The proposed project expansions at the Cosmopolis and Gravatai plants are not expected to result in impacts to: i) natural or critical habitat or ecologically sensitive areas; ii) lands and resources on which communities of indigenous people are dependent and have collective attachment; and iii) cultural heritage sites. Thus PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources; PS7: Indigenous Peoples (IPs); and PS8: Cultural Heritage do not apply to the project.

The expansions are within the confines of the existing plants and thus no additional land is required in relation to site activities. However, the new 2.6 km long 138-kV transmission line associated with the expansion at the Cosmopolis plant required the easement of a 30-meter-wide right-of-way. The negotiations of the easements did not result in involuntary resettlement as the transmission line crossed rural properties, without impacting residences or other physical structures. Negotiations of easements with affected property owners were conducted in alignment with PS5 requirements and in accordance with market values estimated by qualified companies.  As such, the impacts associated with the transmission line were managed in accordance with the requirements of PS5: Land Acquisition and Involuntary Resettlement. Further detail is provided below.               

This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability as the project has limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures, by adhering to good international industry practice (GIIP) procedures, guidelines and design criteria, as described in the following sections. Key E&S issues associated with the project include: (i) adequacy of the corporate E&S management system and organizational capacity to assess and manage risks and/or impacts associated with company’s operations and expansions; (ii) management of labor and occupational health and safety including COVID-19 response, and contractor management; (iii) pollution prevention and control, including management of hazardous materials and waste management; (iv) stakeholder engagement and grievance mechanism; and (v) community health safety and security.                     

Environmental and Social Assessment and Management System

Fitesa is a Brazilian company that operates in 13 countries. The company has developed E&S policies and procedures that are aligned with good international industry practices (GIIP) and with the Sustainable Development Goals (SDGs). Thus, the corporate E&S policies and procedures dictate GIIPs that each facility must follow, however such documents are customized to comply with regulations in the 13 countries where the company operates. The company has a Sustainability Policy that states commitment with the environment, society and sustainable principles, including the SDG’s.

The company has several individual policies related to sustainability including that associated with a) efficiency; b) sustainability, c) quality; and d) commitment to compliance with applicable laws and ethical standards. These policies emphasize the company’s commitment to working towards reducing environmental impacts by minimizing the volume of wastes sent to landfills, improving energy efficiency, addressing the issue of climate change by reducing greenhouse gas (GHG) emissions and operating responsibly in the regions where the company operates. Fitesa has initiatives for long-term reduction of (GHG), water and energy efficiency and innovation to substitute raw materials with sustainable and biodegradable products.

Identification of Risks and Impacts

The Fitesa corporate environmental and social management system is aligned with the requirements of ISO 14001 (environmental management). While not all of Fitesa’s plants are ISO 14001 certified, each facility operates in alignment with the requirements of the Fitesa management system and the company conducts annual corporate and independent external audits to ensure good E&S performance and alignment with the corporate ESMS requirements.

Based on documentation reviewed during the appraisal, IFC concluded that the Company has developed and implemented E&S plans and procedures to address the risks and impacts associated with manufacturing operations at each facility and immediately surrounding areas that may be impacted by environmental noise, traffic and dust. There are procedures related to waste management, air emissions, hazardous materials management, noise (occupational and ambient noise levels), indoor air quality, fire risks, among E&S and OHS risks and impacts. In accordance with national legislation no Environmental Impact Assessment is required for the expansions of activities associated with the Cosmopolis and Gravatai plants.  At the time of construction of the 2.6 km long 138-kV transmission for the Cosmopolis plant it was understood that no environmental permitting process was required for this activity.

Going forward, Fitesa will formalize an E&S due diligence procedure to identify and assess risks and impacts associated with future expansions, especially any structure (e.g., transmission/distribution lines and access roads) which may be located outside of Fitesa’s property line. The procedure will ensure the identification and assessment procedure will be undertaken to ensure compliance with national regulations and IFC Performance Standards and facilitate the application of mitigation measures / corrective action plan as required (ESAP #1).

Management Programs

Fitesa operates its facilities in compliance with local regulations and corporate policies that are based on GIIP. Thus, the Company has management programs on human resources (HR), occupational risk assessment, emergency response, waste/wastewater management, noise levels, air emission, indoor air quality, health and safety training, environmental monitoring, hazards identification, fuel use, among others. Fitesa’s manufacturing facilities are highly automated with staff primarily focusing on the monitoring of manufacturing equipment performance and associated indicators. Due to the nature of the materials produced (non-woven textiles for hygiene, healthcare and industrial products) ensuring optimal workplace conditions are of paramount importance to maintain the quality of the products and safety of employees.  Examples include positive air pressure in manufacturing areas, air curtains and double airlock doors separating production from other areas to minimize airborne contamination (dust, dirt, or even insects). In terms of environmental management programs, there is a strong focus on waste minimization generated from the manufacturing processes, with an emphasis on recycling raw materials as opposed to disposing at landfill. The manufacturing process require small amounts of water and the resulting small volumes of liquid effluents are stored and transported to offsite facilities for treatment and disposal. Fitesa also closely monitors the use of natural gas and electrical energy with the focus to increase efficiency and reduce greenhouse gas emissions. All management programs have established performance indicators for each facility and these are managed via internal control systems. The company conducts annual internal and external audits to verify E&S performance indicators at each plant (e.g., kilogram of manufacturing waste/per ton of product, KwH/ton of product, waste usage /ton of product, noise levels, incidents/accidents per facility, among many others). Corrective actions are prepared when deficiencies are identified.

Organizational Capacity and Competency

The Plant Manager at each facility reports directly to Fitesa’s Vice-President. At each manufacturing facility, there is an environmental, quality and OHS manager respectively who are supported by an environmental, quality, OHS technicians and assistants. These teams report to both the Plant Manager and the environmental, quality, and OHS Global Director.  As per Company’s policies and code of ethics, even though the E&S and OHS staff reports to the Plant Manager and OHS Global Director, there is sufficient autonomy and controls that allow these staff to stop operations if unsafe conditions are observed. The Company empowers and encourages each and every employee to report unsafe conditions and to propose improvements.

Overall, the E&S, OHS, and HR staff were noted to be suitably qualified and experienced.

Emergency Preparedness and Response

Fitesa has emergency preparedness and response plans at each facility to respond to non-routine events such as fire and explosion, chemical spills, electrical shock, among others emergency scenarios. The emergency preparedness and response plans also include emergency communication procedures within the Company. The roles and responsibilities for various teams include that related to exit control, rescue, firefighting, first-aid and security and are defined in these plans. An emergency brigade is established in the main manufacturing sites. The local fire departments are located within short distances of the Gravatai and Cosmopolis manufacturing facilities and can be called upon major emergencies. Evacuation routes, emergency exits, and assembly points are identified in the emergency plans. Regarding life and fire protection, IFC verified that Fitesa has all the necessary environmental licenses and permits from local fire departments.

All Brazilian operations are located within industrial zones, among which the Gravatai Industrial Park is the only one in proximity to residential areas due to the expansion of the neighbouring community. Thus, as s per ESAP#2 the Emergency Preparedness and Response Plan at the Gravatai plant will be updated to include procedures to communicate and coordinate with local residences that are in close proximity to the plant.

Response to COVID-19 Emergency

Fitesa did not have any staff reduction due to the impacts of the COVID-19 pandemic because of the high demand for non-woven fabrics needed to manufacture hygiene and medical protection equipment (e.g., masks and gowns). In line with good practices recommended by the World Health Organization and the Brazilian Health Ministry, Fitesa adopted various measures to prevent the spread of the virus among workers and contractors. Administrative workers who could work from home adopted home-based work. Since the Gravatai and Cosmopolis facilities are highly automated, the number of works per shift is relatively small and workers are able to stay within a safe distance from each other. Fitesa provides masks and sanitizer in all working areas, has increased the distance between seats for workers and developed a longer period of operation for the cafeterias. In addition, the temperature of staff is taken at the beginning of each shift. Any person suspected of being exposed to the virus is requested to work from home or take leave until exposure/infection can be confirmed or refuted. The Company stated that there have been no fatalities in Brazil within workforce and few cases of COVID-19 have been reported.

Monitoring and Review

Fitesa has established procedures to monitor compliance with its legal, E&S, OHS requirements and contractual obligations. Records of incidents and accidents are recorded in the monitoring system as well as training activities. Performance indicators are shared with the Company’s corporate management and the Company also produces an annual sustainability report.         

Human Resources (HR) Policies and Procedures

Fitesa has a set of procedures covering recruitment, compensation and benefits, performance evaluation, transfers, training and career development and grievance redressal, which are applicable to all employees and reflects the Brazilian labor code (known as the Consolidação das Leis de Trabalho, or CLT). The Company offers workers all basic benefits guaranteed by Brazilian laws, which are prescriptive and consistent with PS2 requirements. These include healthcare, vacation, retirement plan, overtime, opportunity for continuing education. Compensation packages are agreed in the collective bargain agreements (CBAs) with the labor unions, additional benefits are provided in order to attract and retain high-performing staff and the compensation system is based on performance and results. The Company’s operations in Brazil prioritize in-house recruitment and have a low turn-over.

Additionally, Fitesa has a Code of Ethics, whereby the Company commits to compliance with applicable regulations and principles of ethical behavior as defined in the Code of Ethics; prohibition of any type of harassment and abuse; non-discrimination and equal opportunity; freedom of association; health and safety; and environmental compliance. The Code of Ethics is communicated to all new employees during the induction process, and specific training programs are conducted throughout the year. Fitesa has a grievance mechanism to address complaints associated with compliance with the Code of Ethics (see below under “Grievance Mechanism” for more information). The HR Committee has the overall responsibility for the implementation of the Code and for properly addressing such complaints.

Fitesa’s HR team is fully integrated in terms of global, country and plant operations. The global HR Director and South American HR Manager are based in Brazil and work in close coordination with the HR staff based at each plant. Worker engagement surveys are available to all employees who choose to participate voluntarily and anonymously, and the Company reports a high approval rate and satisfaction among the staff. The satisfaction among employees is also reflected in the low turn-over rate reported by the Company’s operations in Brazil.

Working Conditions and Terms of Employment

As of September 2021, Fitesa employed 584 direct employees in its Brazilian operations, distributed in the following manner: 33 at the Corporate Office, 340 at the Gravatai Plant, 66 at the Cosmopolis Plant, 81 at the Jacarei Plant and 64 at the Diadema Plant.  Of the total directly employed staff, 15% percent are women, including 22 percent at the senior management level and 33 percent at the middle management level. Third-party employees working at the Fitesa facilities include those contracted for the operations of the cafeteria, janitorial services and security.

A contract is signed with every worker at the time of employment. The contract describes the working conditions and terms of employment. In addition, induction training is provided to explain human resources policies and procedures, working conditions, wage calculation, benefits, leave period, basic OHS, among other content. The policies and procedures, applicable to all operations, are also displayed at the companies’ intranet available to all employees. Overtime hours at the facilities are within the legal limits and overtime is paid as per the legal requirements. No accommodation is provided to workers since the manufacturing plants are located within urban settings.

Workers’ Organization/Freedom of Association

As per Fitesa’s Code of Ethics, the company recognizes workers’ right to freedom of association and there is no restriction to collective bargaining. At the Gravatai and Cosmopolis plants, operational workers are members of the Sindicato das Industrias de Fiação e Tecelagem. The company abides by the CBAs in terms of salaries and benefits negotiated through collective bargaining, which are negotiated once a year.

Non-discrimination and Equal Opportunity

Fitesa’s Code of Ethics emphasizes the company’s commitment to non- discrimination based on gender, race, religion, social status, and disability.

Child and Forced Labor

Fitesa abides by all legal prohibitions against under-age employment, forced labor, or any kind of irregular work. Minimum age of employment at the company is 18 years old, except for young apprentices, who can range from 14 to 24 years of age according to Federal Decree 5.598/2005. The Young Apprentice is a federal program in Brazil that aims at providing young people the opportunity to learn a professional trait while still in school. Each apprentice can participate in this program for up to two years. The program prescripts align with IFC’s requirements in relation to the employment of individuals under the age of 18 years.

To prevent use of child labor, age proof documentation (e.g., copy of National Identity Card) is collected at the time of recruitment of the worker.

Grievance Mechanism

Fitesa has an integrated grievance mechanism in place, through which staff members, including third-party workers may raise concerns and/or any misconduct associated with the Code of Ethics. Grievances can be registered through a toll-free number, email, or the company’s website at https://www.canaleticofitesa.com/Brasil/welcome.html, available 24 hours/7 days a week. The mechanism allows for anonymous complaints related to non-conformities to the Code of Ethics (e.g., corruption, sexual and moral harassments), without retaliation. Grievances are received and classified by a third-party contractor and channelled to Fitesa’s assigned team and Compliance Committee who administers the grievance mechanism.

Occupational Health and Safety

Fitesa has an integrated environmental, quality and OHS Director who reports to the Global Operations Vice-President. At each manufacturing facility there is an environmental, quality and OHS manager respectively who is supported by coordinators, technicians and assistance to cover the various shifts. OHS risk assessments conducted to date have identified the most significant risks associated with the manufacturing operations. At each plant, there is an OHS Management System that follows the requirements of the corporate Fitesa management system, but each facility tailors its OHS programs to reflect local legal requirements and specific risks associated with major equipment and activities and operations performed by workers. During the virtual visits to the Cosmopolis and Gravatai plants as well as videoconferences with Fitesa’s managers, IFC’s E&S specialists observed a strong involvement of the Company's senior management in OHS matters. This seems to be an important factor that contributes to Company’s good performance in terms of low number of accidents, high efficiency and low turn-over.  The Company conducts internal and external audits by independent parties to verify compliance with applicable regulations as well as with corporate and facility environmental and OHS policies and procedures.

Risk assessments conducted to date have identified the greatest OHS risks as those associated with machinery trapping, working at height, working in confined spaces, trip and fall, electric shock and chemicals handling. Fitesa implements the LTCAT (Laudo Técnico das Condições Ambientais do Trabalho - Technical Report of the Environmental Conditions in the Workplace), which requires the monitoring of workplace conditions such as noise levels, temperature, illumination and indoor air quality. Monitoring data indicate compliance with Brazilian and IFC requirements.

Regarding occupational accident rates, Fitesa reported a total of four accidents (2020) in the Brazilian operations, with four accidents with lost time, resulting in Lost Time Injury Frequency Rate (LTIFR) of 6.7; 3.17; and 3.47 for 2018, 2019 and 2020, respectively. These LTIFR are within the industry standard of 6.5 accidents per million hours worked.

The operations are largely automated and require a relatively low number of workers per shift. Observations made during the virtual site visit indicate good signage and housekeeping conditions throughout the plants.  All machinery had protection to prevent contact between workers and moving parts as required in accordance with Brazilian regulations i.e., NR-12 (Regulatory Standard for Machines and Equipment) as well as with requirements of the NR-10 (Safety in Installations and Services in Electricity). Workers assigned to work in the production areas have the required training to perform their duties in a safe manner, fully complying with Brazilian OHS Regulatory Standards. Fitesa has its own maintenance team that conduct regularly scheduled preventive maintenance work, thus focusing on maintaining safe working conditions for the operational staff.

As per Brazilian regulations and Fitesa’s procedures, each facility has implemented a personal protective equipment program. The PPE program identifies what specific PPE is required for specific jobs and workers undergo training to learn how to properly don each type of PPE.

Based on documentation reviewed, no emergency drills were conducted in 2020 and 2021, even though each facility in Brazil has an emergency brigade. As per ESAP #3, Fitesa is required to resume the regularly scheduled emergency drills at all facilities. 

Workers Engaged by Third Parties

Fitesa has approximately 70 third-party workers at its facilities in Gravatai and Cosmopolis who provide janitorial services, food services at the cafeteria and security of facilities. The Company’s contracts with these contractors require full compliance with Brazilian regulations. Third-party workers go through OHS and other appropriate training during induction. The department responsible for hiring third-party workers periodically reviews evidence that companies responsible for third-party workers operate in compliance the Brazilian labor laws. 

Fitesa procedures to hire construction firms for construction of new facilities or expansions follow selection criteria and the construction firms must present evidence of compliance with applicable Brazilian regulations in terms of labor laws. EHS performance of construction firms is monitored through documentation and site visits to verify site conditions and compliance with applicable regulations. During the virtual site visit of the Cosmopolis Plant, IFC E&S specialists observed good housekeeping and workers donning PPE.

Supply Chain

Fitesa does not have suppliers involved in primary production. Approximately 80% of supplies to the manufacturing facilities consists of polymers. In Cosmopolis and Gravatai the suppliers of polymers are located at short distances to the manufacturing plants. Fitesa has procedures to identify, register and evaluate its suppliers. Fitesa checks the relevant documentation. Contracts with suppliers require full compliance with the Company’s code of ethics and Brazilian labor laws.     

Resource Efficiency and Greenhouse Gas (GHG) Emissions

Fitesa has developed policies, procedures and targets to increase production efficiency while reducing energy and water consumption as well as the volume of wastes disposed at landfills. Initiatives to improve process efficiency include upgrading equipment, changing fuels and sourcing renewable energy where available. Production processes at the Fitesa plants do not require significant volumes of water, and the Company reuses reclaimed water as much as possible and some processes operate in closed system. At the Cosmopolis plant, Fitesa has implemented rainwater collection tanks to use this water in restrooms and landscaped areas.

The Gravatai and Cosmopolis plants use electricity from the grid and natural gas for heaters and dryers; the latter is piped directly to the facilities.  The Company does not own fleets as the distribution of products is provided by large transportation companies. The Scope 1 GHG emissions associated with combustion of fossil fuels (natural gas for heaters and dryers) and Scope 2 associated with electricity consumption from the national grid at the Gravatai and Cosmopolis plants are approximately 10,400 tonnes CO2eq per year (calculated from monthly average consumption of electricity and natural gas). Fitesa monitors GHG emissions and reports via its annual sustainability report. The Company has developed KPIs and internal targets to reduce GHG emissions by 10% by 2025 and is evaluating options to source more renewable energy where available.

Wastewater Management and Air Emissions

Water for the facilities is sourced from the local water Company. Domestic wastewater is collected and sent to the public sanitation system. A small amount of industrial effluent is produced from production processes. The industrial effluent is stored in containers in a designated storage area. The effluent storage tanks are collected by licensed companies and transported to industrial wastewater treatment facilities for treatment and disposal. Industrial effluents are characterized by the waste management companies for selection of the appropriate treatment.

Fitesa manufacturing process are not required by local regulations to monitor air emissions. Heaters and dryers have control technologies such as air filters and recirculation vents. Results of air emissions conducted at the Gravatai Plant demonstrate compliance with Brazilian standards and WBG/IFC EHS Guidelines for textile industry.

Waste Management

Fitesa has developed waste management procedures including a system of appropriate sorting, handling, storage, and disposal which are consistent with applicable legal requirements and good industry practices. Scrap textile products are recycled in the production process. Waste produced in the processing plants includes paper waste, carboard roll cores, plastic waste, metal, wood, and hazardous materials such as contaminated products. All hazardous and non-hazardous wastes are collected for disposal by authorized companies specialized in each type of waste. Recyclable waste such as paper, plastic, metal, and wood are collected by recycling companies.

At the Gravatai and Cosmopolis plants, all waste materials were noted to be properly stored in the designated area. Fitesa maintains monthly records of wastes generated at each facility and the total volume recycled. The Company has a global target of reducing wastes disposed at landfills by 50% by 2025.

Management of Hazardous Materials

Fitesa has limited use of hazardous materials in the production processes. Fitesa has developed a policy and procedure for the management of hazardous materials. Each plant has a designated area for the storage of chemical products. The designated storage areas were observed to be properly designed secured, protected from the elements, with fire protection system, drainage system, and all products were duly labelled.          

Community health and safety risks and impacts associated with Fitesa’s facilities are limited and generally associated with traffic to and from the manufacturing facilities. The Cosmopolis facility is located in an industrial park and surrounding zones are rural and agricultural. There are no residential areas immediately surrounding the Cosmopolis plant. The Gravatai plant is withing an industrial park that is located in proximity to residential areas due to the expansion of the neighboring community.

To minimize noise and visual impact, the Company has created a green belt around the facility. At Gravatai, the Company also limits the delivery hours to minimize traffic and noise impacts during nighttime. All facilities are fenced and do not allow unauthorized access to members of local communities.  Fitesa does not own a fleet, but rather secures the services of large transportation companies for distribution services. Transportation companies are not exclusive to Fitesa, but rather provide services to many clients in Brazil. These companies have insurance policies and GPS tools to control routes and the speed of their fleet.

Security Personnel

Fitesa’s security personnel are secured under contracts with qualified security companies. Security personnel are unarmed.  Companies that provide security personnel are regulated by the Federal Police Decree 387/06. According to Decree 387/06, all security personnel are required to be approved by an agency authorized by the Federal Police. Procedures to obtain authorization from the Federal Police include review of the candidate’s criminal background and psychological evaluation. The candidate must pass a course administered by the Federal Police, which includes basic training on human rights and the use of force. As per information reviewed, there has been no complaints associated with security personnel at Fitesa’s facilities.