This is a Category B project according to IFC's 2012 Policy on Environmental and Social Sustainability due to limited and site-specific E&S risks and impacts associated with the proposed expansion of Naturasol’ processing/packaging lines. These can be avoided or mitigated by adhering to recognized Good International Industry Practices (GIIPs). Key E&S risks and issues associated with this project include: (i) adequacy of Naturasol’s E&S and supply chain policies and management systems; (ii) labor / OHS issues regarding workers in the production lines and logistics; (iii) resource efficiency and pollution prevention/control, including point source air emissions, ambient air quality, odor, noise,  wastewater, and solid/hazardous waste management; (iv) community health and safety, including risks due to transport of products and raw materials; and, (v) stakeholders’ engagement, including community grievance mechanism and gender-based violence (GBV) sensitive grievances and referrals.

PS1: Assessment and Management of Environmental and Social Risks and Impacts 

E&S Policies. Naturasol has started the formulation of its Sustainable Strategy in 2023, which is structured across four pillars: (i) defined goals, (ii) strategic plans, (iii) implementation strategies, and (iv) risk management. The company is currently committed to (i) transitioning 90% of its portfolio to primarily mono-material packaging to enhance recyclability and increase the use of recycled materials in secondary packaging, (ii) supporting the development of sustainable agricultural practices and capabilities among local suppliers of critical raw materials, and (iii) investing in advanced machinery that optimizes resource use—including energy and water—reduces emissions, and boosts production efficiency. During the first quarter of 2025, Naturasol will undertake a comprehensive assessment to identify gaps in its sustainability practices, aligning them with international standards (e.g., IFC Performance Standards) and Good International Industry Practices (e.g., World Bank Group (WBG) Guidelines – General EHS Guidelines, and Food and Beverage Processing). Following this, Naturasol will: (i) develop/conclude its sustainability strategy that integrates a risk and opportunity matrix from an ESG perspective, (ii) design and implement a corporate-level Environmental and Social Management System (ESMS), including the revision and alignment of corporate policies, and (iii) establish clear sustainability objectives, goals, and key performance indicators (KPIs) to drive progress and accountability. (ESAP#1).

Naturasol has developed environmental and OHS policies defining its commitment towards the (i) reduction of natural resource usage, (ii) adherence to Mexican’ legal and regulatory requirements, (iii) establishment of annual monitoring of environmental targets, (iv) execution of site-specific E&S management programs, and (v) prevention of harm to workers, facilities, and the environment. These policies lack uniformity and require expansion in EHS performance-based commitments. This expansion should adhere to GIIPs and food safety certifications, transparent communication with employees, and comprehensive disclosure on Naturasol's website, among others. As a part of ESAP#1, Naturasol will update its environmental and OHS policies and Supplier Code to align its E&S performance against IFC PS requirements for its proposed processing/packaging lines for potatoes and corn flour and raw material sourcing. Specifically, the policies will be aligned with the elements of PS1 requirements, and addressed PS gaps as per ESAP#7, and ESAP#8 below.

Identification of E&S Risks and Impacts. Naturasol's facilities are situated within designated industrial zones and adhere to Mexican E&S legal and regulatory requirements. The E&S license, including Terms and Conditions (T&Cs), and water intake and discharge permits for all three facilities, including the ones targeted by IFC use of proceeds, have been properly secured from local authorities. Regulatory oversight is ensured through annual inspections conducted by competent authorities, including the Secretariat of Environment of the Government of the State of Mexico.

Naturasol has a risk assessment matrix and maintains a risk management structure to identify and evaluate potential E&S risks and impacts and to mainstream resource consumption efficiency across its operations. This encompasses a broad spectrum of considerations, including but not limited to air emissions and ambient noise, wastewater discharges, water contamination, solid and hazardous waste management, spill containment protocols, risk of explosion, fire incidents, and consumption of resources such as drinking water, electricity, chemical substances, carton packaging, and fuels like liquefied petroleum gas (LPG) and diesel. Material risks and impacts are properly identified and assessed through the procedures and are periodically reviewed and updated when operational changes occur. Naturasol will undertake a gap analysis of its risk assessment matrix and risk management structure against the applicable and relevant sections of the WBG EHS Guidelines (General and Sector-specific – Food and Beverage Production) and, as needed, develop a plan to implement any relevant corrective measure identified to the potatoes and corn flour processing/packaging lines targeted by this investment (ESAP#2).

E&S Management System & Programs. Naturasol has developed and implemented an Integrated Management System (SGI, in Spanish) and maintains several international sustainability standards and certificates on food safety and quality, including ISO 9001, FSSC 22000, SA8000, HALAL, Gluten-Free (GF), Keto Certified Standards, Corporate Social Responsibility (ESR), NON-GMOs Project, Global Compact, and Sedex Members Ethical Trade Audit (SMETA), among others. Oversight of performance requirements mandated by these certifications is integrated into its SGI framework. As a part of its SGI, Naturasol has implemented comprehensive E&S management plans/procedures (ESMPs), encompassing plans for air emissions, water, energy, noise, pest control, waste, hazardous waste, and wastewater. These plans incorporate audit protocols, resource conservation measures, communication strategies, and corrective actions for deviations. As a part of its ESMS enhancement (ref. ESAP#1 mentioned above), Naturasol will update its ESMPs and OHS management system focusing on the expansion of its potato processing lines and the introduction of corn flour processing and packaging lines (ESAP#3).

E&S Organization Capacity/Competency. In 2024, Naturasol hired a Sustainability Manager to lead the development of its sustainability strategy, reporting to the Finance Department. The company also conducted a gap assessment to strengthen its corporate governance, and key actions will be implemented in due course. At the senior management level, a diverse team of directors oversees different aspects of the business, including Operations, R&D, Supply Chain, Human Resources and Manufacturing. Health, Safety, and Environmental (HSE) management falls under the Manufacturing directorate, with one (1) specialized HSE manager and three (3) HSE coordinators assigned to the seeds and honey facilities, and the distribution center (CEDIS). These coordinators lead teams of HSE technicians and fire emergency brigades to ensure compliance and readiness. Each facility benefits from dedicated plant, quality, and maintenance managers.

Emergency Preparedness and Response (EPR). Naturasol has developed an EPR framework which encompasses contingency procedures tailored for a spectrum of natural occurrences, such as earthquakes, floods, fires, explosions, and severe accidents. Additionally, the company has integrated emergency protocols for addressing terrorism and political events. The EPR framework undergoes regular updates and features streamlined formats to enhance emergency management, including a structured schedule for drills and preventive evaluation mechanisms. The overarching objective of the EPR is to identify emergencies, prioritize the safety and well-being of employees and emergency responders, facilitate knowledge dissemination within emergency response teams, and establish a regimen of periodic drills. Each plan delineates clear staff responsibilities, outlines first aid procedures, mandates routine inspections, and outlines actionable plans for addressing emergencies as they arise.

E&S Monitoring and Reporting. Naturasol prepares annual E&S compliance reports to local authorities based on the T&Cs of its environmental licenses. These reports encompass monitoring plans for solid and hazardous wastes, point source air emissions, ambient air quality, water intake, and noise levels. As a part of its SGI, the company has developed a set of monitoring and evaluation procedures and KPIs, including traceability measures, management reviews, food fraud, regular fire equipment checks, monitoring average hours of training, and diligent work-related injuries. Due to its food safety and quality certification scheme, including ISO, FSSC, and SMETA, the company constantly undergoes annual internal and external audits to comply with the requirements of the certifiers. Naturasol also complies with the auditing process of its major clients.

Supply Chain Assessment and Management. Naturasol's food manufacturing operations encompass diverse raw materials, including potatoes, sugar, honey, nuts (hazelnuts and peanuts), and packaging materials. As a part of its new business lines, the company will also source corn flour. Currently, Naturasol secures its potato supply directly from partners in Mexico and the United States. IFC's risk screening has revealed that potato farms are situated in low-risk areas regarding the conversion of natural habitats. For the corn flour sourcing in Mexico, Naturasol is sourcing from indirect suppliers on a spot purchasing agreement. As a result, Naturasol does not have the traceability and/or management control to assess the E&S risks of corn production at farm-level.

Although Naturasol has not formalized a Supplier Code of conduct per se for the purchase of its raw materials, the company has implemented a Supply Chain Management System (SCMS) for its raw material sourcing. The SCMS delineates procedures overseeing supplier sourcing, selection, planning, procurement, re-supplying, movement of raw materials, packaging materials, as well as semi-finished and finished products. Moreover, a traceability procedure has been instituted, ensuring the identification and quantification of products at every stage of its processes. In accordance with SMETA audits, Labor Standards, Health & Safety, Environment, and Business Ethics undergo annual scrutiny, encompassing human rights and supply chain risk assessment. The SMETA audit report released in 2023 identified areas for improvement, noting that the company had not effectively communicated its human rights policy to its suppliers and had not adequately disseminated the Code of Conduct to relevant stakeholders, which poses risks within the supply chain. A Corrective Action Plan Report (CAPR) was implemented to address these deviations.

As part of IFC’s appraisal findings, there are areas of improvement for strengthening its SCMS. Going forward, Naturasol will (i) develop a Supplier Code to ensure consistency with PS2/PS6 supply chain requirements; (ii) develop a thorough GIS database that includes its direct suppliers, with a specific focus on suppliers of potatoes; (iii) develop an E&S due diligence methodology to assess compliance of its suppliers against its Supplier Code to be developed; and conduct an E&S risk assessment of potatoes  suppliers against PS1, PS2, and PS6 related supply chain requirements; (iv) address SMETA’s requirements by (a) effectively communicating its human rights policy to its suppliers and (b) disseminating its Supplier Code to relevant stakeholders, including indirect suppliers; (v) update its monitoring and verification audit system into its SCMS to ensure that its Supplier Code, including E&S requirements and traceability, are effectively enforced with its direct suppliers, and (vi) conduct independent annual monitoring and verification audits to ensure that all its direct suppliers effectively adhere to Naturasol’s Supplier Code. (ESAP#4). The Supplier Code will be included in all direct and indirect suppliers’ contracts and explicitly mention the prohibition of child labor, forced labor, promotion of fair and equal treatment, freedom of association and collective bargaining, working hours and wages; safe and clean working environment; protection of the environment; quality and food safety; ethical principles and reporting policy violations. The scope of the E&S due diligence will encompass the direct supplier’s sourcing policies and sustainability sourcing strategy, comprehensiveness of its risk screening platform, and implementation effectiveness of sourcing’s sustainability programs, meeting IFC PS2/PS6 supply chain requirements.

PS2: Labor and Working Conditions

As of the end of 2024, Naturasol employed 2,279 workers directly distributed across its honey and seeds-bar facilities, CEDIS, and corporate areas. 51 percent are men and 49 percent are women. 67 percent of total workers are blue-collar workers, and 33 percent are administrative workers, including supervisors, coordinators, managers, and directors. The workforce is hired locally in nearby towns.

Human Resources Policies & Procedures. Naturasol has a Human Resources (HR) policy and several procedures, which are aligned to PS2 requirements and readily available to its workers. The HR policy/procedures define career development, talents attraction, recruitment, training, compensation, salary adjustment, benefits, flexible and extra hours, social responsibility, grievance mechanisms, among others. The contents of the HR policy are shared with new employees during their induction process. The company maintains a Code of Ethics and Conduct (CoE) applicable to all employees, contractors, and third-party suppliers. The CoE defines Naturasol’s commitments regarding Mexican labor regulations, fostering a culture of non-discrimination and zero-tolerance towards harassment, managing conflicts of interest transparently, and actively engaging in community service initiatives. Naturasol also has a ‘human rights, no child labor and gender equity policy,’ reinforcing its commitment to labor and human rights compliance, and prohibiting child and forced labor practices. Going forward, Naturasol will disclose its CoE and human rights, no child labor and gender equity policy on its website (ESAP#5).

Working Conditions and Terms of Employment. Naturasol defines the terms and conditions of employment, including, working hours, breaks, overtime, annual and maternity leave in line with the company’s HR policy, procedures, the Federal Labor Law (Ley Federal del Trabajo - LFT), and collective bargaining agreements (CBA). All workers are direct workers under permanent contracts. Workers have a signed labor contract, which, at a minimum, states the nature and category of employment, place of employment, start date and duration, working hours, remuneration, leave, benefits, and employee rights and obligations. The minimum wage at Naturasol aligns with the statutory minimum wage in Mexico. The standard workweek for administrative workers is 44 hours. The working hours for operational workers are split into three shifts of 8 hours each, from Monday to Saturday. Employees are entitled to 12 days of annual leave, at least one full weekly rest day, mandatory 1-hour meal breaks, and 15-minute breaks during the day. Sick leave is permitted with a doctor's assessment. Benefits include 25% of their salary in vacation bonus, 13% in food vouchers, weekly transportation assistance, transportation, free dining in the facilities (linked to 100% attendance per week), punctuality bonus, discount loans via payroll, and medical services.

Non-discrimination and Equal Opportunity. As stated above, the company defines its commitments of non-discrimination and equal opportunities in its human rights, no child labor, and gender equity policy. Sexual harassment stipulations are also included in Naturasol’s HR policy. The company does not tolerate any form of harassment, and this is communicated to all employees during the induction process. The corporate worker’s grievance mechanism procedure includes expertise in managing sexual harassment cases. Recently, the company established a gender equality declaration to raise gender and inclusion awareness among its employees. The company adhered to the ‘The Women’s Empowerment Principles / Gender Gap Analysis Tool’(https://weps-gapanalysis.org/). The tool helps the clients to (i) assess the company’s strategic approach to gender equality, (ii) identify gaps and opportunities for continuous improvement, (iii) learn about best practices on gender equality globally, (iv) set concrete goals and targets, and measure progress over time, among others.

Workers Organization. As per the local regulation, adhering to labor union is mandatory in Mexico. Naturasol does not restrict the freedom of workers to associate, and management encourages workers to establish a worker committee to discuss labor aspects of their operations. This provision is well defined in Naturasol’s HR policy and communicated during worker induction sessions.

Protecting the Workforce. Neither child labor or forced labor will be or is utilized by Naturasol’s operation as per its human rights, no child labor, and gender equity policy. The company only employs persons according to legal age employment regulation.

Worker’s Grievance Mechanism. A structured corporate worker grievance mechanism system, compliant with ISO 9000 and FSSC 22000 standards, has been implemented. This system offers multiple channels for employees and temporary workers to submit written concerns directly to management, bypassing immediate supervisors if necessary. Ensuring protection against retaliation, in alignment with IFC's PS2 guidelines, the mechanism includes easily accessible physical boxes installed across all facilities, as well as a QR code or online access for digital submissions. In case contractors/suppliers do not have their own grievance mechanism, Naturasol will extend their grievance mechanism to third party workers to facilitate the communication of possible grievances. In 2024, Naturasol received 234 complaints raised by its workers.

Workers Engaged by Third Parties. Currently, 100% of Naturasol’s workforce is directly hired. The company has defined EHS guidelines for the selection of the contractors, including the preparation of Contractor Management Plan, when applicable.

Occupational Health & Safety. Naturasol has an OHS management protocol comprising safety and hygiene committees alongside a proactive preventive program. This program encompasses comprehensive training, risk analysis, and accident documentation reports. It covers Hazard Analysis and Critical Control Points (HACCP), compliance with SA8000 standards, safe chemical handling practices, food safety protocols, proper utilization of personal protective equipment (PPE), and efficient waste management and disposal techniques. In 2023, the company maintained a Lost-Time Injury Frequency Rate (LTIFR) of 0.00013 injuries per million hours worked and a Lost-Time Injury Severity Rate (LTISR) of 0.098 days lost per million hours worked without fatalities, which is aligned with OSHA Industry benchmark for food manufacturing in 2021 (4). To address OHS protocols, Naturasol developed procedures for occupational contexts, including working in confined spaces, performing tasks at heights, executing hot work in response to spills, handling pressure vessels, and maintaining electrical infrastructure. As part of the companies' health procedures, Naturasol requests that all personnel obtain a medical certificate delineating their health profile, complemented by periodic evaluations contributing to each employee's medical dossier. All workers are enrolled in the Mexican Social Security Institute (IMSS) and benefit from access to an on-site physician who rotates among the various plants. All plants prioritize hydration accessibility for every worker, particularly those exposed to elevated temperatures during cutting and welding operations.

Supply Chain. Naturasol is sourcing raw materials, such as potatoes and corn flour, which may be associated with risks of child labor, forced labor, OHS hazards, and migrant workers. As per its Supplier Code to be developed, such risks will be assessed during the selection process of its direct suppliers. For its direct potatoes suppliers, this risk will be closely monitored by Naturasol SCMS (ref. ESAP#4), by implementing a monitoring and verification audit system into its SCMS to ensure that its Supplier Code, including E&S requirements and traceability, are effectively enforced with all its direct and indirect suppliers.

PS3: Resource Efficiency and Pollution Prevention 

Resource Efficiency (energy/water). The production of food is a resource (energy) intensive process. Naturasol's plants use the local power supply for its operations, with an average annual consumption of 500 MWh for the seed plant, 65 MWh for the honey plant and 52 MWh for the distribution center based on 2024 data. In 2020 Naturasol adopted an energy consumption saving plan. The plan aims to formulate objectives and improvement measures, monitor data to observe energy savings post-implementation, and raise awareness and inform employees about their responsibilities in proper energy management. The company also uses LPG for lab use with an annual consumption of 4,664 m3.

The supply of water for processes and services is through the municipal network. Potable water pipes are also used since the availability and intermittence of water from the municipal network does not allow for process continuity. For this reason, there is a cistern with piped water. The average demand for potable water is 2,073 m3/ton produced. The project is located in a water stress area and project site is expected to face increased frequency and intensity of climate-related events, particularly heatwaves, and drought conditions, which may limit the access of workers to drinking water and hygiene. Naturasol has a water management plan in place. Going forward, Naturasol will conduct a climate risk assessment to address this gap and will explore preventive measures for workers during climate-related events, such as heatwaves, heavy storms, and drought conditions (ESAP#6).

Greenhouse gas emissions. The main energy sources of GHG are grid electricity, diesel consumption, and LPG. The total greenhouse gas emissions are estimated not to exceed 25,000 tCO2e/year. Emissions measurements for the boiler, the steam generator, and the furnaces in all the plants comply with the emissions parameters in the WBG General EHS Guidelines.

Air Emissions. The seed plant consumes 133 m3 of LPG for the steam generator and ovens. CO levels comply with national regulations in accordance with the permit issued in May 2023.

Noise emissions. Noise and lighting monitoring are conducted in the workplace to adhere to national regulations. As per the most recent noise and lightning levels monitoring plan of December 2024, emissions remain compliant with local regulations. It's noted that certain work areas exhibit noise levels surpassing 85 dBA, the upper limit delineated in the WBG General Guidelines. Despite the implementation of comprehensive protective measures, including the provision of hearing protectors for all personnel, as a part of ESAP#3, Naturasol will implement additional noise levels preventive/mitigation measures in the new facility aligned with WBG General Guidelines (Section 1.7 – Noise), including but not limited to (i) improving the acoustic performance of constructed buildings, (ii) installing acoustic barriers, (iii) conducting audiometry test for workers exposed to noise area, among others.

Wastewater Management. The volume range of the liquid effluent produced is approximately 50 m3/day, which is discharged to the municipal sewage network. The company complies with the maximum permissible limits for pollutants in wastewater discharges to sewage systems required by national regulations.

Solid Waste Management. The company has a permit to generate special handling waste for each of the plants and a waste collection contract for the sale of recycling and/or final disposal that covers all three plants.

Hazardous Materials. Naturasol handles hazardous materials such as diesel for generators and various chemicals integral to the production process. The management and storage of these hazardous materials adhere to the company's established procedures, ensuring they are appropriately handled and stored. In alignment with the SMETA certification requirements and compliance with the Mexican Official Norm (NOM-010-STPS-2014), the company conducts regular assessments to monitor the concentration levels of these chemicals within the workplace, further enhancing safety protocols and regulatory compliance.

Pesticide Use and Management. Naturasol uses licensed service providers for pest control at its factories, as per ISO 22000 requirements.

PS4: Community Health, Safety and Security 

Community Health and Safety. Naturasol’s facilities are located in industrial zones in Tepotzotlán, and median-income communities are living in a 0.5 km buffer zone. The company's ERP framework incorporates contingency procedures that integrate emergency protocols for nearby communities. Notably, recent initiatives have established collective emergency response systems with neighboring industries. These systems entail processes for disseminating relevant information, providing assistance, and collaborating with local authorities and neighboring communities.

Road Traffic Safety. Naturasol utilizes its owned fleet of trucks for its operations, ensuring control over 100% of its transportation assets. The company conducts regular maintenance on these vehicles and provides ongoing training for drivers to minimize traffic and road safety hazards. At the time of this appraisal, Naturasol lacked a comprehensive traffic and road safety management system for its logistics operations, including appropriate systems to identify and/or monitor the community health and safety risks of its transportation route. Nevertheless, the company has initiated the development of its road safety policy and procedures. Going forward, Naturasol will finalize its road safety policy and procedures in accordance with the WBG General EHS Guidelines (Section 3.4 - Traffic Safety) and WBG Good Practice standards for Road Safety (https://shorturl.at/defS5) (ESAP#7).

Food Safety. As stated above (ref. PS2. OHS section), the company has HACCP in place based on the ISO 22000 food safety standard, which is annually checked by an independent certified body. Each facility benefits from dedicated quality and food safety manager.

Life and Fire Safety. Naturasol meets fire safety standards mandated by national regulations, which incorporate National Fire Protection Association (NFPA) guidelines. Requirements include a fire prevention plan, fixed and mobile fire systems, a trained brigade, PPE provision, and regular drills. Civil Protection and Firefighters participate in drills, issuing compliance clearances annually. The company conducts four drills per year involving all plant personnel. Evacuation, search, and rescue, first aid, firefighting, and communication brigades are established.

Security Personnel. Naturasol’s security procedures align with PS4 requirements. The company has unarmed in-house personnel that carry out security tasks at all facilities. They perform their work in accordance with the instructions for security personnel, designed mainly to monitor entry to their facilities.

PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources 

Supply Chain risk assessment and management. Naturasol secures its potato supply directly from distributors in Mexico and partners in the United States, and its corn flour from mills in Mexico. Although IFC's risk screening demonstrated that potato farms are in low-risk areas for converting natural habitats, changes in the supply chain providers may pose deforestation risks. As indicated under the PS1 Supply Chain section, Naturasol will strengthen its due diligence of its direct suppliers and monitoring/verification oversight against PS6 supply chain requirements (ref. ESAP#4).

Naturasol does not have a Stakeholder Engagement Plan (SEP) aligned with PS1 requirements. The company has established a process to receive external grievances, with the HR department responsible for screening them. This system enables stakeholders to remain anonymous, and complaints can be submitted through grievance drop boxes at plant entrances, over the phone, via email, or through social media platforms. However, despite the presence of this procedure, it is not aligned with PS1 requirements, as it lacks written documentation and a defined timeframe for addressing grievances upon receipt. Naturasol will (i) develop a corporate SEP, and (ii) develop an External Community Grievance Procedure to comply with PS1 (ESAP#8).

• Contact Person: Mario Esquivel
• Company Name:  Naturasol S.A. de C.V.
• Address:  Cto. Circunvalación Poniente 9A, Cd. Satélite Naucalpan, Estado de México, CP 53100
• Email:   mario.esquivel@mielmex.com