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
Operational environmental, health and safety (EHS) risks and impacts of Azza’s operations are limited. The company identifies and manages E&S risks and impacts associated with its operations through compliance with applicable national standards and E&S regulatory permits and requirements.
Azza has a corporate Environmental, Health and Safety Policy, which is consistent with PS1 requirements and will apply to the project.
Azza has a dedicated, adequately staffed company-level EHS compliance team, with focus on occupational health and safety (OHS), food safety and hygiene, and there are separate teams for compliance management at each facility. With the consolidation of production operations into a single central facility, the EHS compliance team will be unified. This is expected to result in greater efficiency, consistency, and a stronger focus on compliance efforts.
The company has previously obtained HACCP certification (Hazard Analysis and Critical Control Points), an internationally recognized system for managing food safety risks, focusing on identifying, evaluating, and controlling hazards throughout the production process. Building on this strong foundation, the company plans to further enhance its food safety and quality management systems by acquiring BRCGS certification (British Retail Consortium Global Standards) once the new bakery plant becomes operational. BRCGS certification is a globally recognized standard for food safety and quality, covering areas such as food safety management systems, traceability, hygiene, and product integrity.
IFC’s review identified a low level of project E&S risks and impacts resulting from a changing climate. The client will manage and mitigate risks of any potential adverse impacts emerging from the increase of temperatures by implementing relevant measures within its OHS protocols.
Azza has documented an emergency response plan for its operations. The roles and responsibilities for various teams responsible for evacuation, rescue, firefighting etc. are defined and displayed at various locations across the facilities. Fire alarm call points, evacuation route maps and hose reels have been placed at many locations. The compliance team conducts internal audits to ensure implementation of functional fire prevention and protection systems and emergency safety measures. Several workers have been trained in fire safety and operation of fire safety equipment.
As part of the corporate EHS management, the company monitors and document key performance indicators (KPIs) related to food safety, workplace safety and sustainability. Most KPIs are reported internally to improve operations and support decision-making. Certain KPIs are reported to regulators, certification bodies or other stakeholders to meet legal and industry requirements. All incidents, such as workplace injuries or food safety issues, are documented in the Incident Report and the team analyses the root causes and implements corrective action.
The company’s overarching E&S management system, as described above, was noted to be commensurate with the current scale and E&S risks and impacts of its operations. Going forward, the company will ensure that its Human Resources (HR) and Health & Safety (H&S) resources remain adequately scaled and aligned with the growing workforce.
In the future, expanding the retail chain may necessitate acquiring land for new Azza’s owned premises (currently all stores, except for two, are leased). The company is intended to acquire land based on a willing buyer-willing seller principle, aiming to avoid physical or economic displacement. Azerbaijani national legislation prohibits the development of agricultural land in use or protected forestry. As outlined in ESAP #1, the company will adopt a Land Acquisition Policy to incorporate the willing buyer-willing seller principle and the procedures that will be established for avoiding physical or economic displacement, including consultations with stakeholders potentially impacted by the new development.
New bakery plant is located in the industrial zone, 25 km away from Baku. The land plot was acquired from a previous private owner in 2017 and didn’t result in physical or economic displacement. No Environmental and Social Impact Assessment (ESIA) was required by the national law due to limited environmental impacts and the project’s location in the industrial zone. To comply with the IFC’s PS1, the company will perform additional environmental measurements of air emissions and noise, as outlined in the PS3 section of this ESRS, to confirm compliance with national and IFC requirements.
PS2: Labor and Working Conditions
As of April 2025, Azza employed 1,136 workers. Out of these, 550 direct workers across its three production facilities, warehouses and as truck drivers, and 586 in its stores. In terms of gender breakdown, 307 workers (17 percent) are male while 829 (73 percent) are female. Out of the total workforce, 70.4 percent are operational employees (non-managerial staff) while 29.6 percent are managerial staff. Upon the transfer to the new larger processing capacity, and the perspective increase in production, the workforce in the stores is scheduled to increase by a total of approximately 80-100 jobs per year (totaling in 500-800 new jobs as the result of the Project), while the remaining workforce is projected to remain the same. Azza does not employ any contracted workers.
Human Resources (HR) Policies and Procedures. Azza has adopted a documented Human Resources Policy and Internal Disciplinary Rules which are broadly aligned with Performance Standard 2 (PS2) objectives and national labor regulations, and are applicable to all workers. The Policy and Rules commit to fair and equitable wages, benefits, and other conditions of employment in accordance with local laws, and to provide safe and healthy working conditions. All direct employees are onboarded on Azza’s Human Resources Policy and Internal Disciplinary Rules at induction. The implementation of HR policies and procedures for the workforce is led by a Head of HR located in Azza’s headquarters in Baku. Also, as female participation in the workforce equals 73% and to further promote gender equality, the company is planning to develop a policy on gender, diversity and inclusion aimed at fostering greater inclusivity and opportunities in the workplace.
Working Conditions and Terms of Employment. Azza defines terms and conditions of employment in line with Azerbaijani labor regulations and consistent with PS2 objectives. Provisions and conditions of employment cover contracts, probation periods, shift schedules, salaries, overtime, and commit to an open-door policy; Azza recognizes compensation and benefits, such as leave entitlements and training opportunities, and regulates recruitment, termination, and disciplinary procedures. Further, each worker receives a written contract that describes the working conditions and terms of employment. Working hours for all direct workers, including overtime, are recorded electronically and comply with national labor laws. While the company does not anticipate a reduction in the current workforce, as per ESAP #2, Azza will update its Human Resources Policy and procedures to include provisions on retrenchment.
Azza is planning a strategic move to consolidate its operations by transitioning to a new processing plant located on the outskirts of Baku. This new facility will merge the personnel from the three existing plants, creating a unified workforce. Despite the significant change, Azza is committed to retaining all its current personnel, ensuring job security for its employees.
Non-discrimination and Equal Opportunity, and SEAH (sexual exploitation and abuse, and harassment). Azza’s Human Resources Policy broadly prohibits discrimination, sexual harassment and bullying in employment, and its Internal Disciplinary Rules establish the employer’s duty to take measures to prevent discrimination and sexual harassment, and to investigating such behaviors. In order to address these issues more comprehensively and through concrete actions, Azza will update its Human Resources Policy and Internal Disciplinary Rules to explicitly address and prohibit discrimination and SEAH amongst the workforce, include disciplinary measures for their violation in its Disciplinary Rules, and provide training to all workers on the SEAH and equal opportunity policies and regulations during their initial induction and periodically thereafter (ESAP #2).
Azza only employs individuals above the age of 18, in accordance with local employment laws. Azza’s HR Policies and regulations guarantee training and career opportunities, as well as promotions based on merit and competencies.
Workers Organizations. While Azza’s employees are not unionized, the company does not prohibit the freedom to associate and workers right to form and join workers organization.
Grievance mechanism. Azza currently maintains an open-door policy for reporting complaints, which is facilitated through managers and human resources personnel. The company will enhance its grievance mechanism to provide a dedicated procedure, including trained focal point for handling “sensitive cases” - such as discrimination, mobbing, harassment and SEAH - while also ensuring multiple options for reporting (in person, via phone, email, and anonymous). It will also identify and provide accessible referral pathways for complainants, accessible to all workers (ESAP #3).
Occupational Health and Safety (OHS):
The company’s Health, Safety, and Environment (HSE) policy covers a commitment for a safe and healthy workplace for workers, in alignment with key elements of PS2. The company has developed its Corporate EHS manual based on Hazard Identification and Risk Assessment. In line with national regulations, regular workplace inspections are carried out by state authorities, alongside internal audits focusing on food safety, hygiene, and health and safety standards. Workers are provided with appropriate personal protective equipment, including clothing, caps, and masks, and receive regular occupational health and safety (OHS) training. Records of OHS-related accidents, incidents, and near-misses are consistently maintained at the plant level. Azza’s OHS statistics are well below international industry thresholds, demonstrating the effectiveness of its OHS management system.
New bakery plant is equipped with fire detectors, alarm systems, and fire-fighting equipment. There are ample emergency exits for evacuation, and there are a minimum of two exits from any work area.
Supply chain management.
Azza Farm supplies milk and milk-based products to Azza’s stores. It operates as a full cycle producer and manages 500 hectares of crop fields. The company does not use contracted workers for any activities, relying instead on direct employment managed by Azza’s corporate HR. Harvesting is automated, without manual labor. Given these control measures, the risks of child or forced labor in the Tier I supply chain are considered low.
For its biscuit and cake manufacturing, Azza uses a variety of raw materials—including oil, fats, sugar, and cocoa—sourced from international suppliers. Globally, the procurement of these ingredients carries inherent risks, such as child and forced labor, poor working conditions, deforestation, and other threats to biodiversity. Azza works with a limited number of long-standing, reputable wholesalers, most based in Europe, who maintain compliance with applicable regulations and internal codes of conduct. As part of its Supply Chain Management System, Azza requires these suppliers to provide relevant sourcing policies, recognized external sustainability certifications, and traceability information for higher-risk ingredients. This helps ensure that upstream producers are also operating in line with responsible labor and environmental practices, in alignment with Azza’s Supplier Code of Conduct.
PS3: Resource Efficiency and Pollution Prevention
The company’s production process primarily involves mixing the ingredients, baking, and decoration, and does not result in significant quantities of waste and emissions. Baking ovens are heated using electrical energy. According to BAT, the electric energy usage for baking ranges from 0.125 kWh to 0.167 kWh per kg of product (450 – 600 kJ/kg). The company’s new plant is anticipated to be within this range. After the project becomes operational, annual GHG emissions are expected to be below the IFC threshold of 25,000 tons CO2e and will therefore not trigger the IFC’s annual GHG reporting requirement.
Electricity is sourced from the national grid, and there are no other major air emissions or pollution from the company’s operations. A steam boiler produces steam for both process and non-process use (e.g., space heating), and the use of natural gas as fuel results in minimal sulfur content in boiler stack air emissions, with nitrous oxides and particulate matter managed by installed technologies in accordance with national requirements. There is a backup diesel generator at the site, but its use will be limited.
As outlined in the ESAP #4, Azza will develop Noise and Air Quality Management Plans, including monitoring of air emissions and noise from its boilers at plant boundaries during commissioning and operation to meet local and WBG EHS Guideline values for ambient air quality and noise. In the event that any exceedances are identified against local standards or World Bank Group’s General Environmental, Health, and Safety (EHS) Guidelines for ambient noise and air quality, Azza will identify and implement mitigation measures to achieve compliance (including but not limited to sound-insulating enclosures, noise barriers, controlling the times when diesel-generator is working or vehicles enter and leave the plant, etc.)
The company does not use R22 or other phased-out refrigerants.
Water will be sourced from the local utility supply company. After in-situ wastewater treatment (oil separators are installed at the site to intercept most greases before they enter the sewage system), partly the wastewater will be re-used within the facility mainly for gardening, and the remaining treated effluent will be discharged to the public sewage system for final treatment. The treated effluent will comply with the technical discharge requirements mandated by the operator of the sewage system. Stormwater will be treated in the rainwater harvesting system in the complex to recharge groundwater. Grease produced from the treatment systems, will be removed and collected by licensed companies.
The company has procedures for managing hazardous and non-hazardous waste, including appropriate sorting, handling, storage, and disposal, consistent with applicable legal requirements. All hazardous and non-hazardous wastes are collected for disposal by authorized public service agencies specialized in each type of waste. Based on IFC’s team observations during the site visit, the current practices have been found to be appropriate.
PS4: Community Health, Safety and Security
The new plant is located within an industrial area, but its boundary is directly adjacent to a residential zone. The construction of the new bakery plant is nearly complete, with no significant construction impacts anticipated at this stage.
During operation, to ensure compliance with ambient air quality and noise standards (both local and IFC), Azza will implement air emissions and noise management plans as described in PS3. These plans will include emissions monitoring and, if necessary, emission reduction programs to minimize potential impacts on nearby residents.
The access road to the plant does not pass through the residential area, so no direct traffic impacts on the community are expected, such as congestion, noise, or safety concerns.
Azza employs security personnel and drivers as direct employees, ensuring a dedicated workforce for its operations. Azza will provide comprehensive training to both existing and newly hired security personnel and drivers on the company’s policies, regulations, procedures, and grievance mechanism, with a particular focus on addressing issues such as discrimination and SEAH (ESAP #6).
