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
Policy, Identification of Risks and Impacts, Management Programs
The company has an E&S management system (ESMS) that is developed per the local laws requirements, at the existing storage, logistics, and retail operations. The corporate E&S policies address environment, OHS, HR, code of ethics, as well as engagement with the communities, and cover the provisions for working environment, safe working conditions, integrity, anti-corruption, information privacy, and grievance mechanism.
Company’s ESMS includes E&S risks and impacts identification and mitigation processes. For its key business activities and operations, E&S Impact Assessments (ESIA) are not required by local regulation. For the proposed expansion project in Honduras, an environmental license was obtained in March 2024, which also describes the mitigation measures to be taken by the company during the construction and operational phases. The proposed expansion project in Nicaragua is at early stage, where the company is in the process of identifying a suitable land. For the existing operations, the company implements E&S management programs, which includes (i) safe work procedures at warehouses, (ii) monitoring of logistics activities, (iii) handling of medicines, (iv) maintenance of equipment, (v) waste management, including the handling of expired medicines, (vi) emergency preparation and responses (EPRP), and (vii) management of security personnel.
Farinter will update the E&S policies and procedures into a corporate level ESMS, that will be implemented at the existing and new facilities in the CA region. The ESMS will incorporate the following elements per the IFC PS requirements (but will not be limited to): (i) identification of environmental / OHS risks and impacts per business areas; (ii) procedures, processes and relevant management programs (such as land acquisition/building leasing checklist, OHS/safe working instructions, resource efficiency measures including monitoring of greenhouse gas (GHG) emissions, solid and hazardous waste management, internal monitoring and audit program); (iii) updates of workers grievance mechanism, (iv) traffic and transportation management for community safety, and (v) stakeholder engagement plans (specifically covering DCs in Honduras, Nicaragua and facility in Central America), and external grievance mechanism applicable for all the operations of the company (ESAP#1). Requirements of each management programs are detailed in the following sections of the PS.
On the land management, the company has acquired a land adjacent to the existing DC from another company on a willing buyer willing seller basis in Honduras. Acquisition of new land is foreseen for the proposed projects in Nicaragua.
For the M&A, the company was in the process of the acquisition of companies in the pharmaceutical sector in Central America at the time of appraisal. During the acquisition phase, the company conduct a technical, financial, and legal due diligence, however, it does not include a detailed E&S due diligence of the target company. The company will undertake a gap analysis of E&S aspects, including but not limited to: E&S organizational capacity, OHS, HR, pollution management & control, waste management, emergency response, and security forces against the requirements of IFC PS and World Bank Group’s EHS Guidelines (General and Pharmaceuticals and Biotechnology Manufacturing, as applicable), including the L&FS evaluation by a qualified consultant and will implement time-bound corrective action plans to close any gaps identified (ESAP #2).
Organizational Capacity and Competency
At corporate level, key E&S functions are delegated to multiple departments where the managers of the respective departments report to the General Director. Departments of Quality and Administration are responsible for overseeing environmental, OHS, and security aspects, including the implementation of EPRP. Department of Project is responsible to oversee expansion projects in Honduras and Nicaragua, including the contractor management of civil works. For the M&A, there is a responsible team represented by senior directors to manage the due diligence and integration process. The company’s social program function (Fundación Kielsa) implements the stakeholder engagement. The E&S aspects at subsidiaries of Nicaragua, and Costa Rica is mostly overseen by the Departments of Administration and is reported to General Director, through the country directors of each country.
The company will assign a corporate-level EHS (Environmental, Health, and Safety) Officer, responsible for the development and implementation of the ESMS with specific roles and responsibilities. The assigned officer will oversee the consistent implementation of the ESMS at the corporate and subsidiary levels across the CA region and will monitor and report E&S performance across the company (ESAP#3).
Monitoring and Review
The scope of monitoring and evaluation is limited to the assessment of E&S performance against the local laws. As part of ESAP#1, the company will establish procedures to monitor the effectiveness of the ESMS, as well as compliance with any related legal and/or contractual obligations. The procedures will define monitoring and internal auditing mechanisms and Key Performance Indicators (KPIs), including environmental, HR, OHS, Security, EPRP, and social KPIs. The company will implement corrective and preventive actions through the implementation of management programs.
Emergency Preparedness and Response
For their operational DCs in Honduras, the company has developed a basic emergency plan that is aligned with local requirements. Training is provided to all employees and emergency drills are conducted periodically. The company is in the process of installing additional fire safety systems (fire detection and alarm, signage, and emergency lighting) in the DCs and the new DC projects will be provided with a more robust fire safety system utilizing sprinkler and hose reel systems in main storage areas supported by fire pumps and fire water reservoirs.
For the future development of the DCs in Honduras and Nicaragua, the company will develop EPRPs for these facilities before they are operational. These EPRPs will consider all feasible risks, including fire earthquake, civil unrest, flooding, landslide, excessive heat, and adequate procedures addressing the potential climate related impacts on and from the communities (ESAP#4).
Regarding the future acquisition of companies in the pharmaceutical sector in Central America, under ESAP #2, the company will engage a fire safety consultant to perform a fire safety assessment of the facilities, including hazardous material’s risks, as well as the review of the emergency response capabilities and plans. The fire safety consultant will develop a corrective action plan, to fulfill gaps (if any), as necessary.
The company operates small retail stores in all the countries of operations. These stores have basic fire safety protection based on local legislation and regulations and the exits are well demarcated and unambiguous, where emergency plans have been developed considering the scale of the current risks.
PS2: Labor and Working Conditions
The company has about 2,655 employees across all Group activities. Roughly 55% of the workforce is female and 45% male. Workers are provided individual contracts, covering both fixed and temporary workers, the latter of which are hired seasonally to cover specific project activities. The company is not anticipating a retrenchment, on the contrary, expecting to increase the number of the workforce upon project completion, due to acquisition and new DCs.
Human Resources Policies and Procedures / Working Conditions and Terms of Employment
Farinter has a Talent Management Policy (TMP) and system that considers and incorporates various elements of the group’s Code of Ethics and Conduct and Internal Labor Regulation. The company has also developed several HR related operational procedures aligned with Honduran labor laws. The TMP is currently being updated to reflect the Honduran labor regulation. This update will reflect the labor standards in addition to commitment consistent with PS2 requirements, such as (but not limited to) (i) all workers (permanent and temporary) to have formal written contracts; (ii) address inclusion, equity and diversity considerations; (iii) include explicit prohibition of child labor and GBVH; and (iv) a retrenchment policy, in line with local legislation and PS2 requirements. (ESAP #5).
The company has a Code of Conduct that applies to all workers. The Code of Conduct specifically addresses healthy and safe workplace practices, the prevention of use of drugs, alcohol and tobacco in the workplace, training on OHS matters, conflicts of interest, among several other topics.
Workers’ Organizations
Farinter Internal Labor Regulations allows for freedom of association, however, none of its employees are currently unionized.
Workers Grievance Mechanism
Farinter has a documented workers grievance mechanism procedure, called Ethical Line (Línea Ética). This mechanism has several channels such as phone call, email, mobile application, written letter, to report grievances and other behaviors that are against the company’s Code of Conduct and values. The mechanism allows for submitting anonymous reports and confidential treatment of grievances. Grievances and other reports are managed by the Ethics Committee. The Ethical Line is available to all employees, contractors and suppliers. As part of the ESAP#1, the mechanism will be updated to include a timeline for resolution of all grievances received, and provisions to handle GBVH grievances with a survivor centered approach, including training to the Committee for management of these cases.
Occupational Health and Safety
The company has developed a general OHS risk assessment mechanism, operational procedures, and training programs. These controls include use of signages at the facilities, handling of expired or damaged pharmaceutical products, handling of temperature-controlled products, use of appropriate personal protective equipment (PPE), EPRP, and maintenance of equipment and infrastructures. The company monitors the health of employees through an annual occupational health surveillance program. The company records incidents for employees, including those happening at the workplace and during commute. In 2023, the lost time injury frequency rate per million hours worked (LTIFR) was 0.5 compared to the good industrial benchmark of 11.0 (US Bureau for Labor Statistics, www.bls.gov, 2022 benchmark for Warehousing and storage). No fatalities have been recorded.
As per the ESAP#1, the company will establish corporate OHS procedures and structures applicable to its operation in all countries, including: (i) establishment of joint committee on OHS; (ii) identification of potential risks and hazards; (iii) identification and implementation of preventive and protective measures; (iv) identification of the training needs and development of a training plan; (v) development of occupational monitoring programs, and (vi) reporting and investigation of occupational incidents and diseases.
Workers engaged by Third Parties
The company engages with the third-party contractors for logistics, security service, maintenance of equipment, and special waste management, among others. For the new projects, the company works with third-party contractors for the expansion of DCs. The company will update its contractor E&S management procedure (CMP), specifically for Honduras and Nicaragua (ESAP#6). The CMP will include: (i) E&S screenings for the selection of contractors, (ii) the E&S controls to be implemented by Farinter including adequate working conditions and OHS risks and mitigations – such as for heat stress; (ii) roles and responsibilities to oversight the contractors performance, (iii) provisions on the prevention and management of sexual harassment and access to grievance mechanism, (iv) E&S monitoring and corrective actions management (with established KPIs). These requirements will be included in the contractor’s contract, and trainings to third-party contractors will be conducted across the facilities.
PS 3: Resource Efficiency and Pollution Prevention
Resource Efficiency and Greenhouse Gases (GHG) Emissions
In most of its facilities, Farinter sources electricity from the grid and started to install photovoltaic panels at some of the facilities of Honduras in 2024. Back up diesel generators are used at facilities during power disruptions. The company monitors energy and water consumption at the facilities but does not estimate the GHG emissions emitted by the company. As part of the ESAP#3, the company will develop a resource efficiency program, using relevant objectives and KPIs and quantify the GHG emissions in accordance with internationally recognized methodologies.
Pollution Prevention and Control
Air emissions are mainly from the ones from back up diesel generators. Wastewater, which is generally limited to sanitary effluents, is disposed via municipal sewerage system as per environmental permit conditions. Monitoring data is in line with the local regulation requirements.
The company has developed a solid waste management procedure, and submits reports to the local environmental agencies, that include the waste types and amounts with recycling/disposal information. The hazardous waste is mainly expired medicines and other pharmaceutical products which are disposed by a licensed third-party provider. The company implements a recycling program, especially for cardboard and plastic materials.
Main hazardous materials used by the company include diesel for backup generators, refrigerants (not ammonia-based products) used for small cold storage rooms, and potential wastes of medical products distributed by the company. The company implements operational procedures which defines its pollution prevention measures, including the safe handling of these products. The company engages with a service provider for pest control and does not use prohibited pesticides listed in the World Health Organization’s Ia or Ib. As part of ESAP#1, the company will implement a monitoring program for hazardous materials for its storage, handling, transportation and disposal, which will include documented safety procedures, secondary containment systems, spill prevention, in line local regulations and the World Bank Group (WBG) relevant (General and Pharmaceuticals and Biotechnology Manufacturing) Environmental Health and Safety (EHS) guidelines.
PS 4: Community Health, Safety & Security
Community Health and Safety
Transportation operations are managed by the logistics department and are contracted to a specialized third-party company. Farinter addresses the risks to communities resulting from its transport-related activities by i) conducting vehicle inspections before starting a journey, and ii) performing real-time Global Positioning System (GPS) monitoring to own transportation units, verifying the use of designated parking areas and compliance with the speed limits. As part of the ESAP#2, the company will develop and implement a Traffic and Transportation Plan for Community Safety to include controls and trainings on defensive driving and pedestrian safety, emergency response for road accidents potentially affecting communities, as well as measures to address GBVH in resting areas or locations where drivers engage with communities.
Security Personnel
All Farinter’s warehouses, offices and drugstores are guarded by armed security guards, who are located in the exterior gates of the facilities. Guards safeguarding interior of the facilities are not armed. Farinter has around 50 guards, of which approximately 40 are directly hired and 10 are from a licensed private security agency. Security personnel are trained in local regulations and Farinter’s Code of Ethics on how to engage with personnel and the public, as well as during emergency situations.
The Company has undertaken security risk assessments, and security is managed by the Operations team. Farinter will develop a security management plan to address threats from and to the community and will implement appropriate policies and procedures in line with PS4 (e.g., a written code of conduct; training; procedures in the event of incidents, community unrest, community requests, crimes, etc.). The Company will align its ESMS, Emergency Response Plan and Community Management Plan with the Voluntary Principles on Security and Human Rights (ESAP #7).
