Going forward, the company will develop a due diligence procedure for screening E&S risks and impacts of its projects, in line with IFC PS1-8 requirements, as discussed under the PS1 section below. If IFC’s investment proceeds, IFC will periodically review the project’s ongoing compliance with the PSs.                                                   

This is a Category B project according to IFC's Policy on Environment and Social Sustainability (2012).

Key E&S issues and risks identified during the appraisal are: (i) the Company's E&S management system, resources, and capacity; (ii) labour management, including terms of employment, gender, sexual harassment, and gender-based violence and harassment, fair and safe working conditions and management of occupational health and safety aspects; (iii) pollution prevention, Greenhouse Gases emissions, hazardous material and waste management from the maintenance of car fleets; (iv) car safety/fleet maintenance; (v) community safety/road assistance services; (vi) security services; (vii) life and fire safety.                                                   

Environmental and Social Management System

Localiza manages E&S risks at its facilities in line with local and national regulatory requirements and permits. The company has also developed corporate policies and internal regulations, including a Code of Conduct, a Procedure for Whistleblowing and Non-retaliation of Whistle-blowers, a Sustainability Policy, and Sustainability Guidelines. E&S aspects are managed independently across several distinct corporate functions, with a focus on sustainability, social investment, compliance, and ethics. As per ESAP item #1, Localiza will develop a formal, integrated environmental and social management system (ESMS), commensurate to the scale and impacts of its operations, and consistent with the IFC PS and World Bank Group (WBG) General Environmental, Health, and Safety (EHS) Guidelines. The ESMS will be developed at the corporate level and tailored to the languages and laws, rules, and regulations of each country where Localiza operates.

Policy

The corporate Sustainability Policy is applicable to all Localiza’s employees, suppliers, and business partners. It includes goals and guidelines for diverse topics such as waste management, water efficiency, energy efficiency, renewable energy, low carbon innovation, vehicle user safety, anti-discrimination / harassment, and diversity. As part of ESAP item #1, the Company will update the Sustainability Policy in line with IFC PS1, to create an overarching policy, defining the E&S objectives and principles that guide the Company to achieve sound performance in all areas of E&S, including environment, occupational health and safety (OHS), community health and safety, labour, working conditions, security, and stakeholder management.

Identification of Risks and Impacts

Localiza identifies key E&S risks and impacts for each specific site in accordance with local and national regulatory requirements. However, Localiza does not have a corporate procedure to assess E&S risks not covered by regulatory requirements. As part of ESAP item #1, the Company will develop a corporate procedure to assess E&S risks and impacts from operations and maintenance as well as building renovation projects, in line with IFC PS and Good International Industry Practice (GIIP). Localiza will also develop a due diligence procedure for prospective new leases to screen for potential E&S risks and impacts in line with IFC PS1-8 requirements.

Management Programs

At the site level, Localiza controls risks and impacts in accordance with applicable local and national regulatory requirements. At the corporate level, Localiza has high level policies in place, but does not have detailed management procedures that outline the specific minimum E&S mitigations and performance requirements expected at all sites, as defined by GIIP. As part of ESAP item #1, Localiza will develop corporate-level management programs in the form of documented procedures, practices, or plans, that describe mitigation and performance improvement measures and actions, addressing Localiza´s identified E&S risks and impacts, aligned with IFC PS, WBG EHS Guidelines, and GIIP.

Organizational Capacity and Competency

At the corporate level, E&S aspects are managed across several independent corporate functions, including the Sustainability Department, Human Resources, Operations, Licensing Department, Rewards and Well-Being Department, and Compliance. The Governance and Sustainability Committee periodically report certain aspects of E&S performance directly to the Chief Executive Officer (CEO), but areas such as OHS do not have equivalent direct reporting lines. Going forward, as per ESAP item #1, the Company will nominate an individual at the corporate level to manage the implementation of the ESMS.

Emergency Response Planning

Localiza complies with national and local structural and fire safety codes for the design of its offices and leased facilities. For each site, Localiza has implemented emergency preparedness and response plans in line with local and national regulations. The plans describe processes to assess emergencies, decisions on evacuation, and detail procedures, as well as the roles and responsibilities of various employees, occupants and the volunteer emergency brigades.

Each site has trained emergency brigades and evacuation drills are conducted at least annually at each site. In addition, the company has two civilian firefighters stationed at the headquarters office. IFC’s visit to various types of buildings noted the presence of fire escapes (including provisions for those with limited mobility), emergency signage, emergency lighting, portable fire extinguishers, sprinkler systems, smoke detectors and fire alarms with manual call points, and fire hose/reel systems, and other measures to address the conditions and risks present.

Monitoring and Review

Localiza has several sustainability key performance indicators (KPIs) which are reviewed once a quarter by the Sustainability Committee. In turn, the committee provide advice to the Company’s Board of Directors and Executive Board on all topics considered in the Sustainability Policy. Similarly, Localiza has a Diversity and Inclusion Committee which monitors KPIs related to gender, age, disabilities, race, sexual orientation, etc. The Localiza Institute monitors the progress of social investment programs, and the Compliance department monitors training and implementation of the Code of Conduct, including the grievance mechanism. Localiza does not conduct periodic corporate level monitoring and review of OHS, emergency response, security, and stakeholder management performance. As part of ESAP item #1 Localiza will develop corporate procedures to monitor compliance with the whole ESMS, establishing and monitoring KPIs and performance targets for all aspects of E&S as defined by IFC PS, as well as internal and external audits to verify compliance with applicable legal requirements and any applicable parameters of the WBG EHS guidelines.                                                   

At the end of 2022, Localiza had 17,505 permanent employees, 44% of which are female. Women constituted 47% of the leadership, when adding together the supervision, leadership/coordination, management, and board categories. In addition, Localiza contracts approximately 829 third party workers for rolls ranging from security services, cleaners, vehicles repairs and facility management.

Human Resources (HR) Policies and Procedures

Localiza has a suite of human resources policies as well as a Code of Conduct which are aligned with local regulations and consistent with PS2 requirements, covering labour and working conditions, including prohibition of child, and forced labour, non-discrimination, promoting equal opportunity and respecting freedom of association. Employees are provided with contracts describing labour and working conditions, and through the induction program are informed of the corporate policies and the Code of Conduct. Ethics training is mandatory for all staff and must be repeated every two years. E&S contractual agreements with contractors require compliance with the Company’s Code of Conduct. Localiza also has a proactive Diversity and Inclusion Program in which all employees are engaged. The program focuses on five priority fronts: gender equity, LGBTI+, people with disabilities, migrants and people in refuge, and race, overseen by the Diversity and Inclusion Committee.

Working Conditions and Terms of Employment

Localiza has a standard contract for personnel, all of which comply with Brazilian legislation and regulations for minimum age, working hours, shift times, overtime payment, rights to privacy, and benefit requirements, in line with PS 2 requirements. The Company also supports employees’ professional and personal development through an employee support and assistance program. Localiza provide adequate washrooms, drinking water, kitchens, dining, and relaxation facilities for staff. At the headquarters, workers have access to onsite health services, hairdressers, beauticians, banking, and other amenities. Localiza provides extended parental leave beyond the legal minimum and provides new mothers with support kits and access to onsite lactation rooms.

Workers’ Organizations

Localiza has in place collective agreements with several workers’ unions around the country, allowing the free association of workers, in alignment with PS2 provisions.

Non-discrimination and Equal Opportunities

Localiza’s Code of Conduct and Sustainability Policy include rules regarding discrimination, equal opportunity, and the promotion of diversity. These procedures are aligned with PS2.

Child and Forced Labour

Localiza complies with Brazilian labour legislation, which includes a prohibition of child labour and forced labor. Localiza’s Hiring Apprentices Policy explicitly prohibits young apprentices from conducting work considered dangerous or unhealthy. Localiza’s Code of Conduct states that it will not accept undignified working conditions or those analogous to slavery and child labour, and that its relationships with its suppliers are guided by those principles. Localiza conducts assessments on suppliers every two years to screen for human rights issues, including modern slavery and unethical labour. The majority of the supply chain with respect to vehicles is contained within Brazil and the wider Latin America region.

Worker Grievance Mechanism

Localiza has a confidential complaints channel operated by a specialized and independent company and is open to all staff, contractors, and stakeholders in general (https://ri.localiza.com/governanca/canal-confidencial/). The channel is available 24 hours a day by telephone, or via a dedicated website and e-mail address. Localiza’s Compliance function is responsible for the administration of the channel and processes the investigation as per a publicly available whistleblowing procedure. Localiza targets the resolution of all complaints within 15 days of receipt, and performance against that KPI is reported to the CEO every quarter. When applicable, complaints are discussed at the Integrity Committee meetings and, when necessary, at the Audit, Risks, and Compliance Committee. The channel is communicated to workers via onboarding, Code of Conduct training, company social media, and periodic reminder emails. Per the latest sustainability report, the channel received 645 complaints in 2021, including topics such as harassment or improper use of company vehicles. Hence, it thus is widely known and utilized.

Gender-based Violence and Harassment (GBVH)

The Code of Conduct states that Localiza will “not accept any kind of disrespect or discrimination, moral or sexual harassment”, including “embarrassing colleagues by constantly flirting and insinuating and without consent, in order to obtain sexual advantages or favours”. This is emphasized to workers during onboarding and Code of Conduct training. The confidential complaints channel is available to report cases of GBVH and Localiza has a specially trained consultant to provide support to survivors.

Occupational Health and Safety

Localiza manages OHS risks at its facilities in line with local and national regulatory requirements and permits. At the corporate level, Localiza has an OHS team consisting of six positions, (two of which are yet to be filled). In addition, the reconditioning centres will each have their own onsite OHS professional, responsible for Localiza sites in their respective region. These onsite OHS positions are yet to be filled. Supporting the OHS team are Internal Commissions for the Prevention of Accidents, which are worker volunteer groups at several Localiza sites. As part of ESAP item #1, the ESMS will include corporate level OHS management, with corporate level OHS practices that comply with the IFC PS and WBG EHS Guidelines. Localiza will recruit and retain staff for the vacancies in the OHS organization.

Workers Engaged by Third Parties

Localiza utilizes contractors for the operation of ethanol filling stations, vehicle reconditioning works, leased site renovation projects, and facilities management, among others. Major contractors are contractually obliged to apply the Code of Conduct and are monitored from the perspective of compliance, integrity, and OHS. Localiza also uses a document management platform for third party companies, ensuring that only workers with validated documentation are able to perform activities on Localiza's premises. As per ESAP item #2, Localiza will develop contractor management procedures to include: (i) E&S requirements for contractors, detailing the OHS, labour conditions, and social requirements; (ii) a contractor management and assurance plan (CMAP) describing the controls to be implemented by Localiza (e.g. inspections, audits, walk-downs, E&S meetings); and (iii) an 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.                                                   

Renewable Energy and Energy Efficiency

Localiza sources approximately 53% of its electricity needs from clean and renewable energy through: (i) onsite rooftop solar generation; (ii) supply from third-party owned and operated solar farms; and (iii) the acquisition of clean energy on the open market. Energy efficiency measures include the use of LED lighting technology, efficient air conditioning equipment, timers for external lighting, maximizing use of natural light, as well as educating employees and setting goals and KPIs, (under the Sustainability Policy).

Greenhouse Gases (GHG) Emissions

In 2022, Localiza merged with Companhia de Locação das Americas (“Locamerica”), another car and fleet rental company. In 2021, the combined Scope 1 emissions of Localiza and Locamerica were 33,779 tonnes GHG, 78% of which is due to refrigerant fugitive emissions from hydrofluorocarbons. Combined Scope 2 emissions were reduced to 3,729 tonnes GHG by increasing the use of renewable energy. Combined Scope 3 emissions were 862,891 tonnes GHG, mainly due to vehicle use by customers. Localiza publishes its GHG inventory in the GHG Protocol Public Emissions Registry every year and is continuously seeking to improve its emissions mapping process. Localiza carries out information campaigns to encourage ethanol use by its customers and ride-hailing app drivers are provided with an ethanol fuel discount as an incentive over gasoline. Localiza also enables customers to offset their GHG emissions via an optional charge that is used to acquire carbon credits.

Water and Wastewater

With the exception of some groundwater wells and rainwater capture, Localiza depends entirely on the public water supply system. Water well abstraction is conducted in accordance with the maximum limits established in the corresponding permits. Water use is primarily for vehicle washing, and efficiency has been achieved via the adoption of “dry washing” methods, which use a chemical cleaner requiring minimal water. This technique reduces the average water consumption per vehicle cleaned by approximately 95%. Due to the degree of dirt accumulated on cars, dry washing is not always feasible, but in 2022, 62.3% of cleaned rental vehicles were “dry washed”. Water use has also been reduced through the installation of efficient toilet flushes and water reuse systems at some sites. Under the Sustainability Policy water efficiency goals and KPIs are established and tracked. All sanitary effluent is sent to the public sewage collection system. Vehicle washing areas drain to oily water separators and the oil and solids are collected by specialist authorized contractors.

Waste Management

Waste generated from offices includes food waste, plastic bottles, cans, paper/cardboard, light bulbs, and small amounts of medical waste from healthcare facilities as well as small amounts of batteries. Operational sites such as reconditioning centres also generate waste oil, oil filters, oily rag, oil sludge, oily water, used paint, spent tires, spent PPE, etc. At some sites such as the headquarters and reconditioning centres, several waste streams are segregated at source for recycling. Tires are sent for reuse or crushed to be used as fuel in cement kilns, and waste oil is sent for re-refining and reuse. Leftover food from the restaurant at the headquarters is composted to use as fertilizer. Medical waste and hazardous waste are collected by specialized, authorized contractors. Waste management procedures at each site are determined by local and national legislation, and at some sites, a plan is not required. However, the Sustainability Policy imposes efforts to reduce waste and increase recycling at all sites, and targets and KPIs are tracked at the corporate level.

Hazardous Materials

Hazardous materials are managed and stored as per their classification in accordance with applicable legislation. Safety data sheets for chemicals are stored on a central database, as well as regulatory risk assessments for the use of chemicals. At some sites, diesel, LPG, and ethanol are stored on-site for emergency power generation, cooking gas, are car refuelling, respectively. As part of ESAP item #1 Localiza will develop a corporate procedure for handling and managing hazardous materials in line with applicable regulations, IFC PSs, and the WBG EHS Guidelines, including ensuring that physical copies of safety data sheets and risk assessments are available on-site, at the point of use.                                                   

Community Health and Safety Management

At some sites, Localiza provides car rental customers with access to a complimentary airport shuttle van. Drivers of such vans are subject to training, special licensing requirements, and rules regarding maximum speed, vehicle checks, and driving behaviour, which is monitored via telemetry. The vans are subject to maintenance every 15 days.

The only locations accessible to the public are the car rental and sales sites, and these are generally low-rise and can be readily evacuated in the event of a fire. Ethanol filling stations are operated by a specialist third-party in areas that are not accessible to customers or the general public. Localiza complies with national and local structural and fire safety codes for the design of these facilities.

The renovation of newly leased facilities is contracted to specialist contractors. Such projects are approved following an inspection by the local fire department. As part of ESAP item #3, Localiza will commission a qualified L&FS professional (acceptable to IFC) to develop a standard Life and Fire Safety (L&FS) and accessibility Master Plan (Plano Diretor de Segurança in Portuguese) applicable to newly leased buildings and renovations (sales and rental sites), considering the elements described in the L&FS section of the WBG General EHS Guidelines and one international fire safety code (e.g., NFPA 101), as well as compliance with applicable regulations.

Customer Vehicle Safety

Localiza has in place strict quality control measures to ensure vehicles rented or sold to retail customers and fleet customers are in safe working condition. This includes preventive and corrective maintenance to standards that in some cases are above legal minimums (e.g., tire tread depth). All vehicles sold by Localiza are their own ex-rentals and therefore the complete service history is known to the Company, facilitating optimized repair works. Localiza also uses measures such as digital ringfencing of vehicles to ensure that they do not travel on unpaved roads or racetracks, as well as monitoring for unsafe driving behaviours. Clients that have previously exhibited safe driving behaviours are offered preferential rates. Vehicles are also equipped to detect an accident and can call emergency services automatically. Fleet customers are offered access to online defensive driving training. Rental centres are equipped with signage for speed limits, use of headlights, speed humps, pedestrian walkways, and other safety features, as relevant.

Security Management

Currently, Localiza works with a single third-party security contractor for all its operations in Brazil. Based on risk assessment, there are branches that do not have security systems in place, branches that have electronic security with third-party monitoring, and branches that have uniformed security guards (contractors) to control access, (including offices and reconditioning centres). The guards do not carry firearms, with the exception of the guard assigned by the commercial bank located within the headquarters building. As per ESAP item #5 Localiza will develop a corporate security policy aligned with PS4 requiring each site to develop a security management plan, including verification that security contractors provide adequate training to their security guards on interpersonal relations, professional ethics, legal requirements, human rights, and security techniques.                                                   

Localiza’s operational sites report good relations with neighbours and open means of communication, including the sharing of the site manager’s direct telephone contact details. However, Localiza does not have a framework to manage stakeholder engagement, including relationships with neighbours, at the corporate level. As per ESAP item #4, Localiza will develop a stakeholder engagement plan in line with IFC PSs.

Localiza uses the same channel for external grievances as it does for workers, as described above. The mechanism is publicly available via the Company’s investor website. As per ESAP item #4 the stakeholder engagement plan will include enhanced communication of the grievance mechanism to ensure it is adequately disclosed to neighbours and other stakeholders.                                                   

Contact Person: José Amilton dos S. Junior

Company Name: Localiza Rent a Car S.A.

Address: Av. Bernardo de Vasconcellos, 377, Belo Horizonte, Minas Gerais, Brazil

Email: jose.amilton@localiza.com

Phone: 31 3247-9243

Facsimile: 31 3247-9243