This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability because the proposed project is expected to have limited adverse E&S risks and/or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures, as described in the following sections. No IFC-financed activities are expected to result in economic or physical displacement of people.

Key E&S aspects associated with the project are: (i) adequacy of  ZGH’s ESMS and its ability to assess and manage E&S risks and impacts across its subsidiaries and business lines per IFC PSs; (ii) labor and working conditions, occupational health and safety (OHS) and emergency planning; (iii) contractor management; (iv) pollution prevention, including solid and hazardous wastes and air emissions/odors; (v) water and energy efficiency; (vi) community health and safety including infrastructure safety, road safety, and life and fire safety (L&FS); (vii) stakeholder engagement and community grievance redress mechanism.                                                   

PS 1 - Assessment and Management of Environmental and Social Risks and Impacts

ZGH has established several group-level policies focused on environmental protection and OHS. E&S risks and impacts associated with their operations are managed by compliance with applicable EU regulations. ZGH, via its subsidiaries, conducts Environmental Impact Assessments (EIAs) for projects as required by national law. Several subsidiaries implement their own E&S policies and ESMSs tailored to their specific E&S risks. Some of these ESMSs are accredited with ISO 14001:2015 for environmental management.

ZGH is developing an ESMS aligned with IFC Performance Standards (ESAP#1). The ESMS will include an overarching E&S Policy, E&S Training Plan, E&S Assessment and Management Procedure, and E&S Monitoring Program. Furthermore, ZGH is forming a centralized Environmental, Social, and Governance (ESG) department and supporting its subsidiaries in developing and implementing their ESMSs.

As per ESAP#2, ZGH will develop a Contractor Management Procedure (CMP) as part of its ESMS to guide all contractors regarding compliance with its ESMS and IFC PS in line with the guidance provided in IFC’s Good Practice Note Managing Contractors’ E&S Performance.

PS 2 – Labor and Working Conditions

ZGH has human resources (HR) procedures that align with local and EU labor requirements. These procedures generally align with IFC PS2 and cover aspects such as hiring, rights, obligations (including non-discrimination and equal opportunities), management of sexual harassment and gender-based violence, freedom of association, and working conditions. A new Collective Agreement (CA) was negotiated in 2023, defining working conditions and employment terms. The subsidiaries operate under collective agreements aligned with ZGH’s.

As part of ESAP#3, ZGH is revising its existing worker grievance mechanism (WGM) in accordance with IFC's PS2 standards and making it available to all workers, including ZGH’s subsidiary workers.

ZGH has developed an overarching OHS management system (OHSMS) that complies with all EU regulations and is generally aligned with IFC PS. ZGH’s subsidiaries operate under their own OHSMS, which is tailored to their business activities and aligned with ZGH’s systems. As per ESAP#4, ZGH will update its OHSMS to include a comprehensive Incident Reporting, Classification, and Investigation Process in line with Good International Practices, including all incidents and near misses. ZGH will communicate significant incidents, root causes, remedial actions, and lessons learned to all workers and contractors. Additionally, ZGH will monitor its and its subsidiary’s OHS performance and establish OHS Key Performance Indicators (KPI) applicable to direct and contracted workers, including leading and lagging indicators (including lost time frequency rates).  

PS 3: Resources Efficiency and Pollution Prevention

Potential negative environmental impacts of project activities include air emissions, elevated noise levels, and hydrocarbon spills associated with heavy equipment operation. ZGH implements an environmental monitoring program that is aligned with national requirements. As part of ESAP#1, ZGH is developing an E&S Monitoring Program to monitor air, dust, water, and noise emissions generated during construction activities.

PS 4: Community Health, Safety, and Security

ZGH’s subsidiaries have individual emergency response and preparedness plans for specific operational risks. The group's emergency preparedness planning and response coordination for significant incidents is centralized and managed by ZGH. ZGH and its subsidiaries operate their own fleet of vehicles (a combination of owned and leased), fitted with a GPS vehicle monitoring system that monitors location, distance traveled, vehicle speed, etc. The group requires all drivers to comply with national traffic laws and implement internal policies to manage occupational road risks. As part of the existing investment, ZGH is reviewing and updating its Transport Plan to ensure it is aligned with national requirements and IFC PS4 and extended to all contractors and sub-contractors (ESAP#1).

ZGH has established several group-level policies focused on environmental protection and OHS. E&S risks and impacts associated with their operations are managed by compliance with applicable EU regulations. ZGH, via its subsidiaries, conducts Environmental Impact Assessments (EIAs) for projects as required by national law. Several subsidiaries implement their own E&S policies and ESMSs tailored to their specific E&S risks. Some of these ESMSs are accredited with ISO 14001:2015 for environmental management.

ZGH is developing an ESMS aligned with IFC Performance Standards (ESAP#1). The ESMS will include an overarching E&S Policy, E&S Training Plan, E&S Assessment and Management Procedure, and E&S Monitoring Program. Furthermore, ZGH is forming a centralized Environmental, Social, and Governance (ESG) department and supporting its subsidiaries in developing and implementing their ESMSs.

As per ESAP#2, ZGH will develop a Contractor Management Procedure (CMP) as part of its ESMS to guide all contractors regarding compliance with its ESMS and IFC PS in line with the guidance provided in IFC’s Good Practice Note Managing Contractors’ E&S Performance.

PS 2 – Labor and Working Conditions

ZGH has human resources (HR) procedures that align with local and EU labor requirements. These procedures generally align with IFC PS2 and cover aspects such as hiring, rights, obligations (including non-discrimination and equal opportunities), management of sexual harassment and gender-based violence, freedom of association, and working conditions. A new Collective Agreement (CA) was negotiated in 2023, defining working conditions and employment terms. The subsidiaries operate under collective agreements aligned with ZGH’s.

As part of ESAP#3, ZGH is revising its existing worker grievance mechanism (WGM) in accordance with IFC's PS2 standards and making it available to all workers, including ZGH’s subsidiary workers.

ZGH has developed an overarching OHS management system (OHSMS) that complies with all EU regulations and is generally aligned with IFC PS. ZGH’s subsidiaries operate under their own OHSMS, which is tailored to their business activities and aligned with ZGH’s systems. As per ESAP#4, ZGH will update its OHSMS to include a comprehensive Incident Reporting, Classification, and Investigation Process in line with Good International Practices, including all incidents and near misses. ZGH will communicate significant incidents, root causes, remedial actions, and lessons learned to all workers and contractors. Additionally, ZGH will monitor its and its subsidiary’s OHS performance and establish OHS Key Performance Indicators (KPI) applicable to direct and contracted workers, including leading and lagging indicators (including lost time frequency rates).  

PS 3: Resources Efficiency and Pollution Prevention

Potential negative environmental impacts of project activities include air emissions, elevated noise levels, and hydrocarbon spills associated with heavy equipment operation. ZGH implements an environmental monitoring program that is aligned with national requirements. As part of ESAP#1, ZGH is developing an E&S Monitoring Program to monitor air, dust, water, and noise emissions generated during construction activities.

PS 4: Community Health, Safety, and Security

ZGH’s subsidiaries have individual emergency response and preparedness plans for specific operational risks. The group's emergency preparedness planning and response coordination for significant incidents is centralized and managed by ZGH. ZGH and its subsidiaries operate their own fleet of vehicles (a combination of owned and leased), fitted with a GPS vehicle monitoring system that monitors location, distance traveled, vehicle speed, etc. The group requires all drivers to comply with national traffic laws and implement internal policies to manage occupational road risks. As part of the existing investment, ZGH is reviewing and updating its Transport Plan to ensure it is aligned with national requirements and IFC PS4 and extended to all contractors and sub-contractors (ESAP#1).

Being a municipal utility holding company, ZGH regularly engages with public stakeholders. Specific public consultation is conducted for projects aligned with national EIA requirements. As part of ZGH’s ESMS, which is in development, the company’s E&S Assessment and Management Procedure will include a requirement to conduct stakeholder engagement as per IFC PS1 (ESAP#1).

ZGH’s website contains information on policies, projects, and corporate updates, and there are separate websites for each of its subsidiaries containing similar information. ZGH has an external grievance redress mechanism, generally aligned with IFC PSs, which includes multiple entry points to raise and address grievances, including options to report anonymously if preferred.                                                                                                    

 Contact Person: Marija Novosel

Email: marija.novosel@zgh.hr