission discharge and liquid effluent discharge permits. 

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 as per regulatory requirement. The company has a well-developed planning process for expansion projects within the factory; Ferrum defines a multidisciplinary team and considers EHS aspects as part of change management process . New production equipment, such as ovens, is selected based on the available technology and considering energy efficiency, reduction in emissions and operational enhancements such as ergonomic factors or safety to workers. This will be the case for the installation of the new oven, expansion of storage areas and other aspects of the CAPEX.

Environmental impacts and OHS risks of the operations have been identified and are updated periodically; as part of the ISO 14001 and OHSAS 18001 process. The company has developed and implemented operational procedures to manage the risks and impacts identified. Operational procedures incorporate OHS and environmental instructions and cover issues such as effluents, emissions, solid waste and occupational exposure monitoring.

Organizational Capacity and Competency: Ferrum has a well-staffed (about 7 professionals) EHS unit with permanent staff in both plants Pilar and Avellaneda. These personnel have responsibilities for management of effluents, solid waste, emissions as well as OHS monitoring and supervision. The EHS coordinator reports to HR director and also with a dotted reporting line to the corporate’s EHS director for the parent F.V. industrial group. Labor aspects are managed by the HR department and plant managers and coordinators (jefes) have accountability on managing labor relations. There are two medical doctors and two nurses providing support in the production plants, and contracted services for physical therapy and ergonomic aspects. In addition, Ferrum has a full team of people responsible for procurement and CSR activities.

Ferrum has an established program to provide necessary induction and periodic training for all its employees on OHS aspects, environmental management, and labor issues related to its operations.

Emergency Preparedness and Response: Ferrum has well established emergency preparedness and response plans at each plant aligned with local legal requirements and good industry practices. The company has in-house brigades, medical personnel and adequate fire-fighting infrastructure across all its facilities. Training for emergency preparedness and response and first aid is provided to all employees.  The Pilar plant is located in an industrial zone, with no residential communities in the nearby vicinity; however, the Avellaneda plant is in a more urban setting and the emergency response plans includes arrangements to engage withthe nearby communities and neighbors.

Monitoring and Review: In line with its E&S management systems and local regulatory permit requirements, Ferrum has comprehensive environmental and safety monitoring program. The EHS parameters monitored are in line with the requirements of WBG EHS Guidelines and include emissions, effluents, waste and OHS monitoring records. Data is collected; however, aggregation and analysis of the information is not done in a systematic manner; therefore, as per ESAP # 1 Ferrum will identify key E&S indicators, assess them and design a dashboard to monitor, share and communicate these indicators across the company. Summary of EHS performance is presented to top management (directors and board members) and periodic internal and external audits are performed, both for OHS and environmental aspects.

Managing Supply Chain: Ferrum main raw materials includes natural resources such as clay, kaolinite, feldspar, kaolin and quartz. 90% of these materials are sourced locally within Argentina. The quarries and processing units are well regulated in the country where legal rights, environmental permits and labor laws are applied and enforced. IFC performed a basic biodiversity screening for areas where key materials are sourced and identified that there is no conversion of natural or critical areas and the biodiversity values in these areas are limited. In addition, given the demand for machinery and advanced processing there is no risk of child labor within the operations. Ferrum sources form a very small group of companies, which have been reviewed and verified in terms of basic environmental, OHS and labor compliance.

     Ferrum employs around 1,540 employees; of these, about 1,200 are employed in the production facilities of ceramics. Female employees are only 46, given the nature of the operations, which requires some heavy lifting and heavy physical work, which traditionally has been male dominated in the country. In recent years the company has doubled the number of female workers and is in the process of improving this number. Non-production related activities like canteen, housekeeping, gardening and security are outsourced to licensed contractors.

Human Resources Policies and Procedures: Ferrum’s HR policies and procedures cover all key aspects such as recruitment, induction and training, performance evaluation, promotion, disciplinary actions and dismissal. The company has documented an “employee handbook” which describes core values, company’s philosophy and internal rules (HR and OHS). Ferrum also has an ethics code which makes explicit reference to non-discrimination, freedom to establish or join unions, equal opportunity, and grievance handling. These principles are consistent with the local regulations and IFC PS2 requirements. Ferrum provides a copy of the handbook and ethics code during the induction program to all employees, and the HR procedures are readily available to all staff. Training programs are planned and implemented based on an assessment of needs and skills required for the production processes, including environmental, production, emergency preparedness and OHS elements. 

Working Conditions and Terms of Employment: Ferrum provides employees with clear terms of employment and information regarding industrial relations, disciplinary procedures, and roles and responsibilities within the organization. Ferrum pays wages as agreed under the collective bargaining agreement and above those required by local law. Ferrum offers various incentives and benefits to its workforce including distribution of earnings considering “presenteeism” (lack of absenteeism) and other bonuses which are agreed with the trade unions. As a result, Ferrum has historically reported very low employee turnover rates.

Sub-contracting is limited to specialized maintenance or civil works. For the expansion plan, Ferrum will hire external companies to perform some works, including civil works and equipment installation. Based on the previous experiences Ferrum hires companies which are evaluated and selected based on, among others, having all legal permits, which in Argentina cover labor and OHS requirements.

Protecting the Work Force, Non-Discrimination and Equal Opportunity: Ferrum is an equal opportunity employer, promoting fair and equitable treatment of employees, including processes of hiring, promotion and termination of employment. The company’s ethics code makes explicit reference to no discrimination based on personal characteristics or gender. The company complies with relevant legislative requirements. No employees under18 years are contracted and no child labor or forced labor is used by the company.

Retrenchment: Ferrum has had a steady workforce during the last few years. Staff turnover is quite low. In early 2016 the company underwent a review of the workforce, which resulted in the reduction of the number of employees (~15%); the process was conducted in coordination with local authorities, unions and representatives of employees, all severance packages were paid and other alternatives identified, the process was conducted following the local laws. As part of this project the company will enhance some productive processes to improve capacity, aligned with the projected growth of the company, retrenchment is not expected as result of the implementation of this project.

Workers’ Organizations: Ferrum supports freedom of association among its workers. Ferrum adheres to the collective bargaining agreements with the recognized workers’ organizations such as Sindicato Ceramista (Ceramics’ Workers Union). The company reports a stable industrial relations climate.  Union’s representatives are part of internal labor committees and channel workers grievances.

Grievance Mechanism: The company has documented an internal grievance mechanism with some channels for workers to raise grievances. T. Alternatives to submit grievances include communications to HR, to supervisors, and worker’s representatives; submitting grievances anonymously is currently not an available option. As part of the ESAP, the company will identify and implement an internal grievances mechanism to allow anonymous grievances from employees and their follow up until closure. Meetings and working groups are also considered points to collect grievances, and are viewed as a healthy exchange of ideas and offer an opportunity to express grievances without retaliation.  Argentinian law has in place mechanisms to protect third party workers and within Ferrum, they also could use the existing grievance mechanism.

Occupational health and safety (OHS): Ferrum’s production facilities have functional OHS management systems which are about to be certified under OHSAS 18001 (still this will be the applicable norm). The company has a proper methodology to identify and manage OHS risks, supported by operational procedures and programs that are implemented across the company. There is a comprehensive workplace monitoring program, that covers key risks of the operations such as exposure to dust, including silica and overall particulate matter, the company also monitors noise levels and illumination among others. Monitoring is conducted annually and corrective measures are implemented where identified. In addition, periodic medical exams are conducted for the employees based on the risks. Monitoring results show overall compliance with the Threshold Limit Values (TLVs); and where exceedance has been identified engineering controls such as water curtains (for dust) or adequate personal protective equipment is provided. The company has an ergonomic program in place which has exhibited some observable progress already; in particular, facilitating material handling and lifting operations.

Ferrum has a system to report and investigate accidents and near misses. Corrective actions are identified; however, injury rates are still relatively high compared to the industry benchmark. Analysis of root causes could be enhanced as well as the analysis of previous events could provide additional guidance on areas to improve and prevent future accidents. As defined in ESAP item #3 Ferrum will perform a detailed assessment of previous (2 years) accidents as well as workplace monitoring results to identify top priorities and define a corrective action plan to enhance OHS aspects and performance in both the plants.  

    Resource Efficiency: Ferrum has implemented some initiatives to enhance production processes and at the same time improve resource efficiency. The manufacturing process is energy intensive; the company uses mostly natural gas for ovens (tunnel kilns), preparation of raw materials, steam generation and key operations. The company has implemented measures for heat recovery from ovens as well as recirculation of gases to manage climatic conditions in the casting/shaping areas of production, which this project will further improve.

The company also reuses discarded ceramic products. Water usage is monitored and part of the water is reused after treatment, for cleaning and preparation of barbotine. Upgrades planned as part of IFC’s project are expected to further improve energy efficiency, for example by installing a modern oven and new equipment. The company will continue to identify resource efficiency opportunities in its operations.

Greenhouse Gas Emissions:  The primary source of greenhouse gas (GHG) emissions is the consumption of electricity and gas for the manufacturing process, small quantities of diesel used for backup generators. Electricity (and gas?) are supplied by utility companies. Current greenhouse emissions from the production plants has been estimated at approximately 32,500 tonnes CO2-equivalent per year.  Additional GHG emissions will be due to the capacity expansion and the normalized GHG emissions in tons of CO2eq/product is expected to remain constant. Given the level of GHG emissions, Ferrum will use ISO-14064-1, as the internationally accepted methodology to measure and monitor GHG emissions and will report annually to IFC the emission levels.

Air Emissions: Ferrum generates air emissions from combustion units (boilers, ovens, generator sets) and process units (grinding, molding, shaping, glazing, and finishing processes). Controls within the processes include installation of extraction systems with filters, installation of baghouses and in some areas enclosed transportation systems. Nevertheless, the process generates particulate matter and the company monitors annually all its discharged points as required by local regulations in Argentina. Parameters that are monitored are those relevant per discharge point and include particulate matter, SO2 and NOx. Monitoring results show consistent compliance with national and applicable WBG EHS Guidelines. Glazing materials are aqueous-base and there are limited emissions of materials in these areas, as application of enamel is done using water curtains and materials are recovered on site.

Wastewater treatment: Ferrum treats the industrial effluents generated in both plants; discharge point to each plant is different; the Pilar plant discharges to a natural body; while effluents in Avellaneda are discharged to the municipality (however further treatment is not known). Effluents are generated in several parts of the process including raw materials preparation, mold making, casting and glazing. Water in some processes is reused and recycled on site, nevertheless a significant amount of wastewater is treated. Treatment is mostly a physicochemical separation with the aid of polymers and sludge is separated using press filters. Sludge has been characterized and is classified as non-hazardous and disposed via local companies for use as off-site filler. Effluents are monitored and results reviewed confirm compliance with local permit conditions and the applicable WBG EHS Guideline limits.

Solid Waste Management: Ferrum has a formal procedure to manage solid waste, involving waste reduction, segregation and disposal through authorized companies. Ceramic’s scrap generated during the production process is classified and as feasible returned to the process as raw materials or sold to third party users. Waste is disposed of through the licensed waste management contractors in accordance with the permit conditions. Housekeeping conditions in the storage area for solid waste can be improved, including better segregation and handling conditions. Ferrum has full chain of custody of waste through the legal records required by local authorities.

Hazardous Materials Management: Ferrum has operational procedures for management of chemical substances; such procedures include handling, storage and labeling of the chemicals (enamel and additives).  Safety Data Sheets and summaries are available at the points of use and employees are aware of the risks and controls in place.                                               

   Community Health and Safety: the production plant in Pilar is located in an industrial zone, without households in the immediate proximity; and the Avellaneda plant is in a more urban setting with some households in the vicinity. The company has proactively engaged in Avellaneda with the neighbors’ association to address any potential concerns, which to date are minimal. The emergency response plan considers the presence of these communities. Transport of raw materials and products is contracted to specialized transport companies and there are defined schedules for trucks to load and unload materials. Dust control is present in the raw materials facilities and there are limited emissions as raw materials have some level of humidity. Ambient air monitoring is performed in selected points as per local requirements, parameters follow local and WBG guidelines requirements. 

Security Personnel: The company hires third party licensed companies to provide security services, these are unarmed security guards, mostly controlling access to the facilities. The security guards are also trained to support emergency response as part of their duty.       

      Ferrum focuses its community engagement efforts towards the local communities where the plants are located. No significant footprint expansion has occurred in recent years; therefore, no formal consultation processes has taken place. Ferrum reports open doors policies to neighbors and communities; some of the concerns expressed by neighbors are well documented and managed. Very few requests have been raised on E&S issues and when there is a request the company has promptly processed and responded to the queries.

Ferrum has several corporate social responsibility initiatives for local communities, including: (i) support to local communities to enhance schools, in particular environmental initiatives; (ii) improvement of homes (in particular bathrooms and kitchens) for workers in needed areas; (iii) financial support to community primary schools, libraries and reading clubs; and (iv) volunteer activities involving Ferrum employees to work on local schools, providing training, reading and in general supporting elementary and secondary education. The company is committed to continue its community relations and support these activities.