This is a Category B project according to IFC's Policy on Environment and Social Sustainability (2012). Based on information reviewed by IFC, the proposed project will have limited adverse environmental and social (E&S) impacts that are few, site specific, largely reversible and readily addressed through existing mitigation measures and good international industry practices (GIIP).

Lexo has an overarching corporate policy covering Health, Safety, Security and Environment (HSSE) issues, which is implemented at all its retail stations. The company identifies E&S risks and impacts of a station during the acquisition phase through an E&S due diligence process that includes compliance with permitting requirements. For operations, the company has a corporate compliance and risk management process through which E&S occupational health and safety (OHS) risks and impacts are identified and managed. This process is documented under the company’s Health, Safety, Security, Environment (HSSE) management system, which constitutes the company’s Environmental and Social Management System (ESMS). The ESMS will be updated to include (ESAP#1):

(i) an Asset Acquisition (fuel station) Procedure covering the E&S screening and assessment including issues such as land acquisition, biodiversity impacts and stakeholder engagement,

(ii) Site Specific operational hazard identification and risk evaluation process and associated risk registers,

(iii) Contractors’ EHS Management Procedure,

(iv) Solid and Hazardous Waste Management Plan,

(v) an updated E&S monitoring procedure with defined KPIs in accordance with WBG General EHS Guidelines;

(vi) Emergency Response and Planning Plan templates;

(vii) a detailed incident investigation procedure and

(viii) a corrective action register for the network.

The company has appointed the Head of Engineering as HSSE Manager. At station-level, E&S performance is managed by station managers with oversight from the Engineering and HSSE Manager. To cater for its expansion needs, Lexo will appoint a suitably qualified and dedicated HSSE Manager to oversee operations in both countries as per ESAP#2.

Lexo has a Business Continuity and Recovery System in which responsibilities, high-level instructions, and facilities for managing disasters and emergencies are provided. The emergencies covered under this system include fire events, oil spill events, riots, and floods. The Business Continuity and Recovery System will be updated as part of ESAP#1 to include the template for site specific Emergency Preparedness and Response Plans (EPRP) covering credible emergency scenarios including incidents related to convenience stores, service bays and any other activities that may occur at these stations.

As part of the corporate EHS management, the company monitors KPIs such as accidents, loss time injury (LTI), hydrocarbon spills, fire incidents, training, near misses and safety violations. Lexo will additionally include energy consumption, water use, solid and hazardous wastes and GHG emissions among its KPIs and ensure appropriate benchmark indicators are established for all OHS-related performance indicators as part of ESAP#1.

Lexo has a corporate HR Manager overseeing its operations in Kenya and Tanzania. The HR Manager is supported by HR officers of the third-party contractors. As of March 2021, Lexo had a total of 149 direct employees in both countries (128 in Kenya and 21 in Tanzania), of which 12% were women. Contracted employees in both countries were a total of 221 (20% female), 180 in Kenya and 41 in Tanzania. Contracted workers are employed through a third-party employment agency. For the expansion, it is estimated that 8-10 employees will be employed per station while during renovation and upgrading works, up to 30 construction workers per station will be required. The company is in growth phase and there was no retrenchment due to COVID-19 pandemic.

Each worker receives a written contract that describes the working conditions and terms of employment.  Direct employees are hired on a permanent contract and contracted employees are hired on a fixed term contract renewable on an annual basis. Lexo has in place HR policies and procedures for direct employees on hiring and onboarding staff, annual and sick leaves, disciplinary and grievance mechanism, sexual harassment, freedom of association and equal opportunities. The updated HR policies and procedures will also include explicit statements prohibiting engagement of child, forced or bonded labor practices consistent with Kenya and Tanzania labor laws and IFC PS2 requirements (ESAP#3). Lexo HR policies and labor requirements are also extended to contracted workers, which are reflected in the specific HR policies and procedures covering the contracted workers. As part of continuous oversight of the labor contractor, Lexo conducts quarterly HR audits of its contracted employees and will expand the scope of this audit to ensure labor practices are in accordance with national labor laws and IFC PS2 requirements (ESAP#4).

The company operates on a 24hours-7days basis and has a 2-shifts system per day. As per Kenya labor laws, weekly working hours above 52 hours for day shifts and 60 hours for nights shifts need to be compensated at a premium rate. In this respect, Lexo adopted a blended approach to compensate for the overtime by providing financial compensation and compensatory time-off (CTO) in accordance to the Kenyan labor laws. For its operation in Tanzania, any work hours above 45 hour per week are paid as overtime according to the Tanzanian labor laws.

The company has a grievance mechanism, which involves the employee informally approaching the line manager to resolve the grievance. If the grievance remains unresolved, this takes the formal route and gets escalated to the HR department via a written note for investigation. A case report outlining the findings and any action taken is submitted to Management and a response is given to the employee. If the matter is still not resolved, the employee may write to management directly. The HR department keeps a record of grievances that goes through the formal route only. The HR grievance procedure will be updated to allow anonymous submissions, to include response and handing timelines and tracking and recording all grievances in accordance to PS2 (ESAP#5). These updates will be also reflected in the grievance mechanism for contracted employees handled by the third-party employer. The updated HR grievance procedure will be communicated to all direct and contracted employees.

In the event of acquiring a new station, Lexo has a policy of retaining above 50% of the existing employees at that station either directly or through its contractor. During the acquisition phase, the employees are interviewed by Lexo and the third-party contractor and academic and performance records are also reviewed. Feedback from the previous owner is also obtained to help in the selection of the employees. In addition, Lexo enters in an agreement with the previous owner to pay all the dues owned to the employees prior to the takeover of the station, including those that may become redundant due to the new station acquisition. The company will update this procedure to define selection criteria, include a communication of the process and engagement with employees to guide the consolidation process in accordance with national laws and extend its HR grievance mechanism to employees affected by the acquisition of the station (ESAP#3).

Lexo has prepared an HSSE policy and has a register where incidents, potential incidents and near misses are recorded. All employees are enrolled in a medical insurance scheme, through which pre-employment and periodic medical check-ups are undertaken. Lexo will develop and implement a training plan that covers OSH topics appropriate to operational hazards and risks including nature of tasks assigned to its workers and contractors (ESAP#6). The company has a COVID-19 prevention policy and has put in place risk reduction measures which apply to all its employees, contractors and customers.

IFC’s review of sample incident reporting form identified the need for the client to implement a detailed incident investigation procedure, under ESAP#1, which will include the identification of contributory factors and root causes material to the failures and circumstances leading to an incident including the development of reliable corrective actions and/or preventive actions. In addition, Lexo will strengthen incident investigation capacity and capabilities of its workforce by ensuring that members of its investigation teams are properly trained on root cause analysis under ESAP#6.

Lexo has a Hospitality and Throughput Agreement with depots in Mombasa and Nairobi for intermediate storage and loading of fuel products in Kenya. The Agreement has an HSSE requirement section that Lexo’s transporters must comply prior to loading. Lexo will communicate its E&S policy to its contractors and service providers (for retail products) including the loading depots and its tenants

Lexo operation primarily involves the retail sale of fuel and does not result in significant quantities of wastes and emissions. The company monitors resource consumption, i.e., electricity and water consumption at all its stations, and will start monitoring and reporting these parameters as KPIs. Lexo will also start the quantification of GHG emissions from its operations, using internationally recognized methodologies.

Electricity is sourced from the national grid for all stations. Diesel-powered generators are installed and used for back-up purposes during power outage, thus, there are no major air emissions / pollution from the company’s operations. The company uses LED for lighting purposes to reduce its electricity consumption.

Water for most of the stations, is sourced from local utility supply companies. About 20% of the stations use groundwater. The only wastewater generated at the company fuel stations is from sanitation and cleaning. The wastewater from cleaning and stormwater is treated through an oil interceptor prior to discharge from site. The effluent is tested monthly to ensure compliance with the legal limits. Wastewater is disposed of either through municipal sewers or septic tanks.

Lexo stations generate mostly paper, plastic, used oil filters, used oil and scrap metals as wastes. The company will update the ESMS to include site specific Solid and Hazardous Waste Management Procedure as per ESAP#1. This procedure will include a system of appropriate sorting, handling, storage and disposal, which are consistent with applicable legal requirements.

The fuel stations are located along the highways and urban roads, and some are adjacent to the communities. Since the project is a brownfield expansion requiring upgrading and renovation works, no significant additional impact on local community is expected.

Lexo has implemented fire prevention and control measures to mitigate the fire and explosion hazards.  Some of the measures include: emergency shutdown systems (local and remote), use of intrinsically safe sensors and measurement probes in underground storage tanks, earthing of storage tanks and pumps and emergency firefighting equipment (fire extinguishers). Lexo also conducts statutory annual fire audits and basic firefighting trainings to its employees. As part of ESAP#1, the company will develop and implement a corrective action register for the network to strengthen the recording and tracking of corrective action.

Lexo uses BS EN 12285-1:2003 specification for design, fabrication and installation of its underground storage tanks. The underground storage tanks are single-walled with an outer epoxy coating to prevent corrosion and degradation of the tanks while underground piping carrying fuel products are of double-walled construction. Underground storage tanks and piping are leak tested during commissioning. Automated gauging system are installed in underground storage tanks for real-time monitoring of in-tank product inventory. In future design and construction of underground tanks, the company will use appropriate secondary containment vaults with leak detection system where single-walled tanks are to be installed in retail stations. In existing station and newly acquired stations, Lexo will apply a risk-based approach to replace single walled tanks with composite tanks or build secondary containment vaults to comply with the IFC EHS guidelines. (ESAP#7).

The company will implement periodic borehole water and soil sampling and analysis for significant parameters such as benzene, toluene, ethylbenzene and xylene (BTEX) where there is a potential risk of hydrocarbon exposure to any proximal sensitive receptors (underground utilities, underground water sources, etc.), ESAP#8. Lexo will undertake remedial actions at its own cost in case of any event of contamination.

Majority of the recorded incidents at Lexo retail stations are related to third party vehicle damage to station infrastructure. Lexo will develop and implement a Traffic Control Management Program (TCMP). The TCMP will address traffic management at the retail station, (ESAP#9).

Lexo currently employs both armed and unarmed security personnel provided by licensed service providers. To manage security across its operations, Lexo will develop a corporate Security Management Plan consistent with the requirements of Voluntary Principles on Security and Human Rights and will communicate this plan to its security service providers (ESAP#10). The Security Management Plan will include: (i) a security risk assessment to determine the risks associated with its security arrangements to those within and outside its facilities and to determine hiring, equipping, and training needs in accordance to PS4, (ii) criteria for hiring, equipping, and training of armed security personnel (human rights issues, proper use of force, and appropriate conduct towards workers and other stakeholders), (iii) auditing procedures of the security service provider.

Lexo leases out building spaces to other business enterprises such as car wash, tyre and service centres, shops, etc. that are accessed by members of the public. Lexo will update and re-issue the Tenancy Agreements to ensure adequate coverage of OHS and LFS requirements for all leased out facilities consistent with its HSSE Policy, ESAP#11.

Lexo has transportation contracts with a number of trucking companies. The contractors are fully responsible for ensuring the integrity and safety of their fleets including the hiring and training of truck drivers and emergency response arrangements. Lexo will ensure that the transporters’ activities and operations meet its Contractor EHS Management procedures to be established under ESAP#1.