This is a Category B project according to IFC's 2012 Policy on Environment and Social Sustainability. The proposed project will have limited adverse E&S impacts that are few, site specific, largely reversible and readily addressed through existing mitigation measures and good international industry practices (GIIPs).  Key E&S issues and risks associated include: (i) implementation effectiveness of Sugal Group’s E&S, Sourcing and Food Safety Management System (MS) at Sugal Chile direct processing plants, farms and third-party suppliers; (ii) Human resources (HR) and Occupational, Health and Safety (OHS) management practices with respect to fair & safe labor and working conditions for permanent, contractual, and seasonal workers, including Gender/GBV risk; (iii) water/energy use and efficiency, incl. GHG emissions; (iv) wastewater treatment, air/dust emission/odors; solid/hazardous waste, pesticide management; promotion of Integrated Pest Management (IPM) and safe storage and use of CPPs (pesticide); (v) promotion of Good Agronomic Practices, including biodiversity protection at farms; (vi) stakeholder engagement and grievance mechanism; and (vii) climate change risks and water resource sustainability assessment.

 Environmental & Social Policies. Sugal Group has a Sustainability and Hygiene, Safety and Health at Work policy, available at: https://sugal-group.com/en/sustentabilidade/ where it states its commitment to operate in meeting BRC (and equivalents, such as FSSC 22000), IFS and ISO14001 standards. Additionally, the company has a food safety management system in place, certified under several frameworks, as detailed in the PS4 section. Going forward, Sugal Chile will upgrade its E&S policy framework to align the company’s E&S performance with IFC PS requirements for all its direct and sourcing operations. The policies will include an explicit commitment to meeting IFC PSs and WBG General and Sector-Specific EHS Guidelines (ref. Food and Beverage Processing and Annual Crop Production). To achieve such policy commitment, Sugal Chile will provide technical resources, including CAPEX/OPEX and timeline for implementation, upgrade current monitoring/reporting framework, and commit to continuous improvement. The E&S policy will include a commitment to not using WHO Class Ia/Ib products in Sugal Chile’s direct/sourcing operations, and even though habitat conversion is likely low at the farm-level, explicitly limit the conversion of natural habitat of existing and future farms. Sugal Chile will provide annual report of implementation progress of its policy framework to its Sustainability Committee and IFC on its Chilean operations. Upon review/clearance by IFC of this updated draft policy framework, Sugal Group’s Board of Directors will approve. Updated policies will be disclosed on Sugal’s website and will include a training plan for socializing the EHS policies in Chile (ESAP#1).

Identification of E&S Risks and Impacts. Sugal Chile manages E&S risks and impacts of its processing facilities and associated facilities through compliance with applicable national E&S legal and regulatory requirements, laid out in the environmental licenses issued for each facility, and available at (link) as well as voluntary standards’ requirements. While the ESMS implementation at processing facilities is in good progress, Sugal Chile will further enhance the current implementation of its EHS risk assessment, including E&S management plans and Manual of Procedures, to its own farming operations, especially to environmental management, resource efficiency, emissions monitoring, and labor and working conditions (ESAP#2).

E&S Management System and Programs. Sugal Chile has implemented many of the elements of an ESMS with a focus on its processing plants and has put in place an EHS function to manage key E&S risks, including solid and hazardous waste management programs, air emissions management plan, wastewater treatment plan, effluent and sludge management plan, emergency preparedness and response, work permit system (lock-out/tag-out, height workplace inventory, inventory of high-risk activities), and OHS leading and lagging monitoring KPIs. Sugal Chile gathers EHS key performance indicators (KPIs) and reports to senior management. Going forward, Sugal Chile will further improve its E&S management practices through systematic and documented identification and prioritization of E&S impacts, alignment of operational indicators to meet E&S objectives and targets, and to roll-out EHS management plans to farming operations. For this proposed investment, Sugal Chile will develop and implement an ESMS, aligned with IFC PS1 requirements, covering its processing, farming and sourcing operations. The ESMS will encompass the following elements: (i) policy; (ii) identification of risks and impacts, including EHS Manual of Procedures in line with WBG EHS Guidelines (Food and Beverage Production and Processing and Annual Crop Production); (iii) management plans; (iv) supply chain risk assessment and management (v) organizational capacity and competency; (vi) training plan; (vii) emergency preparedness and response; (viii) stakeholder engagement and community grievance mechanism; (ix) monitoring and review. The ESMS will address gaps identified during the benchmarking review of Sugal Chile’s ESMS and applicable sections of the WBG EHS Guidelines on Food and Beverage Production and Processing and Annual Crop Production (ESAP#3).

E&S Organizational Capacity and Competency. The plant manager oversees environmental and OHS teams at plant-level. These teams implement the EHS management systems, including regulatory compliance. Sugal Chile’s supplier farm team, composed of 13 technicians, provide technical support to ensure alignment with good agricultural practices. The company has a Sustainability Committee with the objective of implementing its sustainability strategy, which has four pillars: (i) carbon neutrality and energy transition, (ii) sustainable agriculture, (iii) circular economy, and (iv) community relations. Sugal Chile provides mandatory EHS induction training to all workers, including permanent employees, temporary/casual workers, contractors, and service providers. Sugal Chile will reinforce its E&S management capacity to support ESMS enhancements, including EHS training and capacity, especially for its farming operations, internal auditing, and reporting (ref. ESAP#3).

Emergency Response. Sugal Chile has an emergency response plan for its processing operations with defined roles and responsibilities for possible emergencies, including fire, hazardous chemical spills, earthquakes, gas leaks, electrical and health accidents. Employees receive relevant training for adequate response and drills are performed periodically to identify improvements. Going forward, Sugal Chile will update its emergency response plan to ensure that (i) emergency response teams are in place for its processing facilities and farm operations and are adequately trained; (ii) coordination with local fire department and first responders is established; (iii) Communications Plan is implemented for neighboring communities on emergency risks scenarios (ESAP#4).

Monitoring and Review. To monitor ESMS implementation and compliance with regulatory requirements, Sugal Chile has developed KPIs, including water use and reuse, effluent quality and air quality, safety trainings. Additionally, there are KPIs defined to monitor progress on the implementation of the sustainability strategy including water use in agriculture, CO2 emissions per ton of product and packaging reuse. KPIs are reported and discussed in both Operational and Sustainability Committee meetings. Overall, the company’s E&S monitoring and reporting were noted to be commensurate with the scale and E&S risks and impacts of its operations. Going forward, Sugal Chile will further improve its internal inspections and audits, follow-up of corrective and preventive actions, report to management to ensure time-bound implementation, including assignment of CAPEX/OPEX, and scheduled internal/external verification (ref. ESAP#3).

 Human Resources Policies and Procedures. Sugal Chile has an HR Policy (“Reglamento Interno de Orden, Higiene y Seguridad”) that is consistent with the Chilean labor regulations and IFC PS 2 requirements and apply to all employees. To support Sugal Chile’s Diversity and Inclusion efforts within its Human Resources and the Sustainability pillar on Community relations, it will develop a Gender, Diversity and Inclusion Strategy that encompasses the policies and actions aimed to create a diverse and inclusive workplace comprising of different genders (ESAP#5).

Working Conditions and Terms of Employment. Working conditions and terms of employment are laid out on written contracts with each employee noting the aspects of employment relationship, including salary, work shift durations, social insurance, among others. During 4-month peak operating seasons (end of January to mid-April), Sugal Chile employs approx. 1,053 employees (783 in processing, 133 in agriculture, and 137 administrative). In low season, the company employs 240 employees (105 in processing, 60 in agriculture, and 75 administrative).

Non-discrimination and Equal Opportunity. The HR Policy includes commitments against discrimination under any circumstance, including sex, age, political views, race, color. There are also provisions against sexual harassment, including definitions and procedures to address complaints.

Workers Organizations and Workers’ Grievance Mechanism. There are no limitations for employees to freely associate, as there are employee unions in both plants and in the Santiago office with no disputes and no major grievances to date. Sugal Chile has a grievance mechanism in that allows for anonymous complaints (Línea Ética) in line with its HR Policy, also available for contractor workers. Sugal Chile does not have employees under 18 years old. This risk is prevented through its hiring policy and contractor monitoring via audits. Sugal Chile’s supplier farm team provide technical support to ensure alignment with agricultural practices, including prevention of child and forced labor risks. Going forward, Sugal Chile will enhance its farmer supplier on-boarding and monitoring procedures to prevent forced and child labor risks (ref. ESAP#1).

Workers Engaged by Third Parties. Key Sugal Chile contractors provide cleaning, security, and cafeteria services. The company’s HR team also monitors contractors’ compliance with applicable labor laws and compliance with related labor and OGS contract clauses. For its farming operations, Sugal Chile subcontracts seasonal labor and harvesting logistics service providers. Contracts with third party require legal compliance with labor regulations and monitored through spot audits. Due to intense schedule during peak season, Sugal Chile ensures that employees and contractors do not work above the weekly hours specified by law.

Occupational Health and Safety. The company is working to align its existing OHS management system with ISO 45001 requirements, as per its strategic sustainability pillar. As required by law, Sugal Chile has an OHS Committee (Comité Bipartito) led by workers with the objective to define and implement OHS programs. OHS officers are assigned at each plant, who oversee implementation and monitoring of OHS activities. A procedure is in place for hazard identification and job risk assessment, including personal protective equipment (PPE) requirements for both processing facilities and farming operations. As there is considerable seasonality for Sugal Chile activities, there is robust induction program in place that ensure all employees and contractors are trained on safety aspects before performing any work on Sugal Chile facilities. During appraisal, safety programs and procedures were reviewed, including LOTO, inventory of high-risk workstation and activities (e.g. working at height), and occupational health monitoring. Sugal Chile’s Lost Time Injury Frequency Rate (LTIFR) for 2022 was 27.87 accidents per million hours worked, which is higher than the benchmark value for food manufacturing (US sector data - 7.0). The company will commission an independent review of its OHS management system to identify opportunities to improve the OHS MS implementation effectiveness to be aligned with ISO 450001 standards and IFC PS2 requirements, and to improve its OHS management oversight and leading/lagging indicators. The audit’ Corrective Action Plan (CAP) will be shared with Sugal Chile Sustainability Committee, for review and assignment of OPEX/CAPEX for a time-bound implementation (ESAP#6).

 Resource Efficiency. Sugal Chile’s production process primarily involves tomato paste production, which requires heat and result in significant quantities of emissions. Emissions for 2021 amounted to 66,937 tons of CO2eq for Scope 1&2 (direct emission and associated to electricity sourced, respectively). As one of its sustainability strategy’ pillar, the company set a reduction target of its GHG direct emissions by 35% of Scope 1 & 2  emissions (using 2017-2021 levels as baseline) per ton of product and to source 100% of electricity from renewable sources by 2030. To achieve this target, Sugal Chile is implementing several resource efficiency initiatives, such as technological improvements in process, installing solar panels, investing/upgrading industrial equipment (including boilers), and establishing energy management system. Going forward, the company will quantify its GHG emissions annually and report them to IFC in accordance with internationally recognized methodologies and good practice (ESAP#7).

Electricity is sourced from the national grid for all facilities. Air emissions from the company’s operations come from boilers and back-up generation. Sugal Chile has 10 boilers in Tilcoco of which 2 are fuelled by coal and 8 by gas, and 4 gas-fed boilers in Talca. Boiler stack air emissions are in compliance with local requirements for SO2, while nitrous oxides and particulate matter are treated by appropriate technologies to meet with national requirements. Sugal Chile monitors point source air emissions and ambient air quality at plant boundaries on a yearly basis. Emission monitoring reports indicate compliance with applicable national regulatory requirements and WBG EHS General Guidelines. To fulfil its climate reduction objectives, the company has recently upgraded boilers to use gas instead of fuel oil (4 boilers distributed equally between Tilcoco and Talca).

Water is sourced from permitted wells, mainly used for hydraulic transport and washing of tomatoes, industrial processes, and domestic use. WRI’s Water Atlas (https://www.wri.org/applications/aqueduct/) shows that most of the area where processing plants and current farms are located, are at the highest risk of water stress (ratio of total water withdrawals to available renewable surface and groundwater supplies) and medium-high risks of ratio of water depletion (total water consumption to available renewable water supplies). Water use at the two processing facilities is 350 m³/h in Tilcoco and 330 m³/h in Talca from permitted wells, for an overall water use rate of 12 m³ per ton of product, which is within good international industry standards (GIIP). Sugal Chile has implemented water efficiency measures to recover and treat water to be reused within the facility at a rate of 85% in Tilcoco and 55% in Talca. Moreover, it discharges water back to canals used for irrigation at a rate of approximately 400 m³/h in Tilcoco and 345 m³/h in Talca, as it recovers and discharges water extracted from tomatoes (tomato water content is approx. 95%). At Sugal Chile’s farms, water use is approximately 5,000 m³/ha on drip-irrigated fields (86% of area planted) and 12,000 m³/ha on channel-irrigated fields per growing season. Sugal Chile will update its E&S Policy to state its commitment to only produce tomatoes on its own farms using drip irrigation systems and will undertake a hydrological study (water resources sustainability assessment) of key growing areas to better understand effects of its farming activities and identify areas better suited in regard to water risks (ESAP#9).

Pollution Prevention. Following in-situ water treatment, Sugal Chile recirculates 75% of its aggregated water used, mainly for hydraulic discharge, washing of tomatoes. The company is in the process of implementing water efficiency measures at Talca facility to increase reuse at the level of Tilcoco (88%). Thus, the company will identify and implement additional water efficiency measures on its production process (ESAP#10). Treated effluent are discharged into channels used for irrigation. Monitoring reports for both plants indicate compliance with legal limit requirements and guideline values in the WBG EHS Guidelines for Food and Beverage manufacturing. Domestic effluents (kitchen, bathrooms) are discharged into an infiltration pond, following local guidelines. Treated effluent is tested twice, during its peak processing campaign. The by-product sludge from the WWTP company at both plants is managed according to a Sludge Management Plan, that is used for soil conditioning or disposed in landfills.

Waste and Hazardous Materials Waste Management. The company has hazardous and non-hazardous waste management procedures including a system for sorting, handling, storage and disposal which are consistent with applicable legal requirements. All hazardous and non-hazardous wastes are collected for disposal by authorized public service agencies specialized in each type of waste. At the project site, all hazardous materials were noted to be properly labelled and stored in the designated area. The company will enhance secondary containment arrangements of its hazardous waste storage facilities and ensure its hazardous waste management practices are in line with WBG EHS Guidelines (ESAP#11).

Integrated Pest Management. At its processing facilities, the company has pest management plan in place as per Food Safety MS and relies on third parties for monitoring. For its farm operations, Sugal Chile has a Farm Manual where it specifies all details for adequate field preparation, fertilizer management, integrated pest management approach, agrochemical management and safety, among others. The company does not use WHO Class Ia or Ib pesticides. The company will formalize this commitment to not using WHO Class Ia/Ib products in Sugal Chile’s direct/sourcing operations in its policy framework (ref. ESAP#1).

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Community Health and Safety. Both processing facilities are in urban areas with agricultural, residential and industrial dwellings on its perimeters. Key risks to the community are noise and odour nuisance. Sugal implemented noise abatement measures at its Tilcoco plant and undertake periodic monitoring. The company also implemented a detailed traffic management plan that minimizes traffic of tomato truck delivery activities to the processing facilities.

Food Safety. The company implemented a food safety management system, certified under Food Safety System Certification (FSCC) 22000. As part of the system, the company continuously monitor the Maximum Residue Level of pesticides, to control for human health risks.

Security Personnel. Sugal Chile contracts security services with licensed providers, in line with local regulations. Security workers are unarmed and are also trained in emergency response. Regular monthly training program are conducted by company for the security workers on the standard operating procedures for their job, including engagement with the communities and external communications.

 Sugal Chile produces and purchases agricultural products essential to its core business within the Chilean matorral ecoregion, a region subject to extensive grazing, logging and urbanization. Sugal Chile sourced fresh tomatoes from 276 farms across 7,250 ha (33% of hectares managed directly by Sugal Chile and 67% by third parties) over the 2022-2023 growing season within regions of consolidated agricultural production.

Sugal Chile has been implementing Unilever’s Sustainable Agriculture Code (SAC) across its operations, which consists of principles that include ensuring that adverse effects on soil fertility and biodiversity from agricultural activities is minimized, and positive contributions are made where possible. Sugal Chile will benchmark WBG’s EHS Guidelines, including Annual Crop Production (2016), to the application of Unilever’ SAC (ESAP#11) and develop an action plan to address gaps on company managed farms. To further align with the WBG’s Guidelines on Annual Crop Production, Sugal Chile will improve their screening process of new lease sites by integrating biodiversity considerations and soil quality to be maintained and improved through farming practices (ESAP#10). To align with the objective of demonstrating continuous improvement and PS6 requirements related to invasive species, Sugal Chile will develop decommissioning procedures to ensure that measures are taken to prevent the spread of invasive species and make best efforts to ensure that biodiversity values and soil quality are maintained and improved upon, as feasible, following the production cycle (ESAP#11).                                                  

One of Sugal Chile’s Sustainability strategy pillars relates to communication with stakeholders. As part of the development of their materiality sustainability matrix, the company has reached to a number of stakeholders e.g., clients and consumers, labor unions, government entities, suppliers. Additionally, the company has some level of communications with nearby users, although not systematically. Sugal Chile will develop and implement a stakeholder identification and engagement plan in line with PS1 requirements and ensure its current external grievance mechanism (Línea Ética) is socialized with affected communities so that Community concerns and grievances about the company’s E&S performance including gender-based violence & harassment aspects shall be resolved using such mechanism (ESAP#2).                                                  

 Contact Person: Joa Fezas-Vital

company Name: Sugal

Address: Francisco de Aguirre, 3720, Piso 5, Vitacura, Oficina 53

Email: Joao.FezasVital@sugal-group.com