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.
While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards
• PS1: Assessment and Management of Environmental and Social Risks and Impacts
• PS2: Labor and Working Conditions
• PS3: Resource Efficiency and Pollution Prevention
• PS4: Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the project’s ongoing compliance with the Performance Standards.
PS 1 - Assessment and Management of Environmental and Social Risks and Impacts
Environmental and Social Policy & Management Systems:
Midroc will develop an Environmental and Social Management System for its hospitality and hotel development projects. The ESMS will include an E&S Policy and requisite management plans and procedures, that are aligned with the roles and responsibilities of the company, construction contractors and its hotel refurbishment contractors. (ESAP #1). Additional actions required to meet PS requirements for hotel operation phases are provided under hotel operations monitoring review and management actions below.
Identification of Risks and Impacts: Midroc undertakes Environmental and Social Impact Assessment (ESIA) for new constructions in accordance with local environmental legislation. Contractors are then required to undertake task specific environment health and safety (EHS) risk registers and develop construction EHS Plans and Procedures for the construction works. Midroc will undertake an IFC PSs compliant ESIA Study for the new Sheraton Hotel construction (ESAP #2a). For Sheraton Addis, Midroc is undertaking an E&S risk assessment that will incorporate an assessment of the impairments on existing hotel operations E&S Management systems.
The findings of the two risk assessments will be incorporated into site specific Construction Environmental Health and Safety Management Plan (CEHSMP) as overarching documents for construction activities throughout the construction program. Midroc will also standardize the systems for site and task specific EHS risk assessment to capture the various stages of refurbishment works and the change in lead contractors at the existing Sheraton Hotel. The CEHSMPs will also form part of the construction contract documents (ESAP #2b).
The Midroc EHS officer engaged (discussed below under ESAP #3) will be responsible for the oversight, monitoring and audit functions of the CEHSMP and will provide overall quarterly and annual EHS Reporting for the construction phase. The EHS reporting will capture EHS performance on metrics and key performance indicators (KPIs) as set during the development of the CEHSMP.
Organizational Capacity and Competency. E&S responsibilities at MEP are split between the Corporate Operations Director who handles operational facilities like the Sheraton Addis and the Projects Development Director who handles construction projects. Both directors report to the Hotels and Resorts cluster CEO. E&S responsibilities at facility level are handled by the operators and contractors. The Sheraton Addis operator has a Facility Director who handles environmental issues while the HR Director is charged with management of HR issues. The two directors report to the operator’s General Manager at the hotel level, who is the overall in charge of ESG matters. This structure will also be applied to the New Sheraton Hotel. The Contractor engaged for refurbishment activities at the existing Sheraton Hotel have appointed a site EHS Officer who reports to the site project manager.
During appraisal, Midroc was procuring a qualified Project Management Company with delegated site safety and general EHS responsibilities at the existing Sheraton Hotel. The Project Manager will also provide E&S oversight, monitoring and audit functions for the construction projects. Midroc will share evidence of engagement of these staff and the job descriptions of the officers with delegated EHS responsibilities (ESAP #3).
Emergency Preparedness and Response. The operator enforces standardized emergency protocols capturing life and fire safety, security and terrorism threats, road accidents involving the hotel vehicle fleet, food safety, environmental spills and accidental release of hazardous materials like diesel & LPG and medical emergencies. Fire prevention and response systems at the hotels are based on local regulatory requirements and international guidelines and practices aligned with the World Bank Group EHS Guidelines. Further details on life and fire safety (L&FS) are discussed under PS 2.
Hotel Operations Monitoring, Review and Management. Midroc, as the owner, maintains oversight of E&S performance through its contractual relationship with Marriott, the hotel operator. While Marriott implements its own global Environmental and Social Management System (ESMS) under the Serve 360 framework, Midroc requires compliance with Ethiopian E&S regulations, including labor, safety, and environmental standards, periodic reporting on risk management, sustainability metrics and community engagement. Marriott typically reports E&S performance to the owner through monthly management meetings, periodic reports on regulatory reviews and audits and reporting on incident management as cases arise. Midroc as the owner of the hotel has retained some responsibilities in EHS management of hotel operation activities including management of Life and Fire Safety (L&FS) and labor risks.
The operator has an ESMS that includes a Sustainability Policy, HR Policy and a Supplier Code. Marriott’s operations at the Sheraton Addis are guided by its global Environmental and Social Management System (ESMS), anchored in the Serve 360 platform (https://serve360.marriott.com/ ). This framework includes strategies for environmental management through targets on reduction of carbon emissions, water usage, and waste. Life and fire safety protocols are standardized and aligned with both international and local codes. Security measures follow brand-wide standards tailored to local risk contexts, while human rights commitments are upheld through anti-trafficking training, ethical recruitment practices, and responsible sourcing policies. As part of ESAP #1, Midroc will establish an E&S reporting, monitoring and review system to enhance E&S oversight on the operator. The system will capture E&S performance monitoring and review systems against pre-set KPIs as defined in this ESRS. This system will also incorporate monitoring of subsequent E&S corrective and improvement actions within agreed timelines.
PS 2 – Labor and Working Conditions
Sheraton Hotel had 1,336 workers (37% women) at appraisal and this number is expected to be replicated at the New Sheraton Hotel bringing the total project workforce to about 2,600 at full operations. Contracted staff make up about 1% of the total workforce at the hotel and provide engineering, security and IT services (all male).
The construction contractor’s peak workforce is estimated as 150 staff at the new construction site and 50 staff at the Sheraton Addis.
Human Resource Policy and Working Terms and Conditions. Midroc HR policies and procedures are outlined in the company's personnel management guide. Hotel operators are required to follow these policies and procedures when managing hotels and resorts. The hotel operator maintains HR policies that are consistent with both Marriot guidelines and local laws, and these are supported by a worker's code of conduct, policies on associate awards, the provident fund, and various employee benefits such as health insurance, meals, and transportation services. Both Midroc's and the operators' HR policies align with the 2011 Collective Bargaining Agreement (CBA) for Sheraton Hotels (discussed below). The hotel has made specific commitments to ensure that employment decisions are based solely on qualifications and performance, without regard to race, gender, religion, age, or other protected characteristics. During induction, workers are informed of engagement terms and conditions via written contracts and receive a copy of the 2011-2013 CBA as part of the onboarding process.
The hotel operation agreement gives Midroc control and discretion over the Marriot’s labor policies, including hiring and discharge of all employees. The hotel has established a web-based HR management system (HRMS) to monitor compliance and provide intervention or approvals as appropriate.
The Midroc and operator policies and procedures generally align with PS2 requirements regarding working terms and conditions, which include recruitment, working hours, wage and pay structures, paid leave, non-discrimination and equal opportunity, performance evaluations, statutory deductions such as social security contributions, medical coverage including work-related injuries and workers' compensation, awards, benefits, and termination practices including retrenchment. Any identified gaps are detailed in the following sections. All HR policies and procedures including any actions taken as per the ESAP will also be implemented for the New Sheraton hotel.
Workers Organizations. The operator has policy statements outlining their commitment to freedom of association and collective bargaining for its workers.
While there are currently no unionized workers at Midroc, the company has other hotels such as Blue Nile Resort Hotel, where workers are represented by an active trade union, and a Collective Bargaining Agreement (CBA) is in place and operational. In 2023, Blue Nile Resort Hotel received an award in recognition of their contribution to “decent work and industrial peace” at Ethiopia’s ILO Centennial Anniversary and National Labour Conference (sponsored by the Ministry of Labour and Skills).
Midroc will develop a policy statement for its hospitality arm to capture commitments to freedom of association and collective bargaining in accordance with PS 2 and local law requirements. The commitments will include Midroc’s obligation to ensure that workers are not subject to retaliation, discrimination, or other adverse actions when exercising their rights to unionize. (ESAP #4a).
The Sheraton Addis Hotel staff and the contractor staff engaged at the time of appraisal had no unionized workers and no active CBAs. The Sheraton Hotel trade union established in 2010 ceased functioning in 2014 after the resignation of a majority of the union members, subsequently nullifying the recognition agreement between Midroc and the Sheraton Hotel Workers Union. This resignation was preceded by a dispute between Midroc and the workers union representatives during negotiations for renewal of the 2011 CBA. The dispute was active between 2013-2014 and despite mediation efforts by the Labor Ministry, the negotiations arrived at a stalemate, a deterioration in labor relations, disciplinary action on the union representatives by the local labor board and eventual termination of the union representatives. While the union representatives sued for restoration of their jobs at the Sheraton Addis, the court ruling was in the form of alternative remedy by payment of terminal dues and back pay for the dismissed workers in accordance with Ethiopia’s worker dismissal requirements. Midroc complied with the ruling and paid all the dues to the dismissed workers.
In the absence of a union and in accordance with the operator’s policies, Sheraton Addis workers are represented through a workers’ representation committee known as the Associate Relations Committee (“ARC”). The ARC Guideline outlines the roles and responsibilities of the ARC members and the framework for worker and management engagement and dialogue on working terms and conditions. Though there is no active CBA in place, Sheraton Addis Hotel continues to engage the ARC using the labor standards, benchmarks and requirements established under the 2011-2013 CBA. The operator also plans to establish an ARC for the New Sheraton Hotel. Both Midroc and the operator will strengthen the ARC guidelines to meet the requirements under ESAP #4a and establish employee and anonymous surveys to gauge the workers’ perception of the ARC's effectiveness, their satisfaction with how their concerns are being handled, and their overall perceptions about their representation (ESAP #4b).
Enhancements under this ESAP and ESAP #4a will clearly articulate how Midroc will foster an environment in which workers are free to exercise their rights to freedom of association without fear of retaliation or reprisal. This will include: (i) confirmation that workers are free to form or join trade unions independently of existing workers’ committees, including the workers committees, and that such processes will occur without interference, intimidation, or obstruction, (ii) explicitly prohibit any form of management interference in the formation, administration, or functioning of workers’ organisations or trade unions, including any influence over leadership structures, membership, or activities. (iii) Midroc will enable workers’ committees and trade union representatives to have reasonable access to employees and the workplace for legitimate activities related to informing workers and organizing trade unions, in accordance with applicable law, (iv) prohibition on retaliation, discrimination, or adverse consequences against workers, committee members, or union representatives for exercising their freedom of association rights will be clarified and reinforced, (vi) protections related to freedom of association will be strengthened under the relevant policies through a clearer articulation of safeguards and disciplinary measures applicable to management in cases of non compliance. Linkages between the workers’ grievance mechanism and disciplinary procedures will also be strengthened and communicated widely to workers, (vii) workers and their representative organisations will be provided with access to neutral and credible dispute resolution mechanisms, including mediation, in the event of disputes between management and workers’ organisations (ESAP #4b). IFC will also undertake two monitoring activities six months and 12 months after documentation of the enhancements on freedom of association, prior to completion of the ESAP #4.
Child and Forced Labor. Midroc and the operator prohibit engagement of minors and ensure this by requiring age verification and submission of national identification documentation prior to employment. Forced labor is also prohibited and the operator is able to track potential indicators of forced labor through the HR management system and the corporate whistleblower platform. As part of ESAP #1, Midroc will provide mechanisms of tracking resolution of reports/incidences of child and forced labor among its contractors and the operator.
Worker’s Grievance Redress Mechanism (GRM). Midroc contractors engaged during the appraisal stage relied on on-site EHS and HR & Administration personnel to receive and respond to workers’ grievances. The operator has a workers’ GRM that provides both formal and informal mechanisms and this is available to all categories of the workforce. Anonymous and confidential reporting is done through a web-based system accessible through worker’s smartphones. The workers GRM is designed to address a wide range of concerns, including workplace behaviour, policy violations, and gender-based violence (GBV), sexual exploitation and abuse (SEA), and sexual harassment (SH). At global level, Marriot also has a whistle blowing system to capture ethical violations in the workplace. The ARC members at the Sheraton Addis also collate individual and group grievances at department level and present issues for resolution at worker/management meetings. The HR team has a system for tracking resolution of grievances submitted to management and through the ARC.
However, the documented worker’s GRM procedures that are shared with workers as part of the employees’ handbook, do not capture all the above mechanisms. Midroc also has a documented grievance mechanism, but the wording is restricted to complaints about unfair disciplinary action.
Midroc will document and collate the existing practices and procedures in one formal workers’ GRM policy and procedure, aligned with PS 2 requirements and the local labor code. The mechanism will allow for multiple reporting mechanisms and incorporate formalized standard operating procedures to support handling of confidential and anonymous grievances and monitoring the support to complainants at risk of retaliation and reprisal (ESAP #5a).
Midroc requires both the operators and construction contractors to abide by the local law requirements on prevention and response to gender based violence, sexual exploitation and harassment (“GBVH”)in the workplace. The local law requires employers to take preventive measures, respond to complaints, and ensure redress mechanisms are in place and provides for legal action if an employer does not respond to a complaint related to GBVH in the workplace. To capture PS requirements in prevention and response to GBVH related cases, Midroc will establish a mechanism for contractors and operators to report on actions in preventing and responding to GBVH related complaints in the workplace including evidence of (i) workers sensitisation on the workers GRM in general and on GBVH policies and commitments; (ii) confidential and anonymized reporting on GBVH incidences in the workplace, including cases involving hotel guests; (iii) engagement of an active focal point for receipt of GBVH related complaints; (iv) training of staff with responsibilities in receiving and handling complaints related to GBVH to specifically cover survivor-centric mechanisms, referral pathways, data protection policies and non-retaliation protections (ESAP #5b). The workers GRM developed under ESAP #5a and ESAP #5b will include provisions for extending these mechanisms to operator and contractor staff.
Midroc will also integrate reporting on implementation and performance of the workers’ GRM into the E&S reporting by the operator, under the Midroc E&S Performance reporting and review systems developed for the operator ESAP #1.
Retrenchment. The Sheraton has not undergone retrenchments in the recent past. During the COVID-19 pandemic, the hotel management, Midroc and the ARC discussed and agreed on strategies to avoid worker lay-offs which included fewer working hours and reduced salaries. By 2023, normal business had resumed, and the operator and workers representatives had agreed on resumption of working hours and pay standards. There is no past nor outstanding legal litigation related to the pandemic related adjustments in working terms and conditions. Midroc will develop a retrenchment policy and guideline for its hospitality arm aligned with PS 2 requirements (ESAP #6).
Occupational Health and Safety (OHS). Sheraton Addis Hotel adheres to Marriott’s global safety and security guidelines alongside local OHS directives to manage operational risks. These standards are embedded in daily practices through departmental job safety analyses, regular hazard identification and risk assessments, use of personal protective equipment (PPE), and emergency preparedness planning. A formal health and safety policy and contractor code of conduct are in place, supported by permit-to-work systems for high-risk activities such as hot work, confined space entry, and electrical tasks. First aid and emergency response protocols are also established. Incident reporting is systematic, with all injuries, near-misses, and unsafe acts documented via Marriott’s reporting system. Each incident undergoes root cause analysis, and corrective actions are implemented accordingly. This system will also be replicated at the New Sheraton Hotel. As part of ESAP#1, Midroc will incorporate reporting by the operator on implementation of the hotel’s health and safety program, reporting on accidents and incidents including road accidents, incident investigation and corrective action development & implementation, as well as OHS performance against pre-agreed KPIs and benchmarks.
Third Party Workers and Supply Chain. As previously indicated, about 1% of the hotel operation workforce is third party workers. E&S performance of contractors is based on local laws and Marriot’s human right’s guidelines, whose requirements are defined in service-level agreements (SLAs) and monitoring is undertaken through routine audits, guest feedback, and contract reviews. Marriot’s Supply Chain Code restricts employment of workers in its supply chain to workers of legal minimum age and/or those who have completed compulsory primary education. It also requires its suppliers to respect employees’ freedom of movement and actively support the elimination of all forms of human trafficking, forced, bonded, or compulsory labour, as well as the exploitation of children. The guidelines also emphasize the importance of a workplace that is free from harassment and discrimination and encourage suppliers to implement management systems that facilitate compliance, risk mitigation, and continuous improvement in workplace conditions. The guideline requires risk-based onboarding and screening of suppliers, annual evaluations and audits, alongside performance scoring based on defined KPIs.
As part of ESAP #1, Midroc will incorporate mechanisms for reporting by the operator on E&S performance of third-party workers as well as the achievements and outcomes in the implementation of the operator’s Supply Chain Code.
PS 3 – Resource Efficiency and Pollution Prevention
Sheraton Addis primarily sources water from municipal sources with the onsite geothermal boreholes providing back-up water supply. Midroc uses a reverse osmosis system to treat the geothermal water for operational use thermal water. Currently, Sheraton Addis consumes about 150,000m3 per annum and the total consumption for the project operational phase is estimated at 300,000m3 per annum. The project will continue to implement water efficiency strategies as guided by Marriott’s global water utilization guideline and implemented through a water efficiency plan that incorporates various techniques, including installation of flow restrictors and splash-reducing fixtures in faucets and bathrooms.
The project relies on electricity from the national grid with diesel generators as a backup source. Sheraton Addis will maintain the use of its 3 diesel generators while diesel generators will also be installed at the new Sheraton hotel. Sheraton Addis consumes about 6.3GWh per annum and the electricity consumption for the project is estimated as 12GWh pa. Liquefied Petroleum Gas (LPG) is primarily used for kitchen operations with the latest consumption estimates as 45T at Sheraton Addis. The estimated annual consumption of LPG during the operational phase of the project is 90T. The operator will continue to monitor energy consumption as recorded in Marriott’s Environmental Sustainability Hub (MESH), which incorporates performance tracking against predefined KPIs.
The operator collates data on GHG emissions through the Marriott Mesh system. Scope I GHG Emissions for the project are estimated at about 3,873.65 tonnes of CO2-equivalent annually. The project GHG emission reduction strategy at the existing Sheraton hotel will incorporate a shift from diesel-powered systems to energy-efficient alternatives, including heat pumps for hot water and laundry operations and use of thermal water from the existing onsite geothermal boreholes. The operator also intends to deploy advanced energy monitoring tools to optimize consumption. The operator will continue to monitor and report on greenhouse gas (GHG) emissions using the Marriott Mesh system and establish annual GHG reduction targets. Overall, the project is expected to help avoid approximately -960.57 tonnes of CO2-equivalent annually.
For the operational phase, the operator will extend the current waste management practices whereby solid waste, waste oil and grease is adequately segregated and stored awaiting disposal by licensed solid waste handlers and licensed recycling company for oil and grease. The project wastewater from cooking, laundry, housekeeping, and guest activities will be stored in a septic tank and discharged through municipal lines.
As part of ESAP #1, documentation on PS 3 reporting requirements including emissions, handling and storage of diesel and LPG, resource use data, achievements under the Mariott GHG and waste reduction strategies as well as the performance in water and energy minimization targets will be incorporated into the ESG reporting system to Midroc.
PS 4 – Community Health, Safety and Security
Food Safety. The operator complies with local laws and Marriot International food safety requirements for all its restaurants at the Sheraton Addis. The food safety requirements are aligned with Hazard Analysis Critical Control Point (HACCP) principles, including identification of hazards associated with each step of the food handling process and determination of critical control points necessary to ensure food safety. The hotel also implements procedures for hygiene and sanitation; staff training; periodic medical examination for applicable staff; pest control measures; chemical control; customer complaints mechanism, and monitoring procedures and corrective actions in the event of control failure. The operator will establish a similar system at the new Sheraton Hotel and incorporate reporting requirements on the implementation and performance of the hotels’ food safety management systems into ESG reporting system to Midroc developed under ESAP #1.
The Sheraton has a fleet of vehicles used for transfer of guests and transportation of staff. The operator implements road safety requirements capturing routine vehicle inspections and maintenance, monitoring of driver qualification reviews, training and licensing nad the prohibition of the use of drugs and alcohol at work. Additionally, road safety requirements are defined for drivers, including procedures for responding to road accidents impacting staff, guests or local communities. These requirements will be replicated at the new Sheraton Hotel. Midroc shall incorporate mechanisms for the operator to report on the performance and implementation of its road safety requirements into the ESMS to be developed under ESAP #1.
Life and Fire Safety. The building designs at Sheraton have incorporated L&FS requirements aligned with PS requirements. Emergency response procedures incorporate guest considerations including clearly marked evacuation plans, public address systems in the event of emergencies and contact details for applicable emergency service providers. Guest rooms and public areas are fitted with applicable fire detection and firefighting equipment. The same systems will be established at the new hotel.
Midroc engages qualified fire safety engineering experts to prepare plans and specifications for fire safety in its hotels. The specifications capture fire prevention and response elements including layout and means of egress, fire detection, suppression and firefighting equipment as well as evacuation alarms and related communication systems. The operator is involved in review of layouts, plans and specifications at all stages of the design and requires certification of the fire safety systems prior to occupation of the hotel. These procedures are under application for the Sheraton hotel refurbishment activities and will be applied at the New Sheraton Hotel. Midroc is also responsible for maintenance and upgrading of the fire safety systems during the operation phases-to ensure continual compliance with the latest fire safety standards and requirements. Periodic fire safety site inspection reports are undertaken with the latest inspection being done in October 2024 for the current Sheraton Addis operations. Further details on life and fire safety are discussed under PS 4.
The existing Sheraton Hotel will be renovated in phases with certain areas of the hotel remaining operational and occupied. The CEHSMP prepared under ESAP#2 will include fire protection and egress drawings for each one of the key phases. The drawings will ensure that all areas have a minimum of two exits available under any configuration and condition created by the construction work. The CESHMP will also incorporate a system for reviewing temporary impairment of L&FS systems in the hotel during construction, and that the impairment will not affect the occupied portions of the hotel. The contractor and operator will also implement a coordinated EPRP between the construction EHS manager and the hotel.
Midroc will engage a qualified life and fire safety (L&FS) Expert and comply with local regulations and IFC requirements regarding L&FS design and installations at the refurbished and new Sheraton Hotel and provide a design compliance report in both local requirements and an international L&FS code aligned with the WBG EHS Guidelines (ESAP #7a). Upon physical completion of the building, the L&FS Expert will then verify that the systems were installed as designed/certified and provide the certification, affirming the installation and requisite testing. If the certification is not issued, then a Corrective Action Plan with proposed completion dates and expected metrics shall be submitted to IFC (ESAP #7b).
As part of ESAP #1, the L&FS Expert will prepare a L&FS Master Plan whose coverage will include fire prevention, means of egress, detection and alarm system, compartmentation (including smoke compartmentation in all floors), fire suppression and control, emergency response planning, and operation and maintenance (including schedules for mandatory regular inspection, maintenance and testing of life and fire safety systems and regular fire drills).
Security Personnel. The hotel operations are served by both armed and unarmed contracted security personnel. Midroc will incorporate reporting on the operator’s actions in observance of the Marriot’s human rights requirements in use of security personnel into the project E&S reporting systems developed under ESAP #1. As a minimum, annual reporting by the operator will capture: (i) sensitisation of security staff on the hotel’s Code of Conduct and specific training on appropriate use of force and use of firearms, (ii) training on human rights commitments, and (iii) how the operator addressed community/guest complaints related to company security personnel.
