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 expansion of the processing capacity at three existing cocoa processing plants. These can be avoided or mitigated by adhering to Good International Industry Practices (GIIPs). The sourcing of cocoa beans in the states of Para and Bahia is considered of low risk as the producers are presently on areas of either recuperated former degraded pasture (converted in the 1980’) and consolidated agricultural areas. These are not regions of high risk for harmful child and forced labor. As per its risk screening platform for its cocoa beans sourcing, Gencau has and will continue to avoid any deforestation and habitat conversion and/or overlapping with Indigenous Peoples land and Quilombolas communities. Key E&S risks and issues for this investment are: (i) implementation effectiveness of Gencau E&S management System (ESMS) at its cocoa processing facilities and farms, including E&S policies, risk assessment studies, E&S management plans and SOPs during operational phase, E&S organizational capacity/competency; (ii) fair treatment and safe working conditions for employees and contractors, including implementation of HR policies and procedures aligned with PS2 requirements; (iii) emergency preparedness and response; (iv) resource efficiency and GHG emissions; management of air emissions, noise, solid/hazardous waste, and effluent; (v) community safety, traffic and use of security forces; (vi) stakeholder engagement, including community grievance mechanism.

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

Environmental and Social Policies. Gencau enacted an ESG Committee in August 2023 and is in the process of recruiting an E&S consultancy to support the development of a sustainability strategy and the definition of sustainability targets. Gencau adopted an Environmental and Occupational Health and Safety (EHS) Policy in October 2022. This policy commits Gencau to (i) meet applicable Brazilian legal and regulatory E&S requirements, (ii) avoid/minimize hazards risks at workstation; (iii) continuously improve its E&S performance through the establishment of an E&S management system (ESMS). To effectively implement this EHS policy, Gencau has defined an Implementation Plan with Key Performance Indicators (KPIs), which is in progress. As part of this proposed investment, Gencau will upgrade its EHS policy to align its E&S performance against IFC PS requirements for its three manufacturing plants, two farms and cocoa sourcing operations. (ESAP#1).

Identification of Risks and Impacts. E&S risks and impacts of Gencau’s processing and farming operations are assessed against Brazilian E&S legal and regulatory requirements, and mitigated through Operational License’s Terms and Conditions, Brazilian OHS Regulatory Standards (NR), Gencau’s EHS SOPs and the agronomic SOPs for Gencau farms and cocoa bean suppliers.

Among its three processing plants, the Medicilandia facility underwent an Environmental Impact Assessment (EIA) process in June 2023 as per Para State regulation. The processing unit in Tambau and the two cocoa farms were exempted from such requirement. As Gencau is planning to commission the Ibirapitanga unit in late 2024, consultation with local authorities is underway to verify environmental requirements. All processing facilities and farms have respectively obtained the Operational (OL) and Rural Activity (LRA) Licenses which were all valid at the time of this appraisal. Terms and Conditions (T&Cs) of the Environmental Licenses at Medicilandia and Tambau processing facilities included monitoring of stack air emission and noise (at workstation and plant boundary), treatment of sanitary and process water prior to discharge, safe storage of biomass (eucalyptus chips) under roofing structure, and collection and disposal of solid and hazardous wastes by a licensed service provider, including an on-site locked and well aerated storage room. For the farms, the only T&C was the collection, safe storage (including triple rinse and puncture) and disposal of agro-chemicals plastic containers by a licensed service provider. Gencau maintains a legal EHS / labor registry of applicable laws and regulation, accessible to legal, EHS, and operational management teams.

Aside from regulatory requirements, EHS risk assessment at Gencau’s cocoa processing facilities is done through its EHS SOPs which have been developed based on the License T&Cs and Brazilian Regulatory Standards (NR). These SOPs are the foundation on which cocoa processing unit’s EHS management programs are established, reviewed, and implemented. Internal EHS audits are performed annually to assess implementation status and effectiveness of the T&Cs and SOPs at all operations. Deficiencies identified are addressed through plant-level time-bound corrective actions plans, with CAPEX/OPEX assigned for their closure. As part of IFC financing, Gencau has assigned specific CAPEX for EHS related investments at its Tambau processing unit. Going forward, as per ESAP#1, Gencau will (i) undertake a gap analysis of its EHS SOPs for its processing, farming and sourcing operations against IFC PS requirements, applicable and relevant sections of the WBG EHS Guidelines (General and Sector-Specific – Food and Beverage Production / Perennial Crop Production) and voluntary cocoa production standards (e.g. Rainforest Alliance) and (ii) develop a corrective action plan to close gaps identified, including the implementation of any relevant update of its procedures and any relevant mitigation measure at its operations.

E&S Management System and Programs. Gencau has made good progress in developing and implementing an E&S Management System (ESMS) at processing plant level through the adoption of an EHS Policy, E&S management programs for its processing and sourcing, establishment of an E&S function and developing an EHS monitoring framework, initially including elements such as resource efficiency and OHS leading and lagging KPIs. Gencau has environmental and OHS preventative plans for all contractors. As the above programs and procedures are currently focused on facility level, Gencau will develop and implement a corporate-level ESMS – aligned with PS1 requirements – incorporating all its plant-level programs and SOPs for environmental management, safe working conditions, emergency preparedness, food safety, supply chain management, stakeholder engagement and community grievance mechanism (ref. ESAP#1). 

Organizational Capacity/Competency. Gencau’s Operation Director is assuming the EHS responsibility at the three processing facilities. The Director is supported by a safety supervisor and technicians at each of the three facilities. In addition, Gencau is recruiting specialized consultancy firms for the preparation of Workplace Risk Management Plan (PGR) and Technical Report on Environment Conditions at working stations (LTCAT). As mentioned above, Gencau is also in the process of recruiting a E&S consultancy to support the development of its Sustainability Strategy, targets and KPIs. As Gencau will double its production capacities at its three processing facilities based on its 2024-25 CAPEX, Gencau will strengthen the environmental capacity/competency of its E&S function with the recruitment of an E&S manager who will review/upgrade Gencau E&S Policies/Codes, SOPs, and develop/implement a corporate E&S Management System complying with PS1 requirements (ESAP#2). As mentioned above, Gencau has established a ESG Committee in August 2023. Each plant has an OHS Committee for safety performance review.

E&S Training. Gencau is implementing an EHS training program for its different management, operational and support functions (Quality, Innovation, Production, Engineering, Procurement, Marketing and Sustainability, Human Resource, Finance, and Audit) and for its workplace on applicable and relevant Brazilian regulatory standards, such as workplace risk plan (known as PGR), use of Personal Protective Equipment (PPE), OHS Committee, OHS Health Examination Program (Programa de Controle Medico de Saude Occupacional - PCMSO), good housekeeping practices, electrical safety (Lock-Out/Tag-Out system), work permit system (e.g., confined space, hot work, working at heights, rigging and scaffolding, heavy lift), emergency preparedness, fire prevention, first aid, chemical handling and storage, and integrated waste management. The training program will be updated as per corrective actions defined ESAP#1 and #2.

Emergency Preparedness and Response. In accordance with Brazilian regulatory requirement, Gencau has implemented mandatory Emergency Response Plans (ERPs) at the Tambau and Medicilandia processing plants, commensurate to all possible emergency scenarios, including dust explosion and life and fire safety. The plans are socialized to all staff on site. In case of emergency, Gencau has assigned emergency and fire brigades at each plant and for all shifts. These brigades are trained by a Technical Training Center on an annual basis. The company carries out emergency drills on semestrial basis, and coordination take places with local emergency authorities. All plants are equipped with fire hydrants and extinguishers. The fire safety authorities inspected such installation and procedures and confirmed compliance. The three processing facilities have clearly marked evacuation routes and lighting along with appropriate fire prevention system and equipment.

Monitoring and Review. Gencau maintains monthly EHS performance dashboard for its three processing facilities, including Key Performance Indicators (KPIs) focusing on (i) resource efficiency - energy (electricity/kW-h) and water (liter) consumption and efficiency (per ton of product); (ii) implementation of regulatory safety training; (iii) Loss-Time Injury Frequency Rate (LTIFR) and Loss-Time Severity Injury Rate (LTSIR); (iv) pollution control. The ESG Committee reviews the EHS performance on a quarterly / annual basis and, as needed, takes corporate and plant-level E&S management actions to meet continuous compliance with Brazilian legal and regulatory requirements. Various types of internal audits and controls are conducted by Gencau functions (Quality, Production, Engineering, Procurement, Marketing and Sustainability, Human Resource, Finance, and Audit) at its processing facilities. Gencau’s Tambau facility underwent a Sedex Members Ethical Trade Audit (SMETA) in October 2022 which methodology and screening criteria covered labor (HR), OHS and environmental management issues as well as business ethics. Further details are provided in PS2, HR policies section below.

Supply Chain Risk Assessment & Management System. Gencau purchases its cocoa beans from third-party producers in the states of Pará and Bahia. The regions of production are of concern for natural habitat conversion, although producers in the supply chain are generally on areas of either recuperated former degraded pasture or long consolidated cocoa plantations. These are not regions of high risk for forced and child labor.

The most significant area of production in the client’s current cocoa supply chain is Pará. Suppliers are smallholders with an average area of cultivation of 15.5 ha, accounting for a total supplier production footprint in Pará of over 5,000 ha in 2023. The client’s goal is to increase the base of suppliers and the percentage of production purchased from existing suppliers in Pará. All producers are located along the Trans-Amazonian Highway (BR-230), east of the city of Altamira. This region experienced significant conversion of Amazonian rainforest to cattle pasture during its colonization starting in the 1970s. In recent years, enforcement of the Forest Code in this part of Pará has resulted in reforestation to restore areas of legal forest reserve (minimum area of natural habitat required on every property) and areas of permanent protection (natural habitat buffers to protect water resources and steep slopes). Legal reforestation requirements can be met through establishment of regulator-approved mixed plantations of cocoa and other native tree species. Although mixed cocoa plantings are not ecologically equivalent to natural forest, they represent a significant step towards reversing the large-scale forest loss and land degradation that occurred in previous decades. Cocoa plantations established either many years prior or more recently on lands cleared for cattle pasture many years prior (Modified Habitat) meet PS6 supply chain requirements, and the ecological benefits of returning degraded pasture to cocoa with mixed native tree plantings generates a biodiversity gain.

The supply chain in Bahia is smaller. Suppliers have an average area of cultivation of 4.2 ha, accounting for a total supplier footprint of 304 ha in 2023. The supply from Bahia is substantially smaller than Pará but is also expected to grow, although growth is anticipated to come largely from purchasing a greater share of production from current suppliers, not an expansion of production area. Producers in the supply chain in Bahia are located inland from the coastal city of Ilheús. This region was historically the stronghold for Brazilian cocoa production during the 19th and 20th centuries, making Brazil the third largest producer of cocoa in the world. Production declined rapidly in the 1990s due to disease (Moniliophthora perniciosa). Development of resistant strains of cocoa and modified management techniques have succeeded in restoring production. Cocoa cultivation in the Bahian supply chain ranges from cabruca (cocoa trees in the understory of closed canopy forest) to more open plantings with a range of native tree planting densities. Cocoa plantations in this region generally occur in long-established production areas. Producers are also required to comply with the Forest Code, including satisfying the legal reserve requirement with either natural forest or regulator-approved mixed plantings of cocoa and native tree species. Cocoa produced on consolidated agricultural land meets PS6 supply chain requirements, and the ecological benefits of maintaining cocoa with mixed native tree plantings generates a biodiversity gain relative to the alternatives of pasture or row crops.

All cocoa beans are traceable to the producer and evaluated for compliance with Gencau’s Supplier Code and the buyer requirements. The Gencau Supplier Code and buyer requirements cover PS2/PS6 related risks, including no harmful child / forced labor or deforestation since at least 2020.

Gencau’s sustainability and technical team evaluates all suppliers. The first screen for all producers is environmental registration of the property (Cadastro Ambiental Rural - CAR), which indicates compliance with the Brazilian Forest Code that includes minimum forest reserve and other habitat protection requirements. The second screen is to verify that the prospective supplier has no violations related to illegal deforestation, infringement on protected areas, indigenous territories or quilombolo lands, or has been legally charged for forced labor. The platform for the second screen also indicates if any forest conversion, legal or illegal, has occurred on the property. The third screen is a site visit from Gencau to confirm the results of the first two screens, resolve discrepancies, and ask additional E&S questions to workers and in some cases other parties regarding labor conditions at the farm, including child labor. Screening to date has resulted in 60 prospective suppliers being found unsuitable and an external audit found two cases of child labor in the supply chain, both of which have been addressed. If a producer is approved to sell to Gencau, they are visited at least once per year thereafter to confirm ongoing compliance. Suppliers also meet with Gencau each year at capacity building events hosted by the company. If a producer is found unsuitable, they are invited to work with Gencau to meet the supplier requirements. For suppliers that choose to participate, a defined list of performance criteria forms the basis for evaluation and continuous improvement. Participants are encouraged to work their way up through four tiers of sustainability performance with the technical support of Gencau. Each tier has a minimum set of criteria that must be met in each category of performance: property management, agricultural practices, labor and living conditions, and environment. For example, in the category of labor and worker living conditions, a producer must satisfy a minimum set of 10 criteria (e.g., no forced labor) to enter the lowest tier, “bronze.” In the environmental category, entering the bronze category requires a minimum set of two criteria (no deforestation since 2008 and no use of agricultural inputs near water bodies). Two additional criteria are added to enter the silver tier for labor and worker living conditions (e.g., good quality of worker living accommodations), another three for “gold,” and a total of 16 criteria for the “diamond” tier. In the environmental category, an additional two criteria must be met to enter “gold” and “diamond” tiers (protection of riparian areas and good practices for waste management).

Aside from cocoa sourcing, the only other raw material purchased by Gencau are eucalyptus logs/chips. Gencau buys this material from approved plantations. The suppliers of the wood chips must provide the needed documents to be eligible suppliers. The documents being provided by the eucalyptus suppliers include a valid License, compliance with T&C of the license and the farm location (environmental registration of the property in the Cadastro Ambiental Rural – CAR).

PS2. Labor and Working Conditions

As of March 2024, Gencau’ gender breakdown of its workforce includes 69 percent being male while 31 percent being female. Out of the total workforce, 86 percent are operational employees (non-managerial staff) while 14 percent are managerial staff. Upon the doubling of the Tambau processing capacity and the commissioning of the Ibirapitanga cocoa processing unit in Bahia, the workforce is scheduled to increase by around 25%.

Human Resources (HR) Policies and Procedures. Gencau has adopted a Code of Conduct & Ethics and a Human Right Policy which are aligned with PS2 objectives and the Brazilian Labor Code and is applicable to all workers, including those employed by third parties. Gencau commits to fair and equitable wages, benefits, and other conditions of employment in accordance with local laws, to recognize employees’ right to freedom of association, provide safe and healthy working conditions, and to prohibit harmful child labor and forced labor. In addition to the principles of its Code of Conduct & Ethics, the Human Right Policy defines Gencau’s commitment on harassment, OHS, working hours and overtime, and the rights of local communities. Gencau does not have a specific Inclusion and Diversity Policy to enhance women representation in its workforce. However, Gencau closely monitors the percentage of female employees on a monthly basis which has been stable at 40 percent for 12 months. Gencau commitment is to achieve 50% female representation in 2025. Human Resources (HR) procedures and practices were developed based on these main policies. All direct employees are onboarded on Gencau’s Code of Conduct & Ethics and key HR documentation, payroll systems, and EHS requirements at induction. The implementation of HR policies and procedures for the workforce is led by a HR coordinator located at the Tambau facility who is supported by two HR officers at the Medicilandia facility. As indicated, Gencau’s Tambau facility underwent a SMETA audit in October 2022 which identified nine corrective actions. Based on SMETA audit report of June 2023, all the corrective actions have been completed.

Working Conditions and Terms of Employment. Gencau defines the terms and conditions of employment in line with the Brazilian Labor Code and consistent with PS2 objectives. All workers are required to 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, overtime, remuneration, leave, wage and benefits, and employee rights and obligations as applicable. All employees can track and see their pay slips showing the number of hours worked, wages (including overtime provisions), statutory social security deductions and other HR information including performance and training. As mentioned above, Gencau commits to fair and equitable wages. Only 5 percent of Gencau workforce is receiving the statutory minimum wage in Brazil.

Non-discrimination and Equal Opportunity. Gencau’s Code of Conduct and Ethics prohibits forced labor, child labor, and harassment. Sexual harassment stipulations are included in Gencau Code of Conduct and Ethics. The company does not tolerate any form of harassment, and this is communicated to all employees during the induction process. Gencau only employs persons according to legal age employment regulation. Workers are encouraged to report any situation of harassment, discrimination, violation of law, and misconduct to a specific channel (Canal de Denuncia, see worker’s grievance mechanism below). The hiring process and promotion follow well-established policies based on merit and competencies.

Workers Organizations. Gencau recognized employees’ right to freedom of association. All direct workers are covered by the Collective Bargaining Agreement (CBA) signed in 2023 and valid for one year.

Grievance Mechanism. As per its Code of Conduct and Ethics, Gencau has established a formal corporate worker’s grievance mechanism procedure (ref. https://www.gencau.com/areacolaborador/) which provides several alternatives for employees to raise concerns in writing to management other than to immediate supervisors and allows grievances to be presented without the risk of retaliation, in line with IFC’s PS2.

Occupational Health and Safety. Inherent hazards and risks of a cocoa processing and farming operations include working at height, in hot and noisy environment, in confined spaces, with energized equipment, or with hazardous materials (agro-chemicals products). Gencau adopted an Environmental and Occupational Health and Safety (EHS) Policy in October 2022. As indicated above, Gencau undertook a workplace risk assessment as part of the PGR and the LTCAT, which defines OHS management plans, including OHS training need for workers, use of PPE, and health check-up requirement. Gencau has developed ten OHS golden rules which employees are strictly required to abide.

Worker’s induction session and annual training on OHS SOPs, working system and golden rules are provided to permanent employees and contractors. Annually, Gencau is updating its hazard risk register. As per regulatory requirements, Gencau has implemented a protection program for respiratory and hearing conditions. In addition, ergonomic risk assessment is conducted at each working station. At each plant, a safety supervisor (Tambau) and/or technician (Medicilandia, Ibirapitanga) is assigned for effective implementation. Safety talk is done prior to every shift. Gencau closely monitors OHS KPIs. Current LTIFR – 3.6 at Tambau and 4.9 at Medicilandia - are aligned with US OSHA 2021 Industry Data (3.3. and 2.9 respectively). Farm workers applying agrochemicals undergo semestrial cholinesterase test. IFC reviewed implementation of training plan for 2023 and OHS measures at the three processing facilities, including adoption of good practices (e.g., use of telescopic conveyors at the onloading workstation, use of lifeline and safety harness for working at height, use of PPE for spraying). Tambau facility is equipped with an on-site first aid clinic while the other operations have contractual agreements with the closest medical clinics. All employees have access to gender-disaggregated locker rooms with good hygiene conditions and are provided with meals at the on-site cafeteria.

Supply Chain. As indicated in the PS1 Supply Chain section, all prospective Gencau cocoa suppliers undergo risk screening, including risk filters such as embargos for forced labor risk (ref. “Lista Suja”) (Ministry of Economy, Secretariat of Labor). If the supplier is deemed eligible based on the results of the risk screening platform. Gencau undertakes a technical visit to the prospective cocoa supplier during which a socio-economic and environmental questionnaire is completed. This questionnaire includes the relevant provisions as defined in the Gencau Supplier Code which prohibits harmful CL/FL, and in the buyer Supplier Codes. Working conditions at the farms is also documented, such as the availability of PPE for Crop Protection Products (CPPs) spraying, on-going health monitoring for cholinesterase, proper storage of agro-chemical containers and disposal of empty containers, and availability of drinking water in the plantations to prevent dehydration. Based on Gencau visit, if the farmers meet all the provisions, they are then officially registered in Gencau’s supplier database. Gencau sourcing /agronomic team undertakes technical visits – at least once a year – to suppliers to verify implementation of the Supplier Code’ CL/FL and working conditions at farm. On an annual basis, Gencau hires an external auditor to undertake an audit of a sample of cocoa suppliers to verify effective implementation of Gencau’s Supplier Code.

PS3: Resource Efficiency and Pollution Prevention

Resource Efficiency. The processing of cocoa beans into nibs and production of cocoa powder and butter is an energy intensive process. Gencau’s processing facilities are connected to the local electricity grid. Biomass-boilers using eucalyptus chips as feedstock produce steam for the sterilization process at Medicilandia and Tambau plants. Two key pillars of the technical design of Gencau’s facilities have been the adoption of best-available technology, and the maximization of automation. Based on resource efficiency data shared during this appraisal, Gencau has above average industrial efficiency. Gencau’s facilities rely on permitted abstraction wells for its water supply. Raw water is treated for use as process water and drinking water for the workforce at Medicilandia and Tambau. Based on analysis results, water quality parameters are meeting WHO Guidelines for drinking water quality. As cocoa bean processing is a dry process, volume of process water is minimal. Upon completion of the upgrade of the processing capacity at its three processing facilities, Gencau will be using its current resource efficiency KPIs to define energy and water reduction target as part of its Sustainability Strategy.

Greenhouse gas (GHG) emissions. Gencau started calculating Scope 1, 2, and 3 emissions in 2021. To reduce Scope 1 and 2 emissions, it installed on-site biomass boilers and purchased electricity from renewable energy sources. As a result, the Scope 1 and 2 emissions before the IFC’s project in processing facilities were around 330 tCO2e/year. The Project by IFC aims to expand Gencau's processing facilities. However, the company has set a goal to achieve Scope 1 and 2 net zero emissions within the next three years. As a result, the Project's Scope 1 and 2 emissions could potentially be zero, or approximately 650 tCO2e/year, if the company maintains its current practices.

Pollution Prevention. The main environmental risks associated with the cocoa bean processing facilities are related to air emissions, noise generation, disposal of boiler’ ash, and wastewater effluents. For food safety measures, air inflow within the cocoa processing plant in Tambau is filtered at entry.

Air emissions and noise. Point source emissions, including from boilers, of particulate matter (PM) and nitrogen oxides (NOx) were measured at Tambau’s processing facilities in September 2023 and found above the PM emission guidelines values of CONAMA Resolutions 381/06 and 436/2011. To abate such emissions, Gencau will install a multicyclone dust collector at its Tambau’s biomass boiler. Similar point source air emissions measurement is scheduled in the third quarter of 2024 at Medicilandia facility. In case of exceedance of guideline values, Gencau will also install a multicyclone at this biomass boiler. Going forward, Gencau will monitor its point source air emissions at the Tambau and Medicilandia facilities against CONAMA and relevant WBG EHS Guideline values and will take corrective measures in case of further exceedances of the most stringent guideline value (ESAP#3). Ambient noise during day and night-time has been measured at the Tambau processing facility and found within CONAMA/WBG EHS Guidelines values (less than 70 dBA during day and night-time at facility boundaries). The results of the point air emissions and noise monitoring are communicated to the local authorities, as per Environmental License Terms and Conditions.

Effluent Treatment Plant. As cocoa processing is a dry process, the volume of process wastewater is minimal. However, Gencau will be expanding its production capacity at the Tambau and Medicilandia facilities with the proposed IFC financing, and therefore it will install a new wastewater treatment plant (WWTP) at its Tambau unit. Selection of the WWTP must allow meeting the most stringent value between CONAMA and WBG EHS Guidelines for quality of the treated effluents before discharge (ESAP#4).

Solid and hazardous waste management. Gencau has developed and implemented a Solid and Hazardous Waste Management Procedure, as per the T&Cs of its Operational License. Characterization of the waste includes solid (organic) waste, which is being collected by the municipality. The ashes from the biomass-boiler are currently kept on-site. Gencau did a physico-chemical analysis of this waste to assess its potential application as organic fertilizer, especially for distribution to the cocoa producers in Para state. Gencau will formalize a waste (ash) management plan for its on-site storage and distribution at its farms and/or suppliers. Limited quantities of hazardous wastes (e.g., used oil, oil filter) are being stored in a locked/well-ventilated storage room and volumes are registered in a registry (log). A service provider is collecting and disposing such waste to a licensed location.

Pesticide Use and Management. Rodent and pest control at the cocoa processing facilities is undertaken by licensed companies. For its farms, Gencau is referring to Nestle Cocoa Plan as agronomic SOP to prevent disease. The plan encourages adoption of Integrated Pest Management (IPM) as prescribed by the Rainforest Alliance Standard. It promotes cocoa tree pruning to reduce the prevalence of disease by increasing air circulation. The Rainforest Alliance Standard also prohibits the use of WHO Class Ia (extremely hazardous) and Ib (highly hazardous) substances, in alignment with IFC PS3 requirements. As Gencau will align its Environmental and OHS policies to IFC’s Performance Standards (ref. ESAP#1), it will commit that purchase, storage, and use of CPPs that fall in WHO Class Ia and Ib are strictly prohibited at its farms and in its supplier base in Para and Bahia states, and monitor and correct any non-compliance, while for WHO Class II (moderately hazardous), Gencau will develop appropriate controls for the use of these chemicals. In addition, Gencau will include in its Supplier Code its commitment toward the promotion of IPM to its cocoa suppliers and will deliver on a yearly basis a training course on IPM and regenerative agriculture to its cocoa suppliers (ESAP#5). As per its T&C of its Rural Activity License (LRA) from local authorities, agro-chemical products were found to be safely stored in a locked and well-ventilated storage room, with available Material Data Safety Sheets and log, availability of PPE for the CCP sprayers, changing rooms, while empty CPPs plastic containers were found to be properly stored at the farms, including triple-rinse, puncture, and disposed of by a certified service providers and/or agro-chemical supplier on a seasonal basis. 

PS4: Community Health, Safety and Security

All three processing facilities are in remote rural areas. Closest human settlements from all plants are from 2km (Tambau) and 5 km (Medicilandia and Ibirapitanga). Potential community health and safety risks and issues associated with the operations of the plants are minimal. As indicated in the section above, Gencau will continue to develop and implement its E&S operational safeguards and install necessary air emission and wastewater treatment units to minimize risks and impacts.

The transport risk is minimal, given the volumes of traffic associated with the transport of cocoa beans in Para and nibs from Medicilandia to Tambau. For the transport of cocoa beans and cocoa nibs, Gencau uses a transportation service provider. Gencau requires the provider to comply with legal and regulatory requirements applying to road safety, including Brazilian Regulatory Standard N.11 (transportation, movement, storage and handling of materials) as well as Gencau’s third-party labor/EHS guidelines and Code of Conduct, which include zero tolerance to gender-based violence and sexual exploitation, abuse and harassment. Drivers receive safety instruction, including undergoing a defensive driving course. Drivers must hold a psychological fitness certificate which is renewed periodically. Medical checks are undertaken on an annual basis. Annual inspection of trucks is also required. All three facilities have parking for trucks within their premises.

Food/Product Safety Management. The cocoa processing facility at Tambau has been certified FSSC 22000 (Food Safety System certification) since 2021 for cocoa nib packaging and production of cocoa liquor, butter and powder. All three processing facilities have an on-site laboratory for quality testing. External laboratory analysis is done for presence of heavy metals (e.g. lead) and Maximum Residue Limit (MRL) for agro-chemicals products. Based on results reviewed by IFC, cocoa nibs have been within permissible limits since the establishment of Gencau’s facilities.

Security. The processing plants are fenced. Closed-circuit Television (CCTV) systems have been installed at the Medicilandia and Tambau plants and strict entrance/exit protocol being observed. The company uses a licensed security service provider. The security agents do not carry firearms. No incidents associated with the conduct of the security personnel were reported by Gencau.

PS6: Biodiversity conservation and sustainable Management of Living Natural Resources

Client-owned operations are in agricultural areas within the Tapajós-Xingu ecoregion of Pará and the Bahia Coastal Forest ecoregion, as well as an urban site in São Paulo. There is no recent or planned conversion or degradation of Natural or Critical Habitats for Gencau operations.

Gencau’s operation in São Paulo includes an existing industrial facility within the urban zone of the town of Tambaú. The construction footprint for the facility occurred in 2019-2020 (approx. 2.5 ha) in Modified Habitat (modified at least 15 years prior). Gencau’s operations in Bahia include an existing cocoa processing facility (approx. 1.5 ha) and research plantings of cocoa (approx. 6 ha), installed by a prior owner on Modified Habitat. Finally, Gencau operations in Pará include an existing cocoa processing facility, constructed in Modified Habitat (approx. 5 ha), and plantings of cocoa on Modified Habitat (approx. 100 ha). All the client’s operating sites are compliant or in the process of attaining compliance with the Brazilian Forest Code. PS6 requirements are limited to continued implementation of GIIP for environmental management and none of the sites trigger offset requirements.

Gencau will achieve certification of its two farms (6 hectares in Bahia and 100 hectares in Pará) against a credible cocoa production standard (e.g., Rainforest Alliance) (ESAP#6). PS6 requirements for agricultural supply chains are covered in the PS1 section.

 As Gencau’s processing and farming operations are located in rural areas and isolated from neighboring communities, the company has yet to develop and implement a stakeholder engagement plan, including a formalized community grievance mechanism. In its Code of Conduct, Gencau has established a corporate reporting channel which can be accessed by external parties and can receive/respond to communities’ concerns (https://www.gencau.com/areacolaborador/). At the time of IFC’s review, there have been no community grievances received by Gencau, aside from a community’s complaint about black smoke at the Medicilandia plant, which has been resolved through improved maintenance program of the boiler. Scheduled air monitoring is scheduled in September 2024. Going forward, to strengthen its stakeholder engagement and grievance management, Gencau will (i) develop and implement a corporate Stakeholder Engagement Procedure and implement site-level SEPs; (ii) develop an External Grievance Procedure to comply with PS1 requirements which will be socialized in all cocoa bean sourcing and direct operations through training and internal audit. Provision to accept and respond to allegations of gender-based violence and sexual harassment in the sourcing and at its processing facilities will also be included (ESAP#7). Gencau will report on its E&S performance to municipalities and neighboring communities on an annual basis.                                                  

 The ESRS / ESAP and the ESIA for the Medicilandia plant will be made available via IFC Project Information Portal.