PS7 (Indigenous Peoples) is not triggered by this Project because the appraisal did not identify Indigenous Peoples (IP) inside or using the Project’s area of influence. IFC’s proceeds will be used for the electrification and technification of an existing farm cluster and will include the construction of a 6-km sub-transmission line. An Environmental Impact Assessment (EIA) and an Environmental Management Plan (ESMP) including the implementation of an archeological chance finds procedure will be required prior to the construction. Any potential issues that might emerge will be addressed under PS1. Therefore, PS8: Cultural Heritage, has not been triggered.                                                   

This is category B project based on IFC’s 2012 Policy on Environmental and Social Sustainability. Based on information reviewed by IFC, the proposed business activities are considered to involve limited adverse E&S risks and impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures. Key E&S risks of the Project are the handling of fuels and hazardous wastes, handling of chemicals (metabisulfite), large generation of effluents from aquaculture ponds, workers’ occupational injuries, community grievances, potential abuses from private security forces, and origin of feed. Potential key E&S risks of the sub-transmission line construction include conversion of natural habitat and physical and/or economic displacement along the right-of-way of the sub-transmission line.                                                 

Environmental and Social Policies. While the Company’s E&S policies are largely prescribed through adherence to internationally recognized sustainability standards, the company does not have a documented overarching E&S Policy committing to sound E&S performance. Going forward, the company will adopt an overarching E&S Policy consistent with the objectives of IFC Performance Standards and other internationally recognized sustainability standards to which the company subscribes. A communication and training plan will be developed to socialize this policy internally and with Profremar’s stakeholders. To ensure that the intent of the Company’s E&S Policy is met, implementation of the E&S Policy will be monitored and reported quarterly to the Company’s CEO and Board of Directors (when formally appointed), including assignment of OPEX/CAPEX for Profremar (ESAP#1). 

Identification of risks and impacts. The ex-post Environmental Impact Assessment (EIA) and Environmental Management Plan (EMP) for the California farm was approved by the Ministry of Environment in 2019 and the environmental license was issued in February 2022. The farm has authorization by the Ministry of Fisheries (Acuerdo Ministerial) to operate since 2012. Significant environmental risks of aquaculture farms operated by diesel power generators include the contamination of soil and waters with fuel and lubricants, the generation of solid and hazardous wastes, air emissions and noise from diesel generators, and effluent discharge from aquaculture ponds to receiving surface waters (system requires a 10 percent of daily water exchange). An OHS risk matrix has been also prepared and is regularly updated based on field observations and the analysis of injuries. The most significant OHS risks include the risk of drowning, car/motorcycle collisions, and exposure to chemicals (e.g., metabisulfite).  

Management Programs. Profremar has documented procedures for the management of hazardous and non-hazardous wastes, handling of fuels, handling of chemicals used in ponds, and handling of metabisulfite during harvesting activities. In addition, Profremar makes no use of antibiotics, pesticides or chemical additives in its farming operations. Regarding the control of OHS risks, Profremar has also identified the required personal protective equipment (PPE) as per job risk assessment (JRA).

Organizational Capacity and Competency. The Environmental Manager, with the assistance of an Environmental Analyst and the Occupational Health and Safety (OHS) Supervisor, coordinates with farm management staff to ensure implementation of EHS procedures. The EHS team monitors compliance with regulatory environmental requirements in all aquaculture farms and conformity with the Company’s EHS procedures. The HR Department is headed by the HR Manager with the support of 3 team leaders (payroll, processes, talent management) and 11 support staff.

To ensure proper implementation of an E&S Management System in Profremar in line with the requirements of IFC Performance Standard 1, and of the specific requirements in this ESRS, the Company will appoint a Senior E&S Manager directly reporting to the Company’s CEO (and subject to Board of Directors supervision, when appointed) with adequate qualifications to manage and coordinate overall environmental and social affairs and plans related to Profremar’s operations (ESAP#2).

EHS Training. Profremar’s labor policy and basic EHS instructions are delivered to all workers during a 1.5-hour induction training. In addition, the EHS Department has developed EHS toolbox talks covering 58 different subjects, which are delivered throughout the year to all workers. Delivery of the toolbox talks is done either by the Environmental Manager, the OHS Supervisor or the farm manager.

Emergency Preparedness and Response. Farms are accessible through roads and vehicles are permanently on site in case a medical evacuation is required. Communications between the farms and the base headquarters operations are good and guaranteed by radio and cellular service.

COVID-19 Impact. The Government of Ecuador designated the food and agriculture sector as a critical sector whose assets, systems, and networks are considered vital. Therefore, the client’s operations did not stop due to COVID-19 and, as of October 2021, all workers are fully vaccinated, and the use of face masks is still mandatory. According to Profremar, there has been no COVID-19 related fatalities among its workforce since March 2020.

EHS Monitoring and Review. Profremar has EHS monitoring programs to comply with environmental regulatory requirements (e.g., effluents, soil salinity, noise, generation of hazardous wastes, implementation of the environmental management plans) and an EHS internal inspection program focusing on good housekeeping practices in farms is in place. Farms are rated based on the results of the EHS bimonthly inspections, and evidence of progress in the implementation of corrective actions must be presented by each farm manager during weekly coordination meetings. Managers have up to 28 days to close any non-conformity.

To ensure that the intent of the Company’s E&S Policy is met (see ESAP#1 above), Profremar will select E&S key performance indicators (KPI), which will be reviewed by the Company’s CEO and Board of Directors (when formally appointed) on a regular basis.  Indicators will include, at a minimum, energy consumption, generation of hazardous and non-hazardous wastes, effluents quality, soil salinity, lost-time injuries, employee turnover and absenteeism, employee training, grievances (e.g., open vs resolved) by internal and external stakeholders, and social indicators. Profremar will benchmark its E&S KPIs with good international industry practice when available (please refer to WBG EHS Guidelines for Aquaculture (2007) for environmental indicators) and set up annual and long-term farm-level and corporate targets (ESAP#3).

Transmission Line. The Project will require the construction of a 6 km 69 kV sub-transmission line (TL) to connect California to CNEL substation in Naranjal.  CNEL is responsible for the design, siting, environmental licensing, and land acquisition for the right-of-way of the TL. CNEL is also responsible for preparing the EIA and obtaining the environmental license for the 69 kV TL. Profremar will build the TL and will transfer it to CNEL once completed. CNEL will own the TL and will be responsible for maintenance and operation.

The company will include in contract documentation with construction contractors, the requirement (i) to comply with the environmental management plan (EMP) included in the EIA; and (ii) to implement specific client-approved E&S management plans, which will include at a minimum, plans for labor, occupational health and safety, emergency response, hazardous materials and hazardous waste management, erosion control, site restoration, archeological chance finds procedure, general pollution prevention, and stakeholder engagement (including grievance mechanism) (ESAP#7). The company will retain a qualified Environmental, Health and Safety (EHS) consultant to approve the contractors’ E&S management plans and supervise the EHS performance of contractors during the construction of the TL, substation and distribution lines (ESAP#8).

Supply Chain. Performance Standards requirements related to primary suppliers of shrimps or fish do not apply in this investment, as proceeds will not be used in packaging plants. Aspects related to the management of E&S risks related to primary suppliers of feed are described under Performance Standard 2 and 6.                                               

As of end 2021, Profremar had about 5,000 permanent full-time employees. Profremar does not employ part-time or temporary workers for shrimp harvesting activities. Women are practically absent from the workforce except for about 60 women in administration and 100 for the provision of catering services. Employee annual turnover in the last five years has ranged from 45 to 60 percent.

Human Resources Policies and Procedures. Workers’ rights and responsibilities are documented in the Internal Works Regulation (“Reglamento Interno de Trabajo”) approved by the Ministry of Labor. The Company’s labor commitments are listed in a one-page Social Policy adopted in 2014 and regularly updated. This Social Policy is in line with IFC PS2 requirements and includes the following commitments: non-hiring of minors, voluntary overtime, fair and on-time payment of salaries compliant with minimum wage, provision of decent accommodations and adequate food, non-discrimination, prohibition of harassment and sexual harassment, prohibition of abusive disciplinary measures, freedom of association, comply with maternity legal provisions, and no discount of salaries due to fines (the Ecuadorian Labor Code allows to discount up to 10% of a worker’s salary). The content of the Internal Works Regulation and the Social Policy is explained to workers at recruitment during a 1-hour induction training.

Working Conditions and Terms of Employment. Terms of employment are documented in the Internal Works Regulation and contracts. As part of the workers’ contracts, Profremar provides in/out transportation, meals, and lodging (in aquaculture farms) at no charge to all workers. In aquaculture farms, Profremar operates a day shift from 07h00 to 16h00 (8 hours per day and 1-hour non-paid lunch/dinner break). Employees in shrimp farms work 10-day-on and 4-day-off or 15-day-on and 6-day-off shifts. Overtime is recorded by each field manager and then validated by the field Biologist. Employees have indefinite contracts (after a 90-day probation period). In June 2020, the Government of Ecuador approved a law due to the COVID-19 emergency allowing companies to hire workers on an annual contract (renewable once), after which the contract becomes indefinite (Ley Organica de Apoyo Humanitario). Santa Priscila has been relying on such contracts (“contratos de trabajo emergente”) for all new hires.

Workers sign a copy of their contract at recruitment, but they do not receive copies of it and of the Internal Works Regulation and Social Policy. To provide workers with documented information that is clear and understandable regarding their rights, Profremar will provide all workers a hard copy of their contract. Copies of the Internal Works Regulation and the Company’s Social Policy will be either provided to each worker or be made always accessible through communication boards or other adequate means throughout the working site, such as canteens and dormitories (ESAP#9).

Workers’ Organizations. Ecuador’s labor laws allow for worker’s organizations and protects labor leaders against discriminatory actions by employers but less than 4% of workers in Ecuador belong to unions. The Company’s Social Policy includes freedom of association. Workers do not belong to any union and the Company has confirmed that there has been no initiative by employees to create a workers’ organization.

Non-Discrimination and Equal Opportunity. The Company has a one-page Social Policy committing not to discriminate on the basis of race, religion, color, origin, ethnicity, gender identity, sexual orientation, political parties. The Social Policy also includes the prohibition of harassment and sexual harassment.

Retrenchment. About 150 employees worked in the California farm prior be acquired by the Company. All workers were transferred and no retrenchment was required.

Workers/Contractor Grievance Mechanism. According to Profremar’s procedure, workers can raise grievances either directly with the farm manager or anonymously through suggestion boxes located at the entrance of each farm. Grievances are collected by the farm manager once per week and submitted to Human Resources for analysis and implementation of corrective actions. The existence of the suggestion boxes is communicated during induction training. Despite this, according to Profremar, no workers’ grievances have been recorded. To ensure accessible channels for reception and prompt resolution of workers’ grievances, Profremar will revise and update its Workers’ Grievance Mechanism in line with IFC PS2. Profremar will also hire social workers, as required by national labor law, to regularly visit the shrimp farms and collect workers’ grievances (ESAP#10).

Workers’ accommodations. Accommodations in farms are made with durable materials and have adequate ventilation. Most accommodations are made out of brick, but some accommodations are made out of containers that have been adapted to this purpose (i.e., insulation, windows, flooring). Fire extinguishers are located on the exterior walls of each accommodation. Each worker is provided with its own separate bed. Toilet facilities are built in durable materials that are easily cleanable. Filtered drinking water is accessible through a spout located in the exterior of each canteen. Filters are replaced every month by a third-party provider. To ensure that workers’ accommodations comply with the Executive Decree 2393 (Decreto Ejecutivo 2393 Reglamento de Seguridad y Salud de los Trabajadores y Mejoramiento del Medio Ambiente de Trabajo) and are in line with Part II of the IFC EBRD Guidance Note on Workers’ Accommodations, Profremar will conduct a diagnostic of its workers’ accommodations and keep an up-to-date inventory indicating the available floor space per resident. A timebound and budgeted plan will be agreed with IFC to ensure that all rooms have a floor space of 4 square meters per resident (ESAP#11).

Child Labor and Forced Labor. The Company does not hire people under 18 years old; age is verified through the person’s ID and recorded in the worker’s file. The US Department of Labor (USDOL) 2020 report does not identify the production and processing of shrimps in Ecuador as an activity at risk of child labor.

Workers engaged by Third Parties. Most activities in the farms are performed by full time employees. Profremar relies only on three (3) contractors for physical security (about 300 security personnel) and one small contractor for catering services. Every month, Profremar verifies labor compliance by catering and physical security contractors (i.e., contracts, payroll, payments to social security).

Occupational Health and Safety.  Profremar has prepared a hazard identification, risk assessment and control (HIRAC) matrix, and a matrix indicating the required personal protective equipment (PPE) per job function. Profremar will update the HIRAC and PPE matrices to address the new hazards introduced by the electrification of farms (ESAP#12). Farm administrators are responsible for requesting the required PPE based on the matrix and the number of workers. Use of PPE and basic safety instructions (e.g., no removal of machine guards, no maintenance of machines while in operation, no smoking close to fuel storage areas) is covered during induction training. Profremar has also prepared 58 toolbox talks, which are delivered to workers throughout the year.

One of the main risks in aquaculture farms is the risk of drowning. During IFC site visit, it was observed that the use of floating devices by workers was ubiquitous throughout the farms. IFC could also observe that workers exposed to metabisulfite during shrimp harvesting operations used adequate PPE (i.e., half masks with cartridges for acid gases, nitrile gloves and aprons, rubber boots), and that workers exposed to high levels of noise used hearing protection equipment (i.e., operators at pumping stations). Nevertheless, some deficiencies were also observed: (a) workers driving motorcycles without helmets; (b) maintenance workers without adequate PPE (e.g. gloves, eye protection); and (c) workers walking on top of diesel tanks without any fall arrest protection.

To prevent falls from heights during the delivery of fuel and other injuries to workers, Profremar will (a) provide helmets to all motorcycle drivers; (b) provide adequate PPE to all maintenance workers; and (c) install passive fall protection systems (e.g., platform with guard rails) for diesel tanks where there is a risk of fall from height. A job hazard analysis will be performed before any hot work around diesel tanks (ESAP#13).

From January to October 2021, Profremar recorded 16 lost time injuries. Most injuries (12) are limb fractures. The other injuries are second degree burns and eye injuries. No fatalities have occurred since April 9, 2018.                           

Resource efficiency. Shrimp production and long-term profitability are determined by efficient resource use, including avoidance or minimization of mortality in hatchery operations and careful control of efficient feeding during grow-out. Feed expenses often represent more than one third of total aquaculture costs thus Feed Conversion Rates (”FCRs”) are a determinant of financial success as well as sustainable production systems. FCR’s are, in turn, dependent several factors, including the quality and protein content of the feed, the quality of fry stock, and the water management on each farm. Similar to other “precision farming” systems providing the correct feed at the correct time and correct location is critical. Overfeeding shrimp can result in toxic conditions which can stress the growing stock and usher in pathogens while underfeeding them results in slower growth and higher costs. Similar to other precision farming systems, Profremar has developed management systems to integrate and calibrate its information on fertilization, feeding, aeration, and water exchange in order to identify, and scale as appropriate, those practices which have the best results in terms of FCR (currently between 1.6 and 1.8) and total productivity.

Water Consumption and Water Quality. Water is pumped from the Churute estuary and released into the shrimp ponds through a central canal. Water is returned by gravity to the estuary. Water quality (i.e., pH, temperature, Dissolved Oxygen (DO), Biological oxygen demand (BOD5), Chemical Oxygen Demand (COD), Total Suspended Solids (TSS), Oil and Grease, Total Nitrogen (N), Total Phosphorous (P) and Fecal Coliforms) is tested at the intake and outfall of the shrimp ponds by an accredited external laboratory twice per year (dry and rainy season). For all parameters, results indicate compliance with national discharge requirements and with WBG EHS Guidelines for Aquaculture (Table 1).

Greenhouse Gases and Energy Efficiency. The primary source of Profremar’s GHG emissions stem from diesel use in the pumping of brackish or ocean water into outgrowing systems (system requires a 10 percent of daily water exchange). Each farm has multiple pumping stations with large diesel generators operating (from 1,000 to 4,000 HP in total in each station). Another important source of GHG emissions is diesel powered mechanical aerators. IFC’s financing will be used for the electrification of California replacing diesel powered generators, and therefore substantially decreasing the amount of GHG emissions.

Pesticide Use and Management. Profremar makes no use of antibiotics, pesticides or chemical additives in its farming operations. The use of low stocking rates and disease resistant shrimp are key pillars of Profremar’s strategy to prevent disease outbreaks, including the White Spot virus disease. These practices are complemented by breeding for vigor and resistance to disease and provision of probiotic supplements to enhance the capacity of shrimp populations to resist harmful viruses and bacteria.

Hazardous Materials Management. On farms, the most dangerous substances used are petroleum derived products: diesel and lubricants used in pumping stations, aerators and vehicles. While present, the risk of significant spills is minimized by Santa Priscila’s use of specialized petroleum product transporters and handlers monitored by the Government of Ecuador’s Directorate of Hydrocarbons and the storage of diesel in steel tanks (around 5,000 gallons) with concrete secondary containment. However, some secondary containments have deficiencies (e.g., broken valves, gaps in the containment wall) which compromise their integrity. To address this issue, Profremar will conduct a diagnostic of all fuel storage areas to repair any deficiency compromising the integrity of the secondary containment and will implement an inspection program to prevent reoccurrences (ESAP #14). Risk of minor spillages and leakages requires constant attention by Profremar due to the large number of water pumps and generators (i.e., aerators) distributed across the farms. Risks derived from the handling and storage of fuel will be significantly reduced thanks to the electrification of farms.

The other chemical largely used by Profremar is sodium metabisulfite added to the shrimps at the time of harvesting to keep shrimp shells from undergoing melanosis (also called black spots). To minimize the impact of sodium bisulfite on Dissolved Oxygen in the receiving water body, the sodium bisulfite solution is deactivated with lime and left overnight before its discharge into the ponds’ walls.

Hazardous Waste Management. Lubricants, used oil and oil filters are temporarily stored on site in enclosed, covered areas with secondary containment. Hazardous wastes are collected and transported for processing and/or disposal by a company licensed to provide these services (GeoAmbiente). Profremar keeps records of the manifests ensuring the chain of custody from the farms to the point of disposal, reprocessing or recycling. Profremar reports the quantity of hazardous wastes generated per farm to the environmental authority on an annual basis.                                          

Ecosystem services. The most important ecosystem service and source of livelihood to local communities in the Gulf of Guayaquil is the production of fish, mollusks and crustaceans by mangrove ecosystems, which are legally protected in Ecuador since 1994. According to the authorization from the Ministry of Fisheries, 1,167 ha of California’s shrimp farms are located in private highlands (tierras altas) and only 65.95 ha are located in mangrove ecosystem (zona de playas y bahia) that were converted before 1994. Prior to 1994, the previous owner of the California farm cluster acquired a concession of 1,000 ha of mangroves adjacent to the farm. This area was never developed and continues to be used – without any restriction of movement by the Company – by associations of fishermen.

Security Personnel. Profremar relies both on its own security personnel and agreements with three professional security firms – licensed by the Government of Ecuador – for protection against theft on the farms. Profremar’s Security Manager (police in inactive duty) and field-level security coordinators in each farm cluster ensure good coordination and communication with its own and third-party security personnel through daily work assignment meetings. The function of security personnel in the shrimp farms is to control access and patrol the perimeter to prevent unauthorized access and thus avoid confrontation.  Security risk assessments for each farm are regularly updated by the Security Manager and field-level security coordinators. According to the Security Manager – who joined the Company four years ago – there have been no confrontations in the farms. 

Both in-house and contracted security personnel is armed with lethal weapons. In Ecuador, security personnel must undergo a 120-hour government-approved training program before they are deployed, which includes topics such as Human Rights and public safety. Nevertheless, the Company shall reinforce the expected behavior of security guards vis-à-vis members of communities in its area of influence and fishermen associations with the right of passage through Profremar’s farms, and in the event of confrontations. Therefore, the Company will adopt and document a Code of Conduct for security personnel in line with the Voluntary Principles on Security and Human Rights (the Voluntary Principles) and/or the International Code of Conduct Association for Private Security Providers (ICOCA) and will provide regular induction and progressive training on the subject to all the security personnel (ESAP#15). In addition, as required in ESAP# 5 - Stakeholder Engagement, the Security Manager will collaborate with the Social Coordinator for the preparation and regular update of Profremar’s stakeholder mapping and stakeholder engagement plan. The Security Manager will keep the Social Coordinator informed of any existing and potential conflicts with nearby communities and fishermen associations.                                               

California farms overlap the South American Pacific mangroves ecoregion. The South American Pacific mangrove ecoregion bordering the Gulf of Guayaquil is limited by plant formation of mangrove (Rhizophora spp.) forest that occur at the confluence of many rivers.

Project activities include (i) the installation of a 6 km 69 kV TL; (ii) construction of electricity distribution lines inside the farms; and (iii) the acquisition of associated electric pumping, aeration and feeding systems. Neither the existing operational area, nor the proposed TL, are located within any protected areas or internationally recognized areas. The existing California Project area was converted prior to 1990 and is being treated as Modified Habitat. The Company will be expected to minimize impacts through its management plans and certification commitments (see below ESAP #19). 

With respect to the 6 km 69 kV TL associated with this site, CNEL is responsible for preparing the EIA.  To ensure conformance with PS6 requirements, the Company will (i) hire a qualified ecologist with experience on powerlines lines to conduct a habitat classification along the TL and electricity distribution lines with respect to PS6 definitions and identify priority species at risk of collision and electrocution; (ii) seek to avoid habitats of highest risk; (iii) with respect to distribution lines, select designs that minimize the risk of bird electrocution; (iv) install bird flight diverters in habitats associated with priority birds; and (v) maintain bird flight diverters for the duration of the Project (ESAP #17). Based on this assessment, the Company will also hire an international consultant with experience in fatality monitoring to design a fatality monitoring program of birds and procure a team of biologists to undertake fatality monitoring and report on results for the first three years of Project (ESAP #18).

With respect to the primary production of living natural resources, the Company will demonstrate compliance with either ASC or BAP standards by the California cluster through independent verification or certification (ESAP #19).

Invasive species. The shrimp species (Litopenaeus vannamei) is a native species so there is no risk of introducing invasive species into native habitats.

Supply chain – feed. In 2020, Profremar consumed about 160,000 MT of feed to supply all its farms. The main ingredients of shrimp feed are soya and wheat (at about 40% each), and fishmeal and fishoil (at about 16%). This corresponds to an approximate consumption of 64,000 MT of soy and 25,000 MT of fish derived products per year. Considering an average soy productivity of 4 MT per ha, 16,000 ha of soy plantations are needed to supply the Company’s feed requirements.

Currently, the Company’s main feed suppliers are Skretting and Nicovita. According to information disclosed in Skretting’s website, in 2020, 75% of fishmeal and fish oil came from fisheries certified according to the MarinTrust or Marine Stewardship Council (MSC) programmes, or from fisheries that were part of a MarinTrust fishery improvement programme (FIP). Skretting’s sustainability roadmap has the goal to increase that percentage to 100% by 2025. Likewise, fisheries supplying Nicovita are certified by MarinTrust or are part of a MarinTrust FIP. With regards to soy, both companies – Skretting and Nicovita – buy Roundtable for Responsible Soy (RTRS) credits for the feed supplied to the ASC-certified aquaculture farms. RTRS credits totaling 7,000 MT were bought by both feed suppliers for the Company in 2020.