The following performance standards are not applicable for the stated reasons:

PS5: Land Acquisition and Involuntary Resettlement: Although limited land acquisition may occur as part of this loan, PS5 is not applicable because any land acquisition would be based on principles of willing seller-willing buyer and properties will consist of farmland in areas already considered agricultural. The client strategy is to increase production through replanting of old orchards with a denser planting regimen and better crop practices;

PS7: Indigenous Peoples: Company operations are currently not conducted in areas that impact indigenous peoples. Potential indigenous peoples impact in any future acquired land would be identified through the company’s E&S risk and impact identification process;

PS8: Cultural Heritage: Operations are located either in industrial parks or consolidated agricultural land. Potential cultural heritage in any future acquired farm would be identified through the company’s E&S risk and impact identification process. 

    The proposed investment is categorized as an environmental and social (E&S) category B Project as there are no elements of the project with diverse, unprecedented or irreversible, negative social or environmental impacts. Company operations are well known to IFC through previous investments in San Miguel’s operations in Argentina and Uruguay. The results of the current E&S due diligence indicate that previously identified risks and impacts have been managed by San Miguel in a manner consistent with good practices.

The potential environmental, social, occupational health and safety risks and impacts associated with this project relate to: (i) performance effectiveness of environmental, social (labor), occupational health and safety, and food safety management systems, procedures, management programs, and timely implementation of recommendations from internal and external/third-party audits; (ii) provision of fair and safe working conditions, compliant with local labor law, for permanent and temporary (seasonal [local and migrant]) workers, contractors and supply chain labor; (iii) emergency preparedness and response (e.g. release of ammonia from refrigerator system); (iv) sustainability of water supply; (v) management of solid, liquid and hazardous wastes from agriculture and processing activities; (vi) traceability and sustainability sourcing of its third parties suppliers (ref. supply chain); (vii) workers’ exposure to noise, vibration and particulate matter; (viii) physical hazards (electrical hazards, confined spaces, slippery surfaces, risk of fire and explosion), among others.   

   • Environmental and Social Assessment and Management System

IFC has invested in San Miguel since 1998, at specific facilities in Argentina and Uruguay. During this time, the company has implemented multiple environmental, social, health and safety (ESHS) policies, procedures and programs to comply with in-country requirements and with IFC requirements. IFC requirements for each investment were aligned with those effective at the time and targeted E&S risks and impacts associated with San Miguel’s operations at the time of the investment. Thus, with each investment, San Miguel built up on previous E&S practices and improved the E&S performance of its operations.

The proposed investment is a corporate loan to cover San Miguel’s operations across four countries in two continents. Therefore, IFC E&S requirements will target actions to strengthen the company’s corporate environmental and social management system (ESMS) to ensure consistent E&S performance aligned with the IFC Performance Standards (PS) at all locations where the company operates.

Moving forward, as part of ESAP Action #1, San Miguel will establish, implement and maintain an Integrated Quality, Environmental, Social and Health and Safety (QESHS) Management System at corporate level, establishing close coordination between the E&S, OHS and HR departments to ensure consistent ESHS performance at all operations. The Integrated QESHS Management System will include EHS plans and procedures applicable to processes and activities at all locations. As part of the implementation of an integrated QESHS, San Miguel will also enunciate an Integrated QESHS Policy that reflects the adoption of the company’s values and principles. San Miguel will implement a methodological approach to identify and to evaluate potential E&S impacts, OHS risks and legal aspects by a structured manner and on an ongoing basis, through the preparation and implementation of identification and evaluation matrices. Specific QESHS management systems will be established, implemented and maintained by San Miguel at each country, and such management systems will be fully aligned with the requirements of IFC PS1.

• Identification of Risks and Impacts

San Miguel’s EHS standard procedures include assessments of key environmental and social aspects and occupational health and safety risks. At San Miguel’s operations in Tucuman, Argentina, where the company has operated for more than 60 years, these procedures are applied as part of the company’s standard operating procedures (SOP).

As part of ESAP Action #1, the company will adjust its environmental and social risks and impacts identification process to include country legal requirements, sector and contextual risk considerations at all operations. 

• Management Programs:

In Argentina, the company demonstrates good industry practices. There are important ESHS management programs that are required to address inherent risks and impacts associated with the company’s operations in the orchards, packinghouses, processing plants and logistics. The company has also developed dozens of management programs including those essential for management of natural resources such as water efficiency, soil conservation, biodiversity conservation, integrated pest management, effluent treatment and discharge, and protection of groundwater resources. Other important management programs include stakeholder engagement, social investment and general and industry-specific OHS programs for the identification of risks for workers’ health and safety. As described throughout this document and as set forth in the ESAP, San Miguel will consolidate and strengthen its ESMS and implement best practices at all operations.

• Organizational Capacity and Competency

Environmental, social, occupational health and safety (ESHS) departments are staffed by qualified professionals with relevant experience in their specific area of expertise. Currently, at the corporate level in Argentina, E&S personnel reports to the Sustainability Department while the OHS personnel reports to Human Resources (HR). These individuals are responsible to implement the ESMS, manage E&S impacts, and ensure E&S performance is improved. As proposed in ESAP Action #1, the ESMS will integrate the E&S, OHS and the HR management systems resulting in a more comprehensive and robust integrated management system. There is a need to enhance the ESHS organizational capacity and competency at corporate level and at local operations. . Therefore, as per ESAP Action #2, San Miguel will ensure that each country will have sufficient number of qualified environmental, social, occupational health and safety (ESHS) and human resources personnel to implement the company’s policies and procedures in a consistent manner to ensure full compliance with in-country requirements and E&S performance. Personnel responsible for ESHS management will report directly to the operational Directors of the company.

• Emergency Preparedness and Response

San Miguel has implemented emergency preparedness and response plans to address identified risks associated with its various activities. However, across the four countries where the company currently operates, there are inconsistencies in the adequacy of such emergency preparedness and response plans to address the specific risks that may exist in each facility (e.g., fires, chemical spills/gas leaks, earthquakes, etc.). To ensure consistent and site-specific emergency preparedness and response plan at each facility, as per ESAP Action #3, San Miguel will: (i) update its risk analyses for job functions and major equipment; and (ii) improve and update existing emergency preparedness and response plans for each facility, based on facility-specific emergency scenarios. Updated plans will incorporate results of specific studies conducted for implementing preventive maintenance (e.g. release of ammonia from refrigeration systems) and improving firefighting facilities.    

• Monitoring and Review

San Miguel has ongoing efforts to assess its EHS performance across the four countries. EHS staff frequently visit operations in other countries to share their experience and good practices. Based upon internal review results, and when needed, the company allocates financial and technical resources to address identified deficiencies. EHS key performance indicators are reported on a monthly basis and shared with senior management at the country and corporate level. This information guides updates in management plans, procedures and budgets.

    San Miguel’s direct employees include 1,300 workers allocated between Argentina, Uruguay, Peru and South Africa. Approximately 7,000 workers are also employed seasonally, under temporary contracts, for harvesting, packing and fruit processing.

• Human Resources (HR) Policies and Procedures, Working Conditions and Terms of Employment

San Miguel is a signatory to the UN Global Compact which includes public commitments to manage its activities according with the principles of Human Rights and Freedom of Association, including workers right to collectively bargaining, eradication of child and forced labor, equal opportunity and non-discrimination, which apply to its contractors and suppliers.

At the corporate level, the company has developed a Code of Conduct that abides by all legal prohibitions against under-age employment and forced labor within its operations. The company observes ILO Conventions 138 on Minimum Age, which is established at 18 for all global operations, and 182 on Worst Forms of Child Labor.

In each location, the company has a set of policies and procedures applicable to all direct employees that reflects host country employment law and regulation. These terms of employment cover the following provisions: (i) recruitment and hiring; (ii) compensation (including wages and benefits); (iii) hours of work; (iv) overtime arrangements; (v) leave; (vi) benefits, including health insurance, pension schemes; (v) conditions of work; (vi) termination procedures and rights; (vii) communication procedures; (viii) training; and (ix) other requirements according to national law.

To improve coherency of labor performance across the company, there is a need for a single set of HR policy and procedures at corporate level, which are then cascaded down to each country level and be adapted, as required, to meet specific country’s labor legislation, especially in relation to terms and conditions of employment.

Going forward, as part of ESAP action #4, San Miguel will develop a set of corporate HR policies fully aligned with the objectives of PS2 that will be cascaded down to all subsidiaries.  Furthermore, all subsidiaries will update or develop a HR Manual, in local language and following the company’s Code of Conduct, to account for the corporate HR policies and procedures including: (i) labor sourcing and recruitment procedures, with measures to identify and prevent the risk of modern slavery - including human trafficking, forced and compulsory labor, debt bondage, slavery, servitude, worst forms of child labor and slavery; (ii) induction procedures; (iii) terms and conditions of employment, aligned to national legislation requirements; (iv) OHS requirements; (v) performance management; (vi) procedures for workers representation or committees; (vii) disciplinary procedures including explicit provisions for sexual harassment; (viii)  labor grievance mechanism; and (ix) termination of contract and dismissal. These policies and procedures will apply to all categories of employment across all San Miguel operations. They will be made accessible and will be displayed at prominent areas where workers may gather at the start and end of the day and at the offices.  All workers, including seasonal and migrant workers, will be trained during the induction session and through additional sensitization training provided to all workers, on all aspects of the updated HR policies and procedures. San Miguel will verify annually, through internal audits and other verification channels, compliance of all its operations with its HR policy, country labor law, and IFC PS2 requirements.

As set forth in the ESAP (action #5), San Miguel will conduct a gap analysis of all worker accommodation provided by the company to its workers (own staff, contractors and eventual personnel) against the PS2 requirements, so as to identify shortfalls and implement appropriate corrective measures, prioritizing drinking water, adequate sanitation facilities, minimum space, and fire protection systems.

• Workers’ Organizations

In alignment with national labor laws that guarantees workers’ rights to freedom of association, San Miguel’s workers join unions of their choosing. Operations in Argentina, Uruguay, and South Africa negotiate collective bargaining agreements, which are reviewed once a year mostly regarding salary increases. Representatives from the unions are part of committees that meet regularly to review workplace conditions, training requirements, and occupational health and safety requirements. In Peru, the workers set their own equity committees, which are composed by workers representatives that meet regularly with San Miguel management to discuss wages, social benefits, workplace conditions and other relevant matters.

In South Africa, most of the permanent workers at the Eastern Cape operations are unionized. The rate of unionization amongst the seasonal workers is lower. The company has negotiated an Annual Wage Agreement with the Food and Allied Workers Union (FAWU) for the Eastern Cape operations. All measures negotiated under the collective agreements are extended to cover non-unionized workers as well.

• Grievance Mechanism

In each operation, San Miguel has a grievance mechanism in place through which staff members may raise employment concerns and/or report any misconduct.  Worker grievances can be presented to the immediate supervisor, to a representative of Human Resources, to an e-mail (rrhhcorporativo@sanmiguelglobal.com) account, and through grievance boxes distributed in the company’s offices and facilities.  As reported by San Miguel, there are specific committees to address all labor grievances and grievances associated with harassment in the workplace.

The grievance mechanism implemented is mostly aligned with this PS; however, additional measures will be implemented to ensure full compliance with PS2 requirements, including: (i) incorporating a  process that allows for the submission and resolution of anonymous complaints and that also protects the confidentiality of the complainant, if required; (ii) appointing a grievance committee that not only includes the HR Department, but also management and workers representatives; (iii) include expertise to manage sexual harassment complaints; (iv) keeping records of all grievances including those that are resolved informally; and (v) allowing for San Miguel to register and resolve grievances emanating from employees of third-party contractors, such as those employed by labor brokers.

As set forth in ESAP #6, San Miguel will update its labor grievance policy and mechanism and operationalize it across all its sites, in line with PS2 requirements. The mechanism will allow the submission and resolution of anonymous complaints, protect the confidentiality of workers, ensure expertise to handle sexual harassment, enable for timely response and feedback and keep a register of all grievances. An appropriately structured committee will be set up to address grievances. Furthermore, the labor grievance mechanism will be made accessible to all third-party workers. San Miguel will also inform and sensitize its workforce of the grievance mechanism during the induction session and through additional training and information sessions provided to all existing employees and third-party workers.

• Occupational Health and Safety

IFC’s E&S due diligence reviewed operational level OHS activities in Peru, Argentina, South Africa and Uruguay. In Peru, San Miguel’s industrial operations are OHSAS 18001-certified, thus risk assessments are routinely carried out and responsible and competent personnel are in place to avoid, manage or mitigate those hazards that had been identified. Due to the distance to urban centers, the company maintains paramedics on site and a third-party ambulance service provider for medical emergencies.

Similarly, in Argentina, the industrial facilities were seen to have good management practices in place for labor/safety and the general housekeeping situation was found to be good. Field operations in citrus plantations are also covered by OHS practices and procedures aligned with Good International Industry Practices (GIIPs). Mechanized site preparation, planting and harvesting is conducted by temporary employees, who are managed directly by San Miguel or through contractors. During the IFC's appraisal visit, it was noted that uniforms and personal protective equipment (PPE) were provided to all workers, and there was acknowledgement of the safety risks associated with various operations. Training of employees who operate dangerous equipment or handle hazardous materials such as pesticides is being developed in appropriate forms. Records and documents are also being properly maintained and controlled.

However, there are still discrepancies in the policies and procedures for consistent management of OHS risks across the various geographies where San Miguel currently operates. As per ESAP Action #7, San Miguel will develop and implement a set of corporate OHS plans and procedures, which will be operationalized across all its sites and aligned with GIIPs covering the activities associated with industrial facilities and field operations. At a minimum, this will include: (i) physical hazards management, such as exposure to noise and vibrations, moving objects, machinery and vehicles, ergonomics, confined space entry and extreme weather conditions; (ii) risk of fire and explosion; (iii) biological hazards, such as venomous animals; (iii) chemical hazards, such as exposure to pesticides; (iv) use of comprehensive PPE; and (v) induction, training and emergency drills.  The plans and procedures shall apply broadly across San Miguel organization, including contractors and primary suppliers.

In Uruguay, San Miguel owns a 50% stake in a joint-venture that operates a processing facility named Novacore. Field observations indicate a need for upgrade of major equipment, including ammonia refrigeration system, fire protection system, and electrical system. In addition, the company must establish a better maintenance program and emergency preparedness and response plan to guarantee safer working conditions.

Moving forward, under ESAP Action #8, San Miguel will hire qualified ammonia refrigeration system specialist to conduct safety assessments of all industrial scale ammonia refrigeration systems, including in facilities that are under joint-venture ownership, and compare the results against local regulatory requirements and applicable international standards (such as those of the International Institute of Ammonia Refrigeration - IIAR).  Based on the results of the safety assessment, San Miguel will identify opportunities and implement measures to improve the ammonia systems’ safety consistent with international safety standards. The maintenance of the ammonia refrigeration system will be performed by qualified personnel.

Also, under the ESAP (Action #9), San Miguel will conduct in-depth audits to verify the conditions of all systems and equipment (e.g. electrical systems, surface drainage system around areas that store chemicals and fuels, boilers, chemical storage tanks, fire protection systems, pumps, etc.) at older facilities and will develop action plans to improve conditions or upgrade systems and equipment in a phased manner. Follow up audits will be performed every year until all gaps are closed and corrective measures implemented.

The transport of the company’s products entails a large number of trucks. Moving forward, under the ESAP (Action #10), San Miguel will develop and implement a procedure to manage risks associated with subcontractor’s drivers, including: (i) defensive driving trainings; (ii) visual inspections of truck conditions; and (iii) requirements of drivers’ qualifications/certifications.

• Workers Engaged by Third Parties

San Miguel does outsource services, such as janitorial and groundskeeping services, security and, on a bigger scale, temporary workers for the field activities (planting and fruit picking), packing and fruit processing. In Uruguay, South Africa and Peru, all seasonal workers are hired directly by San Miguel. In Argentina, a significant portion of these workers are hired through specialized companies that recruit and manage the working arrangements (hours, pay, etc.). San Miguel’s code of ethics, code of conduct and grievance mechanism also apply to workers engaged by third parties. All third-party workers have a contract which details their terms of employment and working conditions which are in line with country regulations and San Miguel HR policy. All HR and OHS aspects of the seasonal workers (including the selection, recruitment, contracting, induction, training, etc.) are the responsibility of San Miguel. Thus, San Miguel regularly supervises enforcement of contracts and ensures terms of employment are respected. The company conducts internal audits during the harvesting periods, each year.

• Supply Chain

Fruit production in Argentina and Uruguay is supervised by San Miguel as the company works in close coordination with contractors at the leased farms and with associated producers. The company does not have leased farms in South Africa and Peru, where all planted areas belong to San Miguel.

Potential supply chain risks, as it pertains to labor issues (child or forced labor) and life-threatening occupational health and safety issues, is continually monitored by San Miguel through regular checks and inspections during the crop season. The company has also developed and incorporated a set of principles that are applicable to all its suppliers, which covers the prohibition of child and forced labor. These requirements are included into contracts and San Miguel staff monitors suppliers on an annual basis.

The company has also engaged with different social organizations that work exclusively on childhood

issues, to contribute to the eradication of child labor and to ensure that Children’s Rights are respected. In  , for example, San Miguel has signed a record with the Asociación Tucumanadel Citrus (ATC) and the Companies Network against child labor. The company has conducted several awareness campaigns together with their contractors. In rural areas, several foremen from San Miguel and supplier companies uses vests with a legend alluding to the subject to raise awareness about this issue. In addition, in the central areas of Tucumán, the company has celebrated campaigns to commemorate the Day Against Child Labor (June 12), with the delivery of brochures and dissemination material.  

   • Resource Efficiency

San Miguel utilizes modern equipment, GPS-based technologies, precision agriculture practices and competent staff to optimize efficient and sustainable use of soil, energy and water, which are paramount to the company’s successful business and operations. San Miguel also measures the consumption of energy and water and reports annual consumption through its Sustainability Report. For instance, in the lemon crushing process, San Miguel has adopted new technology which has reduced by 40% the water consumption for essential lemon oil extraction. The company specific initiatives related to resource efficiency and pollution prevention are described in the sections below.

• Water Management

Each country where San Miguel operates presents unique water resource conditions and water sources for San Miguel’s operations include intakes from rivers, dams and groundwater, in various combinations. In Peru and South Africa, which have drier climates, drip irrigation systems are used. In Uruguay, where rainfall is consistent throughout the year, irrigation is only used during dry periods to complement water supply.

Overall, San Miguel has focused on optimizing crop uptake of water and applies good practices that include: (i) routine maintenance of the irrigation system and associated infrastructure; (ii) use of liners in supply channels and storage ponds/dams to reduce losses through seepages; (iii) storage of runoff from rainy periods to supplement water supply during dry season; and (iv) irrigating crops during coolest times of the day to minimize losses through evaporation, among other good practices. However, while San Miguel already adopts important water measures to conserve water resources, the company’s procedures are not fully aligned with all the key components of an integrated water management. Thus, as part of ESAP Action #11, San Miguel will develop integrated water management plans for each facility. Such plans will be based on site-specific water balances that take into consideration all activities performed at each site and will aim at: (i) Consider opportunities for reuse, recycling of treated water, where feasible, (ii) Consider the potential impact to the water balance prior to commencing new activities; (iii) minimize impact to natural systems by managing water use, avoiding depletion of aquifers, and minimizing impacts to other water users.

• Air Emissions and GHG Emissions

The annual global GHG emissions are estimated at 106,710 tonnes CO2 equivalents. The company has a team that evaluates technically and financially feasible options to reduce or offset project-related GHG emissions. For example, at the Famailla facility in Argentina, the company reduced its consumption of natural gas from 72 m3/ton of processed product in 2015 to 69 m3/ton in 2017. This resulted from initiatives such as better automatization of equipment and optimization of processes. In addition, the company is currently evaluating a project to use biogas. Of the 15,000 m3/day that is generated at the Famailla facility, the company uses 10% of the biogas to heat the effluent that enters the anaerobic digestor reactor to increase its efficiency. There are ongoing studies to determine where the company will reuse the remaining biogas, either vapor generation in boilers or electricity generation plus further heating capacity of incoming effluent. Beginning in 2019, the company will include global GHG emissions on its sustainability reports. The results of the GHG inventory will be used for a future long-term GHG emission reduction plan.

There are boilers at all process plants which are fired with natural gas. Boiler safety is ensured through government-required inspections. Air emissions are monitored and measured twice a year by a government–approved contractor and results are compliant with national emission levels and applicable WBG EHS guideline levels.

Wastewater Quality

The San Miguel’s processing facility in Famailla is the company’s largest industrial plant and has had a long history of initiatives to improve the quality of its industrial effluent discharges. Several engineering improvements have been implemented since 2005 to render the effluent to an appropriate quality, as documented in ESAPs from previous investments. Industrial wastewater management at the Famailla plant includes treatment via the wastewater treatment plant (WWTP) and re-use of effluent as a source of irrigation/land application, similar to practices used by the sugar cane industry. Since 2005, upgrades and adjustments to the WWTP have led to 91% improvement in the effluent quality discharged to surface waters. At present, the company has ongoing improvement plans for effluent management which are expected to lead to full compliance by 2019.

Since 2016, Secretariat of Environment in Tucuman (SEMA-Tucuman) has monitored the quality of treated effluents that are discharged to the environment on a continuous basis through an online monitoring station at the point of discharge at the Famailla processing plant. San Miguel also conducts monitoring of surface water bodies, including the Famailla River. Preliminary results from the surface water quality monitoring programs indicate no adverse impacts on the Famailla River. However, monitoring of receiving surface water bodies have been conducted at inconsistent frequencies which do not allow for a full understanding of concentration trends over time and seasonal variations.

Moving forward, under ESAP Action #12, San Miguel will conduct an environmental impact assessment of current and proposed effluent disposal options at the company's Famailla facility. As part of the impact assessment, the company's wastewater treatment system capacity/performance and disposal options will be reviewed. San Miguel will hire an external qualified consulting firm with proven international experience in undertaking similar work elsewhere. Scope of work will be phased and include: (i) San Miguel will develop a TOR, in consultation with IFC, to conduct a detailed environmental impact assessment related to potential impacts for disposal options being considered. Disposal of treated effluent to surface water or land application must comply with regulatory requirements and PS3 objectives; where land application is considered, establish specific criteria that take into account the assimilative capacity of the receiving environment (consideration of hydrologic, agronomic and seasonal conditions included) with the objective of protection of human health and environment; (ii) hire an external qualified consulting firm with proven international experience in undertaking similar work elsewhere (iii) Undertake the environmental impact assessment as per (i). Develop a costed and time-bound action plan (in consultation with IFC) to achieve compliance with regulatory requirements and PS3 objectives and allocate appropriate human and financial resources to implement this action plan; (iv) Implement action plan for disposal of effluent to achieve compliance with regulatory requirements and PS3 objectives; and (v) Develop and implement a comprehensive long-term monitoring program for the receiving surface water bodies located downstream of the Famailla processing plant as well as soil and groundwater at locations where effluents are applied.

As part of IFC’s due diligence, the WWTP and effluent quality at the processing plant in Paysandu were also assessed. As stated in the ESAP Action #13, San Miguel will conduct an assessment of Novacore’s WWTP adequacy and capacity to treat existing effluent streams and will prepare a corrective action plan to improve the WTTP and to ensure that treated effluent quality is compliant with national requirements and WBG’s EHS Guideline values for food and beverage processing. The same requirement applies to Ponders End in South Africa.

As the proposed transaction contemplates a new processing plant in Uruguay, under the ESAP Action #14 San Miguel will be required to design and construct the processing plant with an associated WWTP. This plant will be designed with proven technologies and capacity to treat maximum effluent volumes at projected peak production and ensure compliance with WBG’s EHS Guideline values for food and beverage processing and national requirements.

• Crop Residue and Solid Waste Management

San Miguel uses crop residue from the orchards as well as other organic-rich wastes/materials to improve soil organic matter and soil structure, resulting in reduced soil erosion.

The company has solid waste management that includes segregation and storage of wastes according with their characteristics. The company also has initiatives to recycle and to minimize solid waste generation. Hazardous and non-hazardous solid wastes are stored at appropriate storage areas and disposed at authorized waste management facilities. Manifests are maintained, and volumes of wastes are recorded. There is no burning of crops at the site. Used oil is segregated and sent to recycling facilities.

Empty pesticide containers are triple rinsed and washing used in the pesticide tank are sprayed in the fields. Containers are punctured to prevent unsafe use and returned to original distributors or sent to recycling facilities, depending on availability of services at each location.

• Hazardous Materials

The company maintains inventories of hazardous materials such as pesticides, acids, diesel, solvent, among others. Diesel tanks are located at fueling stations used by field equipment and vehicles. Field observations indicate inconsistent standards for diesel storage tanks, secondary containment, surface drainage and presence/absence of oil/water separators across the four countries where San Miguel currently operates. Similarly, conditions of acid tanks were also inconsistent among countries. As per ESAP Action #15, San Miguel will ensure that hazardous materials storage areas are designed and built in accordance with good industry practices at all locations where the company operates. The company will conduct audits and develop a prioritized action plan to bring hazardous materials storage and handling areas to good industry standards at all locations.

• Pesticide Use and Management

Across its operations, San Miguel applies good practices to minimize the use of pesticides/herbicides/fungicides in the orchards. To achieve this objective, the company has ongoing monitoring of pests through traps and visual inspections and also utilizes biological controls. The Company also uses mainly mechanical means to control weeds in the orchards. All orchards hold Global Gap certification and the company does not use World Health Organization (WHO) Class Ia (extremely hazardous) or Ib (highly hazardous) chemicals.

Pesticides at the various facilities were observed to be properly locked in designated areas with access controlled by authorized personnel. Pesticides were packed and labeled and applied in accordance with FAO guidelines. Standards for pesticide storage facilities, however, were not consistent across San Miguel’s operations, with some storage facilities structurally below standards. Thus, also under ESAP Action #15 described above, corporate audits will also assess the pesticide storage facilities and will develop a plan to improve or build new storage facilities at locations where such facilities are non-compliant with in-country requirements and GIIPs.

 • Community Health and Safety

San Miguel’s management of community health and safety risks is defined by locally applicable requirements. In general, San Miguel’s packing and processing plants are located in industrial areas, themselves located in small towns or cities proximal to the agricultural areas from where the fruits are sourced.  Potential emergency situations, such as chemical fire or explosion, would be contained within the limits of the industrial facilities. In these areas, the interface is limited to truck traffic and members of the security personnel that are contracted to protect company assets. As such, there is little interaction between such operations and the general public. 

In the orchards, potential risks to communities from San Miguel’s operations are primarily associated with fugitive air emissions from trucks (dust) and aerial application of herbicides and grass seeds for soil protection. In Uruguay, most locations use aerial spraying of crops by licensed companies using crop spraying airplanes which follow local regulatory requirements. To improve management of these operations and minimize risks to communities, as described under ESAP Action #16, San Miguel will formalize a procedure for aerial spraying of chemicals in accordance with the FAO Guidelines. The procedure will include weather conditions monitoring during aerial spraying, pro-active communications with neighbors and safety buffer zones from towns, small villages or households.

• Hazardous Materials Management and Safety

The Company uses registered and approved pesticides for termite control, fertilizers and mineral amendments for growth, and herbicides to manage weed competition. With regards to community health and safety, risks associated with the use of pesticides and fertilizers include localized contamination of surface water from overuse and spills and potential misuse by local inhabitants and workers. Beyond good application practices, the appraisal team observed adequate awareness about the hazards of pesticide and herbicide use and familiarity with protective equipment by field workers. However, as mentioned under PS3, above, standards for pesticide storage facilities were not consistent across San Miguel’s operations, with some storage facilities structurally below standards.

• Emergency Preparedness and Response

Potential emergencies, such as chemical spills, fire or explosions, would involve the onsite brigade and support from local fire departments. The local communities would not be involved in emergency response efforts since potential emergencies would be expected to be contained within the facilities’ property limits.

• Security Personnel

The boundaries of the plantations are currently mostly unfenced, except for Peru, where the planting fields are concentrated within the same area. However, packing facilities and nurseries are surrounded by a perimeter fence and access is controlled by manned gates. The provision of security is mostly in-house (with the use of both permanent and seasonal guards) and unarmed. San Miguel currently does not have a security procedure to manage potential security issues, especially with communities, and minimize potential conflicts. Going forward, as per ESAP action #17, San Miguel will establish clear security protocols, including the interface with the police force, and train its security guards accordingly. Furthermore, the approach will include the ability by the communities to raise complaints (including anonymous ones) regarding security personnel and security provision as part of the external grievance mechanism.    

   • Protection and Conservation of Biodiversity

In all regions, citrus plantations are located on traditional areas of agriculture, and no direct conversion of natural habitats to croplands or significant loss of biodiversity is expected from this project. In Argentina, the project is within a high value environmental context, mainly in the Yungas (mountainous subtropical rainforest) ecoregion. Together with the ProYungas Foundation (http://proyungas.org.ar), San Miguel has implemented the Protected Productive Landscape Program, which is a landscape scale territory management model that seeks to integrate production, biodiversity preservation and associated ecosystem services, in five different working lines: (i) Environmental context characterization; (ii) Biodiversity monitoring; (iii) Resource preservation and improvement processes incorporation in environmental performance; (iv) Internal and external communication; and (v) The construction of strategic alliances with different territorial actors.

The company understands the importance of biodiversity protection and conservation and has started to identify other entities that could develop similar biodiversity protection programs in Peru, South Africa and Uruguay. As described under PS3 (ESAP action #11), the company will also develop integrated water management plans for each facility, with a focus on preserving ecosystem services and availability of water for other users.

• Sustainable Management of Living Natural Resources

San Miguel has a corporate commitment to the use of recognized best cultivation practices and the use of independent certification systems to verify their use. The Company’s fruit production is based on plantations operated by San Miguel in owned properties as well as on leased properties and associated producers which are certified to several international standards, such as: (i) Tesco Nurture; (ii) GLOBAL GAP; (iii) SMETA; and (iv) Sure Global Fair (SGF).

IFC observed proper planning and environmental initiatives that demonstrate San Miguel’s efforts to remain a leader in the citrus sector. As previously mentioned, San Miguel’s plantations take place in mostly already converted land and consolidated areas of crop plantations in the countries where the company operates, and the company is currently focused on improving tonnage of fruit production per hectare rather than increasing plantation area. For new areas and replanting, San Miguel develops and implements a planting plan, which incorporates: (i) thorough assessment of site conditions and restricted areas; (ii) soil quality and preparation; (iii) erosion prevention and management; (iv) conservation of soil quality; among others.

• Supply Chain

Currently, as of 2018, San Miguel’s produces 79% of all fruit that is commercialized and processed by the company and 21% is produced by key strategic suppliers in Argentina, Uruguay and South Africa. The company does not outsource fruit in Peru. Annually, the company conducts audits of all its suppliers, verifying issues such as service, on-time delivery performance, compliance with specifications and quality assessment. The company has also an auditing schedule for suppliers of raw materials and critical supplies; in these cases, assessments are conducted by staff from the Quality Assurance area.  As mentioned above, citrus plantations are located on traditional areas of agriculture, and no direct conversion of natural habitats to croplands or significant loss of biodiversity is expected from this project. 

   External Communications and Grievance Mechanisms

The company uses a number of channels to communicate with external stakeholders. Through the company’s website, www.sanmiguelglobal.com, e-mails can be sent to various departments. In the same website, external stakeholders can access institutional information relevant to how the company manages its business, including its annual sustainability reports, which include benchmarking against the GRI indicators.

The company has a number of social programs, with nutrition, health and education as the main lines of action of San Miguel’s community development strategy, which are aligned with specific Sustainable Development Goals (SDGs). San Miguel also has a program to encourage small companies and purchases products (e.g. company uniforms) from small contractors.

In South Africa, the company is supporting the Living a Winning Life program, which aims to foster the acquisition of social and work skills, but also addressing gender and health issues. San Miguel also supports the Sisters of Mercy program (Home based caregivers), which provides health care to high risk patients, who, due to their health condition, cannot leave their homes to receive medical care.

In Uruguay, the company is developing the Rural Community Support Program, where they provide support to 16 educational and neighborhood institutions from the communities close to the company’s operations. The company donates fruit to hospitals and school cafeterias and collaborates with maintenance services and organized educational visits from universities and local schools to their farms and packing plant.

• While the company demonstrate great sense of community and provide donations to local institutions, in order to further enhance this approach and bring stakeholder engagement into full alignment with PS1, ESAP Action #18 requires San Miguel to formalize its stakeholder engagement strategy through the establishment of the following elements: (1) a mapping of stakeholders at/near each of its sites, including an identification of how its operations might affect each group, (2) a Stakeholder Engagement Plan (SEP) for each facility, (3) an annual plan starting in 2019 as to how San Miguel intends to implement its stakeholder engagement strategy at its multiple locations, and (4) an articulated approach to sharing information with and reporting to affected communities and other stakeholders on a regular basis, including, as appropriate, the periodic publication of a sustainability report on its E&S performance 

   Carina Pasut – Corporate Finance Manager

S.A. San Miguel

Phone: +54 11 4721 8300

E-mail: cpasut@sanmiguelglobal.com

Argentina

Cazadores de Coquimbo 2860, Torre 2 - Piso 1 (1605) Vicente López - Buenos Aires

URUGUAY

Colonia 950, Floor 9º (C.P. 11100) Montevideo

SOUTH AFRICA

Ground 1, B Block, Walmer Park Office Suites, 16th Avenue Walmer, (6001) Port Elizabeth

PERU

Calle Chinchón 1018, piso 5 (C.P. 15046), San Isidro - Lima