Randon S.A. Implementos e Participacoes

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	24833
Country	Brazil
Sector	Industrial & Consumer Products
Department	Global Manufacturing & Services
Company name	Randon S.A. Implementos e Participacoes
Environmental category	B
Status	Active

Date ESRS disclosed	March 8, 2007

Previous Events	Invested: February 1, 2008 Signed: June 26, 2007 Approved: June 19, 2007

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

The project began with a 3 day site visit to both plants (Randon Implementos and Fras-le) in Caxias do Sul starting on December 12, 2006.

- Interview 1 – Fras-le – December 13, 2006:
From Fras-le: Marcelo Roberto S. Santos / Health and Safety Coordinator, Fabiane Mafessoni / Environmental Specialist, Tatiana Viegas/Human Resources

From IFC: Sérgio Finger / Environmental Consultant

- Interview 2 – Randon Implementos – December 14, 2006:

From Randon: Gerson Luiz Dupont / Environmental health and Safety Engineer, Luciane Sartori / Environmental Specialist
From IFC: Sérgio Finger / Environmental Consultant.
A Desk review was made with documents provided by both Randon Implementos and Fras-le, such as:
Randon:

- Environmental and Social questionnaire;
- Environmental Management System;
- Water supply;
- Ambient Noise;
- Workplace Noise;
- Air Emissions;
- Liquid Effluents;
- Solid Waste Management;
- Hazardous Waste Management;
- Public Disclosure and Social Development Programs;
- Occupational Heath and Safety;
- Fire and Life Safety;
- Accident Statistics;
- Emissions from boilers and Environmental permits;
- Emergency preparedness;
- Internal Communication Procedures;
- Performance Indexes.

Fras-Le:

- Environmental and Social questionnaire;
- Environmental Management System (ISO 14.000 procedures – Ifs);
- Gas Washing system;
- Water supply;
- Energy supply
- Air Emissions;
- Liquid Effluents;
- Solid Waste Management;
- Hazardous Waste Management;
- Public Disclosure and Social Development programs;
- Trainings;
- Occupational Heath and Safety;
- Fire and Life Safety;
- Emergency preparedness;
- Internal Communication Procedures;
- Performance Indexes.

Project description

The Randon Group (the Randon Group) is a medium-sized Brazilian industrial group and a good existing IFC client. The Randon Group is Brazil’s leading producer of trailers mainly for trucks and rail transportation, and it also manufactures automotive components, including friction materials for brakes. The Randon Group is headquartered in Caxias do Sul, a city 120 miles north of Porto Alegre.

The Randon Group has approached IFC with a request for financing of an investment program that will expand and modernize the production capacity of its operations. The project will be implemented during 2005-2009, and its cost is approximately $350 million. The project has the following components:

- the expansion and modernization of trailer and wagon manufacturing production capacity ($153 million);
- the expansion and technology upgrade of automotive component production facilities ($132 million); and
- working capital requirements for continuing growth (US$65 million). This investment program is part of the Randon Group’s long-term strategy to further consolidate its leading position in the domestic market and to strengthen its competitiveness in the global market.

IFC has been requested to provide loans of up to $35 million for two specific project items to be carried out by IFC’s existing borrowers as follows:

- up to $25 million to Randon S.A. Implementos e Participações (Randon) for the installation of an electrostatic and water-based painting line, which will replace the existing painting processes with state-of-the-art technology to reduce the air and water effluents, improve the product quality and achieve cost savings; and
- up to $10 million to Fras-le S.A. (Fras-le) for the expansion of brake pad manufacturing capacity to supply a new order from DaimlerChrysler.

Key environmental and social issues and mitigation

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. [Further information is provided in the attached documentation.]

- PS1: Social and Environmental Assessment and Management

Randon Implementos General Information:

Randon is located in a region with both Industries and residences. It is surrounded as indicated below:

- North side – Residences, Industries and Commercial Establishments;
- South side – Industries and Commercial Establishments;
- East side – Residences;
- West side – 2 Country clubs that serve as training centers for soccer teams.

Management Program:

Randon has 2530 direct employees and is certified ISO 9000 since 1998. Randon runs an Environmental Management System (EMS) based on ISO 14.000 certification since 2003. However Randon Implementos had not certified it due to internal reasons.

The Environmental and Safety department is composed by seven Workplace Safety technicians, one Administrative assistant, two Environmental Engineer Assistants and four Environmental Operators
Randon Implementos controls the following parameters in Workplace, such as:

- Frequency of employees;
- Accidents;
- Total Lost Time in accidents;
- Normal examinations per total examinations;
- Inadequate conditions of work;
- Noise;
- Energy per product (piece);
- Hazardous Waste;
- Non-hazardous waste;
- Industrial Effluent;
- Water consumption ;
- Training.

Public Disclosure:

Randon Implementos maintains a website with relevant information of the Randon group, Social Responsibility and Environmental actions. It also publishes periodically a magazine entitled “Carga Total” (Total Load) with detailed information of clients, products and environmental issues focusing clients, distributors and providers. Internally the Company publishes every 3 months the “Randonário”, an update dedicated to internal issues, focusing all employees.

Training:

Every team manager assesses its employees based on job profile (responsibilities, behaviour, technical abilities and knowledge). When necessary, the company may sponsor trainings, courses or field trips. A good example is the international expansion process which required a massive effort to train people in foreign languages and management practices.

It is Randon’s policy to provide up to 40% scholarships for its employees in undergraduation and post-graduation courses.

Community Engagement:

The surrounding communities work together with the company, acting as “living nose” for any kind of incident, alerting the staff for any different occurrence or bad smell.

Grievance Mechanism:

Randon has good relationship with the surrounding communities, working together to prevent and mitigate possible impacts. Additionally, Randon makes available a direct contact through its website.
FRAS-LE

Fras-le General Information:

Fras-le is located in an industrial area outside the city of Caxias do Sul, surrounded by small farms with plantations and a horse breeding farm. The closest community is Bairro Forqueta and is located 300 meters away.

Management Capacity:

Fras-le E&S department is currently organized in 3 departments: Occupational Health and Safety, Environmental Management and Human resources.

Fras-le obtained the ISO 14.000 certification since 1999 which was re-certified in 2006 for another period of 2 years. In addition The local Environmental Protection Authority (FEPAM) imposes very strict parameters for liquid effluents, Air Emissions and Solid waste generation. Additionally Fras-le has adopted all performance indexes related to the final product.

Public Disclosure:

Fras-le maintains a website with information regarding its Environmental and Social policy which is addressed for the outside public. The internal communication is made by IF, which means Fras-le Instruction, as described in the ISO requirements.

Community Development:

Most of the work force employed in Fras-le comes from the surrounding communities. All the Community programs developed for Randon are also applied for Fras-le.

Grievance Mechanism:

Fras-le has a grievance mechanism implement according to ISO 14.000 forms. For every complaint one order is opened and a form is addressed to the responsible person.

- PS2: Labor and Working Conditions

Human Resource Policy and Management (both for Randon and Fras-le):

Admission – 2 day integration which consist in one full day of lectures and explanations on Randon Group, rights and obligations, and a second day for specific information on the company where the employee will be sited. A broader integration takes 7 to 8 days and consists of 8 meetings of 1 hour each, in order to explain:

- CRM policies;
- Safety issues;
- Total quality policies;
- Marketing issues;
- Environmental management policies;

Workplace training:

- New Employees – those new employees who work in the production will have to wear a yellow short jacket during the first 30 days, to prevent accidents and inform unadvised employees. Every new employee has a responsible manager to support and coordination in the initial period.
- Current Employees – Every 90 days, factory employees are trained. The administrative staff is trained when necessary.

Training Plan – for every a specific job position, there is a specific training (cross information of the job profile and employee’s CV). Every new position is first offered internally and only than made public.

Benefits offered:

Health Insurance, dentist, accords with pharmacies to lower the prices of medicines, transportation to and from the company, restaurant, sports center for various types of practices, agreements of credit to lower interest rates and an internal social security system with the option to receive part of the salary at the age of 55 or the whole salary at the age of 60.
Randon Implementos

Occupational Health and Safety (Workplace Monitoring):

The Occupational Health and safety team is composed by a health coordinator, a physician, two occupational nurse technician and two administrative assistants, in charge of:

- Occupational Health Control Program;
- Environmental Risk Prevention Program;
- Ergonomics;
- Environmental Aspects and Risk Assessment;
- Environmental Management Program;
- Medical Examinations;
- Inadequate Condition Notification;
- Environmental Risk Survey;
- Implementation of the PPR;
- Implementation of the PCA;
- Implementation of the PDE.

The following programs are implemented in Randon:

- PPRA – Programa de Prevenção de Riscos Ambientais (Environmental Risk Prevention Program)This is a compulsory legal requirement following national, state and municipal codes (NR 09), serving to anticipate and control environmental risks in work environment (chemical, physical and biological), considering environmental protection and natural resources preservation.
- PCMSO – Programa de Controle Médico de Saúde Ocupacional (Occupational Health Medical Control Program) - This program aims to prevent, track and early diagnose workplace health problems through medical check.
- PPR – Programa de Proteção Respiratória – Respiratory Protection program – it approaches the correct use of the respiratory protection equipment
- PCA – Programa de Conservação Auditiva – Hearing Conservation Program and Audiometric Control.
- Ergonomics program – it aims to prevent ergonomic problems in employee’s workplace.
- CIPA – Comissão Interna de Prevenção de Acidentes – (Internal Commission for Accident Prevention)
The CIPA members are both employees indicated by Randon and employees elected yearly by themselves. The CIPA promotes monthly meetings to:

- Investigate certain accidents and to debate measures to eliminate future occurrences;
- Promote trainings on accident prevention;
- Map existing risks;
- Yearly perform the Biosecurity Training;
- Promote the SIPAT which is the yearly one-week training on Occupational health and safety;

The main problems related to OH&S are the workplace noise, which sometimes reach 93 dB, the organic vapors from the painting cabins (xylene and toluene) dust from sanding, fumes and gases from the welding process.

Noise in Workplace:

The workplace noise is never higher than 90 -93 dB, which is compliant to IFC Occupational Health and Safety guideline for heavy industry (with no demand for oral communication) when using ear protection. The equivalent noise level is never higher than 85 dB which is also in compliance.

Accident Statistics:

The number of accidents decreased 12.3% in 2006 in comparison with 2005 and the accident trend is decreasing more rapidly than the previous year.

FRAS-LE
Occupational Health and Safety:

The Occupational Health and Safety team is composed by 14 members with a coordinator and a safety engineer. It is in charge of implementing 7 different programs:

- PPRA - Programa de Prevenção de Riscos Ambientais (Environmental Risk Prevention Program);
- PCMSO - Programa de Controle Médico de Saúde Ocupacional (Occupational Health Medical Control Program);
- PCA – Programa de Conservação Auditiva (Hearing Conservation Program and Audiometric Control);
- PERG – Programa de Ergonomia (Ergonomic Program);
- POT – Programa de Organização e Treinamento (Organization and Training Program);
- PCR – Programa de Controle Respiratório (Breathing Protection Program);
- PPA – Programa de Prevenção de Acidentes (Accident Prevention Program).

- PS3: Pollution Prevention and Abatement

Air emissions:

Randon had 2 complaints regarding air emissions, one in the painting area and the other in the oxicut, both of them solved by replacing the equipment with problems. The emissions control is based on an initial dry filtering followed by a wet filtering in order to prevent escape emissions. The most significant problems are related painting cabins, welding stations, which are controlled by active carbon filters and boilers, equipped with multicyclones. Random controls the PM emissions from the wood boiler, painting cabins, Oxicut and sandblasting. Controlled parameters: NOx, SOx and PM10.

Energy Efficiency:

Energy sources:

Natural Gas, Liquid Petrol Gas, Diesel, wood and electric energy. The company has achieved its own targets for wood and Natural gas consumption and is very close to the initial target for Diesel, but still has a lot of work to do regarding electric energy and Liquid Petrol Gas.

Water supply:

Until 2006 water was supplied by the local state company (public supplier). In April 2006 the company began to use artesian wells to supply up to 60% from its needs. In September 2006, a water recycling program was implemented, achieving up to 17,4% of Randon’s needs, but still using 50% form wells and 32,6% from the local supplier. During 2006 the water use increased 7,67% while total water cost decreased 60,5%.

Liquid Effluents:

Randon has just increased the capacity of its effluent treatment station (ETE), which attends all the companies of Randon group (Randon, Suspensys, Master, Jost) located in the same site. The ETE is completely automated and had its capacity doubled in 2005 in order to increase performance. There was a need to increase the retention time for a better removal of the Nitrogen and Phosphorus. The main effluent is sanitary (160 m3 per day) although there is also a heavy load from the painting cabins.

All measured parameters were compliant with IFC guidelines.

Water Recycling Program:

Randon aims to recycle up to 130m3 of water back to the productive process. Currently, the company is recycling up to 60 m3 per day of water. The sludge resulting from treatment station is sent for co-processing in a certified company. The ETE water is sent to an open lagoon (on site) prior discharged to the public network and later on to Tega River.

Ambient Noise:

Some incompliances were observed for both night and day. The highest measurement reached 82 db close to the cooling tower on the right side. Another problematic site is the area close to the compressors, where noise also reached 82 db, where a maximum of 70 dB is allowed.

Solid Waste:

Randon maintains an Industrial landfill for class IIa waste (not dangerous) which is licensed by the Local Environmental Authority (Fepam).

Main Hazardous Materials:

Fluorescent bulbs, Ink waste and sludge, Treatment station sludge, Used oil, Contaminated solvent, Batteries(Pb), Plastics and filters from painting cabins and Hazardous waste from nursery.

Main Solid Waste:

Plastic waste, Wood waste, Organic waste, Metallic drums, Fiberglass and papers with resins, Non-ferrous scrap, Sweeping waste, Ferrous scrap, Non-contaminated packing, Boiler ashes, Domestic waste form office areas and Organic waste from restaurant

Cleaner Technologies:

Since 1999 Randon has a partnership with CNTL (Centro Nacional de Tecnologias Limpas – Cleaner Technologies National Center) from SENAI/RS, implementing new policies (Solid Waste Management, Water consumption and Energy efficiency).

FRAS-LE

Air Emissions:

Fras-le has a gas exhaustion system implemented in specific places of the production. A gas washing system is also in place using cloridric (HCl) and sulphiric (H2SO4) acids while the effluent generated in the process is sent to the Effluent Treatment Station.

Gas Washing Systems:

The gas washing system presents two towers one for the acid washing takes on other for the neutralization by adding an alkaline solution. Four hazardous substances were monitored in 2005 (Fenol, 0-cresol, Ammonia and Metil-amina) but none of them was detected. In the last two years, no problems were detected according to the air emissions controls. Fras-le replaced the fuel source of the boilers which was BPF oil, to natural gas allowing a considerable reduction of greenhouse gases emissions.

Energy Efficiency:

Fras-le uses Electric Energy and Natural Gas as energy source for its boilers, greenhouses and burners.

Water supply:

The water supply is 80% from artesian wells and 20% from the local state supplier.

Liquid Effluents:

The Effluent Treatment Station was design in 1998 and remodeled in 2002. It was built to treat the domestic and industrial liquid effluents generated by Fras-le. The industrial effluent receives physical-chemical treatment and the sewage is treated in an activated sludge system plant, prior to discharge; After treatment part of the water is reused and part sent to a stabilization lagoon, a than discharged to a river (Rio das Antas). In 2002 Fras-le invested R$ 165,000.00 in order to optimize the effluent treatment station, with the installation of a tertiary treatment which consists in the use of biological filters and an activated coal system. The Effluent Treatment Station (ETE) has a nominal capacity of 268 m3 per day, which - 144 m3/day from toilets (organic) and 124 m3/day from industry effluent.

In 2005 pH, BOD, COD, TTS, TS, Coliform, Nitrogen and Temperature were compliant with both local WBG/IFC guidelines; Phosphorus measurements indicated compliance only local standards but not with IFC guidelines.

Solid Waste:

Fras-le shows a 76,48% recovery rate of the total solid waste to be used as raw material.
- The remaing solid waste is disposed in Company’s own Industrial landfill, authorized by State Environmental Authority (FEPAM). During the year 2005, the amount of 10.353,50 m3 of solid waste had been placed there. Most of the solid waste generated in the process is stored in 7 m3 bins in a covered area.
- Fras-le also installed a composting site, located at the back of the company, which uses sludge generated from Effluent Treatment Station.

Hazardous Materials:

Asbestos:

Since 30 September 2002 Fras-le changed its process, using only alternative raw materials in substitution to Asbestos.
The hazardous materials are being handled according to the State Environmental Legislation and internationally accepted standards. Liquids are stored in special areas. Solvents and other hazardous wastes are stored in appropriate containers to prevent spills and soil contamination of the groundwater and surface waters.
Sustainability Issues:

Almost all the effluent generated in Fras-le is domestic (the production process does not involve water). The effluent is treated and reused in sanitaries, gas washing system and coolilng towers. The company is studying the possibility of using the treated effluent in the irrigation of crops.

- PS4: Community Health, Safety and Security

Randon Implementos

Emergency Preparedness and Response

The company is prepared to an eventual explosion, fire or leak.

Life and Fire Safety:

Water storage capacity – Randon has 2 stages of water storage:

- 700.000 liters storage close to the restaurant (main storage area)
- 150.000 liters (30 meters high reservoir)

There is a 3rd reservoir with 60.000 liters to supply the hydrants network.
Randon has 65 hydrants, which are tested annually both with fire hoses, registers and spouts.

Fire extinguishers:

Randon has 550 fire extinguishers tested monthly by a subcontractor licensed by INMETRO, which is the local related authority. Randon doesn’t have sprinklers.

Alarm Buttons:

Randon has a central emergency alarm and an emergency team 24 hours a day. It is equipped with alarm buttons, smoke detectors, emergency lighting, automatic power shut down and signed way out pathways.

The fire prevention plan is under implementation and will be finished by mid 2007.

Emergency brigade:

Randon’s emergency brigade is composed by 230 employees who are constantly trained to emergency situations.

Ergonomic:

All the furniture is approved by the ergonomic commission which is in charge to prevent the ergonomic related injuries.

FRAS-LE

Life and Fire Safety:

The company has implement the PEF – (Plano de Emergência Fras-le) Fras-le Emergency Plan, which disciplines the procedures for explosion, fire, leaks and other emergencies. Fras-le counts with smoke detectors but does not have sprinklers. It is also equipped with hydrants, fire extinguishers, smoke detectors, fire alarm, gas detector in the boiler area and fire brigade with 85 members periodically trained.

Training and Health:

The employees have been trained in several programs totalizing 20.500 hours in 2005.

The main trainings are shown above (in man-hours):

- CIPA: Environmental Risk Prevention Program (744),
- PPR: Breathing Protection Program (237), PCA - Audition Conservation Program (20),
- PPA: Accident Prevention Program (25),
- Fire defense (1240),
- Heart massage (44),
- Security participation (494),
- Fork driver (240),
- Integration (1772),
- Training for contracted services (770),
- Other trainings (1400),
- Emergency Program (45),
- Integration (1772),
- Training for contracted services (770),
- Other trainings (1400),
- Emergency Program (45).

IFC PROJECTS