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.
PS1: Assessment and Management of Environmental and Social Risks and Impacts
Environmental and Social Assessment and Management System
The Company’s operations are driven by four main policies covering health and safety, quality, resource efficiency and sustainability. Through its policies, Fitesa commits to i) comply with all applicable legal and other requirements regarding E&S issues, including OHS; ii) to work in the reduction of its environmental impacts; and iii) to work in the prevention of work-related injuries.
The Company has established a corporate E&S management system (ESMS) that is aligned with the requirements of PS1 and commensurate with the scale and E&S impacts of its operations. The corporate ESMS has been cascaded down and adapted to the specificities of each facility.
The Company 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. As part of the ESMS, Fitesa has a corporate procedure for the identification of E&S risks and impacts related to its operations. Based on the corporate guidelines and considering local conditions, individual plants define their significant environmental aspects and impacts and associated management plans. As part of the ESMS, Fitesa has established procedures related to waste management, hazardous materials management and occupational health and safety, a Process Safety Management and Management of Change procedure to ensure that OHS and environmental issues have been adequately addressed for expansion or modifications of production facilities. As part of ESAP #1, the Company will expand the existing checklist to include impacts on communities, biodiversity and land acquisition in alignment with the requirements of IFC PSs.
As part of the corporate EHS management, the company monitors key performance indicators (KPIs) through internal and external audits. Fitesa has recently implemented a cross facility auditing program. Non-conformities are recorded, reviewed and root causes discussed to define related corrective actions.
Organizational Capacity and Competency
Fitesa has a dedicated team to oversee HSE aspects. There is a Corporate Quality Assurance, Health Safety and Environment and Management System Director that reports directly to the chief operating officer (COO) and is supported by the Corporate Global Quality Manager, the Corporate HSE Coordinator and the Corporate Global Management System Specialist. A Corporate Senior Director of HR, Marketing and ESG reports directly to Fitesa’s CEO. The Plant Manager at each facility, which is the ultimate responsible for HSE issues reports directly to Fitesa’s Vice-President. There is an HSE supervisor for the Sao Paulo facilities that is supported by HSE analysts and technicians at each manufacturing facility. For Gravatai (RS), there is a Quality and HSE Manager supported by environmental, quality, OHS technicians and assistants. Overall, the E&S, OHS, and HR teams were observed to have appropriate qualifications and experience.
Emergency Preparedness and Response
Fitesa has documented emergency preparedness and response plans (EPRP) at each facility to respond to non-routine events such as fires and explosions, chemical spills and medical events, among others. The EPRP also includes emergency communication procedures within the Company, roles of the emergency brigade, available equipment and contact information of relevant third parties. As per ESAP #2, Fitesa will be required to include climate events such as floods and heat-related events. Moreover, Fitesa will assess the potential risks and impacts from project activities to surrounding communities and inform them of potential hazards. Fitesa will include potential affected communities in regular training exercises (e.g. simulations, drills, and debriefs of exercises and actual events) to familiarize them with proper procedures in the event of an emergency.
Supply Chain
Fitesa’s main raw materials include synthetic polymers and fibers. As part of its expansions plan, the Company is considering expanding its capacity to convert biobased materials in its production process, including bio-polyethylene and fluff pulp. As part of the ESMS, Fitesa assesses and monitors its suppliers. As per the Company’s Supplier’s Manual, Fitesa requires its suppliers to i) implement management systems that guarantee the prevention and treatment of environmental and occupational health and safety risks; ii) follow the principles of Fitesa’s Code of Conduct, which includes provisions against child and forced labor and occupational health and safety, which is consistent with PS2 requirements for supply chain; and, iii) have a traceability system that covers the entire production process (from raw material to final product). For its sourcing of biobased or agro-commodities materials, Fitesa will: i) update its supply chain policies and procedures to ensure supplied materials are deforestation and conversion-free; ii) develop a register to record the yearly verification of supplier’s compliance with Fitesa’s requirements. The verification may include, review of the supplier’s certification systems, audit reports conducted by qualified third-parties as well as written evidence indicating the origin of the product (ESAP #3).
PS2: Labor and Working Conditions
Human Resources (HR) Policies and Procedures
As of September 2023, Fitesa employs 638 direct employees in its Brazilian operations, distributed in the following manner: 35 at the Corporate Office, 322 at the Gravatai Plant, 110 at the Cosmopolis Plant, 121 at the Jacarei Plant and 50 at the Diadema Plant. Of the total directly employed staff, 15% percent are women. Third-party workers include those contracted for the operations of the cafeteria, janitorial services and security.
Fitesa has not significantly changed its existing human resources policies and procedures. These cover recruitment, compensation and benefits, performance evaluation, transfers, training and career development that are applicable to all employees. The Company offers workers all basic benefits guaranteed by Brazilian laws and respects freedom of association. Compensation packages are agreed every year or every two years in the collective bargaining agreements (CBAs) with the labor unions. Human Resources practices are consistent with PS2 requirements.
Fitesa’s Code of Conduct was updated in 2022 to incorporate United Nations Global Compact principles which include freedom of association and right to collective bargaining, elimination of all forms of child and forced labor and discrimination. Further, the Code of Conduct includes the Company’s commitment to conduct its business in compliance with all applicable health and safety and environmental laws and regulations in the workplace and to provide a safe and healthy work environment. The Code also outlines the Company’s principles with regards to harassment and discrimination. Fitesa’s HR policies aim to ensure that all employees are treated fairly and with respect and dignity, prohibiting any form of harassment or discrimination based on color, nationality, race, religion, ethnic or national origin, sex, marital status or disability.
The Code of Conduct is communicated to all new employees during the induction process, and specific training programs are conducted throughout the year. Breaches to the Code of Conduct can be reported through an Ethics Channel (see below under “Grievance Mechanism” for more information).
Grievance Mechanism
Fitesa has an integrated grievance mechanism in place, called Ethics Channel, through which staff members, including third-party workers may raise concerns about any misconduct associated with the Code of Ethics. Grievances can be registered through a toll-free number, email, or the company’s website at https://www.canaleticofitesa.com/Brasil/welcome.html. The mechanism allows for anonymous complaints related to non-conformities to the Code of Ethics (e.g., corruption, sexual and psychological harassment). The Ethics channel is run by a third-party contractor (Ernst & Young) which receives, classifies and channels grievances to Fitesa’s Ethics Committee composed of the HR manager, relevant plant manager and ESG Director.
The Ethics Channel has also a User Guide, available on the same website, describing who can use it, when, how and what are the available channels. It also superficially describes how the information will be processed/analyzed. Most grievances are related to subordination issues and there have not been sexual harassment complaints. As requested by ESAP #4, to improve the efficacity of its existing channels, Fitesa will update its Code of Conduct and associated User Guide to: i) include GBV&SH as one of the issues that can be reported; ii) define specific timelines to respond and investigate grievances; iii) outline specific roles and responsibilities of the Ethics Committee; and iv) clearly indicate the existing channels in the Code of Ethics. Moreover, Fitesa will appoint and train a focal point to handle sensitive issues, including GBV&SH complaints that will be a member of the Ethics Committee. The composition of the committee should factor in the demographics of the workforce, so there is adequate representation including women. In addition, the Company will develop and implement a periodical awareness-raising campaign on GBV&SH.
Occupational Health and Safety
In 2022, Fitesa has implemented its called “’Safety Golden Rules” across its operations to promote safe behaviors and a safer work environment through training and open communication on safety. This set of rules aims to simplify communication and understanding of the main safety risk areas and is applicable to all employees and subcontractors. The Safety Golden Rules are composed by 8 rules covering i) lock out and tag out; ii) use of personal protective equipment; iii) machine safeguarding and safety devices; iv) hands and fingers safety; v) risk assessment; vi) fall protection; vii) tools and equipment; and viii) powered lifting equipment.
Each plant has an OHS Management System that follows the requirements of the corporate management system while reflecting local requirements and specific risks associated with the facilities’ operations. Each facility has its own OHS program, occupational risks inventory and related mitigation measures. Main OHS risks associated with Fitesa’s operations are related to machine safety, electrical shock, confined spaces, work at height, exposure to noise and chemicals and incidents related to powered industrial vehicles such as forklifts. Workplace OHS monitoring results are broadly consistent with national legal regulations. While some areas exceed 85dB noise values, workers are provided with ear plugs and employees were observed to use personal protective equipment during the site visit.
Fitesa collects the incident statistics on a monthly basis from each site. Until August 2023, there were no recordable incidents in Jacarei and Gravatai, and there were two lost time incidents in Cosmopolis. In 2022, there was one lost time incident in Jacarei, three in Gravatai and none in Cosmopolis.
The operations at the plants are mostly automated and require a relatively low number of workers per shift. The plants were found to have adequate signage and good housekeeping conditions. The Company is currently implementing several OHS initiatives, including Life and Fire Safety improvements and adaptation of machinery as required by Brazilian regulations NR-12 for Machine Safety. Going forward, to enhance its OHS practices, the Company will: i) include heat -related risks in the inventory of OHS risks considering temperature increase due to climate change and implement adequate mitigation measures; ii) implement mitigation measures to reduce dust explosion hazards in Jacarei, including the formalization of a house keeping procedure to avoid the accumulation of dust; iii) complete improvements and adaptation of machinery in line with the latest NR-12 update (ESAP #5).
Workers Engaged by Third Parties
Fitesa continues to outsource janitorial services, food services at the cafeteria and security of its facilities. The Company’s contracts with these contractors require compliance with Brazilian regulations. Moreover, Fitesa has a documented procedure outlining the requirements that should be followed by all third parties. Outsourced workers are required to attend OHS and other relevant EHS training during induction process.
PS3: Resource Efficiency and Pollution Prevention
Resource Efficiency and Greenhouse Gas (GHG) Emissions
Fitesa sources water, electricity, and natural gas from the grid and continuously monitors its consumption and invests in resource reduction initiatives, including reprocessing of non-conforming products. The Company has established the following short term sustainability goals (2025): i) 50% reduction in the production of waste sent to the landfills (kg of waste/ton of product); ii) 10% reduction of scope 1 and scope 2 emissions (tons of CO2/ton of product) and iii) 10% reduction in energy consumption (kWh/ton of product). At the corporate level, in 2022 Fitesa produced 44.9k ton CO2 eq for scope 1 and 187k for scope 2. Scope 1 and 2 emissions at Gravatai, Jacarei and Cosmpolis, accounted for around 21k ton of CO2 eq in 2022.
Wastewater Management and Air Emissions
Water for the facilities is sourced from the local water company. Domestic wastewater is collected and sent to the public sanitation system. In Gravatai and Cosmpolis, a small amount of process wastewater is produced from production processes, which is stored in containers in a designated storage area before being collected by licensed companies for treatment and disposal. In Jacarei, industrial effluents are treated in a wastewater treatment plant (WWTP) and while most of treated water is recirculated in the process, a small part is discharged into Paraiba do Sul River. Overall, the quality of discharged effluents complies with parameters established under local regulations but does not comply with WBG EHS Guidelines for Textile Manufacturing. As part of ESAP#6, Fitesa will evaluate its current management and treatment of process wastewater and identify cost effective technical measures to improve the effectiveness of WWTP and achieve compliance with effluent levels defined by WBG EHS Guideline for Textile Manufacturing (2007).
Fitesa manufacturing processes are not required by local regulations to monitor air emissions. Nonetheless, in Jacarei, Fitesa’s monitors volatile organic compounds and particulate matter from two-point sources. In Gravatai, the Company’s measures particulate matter and nitrogen dioxide from three point-sources. Air emission monitoring results indicate compliance with the national legislation and WBG EHS Guidelines for Textile Manufacturing (2007).
Solid and Hazardous Waste Management
As part of the ESMS, Fitesa has developed and implemented a waste management plan consistently with applicable legal requirements and good industry practices which includes specific procedures for sorting, reuse, handling, storage treatment and disposal. All facilities monitor and manage waste generated and scrap textile products are recycled in the production process. As already mentioned above, the Company has a global target of reducing wastes disposed at landfills by 50% by 2025. In addition, all Fitesa’s facilities have ongoing programs to reduce or eliminate the amount of waste sent to landfill. Waste and hazardous waste are temporarily stored in a designated area including fire protection and drainage system in alignment with Brazilian regulation ABNT NBR 12235.
Management of Hazardous Materials
While limited quantities of hazardous materials are used in the production process, Fitesa has a corporate procedure for the management of chemicals and hazardous materials that is adapted to each production facility. All products should be labelled following the Globally Harmonized System and each facility has a designated area for the storage of hazardous materials and chemical products that includes fire protection and drainage systems in alignment with Brazilian Association of Technical Standards requirements (ABNT).
PS4: Community Health, Safety and Security
Community health and safety risks and impacts associated with Fitesa’s facilities are limited and generally associated with transport to and from the manufacturing facilities. The Cosmopolis facility is located in an industrial park with no residential areas immediately surrounding the plant. The Gravatai plant is withing an industrial park that is located in proximity to residential areas The Jacarei plant is located in proximity to industrial and residential areas. All facilities are fenced and do not allow unauthorized access. Fitesa outsources transportation services from large transportation companies that are not exclusive to Fitesa. Contracts with transport providers include compliance with safety, health and environmental legislation. As per ESAP # 7, Fitesa will include the following provisions in the contract: i) requirements for maintenance and inspection, ii) speed control; iii) trip time and duration; iv) drivers’ competence and training; v) road safety controls (inspections, drug tests, trip planning); vi) emergency preparedness and response, including coordination with first responders and communications; vii) incident/accident recording.
Security Personnel
Fitesa’s has contracted licensed security companies to provide security to safeguard its personnel and property. All security personnel, according to the national law, are required to attend a 200- hour security training course, carried out by authorized agency by the Federal Police. The course includes applied legislation on human rights, human relations at work, fire prevention and fighting, first aid, proportional use of force and psychological assessment, among others. As per the information reviewed, there have been no complaints associated with security personnel at Fitesa’s facilities.
