In case land is purchased, it is purchased on willing buyer-willing seller basis. Most of the stores are in leased spaces from Aradei Capital or other third parties. Therefore, PS5 Land Acquisition and Involuntary Resettlement is not considered to be triggered. Similarly, no impacts are expected on biodiversity, indigenous peoples or cultural heritage, as all stores are developed in urban and sub-urban areas in commercial, with no known presence of a sensitive biodiversity area, indigenous people and cultural heritage, therefore, PS6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources), PS7 (Indigenous Peoples) and PS8 (Cultural Heritage) are also not considered to be applicable.

In any case, as further discussed under PS1 Assessment and Management of Environmental and Social Risks and Impacts section below, an E&S management system will be developed and E&S screening will be conducted for new locations to ensure that risks and impacts, if any, will be adequately identified and managed in a manner compliant with IFC’s PSs 1-8, for any potential projects, including store expansion and/or land acquisition. LBV, CDCI and other subsidiaries’ ESMS will include these relevant screening procedures, as discussed under PS1 below.                                  

This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability. Key E&S risks and issues related to this project include: (a) RH’s and its subsidiaries capacity and systems to manage its social, environmental, health and safety aspects of its operations (stores, warehouses and other locations) in compliance with legal requirements as well as IFC Performance Standards and World Bank Group (WBG) EHS guidelines; (b) E&S screening and potential stores and their locations; (c) life and fire safety (LFS) and emergency response management for all stores as per WBG EHS guidelines; (d) assurance of fair, safe and healthy working conditions for its workforce (both employees and third party workers); (e) waste management; (f) compliance with IFC PSs in the supply chain; and (g) traffic and security management.         

E&S Policy, Management Systems: LBV has an environmental policy which includes commitments on legal compliance, resource (water, energy and raw materials) efficiency, circular economy, carbon footprint reduction, pollution prevention, communicating about environmental performance, agricultural supply chain partners and collaboration with stakeholders. Also, LBV has publicly disclosed its E&S commitments on its website on various aspects including environmental protection, human capital development and business ethics. (https://www.labelvie.ma/en/commitment/protection-of-the-environment/). LBV also developed a corporate social responsibility (CSR) strategy in 2018 (which also includes E&S aspects) and has obtained a CSR Label by the General Confederation of Moroccan Enterprises (CGEM). LBV, has initiated a project to implement an environmental management systems (EMS) in line with the international standard for environmental management system, ISO 14001 requirements and has drafted a number of basic procedures under the EMS.

As regards CDCI, it identifies and manages E&S risks and impacts associated with its operations through compliance with applicable national standards and E&S regulatory permits and requirements. However, CDCI  currently does not have an E&S policy or management systems.

Aradei Capital has a publicly disclosed environmental and social governance strategy, called “Bricks for Impact” (https://www.aradeicapital.com/en/esg/) with priorities and commitment on environmental management, human management, local community development, stakeholder support, ethics and governance. Also, Aradei has developed and implemented a sustainability framework.

As per the ESAP(#1), LBV will align the current EMS with IFC PSs requirements and expansion of such to an environmental and social management system (ESMS). Also, an E&S due diligence/screening procedure will be implemented by all RH subsidiaries to identify and mitigate E&S risks and impacts, if any, in line with IFC’s PSs 1-8, for any potential projects, including store expansion and/or land acquisition.

For LBV, alignment of the existing EMS, will include (but not limited to) development of additional procedures, such as: (a) life and fire safety (LFS) management programs for new and existing stores (as described under PS4); (b) occupational, health and safety management and contractor management programs (as described under PS2); (c) resource efficiency program with specific commitments on resource efficiency (as described under PS3); (d) supply chain compliance procedures (as described under PS2); (e) monitoring, review and reporting framework including the key E&S performance indicators for effectiveness; (f) road safety and security management procedures (as described under PS4); and (g) community grievance mechanism. The procedures will be developed and implemented at all subsidiaries withing agreed timelines. Since Aradei already has a sustainability framework, the same will be reviewed to include additional procedures out of the above as part of the implementation.

E&S Organization Capacity: For LBV, the Director Administration and corporate social responsibility (CSR) and team are responsible for implementation of CSR strategy and thus the EMS. A multi-disciplinary committee has been formed to support his implementation. The expansion team is responsible for selection of new store sites and managing the construction of new stores. During operation phase, security, quality and technical (or maintenance) teams (which is part of expansion as well) are responsible for various E&S aspects of the stores. For the logistics platform, there are safety and quality teams for implementation of E&S aspects. Similarly, for CDCI, the E&S management responsibilities are shared across multiple departments including HR, technical, security and safety. Aradei Capital has a Sustainability Committee created by the Board to oversee implementation of ESG strategy, assess risks and impacts and identify opportunities of improvement. Also, there is a E&S cluster – which is multidisciplinary team responsible for implementation of the ESG strategy.

As per the ESAP(#2), in order to strengthen its E&S organization, both for LBV and CDCI, a full-time appropriately qualified E&S Manager/Lead, will be identified/appointed who will be responsible for implementation of ESMS as well as other requirements of IFC PSs for all operations. Similarly, E&S manager/lead will be identified for all other subsidiaries.  

Identification of E&S risks and impacts: The sites for the new stores for LBV are proposed and screened by the expansion team. Aradei or other developers will also propose sites to LBV for selection. The sites are then presented internally for approval from operations and business perspective. Once approved, stores are designed and all the required regulatory permits and approvals are obtained before construction or operation, as applicable. Currently, there is no specific E&S screening checklist for proposed store locations and as per the ESAP(#1), the same will be developed and implemented for all subsidiaries, including LBV, CDCI and Aradei. 

Emergency Preparedness and Response: The LFS systems provided at the CDCI and LBV stores are further discussed under PS4. All visited stores were low-rise buildings (maximum Ground +1 floor buildings) and for LBV, all stores have multiple emergency staircases, routes and exits which were identified with photoluminescent marking. Also, emergency evacuation route maps were displayed. The Aradei building visited during the visit had similar fire safety and emergency response systems.

There is an emergency management procedure, that has been drafted under the existing EMS of LBV. As per the ESAP(#3), LBV and CDCI will develop a template for emergency preparedness and response plan (EPRP) considering all potential emergencies e.g. fire, earthquake, bomb threat, disturbance by a customer, missing child, and medical emergencies and describe detailed roles and responsibilities for relevant personnel (as well as their back-up), training needs and their frequencies. The EPRP will include building evacuation procedures with specific consideration of disabled and/or senior customers and/or children present in the stores and special facilities required (e.g. wheelchairs). All stores will then adapt the corporate EPRP into their own emergency response plan and implement it accordingly. Regular classroom training and mock drills shall be conducted for all stores.

Monitoring and Review: For LBV, the EMS implementation committees meet regularly to review the E&S performance, including on progress on environmental management, waste management and recycling targets, induction/training plan implementation, energy efficiency, and adequacy of the emergency response systems.

Aradei has also publicly disclosed its ESG strategy and published an ESG report in 2020 (https://www.aradeicapital.com/en/2021/04/esg-report-2020/).

As per the ESAP(#1), a specific procedure will be developed and implemented by all subsidiaries which will define the key E&S performance indicators for the store and corporate level, that will be regular reviewed by the senior management. Also, separate procedures will be developed for monitoring supply chain and contract workers’ compliance. 

RH employs about 12000 employees with LBV employing 8000 employees (~30% female) and 1500 third party workers (mainly for security and cleaning). CDCI has about 1300 employees (36% women) and 100 temporary workers hired through a labor hire agency. Also, about 600 workers employed through third-party contractors for logistics, security and transport.

HR Policies and Procedures, Working Conditions and Terms of Employment: LBV has documented HR Policy/Internal Regulation and a Code of Conduct, which covers clear commitments on non-discrimination and equal opportunity, prevention of harassment and abuse, freedom of association and collective bargaining, safe and secure workplace. LBV has made additional public commitments (https://www.labelvie.ma/en/commitment/human-capital-development/) on elimination of prohibited (child and forced) labor, accident prevention and providing welfare facilities. All visited stores have two overlapping shifts of 8 hours in line with the applicable legal requirements. All employees have documented contracts with LBV which explain their working conditions and terms of employment.

CDCI has documented Internal Regulation which covers basic administrative, health and safety and disciplinary measures in line with the applicable legal requirements and is currently in the process of developing internal HR procedures that align with LBV’s policies. Working conditions for the employees are defined by applicable legal requirements and the Internal Regulations. Majority of CDCI employees (>85%) have an open-ended contract whereas the remainder have fixed term contracts. The contracts describe terms of employment such as renumeration, employment period, responsibilities, probation period, access to health insurance and annual leave.

As per ESAP(#3), CDCI and other subsidiaries will (i) adopt the code of conduct of LBV for its operations; (ii) develop documented policies aligned with LBV and IFC PS2 requirements on non-discrimination, no harassment and abuse, freedom of association and collective bargaining, grievance mechanism and prevention of child and forced labor. Finally, CDCI and other subsidiaries will communicate HR policies and procedures to all employees through induction and other methods in appropriate languages.    

Non-discrimination and Equal Opportunity and Prevention of Child and Forced Labor: LBV has made publicly disclosed commitments on non-discrimination, providing equal opportunities, creating a workplace free of harassment, elimination of prohibited labor i.e. recruitment of minors and forced labor. CDCI, as well as other subsidiaries, will adopt LBV’s code of conduct and develop similar policies.

Freedom of Association: LBV has a commitment under its code of conduct on freedom of association and collective bargaining. Currently, the Cash and carry stores have a workers’ union and collective bargaining agreements. The other business units do not have a union.

CDCI’s Internal Regulations stipulate that worker representatives will be elected every two years as required under the national labor code. There are two elected worker representatives in CDCI headquarters. In addition, approximately 25% of CDCI’s employees are members of a union. As per the ESAP(#3), CDCI will organize elections for worker representatives for its stores in line with applicable legal requirements.

Grievance Mechanism: LBV has a documented procedure to handle any harassment related complaints. HR is expected to investigate the complaints and gather information and in line with the procedure, might initiate change in store to protect the aggrieved employee. LBV, CDCI and other subsidiaries will develop and implement a grievance mechanism for employees aligned with the PS2 requirements (ESAP#4). The mechanism will include provision of anonymous complaints and no retaliation/retribution for the employees who raise the grievances. Within the mechanism, specific procedure will be included to handle any complaints related to sexual harassment with adequate safeguards to ensure confidentiality of and no retaliation/retribution against the complainants. All subsidiaries will ensure communication of grievance mechanism to all employees and document/track the received grievances. Finally, training will be provided to staff on prevention of harassment and abuse.

Retrenchment: In 2020, CDCI conducted two retrenchment exercises linked to closure of certain stores and outsourcing of its logistics platform. CDCI reportedly followed the national labor code for the retrenchment. While no further retrenchment is anticipated, as per the ESAP(#3),a retrenchment policy will be developed for LBV, CDCI and other subsidiaries in line with PS2 requirements including consultation with the employees, identification of alternatives and non-discrimination in retrenchment decisions and compensation.

Workers Engaged by Third Parties: The third-party workers are hired mainly for security, cleaning and transport through external agencies. LBV has a responsible purchasing charter which is applicable for all service providers. The charter requires service providers to commit to no child or forced labor; non-discrimination, freedom of association, no harassment and abuse, provides salary, benefits and working hours in line with legal requirements, implementing health and safety management system, resource efficiency and pollution prevention. The charter has been shared with the service providers. As per the ESAP(#6), CDCI and other subsidiaries will adopt the same charter. Also, all subsidiaries will document a specific process to monitor service provider’s compliance with the charter. As per the ESAP, as a part of the corporate ESMS, a procedure, for periodic review of contract workers management at a sample of stores and logistics facilities, will be developed and implemented.

Occupational Health and Safety (OHS): Due to the nature of operations, the stores have limited OHS risks. The key risks will be those related to the construction/fit-outs of the stores, for an average period of about 7 months for a hypermarket and 3 months for a supermarket. Although LBV has a responsible purchasing charter which requires service providers to implement a health and safety management system, no detailed environmental, OHS and social requirements are included in the contracts signed with the construction/fit-out contractors.

Aradei Capital implements a construction contractor management policy and safety prevention plan is signed by the contractor. Also, an independent OHS coordinator is appointed for each project. Weekly site meetings are held and periodic inspections by OHS coordinator are conducted.

As per the ESAP(#6), LBV, CDCI and subsidiaries will document specific and detailed environmental, OHS and social requirements to be included in the construction contracts and will define processes to monitor their implementation on-site. For any maintenance work during the operation phase, LBV’s security and safety department has a work permit system which requires the contractor to develop a risk prevention plan. As per the ESAP, a similar work permit system will be implemented at CDCI and at other subsidiaries.

Supply Chain: LBV has a responsible procurement charter which is also applicable for all suppliers. LBV has identified biggest suppliers based on volume and plans to conduct an audit of these sample suppliers using an external agency. Although the charter has been shared with the LBV suppliers, it has not been shared with CDCI suppliers. Also, the charter does not include requirement on prevention of conversion of natural habitat which may be a risk for primary production, which will be included in the charter as per the ESAP(#). Additionally, as per the ESAP(#5), LBV, CDCI and all subsidiaries will:

(a)   Map their entire supply chain and identify key suppliers based on E&S risks as well (e.g. textile or leather processing suppliers, denim manufacturers) and mutual dependence (e.g. key suppliers supplying significant volumes or only suppliers of certain products or private labels);

(b)   Document a supply chain compliance procedure which will describe processes of communicating E&S compliance requirements, screening of new suppliers with respect to these requirements, incorporating compliance requirements in the contracts, regular monitoring and verification of compliance, frequency of audits, rating system for suppliers and consequences of non-compliance;

(c)   Prepare a plan for auditing key identified suppliers through and implementation of the supply chain compliance procedures; and

Resource Efficiency:  Under both the environmental policy and CSR strategy, LBV has made public commitments to reduce energy consumption (https://www.labelvie.ma/en/commitment/protection-of-the-environment/#Reduce-energy-consumption) and monitors its environmental impact indicators for its operations (e.g. electricity, water, fuel, waste). LBV integrates sustainability in the design both to meet government regulations and its own energy efficiency targets. There are number of resource efficiency initiatives within RH subsidiaries, including promotion of natural lighting by means of glass facades and lumidomes, night curtains installations on refrigerated sections to conserve energy, and one of the Cash and Carry stores has also installed solar photovoltaic panels on its roof and LBV plans to expand such installations. As part of the development of ESMS under PS1, specific commitments on energy efficiency will be developed and implemented at all subsidiaries.

Power Supply: The main source of electricity at stores and Aradei buildings/facilities is the national grid. In addition, back-up diesel generators (DG) are provided at every store for power back-up.

Air emissions monitoring: The only source of air emissions are the back-up DG sets at the stores which are only used for emergency basis. Given their infrequent/low utilization, the DG sets are expected to be below the threshold to require air emissions monitoring.

Wastewater treatment. The domestic wastewater generated from the stores is limited and is disposed of the in public sewage systems.

Management of solid and hazardous waste. Solid waste from the retail operations (primarily domestic waste, perishable items, food waste and packaging materials) is disposed through municipal or other external waste management services with required authorizations. LBV has initiatives on waste segregation and reduction and similar measures will be implemented by all subsidiaries, in line with ESAP #2, per corporate level ESMS requirement.

Greenhouse Gas (GHG) emissions: The GHG footprint of the company has been estimated to be around 44,000 tonnes CO2 equivalent per annum (tpa CO2 eq) from direct and indirect emissions sources and is expected to increase to 91,000 tpa CO2 eq from direct emissions after completion of the project (5000 tpa direct and 86000 tpa – indirect).                                                 

Life and Fire Safety (LFS) Systems. The expansion team of LBV is responsible for design of the stores including design of the provision of LFS systems. In some cases where the store is part of a larger building (e.g. shopping mall), the LFS systems are integrated with the building’s overall LFS systems. During operation, technical and security teams of the stores are responsible for regular testing, operation and maintenance of the LFS systems. Security audits are conducted at the stores on quarterly basis which include fire safety audits. Visited LBV stores have fire extinguishers, fire hydrant and hose systems, sprinklers, fire doors (on emergency exits), dedicated fire water storage and pumping systems, smoke detection and alarm systems. Also, all visited stores have multiple emergency staircases, routes and exits which were identified with marking. The systems were adequately maintained. Aradei’s building also had same LFS and emergency response systems.

For CDCI, the fire safety equipment was also in place. However, certain exits and equipment had limited access. As per the ESAP(#7):

(a) CDCI will conduct a review of LFS systems at a sample of its stores through a qualified professional (agreed with IFC) to ensure that LFS systems are in compliance with an internationally recognized code. In case any gaps are identified, a corrective action plan will be prepared and implemented within reasonable timelines.

(b) Also, as part of the ESAP, a specific documented LFS management program will be developed for all of its subsidiaries. The program will define (i) minimum fire protection requirements applicable for all store formats (considering average store sizes), including – means of egress, detection and alarm systems, fire suppression and control; (ii) screening checklist for due diligence of new facilities and (iii) operational requirements, including fire prevention, emergency response plan, maintenance and periodic internal audits.      

Transport Safety: LBV does not have its own fleet and uses third party service providers for its transport operations. All trucks are checked for their quality (e.g. integrity, cold storage efficiency), basic permit documents and have global positioning systems (GPS) installed.  Similarly, CDCI also outsources its logistics operations.

The responsible purchasing charter has not been shared with the transport service providers. Also, LBV or CDCI do not provide any training or instructions to the service providers. As per the ESAP(#8) and under the ESMS, a traffic safety management plan to minimize risks and impacts on the communities will be developed and implemented by all subsidiaries, including LBV and CDCI. The traffic safety management plan will address inclusion of the responsible purchasing charter in the transport contracts, regular training on road safety to be provided and regular reviews to check their compliance with the charter requirements.

Security forces. Unarmed private security guards are employed at all LBV stores. Some of the CDCI facilities have armed guards. CDCI will document a specific security policy/code of conduct which will be implemented by all of its subsidiaries, to include community engagement, code of ethics, gender based violence aspects and implement clear guidelines on use of force as well as processes on background checks of the guards (ESAP#8). The policy will be contractually binding for the private security provider and communicated to the security guards as part of the induction, as well as refresher training.

LBV has a publicly disclosed CSR strategy and approach (https://www.labelvie.ma/en/commitment/societal-development/). Also, LBV discloses its E&S commitments on its website. Aradei has also disclosed their ESG strategy, commitments and published a ESG report in 2020.

As per the ESAP(#1) and as part of the ESMS, all subsidiaries will develop a community/stakeholder grievance mechanism i.e. a process to receive and respond to the grievances from neighboring communities and stakeholders (even anonymously). The mechanism will ensure that there is no retaliation against any complainant and track, assess systemic issues, and monitor all received grievances.

Considering the corporate nature of the investment, LBV and CDCI will disclose this ESRS and the ESAP at the following addresses:

 Any queries and/or comments about the project may be directed to:

Mr Abdelmoula Maachi

Director of Investments

a.maachi@labelvie.ma

+212 5 37 56 95 95