Environmental and Social Assessment and Management System, Identification of Risks and Impacts and Management Programs

Although Farmaenlace does not have a formal E&S management system (“ESMS”) in place, its practices are conducted in line with local law requirements and it has obtained the required environmental permits for operation, which are issued by the local environmental authority in Quito. According to the meetings held with the company’s representatives, the Company is currently preparing its first sustainability report in line with the Global Reporting Initiative – GRI. A new storage facility is under construction in a plot near the current operations, and currently, the construction is at an early stage and mainly related to preliminary works. As per ESAP action No. 1, Farmaenlace will develop, implement, and maintain a corporate ESMS, in line with IFC PS requirements, covering all its operations and new developments. The ESMS will incorporate (but not limited to) the following elements: (i) an overarching E&S policy; ii)E&S risks and impacts identification process, including current operation and construction activities; (iii) plans and specific management programs to mitigate E&S risks and impacts, including a contractor’s management plan as described below; (iv) E&S capacity, including roles and responsibilities and training needed, as described in following paragraphs (Organizational Capacity and Competency); (v) stakeholder engagement; and (vi) monitoring and review, in line with PS requirements, described in the paragraphs below.

Organizational Capacity and Competency: Farmaenlace’ s E&S aspects mostly related to its operation activities are currently managed by the Project Manager and legal department of the Company. Farmaenlace will clearly define the corporate E&S roles and responsibilities, including E&S management system implementation and operation, ESG performance monitoring and compliance reporting to senior management, and for overseeing community/stakeholder engagement and community grievance mechanism as discussed below. Furthermore, Farmaenlace will design and implement an E&S training program for their staff. Training will include health and safety aspects, risks and impacts, management of contractors, stakeholder engagement, and ESMS plans, and procedures aligned with IFC PS1 (ESAP Action No. 2).

Monitoring and Review: During the operation, the company retains an external environmental consultant in order to verify company’s performance and operation permits compliance. Annually, this consultant prepares and deliver an E&S report to the relevant authority describing programs compliance and delivering the evidence of it. However, Farmaenlace does not have a formal procedure to undertake monitoring and review of its E&S performance. Farmaenlace will develop E&S monitoring and reporting procedures, including procedures to oversee its operations and project construction. The procedures will define monitoring mechanisms and Key Performance Indicators - KPIs, including environmental, occupational health and safety and social KPIs (Please see ESAP Action No.1).

Emergency Preparedness and Response: Farmaenlace has a set of fire safety procedures describing the actions to be taken in the event of fire, mechanisms for fire detection and prevention, evacuation procedures, roles and responsibilities of the various staff and security service, which are reviewed regularly.

Human Resources Policies and Procedures, Working Conditions and Terms of Employment

Farmaenlace currently has 4712 direct workers, 44% of which are male and 66%, female. Company’s Ethic Corporate Code includes its commitment on conflicts of interest; non-discrimination, anti-sexual harassment, transparency and integrity, generally in line with IFC PS2 requirements. In addition, Farmaenlace has a whistleblower procedure that addresses offences, violation/non-compliance of company’s policies/corporate codes. However, this procedure does not receive anonymous complaints. Farmaenlace follows national requirements related to minimum wage, benefits, working hours, shift times and overtime payment. Farmaenlace, as per ESAP action No 3, will update the protocol that relates to sexual harassment and Gender Based Violence to include a mechanism allowing anonymous complaints to be raised and addressed. Additionally, these enhancements will also include the definition of appropriate and accessible channels and a clear timeframe for their response or resolution.

Workers Engaged by Third Parties

Farmaenlace’s constructions activities rely on contractors. Farmaenlace delegates construction responsibilities to a Project Manager to select and hire the required companies for each phase of the project. Farmaenlace will develop a contractor management procedure to include relevant IFC PS 2 labor provisions of their contractor’s workers. The contractor management procedure will define and establish E&S requirements for contractors to comply with the company’s E&S policies and procedures as well as IFC’s PSs, as relevant, oversight procedures for their E&S performance, and actions to be taken for non-compliance. The contractor management procedure will include: (i) minimum E&S requirements for contractors in line with the IFC PSs (including mandatory competency trainings etc.), (ii) E&S pre-qualification criteria and process, (iii) communication and training, (iv) E&S audit, (v) requirements and process for E&S risk assessment prior to work commencement, (vi) E&S monitoring and reporting (including performance indicators), and (vii) requirements and provisions regarding compliance with labor host country law and PS2 (including nondiscrimination, compensation, training, timely payment of salaries, freedom of association, no child/forced labor, grievance mechanism, occupational health and safety, etc.) (ESAP Action No. 4).

Additionally, the pharmacies' sales are mostly face-to-face based, however, part of them use third-party services for delivering medicines to final consumers. Those companies are mostly gig-economy based; therefore, Farmaenlace will take necessary actions to ascertain that these companies have relevant PS2 provisions in place in relation to compliance with local labor law regulations, practices avoiding force/child labor, policies and programs aimed at providing contracts with clear terms and conditions in a language they understand, and providing safe and healthy conditions, among others in line with PS 2 requirements. (ESAP No 5)

Occupational Health and Safety (“OHS”)

Farmaenlace has internal policies and plans to manage the related OHS aspects, including a risks identification and control procedure, health security inspections, safety induction, OHS training programs, and an incident system that includes accident reporting, investigation, and corrective actions. During the last three years, no significant accidents and/or fatalities were reported, and the number of accidents per year are below 30 (LTIFR 1.5 which is less than the benchmark for retail companies). Farmaenlace does not have a systematic approach to monitors contractors’ performance, therefore, as per ESAP Actions No. 4, Farmaenlace will develop procedures to ensure oversight of occupational health and safety performance of their contractors during construction.

Resource Efficiency

Electricity is sourced from the public grid for all facilities. The company has implemented resource efficiency initiatives including use of light fixtures with LEDs, design of the buildings with natural ventilation, which represent energy saving feature in air conditioning and mechanical systems, and they are envisaging to install solar panels for a distribution center (Llano Grande) intended to provide part of their own consumption. Additionally, as part of this transaction with IFC, the Company will potentially implement and obtain an EDGE certification for its new storage-distribution facility. All facilities monitor the electricity and water consumption, and the data is reported to the corporate team. However, there is no either programs or goals aimed at reducing, nor defined KPIs to monitor their progress. As part of the ESAP No 1 action, Farmaenlace will define resource efficiency programs using relevant KPIs and goals as part of the required ESMS.

Greenhouse Gases (GHG) Emissions

Although the company monitors its energy consumption, they do not quantify its footprint regarding to GHG emissions. Going forward, Farmaenlace will quantify its direct GHG emissions from the facilities owned or controlled within the physical project boundary, as well as indirect emissions associated with the off-site production of energy used by the project, in accordance with internationally recognized methodologies and good practice. GHG will be reported to IFC, as a part of annual monitoring report.

Water and Wastewater, and Solid Waste Management

Water for all its facilities is supplied from the public network. The wastewater is discharged into the public sewage system of the cities. Waste is mainly from the operation and administrative buildings. All non-hazardous waste is temporarily stored in containers and properly disposed later by local licensed third-party contractor. The hazardous waste is mainly expired medicines or drugs which are given back to the manufactures in an extended producers responsibility program. Transport (vehicles and logistic) is provided by the manufactures. The Company has a recycling program including a reusing practice for part of the raw material such as carton and plastic. However, most of those recycling materials are collected and delivered to authorized companies for their treatment.

Community Health and Safety

All the buildings and facilities have obtained operation permits from the local fire department. Part of process for a new pharmacy includes appropriate design and mitigation measures following local regulation, and the required approvals from relevant authorities. All the devices and installations intended for fire prevention are tested annually by an external and specialized third-party. Additionally, Farmaenlace has in all its facilities trained emergency brigade and provided with tools and equipment (communication and alarm system) to manage potential emergency scenarios.

Security Personnel

Farmaenlace’s facilities (e.g., distribution and storage centers) are guarded with unarmed security guards from private security agencies that have the responsibility to prepare the Security Risk Assessment (SRA) and vulnerability analysis. The security service is trained according to local regulations. Small pharmacies do not hire security service, but they use tv closed circuits for monitoring.