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
Drylock has developed a comprehensive set of E&S commitments laid out on: Environmental policy, Human rights Policy, Labour relations and working conditions Policy consistent with principles of PSs that extend to all activities, operations, and activities conducted on behalf of the company and will be cascaded to the new plant funded as part of the project. These policies include environmental, health and safety for subcontractors, human rights, code of conduct and suppliers code of conduct, among others. For each of its manufacturing facilities, Drylock establishes an environmental management system aligned with ISO 14001 requirements, with some facilities already certified.
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. For the construction of the new facility, Drylock undertook an assessment of potential environmental impacts (Avaliação de Restrições Ambientais, ARE) and obtained the corresponding environmental license (Licença Prévia, LP and Licença de Instalação) for construction. The license includes a set of conditions that the company will be addressing in their environmental management plan to address inherent risks of construction activities (e.g. waste management, noise, wastewater management, among others). As part of ESAP #1, Drylock will undertake a risks assessment of its operation activities (environment, OHS, social aspects, emergency response) and will develop and implement an ESMS and related elements in line of PS1 requirements. Additionally, it will obtain all the remaining licenses and permits required to begin plant operations (ESAP#2).
Drylock’ E&S organizational capacity at corporate level provides strategic oversight, develops policy and compliance governance, led by the global sustainability manager at Drylock Technologies, directly reporting to the CEO. Human resources, legal and sustainability managers, are responsible for local EHS matters and report to Plant managers, who have local responsibility for on-site implementation of E&S corporate policies and regulatory compliance. In Brazil, the VP of operations and the project manager have the oversight responsibility for EHS matters for the construction and operation of the new facility.
The construction contractor (Diase) is contractually required to comply with Drylock E&S policies and ESMS procedures, as well as local regulations. Diase has a site-specific construction environmental management plan (EMP) and an OHS management system in place. These include E&S management programs for waste management, emergency response, EHS training, work permits, and others. Drylock’s oversight of the project’s E&S performance is undertaken by the project manager through KPI’s covering injuries, training, emergency response drills, waste management, etc. Diase’s EHS performance is reviewed in weekly meetings at the project level and bi-weekly at Drylock’s board meetings. Diase also developed emergency response plan for construction activities per national law that covers potential scenarios: health emergency, environmental emergency, fire, explosions, landslides, rain/flood, among others. There is an emergency brigade on site, with proper qualifications, emergency equipment and training. Drylock undertakes regular drills and coordinates with local emergency response agencies.
At corporate level, Drylock has developed a comprehensive and detailed set of E&S related indicators, which are periodically and publicly disclosed in its sustainability report. Aligned with the Sustainable Development Goals (SDGs), the established KPIs include renewable electricity use, percentage of materials saved through eco-design, percentage of employees trained on the code of conduct, scrap rate, lost time injury frequency rate, and others. Plant’s EHS personnel undertake regular audits and implement corrective action plans. In addition, Drylock undertakes external audits by SMETA (Sedex Members Ethical Trade Audit Report) to ensure compliance with labor rights, health and safety, environmental management, and business ethics, while also providing transparency to customers and stakeholders in the supply chain.
The company’s ESMS was noted to be commensurate with the nature and scale of E&S risks and impacts of its operations across regions. The implementation of the ESMS at the project’s construction site was adequate.
PS2: Labor and Working Conditions
Drylock is committed to ensuring that employees have safe and healthy working conditions as outlined in its “Labour Relations & Working Conditions” policy and the code of conduct (CoC). The HR policy establishes objectives in several key areas, including equal employment opportunities, diversity and inclusion, non-discrimination, harassment, working hours and rest periods, occupational health and safety (OHS), compensation and benefits, employment contracts, labor relations, grievance and dispute resolution, training and awareness, and monitoring and compliance. The HR policy is consistent with the requirements of PS2 and national law.
There is a standardized on-boarding program for company’s new hires covering all aspects included in labour contracts. Drylock may employ individuals under the age of 18 in accordance with local regulations and to fulfil legal employment quotas at certain facilities. For existing plants in Brazil Drylock follow local requirements, which was validated trough external audits (Sedex Member Ethical Trade Audit, SMETA). No individuals under the age 18 are being hired for construction activities. Drylock’s HR policies prohibit any employment practices that directly or indirectly expose workers to undue health and safety risks. The company strictly forbids the use of child labor, prison labor, forced labor, or any other form of exploitative labor. Employees are free to associate and exercise their right to collective bargaining without restriction.
Drylock has an OHS policy for subcontractors, where it establishes responsibilities for contractors to comply with applicable health and safety laws, regulation and standards, and to identify and manage OHS related risks. The policy also lays out Drylock’s responsibility to provide a safe working environment, communicate health and safety expectations, collaborate to implement H&S plans and conduct regular audits and inspections. As part of its quality and product safety system, the company implemented a toxicological monitoring plan that includes strict raw material selection, HACCP-based internal audits, an independent action plan to assess external contamination, quality labeling, in-house contamination monitoring, and collaboration with industry peers. Regular testing is conducted on three raw material groups (glue, nonwovens, and fluff) for PCBs, VOCs, formaldehyde, phthalates, glyphosate, among others. Finished products are tested on a monthly basis.
For the construction phase, Drylock established contractual obligations requiring its contractor, Diase, to implement an OHS management system and an occupational health medical surveillance program. These measures align with local regulatory requirements, including the “Programa de Prevenção de Riscos Ambientais” (PPRA) and the “Programa de Controle Médico de Saúde Ocupacional” (PCMSO). Drylock conducts periodic audits to monitor on-site working conditions and safety performance, and it performs monthly reviews of labor-related documentation, including pay slips, overtime records, benefits, and induction training. In addition, specific programs are in place to manage construction-related risks such as working at heights, permit-to-work procedures, fire safety, and electrical safety. All workers must complete safety training before accessing the construction site.
Drylock’s reports a Lost Time Injury Frequency Rate (LTIFR) of 0.56 injuries per million hours worked across all sites, which is well below the international industry reference value for medical supplies manufacturing. During peak construction activities, approximately 180 locally/regionally hired contractor employees will be engaged. The LTIFR for construction is 3.5 , also below the sector reference value of 5.5.
A grievance mechanism for workers is in place, allowing employees and contractors to submit anonymous complaints. An external provider manages and processes these grievances, directing them to the appropriate internal function for resolution. The mechanism is introduced during induction and promoted through facility noticeboards and the intranet. Drylock has required construction contractor, Diase, to implement an on-site workers’ grievance mechanism (“transparency channel”), also managed by an external provider and to make it accessible to all contractors and external stakeholders. The workers’ grievance mechanism complies with PS2 requirements. As part of ESAP action #2, Drylock will ensure that contractors have access to this mechanism and will incorporate a review of Diase's project-related grievances and resolutions into its contractor monitoring procedures.
Drylock is committed to a sustainable supply chain, as stated on its Suppliers CoC. As part of its supplier due diligence, Drylock relies on periodic questionnaires to assess suppliers’ ESG practices and trains key suppliers in responsible supply chain practices. The EcoVadis Platinum rating attests to the company’s sustainable procurement. Raw materials used on their products are: polymer for water absorption (called super absorbent material or SAP); fluff pulp made from wood fibers; nonwoven fabrics used as top and back sheets made from synthetic material (e.g. polypropylene, polyethylene); adhesives, organic cotton, elastic materials, and plastic and carton for packaging. 100% Fluff materials is sourced from responsible managed sources and certified (e.g. FSC, PEFC). All packaging is reusable, recyclable or compostable.
Drylock has a supplier’s code of conduct that outlines ethical and operational standards that suppliers and their affiliates must follow. It requires compliance with local laws and international standards (UN, ILO) and emphasizes prohibition of child labor and forced labor. Compliance is verified through audits, and violations may result in contract termination.
PS3: Resource Efficiency and Pollution Prevention
Drylock is committed to continuous innovation and the integration of resource efficiency measures across processes and products. As mentioned above, the company has achieved “Ecovadis’ Platinum” rating — an independent, top-tier certification that recognizes outstanding sustainability performance in areas such as environmental impact, energy efficiency, water usage, waste management, and carbon emissions.
The manufacturing process of Drylock’s portfolio of products mainly involves assembling different layers of materials and absorbents, without the use of process water or chemicals. Thus, it does not result in significant quantities of waste or emissions. The company has strategically focused on and invested in decreasing the carbon footprint of its manufacturing processes through lifecycle assessments. Drylock has been carbon neutral since 2022 and is committed to science-based emissions reduction targets through the Science Based Targets initiative (SBTi). The company aims to reduce absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 70% by 2030, using 2021 as the base year. GHG emissions expected for the project are 1.674 ton tCO2eq/y.
The factory production lines will incorporate servo drives and motors, reducing electrical consumption compared to older machines. Electrical motors are also equipped with soft starters and inverters for better energy efficiency. Additionally, compressors with variable speed drive technology will be optimized through a new management system. At Drylock facilities, water use is limited to ancillary water use such as restrooms, cafeteria, cleaning and landscaping; at the construction site water is brought by truck and the factory will source water from a permitted well that can supply 85 m3/d. Electricity is sourced from the grid, and Drylock has a corporate policy to offset all electricity use from renewable sources.
During construction, air emissions are generated due to earthworks and traffic within the site, diesel generators and vehicle and machinery traffic. Per EIA, for plant operations, Drylock will not have significant air emission sources. The company will monitor air emissions and ambient air quality as part of its air emissions monitoring program on its ESMS. Wastewater generation is limited to sanitary wastewater which will be discharged into a municipal sewage system and treated in a municipal wastewater treatment plant (WWTP). As part of the conditions included for the project in the licensing process with the national authorities (CETESB), Drylock has implemented a municipal WWTP upgrade to ensure WWTP has adequate capacity and efficiency aligned with national effluent standards.
There is a Waste Management Plan as part of its ESMS for managing hazardous and non-hazardous waste for construction activities (“Plano de Gerenciamento de Resíduos da Construção Civil”, or PGRCC) with guidelines for sorting, handling, storage, and disposal of residues in line with local regulations. Waste is collected and disposed of by licensed public service providers authorized to handle each specific waste category, aligned with PS3. For plant operations, hazardous waste is limited to lubricants and solvents, glues; non-hazardous waste is primarily production scrap, paper cardboard and plastic packaging. Drylock tracks all waste generated from its activities and has procedures to reduce waste, increase re-use and recycling (circularity) at all plants.
PS4: Community Health, Safety and Security
The project is located in a predominantly industrialized area, and no considerable risks to health, safety, or security to nearby communities are anticipated. Nevertheless, to address any potential increase in local traffic, Drylock will assess traffic risks and prepare transport management plan in line with good international industry practices (ESAP #4).
The site hired an external security company that provides unarmed security personnel (3 people per shift), who receive training in emergency preparedness and regular training sessions to ensure security staff are well-versed in their standard duties, including protocols related to human rights and community interaction. A similar arrangement will be established during the operation phase.
