If IFC’s investment proceeds, IFC will periodically review the Project’s ongoing compliance with the Performance Standards.

IFC’s review considered the following Performance Standards to be not applicable:

PS5 - Land Acquisition and Involuntary Resettlement: The land for CHP, adjacent to Drenik’s existing production facilities, was acquired 10 years ago from a private owner (automobile maintenance company) on a willing buyer-willing seller basis.

PS7 - Indigenous Peoples: There are no Indigenous Peoples living in proximity of the Project nor will any be impacted by the Project activities.

PS8 - Cultural Heritage: The existing industrial site has no Cultural Heritage value.                                               

 This is a category B Project according to IFC’s Policy on Environmental and Social Sustainability. Based on information reviewed by IFC, the proposed Project will have limited adverse E&S risks and/or impacts that are few, generally site-specific, largely reversible and readily addressed thorough existing mitigation measures and good international industry practices (GIIP).

Key E&S issues associated with the Project include: (i) the Group’s management systems to assess and manage E&S risks and impacts from its operation and those related to construction of CHP; (ii) monitoring and management of contractors’ E&S performance during construction and operation of CHP; (iii) monitoring and management of air emissions, waste, wastewater and hazardous materials relevant to construction and operational phases; (iv) pulp and biomass-related supply chain risks and issues; (v) process safety risks and emergency planning and response; (vi) the plant’s potential operational impacts on nearby residential area; and (vii) Drenik’s stakeholder engagement activities related to E&S aspects.                                                 

 Environmental and Social Policy and Management Systems: The Group has a corporate Environmental policy and an Occupational Health and Safety (OHS) policy (www.dreniknd.com), which provides a framework for E&S and OHS assessment and management processes.

The Group’s ESHS Management System is based on ISO 9001, ISO 14001 and ISO 45001 standards for which the Group maintained regular recertification.

The Group has recently retained an external consultant to enhance the Group’s Corporate ESHS management system and, as per ESAP item 1.1, to introduce and monitor key ESHS performance indicators and develop measures to meet the targets and strive for continuous improvement of its ESHS performance throughout Group’s operations in both Serbia and Hungary.

The Group will rely on engineering, procurement and construction (EPC) contractor for construction of CHP and operational and maintenance contractor for operation of CHP. To ensure that contractors duly follow the project’s E&S commitments, as described in ESAP item 1.2, Drenik will develop a Contractor Management Plan to include general and project-specific E&S and OHS requirements and conditions for the construction and operation of the CHP plant in line with IFC’s Good Practice Note “Managing Contractors: Environmental and Social Performance”. The provisions of the Contractor’s Management Plan shall be an integral part of the EPC contract. 

The Group sources pulp for its production activities from international traders and pulp producers. The Group has a FSC-certified product control system, which covers tissue, hygienic and domestic paper production. This system ensures that most of the pulp supply is certified by the reliable third-party standards for sustainable forestry. Going forward, Drenik will, as per ESAP item 1.3, develop a procurement policy and define verification requirements to ensure that all pulp and biomass for the CHP plant (please refer to PS6 for details) are sourced from suppliers who manage forests sustainably. Drenik will request its suppliers to verify that the production of pulp and biomass relies on timber extracted from operations that do not lead to significant conversion of forest habitat, including by identifying region of pulp and biomass production.

Identification of E&S Risks and Impacts: The Group 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. In this respect the Group has recently submitted its application for an Integrated Pollution Prevention and Control (IPPC) permit.

The CHP project doesn’t require an Environmental and Social Impact Assessment, as determined by the Serbian Ministry of Environment based on a preliminary environmental screening of the Project.

As per ESAP item 1.4, the Group and/or the EPC Contractor, as appropriate, will conduct supplemental analysis to assess the potential E&S risks and impacts of the Project and develop corresponding documentation, such as but not limited to: hazard identification for construction and operation, construction and operational risk register, baseline ambient air monitoring, air emissions dispersion model, traffic impacts study, accommodation plan for construction workers, inclusive of an influx management plan (if needed) and, once ash composition is known, a study of the disposal/recycling options for the ash.

Organizational Capacity and Competence: The Group’s environmental and safety functions are under the responsibility of the General Manager. Two separate teams address respectively environmental issues and health & safety issues. The environmental management functions are allocated to the quality department and include monitoring of the Group’s compliance with the environmental permits, as well as waste management. Any technical measures required to bring the plant into compliance are the responsibility of the paper mill manager.

Occupation Health & Safety is under the responsibility of one safety officer reporting directly to the General Manager. When the safety officer is off shift or on leave, safety supervision is delegated to the shift leaders. Adequacy of the safety supervision arrangements is further discussed under PS2 Labor and Working Conditions, below.

The Group is committed to promote a sustainable culture at all levels of the organization and to this effect, as described in ESAP item 1.5, production supervisors will be assigned personal objectives or KPIs linked to the safety performance of the production departments and the overall plant.

Emergency Preparedness and Response: The paper industry is very sensitive to fire risks because of the combustible nature of the materials handled, stored and produced in the factory. Drenik has documented an emergency response plan for its operations, with clearly defined roles and responsibilities for various teams responsible for evacuation, rescue, firefighting etc. Signage is displayed at various locations across the facilities together with fire extinguishers, alarm call points, evacuation route maps and hose reels. Smoking is prohibited everywhere on the site. 

There is a team of 5 fire fighters, seconded by the state fire brigade to Drenik, permanently present on the site with a firefighting truck at their disposal. In addition, several workers in each shift have been trained in fire safety and operation of fire safety equipment. 

A fire risk assessment was conducted in 2017 for the paper processing facility and, as indicated in ESAP item 1.6, a follow up assessment will be required to include the additional risks associated with the operation of the CHP plant and the biomass storage. The supplementary assessment will take into consideration evacuation routes and distances as well as the means to detect and fight fires throughout the plant and within the warehouses. 

Monitoring and Review: Drenik monitors key performance indicators (KPIs) such as safety statistics, energy and water consumption, and waste generation.

As per ESAP item 1.1 and as part of the ongoing review process, the Group will consider introducing additional KPIs (near misses, use of PPEs, fire incidents, internal and external grievances, etc.) and start tracking them more consistently. The KPIs shall be reported on a monthly basis to the compliance management team. The team shall analyze near misses/root causes of incidents and implement corrective actions.                                                  

   The overall number of employees of the Drenik plant in Serbia is 658, of which 500 are involved with the production activities. Approximately 77% of the employees are male and 23% female. Most of the management functions of the Company are covered by six female employees. Drenik’s turnover in 2022 was approximately 12%, mostly associated with voluntary resignations. The CHP project will require 50 to 60 additional employees. 

Human Resources Policies, Procedures and Terms of Employment: Drenik has documented Human Resources policies and procedures that are consistent with the national labor regulations and with the IFC performance standards. 

Each worker receives a written contract that describes the working conditions and terms of employment, and an employee handbook is also provided.

Working Conditions and Management of Worker Relationships: The terms of employment of all Drenik’s workers are subject to the Serbian labor laws, which regulate salaries, overtime, benefits, leave and working conditions. In addition to the statutory requirements dictated by the law, all employees benefit from a private health insurance, which is paid for by Drenik.

Drenik does not prohibit the freedom to associate and workers’ right to join workers organization. The national labor union in not, however, active within Drenik and workers’ representatives are selected by the employees from each department (5 in total). Employees raise their concerns/suggestions to the management through the elected representatives. Drenik holds regular meetings with employees’ representatives and this interaction is the main channel for voicing employees’ grievances and suggestions to the management. There are no disputes and no major grievances to date.

Non-Discrimination, Equal Opportunity, and Protecting the Workforce: Drenik’s Human Resources policies prohibit child labor, forced labor and bonded labor practices.

Drenik’s policies encourage non-discrimination and equal opportunity for its staff. Ethnic and religious minorities are part of the regular workforce and receive same salary levels as ethnic Serbian workers. 

Grievance Management: Drenik has documented grievance mechanism for workers in line with its HR policy. The grievance mechanism allows for submission of anonymous grievances. As part of the Project, Drenik will also extend its grievance mechanism to the contractors’ workers. In 2022, the management received 7 grievances, mostly related to the quality of the personal protection equipment (PPE). As a result of the grievance, Drenik  has changed the PPE provider.

Occupational Health and Safety (OHS): Drenik has formulated a health and safety policy and has developed its H&S manual based on Hazard Identification and Risk Assessment. Drenik provides PPEs to its employees but their use in the production areas is subject to individuals’ judgement and preference. As described in ESAP item 2.1, the Group has agreed to adopt more effective means of engagement and training of the workers to establish the consistent use of PPE and safe working practices. In addition, the Group has agreed, as per ESAP item 2.2, to commission an independent review of the safety measures associated with the plant, processes and equipment, and implement any recommendations to upgrade the workers’ safeguards, especially in relation to older equipment.

Drenik collects incident data and develops OHS statistics. There have been no fatal accidents since commencement of the Company activities. However, Lost Time Accidents (LTA) recorded in 2022 (44 accidents resulting in 7,392 lost working hours) are behind international benchmarks for the industry. As outlined in ESAP item 2.1 Drenik has agreed to increase the number of safety supervisors to ensure that H&S functions are decoupled from production and to provide safety oversight during each production shift. As outlined in ESAP item 1.1, Drenik will strengthen its integrated management system and introduce additional H&S related KPIs to enhance the safety performance of the workforce and reduce the number of workplace accidents. Finally, Drenik will develop individual performance indicators for production supervisors, linked to the ESHS performance of the productions department and of the overall production plant (ESAP item 1.5).

A medic is present within Drenik’s premises from 08.00 to 16.00 during working days. A contract with a health care provider within the city is also in place. One every fifty employees is a trained first aider, as required by Serbian law.

Drenik retains external consultants to carry out workplace noise and indoor air quality monitoring and no exceedances of regulatory standards have been recorded.                                                

  Resource efficiency - Energy: Drenik currently relies on public utilities for electrical power. The heat required for the plant processes is generated through the combustion of compressed natural gas that is delivered to the plant by trucks. A gas pipeline is being built by Serbian Gas and may become operational in 2024.

Drenik consumes approximately 70GWh of electrical power and over 17 million cubic meters of natural gas, on an annual basis. The energy consumption per ton of paper produced is approximately 3500 kWh, slightly in excess of the World Band Group (WBG) Environmental, Health and Safety (EHS) guidelines for the pulp and paper industry (Paper Mill—Tissue: 500-3000 kWh/t).

Current GHG emissions amount to approximately 77,000 t of CO2 equivalent per year. Implementation of the CHP project will result in a 94% reduction of GHG emissions and a corresponding reduction of non-renewable energy consumption.

Resource efficiency - Water: Process water required for the plant’s operation is abstracted by Drenik from groundwater wells and amounts to approximately 50m3 per hour. Water for civil use and for the fire hydrants is obtained from the municipal water supply system.

The water consumption per ton of produced tissue paper is approximately 6.7m3, which is below the WBG EHS guidelines for the pulp and paper industry (Paper Mill—Tissue: 10-50 m3/t of produced paper).

Pollution prevention - Air Emissions: Gaseous emissions to the atmosphere are mostly associated with the combustion of natural gas in the plant’s boilers (7.75MW and 9 MW). No specific permit is required, and the plant is required to comply with the statutory emission limits. An independent laboratory is contracted to perform the emissions analysis and no exceedances of the statutory limits have reportedly ever occurred.

Air emissions for new CHP based on an identical proxy plant in Amsterdam are within IFC’s guideline values. To ensure compliance with IFC’s guideline values, Drenik will include this requirement in the EPC contract. Drenik will however perform point source emissions monitoring and ambient air quality when testing the CHP plan, prior to commencement of operations as described in ESAP item 3.1.

As per ESAP item 1.4, Drenik will conduct supplemental analysis to assess the potential risks and impacts of the CHP project on nearest residential areas, which will include pre-construction ambient air quality monitoring and air emission dispersion modelling. The results of the analysis will inform the final design of the CHP plant stack.

Pollution prevention - Wastewater Management: Three wastewater streams are generated by the plant: process wastewater, domestic sewage (from the offices, changing rooms and canteen), and storm waters. 

Domestic sewage is discharged to septic tanks, which are periodically emptied by authorized companies. Storm water is channeled to a sedimentation tank fitted with an oil water separator, from which the water is discharged to the surface water drainage network of the district. Process water is recirculated in the system after being treated at the plant by physical and chemical means, which include aeration, filtration, coagulation, flocculation and final clarification. Excess water in the amount of ~395,000 m3/year is discharged to the surface water drainage network of the district (K-5-25-1 channel, Kalovita channel) and finally to the Danube River. The effluent quality is prescribed by the regulation, as published in the Official Gazette of the Republic of Serbia n. 67/2011, 48/2012 and 01/2016, table 21.1. The wastewater treatment process generates sludge, which is dried and subsequently disposed of, as a solid waste, through authorized companies.

The wastewater treatment plant will be permitted as part of the IPPC permit, for which an application has been submitted to the Serbian Ministry for Environment. Effluent analyses are carried out by an independent laboratory and effluent quality complies with the statutory discharge standards and WBG EHS Guidelines for Pulp and Paper Mills (2007).

Pollution prevention - Waste Management: Solid waste is managed in accordance with the Drenik’s waste management plan. Solid waste includes recyclable waste streams: paper/cardboard, metal wires, plastic packaging and wood pallets. Non-recyclable waste streams include empty containers of lubricants or chemicals, neon lights, sludge from the wastewater treatment plant and canteen waste. The quantities of generated waste are recorded together with final disposal records, which are provided by the licensed companies contracted to dispose of the waste.

The majority of the waste is stored in segregated containers located in an open area of the plant where pulp bales are also stored prior to being used in the processes. As outlined in ESAP item 3.2, Drenik has agreed to implement a housekeeping improvement program to ensure that light weight waste material cannot be blown by the wind beyond the plant’s property fence.

As part of the CHP project, the Drenik will assess the feasibility and regulatory requirements associated with the disposal of the sludge generated by the wastewater treatment plant in the wood chip boiler. The CHP plant will generate ash as a result of the combustion of wood chips. Drenik has secured a contract to dispose of the ash at the local municipal landfill. However, alternative options to reuse the ash will be considered once the ash is being produced and its chemical properties can be analyzed.  

Pollution prevention - Hazardous Materials Management: Relatively limited quantities of hazardous materials (drums of lubricants and chemicals for the process and the wastewater treatment plant) are handled at the site. The containers are stored within the plant and the potential for pollution of soils or groundwater is therefore very low.                                                 

  As per ESAP item 1.4, Drenik will conduct supplemental analysis to assess the potential risks and impacts of the CHP project on nearest residential areas, which will include a traffic impacts study and an accommodation plan for construction workers, inclusive of a workers influx plan (if needed). Drenik is committed to manage negative impacts, if any are identified by the studies, in accordance with the mitigation hierarchy, in compliance with national legislation and IFC’s Performance Standards.                                                 

  The project is located in the Krnjaca Industrial Zone of Belgrade, which falls within the Pannonian mixed forests ecoregion of the temperate broadleaf and mixed forests biome (as designated by World Wildlife Fund). The CHP Project will be developed within an industrial zone in modified habitat, with no overlap with protected areas or priority biodiversity values.

Sustainable Management of Living Natural Resources. The CHP Project will rely on the supply of approximately 90,000 tons per year of biomass originating from timber products that are 100% traceable. Timber products will be obtained from the Serbian Forest Management Agency, Srbijašume (https://srbijasume.rs/en), which manages 893,204 ha of forest land in Serbia and follows the principles of sustainable forest use. All 18 forest estates under the management of Srbijašume are certified by a reliable third-party standard. Timber that Drenik will purchase from the Agency will be obtained through forest maintenance activities, which include thinning, sanitation felling and clearance of offcuts from commercial timber logging, and, as per certification requirements, not as a result of production in areas where there will be the risk of significant habitat conversion. Additional biomass for the CHP plant may consist of maintenance waste from green public spaces’ maintenance, which will be sourced from the Municipality of Belgrade or other cities. In accordance with its procurement policy to be developed as per ESAP item 1.3, Drenik will ensure that all biomass will be sourced from suppliers that do not lead to significant conversion of forest habitat.                                                 

The Company disclosed information about the proposed CHP Project according to the regulatory requirements, which include the publication of the preliminary Environmental Screening on national newspapers and, after issuance of an official opinion by the Ministry of Environment, an additional publication describing the Project scope and the outcome of the assessment carried out by the Ministry of Environment.

No additional stakeholder engagement activities are required by Serbian law in relation to the plant operation or the CHP Project.

As described under ESAP 1.7, Company will establish an internal procedure for addressing E&S related questions from members of the public, during construction and operation of the new plant.                                               

      Drenik ND d.o.o.

Pancevacki Put 69, Beograd, 11210, Serbia