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| LAPCO- Solid |
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| 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 | 28558 |
| Country |
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| Region | Latin America and the Caribbean |
| Sector | Paint and Adhesives |
| Department | Reg Manufact, Agri & Services, CAF/CLA |
| Company name | Grupo Solid Guatemala, S.A. |
| Environmental category | B |
| Status | Active |
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| Date ESRS disclosed | February 9, 2010 |
| Last Updated Date | February 9, 2012 |
| Previous Events | Invested: August 13, 2010
Signed: May 21, 2010
Approved: May 17, 2010 |
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| View Summary of Proposed Investment (SPI), click here |
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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 social, financial, and technical team of LAPCO and visits to the production plant in Villa Nueva and the site for the new plant in Escuintla, Guatemala. Operations in other countries in Central America are mainly distribution centers and were not visited.
Environmental and social conditions of the operations were assessed through documentation review, interviews with the sponsor, and information submitted by LAPCO. The main aspects evaluated included emergency preparedness and response; handling, storage and disposal of hazardous materials; liquid effluents; use of energy and water; and labor and working conditions, including occupational health and safety. |
| Project description |
Latin America Paint Corporation (LAPCO or the “Company”) is a holding company that owns paint manufacturing and distribution units in Central America. LAPCO is the leading manufacturer of paint and ancillary products in Central America. The proposed investment will modernize and expand the existing manufacturing operations in Guatemala and strengthen the distribution in two countries in Central America. LAPCO produces water based paints, alkyd paints, industrial coatings, automotive refinishes and specialties.
LAPCO has initiated the construction of its new plant in the state of Escuintla in Guatemala, most of the civil work has been done so far. Some of the distribution activities are taking place in the new plant. |
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| Identified applicable performance standards |
While all Performance Standards (PS) are applicable to this investment, IFC’s environmental and social review of project information indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:
- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security
The land for the expansion of the plant has been acquired in a willing buyer, willing seller transaction, it is industrial land to be used exclusively for industrial/commercial activities. The land was previously used for industrial purposes; therefore no effects on biodiversity or cultural heritage is expected. Accordingly, no project impacts are expected related to PS 5 “Land Acquisition and Involuntary Resettlement”, PS6: “Biodiversity Conservation and Sustainable Natural Resource Management”, PS7: “Indigenous Peoples”, or PS8 “Cultural Heritage.” |
| Environmental and social categorization and rationale |
This is a category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria as is described in the following sections.
Key environmental and social issues identified during the appraisal include the following:
Corporate environmental and social management capacity
Emergency preparedness and response
Handling, storage and disposal of hazardous materials
Construction and management of the new plant, including operational safety
Use of energy, water and resources
Wastewater reduction, treatment and disposal
Labor and working conditions
Occupational health and safety. |
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| Key environmental and social issues and mitigation |
LAPCO has presented information on its current practices and policies that seek to address the potential impacts and to ensure that the proposed project will comply with the environmental and social requirements upon implementation of the specific agreed measures. The social and environmental requirements are the Guatemalan laws and regulations, IFC’s Performance Standards, and the applicable IFC’s environmental, health and safety guidelines. The information about how these potential impacts will be addressed by LAPCO is summarized in the paragraphs that follow. Additional actions are summarized in the attached Environmental and Social Action Plan (ESAP).
Social and Environmental Assessment and Management System
Social and Environmental Assessment
LAPCO’s environmental and social aspects are evaluated for the current activities in the plant of Villa Nueva and for the new plant “Mauricio” in the state of Escuintla, Guatemala.
The Villa Nueva Plant has been in operations since 1959, and under LAPCO management since 1981. LAPCO has identified the main risks and impacts of its operations, and has addressed the issues through basic policies and procedures. The company has considered elements such as Life and Fire Safety, Liquid Effluents, Air Emissions and Occupational Health and Safety. A detailed report on such elements is provided later in this document.
LAPCO commissioned an Environmental Impact Assessment (EIA) for the new plant “Mauricio.” The EIA was submitted to the local authorities in Guatemala and it was approved in 2008. At the time of IFC’s involvement and preparation of this document, almost 50% of the plant has been already built. The study assesses the main risks and impacts derived from the project. The EIA includes the description of the project; the biophysical environment; the biotic environment and; the socio-economical and cultural context. The EIA also presents an evaluation of the risks and impacts, an evaluation of alternatives; and a basic environmental mitigation plan. The EIA has been complemented by the technical documents from the design and supervision reports of some consultants supporting the construction of the plant.
The design has been mainly an internal one with the support and counseling of external experts from the paint industry. design has considered Guatemalan legal requirements and the World Bank parameters for emissions and effluents, for example. During construction LAPCO has coordinated the activities on site through a permanent supervisor and close collaboration with the construction company. LAPCO will finish the construction of the new plant addressing the mitigation measures and recommendations provided by the EIA and the experts.
The new plant is located in an industrial zone in the state of Escuintla, Guatemala. The plant is located in a small fraction of a land that was used as a refinery until 2002. Potential contamination of the land has been assessed and the land is to be used only for industrial purposes.
Social and Environmental Management Program
LAPCO has implemented some basic elements of an environmental and social management system such as policies and essential procedures. The company has policies for Quality, Environment, Occupational Health and Human Resources. Procedures address mainly quality control elements and some OHS aspects such as work permits, confined spaces, and emergency plans. LAPCO is planning to operate the new plant under international standards such as ISO 9001 and ISO 14001. A Social and Environmental Management Program will be implemented in the company. The scope of such program will include environmental aspects, human resources elements, occupational health and safety, and life and fire safety considerations.
Organizational Capacity
LAPCO has assigned personnel to be responsible for environmental and social aspects in the operations of the plant. The environmental aspects are under the responsibility of the Research and Development Director; occupational health and fire safety are responsibility of the Manufacturing Director and the social elements are coordinated by the Human Resources Director. Environmental and OHS activities are only a small fraction of the main responsibilities of the directors, and actions are focused to ensure compliance with local requirements. A systematic approach towards Environmental and OHS elements is missing; LAPCO will implement a management system to address this element. In addition to the directors, the plant in Villa Nueva has an onsite doctor, nurse and a dentist who provide health services to the employees and their families. Occupational elements have been addressed through a committee with employees’ participation; meetings are held monthly and corrective measures are identified. In addition the company has an internal emergency response team with responsibilities in prevention and control of emergencies.
For the construction of the new plant there is complete management team addressing engineering elements, site management and construction of the plant. Fire risk as well as environmental considerations have been analyzed and addressed by the team. The company has not planned changes in the E&S responsibilities and it is expected to operate with the same structure as it is operating the plant in Villa Nueva. A previous external risk review for the plant suggested the need of a Safety manager. This position has been approved and the company; the company reported the existence of the position Industrial and Safety Manager. This manager will address not only fire aspects but occupational and safety considerations throughout the plant.
Training
LAPCO has a well defined training program based on skills and development needs of its employees. There are three main areas of training: organizational culture; technical and human development; and special programs. Environmental and social elements are mainly addressed through the technical and human development, which includes modules in occupational health and technical operations. An important element of the training plan is the emergency response training, which includes fire drills and evacuation exercises.
LAPCO values education and training, this is reflected not only in the complete training towards job skills, but in the support to employees to improve their basic education. LAPCO has a private school, accredited by the education ministry and provide primary and high school to those employees interested. There have been 14 graduated classes so far. The company also offers some opportunities for external training.
Monitoring and Reporting
LAPCO has monitored its environmental impacts, including energy use, liquid effluents and air emissions; however, there is not a clear monitoring program defining periodicity of monitoring, evaluation of results and application of corrective measures as needed. Such monitoring system will be implemented by the company. Measures considered in the EIA and recommendations of the insurance and technical experts will be implemented in the new plant.
Labor and working conditions
Human Resource Policy and Management
LAPCO has a strong focus on its human resources and has had HR policies since the early founding of the company. Currently, the HR strategy is based on three pillars: (i) best place to work; (ii) best place to develop ourselves; and (iii) as company growths my life status growths. Human resources activities are aligned with those pillars and are reflected through training, open communication and compensation policies among others. LAPCO has a HR manual and policies dated 2007, which is shared with all the employees. The manual defines 19 policies covering most of the elements in the Performance Standard 2 (PS2).
Terms of Employment and Workers Organizations
Most employees have a direct contract with LAPCO; conditions of employment are defined in the HR manual. In addition the contracts establish specific benefits and salaries. The minimum salary paid in LAPCO is the legal minimum salary plus 10%. In peak production periods, the company hires temporary employees to support the operations, and those employees are entitled to the same salaries as direct employees, however the benefits differ. LAPCO employees do not belong to workers organizations or unions, and there has not been such request among the employees. The management team of LAPCO confirmed that they would not prevent employees to organize or participate in workers organization. There is a cooperative in which employees participate voluntarily to access to credits and small financial support, but its role is not related to negotiations or expression of grievances to the company. The company has other mechanisms by which employees might raise their concerns such as team meetings, suggestion boxes, through the supervisors or direct communication to Human Resources or other directors. There is a formal policy/procedure to receive and process grievances from employees with guarantee of non discrimination and response in less than a week. The procedure has been implemented with positive results.
Retrenchment
With the new plant, the company is expecting to increase its production capacity and sales. There will be a modernization processes that will require less labor in some processes; nevertheless, there are other areas where personnel will be required due to the growth in production. The initial headcount of the new plant provided a surplus of near 12 employees, which represent less than 2% of the total workforce of the company. LAPCO will keep the same employees and will provide transportation to the new plant. The company has communicated openly the plans of the new plant. Currently some of the employees from the distribution center are already working in the new location. LAPCO will guarantee an open communication to the employees during the transition process to the new plant and will offer alternatives to the employees. For those employees deciding not to move to the new plant, LAPCO will compensate accordingly to the legal framework.
Non-Discrimination, equal opportunities and protection of the workforce
LAPCO applies the principles of Non-Discrimination and Equal Opportunity. There is no evidence of discrimination based on personal characteristics or gender. Fair treatment is observed in the company, including processes of hiring, promotion and termination of employment. Promotion is based on merits and a leadership program. LAPCO has semi-annual performance evaluations and defines targets based on the corporate objectives; such aspects are considered for promotion or access to distinctive benefits. Working conditions comply with local regulations, no employees under18 years are contracted as required by the local Law. No child labor or forced labor is used by the company.
Occupational Health and Safety
The company presented an Occupational Health and Safety Plan for the current plant in Villa Nueva and an additional OHS plan for the new plant in Escuintla. The documents cover basic elements of OHS and are supported by specific procedures and policies. The OHS policy dates since the year 2000; nevertheless, the OHS plan was reviewed in 2007 to include a safety committee, training, and compliance policies within other improvements. The main responsible for the implementation of OHS is the Manufacturing Director in cooperation with the Human Resources Director. There is a nominated Industrial and Safety Manager; however he did not join the appraisal.
There are some discrepancies between what is defined in the procedures and the application in practice. With the new plant some of the manual processes will be eliminated reducing the exposure of employees; however in the meantime LAPCO will identify and correct the main hazards throughout the plant. LAPCO will implement OHS programs including but not limited to a chemical handling program, Lockout Tagout procedures, and a personal protective equipment program.
Pollution Prevention and Abatement
Resource Conservation and Energy Efficiency The company controls and reduce loses of product and raw materials through quality control and permanent research and development of new formulations. LAPCO reuses its solvents; in particular, solvents used for cleaning are reincorporated into the process. The new plant will have a solvent extraction and purification stage to strength the reuse of solvents. The new plant also will have automatic feeding systems with closed containers which will reduce loses, improve quality of the products, reduce emissions and reduce exposure of employees.
The new plant also includes a series of measures to increase the efficiency in the use of water and energy, this include the use of nozzles at high pressure for cleaning, reduction of polymerization time, recovery of heat from the burners and the use of energy-efficient equipment.
Air Emissions
LAPCO’s combustion facilities are small, and below the size threshold at which IFC or local regulators require emissions monitoring. However the company has monitored its air emissions and limits for NOx and SO2 are well below the emissions limits. The company has been burning used oil with positive results and will work with the provider to ensure a proper quality of the oil.
Another source of emissions is the distribution fleet, the company owns part of the fleet and the other fraction is leased. LAPCO performs periodic maintenance of vehicles to ensure adequate control of emissions.
Liquid Effluents Industrial effluents are mainly derived from the latex process; currently LAPCO has a compact wastewater plant. The treatment includes sedimentation, clarification and filtration. Effluent monitoring undertaken shows a significant reduction from the initial load (e.g. 99.4% reduction of COD); however the final levels are not enough to comply with IFC requirements. The new manufacturing plant has contemplated a more advanced wastewater treatment plant (WWT), in addition LAPCO has placed efforts on the reduction of the amount of effluents generated. Based on the design of the plant, it is anticipated that the new WWT plant will achieve local and IFC requirements. LAPCO is expected to move the operations in near 12 months to the new facilities in Escuintla. In case the operations are not moved to the new plant in Escuintla within 18 months after disbursement, LAPCO will implement corrective measures to comply with IFC requirements for the liquid effluents.
The new production plant in Escuintla has considered the use of the residual water as water for gardens and will assess options to reuse the water in other parts of the process. In addition domestic water will be also treated, it is anticipated that these effluents will be in compliance with the IFC requirements. LAPCO will report the measured parameters of both plants annually to IFC.
Hazardous materials
LAPCO has basic hazardous materials procedures for handling and storage of chemicals. The use of hazardous materials and high volume of chemicals is inherent to the operations of LAPCO. Xylene, Toluene, Thinner, natural oils and resins are stored in tanks ranging from 5000 to 15000 gals. Overall the facilities for liquid storage are well-constructed with secondary containment. For specialty products the company uses Nitrocellulose. The storage of Nitrocellulose follows strict internal and external controls; LAPCO has detailed procedures to storage, handle, and control the access to the material.
Due to the high volume of materials and production rates, the company has been forced to adapt temporary solutions for storage of the final product. The company has moved part of the distribution operations to the new warehouses in the new plant in Escuintla. The new warehouses are well equipped with Life and Fire safety measures. With the new plant a significant improvement in the storage will be achieved due to a better distribution of the tanks and materials by hazard. Better emergency response equipment will be available. Although the company has Material Safety Data Sheets (MSDS) for the raw materials and employees seems to acknowledge the hazards at the workplace, there is a good opportunity to implement a proper Hazardous materials program that includes identification, classification, storage, handling, and final disposal of the materials. This program will be developed by LAPCO.
Solid Waste Management
Wastes are collected and separated according to risk. Recycling is promoted; and the workers’ cooperative sells the recycled material to fund its operations. Solvents used for cleaning are recycled after a sedimentation process; the sediments are disposed. LAPCO will ensure that such residuals are disposed in an adequate manner; according to the risk and will ensure that the contractor in charge of the disposal follows procedures authorized in Guatemala. LAPCO will improve the handling of the solid waste through identification, classification, storage, spill handling and control over the final disposal. In the new plant there has been a specific area assigned for the handling of waste, LAPCO will ensure that a solid waste management program is in place.
Greenhouse Gas Emissions
Greenhouse emissions of the operations are associated with electricity consumption, the use of combustible for polymerization reactor and the fuel used in the fleet used to distribute the products in Guatemala and in Central America. The Greenhouse emissions of the current operations have been estimated as 1760 tons of CO2, 55% of which is derived from the electricity use, mainly from the production plant.
Community health, safety and security
Fire and Spill Prevention and Emergency Response
Life and Fire Safety is one of the main risks of the operation. The plant in Villa Nueva is located in a semi-industrial area, but there are communities in the vicinity. This will be resolved with the new plant which is located in an entire industrial zone and with a better distribution and separation of the hazards within the plant. The company has an emergency response team and currently it can be supported by the local firefighters. There is a hydrant system that covers all the plant, water is reserved for emergency response and there are extinguishers throughout the plant.
The emergency response team has periodic training and performs fire drills; occasionally the fire drills include external resources such as firefighters from the municipality. The company has a contract with an external company to verify and check the extinguishers, however it was observed that many of the extinguishers were deteriorated and some of them appear expired. There have been previous recommendations from the insurance company to address the deterioration of the extinguishers. The company will correct such deficiencies. In addition, due to the high production there is additional storage and handling of combustible materials, sometimes in temporary areas with deficient fire protection. With the existence of the new warehouses in Escuintla part of the material has been located there, where better Life and Fire Safety conditions were observed.
The design of the new plant has considered seriously the fire risk and has a well defined firefighting system, with enough water capacity and much better distribution of extinguishers. The location of the new plant presents reduced risks for the communities, but also requires LAPCO to have a better capacity to handle emergencies given that firefighters of the closest town will take longer than in the current plant. The company has included foam protection and just acquired a firefighting machine to be retained in the plant.
Potential spills in the plant might occur either from raw materials, processes, or finished product. LAPCO has secondary containment for the tanks used for raw materials and had located sand containers to be used in case of spill. However the amount, type and location of the containment systems will be improved to ensure proper response in case of spill and such event will be considered within the emergency response plan.
Operational Safety and Transportation of hazardous materials.
LAPCO has designed the new plant considering operational safety as a key priority. Key components include the separation of hazard zones and emergency response equipment. In this process external consultants have provided input in both the design and construction. The design of the plant considered the specific structural needs of the plant due its location.
Most of the raw materials are dispatched in the plant by the suppliers and final products are transported mainly by road in trucks. The road transportation is conducted through contracted transportation companies and a small own fleet. Products are never dispatched in bulk; it is distributed in cans of maximum 5 gals. The company will include transportation safety within its program for chemical handling to ensure that drivers are aware of procedures in case of an emergency and that preventive measures are taken to avoid road accidents.
Security Personnel
LAPCO contracts security guards for the plant, distribution center, stores, and transportation system. The guards are contracted through a recognized security company and are armed. The security company has ethical manuals and trains the employees to guarantee adequate use of the arms and follow up of the procedures. There has not been complains or reports regarding abusive behavior or improper use of the guns |
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| Client's community engagement |
| LAPCO’s community relations are manifested in different fronts: (i) through donations of products to schools and cities in Guatemala; (ii) through medical and educational support to LAPCO’s employees and its families; and (iii) through active participation on addressing community needs in Villa Nueva. LAPCO participates in campaigns to embellish marginal areas in Guatemala as a mechanism for peace and harmony in the communities. It is part of a campaign to reduce criminal activity in those areas. In addition LAPCO provide donations to other actors such as schools and hospitals; even employees donate voluntarily some time as part of its community support. LAPCO also works with rural communities: in Honduras working directly with 50 local cooperatives in its rosin distillation plant; and with women from the rural area of Palin in Guatemala. The company provided medical services t o its employees and their families, services include medical and dental care. LAPCO also support formal education of its employees. LAPCO participates in community activities in Villa Nueva and provide information as requested by local communities. |
| Local access of project documentation |
Project documentation will be publicly disclosed locally in the Villa Nueva plant and in the new facilities in the state of Escuintla.
To contact the project company, please write to:
Yara Argueta Executive President GRUPO SOLID, S.A. Nuevas Oficinas Centrales 12 calle 1-25 zona 10, Edificio Géminis 10, Torre Sur, Of. 1802 Telephone: 23206262
E-mail: yara.argueta@gruposolid.com, |
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| Availability of Full Documentation |
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| Information Disclosed |
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