IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS 1 - Assessment and Management of Environmental and Social Risks and Impacts
Karsan established an overarching Environment and Climate Change Policy that guide the company to achieve sound environmental and social performance (https://www.karsan.com/Download/files/Karsan%20Environment%20and%20Climate%20Change%20Policy%20%282%29.pdf).
Karsan has a well-established corporate Environmental and Social Management System (ESMS) certified as per ISO 9001 (Quality, ISO 14001 (Environmental), ISO 31000 (Risk), ISO 45001 (Occupational Health and Safety), ISO 50001 (Energy) standards and IATF (International Automotive Task Force) 16949 (Automotive Quality) standard. Karsan’s management systems regularly undergo internal audits in addition to external audits conducted by independent certification institutions.
In 2022, Karsan received Environmental Production Declaration certification for EV vehicles production in Turkey. The company is also a Carbon Disclosure Project (CDP) Climate Change Program Member, annual report of which is disclosed on the company website (https://www.karsan.com/en/sustainability/cdp-report). As part of the CDP reporting, Karsan assess climate risks that might pose E&S risks to its operations like decreased water availability due to droughts or increased frequency of extreme whether events including floods that might cause hazards.
Karsan has a strong corporate and plant level E&S organizational structures and associated capacity to ensure that corporate policies and EHS procedures are followed at all operational facilities. Karsan’s Environmental management and OHS team is composed of nearly 20 professionals led by an environmental and an OHS representative directly reporting to the Industrial Operations General Directorate. Implementation and compliance review of the environmental management is under the responsibility of the assigned environmental engineer and a third-party environmental consultant.
Karsan Sustainability Committee, chaired by the CEO, sets sustainability goals and strategies. Working under the Committee, the Sustainability Working Group is responsible for the creation and implementation of relevant action plans. Karsan’s sustainability strategy is based on short and long-term (2030) targets that relate to key performance areas such as water and energy efficiency, emissions and waste reduction, OHS, gender, and supply chain compliance. Karsan’s annual sustainability reports are prepared in accordance with Global Reporting Initiative standards and publicly available at: https://www.karsan.com/en/sustainability/sustainability-report.
The company has a documented emergency preparedness and response plan specific to potential risks including fire hazard, earthquake, sabotage, explosion, and environmental contamination. The roles and responsibilities of various teams responsible for evacuation, rescue, firefighting, etc. are defined and displayed at various locations across the facilities. Fire alarm call points, evacuation route maps, and hose reels have been placed at appropriate locations. Drills for all shifts are conducted regularly to ensure the correct implementation of fire safety measures as well as other types of emergencies (earthquake, chemical spills, etc.).
PS 2 – Labor and Working Conditions
Karsan has 2.354 direct employees, of which 204 (9 percent) are female, and 557 contracted workforce.
Karsan has an HR Policy, Gender Equality Policy, Zero Tolerance for Violence Policy and Codes of Conduct, all publicly available at: https://www.karsan.com/en/corporate/about-karsan/policies, and related procedures including a grievance mechanism, consistent with the requirements of IFC PS2 and national law.
Karsan does not hire migrant or seasonal workers; all workers are provided with indefinite term employment contract. Workweek consists of 45 hours with overtime paid. For all workers, the company guarantees minimum wages, which are higher than the official minimum in the country, supported with a comprehensive benefits package that includes family and child allowances, annual leave, and religious holiday packages.
Karsan has an equal opportunity policy and as reflected in its code of conducts, does not discriminate employees based on their language, race, color, gender, political opinion, belief, religion, sect, age, and physical disability: equal opportunities are at the core of the company’ values. As identified in ESAP item #1, Karsan will conduct an assessment of gender equality in the workplace, which will include hiring policies, mechanisms and channels and legal, economic, or sociocultural barriers that can be addressed to support recruitment and retention of women and will develop a gender action plan to identify actions to be taken for improvements that could be made in making jobs equally accessible to both men and women to increase the number of women employees at each plant.
Workers are covered by the collective bargaining agreements, renewed every two years, with the Turkish Metal Union and each plant has union representatives.
All plants operate in accordance with ISO 45001 which includes OHS risk assessments, corrective and preventive action plans, accident root cause analysis and reporting, The company has formulated an OHS policy and has developed respective procedures, instructions, and forms based on risk assessments in line with Turkish OHS Law (No: 6331). The company also reviews ergonomic conditions at each workstation and follows an action plan for continuous improvement. Workers’ health is monitored prior to admission and followed-up on a yearly basis.
The production of commercial vehicles is based on high-tech systems for assembling of parts. Major pressing, stamping, and welding operations in the body shop are carried out by fully automated systems. Painting process is also fully automated and takes place inside cabins that are not accessible to employees during the actual painting operations.
All new employees receive safety training during induction, which is then followed by regular refresher training over the course of time and specific to the workplace risks and hazards. Staff working in production lines of electric vehicles are required to go through electrical safety training.
Under world class manufacturing (WCM) activities, regular OHS audits and inspections are performed. OHS risk assessments are available for all working areas and LOTO (Lock Out Tag Out) procedures are effectively implemented. Operational OHS procedures and a hazardous work permit system is in place (hot work, confined spaces, work at height etc.).
No fatalities have been reported for the last 4 years. The Lost Time Incident Frequency Rate for 2022 is 4.8 while it is 5.4 for the last twelve months which are well below than the industrial benchmark (7.0-US Data).
All third-party workers, including construction workers, are required by contracts to respect and follow the corporate and plant specific labour and OHS standards.
Supply Chain
Karsan has a long and complex supply chain, consisting of more than 7 thousand companies, typical to any automotive producer. Typically, key risks in the manufacturing of EVs are batteries with cobalt containment and potential exposure to lithium-ion cells and related components produced in countries where there are alleged claims of forced labor and child labor. In this case, Karsan purchases 98 percent of EV batteries from Germany and 2 percent from China.
Karsan has in place a supply chain management system including policy, risk screening and mitigation procedures and contractual requirements addressing the labor and working conditions and OHS requirements for its primary supply chain; the system includes risk based annual on-site inspections. The supplier contractual requirements include suppliers’ commitment to Karsan’s code of conduct that requires protection against significant safety issues and prohibition of forced and child labor in compliance with PS2 supply chain requirements. As per ESAP item #2, Karsan will revise its supply chain mapping, risk screening and mitigation procedures, and contractual requirements to include prohibition of child and forced labor along with inspection check lists for its EV and solar PV panel suppliers and will establish a formal process for engagement, remedy and disengagement in case of non-compliance with the code of conduct.
PS 3 – Resource Efficiency and Pollution Prevention
Implementation of the Environment and Climate Change policies is supported by the adapted WCM system which includes environment, and waste and loss analysis pillars. Based on the WCM system, the facilities undergo internal environmental auditing weekly. Energy and environmental KPIs, such as volatile organic compounds and packaging material reduction, are well established. To support efficient implementation, all employees are provided with environmental and energy ration cards and KPI information are made available in the production areas.
Resource Efficiency
Karsan’s plants rely on electricity and natural gas in terms of energy use. As part of its energy policy, Karsan supports the implementation of its ISO 50001 Energy Management system with various monitoring tools including Supervisory Control and Data Acquisition (SCADA) monitoring system. Focusing on preventing energy losses in the production, Karsan achieved a total energy improvement of 6 percent in 2021 by saving 552 MWh/year of natural gas and 611 MWh/year of electricity. Energy consumption per unit production was reduced by 13 percent from 20GJ/unit in 2020 to 17.4 GJ/unit in 2021. The planned investment of 6.74 MW rooftop solar PV panels on the Hasanaga main facility has the potential to meet 95 percent of the energy demand of the factory.
Circular economy efforts of Karsan focuses on reducing waste and optimizing packaging material use by utilizing thinner packaging and using films instead of cardboard. All packaging materials are selected from recycled materials. In line with the zero-waste target, Karsan treats the waste as a production loss. Company’s efforts on decreasing raw materials use are an integral part of its philosophy such as reducing paint consumption in the cataphoresis process.
SCADA monitoring system is also used for monitoring process water use and wastewater generation. Monitoring practices in the painting shop, which is the most water intensive part of the production process, translated into a 1.56 m3/vehicle water saving in 2021.
GHG Emissions
Karsan accounts for its direct (Scope 1) and indirect (Scope 2 and 3) emissions in accordance with ISO 14064 standard; GHG emissions, and results are verified by an accredited institution. To comply with global emission trends and regulations, Karsan has been improving energy and emissions management and the production process resulting in a decreasing trend in its carbon footprint; the company reduced CO2-eq emissions from 9,416 tonnes of in 2018 to 5,600 tonnes in 2021. In addition, Karsan has worked towards unifying supplier routes to reduce vehicle emissions, i.e., Scope 3 emissions.
Water and Wastewater
Water is sourced from four, on-site ground water for which Karsan holds the necessary permits. A Reverse Osmosis (RO) plant provides, production lines with optimum quality water, lowering wastewater generation and the use of chemicals in the treatment process. Karsan continues feasibility studies on using low-quality water from the RO into the production line.
All process wastewater is pre-treated with a 30 m3/h on-site treatment unit before it is discharged to the industrial zone wastewater treatment plants. Karsan holds the necessary permits and fulfills the local regulatory requirements for discharge the processed wastewater to the industrial zone sewages connected to the wastewater treatment plants.
Hazardous Materials and Waste Management
Karsan utilizes a value-chain approach in waste management as per its environment and climate change policy and zero-waste goal. By switching the use of Volatile Organic Compounds (VOC)-based to water-based chemicals and by improving the chemical filling applications, Karsan reduced the total amount of hazardous waste production per vehicle by 1.9 kg in 2022 compared to that of 2021.
The company manages hazardous and non-hazardous wastes in line with ESMS related waste management plan. The company established appropriate sorting, handling, temporary storage, and disposal as per the waste management plan consistent with applicable legal requirements and in line with PSs provisions. Hazardous wastes such as waste oils, organic and other solvents, and medical wastes are disposed by licensed companies in line with the local legislation. Specifically, dewatered sludge is sent to an incineration facility for energy recovery.
Karsan reports its waste production amounts and management activities annually to the relevant local authorities. The reporting scope also includes notifying the authorities about special waste categories including End-of-Life vehicles (ELVs). Karsan has an established management plan to fulfill the requirements of the local ELVs legislation which came into force in 2009 and requires manufacturers and importers to take back the ELVs, properly treat the collected ELVs and prevent waste production by recycling of vehicles and parts. End-of-Life EV batteries are managed within this ELV legislation scheme also fulfilling the requirements of the local regulation on Waste Batteries and Accumulators. Along with a customer hotline, a list of authorized ELV take back facilities is publicly available on the Karsan’s website (https://www.karsan.com/en/after-sales-services/end-of-life-vehicles-elv).
Karsan holds a hazardous material activity certificate issued by the relevant local authorities; its implementation requirements are monitored by a certified hazardous material safety consultant. Karsan’s chemical management procedures incorporates information contained on the Material Safety Data Sheets, control of banned chemicals list, and adhere to specific storage conditions of chemicals and absorbent materials.
Noise and Air Emissions
Karsan is exempt from ambient noise monitoring as per local requirements, based on assessment of the risks and its plants being located in established industrial zones.
Main sources of air emissions include welding, painting, mounting, quality control process, boiler and furnaces. Emission measurements of COx, NOx, SOx, Particulate Matter, and VOCs are periodically performed at point sources stacks by independent and accredited laboratories for all plants. The company operations are in compliance with local regulations and WBG requirements.
PS 4 – Community Health, Safety and Security
All production facilities of Karsan are located in established industrial zones which are not surrounded by community settlements, hence no significant impacts on health, safety and security of the local community are expected due to the operations of the company. Karsan has a traffic management plan, transportation safety procedures in place for prevention of road accidents and providing safe transportation of its employees, products, raw materials, and wastes. Transportation companies are contractually asked to follow Karsan’s transportation safety procedures including vehicle safety checks, speed limits, and safe driving practices. Drivers are provided with relevant trainings about these procedures.
Karsan has 43 unarmed security personnel who are licensed, regularly trained and certified as per the local regulatory requirements.
