This is a Category B project according to IFC’s Environmental and Social Sustainability Policy. Based on IFC’s review, coupled with existing knowledge of the sector, the project is expected to have limited adverse environmental and social risks and impacts that are few in number, short-term and site-specific, and can be avoided or mitigated by adhering to recognized performance standards, good international industry practice (GIIP) procedures, guidelines and design criteria as described in the following sections.

Environmental and Social Assessment and Management System:

Avacare does not currently have a centralized Environmental and Social Management System (ESMS), with each operating company (OpCo) managing E&S in an independent and decentralized fashion. To effectively manage the scale and range of potential risks posed by Avacare’s operations, the company will develop a consolidated ESMS aligned with IFC Performance Standard 1 and commensurate to the level of risks associated with the company’s proposed activities. Specifically, the ESMS will incorporate the following elements: (i) policies defining the environmental and social objectives and principles that will guide the various OpCo’s to achieve environmental and social performance in compliance with the PS; (ii) processes and procedures for the identification of risks and impacts, including appropriate E&S due diligence for new acquisitions (see ESAP 2), (iii) relevant E&S management programs (see ESAP 3); (iv) organizational capacity and competency at both a group and OpCo level; (v) emergency preparedness and response; (vi) stakeholder engagement (that includes external communication and grievance management); and (vii) a monitoring and review procedure (ESAP 1). Where feasible, Avacare will certify their quality and management systems according to ISO 13485, ISO 9001, ISO 14001, and ISO 45001.

Key E&S performance indicators (KPIs) will be assessed and reported on a monthly basis for senior management review.

Identification of Risks and Impacts:

Avacare does not currently have a consolidated risk identification and management procedure. Risk identification and management is largely driven by local legislative and permitting requirements in each respective OpCo. To the extent required in each country of operation, Avacare will commission independent Environmental and Social Impact Assessments (ESIA), meeting local legislative requirements, to identify and assess E&S risks and impacts for the construction and operation of new warehousing and manufacturing facilities as appropriate.

As a component of their Environmental and Social Management Plan (see ESAP 2), Avacare will develop and adopt a consolidated E&S risk and impact screening and assessment procedure for all new acquisitions to standardize assessment and due diligence requirements across the business in line with IFC’s Performance Standards.        

Management Programs:

Avacare does not have a consolidated and centralized Environmental and Social Management Plan (ESMP) that describes the proposed environmental and social management procedures to mitigate risks and impacts of their projects and operations.

Avacare will develop a group level ESMP that will provide detailed actions and management programs required to achieve its overarching objectives, roles and responsibilities, monitoring and verification and KPIs. The ESMP will confirm compliance against national regulations of each OpCo, as well as promote effective environmental and social management throughout the lifecycle of their projects, in accordance with IFC Performance Standards (ESAP 2). Specifically, the ESMP will detail management measures relating to E&S risk and impact screening and assessment procedure for all new acquisitions; E&S engineering design considerations; approval and permitting requirements; water and energy use management and efficiency; materials use handling and storage; fire control and emergency procedures; waste management; transportation management; noise management; security and access management; recruitment and labor management, training and contractor management. The ESMP will also include a legal register indicating applicable legislative requirements, and standardized Environmental Codes of Practice which will be made available to contractors and form part of any contract.

ESMP performance of the various OpCos, against the defined KPIs, will be monitored and audited by Avacare on an annual basis.

Organizational Capacity and Competency:

Avacare have recently appointed a Group Head: Environmental, Health and Safety (EHS) responsible for the oversight and management of the company’s E&S performance, compliance, and training. The Group Head: EHS reports into the Group Executive for HR. At an OpCo level, currently only Swazipharm and Supra Healthcare Johannesburg have dedicated EHS staff, while other OpCo’s have either designated EHS responsibilities at to existing management or quality personnel.

Avacare will conduct a review of their existing organizational structure, at both a group and OpCo level, particularly relating to EHS management, and assess the need for appointment of further resources. Avacare will also designate EHS representatives within each OpCo, with suitable training, knowledge, skills, and experience necessary to perform their work, including current knowledge of the host country’s regulatory requirements (ESAP 3). All EHS resources will report to the Group Head: EHS and will be responsible for the overall implementation and monitoring of the ESMP, the maintenance of E&S records, and the preparation of E&S performance reports, to be presented on a monthly basis, and incorporated into annual E&S audit reports.

Emergency Preparedness and Response:

As a component of the ESMP (ESAP 2), Avacare will develop an overarching Emergency Preparedness and Response Plan (EPRP) that will be adopted, and refined where necessary, by each OpCo. The EPRP will identify and detail potential areas where accidents and emergency situations may occur, communities and employees who may be impacted, appropriate response procedures, provision of necessary protective equipment and resources, designation of roles and responsibilities and liaison with local authorities as appropriate. The EPRP will be communicated to all employees as well as potentially affected communities where required. Periodic training will also be conducted with employees and contractors for effective response and understanding.

Monitoring and Review:

As a component of the ESMP (ESAP 2), Avacare will develop KPIs that will be reported on a monthly basis to the Group Head: EHS and audited on an annual basis. This will include compliance with any related legal and/or contractual obligations, regulatory requirements, and IFC Performance Standards. The extent of monitoring will be commensurate with the project’s environmental and social risks and impacts and with compliance requirements.

EHS resources at each OpCo will be responsible for providing monthly EHS performance reports, against the predefined KPIs, to the Group Head: EHS.

Avacare currently employs approximately 1,500 employs across the group. The majority of these employees (80%) are employed on a permanent basis, while the remaining employees are either third-party contractors or on fixed term contracts. HR management at the group level is overseen by the Group HR Executive, and supported by group heads for remuneration, talent management, organizational development and transformation, and communications. The company is in the process of implementing a regional HR structure that will include regional (South Africa, West Africa, Rest of World) HR heads. At an OpCo level, HR matters are generally managed by existing administration managers, and no dedicated HR functions are in place.

Human Resources Policies and Procedures:

Avacare has developed several group level HR policies, including employee wellbeing, performance management, flexible work practices, talent management, vaccinations, employee relations, leave, and people development. The company uses the Bamboo HR management system for tracking and managing HR data across the group.

Avacare will develop and adopt a centralized and consolidated HR policy that will detail the company’s approach to managing their workforce in a manner consistent with the requirements of PS2 and local labor laws and requirements. (ESAP 4). As per the HR policy, all employees, including contract workers, will be provided with a written contract pertaining to their rights, employment terms and working conditions. This will include, where applicable, working hours, wages, overtime, compensation, and benefits, leave, performance reviews, right of association, health insurance, pension, termination procedures and grievance management. Additionally, the HR policy will include an employee code of conduct (including management of sexual harassment and gender-based violence), and protection of the workforce (forced and child labor).

Working Conditions and Terms of Employment:

Working conditions across the group are defined by local labor law requirements, including number of working hours, overtime, night work (where required), salaries etc. No non-compliances were identified in relation to working conditions, however, Avacare will define and formalize their approach relating to the management of working conditions in the HR policy (ESAP 4).

Workers Organizations:

As detailed in Avacare’s employee relations policy, the company supports membership and engagement with recognized trade unions, as well as the process of collective bargaining to determine and support the terms and conditions of employment (where applicable). Currently approximately 50% of workers in South African subsidiaries, predominantly Supra Healthcare, are unionized with the Chemical, Energy, Paper, Printing, Wood and Allied Workers Union (CEPPWAWU) and a Collective Bargaining Agreement (CBA) is in place. Employees of Barrs Pharmaceuticals are also unionized, however, a CBA has yet to be concluded (ESAP 5).  Currently the company engages with the respective unions as required and no issues or concerns were reported in this regard.

Non-Discrimination and Equal Opportunity: 

As per the Avacare employee relations policy, employment practices are to be fair and equitable, and non-discriminatory in terms of race, gender, culture, creed, sex, marital status etc.

Retrenchment:

Avacare have not been required to conduct any retrenchments over the past two years, however, due to restructuring of certain assets in Namibia, some local employees’ positions were made redundant. This process was managed through a local labor consultant and no further issues or grievances were recorded. Avacare will develop, as a component of their HR Policy (ESAP 4), a consolidated retrenchment policy that will apply across the group and align with the requirements of both PS2 as well as local legislation.

Grievance Management:

Avacare have developed an internal Grievance Policy and Procedure as well as a Whistleblowing Policy and Procedure. The policies can be accessed on the company’s intranet site, and apply across the group, including third party contractors, and all OpCos are required to adapt and implement them. The policy allows for both informal and formal grievance management. The formal procedure includes a three-stage process, including defined reporting lines and communication timelines. The process also allows for external dispute resolution as per relevant local legislative allowances. Avacare will update the current policy to allow for anonymous complaints, to be raised and addressed, as well as ensuring that the policy is communicated and understood by all employees at an OpCo level. Furthermore, Avacare will maintain a grievance log of all received grievances, including their status, at both a group and OpCo level (ESAP 6).

Occupational Health and Safety:

Avacare does not currently have a consolidated Occupational Health and Safety (OHS) policy or procedure, nor have any risk assessments been conducted at a group or OpCo level. OHS requirements are largely driven by local regulatory and permitting requirements. No OHS training is performed at a group level, with limited training provided at some of the OpCos as required by local legislation. OHS KPIs and incident reporting is not implemented and monitored in a consolidated and consistent manner across the group.

Avacare will develop a group level OHS Procedures to be adopted by all OpCos. In a manner consistent with GIIP as per applicable and relevant sections of the World Bank Group Environmental, Health and Safety Guidelines, the OHS Procedures will address areas that include (i) the identification of potential hazards to workers, particularly those that may be life-threatening or cause long-lasting damage; (ii) provision of preventive and protective measures, including modification, substitution, or elimination of hazardous conditions or substances; (iii) training of workers; (iv) documentation and reporting of occupational accidents, diseases, and incidents (including the development of KPIs); and (v) emergency prevention, preparedness, and response arrangements (ESAP 7).

Avacare provides their employees with all necessary personal protective equipment (PPE) and health and safety training for the type of work in which they are engaged, while contract workers are required to provide their own PPE and training. As detailed in the OHS procedure, Avacare will monitor contractors’ level of compliance with this requirement on an ongoing basis. For all its offices and operational sites, Avacare will employ appropriate measures for life and fire safety, under the OHS procedure (ESAP 7).

Workers Engaged by Third Parties:

Avacare make use of a limited number of third-party contractors, predominantly for security and logistical requirements. As a component of their ESMP (ESAP 2), Avacare will formalize and document their third-party / contractor selection and management process that will include the vetting and ongoing monitoring of contractors’ safety, compliance with labor law, and compliance with Avacare health, environmental, working conditions and labor standards and policies. In addition, the contractor management process will ensure that all contractors have access to the Avacare employee grievance mechanism (ESAP 6) should they not have a suitable internal procedure available within their organization.

Supply Chain:

Avacare have an extensive supply chain network and are currently working with numerous pharmaceutical and healthcare consumable manufacturers and distributors. The procurement process with these suppliers is managed through a centralized web-based application, the Procurement Optimization Platform (POP). Currently the majority of Avacare’s suppliers are based in Asia (India, China, Malaysia) hence their local office in Mumbai is instrumental in managing their supply chain and logistics. Current commercial agreements only cover areas such as pricing, product listing, regulatory requirements etc. however do not cover any E&S aspects.

Avacare will develop and implement a Supplier Code of Conduct detailing the company’s approach and protocols to supply chain management, including the provision of E&S clauses in contracts, supplier evaluation, monitoring and auditing requirements (ESAP 8).

Resource Efficiency:

Energy and GHG Emissions: Avacare does not currently have an energy consumption monitoring program nor enhanced energy efficiency objectives or KPIs. All OpCos currently utilize municipal power, and where necessary, are supplemented by backup diesel generators (diesel is not stored on site). The company does not conduct any monitoring of GHG emissions. As a component of the ESMP (ESAP 2), Avacare will develop and implement an energy efficiency management and monitoring plan, including the development of KPIs that will be assessed on an annual basis.

Water Consumption and Wastewater Management: All companies across the group utilize municipal water for their operational requirements, with a small number of OpCos utilizing borehole water. While the company’s water demands are limited, and primarily used for routine administrative, sanitary, and cleaning purposes, as a component of the ESMP (ESAP 2), Avacare will develop and implement a water efficiency and monitoring program. Currently the OpCos produce a limited quantity of wastewater, predominantly from sanitary effluents, kitchens, and ablutions, which are discharged in the municipal sewer systems.

Waste Management:

The company currently generates a variety of waste, including paper, cardboard, plastic etc. Non-hazardous waste is segregated and stored prior to collection by the local municipality or private service provider for disposal in certified landfills. Avacare produce a limited amount of hazardous pharmaceutical waste. Pharmaceutical waste is quarantined, collected, and disposed of in the appropriate manner (as defined by the manufacturers). This is typically undertaken by the local municipality (where appropriate resources exist) or private companies. In all instances, Avacare is provided with waste manifests and/or destruction certificates.

As a component of the ESMP (ESAP 2), Avacare will formalize all waste management procedures (categorization, recycling, quarantine, disposal, etc.). These procedures will be adopted and implanted by all OpCos.

Security:

Security is managed at an OpCo level, with the majority utilizing private security providers at their respective operations. Security is provided on a 24-hour basis with no armed security reported at any operations. In South Africa, only security companies registered with the Private Security Industry Regulator (PSIRA) are procured ensuring adequate vetting, training, responsible use of force etc. No significant incidents or security related grievances were reported.

Given the varying and dynamic contextual risks associated with Avacare’s countries of operation, the company will develop a group level Security Management Plan (SMP) that will include prescriptions for guard selection, rules of engagement (including minimum force), training, equipment, facilities, working conditions, grievance mechanism and others (ESAP 9). OpCo security arrangements will be informed by annual security risk assessments undertaken as per the requirements of the SMP (ESAP 9).