Mi Tienda

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	28587
Country	Mexico
Sector	Wholesale and Retail Trade
Department	Global Manufacturing & Services
Company name	Sistema Integral de Abasto Rural S.A.P.I de C.V
Environmental category	B
Status	Pend FAP

Date ESRS disclosed	October 30, 2009

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Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

IFC’s appraisal of the project included meetings with the management team of Mi Tienda, documentation review and site visits to the distribution center in Atlacomulco and a representative sample of stores that are clients of Mi Tienda. The company has leased the warehouse for its second distribution center in Tepeji, that warehouse was not visited; nevertheless, documentation on the site location and permits were reviewed.

The main aspects evaluated included labor and working conditions; occupational health and safety; life and fire safety in the distribution centers; air emissions from the fleet; waste management; planning and permitting of new distribution centers; and the capacity of Mi Tienda to ensure proper environmental and social management during the expansion process.

Project description

Mi Tienda (“the Company” or “Mi Tienda”) is a privately-held company engaged in the rural distribution of non-perishable food and personal care products in Mexico. The Company distributes products to stores located in rural zones in Central and Southern Mexico (towns with less than 5,000 inhabitants). The clients are small stores between 20 and 65 m2, owned by entrepenurs, mainly women. Most of the stores are not exclusive distributors of Mi Tienda.

Mi Tienda offers modernization programs to its customers, which contributes to increasing sales and efficiency. Mi Tienda also implements an affiliation program to modernized stores. The affiliation of the stores is voluntary and currently near 20% of the clients of Mi Tienda are affiliated stores.

The Company started operations in Atlacomulco (Central Mexico) as a single pilot cell (a distribution center plus distribution fleet).The project consists in the expansion of the pilot cell through the development of 36 cells that will target 4.8 million households in 602 municipalities and 14,740 villages.

Key environmental and social issues and mitigation

Mi Tienda has presented information on its current practices and policies that seek to address the identified impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the Mexican laws and regulations and IFC’s Performance Standards. The information about how these potential impacts will be addressed by Mi Tienda is summarized in the paragraphs that follow. Additional actions are summarized in the attached Environmental Action Plan (EAP).
Social and Environmental Assessment and Management System

Environmental and Social Assessment and Management
The operations in Atlacomulco will be replicated in each new cell. The operation of each cell constitutes a distribution center and a fleet of automobiles and trucks. The automobiles are used for sales purposes and the trucks to deliver the products to the stores. For each cell Mi Tienda identifies a proper warehouse to be the distribution center, leases it, and obtains the applicable licenses and permits. An ultimate operation license is obtained after verification of the relevant permits. The permits include (i) certification of the use of the soil, (ii) sanitary permit for the distribution of food products, (iii) verification of fire protection conditions, (iv) verification of payment of social security for the employees and, (v) authorization of the local environmental authority, within other requirements. Mi Tienda will ensure that all permits are obtained before any distribution center starts operations.

Mi Tienda currently owns the trucks and automobiles, but it is planning to lease them for the new cells. Mi Tienda performs periodic maintenance of the vehicles and obtains emissions certificates for those vehicles used where such permit is required. However, Mi Tienda applies the same maintenance program to all the vehicles. Mi Tienda will perform preventive maintenance and periodic inspections to its owned as well as leased vehicles.

Labor aspects are managed through the recently created human resources department. Mi Tienda complies with the Mexican labor law regarding age of employment, compensation and benefits. The company has identified the future needs derived from the growth of its workforce and has defined a human resources strategy to address such expansion.

Organization and Training
Mi Tienda has a small administrative team to manage the current operations. Recently the team has been reinforced in order to prepare the company for the future expansion. There is a Human Resources Manager who developed a well defined platform for the growth of Mi Tienda; and an Operations Manager who will cover operations in the distribution centers and the fleet. Environmental aspects such as air emissions from the fleet or waste management are handled by the operations manager. In addition there is a small team that provides assistance to those clients interested in become “affiliated stores”. The affiliated stores have benefits such as (i) basic training on accounting, organization of products, and customer satisfaction and (ii) support on the physical modernization of the stores.

Given the expected growth of the workforce (from 38 to near 1000 employees), Mi Tienda has planned and will implement a human resources strategy. Such strategy focuses on selection and retention of personnel, training of personnel, quality of life at work, and promotion of values. All employees undertake a basic induction program during the first week at work. The company will include training in aspects such as vehicle operator safety, emergency response and occupational health and safety.

Monitoring and Reporting
Mi Tienda keeps information of its operations, including energy consumption and operational data of the fleet. However, environmental and social monitoring and reporting is not defined; records such as fire drills, extinguisher inspections and waste generated were not available for review. The company will ensure monitoring and reporting of Environmental and Social aspects.

Labor and working conditions

Human Resource Policy and Management
Mi Tienda has developed an HR strategy to ensure a sustained and consistent expansion of the workforce. Mi Tienda has defined its principles/values; the welfare of its employees is one of the core principles. The company, given its current size, does not have formal procedures and policies. However, within the strategy the company has considered elements such as grievance mechanisms, training, retention of personnel and career development. The company will further develop and implement such programs in a manner that is consistent with PS2.

Terms of Employment and Workers Organizations
All employees have a direct contract with Mi Tienda; conditions of employment are defined in the contracts, including benefits and salaries. All salaries are above the minimum Mexican salary. Employees in the sales department are paid a basic salary plus a sales-based commission. The conditions for the commissions are well defined and understood by all the sales representatives. In addition the company has signed a collective agreement with a union (Confederacion de Trabajadores y Campesinos) that represent some of the employees. The management team of Mi Tienda confirmed that they would not prevent employees to organize or participate in other workers organization. There have been no such requests.

Retrenchment
Expansion rather than contraction of the workface is expected. An average of 28 new employees per cell will be required, with the expected growth of 36 cells; Mi Tienda might reach more than a 1000 employees in the coming seven years. Retrenchment is not expected in this project.

Non-Discrimination, equal opportunities and protection of the workforce
Mi Tienda applies the principles of Non-Discrimination and Equal Opportunity. The company has currently a disparity in gender distribution of the workforce with 18% of the employees being women; however, there is no evidence of discrimination based on personal characteristics or gender. The company has made efforts to hire more female personnel, in particular in the distribution center.

Working conditions comply with local regulations, no employees under18 years are contracted as required by the Mexican Law and the collective agreement. No child labor or forced labor is used by the company. During the appraisal child labor was assessed in the affiliated stores and there is no suggestion of such practices in the stores. On the contrary, most of the stores are owned and managed by women to generate additional income to the households and give the opportunity for children to study.

Occupational Health and Safety
Employees in the distribution center wear safety boots and lower back support belts. Storage is done at ground level minimizing the risk of falling objects. Forklifts are not used and manual trolleys are available to facilitate the handling of materials. Only one serious vehicular accident has been recorded in almost 10 years of operations, considering the number of movements per week and number of trucks, such statistic represents a quite low number. Minor OHS events are not recorded, it was reported that accidents are very infrequent. Mi Tienda will record OHS events and will apply corrective and preventive actions as needed, including but not limited to training.

Pollution Prevention and Abatement

Pollution issues of this project are limited to air emissions from the fleet and waste management. Aspects such as water use, energy efficiency and liquid effluents are minimal and associated with basic operations in the distribution centers including sanitary purposes and illumination. The distribution center in Atlacomulco uses natural lighting, reducing the electricity consumption in the warehouse. Mi Tienda does not distribute perishable products; therefore there is no use of refrigerants.

Air Emissions
Emissions to air derived from Mi Tienda operations are limited to the fleet. My Tienda owns 13 vehicles: 7 trucks with a capacity of 4.5 tons, and 6 automobiles used for sales purposes. The vehicles have been recently replaced by new ones. Three trucks, those circulating in Toluca, have emissions certificates from local authorities. Only some municipalities in Mexico require this certification. However Mi Tienda applies the same maintenance program to all vehicles. With the expected growth of the operations, the fleet will become significant, reaching more than 420 vehicles in the coming seven years. Mi Tienda plans to lease part of the fleet; this will guarantee a modern and less polluting fleet. The company will define a more structured maintenance program and will maintain the emissions certificates for those vehicles that circulate in the municipalities that require such permits.

Solid Waste Management
Most of the solid waste generated includes cardboard boxes and some plastic. Some of the cardboard boxes are used to package and to distribute the products to the clients. However, there is a significant part that is currently being disposed through the municipality. Mi Tienda will assess the possibility to recycle the surplus of cardboard boxes in the current and future operations.

Products that are damaged or expired during the storage or handling must be disposed by Mi Tienda, those are quite small amounts. However for accounting purposes, those products can only be discarded once the local authorities authorize its disposal, usually once a year. Mi Tienda will ensure proper management of such products, including storage and disposal.

Greenhouse Gas Emissions
Greenhouse emissions of the operations are associated with the use of combustible for the fleet and the use of electricity in the distribution center. The Greenhouse emissions of the current operations have been estimated as 23 tons of CO2, 75% of which is derived from the fleet. It is expected that with the expansion this number will increase up to around 820 tons of CO2.

Community health, safety and security

The public health aspects of Mi Tienda include the potential impacts of the distribution trucks for the communities, Life and Fire Safety aspects in the distribution centers and the use of security guards. The impact of the distribution trucks for the communities is expected to be minimal considering the reduced size of the trucks and the low frequency of distribution, which is limited to one trip per week in each route. Mi Tienda will ensure that drivers are aware of the potential annoyances and will provide training to the drivers to avoid affection of the population and potential complains. This will be reinforced with the vehicle operator safety training.

Life and Fire Safety measures in the distribution center in Atlacomulco include the existence of extinguishers, first aid kit, and demarcation of evacuation route and emergency exit. Local authorities perform periodic inspections to verify the adequacy of the protection systems. Mi Tienda will guarantee that all extinguishers are accessible and that employees are prepared to respond in case of an emergency. The new distribution centers require approval of the local Life and Fire Safety authorities (proteccion civil) before a license is granted. Mi Tienda will perform fire drills and provide training to guarantee adequate emergency response.

Through its affiliation program Mi Tienda provides modernization of the stores and training to the owners of the stores, usually women. It is a voluntary program, which so far has benefited near 20% of all the clients of Mi Tienda. It is expected that the project will benefit a significant number of small entrepreneurs, providing a positive impact. Mi Tienda will incorporate in the training and affiliation of the stores a basic environmental module to promote efficient use of resources and proper management of waste.

Mi Tienda contracts security guards for the distribution center. The guards are not armed, and they are contracted through a security company. The guard has been instructed on its role and conduct towards employees. There has not been complains regarding abusive behavior.

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