This is a Category B project according to IFC’s 2012 Policy on Environmental and Social Sustainability. The E&S risks and impacts are limited, site-specific, and can be easily avoided or mitigated by adhering to generally recognized Good International Industry Practices (GIIPs) and design criteria. Key E&S issues reviewed for the project include: (i) maturity and implementation effectiveness of the client’s corporate E&S management system (ESMS), including capacity/competency at manufacturing plants; (ii) working conditions for employees; (iii) occupational health and safety (OHS) risks and mitigation measures; (iv) efficient use of energy and water; (v) waste and wastewater management; and (vi) construction contractor’s EHS/labor guidelines, including monitoring oversight.                                                 

 E&S Policy and Management System. Bauducco has an integrated environment, energy efficiency, and occupational health and safety policy. Bauducco commits to operate its manufacturing operations in compliance with Brazilian’s legal and regulatory requirements and IFC Performance Standards. This commitment is outlined in its Ethical Code, disclosed on the company’s website (https://www.bauducco.com.br//Style%20Library/assets/PDF/codigo-conduta-pandurata.pdf). Key E&S aspects associated with its manufacturing operations have been assessed against the Brazilian E&S legal and regulatory requirements. Bauducco has a valid Brand Reputation through compliance with British Retail Consumption (BRC) food safety certificate. The company requested an update of its operating license to the Brazilian authorities for the proposed expansion and will submit to IFC upon receipt. Based on this policy review, IFC confirmed the alignment and consistency of Bauducco’s EHS Policy applying to its operations with the IFC Performance Standards’ requirements.

Bauducco is implementing an Integrated E&S Management System (IMS) based on international standards (ISO14000; ISO45000 and SA8000) at corporate level and at its five production facilities level. This commitment is based on the 2016 and 2018 E&S Action Plan (ESAP) agreed upon with IFC. The company hired an external consultant in 2021 to undertake a gap analysis against these standards, which resulted in a corrective action plan (CAP). EHS budgetary allocations (OPEX/CAPEX) for 2021-2022 have been provided during this appraisal. Performance-based requirements of the IMS is the Brazilian E&S legal and regulatory framework, IFC PSs and WBG EHS Guidelines (General and Food and Beverages Processing). Findings from the gap analysis as reflected in the CAP include documentation gaps (ref. Manual of EHS Procedures), training on IMS to staff and contractors, enhancement of internal auditing program, monitoring of applicable legal requirements, among others. The company’s IMS was noted to be commensurate with the scale and E&S risks and impacts of its operations; implementation at the project level, based on virtual appraisal is noted as being well underway, further supported by the implementation of the recommendations summarized in the CAP. Going forward, Bauducco will finalize the implementation of the CAP at corporate and plants-level and will recruit an independent consultancy firm to verify effective implementation at all operations (ESAP#1, #2).  

Organizational Capacity and Competency. The company has a dedicated corporate and plant-level E&S team in charge of the implementation of the IMS. The EHS function reorganized and is currently reporting to the Sustainability Director. IFC’s review concluded that Bauducco has assigned competent technical resources to meet compliance with PSs under the proposed investment.

Emergency Preparedness and Response. The company has adopted operational Emergency Response Plans covering all scenarios for emergency situations, such as fires, explosions at all its operations, including Bonsucesso. Firefighting equipment is in place, and the company has trained fire brigade teams at each site; operating permits from the respective local fire departments have been issued and remain current.

COVID-19 response. The company has implemented COVID-19 response strategies and management plans including an Employee Handbook for COVID-19. During the pandemic, the company did not lay off any workers, and there have been no salary cuts or no-pay-leave arrangements. The company has implemented COVID-19 contingency measures including health declaration, temperature checks, regular cleaning, etc.

EHS Training. The company provides training programs for new and existing employees and contractors at all operations. The training plan covered numerous topics, such as waste management, efficient use of water, first aid, and behavioral safety. Annual training schedule has been sighted during the virtual appraisal. Going forward, the company will strengthen its EHS training program and the periodicity of its delivery, as per the recommendations documented in the IMS’s CAP (ref. ESAP#1) for all employees and contractors.

EHS Monitoring & Reporting. Bauducco’s IMS defined leading and lagging key performance indicators (KPIs) – aligned with national regulatory requirements and WBG EHS Guidelines for Food and Beverage Processing - and monitors all its manufacturing plants for loss-time injuries, energy and water consumption, waste generation, effluents, among others. The KPIs are reported on a monthly basis to the Compliance Management team. All incidents are summarized and discussed in the quarterly management meeting. In case of accidents, the E&S team analyses the root causes and immediately implements corrective action.                                                  

 Human Resources (HR) Policy and Procedures. Bauducco has HR policies and procedures. It follows Brazilian labor regulations which are consistent with IFC PS2 objectives, including wages and benefits, hours of work, overtime arrangements and compensation, annual and sick live, maternity and holidays. At Bonsucesso, it employs approximately 1,042 permanent staff, 45% are female.

Working Conditions and Terms of Employment. The company informs new employees of the specific terms of the job position and benefits. Labor rights in Brazil are enshrined in the constitution and the consolidated labor laws (known as Consolidação das Leis do Trabalho, or CLT), and labor relations are regulated under the country's laws and labor practices, including the requirement for most categories of workers to belong to a union. The Company respects the employee’s union’s collective bargaining agreements (CBA’s) and the company pays a wage bargained with the Union. Bauducco hires unionized workers and unions representatives. There is no evidence that Bauducco restricts the freedom of workers to associate.

Non-discrimination & equal opportunity. Bauducco has a diversity and inclusion Policy in place that establishes guidelines related to diversity, inclusion and human rights. The company’s objective is to provide an environment free of discrimination and that encourages and values respect and equal opportunity. It encompasses principles established on its Ethics Code, the universal declaration of human rights and ILO. The policy states the company’s commitment and responsibilities, describes the responsibilities of the Diversity and Inclusion Committee, and defines indicators to monitor policy implementation.

Worker / Contractor Grievance Mechanism. Bauducco has several internal mechanisms that handle worker grievances with different avenues for the expression and resolution of worker grievances, such as: periodic open chats between managers and workers; private and direct access to HR analysts; and access to Union representatives, in cases where workers want to remain anonymous or where they feel they have not received acceptable feedback from the company. There is an internal communication channel designed to cover/treat corruption and/or report unethical, which also allows for anonymous and accepts communications related to: moral/sexual harassment; employees/suppliers/clients conduct; discrimination; fraud; theft; environmental issues; work safety; complaints and suggestions. Complaints received are assigned to the relevant function in Bauducco for assessment, corrective action(s) and feedback.

Protecting the workforce. Minimum worker’s age is 16 years under a national part-time training program in cooperation of technical schools (Programa Novo Aprendiz). These workers are not allowed to handle or work with hazardous materials or activities. For all other workers, the minimum age is 18 years old, as defined by law. Bauducco’s ethics code states its commitment to prevent and combat child and forced labor and do not establish commercial links with any organization linked where this risk is identified.

Workers engaged by third parties. Contracted workers are mostly hired to do non-routine activities such as construction, electrical and mechanical work on production lines and water and air lines. Bauducco contractually requires contractors to participate in induction trainings and to comply with relevant OHS management plans, including risk prevention, Personal Protective Equipment (PPE), fall prevention, among others.

Occupational Health and Safety. Bauducco has OHS preventive and a monitoring system as per the Brazilian Legislation, defined by the Regulatory Norms (NR) of the Ministry of Labor known as Workplace Risk Prevention Program (PPRA) and Occupational Health Monitoring Program (PCMSO). There are several programs to monitor risks such as periodic workplace noise monitoring, ergonomic assessments, safety of electrical facilities assessment and daily OHS workplace inspections. All workers are subject to an admission and periodic medical examinations. The company requires contractors to have an OHS Management Plan that meets local requirements. In 2021, Bauducco reported an accident frequency rate of 14.2 accidents per million hours worked, higher than comparable industry benchmark for food manufacturing (7.0). The company is putting in place corrective measures to improve OHS performance, including additional training on behavioral safety, increased conversations about safety in regular meetings, among others (ref. ESAP#1).

 Resource (Energy and Water) Efficiency. Electricity is sourced from the national grid for Bauducco's operations. Water supply is sourced from the municipal network. It is implementing cleaner production initiatives at all plants to reduce its energy and water consumption, such asperiodically monitoring gas/oxygen rate in the cooking ovens to optimize gas consumption and installed meters to measure water consumption. As part of its IMS, Bauducco is implementing an energy management system (ref. ISO 50001), aimed to improve energy use, with an objective to reduce its overall energy consumption at all manufacturing plants by 12% until 2026. There are targets at Bonsucesso for a10% reduction in water use and waste generation per ton of product manufactured. Corporate targets are being developed and will be in place by mid-2022. Bonsucesso plant Greenhouse (GHG) emissions are estimated at 16,871 Ton CO2-eq in 2021 (Scope 1 & 2).

Bauducco's operations utilize natural gas cooking ovensthat do not emit significant levels of hazardous air pollutants. The main issue associated with their use are possible nuisance odors. Going forward, Bauducco will develop a plan to ensure adequate monitoring of emissions as per local requirements and WBG EHS Guidelines (ESAP#2). The company maps and monitors its noise emissions and has deployed noise control measures to reduce them and monitors noise emissions following applicable national requirements. Regarding noise, the company undertakes periodic noise monitoring, as part of its legal obligations. The most recent noise monitoring report shows noise values exceeding both local and EHS guidelines but noted issues with traffic noise interference during measurements on the report. Nevertheless, Bauducco will implement measures to reduce noise of its operations (ref. ESAP#3).

Pollution prevention. Wastewater is one of Bauducco's main environmental aspects. Effluents consist of sanitary and industrial effluent (manufacturing processes and cleaning). Bauducco recently upgraded its Bonsucesso wastewater treatment plant, which uses membrane bioreactor technology and discharges to public sanitary sewer. Effluents are monitored and meet local regulatory requirements and WBG EHS Guidelines for Food and Beverage Processing. Going forward, the company will develop procedures for adequate operation of the new WWTP and ensure personnel is trained (ESAP#4).

Solid and hazardous wastes. Bauducco activities generate various types of residues, such as organic and food processing wastes, as well as wastes directly related to production (packaging, recyclables: paper and cardboard, plastics, plastic drums, metal drums, pallets and production waste). Solid waste is properly stored and disposed of in landfills, collected and recycled by licensed service providers, and/or used as animal feed. Hazardous (batteries, lamps, primary care center) and non-hazardous waste are sorted, handled, stored and disposed in a manner consistent with applicable legal requirements. The facility has two 500 L and one 15,000 L diesel tanks used for emergency generators. These have secondary containment. Regarding pest management control, Bauducco has a pest management plan in line with local requirements that relies on certified third parties.

  Community Health and Safety. Bonsucesso manufacturing plant is located in an urban area in Sao Paulo and poses limited health and safety risks to the surrounding community. Potential risks that could arise are: noise, dust, and traffic disruptions due to operations. Bauducco, has periodic engagement with the nearby community and neighbors can use the Company's communication channels to raise any concerns with Bauducco's activities. Bauducco distributes their products through a third-party logistics company. Nevertheless, it, will develop a corporate Road Safety Policy and Procedures consistent with the WBG EHS Guidelines (ESAP#5).

Security Personnel. Bauducco security arrangements relies on third-party companies that meet the local requirements regarding training and qualifications. Security guards are not armed.