- PS 5: Land Acquisition and Involuntary Resettlement: Project locations has been acquired on a willing seller willing buyer basis. According to the information provided by the company, no informal land users have been identified prior to land acquisition for new facilities and the existing facilities. As of May 2022, there have been no grievances or court cases related to the land acquisition and/or leasing. A potential land acquisition related risk is expected to be captured through the risk identification procedure.

- PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources: All land lots for the Project are in urban areas and impacts on biodiversity values are not anticipated.

- PS 7: Indigenous Peoples: No indigenous peoples were identified in the areas surrounding the company’s assets.

- PS 8: Cultural Heritage: The company’s assets do not overlap with World Heritage Sites and there is no known cultural heritage within the vicinity that can be affected.                                                   

This is a category B project according to IFC’s Policy on Environmental and Social Sustainability. Key E&S issues and risks associated with the project are expected to include: (i) company’s resources and capacity to implement an environment, health, safety, and social management system (ESMS), in line with IFC PS requirements, including adequate E&S risk and impact assessment, at corporate and asset level, (ii) labor conditions and workers’ grievance management, (iii) supply chain management, (iv) occupational health and safety (OHS) management, including contractors’ management, (v) gender-based violence and harassment (GBVH), (vi) waste and effluent management, including Greenhouse Gas (GHGs) emissions (vii) resource efficiency, and (viii) stakeholder engagement and external grievance management.                                                   

Environmental and Social Management System

MAVESA has a corporate ESMS that is aligned with international E&S management system standards such as ISO 14001 (environmental), ISO 45001 (OHS), and ISO 9001 (quality). ESMS includes the E&S policy, OHS training and monitoring parameters, air and water effluent management, waste management, and emergency response plans. ESMS covers MAVESA’s operations such as commercialization of vehicles and machinery as well as after-sales services.

As part of the environmental and social action plan (ESAP), as further discussed in the following sections, Mavesa will update its ESMS to include, (i) social risks and impacts identification, (ii) E&S screening for the credit provision, (iii) workers’ grievance management, (iv) contractor’s E&S risks management, (v) life and fire safety (L&FS), (vi) supply chain risk management, (vii) road safety and security management, (viii) hazardous material management and (ix) stakeholder and grievance management for external communities, in line with IFC PS requirements.

Policy

The company has a corporate E&S Policy that guides the operation of all facilities (Policy on the integrated management system). The policy sets out the commitments to comply with Ecuador regulatory requirements and to continuous improvement of the E&S performance across the facilities with resource allocation, is signed by Mavesa’s president, communicated to all employees at induction and has been updated annually.

Identification of Risks and Impacts

The company has procedures to identify and manage key environmental risks and impacts for the operation of the facilities as per the local regulatory requirements. Key risks and impacts include waste management, air and noise emissions, effluents, resource consumption, L&FS management, OHS, management of hazardous materials, security management, and E&S screening for the credit provision. Control measures are documented in system procedures and matrixes. However, the risk identification procedures do not include the social risks and impacts. Additionally, the company’s screening and assessment for the provision of credit is limited to the verification against the national legislation and regulations. As per ESAP#1 specified in the management programs, MAVESA will add social risks and impacts derived from the company’s operation into the E&S risk identification procedure and implement the necessary mitigation measures.

MAVESA acquired the lands for the expansion of three new facilities from private owners on a willing seller-willing buyer basis (Baker, Cuenca, and Duran). There have not been grievances or disagreement related to the land acquisition and lease for new and existing facilities expressed to the company or involved a legal process. It has a corporate process to follow on the technical and administrative aspects of land acquisition and/or leasing, and updated risk identification procedure is expected to identify the potential risks during a future land acquisition and/or leasing.

Management Programs

The company’s management programs include the control of resource efficiency, general and hazardous waste management, liquid effluents, chemical materials handling, and E&S trainings as per the requirements of the local environmental agency. OHS management programs include risk and hazard evaluation, prevention programs, training programs, biosecurity programs related to COVID-19, and L&FS.

Regarding the supply chain risk management, MAVESA has developed and implemented a Suppliers’ Code of Conduct applicable to vendors, brokers, merchants, distributors, contractors, and goods & service providers. It requires the compliance with legislations, regulations, and standards of each country where the company operates in relation to E&S regulations, prohibition of forced and child labor, respect for human rights aligned with the requirements of international standards, safe working conditions, such as reasonable salary payment, provision of social security, working hours, freedom of association, and prohibition of reprisals. For further details, please refer to “supply chain” under PS2.

The company engages third-party contractors for the security, food service, cleaning, and logistics service to transport new products to their clients. MAVESA will strengthen contractor management, including the monitoring and auditing of contractors’ labor management and working conditions (i.e., control of overtime, payment, grievance mechanism).

The company has an established monitoring program to track and report key performance indicators (KPIs) against the corporate E&S targets and benchmarks. The monitoring program covers the topics of resource efficiency, general and hazardous wastes, effluents, HR, OHS, security, emergency response, and external grievance mechanism. Results are reported to senior management monthly, and corrective actions are implemented, as needed. The company also conducts internal and external annual E&S audits for all branches and facilities.

To improve its management program as per the requirements established in the PS, as per ESAP#1 the company will develop the following plans and procedures, including (but not limited to); (i) an E&S risk identification procedure to include social risks and impacts related to its operations, (ii) a procedure to assess MAVESA’s client business activities for the approval of credits against IFC’s Exclusion List, (iii) contractor management procedures, (iv) waste (including hazardous material and batteries) management plan, (v) security management plan for all the facilities, (vi) road safety procedure, and (vii) stakeholder engagement plan and grievance mechanism for the affected communities.

Organizational Capacity and Competency

MAVESA has a corporate structure and qualified team to manage E&S risks covering its facilities throughout the country. At corporate level, there are three qualified managers overseeing (i) Environmental and OHS, (ii) Human Resources (HR), and (iii) Security under the Integrate Services Department. These managers report to the head of the Department of Integrated Services, who reports to the Director of Operations located under the company’s President. Supply chain and contractor management functions are centralized at the corporate level and is led by a supply chain manager reporting to the Director of Operations.

At facility level, Environmental and OHS coordinators are assigned to oversee E&S and L&FS matters, reporting to the Environmental and OHS manager at the corporate level. HR functions are managed at the corporate level, there are two social workers who ensure the implementation of HR policies and procedures at the facility level, including the workers’ and GBVH grievance management.

To improve the company’s supply chain risk management, as per ESAP#2, the company will appoint a qualified coordinator from the Integrated Services Department to oversee the E&S aspects of the supply chain management at the corporate level, including supply chain risk mapping & assessment in relation to the automobile distribution, in line with IFC PS requirements.

Emergency Preparedness and Response

MAVESA has developed detailed emergency response plans (ERPs) for its operations, aligned with local legal requirements and good international industrial practice. Training for emergency preparedness and response and first aid is provided to all employees. The ERPs address probable risk scenarios, including fire, earthquake, spills, civil unrest and personal accidents. Also, emergency drills are conducted more than twice a year in some facilities, based on risks identified and coordinated with local communities. Each facility has implemented an emergency brigade team with its own organizational structure, triggered during emergencies, that is composed of local upper and mid-level managers and operative personnel of the facility conforming three teams (i.e. fire, coordination and first aid teams). The facilities of MAVESA are generally located in a mixed used area with commercial communities nearby or are located in an industrial zone, with no residential communities in the direct nearby vicinity; The ERPs have considered the potential impacts to and from the communities.                                                   

Human Resources Policies and Procedures / Working Conditions and Terms of Employment

As of May 2022, MAVESA employs around 950 direct employees of which 77% are men and 23% are women. Employees are hired full-time under the indefinite term employment contract, except interns (over 18 years-old) partnered with local universities and technical schools.  

The company’s human resources (HR) policies, procedures, and code of conduct are aligned with the local regulations and PS2 requirements and are communicated to employees through induction and training programs. The company’s HR policies and internal regulations cover recruitment, terms of employment, compensation and benefits, OHS, workers’ grievance, training, professional development, gender-based violence and harassment (GBVH), non-discrimination and equal opportunity, freedom of association, and prohibition of child or forced labor. The employment contracts define working hours, working days, holidays, payment including overtime, grievance procedures, and termination of employment.

MAVESA’s non-discrimination and equal opportunity policies are consistent with the local labor legislation and PS2 requirements. These policies stipulate fair treatment and non-discrimination based on race, nationality, disability, social class, age, gender, sexual orientation, marital status, health status, religion, and political positions, guiding actions of employees.

MAVESA complies with Ecuadorian legislation and regulations for minimum age, working hours, shift times, overtime, rights to privacy, and benefit requirements. The employment contract defines compensation, hours of work, leave and medical benefits, disciplinary procedures, and health and safety policies.

Workers’ Organizations

Ecuadorian labor law protects collective bargaining and the right for workers to associate. MAVESA allows the freedom of association that is communicated to workers during induction. However, employees are not represented by any union and the company has confirmed that there has been no initiative by employees to create a workers’ organization.

Retrenchment

MAVESA implemented a workforce reduction as part of the workforce adjustment during the COVID-19 between March and April 2020, resulting in approximately 9% of the workforce reduction.

The company implemented the workforce reduction in line with the national legislation. According to the information provided by the company, it conducted an analysis of alternatives and took the measures such as paid leave and shortened working hours to protect employees and minimize the risk of layoff during the outbreak of COVID-19. The company implemented the workforce reduction and provided applicable compensation and benefits to the dismissed employees as per the national legislation.

The company reports that no retrenchment is anticipated for the proposed project. If the company will implement a retrenchment in the future, it will report to the IFC, prior to its implementation and per ESAP#3, will develop a corporate retrenchment procedure aligned with the national legislation and PS2.

Worker Grievance Mechanism

MAVESA has grievance channels in practice (e.g., telephone, email, suggestion box) to provide employees and its contractors to raise anonymous concerns and grievances related to non-conformities to the code of conduct, working conditions, and internal policies and procedures. It also allows them to access to other judicial remedies set by Ecuadorian legislation.

As per the national regulations, the company has developed a formal and confidential grievance handling protocol to address and resolve grievances related to GBVH. A grievance related to GBVH will be received by HR and investigated and resolved by the corporate committee that is consisted of the managers from HR and Integrated Services Department, corporate advisors, occupational doctor, and social worker with specific timeframe set by the procedure. There is a professional team to provide psychological and emotional support in a confidential way. The company regularly implements prevention of GBVH via awareness-raising sessions and trainings.

Moving forward as per ESAP#3, MAVESA shall formalize HR procedures and disseminate its worker grievance mechanism to enhance the handling of formal and informal concerns and grievances received by workers and third-party contractors without the risk of retaliation. The procedures will include (i) all the available channels (phone, WhatsApp, email, suggestion box), (ii) allowance to file anonymous grievances and treat confidentially, (iii) a reasonable timeframe for resolution, (iv) records of corrective actions taken, and (v) analysis of trends for continuous improvement. HR procedures will also cover a documented corporate retrenchment procedure, aligned with the national legislation and PS2.

Occupational Health and Safety

As also discussed in PS1 section above, OHS management is documented in the internal safety and hygiene regulation. It includes the OHS policy, risk assessments, training plan, procedures and instructions (including working permit system) and medical surveillance. Induction training is applicable to all employees and contractors (providing services and maintenance onsite). Other more specific OHS training are based on Occupational Safety and Health Administration’s (OSHA’s) and European standards, include the risk identification; ergonomic and mechanical hazards; fire prevention and emergencies; use and maintenance of personal protective equipment (PPE); and vehicle/transport safety. It further requires training in specific areas and/or specific jobs for hazards identified in the risk matrix: work in repetitive motion; proper use of hand tools; fire prevention; electrical safety; and accident investigation and analysis. MAVESA has implemented a working permit system in place for approving hazardous work activities or areas (e.g. paint booth), particularly for the mechanical workshop and storage areas.

All workers must undergo a medical surveillance at the start of their employment and subsequently annually (e.g. spirometry, audiometry, etc). All incidents are discussed in monthly committee meetings. The OHS system is audited by local specialized consultants (i.e., Bureau Veritas - BV).

OHS data and statistics (e.g., number of training and audits performed, severity and frequency of accidents) are recorded at each facility and consolidated at the corporate level, which is reviewed by senior management on a quarterly basis. The lost-time incident frequency rate (LTIFR, number of lost time injuries per million worked hour) has been calculated at 5.7 in 2021. This figure is generally aligned with the OSHA industry benchmark (i.e., 7.0 LTIFR). There have not been serious incidents or fatalities in the past three years.

Per the accident investigation procedure, the OHS committee completes root cause analyses of all accidents, and develops corrective action plans to eliminate/control unsafe working condition and/or near misses.

Management of COVID-19 Impacts

The company prepared a corporate framework and programs in relation to biosecurity protocols to manage COVID-19, which has been regularly updated and implemented, based on local governmental and health guidelines. These programs included the follow up plan with infected employees and families, disinfection, monitoring of COVID-19 cases, provision of biosecurity kits, vaccination, stress management programs during remote work, and training programs. The company also adopted several engineering controls and measures, such as the disinfection, social distancing (e.g., installation of signs and partitions in the showrooms), restricted maximum capacity for different areas and shops, to minimize the exposure in line with the Ecuadorian legislations. The company conducted an external audit of the biosecurity protocols and programs with a satisfactory result.

As of April 2022, approximately 80% of the employees has been vaccinated. The company issued a weekly COVID-19 monitoring reports, which was discussed with the senior management to enhance COVID-19 risk management programs throughout the various facilities.

Workers engaged by Third Parties

Third-party contractors currently engaged by MAVESA include security service, logistics, catering, and cleaning among others. MAVESA’s contracts include the E&S and OHS requirements for the contractors, and it conducts quarterly monitoring and audits of contractors’ performance to ensure the compliance with local legislation and regulations.

As per the ESAP#1 and #2, MAVESA will review and update its contractor’s E&S management procedures, to include the requirements of grievance handling, trainings, monitoring and controls as stipulated in PS2. The contractor management procedures will include: (i) E&S requirements for contractors, detailing the OHS, labor conditions requirements, and grievance handling; (ii) a contractors management and assurance plan (CMAP) describing the controls to be implemented by MAVESA (e.g. inspections, audits, walkdowns, E&S meetings); and (iii) E&S corrective and preventive actions management procedure to record and track the performance of the contractors, including KPIs to monitor and assess contractors’ E&S performance. These E&S requirements will be included in the contractor’s contract, trainings to third-party contractors will be conducted and will be used to identify opportunities for improvement.

Supply Chain

MAVESA has incorporated contractual clauses to ensure compliance with its Suppliers’ Code of Conduct for MAVESA Group, strictly prohibiting the use of child labor and forced labor and including OHS requirements in its own operations for employees, contractors, and suppliers. If a supplier breaches the code of conduct, MAVESA holds rights to terminate the contract. The company’s supply chain management team conducts assessment, monitoring and visits to the suppliers and vehicle manufacturers; the scope  is focus on technical, commercial, and environmental sustainability aspects (e.g., impacts to the climate change, waste management practices).

While MAVESA has several international suppliers in relation to the automobile distribution, it currently does not have a systematic approach to screen and monitor risks and impacts on the use of child and forced labor as well as OHS aspects on suppliers as per PS2. As per ESAP #4, the company shall (i) conduct supply chain risk mapping & screening of labor and OHS conditions (e.g., inherent risk in country, region, sector) in relation to the key suppliers and automobile manufacturers, (ii) develop a supply chain management procedure, including the periodical monitoring and audits requirements of labor and OHS aspects as stipulated in PS2, as part of its management programs. As a result of supply chain risk screening, if the company identifies high risks related to the forced/child labor in its supplier and/or vehicle manufacturer, it will assess labor conditions, monitor, and remedy it in collaboration with such supplier as stipulated in the supplier’s code of conduct.   As per ESAP #5, the company shall require suppliers to fulfill contract obligations in ongoing operations, meeting the requirements under PS2.

Resource Efficiency and Greenhouse Gases (GHG) Emissions

Electricity is sourced from the public grid for all MAVESA facilities. Back up diesel generators are provided at facilities in which power disruptions are likely. The dealership uses energy efficient LED lighting. Water supply at the head office and stores is from municipal sources. In 2021, water consumption was 34,433 m3 for all the facilities.

In 2021, total electrical consumption was 2,683,525 MWh; fuel consumption was 35 tons of LPG, 18 tons of gasoline and 100 tons of Diesel fuel. Based on the available 2021 data, the company produces approximately 1,280 tons of CO2 eq per year. The company will not be required to report on annual total GHG emissions.

Water and Wastewater

Wastewater generated at company shops and dealerships consist of mainly vehicle washing effluents, is disposed of via municipal sewerage system as per environmental permit conditions. Prior to discharge, wastewater is treated on site by oil and grease traps and separators. The company performs testing of the water effluent and reports to the local authorities and results are in line with local requirements.

Solid Waste Management

The company has developed and is implementing a solid waste management procedure. The company records waste volumes and type generated and submits this information to the local environmental agency in accordance with national legislation.

In 2018, MAVESA implemented the ECOKAIZEN program which aims to implement the circular economy by recycling the waste generated during the production and maintenance processes. Since the insertion of the program ECOKAISEN in 2018, the company has recovered 57 tons of cardboard boxes, 409 tons of metallic parts, 179,200 gallons of used oil (that is recycled and recovered for reuse by a specialized contractors), 16,292 tires. Other recycled waste is accounted by MAVESA, and includes the recovery of used filters, absorbent materials, contaminated containers, muds, paint, grease, and lighting bulbs.

Hazardous materials

Hazardous materials are expected to be generated from the company activities that relate to general maintenance of vehicles in the dealerships, occasional repairs, battery, oil, tires and other parts disposal. Batteries, paint solvent, lubricant and oils are the main hazardous wastes. MAVESA has a set of management instructions, including hazardous waste handling, as well as a procedure for the management of hazardous waste where an authorized third-party waste management company collects, transports, treats and disposes the hazardous waste in line with the regulatory requirements.

As specified in the ESAP#1, the company will develop and implement a waste (including hazardous material) management plan which will meet the national legislation and PS3.                                                   

Community Health and Safety

MAVESA’s workshops, vehicle showrooms and warehouses are located in urban areas.

The sale showrooms with access to general public are normally open spaces with two separate emergency exits with good signaling. The showrooms are provided with smoke detection, fire alarm, fire hose and fire extinguishers in line with international fire codes.

The mechanical shops, material storage warehouses (rack storage systems) are protected with fire alarm, fire hoses supplied with fire pump systems and water tanks. Also, some areas are presently protected with automatic sprinkler systems that have been implemented by phases in the main/larger facilities (e.g. Guayaquil Matriz, Ceibos, Quito Norte).

As per the ESAP #6, the company will commission a qualified L&FS professional (acceptable to IFC) to conduct a L&FS risk-based review of an agreed sample of facilities (2 or 3 of the largest facilities), to confirm compliance with applicable national requirements. Based on the review, if found necessary, the company will agree with IFC on an enhancement plan to minimize L&FS risks and comply with legal and national code requirements in a reasonable time frame to implement the recommendations.

The company distributes and/or transports products by own drivers for maintenance service and through a qualified third-party logistics company for new vehicles. Potential E&S risks include noise, dust, traffic disruptions, and traffic safety due to operations. The company will conduct a periodic engagement with the nearby community and neighbours by establishing communication channels to raise any concerns with the company’s activities as specified in the ESAP #1.

For traffic safety, all the vehicles have a Global Positioning System that provides a real-time information on routes and speed of a vehicle. The company has implemented road safety trainings for own employees and third-party contractors in coordination with the logistics company (for third-party drivers). As specified in the ESAP#1, the company will develop and implement road safety procedure in coordination with own and third-party drivers.

Security Personnel

Security personnel is provided by a private security company. Security contractors are all armed staff based on site-specific security risk assessments (SRA) that are required to conduct as per the company’s security procedure. All the security contractors must go through mandatory trainings offered by Ministry of Internal Affairs, be registered, and comply with the national legislation and regulations for the provision of these services. Security contractors are required to provide evidence of compliance with Ecuadorian law, and they are vetted by the company with criminal background checks and evaluation. Security contractors are required to participate in trainings offered by security service provider, which includes code of conduct, human rights, and principles of proportionality as per the local legislation. At the facilities with a high security risk, the company works with the national police (Unidad de Policia Comunitaria) whose responsibility is to conduct regular patrol and surveillance within and outside the MAVESA’s facilities. The company does not have a formal agreement with the national police, specifying their roles and responsibilities related to the security arrangement.

As part of the ESAP#1, MAVESA will ensure that SRA and Security Management Plan (SMP) are developed for all the facilities, including the rationales for the amount of armed security force and national police needed, rules of engagement (including use of force, memorandum of understanding with national police), appropriate conduct toward workers and communities, training, equipment, facilities, working conditions, and grievance mechanism. The SMP will discuss: (i) security management objectives and targeted stakeholders, (ii) outcomes of the SRA, (iii) security arrangement employed in each facility, (iv) details of coordination with the contractor and national police, (v) incident reporting, and (vi) key performance indicators (KPIs) for security management. As per ESAP#1, MAVESA shall also formalize the agreement with the national police with their roles and responsibilities on their security arrangement at the corporate level.                                                      

Stakeholder Mapping, Analysis and Engagement Planning, Consultation, Information Disclosure

MAVESA has established a CSR (Corporate Social Responsibility) policy, guidelines, and dedicated a team (Fundación MAVESA) to implement CSR programs. It has engaged with communities where MAVESA operates to support local entrepreneurship, community environment, housing, and basic education. Although the company engages with the communities through the CSR programs, it does not have a corporate stakeholder mapping and engagement plan to maintain ongoing dialogue with project affected local communities as per the PS1 requirements.

As per ESAP#1, the company shall develop and implement a Stakeholder Engagement Plan (SEP) in line with PS1. The SEP will include: (i) criteria and mechanisms of stakeholder identification and analysis, (ii) methods of consultation and engagement with communities, (iii) methods and frequency of reporting on the risks and impacts derived from project activities; and (iv) monitoring of community engagement activities. The SEP will be tailored/commensurate with the nature of activities and the relevant E&S risks.    

Grievance Mechanism for Affected Communities

MAVESA has confidential channels to receive concerns and suggestion from commercial clients through email, telephone, and in-person. Requests and grievances received are documented and transferred to respective heads of facilities by the client service department, to be addressed and responded. The department monitors the resolution process until the closure.

As per ESAP#1, the company shall update the external grievance mechanism to receive anonymous concerns and grievances from communities nearby the company’s operations and implement it through the updated corporate stakeholder engagement plan. The grievance mechanism will (i) specify and allow the anonymous channels (e.g., suggestion boxes, email, phone call), (ii) disseminate communication channels to communities, (iii) receive, register, and handle all inquiries and grievances in timely manner, (vi) provide a resolution and feedback to communities, and (v) analyze its trends and take corrective actions, including KPIs to measure its effectiveness.                                               

Contact Person: Adrián Lozano Gutierrez (Director of Integrated Services)

Company Name: Maquinarias y Vehículos S.A - MAVESA.

Address: Av. Juan Tanca Marengo Km 3.5, Guayaquil, Guayas 

Email: alozano@mavesa.com.ec