Potential risks and impacts relevant to the PS5 (Land Acquisition and Involuntary Resettlement), PS6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources), PS7 (Indigenous Peoples) and PS8 (Cultural Heritage) are not expected from the company’s business activities as the company is currently leasing all its facilities and the new stores are also expected to be leased. Land which is currently owned by Profi was acquired through willing-buyer-willing-seller transactions, which did not result in any physical or economic displacement. The company’s existing properties are located in modified urban environments and risks to biodiversity are limited. Going forward, prior to any significant expansion requiring land acquisition, the company will conduct social and environmental due diligence to ensure that risks and impacts, if any, will be adequately identified and managed in a manner compliant with IFC’s Performance Standards 1-8, the corporate E&S management system (ESMS) will include relevant screening procedures as discussed under PS1.

This is a category B project according to IFC’s Policy on Environmental and Social Sustainability as the E&S impacts are expected to be mostly site specific and localized and can be avoided or mitigated by adhering to the performance standards, guidelines or design criteria and adequately managed through the implementation of a project specific Environmental and Social Management Plan.

Policy:

The company has a ‘Safety & Health at Work and Prevention of Fires’ policy which reiterates its commitment to comply with national regulatory requirements and implement appropriate measures to strive for continuous improvements to health & safety performance. 

As outlined within ESAP #1, Profi will develop an overarching EHS Policy defining its commitment to minimize its impact on EHS matters guided by applicable laws and regulations of Romania and the objectives of IFC PSs. The policy will be endorsed by Profi’s senior management and communicated to all employees.

Environmental and Social Assessment and Management System:

In accordance with the national legislation, environmental impact assessments (EIA) are not required for any of the company’s facilities due to the small size of its stores. The E&S assessment for any proposed new store or distribution center being developed by Profi follows the legal requirements of the national and local authority. Accordingly, in order to operate, the company is required to obtain all required permits & licenses (e.g. environment permits, fire permits, building permits, functioning permits), and these are to remain valid whilst operations are ongoing.

Based on the information provided during the E&S due diligence the large majority (91%) of Profi’s stores are operating with fire permits. About 8% of its total operational stores are under a transitory condition and operate with a “temporary fire visa” and are reportedly in compliance with national fire law requirements. This allows Profi to operate these stores whilst working towards closing any non-compliances and finally obtaining the required fire permits.

Furthermore, as per the national environmental regulations, amended in 2016, Profi is required to obtain Environment Permits for all retail stores which have an area > 400 m2. Profi is in the process of obtaining environmental permits for all applicable stores and is actively working with the relevant authorities to ensure all stores are appropriately permitted. According to the provided information, these stores are operated in accordance with national environmental legislation requirements, while the regulatory documentation is being finalized.

For the evaluation of future prospective sites (new brownfield stores or acquisitions), the Corporate Director of Expansion contracts specialized technical advisors to perform audits of existing conditions of the buildings and assess compliance with legal requirements (permits, certificates, etc.). The audit includes the site verification, preliminary evaluation of building architecture (including L&FS features), structural system, environmental systems and engineering systems (i.e. water, electricity, sewage, IT). All deficiencies are evaluated to determine the feasibility of the store, basic design by Profi, correction of non-compliances and engagement of specialized architecture companies to develop the construction documents.

The company’s current screening process for potential new retail store locations is limited to condition of the building and legal requirements and does not include all the E&S aspects and impacts for the proposed new development as envisaged by IFC PSs. As per ESAP # 2, Profi will develop and implement a documented screening / assessment procedure to assess potential E&S risk and impacts vis-à-vis the applicability of IFC PS 1-8. This will covers issues such as proximity to environmental & social sensitives (i.e. sensitive biodiversity features, cultural heritage sites), potential legacy issues (i.e. existing labor issues, permit infringements, legacy land contamination, asbestos), availability of adequate waste and wastewater management, adequate facilities for life and fire safety protection, prior to acquiring new land or entering into a lease agreement. The screening findings will be reviewed by the Board and the company's internal audit committee will track non-compliant items for management/Board follow-up.

Profi has developed and implements a number of standard operating procedures to manage its operational E&S and occupational health and safety (OHS) risks in line with local regulatory requirements. The procedures comprise of waste management, occupational health and safety, hazardous materials management, and fire safety. The company is also implementing a food safety & traceability regime which is generally aligned with Hazard Analysis and Critical Control Point (HACCP) principles and continuously control foodborne illness risks.

IFC also observed that implementation of the operational procedures is required to be strengthen by developing a monitoring procedure addressing the EHS risks of operations. As per ESAP # 3, Profi will update its existing monitoring procedure defining the EHS related key performance indicators (KPIs) aligned with, local regulatory requirements as well as WBG General EHS Guidelines. This procedure will also have a provision for periodic internal audits and management review to verify compliance to local regulatory requirements.

Organizational Capacity and Competency and Training:

At corporate level, EHS performance is managed by the HR Director, Administration and Compliance Director, Operations Director and the Expansions Director who report directly to the CEO. The corporate EHS team consists of two Environmental Specialists who report to the CFO and Food Safety Managers. Daily EHS operations at the stores are overseen by store managers, area sales managers, regional directors and ultimately the Operations Director. The company outsources OHS service to verify the implementation of the national requirements.

The company has also formed an OHS Committee which includes representatives from the general workforce, the OHS service provider and the labor relations department. The committee provides a forum for communication between workers and management on health and safety issues and reports directly to Compliance Director.

The company has developed an EHS training program which utilizes internal & external resources to conduct practical and theoretical training. All members of staff complete EHS training which includes topics such as OHS, life and fire safety, emergency preparedness & response (fires, earthquakes, loss of power) which includes topics such as first aid, emergency management, use of fire extinguishers, evacuation, among others. The company conducts simulations of emergencies / unplanned events at a minimum biannually from which an evaluation report is generated. In addition, the company provides specialized, role specific training to individuals whose position necessitates it (i.e. work equipment, forklift and first-aid training).

Emergency Preparedness and Response:

The company has a documented Emergency Preparedness and Response Plan (EPRP) at corporate and facility levels (i.e. stores, DCs and corporate offices). The contents of the EPRPs for stores follow a standard template recommended by the local authorities and primarily focuses on fire emergency. As part of the ESAP # 4, Profi will update the template for individual store level EPRP to cover other types of emergencies (e.g. earthquakes, natural calamities, terrorism etc.) and will include measures specific to retail stores such as emergency evacuation, assembly points, emergency contact numbers etc., with special attention to children, elderly and disabled. The emergency preparedness and response plan will also include provisions for regular emergency drills and regular maintenance of fire safety equipment, which is discussed in detail under Life and Fire Safety section under PS4.

As in March 2021, Profi’s workforce comprised about of 17,400 employees (approximately 70% of which are female). The majority of female employees work within the retail stores (only approximately 33% of employees working at headquarters and logistics are female). The turnover is high as is generally the case in retail sector (from 10% to 50% (annually) depending on the store format).

As at the time of IFC’s appraisal, the company operated 389 of its retail stores (Profi Loco Stores) through an ‘agent’ model. The number of agents operated stores is set to increase with the retail store expansion. As part of this model, the company provides HR support & guidance to the agent operated stores although, but ultimately the agent is responsible for the human resource functions (including recruitment) at each individual store level, and is responsible to ensure working conditions are aligned with the provisions of the Romanian labor law. This workforce (about 5400 across the 389 stores) is not a part of Profi’s workforce described above.

Human Resource Policies and Procedures:

For its own workforce, Profi has implemented formal HR policies and procedures which are consistent with Romanian labor law and IFC PS2 and are included in its documented internal rules and regulations manual. The HR requirements are communicated to all company employees during onboarding. The policies and procedures are available on the company’s internal shared drives and accessible to all employees.

As per ESAP #5, Profi will develop documented policies and procedure for employees at agent operated stores to standardize the management of this workforce, in relation to the requirements of local labor law as well as the IFC Performance Standard 2. This procedure will also include an auditing program to monitor all agent operated stores to ensure that those comply with national labor law requirements & company HR policies & procedures. Profi’s corporate grievance mechanism (described below) will be easily accessible to these employees at agent operated stores.

Working Conditions and Terms of Employment:

The company predominantly employs its workers on permanent contracts. The employee rights and duties (including wages, working hours, overtime arrangements and compensation, benefits etc.) are communicated during the employment process and documented within individual employee contracts. Employees work 40 hours/week and 2-3 shifts per day depending on store schedules. Worker salaries are aligned with national requirements. Profi does not use migrant/seasonal workers in its operations.

Workers’ Organizations:

In Romania, the rights to freedom of association and collective bargaining are provided for in national legislation. The company is not a party to a collective bargaining agreement with worker’s organization. However, there is no objection from management if workers wish to join one or form workers’ organization.

Non-Discrimination and Equal Opportunity:

Profi operates on the Code of Ethics and Professional Conduct which includes statements about intolerance to harassment including sexual harassment, intimidation and discrimination based on nationality or ethnic origin, culture, religion, political beliefs, age, mental or physical disabilities, sex or sexual orientation. Non-discrimination is also a requirement of Romanian labor law. There were no reported complaints in relation to discrimination against the company including gender-based violence and harassment.

Grievance Mechanism:

A dedicated telephone number called “Green Line” and a dedicated email address are shared with workers who want to lodge any complaint anonymously and the process is explained to employees during the induction period. Moreover, workers with concerns or feeling an unfair treatment are encouraged to report to the store manager or labor relations office at the corporate level. This mechanism is also applicable to its workers engaged at agent operated stores and contractors.

While there are adequate channels to receive grievances from the workers, going forward the company will formalize its grievance procedure and share it with all employees including contractors. The procedure will be compliant with PS2 requirements and based on confidentiality and fairness.  This procedure will cover the way grievances can be submitted to Labor Relations unit, how they are logged, processed and resolved, and outline steps available to appeal any decision. Profi will ensure that the procedure includes clear deadline for each step of the procedure, ensure that the process is fully documented, including responses and feedback to the interested party. Once implemented, an explanation of the grievance process will be included in the induction plan for each employee (ESAP # 6).

Workers engaged by Third Parties:

The company retains the services of several 3rd party contracting companies (e.g. security, transport, pest-control, etc.) during different phases of operations including for completing works related to the fit-out of new retail stores warehouse/ distribution / trucking services.

In legal agreements, there is a standard text that informs contractors of their responsibility to comply with national labor legislation, including OHS. The company will formalize a documented monitoring procedure to track the EHS performance of the contractors and personnel services, subcontractors, and other third parties working for the company aligned with IFC PSs and national regulatory requirements (ESAP # 2). 

Occupational Health and Safety:

According to the information provided, Profi has recently developed a ‘corporate level’ risk assessment which identifies health & safety and environmental risks which may impact company operations. Additionally, the company has further established a 5-step process to assess and manage possible sources of OHS risk to employees at the individual facility level. To verify OHS compliance, the company also works with a third party OHS inspectors. Moreover, the company has a team consists of 5 qualified staff who are each assigned to a region and conduct daily checks across the retail stores related to food safety such as expiry dates, storage, refrigerator and freezer temperatures and traceability.

COVID-19 Response:

The company has developed an action plan and internal procedures including a procedure for suspected COVID-19 cases, which is applicable to all employees within the company. The procedures cover good practices to prevent COVID-19 transmission, including social distancing, employee hygiene, cleaning and disinfection, PPE, symptom identification.  The company has identified high-risk or vulnerable workers and have introduced measures to protect them. The company provides instructions to workers in in the hazards, risks and control measures associated with the recommended actions and the revised / new COVID-19 procedures. The company reported no layoffs or salary cuts during the pandemic.

Supply Chain:

The company has own branded products in different product categories such as dairy and canned food, mainly sourced from local suppliers. IFC’s desktop research did not indicate potential for child labor risks in the current supply chain. The contracts with suppliers include an annex which defines obligations each supplier is to abide by, including compliance with all applicable national regulations, particularly pertaining to working conditions and labor protections. 

The company performs an external audit of suppliers prior to contract award. However, the company currently does not have a formal E&S screening process or a documented supplier code of conduct. As per ESAP # 7, the company will establish a supplier code of conduct articulating its commitment to prohibit forced, or child labor and impacts to biodiversity; and a procedure to assess supply chain E&S risks for its own branded products & products, which it can exercise high leverage or has management control on (primary suppliers). The client will monitor its primary supply chain on an ongoing basis in order to identify any significant changes in its supply chain and if new risks or incidents of child and/or forced labor are identified. If such risks are identified, the company will develop processes to prevent and remedy such practices including termination of contracts if risks are not adequately addressed in a reasonable period of time.

Resource Efficiency and GHG emissions:

Electricity is sourced from the public grid for all Profi facilities. Back up diesel generators are provided at facilities in which power disruptions are likely. The DCs use energy efficient LED lighting. Water supply at the head office and stores is from municipal sources. Stores have building management systems which permit remote monitoring and control of stores. Additionally, energy audits are conducted by an external company through ANRE (The National Authority for Energy Regulations in Romania) certified auditors biannually.

Based on the available 2020 data, the company produces approximately 68,000 tons of CO2 eq per year. As part of this proposed investment, the company will calculate and report annual total GHG emissions.

The company uses refrigerant R 404a, R 410, R 448, R 449, R290 (propane) in its stores’ chill temperature systems and R410, R32 in store air conditioning systems, all are permitted refrigerants in Romania. All stores developed post 2016 no longer utilize R404a as a refrigerant.

Waste and wastewater management:

Wastewater generated at company stores and DCs consist of waste from ablutions which is disposed of, predominately via municipal sewerage system as per environmental permit conditions, which is further treated in the central treatment plants. Prior to discharge wastewater passes through company installed grease traps. At locations in which disposal via municipal sewage systems are not practicable, the company has installed alternate systems (e.g. septic tanks). The sludge from septic tanks is collected by an authorized 3rd part and disposed according to national legislation requirements.

The company has developed and is implementing a solid waste management procedure. The company records waste volumes and type generated and submits this information to the local environmental agency in accordance with national legislation. Typical wastes include plastic, paper, edible oil, organic, and electronics wastes. Each waste stream is disposed of by a 3rd party authorized company. Expired or damaged food products are stored separately in a lockable freezer, located within a dedicated storage area and are disposed of by a licensed company.  Organic wastes are given to zoological gardens and animal shelters.

Hazardous Materials Management:

The company’s use of hazardous materials is limited to cleaning agents and refrigerants.  Maintenance of refrigerants is conducted by an authorized company. Hazardous waste generated by the company (cleaning agent containers etc.) are collected separately and disposed of by an appropriately licensed contractor. The company will ensure the contractor follows good practices in hazardous materials management and disposal of hazardous wastes.

Pesticide Use and Management:

The company has outsourced pest control/management of its distribution centers to specialized contractors. The contractor companies follow the local regulatory requirements and relevant EU Directives while performing the activity and storage of the relevant substances.  To control any harmful organisms, biocides are reportedly used which are in line with the relevant EU Directives.

Noise:

The company does not implement a regular noise monitoring program as it is not a regulatory requirement due to the nature of the operations. However, in the past, the company has received complaints from its neighbors in 3 of its stores regarding noise from back-up generators, which are only used when there is a voltage drop. To eliminate the disturbance, the company has installed rubber mats to reduce noise to cardboard presses, mounted elastic supports for anchoring cold and climate aggregates both indoors and outdoors, sound-absorbing panels on the outside around the cold and / or climate aggregates.

 Life & Fire Safety:

Profi’s stores are aligned with the national construction and fire code of Romania, which includes requirements for fire prevention, fire protection and emergency planning. The formal technical specifications for the construction of L&FS systems and emergency planning are determined by the regional authority and Fire Department. The Expansion Director’s team is responsible for the design and implementation of L&FS features during the feasibility and construction phase of the stores. After opening the stores, the Regional Managers and Compliance Management teams are responsible for the O&M aspects, renovating the respective operating, fire and environmental permits, and perform the safety training of personnel.

The company performs formal pre-opening inspections for all new or modified stores. During operations, the company periodically verifies the compliance with the legal L&FS requirements, via post-opening inspections; quarterly L&FS audits for each store; random inspections performed by the Fire Department and mandatory backchecks to confirm compliance; corporate “ticketing tool”, in which Store Managers or Area Managers can report unsafe conditions at any time (or resulting items from audits within the store through an intranet system). The findings of the audits are shared with the Regional Directors and with whoever is responsible of the process that need to intervene. The company has represented that all its stores are operated in line with national law requirements.

The maintenance of L&FS equipment is managed by 3rd party authorized companies that conduct evaluations and maintenance controls quarterly in accordance with a maintenance program. The deficiencies, observations and time-bound corrective action plan are reported to the Compliance Director by the contractor.

The virtually visited stores observed to have a supply of portable fire extinguishers and hose reel cabinets, safety and health at work signage, and information for compliance with safety procedures, alarm systems, smoke detection and CCTV systems which are monitored 24 hours a day by the security central station of the company. An Emergency Brigade of a minimum of a portion of the employees trained in First Aid Care, emergency evacuations and use of fire extinguishers as well as fire control techniques per each store.

The virtually visited DC was noted to have provision of fire protection systems in line with international regulations and GIIP, in compliance with the legal L&FS requirements and based on the company’s fire risk management for property protection, business continuity and protection of staff.

Within the company’s plan for the future growth, Profi’s intent is to have stores mainly located as stand-alone one-story structures, with few located inside shopping malls or other structures, that will have an average size of 300 m2. As per ESAP # 8, Profi will develop a corporate “Life and Fire Safety (L&FS) Master Plan” for the construction and remodeling of the new stores, that will form part of the “corporate store design manual”. The master plan will consider local legal requirements, and aspects such as occupancy levels, means of egress and systems for fire prevention, detection, and suppression as per the section 3.3 Life and Fire Safety (L&FS) applicability and approach of the General EHS Guidelines.

Similarly, as per ESAP #9, for a group of 10 new “Supermarkets” (average 400 m2) remodeled or built in next 12 months after IFC’s investment (selecting 6 in 2021 and 4 in 2022), the company will submit to IFC the acceptance reports of L&FS, fire department permits and certifications that each facility is constructed and commissioned in full compliance with local building codes, fire department regulations. In 2022, for the last group of 4 supermarkets after implementation of the L&FS master plan and all life and fire safety aspects of the previously approved L&FS Master Plan.

Community Exposure to Disease:

The company has a food safety policy and program and a dedicated food safety team which entails hygiene procedures, internal audit, traceability, training which is found to be generally aligned with HACCP principles and continuously control foodborne illness risks. During the pandemic, the company reportedly follows strict hygiene protocols to avoid any food safety risks.

Transport / Road Safety:

The logistic services are outsourced. Currently, the company does not have a formal guideline to address potential road safety risks to communities due to the company leased vehicles. As per ESAP # 10, Profi will develop a transport safety program which will include guidelines for drivers on traffic safety and defensive driving to minimize risks to safety of communities from vehicles plying to and from the DCs. The guidelines will be included to the contractor’s agreement and monitored periodically.

Security Personnel:

Store premises are protected using contracted unarmed security. These individuals work inside the store (to prevent shoplifting) and also outside to protect assets including incoming supplies and are hired from licensed firms using trained individuals. Security personnel will be trained to assist Profi in evacuation of people in case of emergency.