Bauducco NE

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number	27783
Country	Brazil
Sector	Food & Beverages
Department	Agribusiness
Company name	Pandurata Alimentos Ltda.
Environmental category	B
Status	Active

Date ESRS disclosed	May 14, 2009

Previous Events	Invested: August 19, 2009 Signed: June 22, 2009 Approved: June 19, 2009

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

IFC’s review of this Category B project consisted of appraising Pandurata Alimentos Ltda.’s (Bauducco) own assessment of its environmental, occupational health and safety, labor and social development information as per:

- During IFC’s appraisal the following actions took place:

- Presentation by the company of the proposed investment;
- Presentation by the company on the Human Resources policy and actions and on Occupational Health and Safety issues;
- Presentation by the company of the Social assistance/responsibility area;
- Site visits to Guarullhos Plants (Argentina St and Endres St), Bom sucesso Plant, Extrema plant and Fernão Dias Distribution Centers to evaluate both social and environmental issues.
- The company submitted statistics on occupational health and safety issues, as well as on more general labor and social responsibility issues
- Meeting with the company’s quality assurance team.
- Presentation by the company of the Rio Largo, AL new factory and Distribution center project design and selected area in negotiation for construction of the plant.

Project description

Bauducco is one of the leading food producers in Brazil. It produces and distributes basic food, staples, cookies and biscuits, part of which directed to the bottom of the social pyramid. The Bauducco owns 5 state-of-the-art, high capacity, and modern production facilities, for all product lines which allow them to be among the most competitive companies in the market.

The Northeast region is one of the main biscuits markets in Brazil, where Bauducco has to compete with local players like M. Dias Branco and J. Macedo, which have plants in the region and have lower logistics costs. In order to be a competitive player in the market, Bauducco has decided to implement a plant in the region.

The Project entails a $50 million investment to implement an industrial plant and a distribution center in Rio Largo, state of Alagoas. In December 2010, Bauducco expects to initiate the operations of the distribution center and the wafer product line (productive capacity of 9,000 mt), which is Bauducco’s most demanded product in Northeast.

The Bauducco’s expansion project in Northeast of Brazil is in advanced negotiations with Alagoas State (AL) and the City of Rio Largo, to be built in the border of the Rio Largo urban area in an Industrial site. Rio largo is part of Maceio, AL metropolitan area that already has other industries like a sugar cane mill and a textile company. The new plant design is intended to be very similar to the existing Extrema factory with some improvements. It will be a state-of-the-art plant in terms of technology and Environmental Healthe and Safety (EHS)control. The plant will be built in stages and the first one will be a waffles production line with a distribution center.

Key environmental and social issues and mitigation

The issues, the potential impacts and how they will be addressed by the company are summarized below:

- PS 1: Social and Environmental Assessment and Management System

Following is the description of existing management elements of Bauducco’s Management Framework that will be applied at its new plant in Rio Largo, AL:

Social and Environmental Assessment

Prior to a new site construction and during the project design phase, Bauducco will be required by the Local Environmental Authorities to present an RCA –Enterprise Environmental Characterization Report – which will include a detailed description of the project, the local social and natural environment description, the impacts of the construction and operational phases and the controlling, mitigating and compensatory measures that will be taken to deal with these impacts.

In addition, during the project design phase, the Bauducco’s Engineering Unit review the project design to be consistent with local OHS legal requirements and existing Bauducco’s standards.

Management Program
Bauducco complies with local social and environmental regulations, they have an OHS Risk prevention plan, a workplace health and safety assessment and periodic monitoring systems. They have daily Health and Safety inspections and corrective plans. Bauducco also has all required licenses and permits and they treat and monitor their wastewater discharges. In addition, Bauducco already has the food safety management systems HACCP and GMP in their factories.

Organizational Capacity
The EHS structure is composed by one part time OHS Engineer, one Health and safety coordinator, one Environmental coordinator, one wastewatter operator for each facility and two EHS technicians in each plant. Bauducco is supporting the OHS technicians training on Environmental Management. They also have one nurse and one part time physician in each factory. Bauducco will hire a EHS manager that will be responsible to coordinate the Social and Environmental aspects of Bauducco’s operations and construction of new and existing sites.

Training
All operational workers of Bauducco have specific training on existing workplace risks, on required prevention measures, and on the results of the workplace monitoring assessments. Bauducco will design aformal annual EHS training program considering the specific nature of its operations and workers skills and needs.

Monitoring
Bauducco has an Occupational Health and Safety (OHS) monitoring system under the nationally required Workplace Risk Prevention Program (PPRA) and Occupational Health Monitoring Program (PCMSO). They have a periodic workplace noise monitoring, ergonomic assessment, Safety of Electrical Facilities assessment and daily OHS workplace inspections. All workers are subject to an admission, periodic and demission medical examination.

Bauducco monitors its wastewater discharges and solid wastes production, treatment and disposal. They also monitor the water, gas and energy consumption. They periodically monitore the gas/oxygen rate in the ovens of Bom Sucesso plant to optimize the gas consumption and plan to install some specific manometers to better monitor water consumption/reduction rates.

Reporting
Bauducco has a monthly OHS report that is shared with operational managers and discussed in the Accidents Prevention Internal Committee (CIPA). All accidents that result in lost work days are reported to the Public Welfare Authority.

- Bauducco reports twice a year its monthly wastewater, environmental noise and solid wastes production monitoring data to the Local State Environmental Authority, and annually reports to the Federal Authority (IBAMA) its wastewater, solid wastes, hazardous wastes production and disposal and air emissions releases.

- PS 2: Labor and Working Conditions

- Occupational Health & Safety –
The company has an Occupational Health and Safety department developing mandatory programs such as Environmental Risk Prevention Program (PPRA), Occupational Health Medical Control Program, Ergonomics program (PCMSO), Internal Commission for Accident Prevention (CIPA), Personal Protection Equipment (PPE). It is expected to have the same OHS programs in the new Rio Largo plants.

Bauducco has deployed Collective Protection Equipment (CPE) throughout existing facilities including such things as the isolation of noise sources with acoustic insulating materials; isolation of the heat sources with thermal insulating materials; guarding of moving parts of packing machinery and automatic shutoff devices and sensors that stop the machine automatically before an operator, or part of an operator, enters the danger zone. The Company plans to apply the same CPE standards to new machinery at the new Rio Largo plant.

Fire Safety and Training –
The Company has a well maintained structure of fire prevention, detection and response with smoke detectors in the industrial area, fire extinguishers and fire hoses (tested annually) at existing facilities. All Plants have fire prevention and fire fighting projects designs which are approved by the local fire authorities. A post construction and periodic inspection (AVCB) are required by the local fire authorities. The Company has a trained fire brigade in every plant, identified by a red cap and regularly trained in a special training site located at the Extrema plant. The Company plans to implement a similar fire safety and training program in the new Rio Largo plant.

Hazardous materials in existing facilities are stored in confined areas which will be remodeled to comply with Brazilian Fire Protection Standards and IFC requirements.

- Labor Conditions
In its existing facilities, the Company employs approximately 3032 permanent staff, 407 seasonal workers and 113 trainees for a total of about 3552 employees. Sixty percent of the workforce are women and forty percent are men. The Company has a program to hire disable people and a special training program. During the first phase of the Rio Largo project, which will be completed on 2011, about 256 new job positions will be created. When all phases of the Alagoas project are finished, the new plant will have approximately 863 workers divided into three shifts of work.

The Company respects the employee’s union’s collective bargaining agreements and the company minimum wage is $ 713.00 BRL, which is 8% above the agreed minimum wage. The minimum workers age is 14 years, but under a national part time training program in cooperation of technical schools. Underage workers are not allowed to handle or work with hazardous materials or activities. For other workers the minimum age is 18 years old. Bauducco hires unionized workers and unions representatives. There is no evidence that Bauducco restricts the freedom of workers to associate.

Bauducco has a human resources (HR) policy and follows Brazilian labor regulations, which are consistent with ILO standards (Brazil is a signatory to ILO conventions). The terms of employment, such as wages and benefits, hours of work, overtime arrangements and overtime compensation, annual and sick live, maternity, vacation or holiday are established by local labor regulations. Although Brazilian workers in general are familiar with the national terms of employment, the Company also informss them during the recruiting phase about the specific terms of the job position and additional benefits.

Bauducco has several internal grievance activities that provide different avenues for the expression and resolution of worker grievances. These activities include periodic open chats between managers and workers; private and direct access to HR analysts; and access to Union representatives in cases where workers want to remain anonymous or where they have not received acceptable feedback from the Company. Bauducco will develop and implement a formal internal grievance procedure at a corporate level in compliance with IFC’s Performance Standard 2 requirements that will be applicable to existing operations and the new plant in Alagoas.

The Company audits and ranks its suppliers according to technical issues and they have included social issues in the contracts, particularly on child labor and forced labor.

Bauducco will contractually require the construction contractors to have an OHS Management Plan that will encompasses: Risk Prevention Plan (PPRA); PCMSO (Occupational Health Medical Control Program); CIPA (Internal Commission for Accident Prevention); PPE (Personal Protection Equipment); Fall Prevention Program; Construction Workplace Conditions Program (NR18); Safety in handling; lifting of cargo and daily inspections

Bauducco will conduct monthly EHS inspections over the construction area to check contractors’ Occupational Health and Safety performance and compliance with national regulations.

- PS 3: Pollution Prevention and Abatement

- Solid and Liquid Waste
The existing plants generate various types of residues such as organic and food processing wastes as well as wastes directly related to production such as packaging, recyclables (mainly paper and cardboard, plastics, plastic drums, metal drums, pallets and production waste). The waste is properly stored and part of it is disposed of in landfills (sludge, green waste and food), part recycled (paper and cardboard packages and plastic packages) and part is used as animal feed. The Company will implement solid and liquid wastes management practices at its new plant in Rio Largo that are consistent with the management practices at existing facilities.

- Hazardous Wastes Handling and Storage
Hazardous solid wastes generated at the Company’s existing operations include sludge from effluent treatment plants which is disposed of in authorized landfills; smaller quantities of solid waste from the health clinics and light bulbs, which are respectively incinerated and collected by licensed companies. The Company will implement hazardous wastes management practices at the new plant in Rio Largo that are consistent with the management practices at existing facilities.

- Liquid effluents
The liquid effluents from existing plants are treated and discharged to public sanitary sewer systems. They are periodically monitored and meet local regulatory requirements and IFC Standards. All existing plants treat their effluents according to the local environmental regulations. The Company monitors treated effluents for biochemical oxygen demand (BOD), COD (Chemical Oxygen Demand) PH, Temperature, Oils and Grazes and Total Suspended Solids.

The liquid effluents from the new plant are expected to be discharged to the public sewage system and will have the same kind of treatment of the effluents from Extrema Plant which includes homogenization tanks, chemical treatment, flotation system, biological treatment, and membrane filtering system. In the case of being necessary to discharge them to a water body, the company will comply with local regulation, which requires that the effluents are in the same standard of the receptor water quality.

- Air Emissions
The main source of air emissions from Company operations are the ovens which are fired with natural gas and which therefore do not emit significant levels of hazardous air pollutants. The main issue associated with air emissions are nuisance odors. All oven stacks have filters to prevent odor emissions and there are no reports of community complaints at existing facilities. The same type of odor management technology will be applied to the new facility in Alagoas.

- Ambient Noise
The company monitors its noise emissions and has deployed noise control measures such as isolating the emissions sources. The Guarulhos Plant complies with local Standards of 70 dB(A) for a Predominant Industrial Area and Bom Sucesso Plant will make the necessary adjustments to fit Local and IFC Ambient Noise Guidelines. The Extrema Plant meets local and IFC guidelines and the new Alagoas Plant will include design specifications to comply with these requirements.

-Resources Conservation and energy efficiency
Bauducco is working on a cleaner production program that will allow them to have significant savings of water and energy consumption. The water from the water treatment plant in Extrema is reused in the boillers/steam system and they have burners’ optimization and maintenance measures to reduce natural gas consumption. The company will form a cleaner production working group at the corporate level to implement the program in all of its plants. The new Alagoas Plant will have a cleaner production plan consistent with the existing one.

- New Alagoas Plant Construction
Bauducco will contractually require from the construction contractors to have an Environmental Management Plan, following to local requirements, that will encompass: licensing; waste management; water usage and permit; wastewater treatment and control; erosion prevention and control; soil contamination prevention from lubricant and hydraulic oil spills; fugitive air emissions control; neighboring community impact and mitigation; and applicable mitigation measures designed in the RCA and the conditions of the Environmental License for construction.

Bauducco will conduct monthly EHS inspections over the construction area to check contractors’ environmental performance and compliance with national regulations and IFC requirements.

- PS 4: Community Health, Safety and Security

Buducco has received complaints from the community due to noise from the manufacturing facilities and from heavy traffic of trucks in the area of the Guarulhos plants. Bauducco has introduced noise reduction barriers, deployed a parking lot for the trucks and engaged with Guarulhos plants’ neighboring community. Bauducco will develop a standardized procedure for the prevention of noise related impacts and for addressing community concerns for all plants, including the new Alagoas plant during both the construction and operational phases.

- PS 5: Land Acquisition and Involuntary Resettlement

The property on which the new Alagoas facility will be built previously belonged to a local sugar mill and has been historically used to plant and harvest sugarcane. The plantation is managed and operated by the sugar mill, and there is no share cropping with local farmers at that area.
The sugar mill is currently reaching a negotiated settlement to turn the land over to the Government of the State of Alagoas to help settle an outstanding tax debt. The State of Alagoas in turn plans to donate the property to the Company as a fiscal incentive to promote economic development in the region. This type of arrangement is a common kind of incentive used by state governments in the less developed Northeast Region of Brazil to attract new projects and investments.

Neither of these voluntary land transactions will result in economic or physical displacement of persons.

Should the Company decide to acquire another property than the one described above, it will ensure that the negotiating and acquisition process complies with IFC’s PS 5 requirements.

Client's community engagement

Bauducco engages with communities on an ongoing basis through the implementation of different social projects. These projects have strategic links with the company impacts and community needs.

This program includes proactive community engagement / communication activities such as contact and invitations to neighbors as already done at the Guarulhos plants, where neighbors were identified and contacted by the Social Assistance Unit. The program includes periodic contact and invitations for chats to help establish open channels of communication. The company will develop a formal procedure for addressing community complaints in all their plants, including with the new Rio Largo facility. Furthermore, the contractors under the construction phase will be required to have a communication and engagement plan with the local and affected community.

Bauducco has a Consumer Services Center (SAC) system in place that can be accessed through the internet: http://www.bauducco.com.br/bauducco.html, by phone via a toll free line at 0800 7011599, or by post: Caixa Postal 11039, CEP 05422-970. These contact options are widely announced through the Company’s consumer products. Most complaints that come through the SAC are related to product quality. The SAC is consistent with Brazilian consumers’ rights regulations. All claims are registered and a product replacement is offered. The defective products are analyzed and a monthly report of products claims is shared with managers and directors, who decide if any corrective action is needed.

Bauducco has a Social Investment Program that includes support for local organizations that assist poor children and mental disabled people. They actively support a Bakery Training Center at the organization to assist mentally disabled people (APAE) were they prepare and hire trainees for their social inclusion program. The Company will look for similar local opportunities for social responsibility investments in Rio Largo, AL.

Bauducco has an Open Factory program for the community interested in visiting its plants, mainly targeting school-age students.

Local access of project documentation

The person responsible for all inquiries is:

Roberto Francisco
Financial Manager
Pandurata Alimentos Ltda.
robertof@bauducco.com.br
Phone: +55-11-2142-9438

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