PS5 Land Acquisition and Involuntary Resettlement, PS7 Indigenous People and PS8 Cultural Heritage are not expected to apply to this project for the following reasons: although the company leases land for sugarcane plantations and also owns land, no involuntary resettlement was identified during appraisal and all future land leasing for sugarcane plantations will be under market based transactions on existing agriculture or pastureland areas. The company is expected to have flexibility over the location of such plantations, and therefore no involuntary resettlement is expected to take place. No Indigenous People areas or cultural heritage was encountered during appraisal and assessment of this project as most of São Martinho’s facilities and plantations are located on consolidated areas of agriculture.

This Project has been classified as Category B according to IFC’s 2012 E&S Sustainability Policy. The Project’s E&S risks and impacts are associated with existing sugar, ethanol and energy production activities in Brazil. Key E&S risks and impacts from these activities are: biodiversity loss and set asides (compliance with Brazilian Legal Reservation and Permanent Protected Areas requirements); labor issues regarding workers in the sugarcane plantations (within the company’s own operations and those of its third-party suppliers); wastewater (vinasse) treatment and discharge; air emissions from boilers; safe working conditions and health (employees and communities) issues related to agrichemical exposure; OHS risk prevention and management; life and fire safety; neighbouring and community engagement. These risks and impacts can be readily addressed through well-established mitigation measures. These measures are based on the General WBG EHs Guidelines and Sector-specific EHS Guidelines (Annual Crop production and Sugar Manufacturing).

Environmental and Social Assessment and Management System (ESMS). The company is in the final stages of rolling out its Integrated Management System (SGI, in Portuguese) to all its sugarcane plantations, milling, bio-generating energy operations, which brings together various E&S procedures and tools adopted in agricultural and industrial operations. As agreed in the 2017 ESAP, the company timely completed its internal and external management system audits. The corrective actions identified during the external audit are being implemented, following the ISO14001 format, and including the IFS PS 1 ESMS elements. For the latter, the company uses the IFC ESMS toolkit and provided a self-assessment of the IFC PS 1 inclusion. An independent assessment by IFC confirmed that sufficient progress has been made on implementing a robust ESMS at all its operations. Through its Integrated Management System, the company monitors its performance-based requirements, including IFC Performance Standards and Bonsucro requirements, and compliance against applicable national legal and regulatory requirements, making management processes auditable and transparent to various stakeholders. The company has currently 247k ha under production, 55k ha of which are owned, and the remainder is leased land and partnerships. Currently, Santa Cruz mill holds the ISO 14001 certification, and the company is working towards meeting ISO 14001 requirements in all of its mills by the 2023/24 harvest season. The company will contract an external auditor to conduct an assessment of ISO 14000 in Iracema Mill and ISO 45001 standards in all of São Martinho’s mills. In addition, Iracema and Santa Cruz mills hold the Bonsucro certification (certification to promote sustainable sugarcane products) of its agricultural and industrial operations.

Policy. São Martinho has a written environmental policy stating its commitment to produce renewable energy while considering its environmental & social responsibility, aiming for sustainable development, meeting legal and regulatory requirements and working to continuously improve its pollution prevention practices and thereby reduce its environmental impacts. In addition, São Martinho has an OHS policy which states its commitment to comply with the Brazilian law, apply prevention and reduce accidents, strive for continuous improvement, and implementation of applicable and mandatory management programs. All elements of São Martinho’s policies are linked to specific objectives and targets with respective performance indicators (KPIs). As set forth in ESAP # 1, São Martinho will disclose both current policies on its website.

Identification of Risks and Impacts. Annually, the company identifies material risks and impacts from all its operations, including air emissions, effluents, solids waste and main OHS risks under an annual Risk Prevention Plan (Plano de Prevenção de Riscos Ambientais – PPRA) required under Brazilian regulations. São Martinho conducts environmental assessments of its sugarcane fields and excludes the mandatory riparian areas and legal biodiversity set-asides from the sugarcane plantations. The São Paulo mills were built well before the existence of environmental regulations and EIA requirements in Brazil, however due to expansions and regulatory requirements, Santa Cruz, São Martinho and Boa Vista mills have completed EIA processes. The current Cogen plant in São Martinho mill was licensed in 2015 and the new Cogen project, which will be situated within São Martinho sugar mill site, already holds the construction permit LI (Licença de Instalação). In January 2020, the company completed the required air dispersion modeling to demonstrate no impact on ambient air of the proposed cogen plant (see the PS3 section for further details).

Management Programs. São Martinho has mandatory E&S Management Programs to avoid, control and mitigate identified impacts from the projects, as defined in the environmental license. These plans include monitoring and management programs for waste streams; air quality monitoring, surface water quality monitoring, vinasse application program, fauna and flora monitoring, traffic safety and control, environmental monitoring of field/agricultural activities; monitoring of erosion process, among others. The company has adopted several policies and procedures to manage human resources and OHS matters related to its own activities and contracted works including, among others, OHS programs required under Brazilian law, such as the Risk Prevention Plan, an Occupational Health Monitoring Plan (Programa de Controle Medico da Saúde Ocupacional – PCMSO) and a Hearing Protection Program (Programa de Conservaçao Auditiva). São Martinho also has specific procedures (working permit system) for hazardous work (e.g. working at heights, hot work, working with electrical systems, working in confined spaces) which must follow the company's mandated procedure for approving hazardous work activities. This includes both the workers in the fields and the mills.

Organizational Capacity and Competency. At the corporate level, São Martinho has two managers taking care of Environment and OHS matters respectively. While the environmental manager reports to the COO, the OHS manager reports to HR. Under their supervision there is a dedicated OHS team at each site, consisting of an OHS engineer, OHS technicians, nurses and physicians. In both the agricultural and industrial operations, there are so-called CIPAs, employees who have received basic firefighting and first aid training. For the construction of the cogen plant, the EHS team will keep oversight of the contractor’s compliance with EHS/labor requirements, including adhering to all São Martinho’s E&S requirements applicable to the construction. Regular safety meetings will be held between the EHS team and all contractors. São Martinho has training programs that include an EHS induction for new employees and contractors, as well as periodically repeated job-specific and regulatory trainings, such as working at heights, working in confined spaces, electrical and pressure vessel safety, work as machine or boiler operators, handling and use of pesticides.

Monitoring and Reporting. São Martinho monitors the main aspects and impacts from its operations, including mandatory monitoring programs defined during licensing process (e.g. surface water quality, fauna and flora, air emissions, aquatic ecosystem, social development, solid wastes generation and disposal) and internal indicators, such as work-related injuries, water and fuel consumption and pesticide consumption. The EHS team conducts scheduled inspections of all operations. Findings, corrective measures and closure rates are reported to senior management. As required, the company reports environmental compliance information to the relevant authorities. Information includes the completion of required actions as prescribed in respective environmental licenses (e.g. air emissions monitoring from boilers, water use permits, compliance with Brazilian biodiversity set-asides (reserva legal, in Portuguese), and solid and hazardous wastes management).

Since 2011, São Martinho reports its social and environmental performance to its stakeholders and the general public in the format of a sustainability report using the GRI (Global Reporting Initiative) framework, accessible at company’s website: https://www.saomartinho.com.br/. In 2018, the company completed a materiality assessment to determine the material issues to work and report on. The chosen themes have been connected to the relevant Sustainable Development Goals.

Supply Chain Risk Assessment and Management. Approximately 30% of the total sugarcane processed by the company comes from third party suppliers, predominantly located in the State of São Paulo. São Martinho has a Supplier Code of Conduct for third-party sugar cane suppliers and contracts include covenants to ensure adherence to Brazilian labor and biodiversity laws. This is assessed when the first contract is signed and monitored by the sourcing team who have been trained for this purpose (see section the PS2 and PS6 for further details.

Working Conditions and Management of Worker Relationship. São Martinho workforce comprises approximately 12,000 permanent workers. Annually, the company hires approximately 500 seasonal workers. With the mechanization of the planting and harvesting process, the need for cane cutters and other workers involved in heavy manual work duties is now minimal. More than 97% of workforce is hired locally, in nearby towns. Approximately 90% of workforce is male and 10% female, which is consistent with this industry/sector. For the cogen plant, the company expects to have 300 – 400 contractors on site during construction phase and new hires for the plant operation will be an additional 5 -10 workers as the company will simultaneously take four boilers out of operation. These workers will be transferred to the operation and maintenance of the cogen plant.

Through its human resources (HR) policies and practices, which are clearly articulated and readily available to its permanent and casual workers, São Martinho adheres to all Brazilian legal requirements regarding working conditions and management of the employer-worker relationship, promotion of a positive work environment, and retaining/motivating its workforce. Employees are hired based on clearly communicated contracts, undergo an induction and training process, and end-of-employment formalities are carried out in a transparent and orderly fashion. Time clocks are electronic and readily accessible to the workforce, and overtime is calculated and paid. São Martinho reported paying all employer social security taxes and legally mandated benefits, as required. In addition, the company provides a series of benefits that go beyond Brazilian legal labor requirements, including additional health insurance, transportation arrangements or vouchers, complementary pension plan, life insurance, dental care, supplementary health benefits (reimbursement for classes, contact lenses, braces and prothesis), on-site cafeterias, grocery vouchers, meal vouchers (São Paulo), shopping cards/advances, PBM (drugstore cards or discounts), Christmas hampers, credit  cooperatives, workplace exercise, extended parental leave in accordance with “Corporate Citizenship” regulations, shuttle buses for operations and transportation tickets, pension plans and flu vaccination. While meals are provided for all plant workers during working periods, vouchers are provided to rural workers, who bring their own meals to the field.

Workers’ Organization. Labor rights in Brazil are enshrined in the constitution and the consolidated labor laws (known as Consolidação das Leis do Trabalho, or CLT, in Portuguese), and labor relations are highly regulated under the country's laws and labor practices, including the requirement for most categories of workers to belong to a union. In São Martinho’s case, the workforce can belong to any of 3 unions at each workplace depending the nature of the job (e.g., Union of Food Industry, Union of Rural Workers or Union of Truck Drivers). São Martinho participates in the negotiations with the Union’s Federations at the State level, which define broader sector agreements (collective conventions) as well as direct collective bargaining agreements with local unions. Salary increases, profit sharing program, overtime bank, and benefits are negotiated locally with Unions. There are union representatives working at all sites. They organize internal workers’ committees to participate in the collective bargaining agreement (CBA) process.

Human Resources Policies and Procedures. As mentioned above, São Martinho has a set of HR specific policies and procedures which defines HR framework. These policies and procedures include Career Development and Succession, Travel, Benefits, Social Responsibility Communication Recruitment and Training, Compensation, Transfer between units and Education.

Working Conditions and Terms of Employment. Many aspects of the work contract (such as working period, rest period, overtime, annual, sick and maternity leave) are defined by law and under CBAs with worker’s unions. The standard working period is 44 hours per week and the daily working period cannot exceed 10hs (overtime included). 30 days of annual leave is granted for all workers. There are mandatory 1-hour breaks for meals (lunch or dinner) during the day and 15 minutes brakes during the day. Sick leave is granted but requires a physician assessment/request, and after 15 days absence workers are covered by mandatory social security program. All workers have the right to at least one full rest day per week. Harvesting is conducted 24-hours per day in three shifts of 8 hours. All workers receive a 13th salary per year and 1/3 additional salary during annual leave. There is a national social security system in which both company and workers make monthly mandatory deposits.

Non-discrimination and Equal Opportunity. Although forced/child labor, harassment and discrimination are treated as crimes under Brazilian law, the company states its views and commitments against such practices in its Code of Ethics. Hiring process and promotion follows well established policies and procedures based on merit and competencies, and no evidences of discrimination were found during appraisal. In December 2019, São Martinho committed to the Principles of Women's Empowerment, a protocol developed by UN Women (United Nations) and the Network Global Compact Brazil to promote gender equality in the sugar-energy sector. In completing the IFC’s Gender Based Violence assessment tool, no high risks were identified based on the company’s processes in place. The Code of Ethics and Professional Conduct includes rules and principles and formalized a set of guidelines that guide the expected conduct of employees in professional performance and in the relationship with co-workers, suppliers, customers, competitors, shareholders, governments and communities. It is stated in the Code of Ethics that situations of sexual harassment (characterized when an employee or service provider tries to use his / her position to obtain sexual favours from others) and moral harassment should be reported. To report violations of the code or violations of legislation, as well as misconduct, the company has the Ethical Channel. The Ethical Channel, introduced in 2011, is independent, as it is managed by an external company.

Retrenchment. The company’s workforce has been growing and Brazilian law provides a series of protection for workers, in case retrenchment might occur. This includes the countrywide official lump sum program called FGTS (Fundo de Garantia por Tempo de Serviço), in Portuguese, one-month prior communication, negotiation with unions, and state sponsored unemployment security. In case of a contract termination, workers are eligible for compensation under FGTS program.

Grievance Mechanism. São Martinho’s worker grievance system is included in its overarching Compliance policy, particularly the company's Code of Ethics, which applies to all employees (permanent and temporary) and it is also accessible third-party company workers. There are three channels for workers to raise complaints: with their line managers, through e-mail and phone number, been allowed anonymous complaints. Complaints raised through this latter channel pass through a fully confidential process under the Compliance team coordination that regularly meets with the Directors to update and to inform them on the complaint status and has considerable internal autonomy. São Martinho has formal records and consolidated data from all complaints, including follow up actions and resolution. The company reports on grievances received in its Sustainability report. In the harvest period 2019/2020, 338 internal grievances were received and 80% is already resolved and the remainder is still under investigation.

Protecting the Workforce. São Martinho follows Brazil's legislation regarding minimum age required for employment (18 years old.) The company checks the worker's age at time of application, recruitment, and contracting. The company does engage trainees of 16-17 years of age under the Brazilian government's Jovem Aprendiz training program, but it follows all requirements of the program, including limited work hours to allow for participants' schooling and prohibitions against exposing trainees to any forms of hazardous labor. In addition, São Martinho has an approved program to train and retain people with disabilities seeking to meet mandatory quota from Ministry of Labor in Brazil.

Occupational Health and Safety. São Martinho has a well-structured team managing OHS hazards and risks facing the workforce, in line with Brazilian labor requirements. As mentioned above, São Martinho has mandatory OHS programs in place, such as risk prevention plans, health monitoring plans, accident prevention committees, and emergency response plans. There are appropriate collective prevention measures, and São Martinho provides appropriate Personal Protective Equipment (PPE). The company’s current injury frequency rates 0.64 (2019/2020) compared to 0.84 accidents per million hours worked in 2017, which is considered good and well below international reference values (i.e. 7 accidents for sugar manufacturing and 8 accidents for crop production in the U.S.). Average severity rates (lost days/injury) have also dropped from 53 (2017) to 42 (2020). In August 2019 during the harvest period, a fatality occurred at the Iracema mill. During the night shift, a worker at the tyre repair shop was inflating a tyre which exploded. The safety rule which requires that a tyre is placed in safety cage was not followed. This activity is only allowed during the day shift ensuring there are sufficient spare tires available. The accident was reported to the Ministry of Labor and it was concluded that the main cause was not following safety procedures. São Martinho retrained all workers in its tyre repair shops and changed the working procedure to ensure the safety cage is used.

São Martinho has invested in automation of industrial processes reducing the number of workers inside the operational area, thereby significantly reducing the exposure of workers to inherent risks found in sugar and ethanol production. São Martinho has identified all confined spaces and workers must follow safety rules consistent with Brazilian safety requirements (NR33). São Martinho follows the safety rules for pressure vessels, conducting safety inspections, replacing unsafe bottoms and tops, adapting inspection windows, replacing relief and emergency valves and conducting pressure tests. São Martinho has also completed a technical safety standard for procurement of new equipment, ensuring compliance with national safety requirements (NR13). During the last IFC site visit, installation of machine protection was observed as well as fall prevention measures (guardrails, lifelines and platforms for working at height). São Martinho completed a safety assessment of its electrical circuits (Relatório Técnico de Inspeção das Instalações Elétricas) according to Brazilian safety standard NR10.

As agreed in the 2017 ESAP, São Martinho conducted assessments to identify remaining gaps with all Brazilian safety standards, including, Boilers and Pressure Vessels Safety (NR13), Electrical circuits Safety (NR10), Machinery Protection (NR12), Buildings (NR8), Transport, Moving, Storage and Handling of Materials (NR11), Confined Spaces (NR33) and working at heights (NR35). Based on these assessments, a corrective action plan (CAP) was developed to bring all units into compliance with Brazilian national OHS safety standards (NRs) over time. The plan was reviewed and found satisfactory by IFC and includes a schedule for completing actions prioritized on the basis of identified risks to workers, communities and assets. The plan is on track for the harvest season 2019/2020 and the company is maintaining a comprehensive plan for the next harvest seasons.

São Martinho conducts mandatory pre-hiring, periodic and contract termination health assessments of all employees that include basic clinical assessment and additional tests, such as audiometry, diabetes, high blood pressure, and blood tests cholinesterase and leucocytes counts, depending the job function and identified risks. São Martinho monitors workers exposure to hazards in the workplace under its mandatory workplace risk prevention program (PPRA Programa de Prevenção de Riscos Ambientais) and has conducted a formal hazard/risk assessment of its operations. São Martinho completed mandatory respiratory protection plan and ergonomic assessment of workplace, according to the requirements of Brazil's NR 17 worker safety standard and implemented required corrective actions and a management program to prevent such injuries.

Basic infrastructure is provided for workers in the fields, including safe transportation, trailers with toilets, appropriate space for meals and break rests, fresh water supply and electronic time clocks in accordance with Brazilian labor standard NR31. Since all field activities have been mechanized, field jobs are now mainly filled with qualified machine operators. There is a team of OHS specialists responsible for the supply and use control of PPEs.

Workers Engaged by Third Parties. São Martinho hires external companies for transport, housekeeping, maintenance, some specialized agricultural functions (e.g. GPS mapping) and guard services. For its contractors, São Martinho has a highly detailed EHS/labor procedure and checklist system to ensure that they are fully observing legal and regulatory requirements about its own workforces. Procurement Department, which manages contracting, EHS (the safety, health, and environment team), and HR are all involved in applying the checklist, requesting necessary documentation, and checking compliance before payments are authorized. Third-party workers undergo an EHS induction process upon their arrival to the site, and permission is granted for third-party workers engaged in hazardous work activities through the same procedures used by São Martinho’ own workforce. This approach will also apply to the construction workers involved in the construction of the cogen plant.

Supply Chain. In the 2019/2020 harvest season, approximately 30% of the total sugarcane processed by the company came from third party suppliers, predominantly located in the State of São Paulo. The majority of the sugarcane from suppliers is harvested (mechanically) by São Martinho and the remainder of the suppliers conduct the harvesting themselves. São Martinho enters into contractual covenants with suppliers ensuring adherence to Brazilian labor laws, ILO conventions of child and forced labor, freedom of association and collective bargaining, respect to human rights and working conditions for all workers, including migrant and temporary workers.

Resource efficiency. Sugarcane production in São Martinho relies on natural rainfall and vinasse application. Water is extracted from either surface or groundwater for process operations in the mills. São Martinho has all required permits from state governments to extract water. With the mechanization of harvesting sugarcane, washing at the mills has been eliminated, which has resulted in a significant reduction of water consumption. As agreed in the 2017 ESAP, São Martinho conducted a feasibility study to further reduce water consumption by adopting newer and better technologies, such as replacing water cooling sprayer systems in the distillery to a water-cooling tower. The study has demonstrated that São Martinho has been adopting good practices on its daily routine, such as: measuring the volume of water; withdrawn and the wastewater discharged; controlling water quality and availability; controlling the water discharged based on high quality standards. In the harvest season 2019/2020: 72.1% of water was reused. Water withdraw varies from 0,45 (Sta Cruz Mill) to 2.31 (São Martinho Mill) m3 /ton-cane processed. In the case of São Martinho mill, results are above sugar sector benchmarks and Brazilian reference values (0.5 – 0.9 m3 /ton-cane) for sugarcane processing. A new cooling system to reduce the water use at São Martinho Mill to 1 m3 /ton-cane is currently under project detailing so as to evaluate a possible investment in the future.

São Martinho self-generates all its energy needs from sustainable resources through co-generation of electricity from thermal power plants fed with bagasse. In the past years, São Martinho has invested heavily in new and highly efficient power cogeneration units (boilers) and implemented several measures to optimize internal energy consumption, such as, modern and more efficient mills with crushing units reaching almost 95% of extraction efficiency, heat recovery opportunities, and process automation. The proposed cogen plant at São Martinho mill will increase the cogeneration capacity from the current 2,422 MWth to 2,668 MWth. The new boiler will have a capacity of 436 MWth and will replace four existing boilers with a total capacity of 190 MWth.

Air emissions. Biomass (bagasse) boilers are the largest source of air emissions from sugar mill operations; Boa Vista mill has two boilers of 240 MWth capacity each; Iracema mill has 4 boilers varying from 67 to 126 MWth power capacity each; Santa Cruz mill has 5 boilers varying from 75 to 141 MWth capacity each; São Martinho mill has 9 large boilers varying from 38 MWth to 318 MWth. The cogen plant will have a boiler with a 436 MWth capacity and will replace 4 existing boilers with a total capacity of 190 MWth thus leaving six boilers at the São Martinho mill.

The company monitors its air emissions on an annual basis, achieving compliance with Brazilian requirements under CONAMA Res. 382/06 and CONAMA 436/2011, which are less stringent than the World Bank Group (WBG) EHS guidelines (varying from PM 200mg/NM3 to 450 mg/Nm3, NOX 350 mg/Nm3 ,depending the power capacity and year of manufacturing). As agreed in the 2017 ESAP, São Martinho will, in the event of procurement of new boilers or reconditioning of old equipment with increase of power capacity, conduct pollution emission dispersion modelling prior to the construction/remodel of new boilers. Demonstration that air emissions will not result in pollutant concentrations that reach or exceed relevant ambient quality guidelines and standards by, applying national legislated standards would be expected. In January 2020, the air emissions modelling was completed demonstrating lower annual emissions of PM and NOx from the five remaining boilers and the cogen plant boiler used at São Martinho mill. The boiler of the cogen plant will have a bubbling fluidized bed (allowing the fuel to be efficiently combusted) and 2 wet gas scrubbers. This technology is designed to achieve particulate matter emissions of lower than 200mg/Nm3 and NOx emissions of 317 mg/Nm3. With these emission levels, the boiler will comply with the Brazilian requirements and WBG EHS guidelines.

Wastewater Management. Wastewater from ethanol mills include: (i) process wastewater from ethanol production (vinasse), (ii) wet scrubber blow down from stack gas scrubbing, and (iii) miscellaneous wastewaters. São Martinho Mill withdraws water from Mogi Guaçu River for cooling purposes in the production. This cooling water is treated to regulatory and WBG EHS Guidelines effluents limits. Except for the cooling water at São Martinho mill, all wastewater is mixed together and used as a fertilizer in the sugarcane plantations under a ferti-irrigation management program. São Martinho applies vinasse on sugarcane fields following São Paulo State agency (CETESB) standard for wastewater used in sugarcane plantations. Vinasse is pumped to the fields through pipelines, intermediary storage ponds are lined with high density polyethylene cover to prevent groundwater contamination, and the amount of wastewater applied in the plantations is determined by the soil characteristics and the nutrient needs of the crop. In two mills (Iracema and Boa Vista) vinasse is concentrated to optimize the distribution to the fields. All truck/machine shops have vehicle washers, which in some cases are equipped with water treatment and reuse schemes, or either is used for irrigation purposes after decantation and physical separation of greases. As agreed in the 2017 ESAP, São Martinho timely installed a closed water reuse system at all truck washer stations.

Greenhouse Gas Emissions. For every harvest season, São Martinho conducts an inventory of CO2 emissions of all four mills and associated sugarcane production, which resulted in 597,311 ton of CO2eq (Scope 1 and 2) and 494,773 ton of CO2eq (Scope 3) for the 2018/2019 harvest season. This figure by far exceeds IFC threshold of 25,000 tons annually but considering that this is renewable energy from sugarcane plantations, most of the mills' GHG CO2 emissions are naturally offset as they are captured from the atmosphere by growing sugarcane plants. In addition, the ethanol that São Martinho produces is used as a renewable fuel in the national vehicle fleet. Therefore, although São Martinho generates high volumes of gross GHG emissions, net emissions from the company's operations can be considered negative (as they are sequestrated in the sugarcane plantations and off-set in the ethanol that replaces use of fossil fuels). The São Martinho mills are certified under the RenovaBio program, a federal program to curb carbon emissions by 10% in 2028, in line with the UN Paris Agreement on climate change. Under RenovaBio, tradeable carbon credits known as CBIOs, are granted to certified producers generating an extra revenue source. In 2020/21 crop year, São Martinho expects to generate 1 million CBIOs.

Integrated Pest Management (IPM). IMP is applied at all plantations and is a well-established practice in the sector. São Martinho uses biological control techniques to control the sugarcane borer population with the Cotesia flavipes parasite, and Drury larvae are controlled with Metharizium bacteria. Only approved chemicals and fertilizers are used, and application rates and methods are adapted to minimize consumption. Currently in São Martinho group every mill has its own list of pesticides and as a result of its ESMS implementation São Martinho has consolidated this list in a single approved list of products. None of the pesticides used fall into WHO class hazard Ia or Ib, which is also verified under Bonsucro standard audits. São Martinho only uses closed tractors equipped with cabinets for spraying operations, and handling, storage and use of agricultural chemicals follow national regulations and can be considered best practices.

Hazardous Materials: São Martinho uses and stores significant amounts of chemicals, such as soda, sulphur acid, chlorine, cyclohexane, pesticides and, of course, ethanol. A variety of storage arrangements can be found at different areas, but all of them have secondary containment, risk identification, warning signs, MSDSs in place, access control and emergency kits and showers. As agreed in the 2017 ESAP, São Martinho will conduct an EHS assessment of all chemical storage fields and provide corrective action plans to bring all facilities into compliance with applicable regulatory and engineering standards by December 2021. São Martinho has centralized warehouses for pesticide storage. Products are segregated by hazard class, the floor is sealed, the area is contained, and there is proper ventilation and warning signs. As agreed in the 2017 ESAP, smoke detectors and fire alarms inside warehouse for early detection of any fires were timely installed in the warehouses.

Solid Waste Management. Sugar mills produce significant amount of organic wastes (filter cake and ashes from boilers). These are taken to a mixing area in order to reach the soil/culture nutritional needs. This mixture is allowed to rest for 30 days and then applied to the fields. Metal scrap is segregated, stored outdoors and sold for recycling. The solid waste from administrative areas and dining halls is collected and disposed of through the local public waste system. São Martinho collects all empty pesticide containers and delivers them to certified recycling companies.

Community Health and Safety. Although São Martinho’s mills are located in rural areas, there are communities surrounding its operations. Potential impacts to communities from São Martinho operations could arise primarily from the explosions of ethanol tanks, from the distillery or from sugar warehouses. Air emissions from boilers, fugitive air emissions from trucks (dust) and drifts from aerial application of herbicides (to speed the sugarcane maturation process), can negatively affect communities.

São Martinho conducts aerial spraying of crops by contracted companies using crop-spraying airplanes. As agreed in the 2017 ESAP, São Martinho developed and communicated specific procedures to avoid the risks and impacts to health and other crops associated with aerial spraying of chemicals. It includes monitoring weather conditions during aerial spraying, prior communication with neighbours to advise them of spraying schedules and safety exclusion buffer zones to protect towns, small villages or households. São Martinho relies on large number of trucks to transport the sugarcane from the field to the plant. The average distance of sugarcane plantations is about 30km from the processing operation. São Martinho has a formal road safety program; phone numbers, for people to use to record grievances, are displayed on the vehicles. The company has not reported any vehicle incidents in the past 3 crop-years. As agreed in the 2017 ESAP, São Martinho has mapped out small rural villages and settlements across existing access roads used for sugarcane transportation and defined additional applicable control and mitigation measures to reduce the risks and impacts to these communities, such as fugitive dust emissions, excessive noise during the night, and overall safety of traffic. This is monitored and controlled in the agricultural operations centres at each mill with screens showing live images with an overlay of the mapping.

Infrastructure and Equipment Design and Safety. Except for Boa Vista Mill, São Martinho operations were built several decades ago. As mentioned above in PS2 section, São Martinho is investing in improving the safety of pressure vessels, electrical circuits, distillery, sugar warehouses and ethanol tanking fields. As agreed in the 2017 ESAP, the company is completing a corrective action plan (CAP) to bring its operations under applicable regulatory safety standards. To ensure the safety of its operations and to reduce the risk to external communities, São Martinho will conduct a quantitative risk assessment of all its operations, following CETESB standard P.4261. Next a risk management plan (or PGR, in Portuguese) will be developed, including process safety information, a review of all process risks, change management, maintenance and integrity of critical processes, operational procedures, training program, investigation of accidents, emergency response and periodic audits of the risk management plan. This will have to be provided for IFC review by June 2021 (due to the COVID-19 pandemic, this item has been postponed by 6 months). As set forth in ESAP #2, a preliminary operational risk study using the most adequate analysis tools (such as Hazard and Operability Study (HAZOP), Reliability Centered Maintenance (RCM), Failure Mode Effects Analysis (FMEA) and Preliminary Risk Analysis (APR)) will be completed and the company will implement the relevant actions to mitigate the severe risks identified and amendments of the Emergency Preparedness and Response Plan where needed will be implemented before the cogen plant will be taken into operation.

Life and Fire Safety (LFS). São Martinho has been investing in fire prevention of sugar warehouses, and distilleries, employing intrinsically safe electrical circuits and engines, flameproof conveyor belts, proper grounding of idlers, idlers with enclosed ball bearing and thermographic monitoring of equipment. São Martinho holds the LFS certification (Auto de Vistoria do Corpo de Bombeiro, AVCB) from State of Goiás authority for Boa Vista Mill, but its other, older, operations are in different stages of completing required project designs to upgrade their L&FS systems and submission of them to the authorities so as to receive the AVCB certificate. As agreed in the 2017 ESAP, São Martinho has completed the designs of LFS systems which were approved by the authorities. Next, the company completed the engineering of the implementation projects, with a timeline and approved budgets set to be completed before the agreed deadline with IFC (December 2024).

Emergency Preparedness and Response. São Martinho has a mandatory emergency response plan covering all emergency scenarios, such as fires, explosions and environmental leaks as well as fire brigade, evacuation and communication plans. As described in above previous sections, São Martinho will do investments to improve emergency preparedness implementing all required firefighting and fire prevention systems according to local regulatory standards, as well as through the implementation of the Risk Management Plan and respective programs (including process safety information), a review of all process risks, change management, maintenance and integrity of critical processes, operational procedures, training program, investigation of accidents, emergency response and periodic audits of the risk management plan.

Security Personnel. São Martinho relies on armed guards to control access to the sugar mills. Security personnel are sub-contracted through security services companies and personal must have cleared records, special training and certification from Federal Police to carry arms. São Martinho has identified all possible scenarios of security threats inside and outside the mills and specific guidance for security personal is provided that includes radio communication, support from central security, communication with security authorities and panic buttons. There is specific guidance for use of firearms exploring all alternatives to contain the situation without shooting. Use of firearms are only allowed as a last resource and to protect employee’s life’s after a series of attempts to dismiss an attack.

Protection and Conservation of Habitats. The company’s sugarcane plantations are located exclusively in areas traditionally used for agriculture, and no direct conversion of natural habitats to croplands or significant loss of biodiversity is expected from the project. Depending on the region of the country (determined by biome), Brazilian farmers are required to set aside 20% to 80% of their lands as biodiversity conservation areas and to protect buffer zones along rivers and around water bodies. If deficient, riparian buffer zones should be reconstituted, and biodiversity conversation areas can be offset through the protection of intact areas in the same region. For the current area under cultivation (owned and leased), all set-asides for Sao Martinho’s sugarcane plantations have been satisfactory established.

São Martinho conducts environmental assessments of its sugarcane fields and excludes the mandatory riparian areas and legal biodiversity set-asides from the sugarcane plantations. All sugarcane plantation areas are in compliance with the mandatory environmental and rural cadaster (CAR) to implement the regulatory requirements (offsets are either established on the farm or compensated in another area). Rehabilitation or compensation of biodiversity set-asides must follow regulatory timeframe for completion. For the land leased for sugarcane production, São Martinho requires the owner to meet the biodiversity conservation requirements as part of the lease contract.

Sustainable Management of Living Natural Resources. The company applies soil conservation techniques in the fields, including contour planting, terracing and planting design to avoid run-off. Sugarcane leaves and straw are left on the ground to protect the soil from erosion. São Martinho takes advantage of all possibilities to use organic wastes from ethanol production, including vinasse mixed with other suitable wastes, in the plantation fields to reduce the need for chemical fertilizers. When such chemical fertilizers are applied, the prescription is based on soil fertility analysis and plantation extraction needs. As mentioned above, São Martinho monitors pests through and IPM approach, which it seeks first to control through biological agents. When used, agrochemical products are prescribed by qualified agronomists based on pest infestation and economical level of control. Due to 100% mechanical harvesting there is no need of pre-harvesting burns of sugarcane fields.

Two of the three sugar producing mills from São Martinho (Iracema and Santa Cruz) are Bonsucro certified. As agreed in the 2017 ESAP, São Martinho will manage all sugarcane plantations in a sustainable manner in line with the Bonsucro requirements. To demonstrate this for the São Martinho plantations and sugar mill, the company will be demonstrating the inclusion of the Bonsucro requirements through an internal audit by December 2020. As set forth in the ESAP #3 São Martinho will complete an independent verification audit by a certified auditor to assess compliance with Bonsucro requirements version 4.2 at the Boa Vista plantations and São Martinho plantations and sugar mill by December 2021.

Supply Chain. All sugarcane sourced by São Martinho from third parties (about 30% of the total sugarcane volumes crushed in harvest season 2019/2020) meets the regulatory threshold for biodiversity conservation areas. This is required as part of the contracts with these third parties and compliance is monitored. The company supervises and monitors the producers through the public CAR registration. São Martinho always requested this registration from its third-party suppliers and since 2019 it became mandatory to agree new contracts. Today, two third-party suppliers have Bonsucro certification. Another way to attest that sugarcane producers are in compliance with the Permanent Preservation areas and Legal Reserves areas law is RenovaBio. To be certified under this government program the followings pre-requirements have to be met: (i) have CAR registration in place; (ii) to be in compliance with native forest legislation and; (iii) being within ZAE Cana (Zoneamento Agro Ecológico), this certificate determines in which areas sugarcane can be produced. Today, São Martinho has 95% of the areas certified by RenovaBio (its own sugarcane areas and that of third-party suppliers). Going forward, São Martinho will annually report to IFC on the compliance monitoring of their third-party suppliers including identified non-compliances, what corrective measures have been taken and how these measures are tracked to closure.

External Communications and Grievance Mechanisms: São Martinho reports to the public selected aspects of its sustainability performance on its Annual Sustainability Report https://www.saomartinho.com.br. The Sustainability Report is based on a materiality matrix resulting from consultations to key internal and external stakeholders. During the initial environmental licensing phase, the Boa Vista mill project was disclosed to the public under the format of an executive summary of the EIA, called RIMA (Relatório de Impacto Ambiental), meantime the EIA was made available for public local access. Public hearings were also conducted when the company had to present to the audience all the relevant conclusions from the EIA as well as all the measures that would have to be implemented to mitigate and control the impacts associated to the project. With regards to the 2017 EIA for the expansion of São Martinho mill, no public consultations were required as activities were limited to within the site perimeter. As set forth in ESAP #4, São Martinho will inform the communities near to São Martinho mill 15 days before start of engineering work on the cogen plant and if needed, the developed measures for minimizing impact to the communities.

As described in the PS4 section, São Martinho mapped villages and potentially impacted communities to ensure they are informed about aerial spraying and truck traffic schedules and associated mitigation measures (e.g. water spraying on the roads to prevent dust clouds). São Martinho has available communication channels for the communities and the general public which the company has disclosed at their website, including email address, phone numbers and mail information. The company has means to receive, record, forward, treat and provide feedback to all complaints from the public, and the company keep records and shares results internally on managerial meetings.

On-going Reporting to Affected Communities. Iracema mill is located less than 1 km from the nearest town and mills impacts could have impacts on the town. Although impacts from sugarcane plantations are diffuse, it is expected that some rural villages or nearby farmers could be possibly affected by noise and dust emissions from trucks crossing unpaved roads or unintentional agrichemical spraying drifts, especially from air spraying. In addition to existing consultation efforts as agreed in the 2017 ESAP, São Martinho mapped out potentially affected communities in Iracemapolis. One of the material themes from the materiality assessment completed in 2018 was community engagement. In 2019, São Martinho developed a formal structured engagement process for all local communities. As part of this process, annual community panels are organized by the Community Liaison Officer to hear what important themes are for the communities and discuss any concerns they may have. Based on the community feedback the company develops corporate social responsibility (CSR) projects around basic and professional education, sport and culture or environmental education and thus generating value for society. In the harvest period 2019/2020 7 external complaints related to dust caused by trucks, minor damages to the roads and others, were received. Where possible, the complaints were solved with procedure adjustments. It is important to highlight that no grievances related to discrimination were verified during the 2019/2020 crop year.

Contact Person: Cristiane Pigatto

Company Name: São Martinho S/A

Address: Edifício Panambi, Rua Geraldo Flausino Gomes, 61 - Cidade Monções, São Paulo - SP, 04575-060

Phone: +55 11 2105 4100