PS 5 “Land Acquisition and Involuntary Resettlement,” PS7 “Indigenous Peoples,” and PS8 “Cultural Heritage” are not expected to be encountered during the course of this Project, as Agrofertil’s distribution centers are all located in industrial zones or rural centers; and have all received appropriate approvals from the Paraguayan authorities. Sites for the operations are not located in protected areas, areas with sensitive natural habitats or indigenous territories.

If IFC’s investment proceeds, IFC will periodically review the project’s ongoing compliance with the Performance Standards.

This is a category B project in accordance with IFC’s Policy on Environment and Social (E&S) Sustainability. Based on information reviewed by IFC, this investment will have limited adverse E&S impacts that are few, site-specific, and largely reversible and readily addressed through mitigation measures, as outlined in this review summary.

The key E&S issues include: (i) Agrofertil’s capacity to provide systematic and consistent management of E&S issues across its direct operations; (ii) risks associated with the transportation and distribution of products and services; (iii) risks of fire and dust explosion at silos; (iv) labor and working conditions, including occupational health and safety; and (v) Agrofertil’s internal process to ensure that any new clients or those existing clients expanding their land usage don’t source any crops for repayment to Agrofertil in critical and/or natural habitat areas of the country, as to comply with IFC PS 6 supply chain requirements.

Environmental and Social Assessment and Management System and Policy:

Agrofertil currently has an operational Environmental and Social Management System (ESMS) with its functioning components, including policies and procedures to manage environmental permits, human resources, products management, safe transportation of materials, occupational health and safety, emergency response, supply chain, among others. Over the years, Agrofertil has updated its policies and procedures to reflect emerging regulations and investors’ requirements.

Identification of Risks and Impacts and Management Programs:

Agrofertil operates in compliance with applicable Paraguayan legal and regulatory requirements and all facilities have valid environmental permits. The company submits the Basic Environmental Questionnaire (Cuestionario Ambiental Basico - CAB) and the Environmental Control Plans (Plan de Control Ambiental) for all distribution centers and silos to the Paraguayan authorities. Such plans and regulatory forms identify the EHS risks associated with the company’s operations and describe the necessary mitigation measures to manage such risks. The company provides regular reports and updates to the local regulators as defined in the granted permits. The availability of the environmental control plans has been disclosed locally through newspapers in compliance with local regulations.

All products distributed by Agrofertil, including fertilizers, seeds and agrochemicals have been approved by the Paraguayan authority SENAVE (Servicio Nacional de Calidad y Sanidad Vegetal y de Semillas). The transportation of products is also authorized by SENAVE and DINATRAN (Direccion Nacional de Transporte Terrestre). The company also assesses compliance of its operations with those recommended by the Food and Agriculture Organization’s International Code of Conduct on the Distribution and Use of Pesticides and it is in full compliance.

Over the years, Agrofertil’s ESMS has been upgraded to reflect the company’s growth, emerging regulations and good international industry practices (GIIPs).Currently, the company is in the early stages of implementing the requirements of ISO 31000 (Risk Management) which focuses on the involvement of the company’s senior management and the integration of risk management into the organization. Given that there is a significant number of tasks and jobs in the distribution of agrochemicals and the storage of grains, the risk management process should prioritize  those that have a perceived significant level of risk, which should be covered first as they demand immediate attention towards the implementation of suitable preventive controls. The risk assessment matrix should be treated as a dynamic document that is at the same time the core element of the occupational health and safety (OHS) management system. Grain handling is a highly hazardous activity, which historically includes hazards such as fire & explosions from grain dust accumulation, crushing injuries from grain handling equipment, falls from heights, exposure to fumigants and gases associated with decaying fermenting silage and engulfment and entrapment in grain silos. However, in the risk assessments prepared to date, the fire and explosion hazards and other significant industry hazards were not previously included. Therefore, as part of this investment, Agrofertil will prepare a plan for performing the risk assessments giving priority to those in which there is a history of incidents, complaints from the employees, report of near-misses and perceivable high risks from management and operational personnel, including the risk of fire and explosion in areas of handling and storage of grains. The results of the OHS risks matrix will be used to plan for all the OHS management programs (ESAP #1). This core ESMS element will provide information for the company to establish the organizational OHS objectives and goals, key performance indicators (including leading and lagging indicators), also to define clear and formal roles and responsibilities, training courses and strategies to generate the internal competencies, plan activities such as inspections, meetings, establish an OHS-related documentation system, suitable emergency plans and internal audits to verify the overall system implementation effectiveness and performance.

Agrofertil receives grains as payment for agricultural inputs provided to independent farmers. In this region of Paraguay, deforestation for agricultural expansion is currently illegal under national legislation, however, there continues to be some evidence of habitat conversion. This supply chain risk and the management approach are described below under PS6. In addition, the client uses wood as a fuel to dry grains. Associated supply chain issues are also described under PS6.

Organizational Capacity and Competency:

The integrated E&S and OHS team reports to the Administrative Manager. As of March 2021, the integrated E&S and OHS team consists of four qualified professionals: two focuses on OHS and two focused on environmental matters and compliance. The two OHS professionals are responsible for conducting monthly facility inspections and training of operational staff based in the distribution centers and silos.

The workers’ training program is carried out in accordance with an annual set schedule and cover health and safety issues, such as use of personal protective equipment, first aid, confined spaces, work at height, lifting and handling loads, emergency response, among others. Personnel with specific responsibilities in the transportation of hazardous materials are further trained and licensed by the local authorities to transport agrochemicals. Agrofertil also provides additional training to workers who transport hazardous products, including defensive driving, hazmats operations and emergency response. The environmental staff focused on verification of third-party suppliers through the procedure of land verification of new clients and existing clients with new farmland. The environmental staff also focus on regulatory compliance, ensuring the due documentation and studies are submitted to authorities, as required, and all facilities have valid environmental licenses to operate.

The current organizational structure can be strengthened by designating formal and specific safety functions among the people from the operational units, which will improve the ownership and accountability for the OHS aspects of the operations. This is particularly critical for employees working in the grain handling operations, who must have clear role and responsibility for maintenance activities as well as formal preventive maintenance programs to support the operations. As part of this investment, Agrofertil will formally assign OHS responsibilities to key operational staff at each facility as it relates to OHS functions (ESAP#2). Preventive maintenance is a key program to ensure safe conditions of the operations and good housekeeping which are of paramount importance to prevent the likelihood of fires in the ovens and dust explosions in the grain handling operations.

Emergency Preparedness and Response:

Agrofertil provides annual training to employees and contracted drivers on emergency response in case of chemical spills. All the distribution centers have emergency contact numbers available and spill kits and personal protective equipment (PPE). The company performs periodic drills covering fire, evacuation, management of hazardous materials among other topics. A fire drill in each silo and distribution center takes place once a year. The distributed agro-chemicals are confirmed not to be stored on site and typically to be distributed during maximum of 6 months.

Agrofertil has in place emergency response plans for all its facilities. Contracted drivers are trained on management of emergencies; the documentation on the materials being transported is provided and a kit for emergencies with protective personal equipment is placed in all vehicles.

Monitoring and Reporting:

As part of its ESMS, Agrofertil monitors key performance indicators (KPIs)  relevant to its operations’ environmental and social impacts according to IFC Performance Standard 1 and to the Environmental Control Plans presented to the local authorities, including % of compliance with applicable regulations, occupational health and safety accident frequency rates, training, grievances (internal and external), energy and water consumption, emergency drills, extinguisher inspections, facility inspections, among other KPIs. The company reports EHS performance to the upper management and to the IFC via the Annual Monitoring Report (AMR).

Human Resources Policies and Procedures and Working conditions and terms of employment:

Agrofertil has a code of ethics and HR policies that cover key elements of IFC PS2 requirements. The code of ethics and HR policies make explicit references to issues, such as non-discrimination and equal opportunity, workers’ grievance mechanisms, protection of the workforce, and respect for human rights. The code is communicated to all employees during induction. New employees receive a Human Resources folder (“Legajo de Recursos Humanos”) which contains the vision and mission of the company and other corporate values, such as transparency, honesty, corporate responsibility, sustainability, and human rights. The HR policies and procedures state conditions of employment in accordance with labor laws in Paraguay. To stay competitive, the company conducts annual market surveys and offers salaries and benefits, some of which go above and beyond local minimum salary requirements, to attract good professionals.

Workers Organizations:

Agrofertil employees do not belong to workers organizations or unions, and there has not been such request among the employees. Although Paraguayan labor laws recognize the workers’ rights to form and to join workers’ organizations, unions are not common in Paraguay. Agrofertil’s management state that the company upholds local laws and do not prevent employees from organizing or participating in workers organizations. Agrofertil workers’ grievance mechanism in place and an alternative mean, such as to raise concern directly with a worker’s manager.

Non-Discrimination and Equal Opportunity:

Agrofertil’s code of ethics and HR policies include provisions for non-discrimination and equal opportunity, and explicitly prohibits any type of discrimination based on race, nationality, sex, age, marital status, physical capacity, religion, sexual orientation, gender identity, social class, political affiliation, pregnancy, among others. In keeping with emerging regulations and gender issues, as part of this investment, Agrofertil will update its code of ethics and HR policies to clearly prohibit sexual harassment by company’s employee and third-party contractors (ESAP #3).

Retrenchment:

No retrenchment has taken place and the company has increased the workforce over the years to accommodate the increase in distribution centers and silos. Agrofertil expects the workforce will continue to grow slightly, as needed, as the company increases the number of distribution centers/silos.

Grievance Mechanism for workers:

Agrofertil’s grievance and whistleblowing mechanism is available at the company’s website https://www.agrofertil.com.py/linea-etica/.  This is an integrated mechanism to address all external complaints from customers, community and third party, as well as communications from employees regarding violations of the Code of Ethics.  Employee and communities’ communications received through the whistleblowing mechanism can be logged as anonymous via online forms in the website or reported via a toll-free number. These are then tracked and reviewed by the internal compliance committee. Communications can also be reported via e-mail. The company also reports that community members very often visit the local offices to request donations or sponsorships for local events. The grievance mechanism is aligned with the requirements of this IFC PS2.

Protecting the Workforce

The company has defined what are the most important programs that are relevant to its operations, which include fleet safety, personal protective equipment (PPE), first aid, confined spaces, lifting machines operations, working on heights, and forklift operation. Overall OHS controls are defined in the Environmental Control Plans presented to local authorities and enforced through periodic walkthroughs and inspections. The distribution centers are well designed with functional eyewash and emergency showers, spill containment kits, and natural and forced ventilation systems. The company reports that systematic use of PPE and control in the access to deposits and silos continue to be a priority for operations. A fire drill in silos / distribution centers takes place once a year. According to information discussed during the assessment, the silos are well maintained with proper housekeeping conditions and the operational confined space procedure.

As part of this investment, Agrofertil will develop and implement a hierarchy of controls that will include the evaluation of engineering controls as first priority. The hierarchy is to be arranged beginning with the most effective engineering controls as well as substitutions of products for less hazardous substances, to the least effective controls, including the use of PPE as last resort (ESAP #4).

Workers Engaged by Third Parties:

Agrofertil’s day to day activities are mostly conducted by direct employees; however, some transportation services are performed by third party companies, as well as specialized tasks, such as maintenance and security are sub-contracted. The company has a Code of Ethics which applies to all contractors, including safety measures, access to facilities and legal compliance with labor laws and IFC PS 2.

Response to COVID-19 Pandemic:

Because of the steady growth experienced by Agrofertil, the company did not have any staff reduction due to the impacts of the COVID-19 pandemic. In line with good practices recommended by the World Health Organization (WHO) and Paraguayan authorities, Agrofertil adopted various measures to prevent the spread of the virus. Administrative workers who could work from home adopted home-based work while in the distribution centers and silos, the company provided masks and sanitizer and requested that the workers maintain safe distances at the workplace. In addition, temperatures are taken at the beginning of each shift. The company stated that there were no COVID related fatalities within its workforce. When an employee is sick, the company follow up to ensure that the worker has access to health care facilities and stays home until fully recovered and released by a physician. The company confirmed that all employees are receiving their full salaries and that the company honors all contracts with suppliers and contractors.

Resource Efficiency:

Agrofertil’s activities are restricted to commercialization of products (e.g., pesticides, herbicides, fertilizers, soil amendment, seeds) and grains; therefore, the use of natural resources is limited. The company’s storage operations do not require large volumes of water use or energy. The silos have driers that operate during the harvest seasons; i.e., February-March and May-July.

Electricity is used to force air into the silos to maintain the optimal temperature to ensure the integrity of the grains and for lighting purposes in all the facilities.

Air Emissions:

Air emissions are derived from the distribution fleet and vehicles used for sales purposes. The dryers on the silos used wood, which result in carbon-neutral emissions since the source is biomass. Agrofertil replaces every three years the company’s fleet. In addition, Agrofertil has a preventive maintenance program to ensure proper operation of vehicles, including combustion processes and safety operation. The dryers using wood as fuel are quite small (40-60 metric ton/hr) and operate about five months a year. No air emission monitoring is required by Paraguayan law for the dryers or vehicles.

GHG Emissions:  

Greenhouse emissions of the operations are associated with electricity consumption and fuel for the fleet used to distribute the products and for technical assistance. The GHG emissions of the current operations have been estimated as 18,000 tons of CO2 equivalent, derived mostly from the company’s fleet since electricity in Paraguay is from renewable sources, i.e., hydroelectric power plants. GHG emissions from wood/biomass are considered carbon neutral.

Pesticide use and management:

Agrofertil stores and transports fertilizers and agrochemicals in compliance with local and international regulations. All products are approved by the local authorities (e.g. SENAVE) and have the permits and licenses to be traded and used in Paraguay. Near 60% of agrochemicals sales of Agrofertil correspond to products containing active ingredients that are unlikely to present acute hazard in normal use (Class U) or are slightly hazardous (Class III); based on the classification of active pesticide ingredients from the World Health Organization (WHO, 2019). Since 2015, the company has not traded any Class Ia or Ib pesticides. Agrofertil provides proper CPP training to its clients on handling and application of agrochemicals, equipment maintenance, working conditions, and disposal of empty containers.

Technical service is provided by qualified and authorized professionals (agronomists). Agrofertil has controls to ensure quality in the service and retention of its clients, which includes proper guidance in the use and application of the agrochemicals. In addition, the client usually has its own agronomist to advise on specific products, such as fertilizers and soil amendments.

Elements such as registration, labeling, packaging, and storage of chemicals are provided in accordance with international codes. The company ensures compliance with the Food and Agriculture Organization’s (FAO) International Code of Conduct on the distribution and Use of Pesticides or other good international industry practice. Agrofertil is aware of trends and benefits of Integrated Pest Management (IPM). Agrofertil has been following national recommendations and has been proactive in offering its clients pesticides containing less hazardous active ingredients. The company will continue promoting IPM among its clients.

Solid Waste Management:  

Waste generated from Agrofertil’s operations is basically domestic waste and packing materials. Direct use of agrochemical products is practiced by Agrofertil’s clients involved in primary production of grains. One of Agrofertil’s technical services to its clients is the proper selection and application of agricultural products. To that end, Agrofertil provides training on the proper use of pest control products, which includes tripled washing and puncturing the plastic containers. In addition, as part of the SIGEV (Sistema de Gestion de Envases Vacios -Management System of Empty Containers) program, Agrofertil provides designated storage areas for agrochemical empty plastic containers and actively collects these from its clients as well as other producers in the areas where the company operates in Paraguay. The empty containers of agrochemicals are recycled at the Tecnomyl facility in Villeta, Paraguay, which is part of the same Sarabia Group. Currently about 40 % of the containers sold by the company are collected and recycled. The company is committed to this important program and will continue with the awareness training of its clients and communities. This is a voluntary program as there is no current law in Paraguay that requires that farmers recycle empty containers of agrochemicals.

Hazardous Materials Safety:

Agrofertil stores and distributes agrochemicals in accordance with local regulations, which require proper authorizations and documentation of the products, deposits and vehicles. All distributed products are duly labeled and clearly indicate the hazard level of each product, spill and emergency contacts and proper disposal. In addition, Agrofertil provides technical support to each client on the proper storage handling, application and disposal of empty containers of agrochemicals. The distribution centers have been approved by SENAVE and have controls, such as drainages with collection tanks, eye and body washers, spill kits, personal protective equipment and fire-fighting equipment. Access to the deposits is restricted to authorized personnel. Agrochemicals are only transported on enclosed vehicles authorized by DINATRAN. All drivers have been trained and have the permit to transport hazardous materials.

Emergency Preparedness and Response:

Agrofertil has emergency preparedness and response at each distribution center and silos with emergency brigades. Training has been provided to the employees in distribution centers and silos. All drivers are trained on emergency response and phone numbers are available to report events. All vehicles that transport agrochemicals have GPS and communication devices to facilitate response in case of an emergency. Agrofertil distribution centers and silos are located in peri-urban and urban areas and to the extent possible, can request support from local fire departments.

Security Personnel:

Agrofertil contracts security guards through three different recognized security companies. The security companies train the employees to guarantee adequate use of the fire arms and follow up procedures. There have not been complaints or reports regarding abusive behavior or improper use of the arms.

Agrofertil receives grains as payment for agricultural inputs provided to independent farmers. The farms currently within Agrofertil’s portfolio are located in the Eastern Region of Paraguay and are characterized by a mosaic of Natural and Modified Habitats, with possible occurrence of Critical Habitat. In this region of Paraguay, deforestation is currently illegal under national legislation, however, there continues to be some evidence of habitat conversion. Hence, the supply chain requirements of PS6 apply to the client.

The client has a management system and a procedure in place to evaluate and reject producers from its supply chain that have performed significant conversion of Natural and Critical Habitats on their farms. The client can trace the grains that they receive to the sites of production using geographic coordinates of the farms. Producer vetting occurs when they initiate business with a new client or if existing clients undergo expansions of their cultivated areas. The client verifies each producer farm using remotely-sensing images following a standard procedure. The client can, and does, decline to do business with producers where significant habitat conversion has occurred on their properties after 2009.

The client has successfully implemented this procedure since 2016 as a commitment to IFC under its prior loans and will continue to implement this procedure under this new loan. Thus, as per ESAP#5, the client will continue to implement a standard procedure to verify that all new clients and those expanding their land use have not converted to agriculture a significant area of natural habitat on their property since 2009. Agrofertil will not purchase grain from land where recent or significant deforestation is observed. In addition, as per ESAP#6, Agrofertil will continue to include a clause in contracts with new clients and those existing clients expanding their land use that requires compliance with Paraguay’s Law of Zero Deforestation and not to convert natural habitat to agriculture.

To dry grains, the client uses wood as a fuel. The total annual use of wood was approximately 18,717 tons in 2020 for all of Agrofertil’s operations. The company sources the wood from 700 hectares of eucalyptus plantations on its own properties as well as from third party plantation operators. As part of this investment, Agrofertil will commission an external audit of its own eucalyptus plantations to verify that its practices are in line with a recognized international standard for sustainability, such as the Forest Stewardship Council, and performance gaps will be addressed in a timely fashion (ESAP#7). Agrofertil will continue to verify that third-party wood suppliers have required legal documentation that ensures sustainable forest management (ESAP #8). During the life of the loan, if IFC identifies supply chain risks, feasible remedies will be agreed between parties and implemented by Agrofertil.