PS 5: Land Acquisition and Involuntary Resettlement does not apply for this project as the Use of Proceeds (UoP) will cover working capital and maintenance CAPEX at existing production facilities. There is no plan for operational expansion that will require additional land acquisition or leasing as part of this proposed project. PS 7: Indigenous Peoples and PS 8: Cultural Heritage do not apply as the factories are located in commercial and/or industrial zones.

 This investment is classified as a Category B project according to IFC’s 2012 Policy on Environmental and Social Sustainability as Engro Fert’s fertilizer production and mixing activities present limited and site-specific E&S risks and impacts related to the financing of working capital, maintenance CAPEX, EnVen turnaround, and farmer outreach program. These risks and impacts can be avoided or mitigated through adherence to IFC Performance Standards (PSs) and Good International Industry Practices (GIIPs), such as the World Bank Group (WBG) General EHS Guidelines (2007), WBG EHS Guidelines for Nitrogenous Fertilizer Production and WBG EHS Guidelines for Phosphate Fertilizer Production. Engro Fert has worked with IFC on two previous projects (#30186 and #27933). Key E&S risks and impacts of this proposed investment include: (i) the implementation effectiveness of Engro Fert’s E&S management system at the Daharki and Zarkhek plants; (ii) ensuring fair treatment and safe working conditions for employees and third-party contractor workers, including implementation of Human Resources (HR) policies/procedures aligned with PS2 requirements; (iii) emergency preparedness and response, including management of ammonium leaks and potential explosion risks from natural gas; (iv) resource efficiency, including key performance indicators (KPIs) for water/energy usage and efficiency, pollution prevention and control of air emissions, noise, solid/hazardous waste, and wastewater aligned with GIIPs; (v) community safety, traffic, and use of security forces; and (vii) stakeholder engagement, community grievance mechanism near the production plants, and gender-based violence grievance and referral mechanism.

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

E&S Policy. Engro Fert has established Environment, Health and Safety (HSE) policies and procedures that cover environment and OHS issues, and a commitment to E&S sustainability. These follow the Pakistan legal framework, International Organization for Standardization (ISO) certification, and DuPont’s Environmental Management System (EMS) framework. Engro Fert achieved International Fertilizer Association (IFA) certification in 2023, obtaining the Protect & Sustain product stewardship standard, a globally recognized certification for the fertilizer industry (https://www.fertilizer.org/key-priorities/fertilizer-production/protect-sustain-certification/). This certification emphasizes ensuring process and workforce safety, security, and sustainability within fertilizer production and supply chains. Engro Fert has also been recognized with the IFA Green Leaf Award for its robust environmental stewardship practices (https://www.fertilizer.org/initiatives/ifa-awards/ifa-green-leaf-award/). Other policies adopted by Engro Fert include corporate social responsibility (CSR), security management, and emergency preparedness and response. Engro Fert discloses its annual sustainability report at https://www.engro.com/investor-relations/integrated-review/.

Identification of E&S Risks and Impacts. Engro Fert prepared initial Environmental Impact Assessments (EIAs) for the EnVen Plant in 2007. Consistent with local environmental and social (E&S) regulations, the EIAs analyzed E&S data, systematically identified and evaluated E&S risks and impacts, conducted process safety analyses, and assessed cumulative impacts. Public consultations with neighboring communities were organized. Additionally, Engro Fert employs Aspect Impact Risk Management (AIRA) procedures within its manufacturing division to identify environmental aspects, and their impacts related to operations, processes, and activities. AIRA establishes mechanisms and assigns responsibilities to prevent and control significant environmental elements through mitigation measures and ensures compliance with local legal requirements for environmental inspections. The AIRA process covers various environmental aspects, including air emissions, liquid effluents, waste generation, and resource use.

E&S Management System & Programs. Engro Fert has implemented a corporate and plant level Environmental Management System (EMS) aligned with DuPont’s EMS framework, integrating certifications from ISO 9001 (Quality Management), ISO 14001 (Environmental Management), and ISO 45001 (Occupational Health and Safety). In 2023, Engro Fert obtained the IFA Protect & Sustain certification for its robust environmental and social (E&S) management practices related to product quality, security, and sustainability. Going forward, Engro Fert will conduct an IFC Performance Standards (PS) gap assessment of its EMS against PSs 1-4, relevant sections of the World Bank Group (WBG) General EHS Guidelines (2007), WBG EHS Guidelines for Nitrogenous Fertilizer Production and WBG EHS Guidelines for Phosphate Fertilizer Production (ESAP#1). Based on the PS gap assessment results, Engro Fert will upgrade its E&S Management System (ESMS) to strengthen E&S risk management across all targeted assets. Additionally, Engro Fert will: (a) develop a social policy and procedures; (b) integrate supplier compliance monitoring into the ESMS through a Supplier Code of Conduct; (c) align resource efficiency KPIs with IFC PS requirements and WBG EHS Guidelines; (d) enhance community engagement and communication at all assets, particularly for community health and safety concerns, and establish effective grievance mechanisms to resolve issues and build trust; (e) improve emergency preparedness and response plans to address potential incidents, such as ammonia leaks, gas explosions, fires, and chemical spills, ensuring the safety of workers, communities, and the environment; and (f) implement a security management plan that respects human rights and minimizes adverse impacts on communities and workers (ESAP#1).

Organizational Capacity and Competency. The corporate Environment, Health, and Safety (HSE) team at Engro Fert oversees the E&S monitoring program for all operational assets. The team, led by an HSE General Manager (GM) who reports directly to the Chief Executive Officer (CEO) with dotted reporting lines to the Senior Vice President of Manufacturing, includes seven dedicated HSE-qualified staff: HSE manager, senior process safety engineer, process safety engineer, senior Environment and Industrial Hygiene (E&IH) engineer, E&IH engineer, safety supervisor, and safety technician. This team identifies HSE risks in fertilizer production operations and conducts formal monitoring and reporting of key HSE performance indicators (KPIs) in accordance with ISO and IFA certification requirements and national regulations. Dedicated HSE committees at Engro Fert oversees HSE commitments and performance. As part of this proposed investment, Engro Fert will enhance its corporate and plant-level E&S function by recruiting: (a) a qualified E&S Manager to collaborate with the HSE GM in implementing the E&S Action Plan (ESAP); (b) a qualified Occupational Health and Safety (OHS) professional to strengthen the HSE team’s capacity; (c) a social expert from the Community Awareness and Emergency Response (CAER) team to support the E&S Manager in developing, implementing, and monitoring the Environmental and Social Management System (ESMS), with a focus on stakeholder engagement, community relations, managing community-related gender-based violence risks, and social impact assessment; and (d) a qualified resource efficiency expert responsible for the implementation of resource efficiency related ESAP activities, who shall work in close coordination with the external expert(s) mobilized for the ESAP#7 activities. Clear roles and responsibilities will be defined for these positions, with adequate resources allocated to support their work (ESAP#2).

E&S Training. Since receiving the IFA certification in 2023, Engro Fert staff have had continuous access to the IFA’s Sustainable Fertilizer Academy. The General Manager (GM) of Environment, Health, and Safety (HSE) oversees the implementation of an annual training plan, which is closely monitored. The HSE team conducts training sessions on emergency response, Environmental Management System (EMS) awareness, occupational health and safety (OHS), and waste management. Standard Operating Procedures (SOPs), work instructions, work permits, and hazard prevention signs are prominently displayed in production areas. Engro Fert also maintains a training manual for emergency preparedness and response. Moving forward, Engro Fert will update its EHS training plan to include: (a) training on IFC Performance Standards; (b) World Bank Group (WBG) General EHS Guidelines (2007), WBG EHS Guidelines for Nitrogenous Fertilizer Production and WBG EHS Guidelines for Phosphate Fertilizer Production to ensure awareness and implementation of Good International Industry Practices (GIIPs); (c) comprehensive training on the structure, content, implementation, and roles and responsibilities of the updated Engro Fert E&S Management System (ESMS) (ref. ESAP#1); (d) emergency response procedures, including ammonia leak management, gas explosion, fire safety, chemical spill response, and evacuation protocols, with practical drills and simulations to ensure preparedness; (e) effective stakeholder engagement techniques, communication protocols, and grievance resolution mechanisms, emphasizing cultural sensitivity and respect for community concerns; and (f) awareness training on gender-based violence (GBV), promoting respectful workplace behavior and providing guidance on reporting and addressing GBV incidents (ESAP#3).

Emergency Preparedness and Response. Engro Fert has developed a corporate-level Emergency Preparedness and Response Plan, supported by manuals outlining procedures for various emergencies, including detection and declaration processes, alarm codes, communication channels, control centers, and personnel’ roles and responsibilities. This plan is implemented at each production asset and tested through weekly mock drills and quarterly unplanned drills to evaluate response effectiveness. The company collaborates with the National Disaster Management Authority (NDMA) for joint drills and training. The Community Awareness and Emergency Response (CAER) team is integrated into Engro Fert’s emergency preparedness program. Mutual aid agreements with local authorities, emergency responders, and neighboring industries ensure coordinated responses in case of major incidents. Regular joint drills and training with local stakeholders, including community members, enhance emergency response capabilities and foster community resilience. A transparent communication strategy informs communities about potential hazards and response procedures, with the Emergency Response Manual accessible to relevant personnel and community members. To align with IFC PSs and as part of the E&S Management System (ESMS) upgrade (ref. ESAP#1), Engro Fert will further strengthen emergency preparedness and response plans at all assets to address potential incidents, such as ammonia leaks, gas explosions, fires, and chemical spills, ensuring the safety of workers, communities, and the environment.

E&S Monitoring and Reporting. Engro Fert conducts regular internal and external audits in accordance with its Environmental license, ISO, and IFA’ Protect and Sustain certification requirements, focusing on air emissions, wastewater, hazardous/solid waste, and occupational health and safety, performed by DuPont and Société Générale de Surveillance (SGS). Digital tools support Health, Safety, Environment, and Quality (HSEQ) management, enabling data-driven decision-making. Emissions monitoring and reporting are conducted by the Pakistani’s Environmental Protection Agency (EPA) approved third parties, with internal reporting managed through laboratory analysis and sustainability reports. Monitoring includes footprint analysis and improvements through optimized processes, engineering solutions, digitization, and carbon sequestration to ensure efficient resource use and compliance with local ecological standards. Waste handling and management follow EPA-approved practices, including recycling, reuse, and engagement of EPA-approved contractors for hazardous waste disposal. As part of the PSs gap assessment and E&S Management System (ESMS) upgrade (ref. ESAP#1), Engro Fert will enhance its E&S monitoring and reporting processes to align with IFC PSs and World Bank Group (WBG) General EHS Guidelines (2007), WBG EHS Guidelines for Nitrogenous Fertilizer Production and WBG EHS Guidelines for Phosphate Fertilizer Production.

Supply Chain Risk and Management. Engro Fert sources raw materials for urea production, which includes natural gas as well as air and water. Urea is packaged in locally sourced polypropylene bags, while phosphates (Di-Ammonium Phosphate and Nitro Phosphate) and fertilizer blends (NPK) are both produced and imported. Other materials, such as catalysts and chemicals, are procured locally and internationally through Original Equipment Manufacturers and vendors. Engro Fert’s global supply network, managed by its UAE-based trading subsidiary Engro Eximp FZE, spans China, Morocco, and Saudi Arabia, handling imports like Di-Ammonium Phosphate and Ammonium Sulphate. Local procurement of secondary materials is managed through a centralized purchasing function using competitive bidding, while long-term contracts and pricing are regulated by the Oil & Gas Regulatory Authority (OGRA). In 2023, Engro Fert achieved the IFA’s Protect & Sustain certification, emphasizing safety, security, and sustainability in its supply chain. To align with IFC PSs, Engro Fert will establish a Supplier Code of Conduct, integrated into the E&S Management System (ESMS) as a contractual clause for suppliers (ref. ESAP#1).

PS 2: Labor and Working Conditions

Human Resources (HR) Policies. Engro Fert maintains a well-structured Human Resources (HR) management system guided by its Code of Conduct, people strategy, and leadership competency model. HR policies cover compensation, recruitment, performance evaluation, employee development, anti-harassment, whistleblower mechanisms, grievance processes, and continuous learning, aligned with Engro Group’s corporate guidelines. The Board People Committee (BPC) oversees HR matters, including compensation and training. The HR department, led by a director with sufficient staff, manages 1,214 direct workers (1,138 males, 76 females) and 312 third-party contractors (260 males, 52 females), totaling 1,526 workers engaged in activities like bagging, loading, and facility management. The Code of Conduct, enforced by the Ethics department, applies to employees, contractors, and suppliers, addressing ethics, human rights, labor practices, anti-corruption, conflicts of interest, legal compliance, workplace standards, disciplinary measures, while promoting integrity, health, safety, environment, innovation, and community engagement.

Working conditions and Terms of Employment. Engro Fert aligns its employment terms with Pakistan’s labor laws, which ensure fair treatment, safe working conditions, and equitable pay. Normal working hours are eight hours per day and 48 hours per week, with reductions during Ramadan and for young workers, pregnant, or breastfeeding women. Employees are entitled to annual, sick, maternity (12 weeks), and family leave. Robust occupational health and safety regulations, enforced by the Department of Labor, mandate compliance through inspections. The Minimum Wages Ordinance, 1961, sets minimum wage rates, paid in local currency, with regulated deductions and equal pay for women and foreign workers performing similar tasks. Laws protect worker rights, including freedom of association, non-discrimination, and prohibition of child and forced labor. Engro Fert exceeds minimum wage requirements, provides contracts, offers various leave types, including maternity, and supports employee health through a wellness program. Salaries and overtime comply with the Competition Act 2010, governed by HR policies, ensuring a fair and competitive system.

Non-discrimination and Equal Opportunity. Engro Fert’s diversity and inclusion policy promotes hiring and retaining women, providing opportunities for management roles and addressing broader diversity. In 2023, the gender diversity ratio was 9.23%, with a 24% increase in women in senior leadership. Of 1,526 workers, 1.4% are female (76) and 98.5% male (1,450). Women in leadership rose by 10%, entry-level positions by 40%, with 34 of 79 trade apprentices, 14 of 35 graduate trainee engineers, and 9 of 27 M1/M2 positions being women. The Code of Conduct emphasizes equal opportunity, fair competition, and non-discrimination based on religion, caste, or gender, ensuring a safe working environment for all. A 12-month return ship program supports women resuming work after mid-career breaks, offering full-time, part-time, and flexible working hours to enhance employability.

Workers Associations, Freedom of Association and Collective Bargaining. Engro Fert maintains active relationships with six trade unions, ensuring workers and contractors have access to union representation. Unionized third-party workers are compensated under the Collective Labor Agreement (CLA), aligned with government-approved minimum wage guidelines. Compensation and salary revisions are discussed during Contractor Worker Union CLA meetings, respecting workers’ rights to organize and engage in collective bargaining. These unions, representing various groups such as employees, contractors, and workers in bagging, loading, and facility management, are actively involved in ongoing negotiations and conciliations to uphold fair labor practices.

Protecting the workforce. Engro Fert is committed to a harassment-free workplace through an anti-harassment policy endorsed by senior management, aligning with the Protection Against Harassment of Women at Workplace Act, 2010. This policy enforces a zero-tolerance stance against unwelcome, humiliating, intimidating, or offensive behavior, fostering a safe, respectful, and inclusive environment. It clearly defines harassment, outlines responsibilities, establishes confidential complaint procedures, and protects against retaliation. For Gender-Based Violence, Sexual Exploitation and Abuse, and Sexual Harassment (GBVH), the Code of Conduct prohibits unwelcome sexual advances, demeaning comments, jokes, language, or gestures, as defined by the Act. An Inquiry Committee, including at least one female member for cultural sensitivity, handles reports of sexual harassment confidentially. The Code of Conduct strictly prohibits sexual harassment, public ridicule, abusive language, physical violence, or threats, ensuring robust enforcement.

Workers Grievance Mechanism. Engro Fert’s 'Speak Up' grievance mechanism, aligned with national labor laws and widely publicized, provides workers multiple channels to report issues. Managed by the HR function, it includes a grievance committee with male and female worker representatives, a recording procedure, and a log. The Ethics and Compliance Department also handles grievances, ensuring confidentiality, anonymity, and protection under the company’s anti-retaliation policy. The mechanism covers all grievances, including those related to Gender-Based Violence (GBV), with resolutions involving actions like dismissals, warnings, and process improvements.

Workers Engaged by Third Parties. Engro Fert engages third-party workers solely at the procurement level, structuring purchase orders to comply with Pakistan’s labor and occupational health and safety (OHS) standards. Contractors are responsible for adhering to these terms, including worker compensation as per national labor laws and collective labor agreements (CLA). The company monitors contractors to ensure worker protection, conducts safety orientations during induction, and verifies compliance through attendance forms. Engro Fert signs contracts with contractors to manage third-party workers, with contractors overseeing employee management and monitoring. The Contracts Planning section handles onboarding, bidding, and service processing, while end users manage contractor work. The Contracts Planning section addresses any issues in accordance with legal and procedural guidelines, ensuring timely compensation disbursement to contractors for worker payments. Engro Fert will review and update its HR Policies and Procedures and the Code of Conduct (CoC) to align with IFC PS2 requirements, including contractor management plan (CMP) that establishes clear procedures for contractor workers, including labor practices, OHS, and working conditions, management of GBV and provides for regular monitoring and enforcement (ESAP#5).

Occupational Health and Safety. Engro Fert has a comprehensive HSE Policy emphasizing occupational health and safety, industrial hygiene, behavioral safety, and process safety. The company achieved IFA certification in 2023 (https://www.fertilizer.org/key-priorities/fertilizer-production/protect-sustain-certification/), a globally recognized standard for safety, security, and sustainability in the fertilizer industry. Engro Fert maintains a formalized EHS organizational structure with clear roles, responsibilities, and reporting lines. The company conducts internal HSE audits and inspections, compliant with ISO 45001 and DuPont’s environmental management system, alongside external ISO and IFA audits. The Code of Conduct requires business practices to protect the health of employees, contractors, and the community. Engro Fert's Contractor Safety Management (CSM) program ensures contractors adhere to the company’s environmental and OHS standards. Contract agreements include clauses on health, safety, and labor management as per national laws. Third-party workers receive safety orientations and daily toolbox talks. As part of the updated ESMS (ref. ESAP#1), Engro Fert will strengthen its HSE Risk Matrix and HSE Audit Matrix to assess occupational health risks, including exposure to ammonia and other hazardous chemicals, and update the workplace monitoring plan to comply with the World Bank Group (WBG) General EHS Guidelines (2007), WBG EHS Guidelines for Nitrogenous Fertilizer Production and WBG EHS Guidelines for Phosphate Fertilizer Production (ESAP#6). A qualified Occupational Health and Safety professional will be recruited to enhance the EHS team’s capacity (ref. ESAP#2). Engro Fert conducts comprehensive training on emergency response, firefighting, and rescue, and will update its HSE training to include two-way communication and verification of understanding (ref. ESAP#3). Engro Fert conducts ambient air quality monitoring for carbon monoxide, carbon dioxide, sulfur dioxide, nitrogen oxide, total suspended particulate matter, particulate matter (PM10 and PM2.5), ozone, and lead, complying with national standards, World Bank Group (WBG) General EHS Guidelines (2007), WBG EHS Guidelines for Nitrogenous Fertilizer Production and WBG EHS Guidelines for Phosphate Fertilizer Production. Main noise sources include blowers, compressors, and pumps, with most equipment producing less than 95 dB(A), though some reach 100 dB(A). Regular noise monitoring follows the Occupational Health, Industrial Hygiene (OHIH) schedule, with vent silencers on high-noise equipment and mandatory ear protection (earplugs, earmuffs) where needed. Periodic noise surveys assess levels within and at plant boundaries, with mitigation for exceedances. A 21-day outage at the Ammonia-II plant in Daharki was completed without injury, and the Zarkhez Plant achieved a "ZERO" Total Recordable Incident Rate for the fourth consecutive year, reflecting a strong HSE culture. Engro Fert maintains records of work-related injuries, with total recordable incidents of 3 in 2024 and 2 in 2023, yielding incidence rates of 0.054 and 0.062, respectively, against the US OSHA benchmark of 1.0 for nitrogenous fertilizer manufacturing. A 24/7 medical facility includes 8 doctors (male and female), 20 paramedics, 3 ambulances, and 4 drivers. In 2024, 88 employees and contractors were trained in First Aid and Basic Life Support.

PS 3 Resource Efficiency and Pollution Control

Resource Efficiency. The current major raw materials consumed by Engro Fert are process water, natural gas, and air. Natural gas serves as a feedstock for the production of urea and also as a primary energy source for producing heat, electricity and steam. Natural gas consumption is monitored daily to ensure it remains within design conditions. Engro Fert is committed to reducing its carbon footprint as part of its sustainability strategy and is executing a five-year energy and GHG emission reduction plan incorporating into the site specific environmental KPIs. Engro Fert has and continues to improve its Daharki plants’ emissions through its Long-Term Reliability Turnaround (LTRT) of the Base Plant, which includes hardware modifications for better combustion and heat efficiency, and steam optimization for improved fuel efficiency. The company has also implemented additional energy efficiency measures and installed renewable energy sources by converting 86 warehouses to solar power and installing solar lights in educational facilities as part of community support activities. Engro Fert has optimized various plant processes and published a technical paper on enhancing production capacity and energy efficiency, featured in the Nitrogen Syngas conference. The resource (energy use) efficiency indicators for the products produced by Engro Fert are not yet fully aligned with the benchmarks for ammonia and urea production, as found in Table 3 of the WBG EHS Guidelines. Therefore, Engro Fert is committed to continue its efforts towards achieving greater resource efficiency in line with IFC's Performance Standard 3 and international benchmarks for ammonia and urea production (ESAP#7). 

Water is primarily used for cooling and steam production in the ammonia and urea production processes and for the domestic needs in the plant and the company’s residential colonies. The company has acquired a permit from the Irrigation Department and EPA Government of Sindh, for the extraction of water from the Mahi Wah Canal and for multiple groundwater wells, and also for the disposal of treated wastewater back into the Canal. During Canal closures for annual maintenance (about 2 months per year) production relies entirely on groundwater, while during the remaining ten months, 80% of the water use is drawn from the Canal; as such 1/3rd of Engro Fert’s water use is drawn from groundwater wells located close to and recharged from the Mahi Wah Canal. In 2024, gross water use was 17.0 million m3 and 5.4 million m3 of treated wastewater was discharged back into the canal, for a net abstraction of 11.6 million m3. The company produced 2.15-million-ton urea in 2024, at a net Water Use Ratio (WUR) of 5.4 m3/ton urea (similar to 2023). Engro Fert monitors daily water consumption, maintains a detailed effluent balance and documents its water footprint in its Annual Sustainability Report. Overall, production and gross water intake have been stable over the period 2020 – 2024 (respectively 2.16-million-ton urea/year and 16.85 million m3 water), whereas the total discharged effluent has increased by 1.0 million m3/year over this period. As a result, the WUR decreased modestly by 8.5% from 5.9 to 5.4, while the Effluent/Production ratio increased - counter-intuitively - from 1.9 to 2.5 m3/ton urea. Decarbonization of the Engro Fert’s energy use and the reduction of water use go hand in hand.

The company has already adopted various efficiency measures for the rational use and conservation of water, including the optimization of cooling tower systems for lowering the water consumption, steam reduction interventions at the EnVen plant, the installation of condensate recovery units, the reduction of losses, and the reuse of treated wastewater for horticultural requirements. Engro Fert is implementing its five-year Water Conservation Roadmap for water use efficiency improvements and the reduction of its water use.  The company is collaborating with its supply chain partners to minimize water-related supply chain impacts as part of its sustainability strategy. Engro Fert has received the Alliance for Water Stewardship (AWS) core certificates in recognition of its sustainable water management efforts.

During normal operations, 8 to 10 wells are operated to feed the Reverse Osmosis (RO) providing water for steam generation and domestic purposes. Engro Fert intends to construct 10 additional groundwater abstraction wells along the Mahi Wah Canal, to improve the rotation time of the wells, to allow for enhanced aquifer replenishment, and to maintain adequate groundwater quality, while not increasing the annual water withdrawal. Engro prepared an Initial Environmental Assessment (IEE) study in 2007 compliant with local environmental requirements and acquiring permission from the EPA of the Sindh Government. The IEE study included consultations with the communities/ villages of the area.

Sustainability of its water resources and aquifers is a major concern in Pakistan. Going forward, Engro Fert should thus remain focused on reducing its vulnerability to water scarcity and decreasing groundwater quality by minimizing its water use and maximizing water recovery from its production processes and wastewater treatment. By limiting its water use as much as technically possible, the plant will also limit the impact of its water use on other stakeholders in the area and on the salinization of groundwater. Therefore, Engro Fert will, through the services of a competent third-party professional, undertake the following tasks, namely: (i) perform international benchmarking of its KPIs for energy and water use and wastewater generation, for various parts of its production processes; (ii) evaluate its production processes in the context of Best Available Technologies (BAT); (iii) set a target Energy Usage Ratio (EUR) and Water Usage Ratio (WUR) for 2030, keeping in view the international benchmarks and ratios achieved under BATs; (iv) curb the increasing trend in wastewater generation and set a target for minimizing the total effluent per ton of urea; (v) develop a time-bound Corrective Action Plan (CAP) and associated Investment Plan for the period 2026-30 to implement the identified corrective actions and achieving the target KPIs; and (vi) update accordingly the Company’s Water Conservation Roadmap and associated Water Management Plan for the period of 2026-2030 (ESAP#7).

Greenhouse gas (GHG) emissions. Direct/physical boundary (Scope 1) and indirect (Scope 2) GHG emissions are calculated on an annual basis, verified by a third party and published in the annual sustainability report as per the World Economic Forum (WEF) & UN SDGs framework. Engro Fert has a system in place for monitoring GHG emissions. In 2024, Scope 1 and Scope 2 GHG emissions were recorded as 1,863,844 and 2,929 tons CO2e respectively, Engro Fert has a five-year reduction plan for Scope 1 and 2 emissions. As part of this investment, Engro Fert will report on its GHG emissions as part of its sustainability report and the Annual Monitoring Report (AMR).

Industrial and sanitary wastewater management. Engro Fert generates plant effluent and domestic wastewater. As a part of the efficient disposal system, the company operates an array of evaporation ponds being developed within its premises, on land owned by the company. The 16 evaporation ponds along with the gravity channels, developed gradually to suffice the needs, are geomembrane lined with a piping system installed beneath to collect any leaking effluent and transfer it to the drainage collection pits developed adjacent to the pond. The company regularly observes these pits physically as a practice to monitor any potential leakages from the ponds and to check the integrity of the geomembrane. Some ponds have surface aeration systems installed as a mechanism to enhance the rate of evaporation. The wastewater originates from several processes, including blowdowns from cooling towers and boilers, reject streams from RO systems, and backwashing of demineralization trains and filters on-site.  The combined ammonia and urea processes are producing approximately 550 cubic meters per hour of liquid effluent. Of this total, 346 cubic meters per hour is generated from cooling tower blowdown, while the remainder consists of oily effluent, utilities chemical drain, chemical sewer, oil dripping sewer, and domestic sewer. The cooling tower blowdown is non-hazardous and can be utilized for horticulture or other irrigation purposes.

The plant’ effluent, generated from various sources, is collected in different pits within the plant area and regularly monitored for ensuring compliance with the provincial wastewater standards (Sindh Environmental Quality Standards (SEQS)) and WBG EHS Guidelines values for ammonia, total nitrogen and urea. In case the effluent exceeds the SEQS values it is diverted into the evaporation ponds for disposal. The non-hazardous effluent from other sources including the backwash from filters/RO, blowdown from the colling tower and boiler, etc. which are within the SEQS limits, is either reused or disposed of by discharging into the canal. The plant’s effluent directed towards the canal is monitored for various parameters, such as pH, temperature, and ammonia. This monitoring is conducted both internally and by external third-party laboratories monthly. Effluent diverted towards the canal complies with Sindh Environmental Quality Standards (SEQs) standards and WBG EHS General Guidelines and EHS Guidelines for Nitrogenous Fertilizer Production for pH, BOD, COD, Total Nitrogen, Ammonia, TSS and coliform. However, urea levels exceed the WGB EHS Guidelines limits. The third-party monitoring reports are submitted to the Sindh Environmental Protection Act (SEPA). Effluent management includes daily monitoring of discharges to canals and evaporation ponds, when effluent from off-site clarifiers is diverted to the canal, it is monitored for SEQS compliance. These analyses are conducted by Engro Fert’s Laboratory and recorded in the Systems, Applications, and Products in Data Processing (SAP) to establish compliance status.

Effluent Treatment Plant: Sewage from the plant and housing colonies is treated at an on-site Effluent Treatment Plant (ETP), meeting SEQS standards, and is used for irrigation or pumped to pits. Engro Fert has a 100 m3/hr effluent treatment plant to treat domestic sewage from the housing colony. The plant uses modern technology to treat sewage to comply with the SEQS limits and WBG EHS Guidelines’ values. A third-party laboratory monitoring data shows the following results: pH at 25°C is 7.48, Chemical Oxygen Demand (COD) is 79.00 mg/L, Biochemical Oxygen Demand (BOD) is 21.00 mg/L, Total Nitrogen (TN) is 6.20 mg/L, and Total Phosphorus is 1.96 mg/L. Oil & Grease is less than 1.00 mg/L, Total Suspended Solids (TSS) is 9.5 mg/L, and Total Coliforms is 240.00 CFU/100 ml which comply with the SEQS and the indicative guideline values of WBG EHS General Guidelines for the treated sanitary wastewater discharged to the surface water. After treatment, the treated water is recycled within the plant and used for horticulture and irrigational purposes and also disposed of in the canal during normal flow conditions. During the low water flows or canal outages, the ETP’s treated wastewater is diverted to dedicated (SEQS-compliant) evaporation ponds for holding until the disposal in the canal is resumed. In the event of SEQS excursions, the wastewater from ETP is diverted to the (non-SEQS compliant) evaporation ponds for final disposal. The sludge from the ETP is collected by third parties’ vendors for disposal at the government approved sites. Engro Fert will conduct, through a competent third-party professional, the following: (i) an audit of its wastewater management procedures and practices to ensure compliance with the national regulations, IFC PSs, and the WBG General and sector-specific Guidelines (2007) - Nitrogenous Fertilizer Production and Phosphate Fertilizer Production which will include, but not limited to, a comprehensive review of: (a) the procedure and practices of monitoring and management of all wastewater sources, (b) efficacy of the evaporation ponds for effluent disposal, (c) aptness of the ponds’ leakage monitoring system, (d) technical assessment of the ETP’s all unit processes for functionality, efficiency and appropriateness of treatment, (e) ETP’s solid waste disposal, and (f) procedure and practices of discharge into the canal, (g) procedure for contaminated stormwater (first flush) management, and; (ii) Engro Fert will develop a time-bound Corrective Action Plan to implement the corrective actions identified in the audit. Following the audit, Engro Fert will update its procedures for Solid Waste Management, Hazardous Waste Management, and Liquid Effluent Management to address the gaps identified in the audit. Based on the results of the audit, this may include an upgrade of the WWT plant. The procedures will be upgraded and will meet the requirements of IFC PS3 and WBG General and sector specific EHS Guidelines (2007), including for Nitrogenous Fertilizer Production and for Phosphate Fertilizer Production. It will also include the appropriate engineering and management controls (procedures, inspections, communication, training, and drills) to address the residual risks (ESAP#8).

Air Emissions. Engro Fert site operation follows Sindh Environmental Protection Act/regulation with respect to emissions. Monthly sampling is conducted by a 3rd party, and the report is submitted to SEPA authority. Air emission sources include steam generator boilers, Heat recovery steam generators, Furnace, Gas Turbines, Process Vents and Prilling Towers. The environmental aspects/impacts register for ammonia require updating to accurately reflect the severity of flue gas emissions, classifying them as high severity to align with SEPA legal requirements, and mitigation measures should be updated accordingly. The site operation is reported to be in compliance with SEPA, with monthly sampling conducted by a third party and reports submitted to SEPA review/clearance. To ensure ongoing compliance and effective management, Engro Fert monitors air emissions according to a defined schedule, using a laboratory for sample collection and analysis, with results accessible via SAP. Deviations from expected results are addressed by the Production and Process Sections, with further investigations conducted as needed. Periodic stack surveys are also performed to ensure regulatory compliance with Sindh Environmental Quality Standards (SEQS), and ammonia and dust emission surveys lead to recommended mitigation steps if levels exceed standards. Furthermore, off-gas from the ammonia plant is reused, and EnVen Plant flue gases are treated in CO2 removal units, showcasing efforts to minimize emissions. During operation, the primary emissions in atmosphere include dust (particulate matter) and Ammonia in the prill tower exhaust.  Recent data from 2019-2025 indicates a significant reduction in ammonia and PM emissions at the Prill Tower exhausts, attributed to the adoption of isokinetic sampling and sustained operational and maintenance enhancements. These efforts have brought PM and ammonia emission levels closer to the WBG EHS Guideline’ values of 50 mg/Nm3and 50mg/nmc respectively, although Engro Fert has indicated challenges in reducing levels below this threshold. Overall, these measures reflect a commitment to managing and mitigating air emissions, though continuous improvement is needed to meet and exceed established benchmarks. Off-gas from the ammonia plant is reused, and EnVen Plant flue gases are treated in CO2 removal units to minimize emissions and reuse collected CO2 in the urea production process. Engro Fert will conduct an Air Dispersion Modelling (ADM), especially for the Daharki and EnVen plants, to assess potential cumulative impacts on ambient air quality in surrounding areas and communities, considering all existing and planned emission sources (ESAP#9). Using the outcome and recommendations of the ADM report, Engro Fert will develop and implement a comprehensive Air Emissions Management Plan (AEMP) to ensure continuous compliance with IFC PS3 and World Bank Group (WBG) General EHS Guidelines (2007), WBG EHS Guidelines for Nitrogenous Fertilizer Production and WBG EHS Guidelines for Phosphate Fertilizer Production. The AEMP will include a: (a) detailed inventory of all air emission sources at the facility, including the process emissions, combustion emissions, fugitive emissions, and vehicular emissions; (b) monitoring program to regularly monitor all process and stack emissions and assess compliance with SEQS and WBG EHS Guidelines; (c) ambient air quality monitoring at all the sensitive receptors aligned with the findings of the Air Dispersion Modelling and WBG EHS Guidelines; (d) procedure for source control and pollution prevention, including the use of best available technologies and management practices (BAT/BMP); (e) system for tracking and reporting air emissions data to relevant stakeholders; (f) plan for reducing process air emissions over time, with specific targets and timelines; and (g) emergency procedures to address accidental releases of air pollutants. The AEMP will be integrated with Engro Fert's overall ESMS (ref. ESAP#1) and will be subject to regular audits and reviews.

Hazardous Materials Storage and Operation Hazards. Hazardous materials include nitric acid, sulfuric acid, sodium hypo chloride (as disinfectant in water treatment process) and ammonia. Ammonia, used to produce urea fertilizer, is a significant hazardous chemical both in terms of quantity stored and risk of leakages into the atmosphere. Engro has ammonia production capacity of 1,650 metric tons per day and is stored in 5000 MT storage tank having multiple layers of protection. Engro has a documented Risk-Based HSE Management System (based on DuPont EMS framework) which provides necessary tools for effective implementation and continuous risk reduction across its operations. It includes a structured methodology for identifying all HSE hazards present in a facility, designating the hazards having the potential for credible Severe and Catastrophic adverse consequences for People, Environment, Asset, Reputation as Major Accident Hazards, assessing associated risks, and developing the necessary management system barriers to reduce risks to As Low as Reasonably Practicable (ALARP). Engro Fert carries out various risk assessments such as Process Hazard Analysis (PHA), Hazard and Operability Study (HAZOP), Layers of Protection Analysis (LOPA), Failure Modes and Effects Analysis (FMEA), Major Accident Hazard (MAH) review, Safety and Environmentally Critical Element (SECE) identification, Bow-Ties, Fault Tree Analysis (FTA) and ALARP demonstration.  Regular internal and external audits are conducted by organizations like Dupont and Société Générale de Surveillance (SGS). Engro has developed capacity to conduct Process Hazard Assessments (PHA) internally using its own trained human resource. In 2024, Engro conducted Transient HAZOP for Ammonia-II to assess the risks associated with startup and shutdown activities. This process led to recommendations for more stringent quality checks and hold point protocols based on 53 recommendations. The Fire and Gas Detection System at the Engro plant has been designed and installed compliant to National Fire Protection Association Codes (USA). The fire detection and alarm system is equipped with automatic fire detectors, manual alarm call points, audible and visual notifications appliances, dedicated power supply, and fire and gas panels to communicate with other systems. The combustible and toxic gas detection system are installed separately from the fire detection system. Gas detectors and alarms are installed to detect, and to warn, the presence of combustible gases, hydrogen and toxic gases, such as ammonia and carbon monoxide. The Urea and ammonia production areas are installed with 82 ammonia detectors/sensors and 22 ammonia gas alarm beacons, 27 hydrocarbon gas detectors, 2 hydrogen gas detectors, 14 hydrocarbon/ hydrogen gas alarm beacons, 22 fire alarms, 22 gas alarms and 22 manual alarm call points. The plant is equipped with multilayered protection systems to handle emergencies including an Emergency Shutdown (ESD) system that takes control of the plant for shutdown protocols without human intervention. The QRA, HAZOP and EIA studies conducted by Engro relates to the operational hazards at the plant. Engro Fert, using the analysis of the QRA and HAZOP studies, will (i) update the zoning in and around the plant defining the tolerable and intolerable zones, (ii) verify the locations of the offices and operation rooms located within or close to the Ammonia storage tank and relocated them, in case found within the intolerable zones, and (iii) as per the zoning criteria and the recommendations of the  analysis, take necessary measures to safeguard the assets and people (ESAP#10).   

Hazardous and nonhazardous waste. Engro Fert’s Environmental Policies and Principles cover waste minimization and disposal, compliance with national laws and regulations, recycling, awareness among employees and families, emission control, energy conservation, and promote a culture of environmental responsibility. The solid waste management system for the ammonia and urea processes is designed to handle both hazardous and non-hazardous waste responsibly. Hazardous waste at Engro plant includes spent catalysts, used oils, used batteries, dismantled asbestos sheets, ETP sludge, etc. These wastes are stored in suitable containers within a designated Waste Yard, with inventory maintained, and access to the yard restricted to the authorized personnel. Liquid hazardous waste is stored, with secondary containments, in specially designed impervious areas to prevent any leaks. The total solid waste in 2024 amounts to 888 tons, comprising 712 tons of scrap and recyclable material, 149 tons of admin / kitchen waste, 17 tons of cooling tower basin sludge, 9 tons of canal water sludge and 1 ton of clinical waste. Most of this waste is canal water sludge, a non-hazardous mixture of clay and water resulting from canal water purification, which is dried and utilized as landfill material. Both hazardous and non-hazardous waste is transported only by the approved vendors and off-site disposal is conducted following SEPA regulations and safety protocols, including comprehensive safety analyses prior to shipment. The vendors submit final disposal certificates for each consignment handled and disposed-of. To ensure compliance with environmental standards, the company conducts regular inspections of waste vendor facilities in accordance with Sindh Environmental Protection Agency (SEPA) guidelines. Engro Fert will conduct bi-annual audits of hazardous waste vendors to verify proper management and disposal practices. Engro Fert will improve its waste management plan through the development and implementation of a comprehensive Waste Segregation and Recycling Enhancement Program (WSREP) to minimize waste generation, maximize resource recovery, and reduce landfill disposal (ESAP#11). The plan will include (a) clear protocols for at source waste segregation (including plastics, paper, metals, etc.), trainings to staff and colony residence, and development of awareness materials and tools; (b) collaborating with waste management vendors to identify and implement innovative recycling technologies and waste-to-energy options, prioritizing solutions that minimize environmental impacts and maximize resource recovery; (c) establishing clear and measurable targets for waste reduction, recycling rates, and landfill diversion; (d) implementing a system for tracking and reporting waste generation and recycling data; (e) conducting periodic audits of the third-party waste vendors sites and practices to assess the level of EHS and Social compliance in handling, transporting and recycling and disposal of the wastes.

Good Agriculture Practices (GAP). Engro Fert promotes Good Agricultural Practices (GAP) through its farmer outreach programs, funded in part by this IFC financing, enhancing efficient fertilizer use and crop production. The company provides comprehensive agronomic services, including seed-to-harvest training, mobile soil testing, R&D trials, and digital advisories, supported by the "UgAi" platform (Engro Fert’s farmers outreach program), for streamlined fertilizer purchases. These practices, like laser land leveling, align with GAP principles, improving resource efficiency and yielding significant gains, with sustainability efforts evidenced by awards (e.g. IFA Green Leaf Award).

PS 4: Community Health and Safety

Community Health and Safety. The Engro Fert plants are located in Daharki Taluka of the Ghotki District in Sindh Province. There is a population of approximately 20,000 people within a two-kilometers circle around the Engro Fertilizers plants, which is considered the area of potential ammonia influence depending on wind direction during an emergency. This population is distributed across twelve villages and residential colonies (including Kalo Buriro including Suno Buriro; Kotlo Mirza including Ghulam Hyder Bhutto; Bago Bhutto; Jan Mohammad Bughio; Mari colony; Jing colony; Baloch colony; Bashir colony; Labour colony; Abid Town; Jando Khan Bughio village; and Noor Hassan Shah village). These communities are part of the emergency response system due to their proximity to potential ammonia influence during a Level 2 emergency. Engro Fert engages with these communities under its Community Awareness and Emergency Response (CAER) program. Engro Fert conducts ambient air quality and noise levels monitoring at the plant boundary which remained compliant with the SEQS values and WBG EHS Guidelines. The air quality monitored for 24-hrs average in mg/nmc for CO was 1.4, NO2 0.1, SO2 7.4, TSP 222, PM10 138, PM2.5 34, and Ozone 15. The CAER program aims to ensure emergency preparedness and community right-to-know, involving open communication and rapid response to emergencies. The CAER program includes training for emergency squads, communication protocols, and safety equipment provision to ensure the safety and preparedness of these communities. To align with IFC PSs, Engro Fert will update the Community, Health and Safety Management Plan (ref. ESAP#1).

Emergency Preparedness and Response. Engro Fert has an Emergency Preparedness and Response Plan that has been covered under PS1 section. The company has established a robust Emergency Response Planning framework that incorporates various risk assessment tools, including Quantitative Risk Assessments (QRA), fire risk assessments, HAZOPs/PHAs, and Layers of Protection Analysis (LOPA). These methodologies help identify potential release scenarios and develop strategies to mitigate associated risks. Additionally, the organization trains operational staff to effectively respond to emergencies through regular mock drills, ensuring preparedness. Engro Fert has a Community Engagement and Preparedness Program, which guarantees the 24/7 availability of emergency response teams. It conducts ongoing coordination with local authorities and organizes community awareness sessions, training programs, and mock drills. These efforts aim to enhance overall emergency preparedness, ensuring timely and effective response to any incident that may arise. As part of the Stakeholders Engagement Plan (ref. ESAP#1), it will include a community engagement program focused on transparency and education regarding effluent management practices and environmental protection measures. Engro Fert will establish regular stakeholder meetings to discuss E&S performance, address community concerns, and gather feedback for continuous improvement. Furthermore, Engro Fertilizer will improve its stakeholder engagement to ensure consultations with local communities and regulatory agencies, communicating its commitment to responsible water and wastewater management, addressing concerns related to effluent discharges, and ensuring transparency and accountability. Engro Fert will enhance its emergency response procedures to include comprehensive protocols for managing unavoidable SEQS excursions, effluent discharges into canals, shock loads, and accidental spills. This will cover containment, cleanup, and reporting protocols (ESAP#12).

Design Control. Engro Fert implements Safety Critical Equipment (SCE) which systematically identifies and maintains it in accordance with Safety & Environmental Critical Elements (SECE) standards. The effectiveness of both preventive and mitigative barriers and safeguards is ensured through a comprehensive preventive maintenance program. These SECEs include essential systems such as Emergency Shutdown (ESD), Fire & Gas (F&G), Pressure Safety Valves (PSVs), firewater networks, and passive fire protection measures.

Transport Management. Engro Fert owns and operates a fleet of 41 vehicles, used for internal travel and operational support across various departments. This fleet comprises 4 ambulances, 30 cars, 5 motorcycles, and 2 trollies. These vehicles are not used for logistics or transportation of goods. Engro Fert does not own any trucks or dedicated logistics vehicles within its operations. For external logistics and distribution needs, Engro Fert does not maintain ownership over a transportation fleet e.g., trucks or goods transport vehicles. Engro Fert's operations involve the transport of raw materials, finished products, and personnel. The logistics operations, including material or product transportation, are managed through third-party vendors, using two main types of fleet arrangements: dedicated fleet, where certain vehicles are allocated exclusively to Engro Fert’s logistics and supply chain requirements through long-term contractual agreements with selected logistics service providers, and regular or spot fleet, where additional ad hoc transport needs are met by procuring logistics services from third-party transportation vendors on a spot or as-needed basis. To minimize community health and safety risks related to transportation, Engro Fertilizer will update its Transport Management Plan (TMP) aligned with IFC PSs, including Road Safety Policy and Procedures consistent with WBG EHS Guidelines (ESAP#13). The TMP will include a comprehensive safety assessment to identify potential hazards and risks, such as traffic accidents, spills of hazardous materials, and community disruption. The TMP will establish clear EHS procedures for transportation contractors, including requirements for vehicle maintenance, driver training, speed limits, and route selection (ref. ISO 39001). It will include a system for monitoring contractor compliance with EHS standards, including regular audits and inspections, require contractors to develop and implement emergency response plans to address potential accidents and spills, conduct community awareness sessions to inform residents about transportation routes, potential hazards, and emergency procedures, and be integrated with Engro Fert's ESMS. The TMP will also address the safety of Engro Fert's owned vehicle fleet (ambulances, cars, motorcycles) used for internal travel and operational support. The TMP will apply to all transportation activities, establish EHS performance standards/procedures for contractors, and include community awareness sessions.

Security Management Plan. Engro Fertilizer has a security management plan (SMP) in place and outlines general policies and procedures to meet company's security protocols. Engro’s security department implements the SMP ensuring the safety of personnel (employees, staff, and visitors), protecting plant property, responding to emergencies, engaging with government authorities and local communities, and safeguarding the corporate image. The security management plan will be updated in line with IFC PS4 requirements and the Voluntary Principles on Security and Human Rights including risk-based and human rights due diligence, use-of-force procedures, grievance mechanism, community engagement and gender-sensitive human rights training (ESAP#14).

  Engro Fertilizers has a Community Awareness Initiative (CAER) and a stakeholder engagement plan. The plan includes a mechanism for identifying and analyzing primary and secondary stakeholders, using a stakeholder map to prioritize engagement. The company’s Code of Conduct addresses identified stakeholders, including employees, shareholders, customers, families, communities, vendors, and suppliers. This demonstrates a structured approach to understanding stakeholder interests and influence. The company has implemented a community grievance redress mechanism. Stakeholder engagement is viewed as an important element of corporate social responsibility and not merely part of risk management. Engro Fertilizers will update its Stakeholder Engagement Plan (SEP) and grievance mechanism (ref. ESAP #1) to align with IFC Performance Standards (PSs), including: (a) ensuring that the grievance mechanism includes specific channels for reporting and addressing Gender-Based Violence (GBV) related complaints, with appropriate referral pathways; (b) ensuring consultations with local communities and regulatory agencies to communicate Engro Fertilizers' commitment to responsible water and wastewater management, addressing any concerns related to effluent discharges, and ensuring transparency and accountability; and (c) subjecting the plan to periodic audits to assess its effectiveness and identify areas for improvement. The SEP will be a living document, regularly updated to reflect changing stakeholder needs and project circumstances.