Environmental & Social Review Summary
Project Number
9107
Company Name
Aitken Spence PLC
Date ESRS Disclosed
Feb 5, 2010
Country
Sri Lanka
Region
South Asia
Last Updated Date
Dec 31, 2016
Environmental Category
B - Limited
Status
Completed
Previous Events
Approved : Sep 18, 1998
Signed : Sep 28, 1998
Invested : Oct 13, 1998
Sector
Resort Hotel (Including Lodges)
Industry
Tourism, Retail and Property
Department
Regional Industry - MAS Asia & Pac
Project Description
Environmental Review Summary (ERS)
Project Name SRI LANKA: Aitken Spence Group
Region South Asia
Sector Conglomerate
Project No. 009107
1. This project involves a private equity placement of US$25 million in the Aitken Spence Group (ASG) of which IFC has been requested to provide approximately US$3-5 million. ASG will use the funds to reduce it’s leverage, implement an expansion program in their tourism holdings, and enter the power sector through construction of two 20 MW fuel oil fired power plants. ASG’s key existing operations include: hotels (in Sri Lanka and the Maldives); tea and rubber plantations; printing and packaging operations; garment assembly; freight forwarding; property development; and insurance.
2. This is a category B project according to IFC''s environmental review procedure because specific impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The following key environmental health and safety issues were analyzed:
· Labor issues;
· Land acquisition;
· Air emissions;
· Noise;
· Sewage treatment and disposal;
· Liquid and solid waste disposal;
· Water and power supply;
· CFCs and PCBs;
· employee safety training and emergency response; and
· fire protection measures.
As part of the environmental and safety review of this project, independent Environmental Audits and Fire Safety Audits were completed for all of ASG’s owned, minority owned, and managed hotel properties, in both Sri Lanka and the Maldives. In addition, the sponsor (ASG) has submitted additional information outlining how the key issues listed above will be addressed and has made various commitments to implement plans to ensure compliance with local and World Bank environmental policies and guidelines. Key issues associated with the audits, commitments made by the sponsor and information provided are summarized, for each major area of operation, in the paragraphs that follow.
Hotels
3. The environmental and fire safety audits completed of ASG’s hotel’s indicate that sewage treatment and fire safety are the key areas requiring improvement. ASG has committed to implement all audit recommendations, and will install sewage treatment plants at all owned hotels. ASG has already been implementing it’s own upgrading program on this front and is pilot testing a new sewage treatment plant at the Neptune Hotel. In addition, ASG own and operate the Green Globe award winning Kandalama Hotel. This hotel was designed and built in an environmentally friendly way to leave a minimal footprint on the ecology of the area. The hotel includes a sewage treatment plant, the roof structures include gardens of endemic flora and treated effluent is used to irrigate rooftop gardens. Considerable effort has also been put into forging links with local communities, and Kandalama has a full time staff member responsible for community relations.
In addition to sewage treatment and fire safety, ASG have also committed to rehabilitating asbestos roof structures at several hotels and improving fuel handling and storage. Depending on data provided by the Sri Lankan Water Resources Department groundwater surveys may be conducted to ensure sustainable water supply.
In the case of ASG’s two Maldivian hotels, Bathala and Rannalhi, key issues also relate to sewage treatment and fire safety. In addition to this, at Bathala, an issue that requires improved and formalized handling is sea turtle management. Over the last 2 years one sea turtle has nested on the island. Currently two staff members with informal training from the Government are responsible for identification, monitoring and protection of turtle nesting sites. As instructed by Government authorities turtles are left to nest where they choose. The nest site is then protected and monitored on a daily basis until the turtles hatch. Hatchlings are then kept in shaded concrete tanks, through which seawater is mechanically circulated, and are released periodically. The hotel has been provided with a form they are required to submit to the Government indicating when a turtle nested and how many hatchlings have been collected and released. As part of improvement to the hotel’s overall environmental management ASG, in coordination with IFC, will further analyze this issue and consult, as necessary, with a marine/turtle specialist and provide staff with specialized training so that a formal procedure for turtle management can be developed. This procedure can then be implemented at Rannalhi if necessary.
With respect to managed and minority owned hotels ASG has committed to using their maximum leverage to ensure that the owners of these properties implement the Environmental and Fire Safety Audit recommendations. None of these properties present any sensitive ecological issues, the focus, as with owned properties, is on sewage treatment and fire safety.
Freight Forwarding
4. No hazardous materials are handled in ASG’s freight operations. All goods are stored and transported in containers. Typical materials handled include tea, rubber, tires, wastepaper, porcelain, and garments. ASG is pursuing ISO 9000 certification for it’s freight operations and has undergone preliminary safety and inspection audits. A container repair service is also offered by ASG. This unit engages in basic welding and painting repairs. Liquid waste disposal at the container and vehicle washing area requires improvement and ASG will install a grease interceptor in storm drains to prevent ground runoff. Secondary fuel containment structures will also be retrofitted for diesel storage tanks. Noise generated on site is minimal, however due to complaints from nearby residents the container repair unit was relocated to minimize ambient noise. Fire safety equipment is strategically located around the yard and employees are provided with protective equipment and training.
Plantations
5. ASG’s tea and rubber plantations do not operate any boilers. Furnaces operated are small capacity units and use a combination of fuelwood and fuel oil. Fuelwood fired furnaces are being converted to fuel oil units to eliminate the use of rubber wood. Fuel oil storage tanks and fuel tanks associated with backup power supply will be retrofitted with secondary containment structures. No liquid effluent is generated at the tea plantations. The rubber processing plants do not currently have any effluent treatment systems. However under an Asian Development Bank (ADB) scheme installation of effluent treatment plants at the rubber factories will commence in 1999. ASG has committed that these systems will be designed to meet World Bank guidelines, in addition to ADB and Sri Lankan standards, and have indicated that these systems will be designed in coordination with the Rubber Research institute of Sri Lanka and will include equalization tanks and anaerobic and aerobic treatment.
Safety, labour, and social issues at the plantation are handled in full consultation with the Joint Estate Workers Union and the Plantation Housing and Social Welfare Trust. The Trust is jointly funded by the ADB and the member plantations, of which ASG is a contributing member. ASG is a respected plantation manager, which is reflected in the fact that ASG’s Plantations CEO is a member of the Trust’s Board. The Trust and Union groups oversee a variety of socioeconomic issues including housing, wages, sanitation, healthcare, agricultural development, education, and micro-business development.
To further address education, occupational safety training, health, and social development ASG has established a Human Resources Development Division (HRD). In order to run the HRD in a participatory way, the HRD has sub units on each plantation in which workers from all levels are represented. The HRD has also implemented a university scholarship scheme for staff children and an alternative employment training scheme in coordination with CARE.
The Sri Lankan Department of Labor and ASG provide regular safety training to all plantation workers and processing machinery in plantation factories are equipped with safety belt guards and adequate lighting. Chemicals are stored in separate and secure structures and only specially trained and equipped employees handle these chemicals. Only those chemicals approved by the Tea Research Institute and The Rubber Research Institute of Sri Lanka are used.
Garment Assembly
6. The garment plants are only engaged in assembly operations. These plants only employ individuals over the age of 18. Women and men receive equal pay for similar positions and wages paid to all employees are higher than the minimum wage set by the (Government) Wages Board. Plant structures, which are all single storey, are provided with smoke alarms, hose reels (connected to a pressurized main), fire extinguishers (CO2 and foam) and sand buckets. Cooling fans, ventilation, large windows and refrigerated water are provided. In addition, ASG provides free medical services, free breakfast, holiday pay, paid annual leave, maternity leave, and recreational facilities. Special units have been trained by the Fire Brigade and medical specialists to handle fire and health emergencies. Periodic fire drills are carried out involving all staff.
Printing Plant
7. ASG’s printing operations produce minimal amounts of liquid and solid waste. These are disposed of via municipal services, with effluent (which includes sewage and isopropyl alcohol 5% volume solution with water) discharged to the public sewer system. Waste paper and offcuts are collected by waste paper merchants and sold for recycling to the National Paper Corporation. Organic inks and dyes, and solvents are stored in a separate secure area. No inorganic inks and dyes are used. Fuel tanks for backup power supply will be retrofitted with secondary containment structures. The plant is equipped with a ducting system and exhaust fans to facilitate vapor extraction and maintain safe air quality levels. The plant is also equipped with a combination of sprinklers, fire hydrants, fire extinguishers, and smoke detectors. Plant noise levels are within safe limits and therefore hearing protection is not necessary. Staff are provided with appropriate safety training.
Power Plants
8. The two proposed 20MW thermal power projects that ASG intends to develop are still in the early stages of design and preparation. Detailed information is therefore not currently available to complete and assessment of the potential environmental and social impacts of these projects. ASG has committed that they will design, operate and build these plants to comply with World Bank policies and guidelines. IFC will review, and as part of this review, possibly require site visits, independent environmental impact studies and public consultation, these projects as they are defined. Compliance with air emissions guidelines is not generally a major cost or control issue in plants of this capacity, however fuel oil quality and air emissions will be carefully assessed. It is projected that land acquisition for transmission lines will be minimal as ASG intend to locate the plants within several hundred meters of existing sub-stations. Any land acquisition necessary for these projects will be conducted in a manner so as to ensure fair compensation without any legal threats or threat of expropriation. ASG will provide written confirmation indicating that landowners are satisfied with the compensation they have received.
Corporate Environmental Management System
9. ASG has committed to develop a Group- wide document, acceptable to IFC, which constitutes an Environmental Management System (EMS) for all of ASG''s operations. This EMS must will be developed within 1 year of disbursement of IFC''s loan. The EMS will entail: the development of an Environmental Policy that is approved by ASG''s Board; the designation of a staff member at ASG with Corporate Oversight for Environmental and Social Issues and ASG''s Environmental Review Procedure; the development of an internal Environmental Review Procedure, the implementation of which, will ensure compliance with local, national and World Bank environmental and social policies and guidelines
10. The EMS will also be used as a tool to ensure that insurance and property development operations and any new projects that ASG develops will comply with applicable local and World Bank policies and guidelines. ASG will report to IFC on new project proposals, for IFC environmental and social clearance, prior to implementation/construction of these projects.
11. The sponsor has also committed that all new cold storage and central cooling systems installed as part of any ASG project will be CFC-free. Similarly PCB based equipment will not be installed.
12. Based on its review of available information regarding potential environmental impacts and proposed mitigation measures, implementation of all audit recommendations, and commitments made by ASG, IFC concludes that the proposed project is being designed to meet Government of Sri Lanka requirements, and World Bank environmental, health and safety guidelines and policies.
13. IFC will monitor ASG’s audit and corrective action implementation and ongoing compliance with World Bank policies and guidelines during the life of the project by evaluating annual environmental performance reports submitted by the sponsor along with the financial report to IFC and by conducting periodic site reviews during project supervision.
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July 27, 1998 6:33 PM
Environmental and Social Mitigation Measures
Broad Community Support
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