|
|  |
| Riopaila |
|
| 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 | 27549 |
| Country | Colombia |
| Sector | Agriculture and Forestry |
| Department | Agribusiness |
| Company name | Riopaila Castilla SA |
| Environmental category | B |
| Status | Pending Disbursement |
|
| Date ESRS disclosed | April 15, 2009 |
 | |
| Previous Events | Signed: June 26, 2009
Approved: June 25, 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 |
| Appraisal of this project consisted of an analysis of technical, environmental, labor, occupational health and safety information, and field visits by IFC officials. Using diverse information from Riopaila Castilla and field visits, IFC evaluated sugar mills, agricultural operations, cane processing, sugar manufacturing as well as water and waste management processes for the Riopaila and Castilla plants. The objectives of IFC’s physical visit were to collect additional information, to better understand physical processes, environmental and labor conditions in operations and to understand discerning the underlying causes for blockades of the Castilla sugar mill by cane cutters from the Cooperativas de Trabajo Asociado who provide services for the company. The blockade took place in the fourth quarter of 2008 and affected 8 of the 13 sugar mills in the southern portion of the River Cauca Valley. IFC obtained adequate information through the appraisal mission, an analysis of the situation by the Ministry of Social Affairs (Ministerio de Protección Social) and discussions with the client to understand the issue and required ameliorative measures. After the appraisal, the client commissioned studies to evaluate ambient air concentrations of particulate and other air emissions from bagasse-fired boilers to aid IFC in its analysis of the potential impacts of operations and indicated ameliorative measures (see the attached Environmental Action Plan (EAP)). |
| Project description |
Riopaila Castilla S.A. is the largest sugar company in Colombia comprising ~20% of the country’s total production. The company has two production plants with total sugarcane crushing production capacity of 4.2 million mt/year and more than 1,327 of its full time employees and 5200 sub contracted staff. Riopaila Castilla is implementing a cost reduction and technological improvement program from 2008–2012 while diversifying its agribusiness activities. Specifically, Riopaila Castilla’s Investment Program entails:
adding co-generation capacity with the objective of selling excess energy to the national grid;
replacing and modernizing equipment and machinery across production units; and
restructuring short- and medium-term debt that is maturing in 2008–2010.
With this Investment Program, Riopaila Castilla expects to:
- further integrate the sugar-cane value chain;
- improve efficiencies and cut costs by reducing the consumption of steam and energy per ton of cane milled;
- carry out needed maintenance investments and equipment upgrades to firm up its competitive position in Colombia; and
- strengthen its balance sheet by extending maturity of short- and medium-term debt. |
|
| Identified applicable performance standards |
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:
- PS 1: Social and Environmental Assessment and Management Systems;
- PS 2: Labor and Working Conditions;
- PS 3: Pollution Prevention and Abatement;
- PS 4: Community Health, Safety and Security; and
- PS 6: Biodiversity Conservation and Sustainable Natural Resource Management. |
| Environmental and social categorization and rationale |
Riopaila is an established company producing sugar from owned and third party cane fields. Limited impacts are mitigated through the application of good international industry practice consistent with the performance standards. The company owns two sugar mills, Castilla and Riopaila. Castilla is situated in the town of Pradera, Cauca Valley. The mill commenced operations in 1945 and crushes 7000 tons of cane/day. Riopaila is situated in the town of Zarzal, Cauca Valley, commenced operations in 1928 and crushes 9000 tons of cane/day.
The company has developed standardized programs of preventive and predictive maintenance that guarantee continuity and reliability of equipment involved in cane washing, preparation and extraction including systems used for managing wastewater and air emissions all of which contribute to high efficiency with low consumption of energy. Both mills burn biomass waste (bagasse) from cane processing to generate 100% of the electric power required for the mills and ancillary facilities during operating periods. The mills sell excess power to the national grid. Part of the project will facilitate an increase in the amount of electric energy sold to the national grid. Excess molasses, essentially a processing byproduct, is the raw material for alcohol production and the spent wash (vinaza) from processing will be converted to organic fertilizer and used for cane rearing.
Principal environmental and social issues are discussed in the remainder of the document. Specific information related to how Riopaila Castilla will address elucidated impacts to ensure that the project, once agreed ameliorative measures have been completed, will fully comply applicable laws, regulation and IFC requirements are discussed in detail below. These tasks will ensure that the company will comply with social and environmental requirements including Colombian laws and regulations, and IFC’s Social and Environmental Performance Standards. Additional information is provided in the attached EAP that has been agreed with the company. |
|
| Key environmental and social issues and mitigation |
PS 1: Social and Environmental Assessment and Management Systems:
Riopaila Castilla operates in a manner consistent with Colombian laws and regulations and with IFC’s performance standards. The firm produces 500,000 tons of sugar/year and various derivatives. Respect for the environment is demonstrated through the institutionalization of continuous improvement of processes, prevention of contamination and compliance with applicable legislation. Overall management and continuous improvement of environmental and social affairs is consistent with the requirements of Performance Standard 1.
Both plants have the following certifications:
- ISO 9002–2000 (Quality);
- ISO 14000 (environmental and social affairs assessment and management);
- BASC (Business Alliance for Secure Commerce) establishment, application and administration of global security standards to the supply chain of international trade;
- US Federal Department of Agriculture (FDA) certification required to comply with the US Public Health Security and Bioterrorism Preparedness and Response Act of 2002;
- Kaushert (Kosher) Certification (conformance with regulations governing Jewish dietary laws); and
- Hazard Analysis and Critical Control Point (HACP) food safety program (in process).
As a whole, these management systems provide adequate assurance of the company’s ability to manage all aspects of operations and the means to communicate management-approved decisions to company employees.
PS 2: Labor and Working Conditions:
Riopaila Castilla has no plans to reduce its labor force. The company has a human resources management policy that complies with Colombian labor law. Labor management activities adhere to important labor criteria including non discrimination, freedom of association, and collective bargaining. Although not currently explicit in the human resources policy, these criteria are known by employees through communications from the presidency. These criteria will be included in the human resources policy.
Riopaila controls, or has contracts, for the use of ~48,000 ha of land area, of which ~84% or 40,532 ha are planted with sugar cane and the remainder is utilized for infrastructure, roads, irrigation and drainage facilities. Riopaila’s supply chain consists of the following elements: 537 ha of owned land; 6,736 ha under participation or rental contract; 12,527 ha are owned by Riopaila and Castilla Agricola and the remaining 20,732 are under supply contracts arrangements (proveedores) that facilitate sale of cane in the field. Currently Riopaila Castilla has 47 participation contracts for the Riopaila mill and 24 for the Castilla mill. Independent suppliers are responsible for planting and raising sugar cane. There are 107 independent supplier contracts for Riopaila and 120 for Castilla. Estimated payments for cane produced by third parties are based upon a calculation of the kilos of sugar that will be produced from each ton of cane. Payments are based upon the average sales price for a kilo of sugar for the months in which the cane was harvested.
Cane cutting (harvesting) for the Riopaila mill is 100% manual provided by cane cutters under contract from Cooperatives (Cooperativas de Trabajo Asociado). Some 64% of the cane cutters are provided by labor Cooperatives that contract with Riopaila. Cane cutting for Castilla’s fields is 88% manual with labor also supplied by Cooperativas.
Riopaila Castilla provides material support for its service firms (Associated Work Cooperatives, Temporary Employee Firms, Labor Union Contracts and other Contractors) for development of training, orientation, health services and safety processes. Riopaila Castilla retains 12% of contractor billings in a guarantee fund that is used exclusively to settle any claims made by these service providers. The funds are returned to each organization once the firm has demonstrated that it has complied with all of its social security system obligations and payments including health, pension and professional risk insurance.
Riopaila Castilla human resources policy addresses process of employee selection, promotion and hiring; induction and training for workers; activities of company employees and contracted staff; administration of apprentices in accordance with SENA (National Apprenticeship Service); and personnel termination, safety and occupational health.
Riopaila Castilla human resources management is responsible for guaranteeing compliance with the human resources policy affecting both direct hire and subcontracted employees. All reported shortcomings in compliance with these procedures, whether they are related to direct hire or subcontractor employees, are fully investigated and rectified through corrective actions. Riopaila Castilla Office of External Contracting is charged with monitoring of contracted firms to ensure that they comply with their obligations to workers, especially in relation to payment of compensation, issue of personal protective equipment (PPE) and affiliation with and payment of social security dues.
Consistent with institutionalized continuous process improvement, Riopaila Castilla will continue revising, publicizing and improving the human resources policy, and continue demanding that contractors are at all times in compliance with payment of legal benefits to workers; prompt payment of salaries and other compensation; compliance with all occupational health and safety regulations including supply of potable water for cane cutters and mandatory utilization of personal protective equipment supplied for laborers; ILO Convention 138 Concerning the minimum age for admission to employment; and ILO Convention 182 Concerning the prohibition and immediate action for the elimination of the worst forms of child labor. In order to strengthen safety and occupational health programs, the Riopaila Castilla will audit existing contractor practices with the objective of improving occupational health and safety. Using these techniques the company will institutionalize and strengthen occupational health and safety programs consistent with IFC’s general environmental health and safety guideline.
PS 3: Pollution Prevention and Abatement:
Air Emissions. Central Castilla and Riopaila mills operate, respectively, six and five bagasse-fired boilers. The two most modern boilers in each sugar mill provide steam for cogeneration and mill operations and the older units are in a standby mode. Particulate concentrations from boilers DZ and 5 at Central Castilla are currently controlled to 404 and 126 mg/Nm3. Similarly, boilers 3 and DZ at the Riopaila sugar mill respectively discharge 229.4 and 248.6 mg/Nm3. A third currently standby boiler at the Riopaila sugar mill will be retrofit and brought on line to provide supplemental steam.
Reductions in stack emissions have been achieved with the installation of dry cyclones and wet flue gas scrubbers. Riopaila and Castilla mills recognize that supplemental wet flue gas scrubbers and associated technology are required to improve particulate emissions capture. Engineering and construction tasks to achieve this goal are described in the attached EAP. In support of its understanding of current emissions, Riopaila Castilla commissioned Ingesam, a local consulting firm, to conduct air dispersion analyses to determine the ambient concentration of particulate at receptors potentially affected by emissions from the two sugar mills. The conclusions of these air dispersion analyses are that particulate concentrations in ambient air are low. Other ambient air particulate sources aside from the sugar mills include vehicular traffic and field burning of cane by all producers in the Cauca Valley. In order to further reduce particulate and ash in ambient air and to generally improve air quality and any impacts to neighboring populations, Riopaila Castilla complies with cane burning requirements stipulated by “Convenio de Concertación para una Producción Limpia con el Sector Azucarero” (Consensus Agreement for Clean Production in the Sugar Sector). As part of its continuous improvement program Riopaila Castilla will achieve further reduction of particulate concentrations in ambient air.
Liquid effluents from industrial processes include boiler ash, sludge from air emissions control systems, cane wash water with a heavy load of solids and silt, and cooling water. Hot process water is cooled in special ponds and then reused in a closed cycle. Other process wastewaters pass through sedimentation ponds followed by oxidation ponds for biological treatment. Wastewater from both mills is treated and reused 100% for process and agricultural irrigation. The two mills have resolved short- and long-term wastewater management issues in slightly different manners. Excess wastewaters are now discharged to canals that are used for crop irrigation. There are no discharges to surface waters.
Riopaila and Castilla cane field operations employ biological controls for cane insects and parasites. The objectives of biological control programs are to reduce cane borers (Diatraea and Valentinia sp.) and other economically harmful species to levels of economic insignificance through the systematic releases of natural enemies of these parasites (e.g., Metagonistylum minensi and Tricchogramma exiguum wasps). Biological control benefits include elimination of the use of chemical pesticides, promoting the recovery of natural environmental and ecological equilibrium in cane plantations in the Cauca Valley, and maintaining damaging species populations below levels of economic significance. Weeds are currently controlled in an integrated program including manual and mechanical weed removal, planting of animal fodder in cultivation border areas and along irrigation canals, strictly controlled grazing for cattle and sheep, and selected chemical herbicide application. Riopaila and Castilla sugar mills currently use glyphosate herbicides, which have low toxicity and are degraded over time by soil microorganisms, as maturation agents for cane prior to harvest. Agricultural operations supporting both mills are experimenting with less expensive biological and inorganic maturation agents (e.g., potassium phosphate). These materials interrupt the metabolic process as well but also improve sugar recovery per ton of cane, eliminate impacts to neighboring crops, and reduce crop production expenses and environmental impacts.
The largest volume of solid waste, sugar cane waste (bagasse), is burned to generate steam and electricity at Riopaila and Castilla mills as described above. Each mill produces some 45,000 m3/year of solids (boiler ash, cane wash solids, sludge, etc.) that are captured in the sedimentation ponds of the wastewater treatment systems. These solids are removed with mechanical loaders and transported to cane fields under renovation as fertilizer and to improve the physical characteristics of the cane fields. Similarly, cane mud or cachaza (~88,000 tons/year/mill) is mixed with soils and used as a fertilizer for renovating and active fields as it is rich in organic material, nitrogen, potassium and phosphorous. Cachaza is also sold to third party suppliers to improve their fields. Other significant volumes of solid waste (20 tons/month of ferrous scrap; 6–8 tons/month of paper waste; and 3 tons/month used truck and auto tires) as well as batteries, used hydrocarbons, plastic and glass are segregated and collected for sale to specialized firms for reuse or managed in accordance with regulatory agency permits.
PS 4: Community Health, Safety and Security:
Riopaila Castilla has well established relations with communities in the area of influence of its operations through implementation of social development programs by the company and through the activities of the Caicedo González Foundation (Fundación Caicedo González) established 51 years ago. Riopaila Castilla is working to reduce the impacts of company operations on the communities in the area of influence of agricultural and milling operations. Particulate from combustion and sugar cane burning can have an impact on public health. Riopaila Castilla recognizes this and is engaged in a number of programs aimed at reducing community impacts. Environmental managers at both mills and cane growers are working with the Colombian government and other mills in the Cauca Valley to comply with the requirements of the Clean Production Initiative that promotes sustainability in the sugar industry. The agreement entitled, “Convenio de Concertación para una Producción Limpia con el Sector Azucarero” (Consensus Agreement for Clean Production in the Sugar Sector) is designed to coordinate actions and production to support the reduction of contamination; the adoption of sustainable production methods; and to improve public lands management. The parties to the agreement include: Ministry of Environment, Regional Corporations of the Cauca Valley-CVC (Colombian Natural Resources Agency), Cenicaña (Centro de Investigación de la Caña de Azúcar) [Sugar Research Association], Asocaña (Association of Colombian Cane Growers), and the city of Palmira representing all established communities in the Cauca River Valley. To further reduce ambient particulate and soot thereby reducing the impact on neighboring populations, Riopaila Castilla complies with cane field burning requirements of the clean production agreement discussed above. These measures include the use of integrated meteorological stations to ensure appropriate pre burn atmospheric conditions; no burning of cane waste; and no burns within 1000 meters of municipalities, 200 meters of pathways, 80 meters of intercity roads, or within 30 meters of high tension power lines. Additionally, there is ongoing experimentation with leaf shedding cane varieties, implementation of green cane harvesting and management of harvest waste.
PS 6: Biodiversity Conservation and Sustainable Natural Resource Management:
Sustainable water supply management. Riopaila and Castilla cultivation activities use 200 liters/second of water that comes from public irrigation channels and deep wells; process wastewater is treated in the effluent treatment system (see above) and reused 100% for cane washing and cane field irrigation. Cane cultivation consumes ~10,000 liters/second of water from the irrigation channels and deep wells. To optimize water use, together the two ingenios, constructed more than thirty-four reservoirs that store water during the evening for use during daylight hours, installed concrete lining in water distribution canals (>72 Km in the Castilla area), and adopted efficient irrigation systems including sluice gates and computerized controls that take other inputs into account for optimum use of water. Riopaila Castilla promotes and contributes to river use associations in its influence area and is active in management and restoration of hydrographic basins. Activities include reforestation (>27,000 trees planted) and participation in water resources management programs (for the Castilla mill: Bolo, Frayle, Desbaratado and Palo River use organizations; and for the Riopaila mill the Bugalagrande River Use Organization). Assistance takes the form of technical and monetary contributions; educational workshops in soil and natural resources management; creation of fishing, farm and game bird micro enterprises; and varied local training to generate a process for social and economic recovery in the river basin areas. Additionally the firm plants guadua and eucalyptus trees in uncultivated areas. |
|
| Client's community engagement |
The Caicedo González Foundation was created 51 years ago by the founder of Riopaila Castilla and his wife to improve living conditions for workers through contributions to health care, housing, education, and time off from work. Noteworthy activities include funding for two high schools situated in the towns of Florida and La Paila-Zarzal that provide basic primary and secondary education for the workers’ children and for the inhabitants of communities in Riopaila Castilla’s area of influence. Additionally, Riopaila Castilla corporate policies sanction assistance for programs and actions that benefit the wellbeing and development of workers, their families and to all individuals that provide services for the company through the diverse types of service contracts, local communities in general, the government and miscellaneous trades and associations. Riopaila Castilla’s Corporate Social Responsibility program, which is managed through its human resources department, manages diverse programs in housing, education, recreation, culture and allied social capital programs.
IFC promotes good relations with host communities in areas of influence of client projects. To facilitate and consolidate relations with host communities in areas of influence, the company will prepare and fully institutionalize a management system(s) procedure to achieve interaction and open communication with host communities and to attend to any grievance related to the Riopaila Castilla operations including agriculture, processing and transport facilities. This mechanism will allow Riopaila Castilla to receive and consider opinions about company operations and respond to them. The process will be understandable, transparent culturally appropriate and easily accessible for community members at no cost and without fear of reprisals. This mechanism will not interfere with or prevent access to other administrative or judicial recourses. Riopaila Castilla will inform local communities about the mechanism through its existing channels of community engagement. |
| Local access of project documentation |
Technical information provided in this document and the EAP will be translated into Spanish without reference to IFC. The document will be disclosed publicly in Colombia and made available in public places that include local mayors’ offices, libraries and at company operations. These include:
Town Councils (Ayuntamientos) and libraires,
- Biblioteca de la CVC, Corporacion Autonoma Regional del Valle del Cauca, Cali-Colombia
- La Casa de la Cultura, Jose Bolivar Toro, La Paila-Zarzal, Valle del Cauca, Cali-Colombia
Riopaila Castilla web page (http://www.riopaila.com)
El País newspaper (Periódico El País).
For additional information the following individual(s) may be contacted at Riopaila:
Name: Carlos Alejandro Gorricho Escobar
E-mail address: cgorricho@riopaila-castilla.com
Address: Carrera 1ª. No. 24-56 Edificio Belmonte
Cali, Colombia
Telephone: (2) 2606900
Facsimile: (2) 2627191 |
|
| Availability of Full Documentation |
|
|
| Information Disclosed |
|
|
|
|
|