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
Pehart has established an integrated Environmental and Social Management System (ESMS) consistent with the requirements of IFC’s Performance Standards (PSs) and commensurate with the project’s E&S risks and impacts. The corporate E&S policy focuses on continuous improvement, ensuring a safe working environment, respecting human rights, prohibiting forced and child labor, responsibly sourcing raw materials, promoting efficient resource use and reducing greenhouse gas emissions, managing waste effectively, and promoting recycling.
The general E&S Policy is supported by various policies, including a General Management Statement on Social Responsibility, a Code of Conduct, a Supply Chain Policy, and policies addressing anti-mobbing and anti-discrimination. The ESMS company is certified per ISO 14001 (Environmental Management) and ISO 45001 (Occupational Health and Safety Management). The company has also been certified by the Forest Stewardship Council (FSC). Pehart's policy documents and certifications can be accessed at the following link: https://pehartgrup.ro/en/pehart-sustainability-measures/.
The necessary E&S responsibilities are assigned within Pehart. The CFO is responsible for environmental, social, and governance (ESG) matters and reports directly to the CEO. On a corporate level, the CFO is supported by key individuals in various roles. The HR Manager serves as the Social Member of the E&S team, the Legal department fulfills the Compliance Member role, and the Quality Manager acts as the Environmental Member.
At the plant level, the General Manager holds ultimate responsibility for all E&S issues at the site supported by dedicated personnel responsible for E&S functions. This includes an Environmental Officer, an Occupational Health Officer, a Technical Safety Officer, and fire protection assistants and first aiders.
Pehart possesses all required and up-to-date permits, including integrated environmental permits for industrial emissions, water management permits, and fire permits. The company has no environmental liabilities concerning soil or groundwater. Given the project's brownfield nature and the absence of expansion beyond existing site boundaries, no ESIA documents were required for the Project.
Both sites maintain an Emergency Response Plan (ERP) and a Business Continuity Plan, which includes communication with authorities and the public. Fire risks are a significant concern in the paper industry. The ERPs clearly outline the roles and responsibilities of various teams involved in evacuation, rescue, and firefighting efforts. To ensure the safety of employees and visitors, Pehart has strategically placed signage throughout the facilities, indicating the location of fire extinguishers, alarm call points, evacuation routes, and hose reels. Additionally, smoking is strictly prohibited on the entire site. Furthermore, Pehart has invested in training several workers on fire safety protocols and the operation of fire safety equipment during each shift. This ensures that there are individuals present at all times who are knowledgeable and capable of responding effectively in the event of a fire emergency.
The site in Dej is situated within a floodable area, the River Somes bank, susceptible to a 1 in 100 years flood event. While the site has not experienced flooding since its development, the potential risks associated with climate change may increase the likelihood of increased precipitation in future. The company has incorporated flood risk considerations into the ERP to prioritize the safety of employees. The ERP outlines procedures for early warning, evacuation, communication, and coordination with relevant authorities in the event of a flood. Regarding climate change impacts, no other significant risks are anticipated to affect the operations.
Pehart conducts regular internal E&S audits regularly, as part of the internal and external ISO related recertification. s. Additionally, the company’s E&S performance is closely supervised by Abris Capital's ESG team. Abris strongly supports Pehart by sharing E&S knowledge and promoting good international industry practices (GIIP). Abris's E&S team annually conducts site visits and interviews to assess risks and develop E&S Action Plans. Implementation of these plans is integrated into quarterly updates and senior executives' annual KPIs. The most recent Abris ESG report, also covering Pehart, can be found at the following link: https://abris-capital.com/esg-reports/. Pehart’s internal corporate KPIs also include E&S-specific metrics, focusing on employee training, workplace accidents and absence days, energy and water consumption, and emissions.
The company's ESMS is concluded to be appropriate for the scale and E&S risks and/or impacts of its current operation and the Project.
PS2: Labor and Working Conditions
In 2023, Pehart employed 562 full-time employees, consisting of 152 females and 410 males. The distribution of men and women in production is not evenly balanced, primarily due to the physically demanding nature of the work involved. However, in administrative roles, the gender distribution is more equitable. IFC’s gender advisory team has performed a gender assessment and developed a comprehensive action plan to improve gender equality, making Pehart one of the first Romanian companies to have such a strategic tool.
Pehart has established comprehensive human resources (HR) policies in compliance with national law and in line with IFC’s PS2 that encompass labor laws, human rights protection, anti-mobbing measures, and discrimination prevention. The company has also included clauses in its commercial contracts to ensure compliance with human rights standards by its partners. Pehart affirms that there have been no reported violations of labor laws or human rights in recent years.
Employees are provided with standard full-time or part-time contracts that outline their work description, conditions, and salary, among other relevant details. The company ensures equal pay for equal work.
A collective work agreement, registered with the local Labor Inspection Office, covers various topics such as working hours, occupational health and safety, individual employment contracts, professional training, and maternity protection in the workplace.
Pehart has implemented a formal worker’s grievance mechanism that is accessible to all employees. Anonymous comments and suggestions can be submitted, and an open-door policy is maintained. HR personnel and Pehart managers engage in regular one-to-one discussions with employees.
Pehart has not conducted a specific assessment of Gender-based Violence (GBV) within its operations. Although the estimated GBV risks are low, Pehart will adhere to good international practices and adopt a GBV-informed approach. To achieve this, the following measures outlined in ESAP #1 will be implemented: (i) Development of GBV-specific awareness and sensitization training: Pehart will create a training program aimed at raising awareness and promoting a culture of respect among management and staff; (ii) Integration of GBV screening dimensions into the Supplier Self-Assessment Checklist: Pehart will enhance the Supplier Self-Assessment Checklist by incorporating GBV screening dimensions. This will enable identifying and evaluating potential GBV risks within the supply chain; and (iii) Adaptation of the Grievance Mechanism and Whistleblower platform: Pehart will modify the existing platform to facilitate reporting GBV-related complaints and concerns. This will ensure that employees have appropriate channels to report and address any GBV-related issues that may arise. By implementing these measures, Pehart aims to enhance awareness, prevent GBV incidents, and establish effective reporting and response mechanisms for any GBV-related issues.
No collective dismissals have occurred in the past or are expected as a result of the Project. On the contrary, the Project is expected to create 75 new job positions due to the increased production capacity. However, there may be isolated cases of job reductions resulting from replacing older equipment and efficiency gains. As outlined in the ESAP # 2, if such cases arise, Pehart will prioritize internal transfers to retain these employees. Pehart will conduct a comprehensive analysis to identify areas where job losses may occur, if any, enabling proactive planning and identifying alternative job opportunities within the organization. To support affected employees, Pehart will invest in training programs aimed at reskilling and upskilling them to align with the organization's evolving needs. This investment will create opportunities for redeployment into new roles.
Pehart has implemented an Occupational Health and Safety (OHS) Management System in accordance with the national law and ISO 45001 standards. According to the Labor Law, Pehart has performed OHS risk assessments for all activities and workplaces. Regular OHS training is provided to staff members to ensure their awareness and adherence to safety protocols. Internal and external Health and Safety audits are conducted regularly, identifying corrective actions through Action Plans. The company has maintained a low number of incidents and accidents, aligning with international industry benchmarks. Safety measures, such as safety shielding and emergency stops, are installed on all machines at the Dej and Petresti plants.
PS3: Resource Efficiency and Pollution Prevention
The Petresti operation is located within a historical production site. Asbestos roof tiles were previously present in the former paper mill machine waste storage area but were removed and disposed of 15 years ago, prior to Pehart's acquisition. The company has confirmed that asbestos is no further present at the site.
The site includes an onsite power transformer station with 40 PCB oil-based capacitors, which are estimated to contain approximately 100 liters of PCB-based oil. The concentration of PCBs in the oil is currently unknown.
Therefore, as per ESAP # 3, Pehart will prepare and implement a phase-out management plan for PCBs- based capacitors. The phase-out plan will outline appropriate measures for removal and disposal of PCBs- based capacitors in line with national legislation and international conventions.
At the Petresti site, treated process wastewater, totaling approximately 240,000 cubic meters annually, is discharged into the Sebes River.
At the Dej site, treated process wastewater is discharged into the Chiejd stream. Annually, approximately 193,000 cubic meters of treated process wastewater is generated, with 80% being recirculated for beneficial reuse.
Currently, in 2024, both sites at Petresti and Dej comply with national effluent quality standards and requirements and the effluent guidelines of the World Bank Group’s Environmental, Health and Safety Guidelines for Pulp and Paper Mills (2007) confirmed by bi-monthly analysis undertaken by third-party certified laboratories to ensure compliance with facility environmental permits and national effluent standards.
Pehart focuses on energy efficiency, and initiatives to reduce consumption are already in place. The company primarily uses electricity from the national grid and utilizes steam and heat from natural gas for drying paper. The Project will further reduce energy consumption through investments in energy efficiency measures.
Pehart is actively working on decarbonizing logistics, primarily through water transport for pulp delivery. The company maintains a fleet of specialized trucks for product transportation, optimized for fuel efficiency.
Pehart is subject to the European Emission Trading Scheme and is assessing GHG emissions. In 2023, Pehart's operations resulted in 57,000 tonnes of CO2 equivalent emissions. Due to energy efficiency measures, the company has already reduced overall CO2 emissions but still purchases carbon credits to offset the negative balance of allocated free emission allowances. To further reduce GHG emissions, IFC has supported the Company to develop a sustainability-linked finance framework, which includes a target to reduce Scope 1 and 2 emissions by 34% in 2032, using 2023 as the baseline year. This target includes reductions in emissions from gas consumption, refrigerant leaks, electricity, heat, and owned vehicles. Furthermore, the Company has committed to increase the use of post-consumer recycled plastic in its packaging by 2032.
PS4: Community Health, Safety and Security
The brownfield project is located within two existing industrial areas, and there are no plans to expand any of Pehart’s facilities as part of the project. As such, no significant additional impacts on the local communities' health, safety, and security are expected. Given the location of the Petresti plant within the surrounding community, the company established scheduling measures to better manage noise impacts from loading and unloading, reducing noise and disturbances to the community.
The company has its own security staff and does not rely on any 3rd party providers. Security protocols exist to control access to the sites. All new staff undergo security onboarding/ training to understand how the protocols function.
Pehart’s Fleet Management Policy guides its traffic management. Guidelines are provided for safe driving, compliance with speed limits and weight restrictions, and meeting other regulatory requirements in line with national law.
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
Pehart Group sources market pulp from reputable suppliers who have obtained Forest Stewardship Council (FSC) certification. This certification ensures that the suppliers adhere to stringent forest sustainability criteria, including conservation of biodiversity, protection of endangered species and responsible use of forest resources, ensuring long-term forest health and productivity. FSC certification involves an independent third-party assessment of forest management practices, chain of custody procedures, and product labeling. This ensures that products carrying the FSC logo can be traced back to responsibly managed forests.
As a result, all of Pehart's products meet the FSC-COC (Chain of Custody) standard. This certification guarantees that Pehart's products are produced per the FSC's rigorous standards and that the materials are responsibly managed throughout the entire production cycle, from the forest to the final finished products.
