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 implemented a management system that covers environmental, OHS, and HR aspects in the existing plant and logistics operations. It has an integrated E&S policy that includes management of contractors, as well as relationships with communities. Company’s code of conduct is applicable to employees, contractors, and suppliers of Luminova’s entire operations, and it covers the provision of working environment, safe working conditions, human rights, equal opportunities and non-discrimination, anti-sexual harassment, integrity, and grievance mechanism. These principles are cascaded into the corporate E&S procedures, standard operating procedures (SOPs), and work instruction documents. Corporate procedures and the code of conduct are disseminated through the company’s platform, and signature is required before joining the company and at the contract with third-party contractors and suppliers.
The proposed project does not entail a greenfield development; therefore, a new Environmental and Social Impact Assessment (ESIA) is not required. The company’s E&S risk identification and management programs are comprehensive to address E&S risks associated with manufacturing and distribution operations. Accordingly, the company has developed and implemented management programs. The programs include E&S instructions, covering aspects such as effluents, emissions, solid waste, accident investigation, OHS risk management (physical, chemical, biological, and ergonomic risks), road safety, and emergency response. The company operates on the lands acquired on a willing buyer willing seller basis and acquisition of new land is not foreseen for the proposed projects.
For the M&A, the company was in the process of the acquisition of a production plant in Spain at the time of appraisal in February 2024. During the acquisition phase, the company completed a technical, financial and legal due diligence of the plant, including desk review and site visits. For future acquisitions in line with the PS, the company will update a E&S due diligence framework to assess additional E&S aspects such as land acquisition/or leasing, Life Fire and Safety (L&FS), environmental risks and impacts, HR aspects, OHS risk management, and security management practices as part of the M&A due diligence, establishing a clear eligibility for the approval of M&A (ESAP#1). Regarding the plant to be acquired, the company will undertake a gap analysis of E&S aspects, including organizational capacity, OHS management, HR, effluent management, L&FS, emergency response, and security forces against the requirements of PS and will implement time-bound corrective action plans to close any gaps identified (ESAP #2).
Luminova will update the E&S policies and procedures into a corporate level ESMS, that will be implemented at the existing and to be acquired plants. The ESMS will incorporate the following elements per the IFC PS requirements and WBG EHS General and Pharmaceuticals and Biotechnology Manufacturing: (i) identification of environmental risks and impacts; (ii) management programs (HR policies, Worker’s Grievance Mechanism, OHS management, Contractor Management, Resource Efficiency Management Plan, Liquid Discharges Management, Hazardous Material Management, Solid and Hazardous Waste Management, Pesticide Management Plan, Monitoring Program); (iii) Emergency Preparedness and Response Plans (EPRP); and (iv) Stakeholder Engagement Plans at facility level, and External Grievance Mechanism (ESAP#3).
Organizational Capacity and Competency.
Luminova has a corporate structure to manage risks in the existing plants and logistics operations. At corporate level, key E&S functions are led by the Director of Organizational Development and Director of Process Optimization and Commercial Operations who report to General Director. At the time of appraisal, the position of environmental manager was vacant, and the company was in process of hiring a replacement with established terms of reference. Under the environmental manager role, there are coordinators who oversee maintenance of infrastructure, machineries, water treatment, and calibrations at each plant. For the M&A, there is a responsible team reporting to the committee represented by directors to manage the M&A due diligence and integration process. Communication department implements the stakeholder engagement and management of external grievance mechanism.
The company will hire a qualified environmental specialist with specific roles and responsibilities to oversee the environmental aspects of the existing plants and plants to be acquired (ESAP#4).
Additionally, as part of ESAP#2, the company will assess the organizational capacity of the acquired plant and appoint responsible manager(s) to oversee OHS, HR, environment, and security aspects at facility level to standardize and implement E&S procedures and management practices of the acquired plant in line with PSs.
Emergency Preparedness and Response.
As explained in the PS2 section, the company has implemented an OHS program with procedure and programs that includes the preparation for emergency events, maintenance and inspections of emergency systems and the reduction of fire incidence through periodic inspections and training.
The company has an emergency planning and preparation plan (EPRP), and has implanted a complete emergency brigade. Within the EPRP, the company has signed memorandum of understanding with the local Fire Departments, in which the fire departments agree to cover fire events and medical emergencies with high priority, and to provide specialized training to the emergency brigade in firefighting technics, evacuation and first aid. The agreement also covers their active participation in inspections, emergency practices and drills.
Annually, the company carries out emergency drills, focusing on fire scenarios and on evacuation, in order to guide the employee on how to respond to this type of emergency, in addition to being able to identify which routes, emergency exits, and meeting points can be used to make a correct evacuation. As per the ESAP#3 under the ESMS, the company will update EPRPs of the plants and will clearly describe the fire protection systems, making reference to the agreement with the fire department and will improve the description of the actions in case of fire and explosions, and the other probable risk scenarios.
In addition, the company will engage a L&FS specialist consultant to perform a risk-based review of the Novoswiss plant. The result of this evaluation will produce a timebound action plan and confirm the requirement of the fire suppression system for the plant (ESAP#5).
Monitoring and Review
The key monitoring aspects include: liquid effluent, water quality, general and hazardous wastes, air emissions, workplace exposure to noise, OHS incident statistics, HR aspects, workers grievance statistics, emergency response, and E&S trainings. Monitoring outcomes are reported to the senior management at least quarterly, for the continuous improvement.
PS2: Labor and Working Conditions
Human Resources Policies and Procedures / Working Conditions and Terms of Employment.
Approximately 72% of workforce is based in Guatemala and the rest of workforce is distributed in Central and South American As of February 2024, Luminova employs around 980 direct employees (technical, administrative and corporate staff) of which 60% are women. regions. The company hires approximately 100 contractors of which 90% are based in Novoswiss plant and the rest engages in the storage operations in the warehouses. The plant to be acquired has approximately 50 employees, including technical and administrative staff.
The company’s HR regulations and code of conduct are communicated to employees through induction and training programs. The regulations cover terms of employment, compensation and benefits, OHS requirements, recruitment and promotion, workers’ grievance, non-tolerance to sexual harassment, professional development, non-discrimination and equal opportunity, and prohibition of child or forced labor. The employment contracts define working hours, working days, rest time, holidays, duties, salary and benefits. At the plants, workers have three shifts, depending on the type of work performed. The company offers meals, snacks, and free transportation specifically for those who engage in night shifts. The company pays wages and overtime required by local laws. As part of ESAP#3, the company will integrate HR policies and procedures of the acquired company into Luminova’s corporate policies and implement in line with PS2.
Workers’ Organizations.
Approximately 60% of Luminova employees are the members of workers association. Members receive some benefits including savings program, school assistance program, and access to medicines through its own pharmacy. According to the company, there has not been strikes or protests from workers.
Retrenchment.
Luminova has not implemented retrenchment in the recent years. The company is expected to grow as a result of acquisition of the new plant and does not expect to implement it as part of the proposed project. In case Luminova identifies the need to undergo retrenchment in the future, the retrenchment will be carried out as per the requirements of the PS2.
Worker Grievance Mechanism / Prevention of Sexual Harassment.
The company implemented a workers’ grievance mechanism allowing for anonymous and confidential complaints. The channels are accessible via multiple ways and accessible to employees without risk of retaliation (Telephone, HR intranet, Suggestion boxes, Coffee with directors). Employees in general speak directly to the line supervisors, use internet, or HR department. The company has a flow of grievance resolution and responsibilities described in the Code of Conduct, and grievances received are documented and followed up by the HR Department or Ethics Committee until its closure. However, this process is not formalized as a documented grievance management procedure.
The company’s Code of Conduct stipulates the non-tolerance of sexual harassment and disciplinary measures. Although the company established the confidential grievance channel, it does not have a sexual harassment policy and specific grievance mechanism to handle cases related to gender-based violence and sexual harassment (GBVH). The company implements GBVH training where it explains the definition and types of harassment in the workplace environments, its implications, disciplinary measures, and how to prevent and manage such risks. The training programs have been rolled out to employees, supervisors, contractors, including security personnel.
The company will (i) formalize the procedure of worker’s grievance mechanism covering existing and acquired operations, for workers to be aware of the use of channel and process of handling, (ii) establish a sexual harassment policy and procedure to manage grievances related to GBVH risks in the Luminova’s operations, and (iii) conduct the analysis of grievances per category of grievances received for continuous improvement (ESAP#6).
Occupational Health and Safety.
The company has implemented OHS policy and programs covering the risk identification, corresponding preventative measures, trainings, workplace monitoring, work permits system, accident management system (reporting, investigation, root cause analysis and corrective actions), and emergency prevention and response for plant, distribution business (warehouse, logistics), and administrative operations. Key risks covered in the programs include ergonomics, mechanical, chemical, biological, psychosocial hazards, and fire safety. Employees and contractors are provided with information of risks related to the job position, personal protective equipment (PPEs), and trainings. Employees undergo a pre-employment medical check as well as annual health checks required by law for healthcare, and occupational illness prevention. Trainings are annually planned and updated based on the needs identified through OHS incidents and risk analysis. In addition to the quarterly internal audit, the company has adopted a monthly inspection system conducted by corporate OHS team and leaders of subdivisions of the plant to ensure the adequate use of PPEs, maintenance of machineries, and housekeeping practices. Findings and observations are reported and discussed with senior management.
In 2023, the lost-time injury frequency rate (LTIFR) per million hours worked was 1.6 compared to the 2.5 of industrial benchmark (US Bureau for Labor Statistics 2022 for pharmaceutical and medicine manufacturing). There have not been serious incidents or fatalities among employees and contractors in the past three years.
As part of ESAP#1 and #2, the company will review the OHS policies and procedures of the plant to be acquired to integrate into Luminova’s corporate policies, and provide adequate OHS capacity at the plant level in line with PS2 and EHS Guidelines, including the acquired ones.
Workers engaged by Third Parties.
The company engages with approximately 50 third-party service providers for maintenance of equipments, logistics, pest management, catering, cleaning, security service, and transport & disposal of hazardous waste, among others. The company has implemented a screening system of third-party providers through the verification of regulatory requirements regarding E&S aspects, certifications, and internal checklist. As per the local regulations, the company has developed and implemented Code of Conduct, internal regulation of OHS, and contractor management practices that include labor, OHS provisions (PPEs, work permits, adequate use and maintenance of equipments, housekeeping practices, emergency responses), and environmental provisions (use and management of hazardous materials, waste management) to provide the adequate E&S conditions of third-party workers. In case of incompliance, the company requires a time bound action plan to implement corrective actions or holds rights to terminate the contracts.
PS 3: Resource Efficiency and Pollution Prevention
Resource Efficiency and Greenhouse Gases (GHG) Emissions
Luminova relies mostly on electricity from the grid; the annual consumption for all plants is approximately 5,460 MWh/yr and an estimated natural gas consumption of 70,296 m3/yr . Water is sourced from water wells and the municipality at visited plants. Water used for production undergoes extensive microbiological treatment depending on the use and quality required for the water (potable, purified or highly purified water, water for injectables, etc.).
The GHG emission is estimated to be less than 25,000 ton carbon dioxide equivalent per annum based on the average energy consumption data.
As part of ESAP#3 under the ESMS, the company will develop and implement a resource efficiency management plan in accordance with Good International Industry Practices (GIIP). As part of the plan, the company will also identify opportunities to reduce resource consumption (e.g., water usage per production unit, tCO2eq per production unit). GHG emissions calculation will include assets to be acquired and will be monitored through the future supervision activities.
Pollution Prevention and Control
The company has a procedure to control and perform the monitoring of air emissions from process units and combustion sources. According to the annual monitoring reports provided by the company, air emissions at both production plants are in compliance with the local laws and WBG EHS Guidelines for General and Pharmaceuticals and Biotechnology Manufacturing. As part of ESAP#3 under the ESMS, the company will include the capacity of boilers used in the plants and monitoring requirements against the small combustion facilities emissions guidelines (Table 1.1.2).
Liquid effluents from Novoswiss plant are treated by wastewater treatment plant (WWTP) through physicochemical and biological treatments before it discharges to the absorption wells. Industrial effluents from Helvetia plant are treated in a settling pond before being discharged into the absorption wells, while sanitary wastewater is transferred to a septic tank. Sludges are collected, transported, and disposed by licensed third-party contractor at both plants. Similar systems will be adapted to the plant to be acquired.
The quarterly monitoring results of effluents results are in compliance with local regulations. However, the following parameters were exceeding the guidance values of the General EHS Guidelines and EHS Guideline for Pharmaceuticals and Biotechnology Manufacturing: total suspended solid (TSS), grease and oils at Novoswiss plant and biological oxygen demand, chemical oxygen demand, total nitrogen, total phosphorus, grease and oils, and TSS at Helvetia plant. At Helvetia plant, the company is developing a WWTP project to be operational by March 2024, which is expected to treat the wastewater in line with the guidance values.
For each facility, by use of an expert, the company will conduct a comprehensive risk assessment review of the treatment and discharge of process effluent to the receiving environment. The scope of review will include (but not limited to) a fate and transport mass balance around all chemicals used as process inputs (i.e., ingredients used for the manufacture of pharmaceutical products), and process byproducts discharged to the wastewater stream (ESAP#7).
In addition, the company will establish a monitoring program of air, water, soil, and groundwater parameters for each facility with the scope informed by the risk assessment conducted as part of ESAP#7. The monitoring program will be appropriately scaled and provisioned with adequate financial and organizational resources and support. The monitoring program will be designed, implemented and oversight provided by an expert with relevant good international industry practice. (ESAP#8). The monitoring program and outcomes will be in compliance with applicable regulatory requirements, the General EHS Guidelines, and EHS Guideline for Pharmaceuticals and Biotechnology Manufacturing.
The company has an adequate solid management plan and practices in line with the mitigation hierarchy, including waste reduction, classification, storage, and disposal through authorized entities. It also includes the personal protection equipment (PPE) and trainings required for waste handling. The company classifies waste into several groups: general, hazardous (industrial), biomedical, and recyclable waste. General waste is collected by municipal entities, while other types of hazardous waste are collected and disposed of by licensed third-party companies.
Hazardous materials used by Luminova include LPG, diesel for emergency generators, chemicals and active raw materials products used for the production process (cleaning, laboratory reagents, chemicals, solvents, formulation of drugs, etc). Raw materials and pharmaceutical ingredients are properly classified and stored in warehouses in accordance with Good Manufacturing Practice, being standardized as a hazardous material handling program. There are designated areas for flammable materials. Materials requiring temperature and humidity controls are set within special areas with proper ventilation and containment. Safety Data Sheets are readily accessible at each production or storage area.
The company engages with service providers for pest control and products. The company currently uses a pesticide listed as Ia (extremely hazardous) for the rodent control. As part of the ESAP#3 under the ESMS, the company will develop and implement a pesticide management plan that describes a phase-out process of the hazardous pesticide listed in the World Health Organization’s Ia or Ib.
PS 4: Community Health, Safety & Security
Infrastructure and Equipment Design and Safety, Life and Fire Safety
The facilities visited had fire extinguishers, complete fire alarm and fire detection systems, and hazard warning, emergency lighting and exit signs in all areas. Also, it was observed that these LFS systems were well maintained and in good operational condition. Each facility has an emergency preparation plan and the required voluntary fire brigade, that has been conformed and trained based on local regulations.
Presently, all the facilities had passed the local “Proteccion Civil” assessments. All fire protection systems in the production plants have been designed to current local Guatemalan regulations. The production plants maintain close contact with the local fire department that has issued the respective building fire permits for all existing plants and buildings.
Road Safety
Transportation operations within Guatemala is operated with own fleets and own staff. The company owns six fleet of trucks that are exclusively used for delivery to the airport from the plants. Transportation operations outside the country are sub-contracted to specialized companies with safety and verification protocols. The company addresses the risks to communities resulting from of transport-related activities by implementing a road safety and prevention protocol, emergency response plan for road accidents, daily inspections of fleets, and speed control & monitoring through a global positioning system. Drivers are allowed to perform loading and unloading operations during daytimes in the designated space.
Security Personnel
While security personnels, provided by the private security contractors, in the office buildings are unarmed, the company works with armed security personnel at the strategic areas of the plants and warehouses. The company has adopted a policy and protocol, which details the security management structure, its objectives, and instructions on the work ethics and behaviors of security guards to attend workers, suppliers, and general visitors. The security risk assessments have been developed and updated quarterly for both plants in Guatemala.
The security companies are duly accredited under Guatemalan regulations. Security contractors are vetted with a background check (criminal record and sexual abuse), documentation, and accreditation. Security contractors are required to participate mandatory trainings including code of conduct, human rights, and principles of proportionality, HR policy and procedures, first aid, and prevention of sexual harassment. According to the company, there have not been any incidents or grievances related to its security arrangements.
The company will develop and implement security risk assessments and management plans covering all the assets in Central and South America as well as acquired plants, aligned with PS4 requirements. The security management plans will include: (i) security management objectives and targeted stakeholders, (ii) internal and external risks identified in the security risk assessment, (iii) security arrangement employed within facilities, (iv) incident reporting, (v) training requirements for security personnel and (v) KPIs for the security management and trainings. The company will require the security personnel to be adequately trained at all operations consistent with principles of Human Rights (ESAP#9).
