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PT Garudafood Putra Putri Jaya
Environmental & Social Review Summary
This Environmental and Social Review Summary(ESRS) 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 ESRS 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.
East Asia and the Pacific
F-AI - Other Food
GARUDAFOOD PUTRA PUTRI JAYA, PT
Date ESRS disclosed
April 12, 2013
Approved: September 17, 2013
View Summary of Investment Information (SII),
E & S ProjectCategorizationand ApplicableStandards
E&S Risks /Impacts andMitigation
E & S ActionPlans
IFC is proposing an investment in PT GPPJ, an entity within PT Garudafood Beverage Jaya (“GFBJ”), with a senior A-Loan of US$25 million equivalent in Indonesian Rupiah. This financing will be used for capital expenditure, additional working capital requirements and improved financial flexibility.
Starting in 1979 with unbranded roasted peanuts the Company has become a market leader in Indonesia with a current market share of 61% for their peanut products. The Company has also expanded into additional food products such as biscuits, confectionery and flavored milk. Manufacturing involves relatively low risk operations such as receipt and storage of raw materials, drying and roasting, baking, general mixing, extrusion of filings into the baked goods and packaging and storing of finished products. Distribution of goods is the responsibility of another entity within GFBJ, PT Sinar Niaga Sejahtera (“SNS”), which will not receive funds under this investment.
Overview of IFC's Scope of Review
PT Garudafood Putra Putri Jaya (“Garudafood,” “GPPJ” or the “Company”) is organized into three main business areas, Snacks, Biscon (biscuits and confectionary) and Dairy & Others. The Company owns and operates ten production plants (in five sites in Indonesia) and also has agreements to take products from eight contract manufacturers. These independently owned and operated contract or toll manufacturing sites vary in size, function they perform and also in the percentage of their output that is destined for Garudafood. For example, the flavored milk operation provides the majority of its output for Garudafood; other plants are very small with regards to contribution, may function solely as pilot plants or may not operate year round with respect to supplying Garudafood.
IFC visited three Company owned plants and a toll operation that produces flavored milk as such plants are considered to be within the project’s area of influence. IFC met with plant management responsible for production, Environmental and Social (“E&S”) issues and Human Resources (“HR”) at each of the four operations. In addition, IFC met with senior financial, operational, procurement, environmental and HR management at the Company’s Head Office in Jakarta.
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 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
Environmental and Social Categorization and Rationale
This investment is classified as a Category B project in accordance with IFC’s Policy on Environment and Social Sustainability. Based on information reviewed by IFC, the proposed Project will have limited adverse E&S impacts that are few in number, site specific, largely reversible and readily addressed through mitigation measures, as outlined in the Environmental and Social Action Plan (ESAP) attached to this ESRS. The main E&S issue is the need for the Company to increase capacity at GPPJ headquarters to ensure sufficient support to, and implementation of, existing E&S management programs currently in place at the plant level, to extend these programs to include toll manufacturing plants commensurate to E&S risk and GPPJ’s ability to control or influence those operations and to complete outstanding issues previously identified during government-led regulatory audits.
**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability
Environmental and Social Mitigation Measures
IFC’s appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.
PS 1: Assessment and Management of Environmental and Social Risks and Impacts
Environmental and Social Assessment and Management System
Company-owned plants were subject to an environmental impact assessment at the time of construction as per national regulation. During the operational phase these plants are required by regulation to manage, monitor and report upon the E&S impacts identified by those assessments. These ongoing reviews are conducted twice yearly.
Some Company-owned plants have achieved certification to various international standards (e.g., ISO 14001 Environmental Management Systems, ISO 9001 Quality Management Systems and 22000 Food Safety Management Systems); other Company-owned plants have implemented pre requisite programs (e.g., Good Manufacturing Practice or GMP and Sanitation Standard Operating Procedures or SSOP) as part of their quality management system. These standards require assessment of either E&S hazards and risks and those associated with food safety, their active management, monitoring and reporting and internal and external auditing of the systems implementation and effectiveness. IFC understands that current company strategy calls for all production plants to be certified to ISO 14001 by the end of 2015; the need to obtain 3rd party certification for all plants by the end of 2015 to a food safety management scheme that includes HACCP is addressed in the ESAP.
Further, the Group Safety, Health and Environmental (“SHE”) Coordinator audits company-owned production plants every 3 – 4 months against E&S regulations so as to review whether E&S management actions commensurate to the E&S risks identified are being undertaken. Toll manufacturing plants are not currently included in GPPJ SHE-led audits.
The Group has developed an E&S policy designed to govern the nature and intent of its E&S management and each business unit has a SHE policy in place. In addition, the above international standards require the development of a policy applicable to the scope of the certification (e.g., at the plant level).
Identification of Risks and Impacts
The regulatory assessments require that the Company review and report on the risks and impacts associated with operations. Example reports reviewed by IFC included matters related to wastewater management, solid and hazardous waste management (e.g., oil, fluorescent tubes, reagents, filter cake, ink cartridges, etc.), and air emissions monitoring which had either been closed out or where scheduled to be completed under agreement with the authorities. The provincial department of the environmental protection agency issues a permit/license to operations based on such assessments (e.g., a UKL-UPL or Environment Design & Protection Plan.)
In addition, when the SHE coordinator-led audits identify opportunities for improved performance within company-owned operations, these are included in strategic initiatives for 2013 and contain time-bound corrective action plans. The requirement to complete all identified action items so as to attain f
ull compliance with all relevant environmental and occupational health and safety regulations is addressed in the ESAP.
In addition to the regulatory assessment, the Company will review, and broaden as necessary, the scope of its internal assessment practice to 1) ensure compliance with the Performance Standards and additional requirements as included in the World Bank Group (“WBG”) General and Food and Beverage Environmental, Health and Safety (EHS) Guidelines, and 2) include a review of operations at toll manufacturing plants with respect to national regulation and WBG requirements, commensurate with the risks and impacts therein, the extent of their operations that are dedicated to supplying Garudafood and the ability of Garudafood to control or influence E&S performance. These requirements are addressed in the ESAP.
The Company purchases a large but typical variety of raw materials as ingredients for its products. Purchasing is primarily done through agents or traders, of which there are a number for any one of the long list of inputs required to manufacture the food products. Inputs include fresh groundnut, groundnut kernel, flour, potato flake/starch, coffee, refined vegetable oil, sugar, cocoa powder, cream, fresh milk, milk powder, fat and whey.
IFC compared the above commodities and their origins against those contained in the IFC Global Mapping of Agro-commodities (GMAP) tool developed to assess E&S risks in commodity supply chains. Those commodity/country combinations that have potential E&S risks within the supply chain include Indonesia/palm (vegetable) oil (for child and forced labor and issues regarding the protection and conservation of biodiversity) and Indonesia/coffee (for issues regarding the protection and conservation of biodiversity). GPPJ’s position in the value chain, however, is several steps removed from primary production due to their use of traders and agents to procure inputs. They will, therefore, use the IFC Annual Monitoring Report (AMR) to summarize efforts taken with respect to procuring those of the above ingredients that may contain E&S risks and impacts at the level of primary production.
Management Programs, Organizational Capacity and Competency
The Group has in place a well designed management system that applies to all operations that sets objectives for SHE and works with plants on its implementation. The Director of Manufacturing (“DOM”) is responsible for the SHE function at the Group level. A SHE coordinator reports to the DOM who is in charge of the program implementation. In addition to the SHE coordinator, each business area has a Head of Manufacturing (“HOM”) and under them an Engineering Coordinator who is responsible for the technical aspects of new projects and who considers matters of an E&S nature, such as energy use, efficiency, waste management, etc., as well as other business realities. Each plant has also implemented a 5S program that includes element
s designed to sort, set in order, (systematically) clean, standardize, and sustain operations (in effect good housekeeping that includes avoidance of wastes, etc.). Existing projects are also being undertaken to improve resource use and efficiency; examples of these projects are included below under PS3. The Company is currently seeking to internally promote an individual to be responsible for the environmental aspects of the program and to report to the SHE coordinator, thereby freeing up some time for the SHE coordinator to focus on health and safety. This additional capacity at the Group level should translate into better emphasis and implementation on matters of Occupational, Health and Safety (OHS) at the plant level. See additional comments below on the need to improve OHS performance at the plant level. The requirement to ensure sufficient human resources to achieve effective and continuous environmental and social performance is addressed in the ESAP.
SHE at the plant level is managed by a SHE section head, a safety and health officer, and, at some plants, an individual responsible for operation of the wastewater treatment plant (“WWTP”.) These individuals work to develop and implement actual procedures and plans related to the management system; examples of outcomes (monitoring of wastewater treatment plant effluents, recording of wastes generated, energy efficiency programs underway, etc.) are included in the discussion of compliance to PS3 below.
HR is managed at the Group level by the Director of Corporate Human Capital and Corporate Affairs and an HR coordinator who reports to the Director. Policy and strategy are undertaken at the Group level whereas operations (plants) are responsible for lower level HR-related activities. Each business unit has an HR officer who manages that particular plant’s human capital.
Emergency Preparedness and Response
Planning for emergencies and responding to them is undertaken at the plant level. Whereas equipment such as fire hoses, reels and extinguishers were seen during the visits to the plants, some basic measures to aid in the event of an emergency, such as emergency lighting and signs, were lacking, while items that could be tripping hazards were not appropriately visible or marked by signs. Various related items had also been identified in a recent ISO 14001 audit. The need to review operations to ensure all appropriate infrastructure and equipment is in place is addressed in the ESAP. The inspection criteria of the Company’s internal assessment process will be reviewed to ensure that emergency preparedness and response at plants is evaluated – and where necessary improved – on an ongoing basis. See above for the reference for the inclusion of this action in the ESAP.
Monitoring and Review
Plants monitor and report on the environmental aspects of their operations such as air emissions and wastewater effluent, waste management, etc. to the respective provincial office of the n
ational environmental protection agency (i.e., Badan Pengelolaan Lingkungan Hidup Daerah or sometimes shortened to Badan Lingkungan Hidup Daerah). In addition, the Group conducts regular assessment visits to each company owned plant. The result of these Group-driven assessments and the status of regulatory compliance – and associated corrective actions – are the subject of monthly meetings convened by the DOM. During these meetings attendees (SHE coordinator, HOM, members of the manufacturing excellence team) discuss, among others, key issues, SHE and training needs. Additional monthly meetings convened by the HOMs and also the Business Units Heads discuss similar agendas items at lower levels within the organization.
The Group HR coordinator also visits company-owned plants on a regular basis. These visits are designed to drive HR management performance, troubleshoot as necessary, meet with unions on an as needed basis and provide a liaison role between the Group and the plants. Plants report frequently to the Group with respect to accidents and incidents and also to the provincial offices of the labor department on a yearly basis. See the need to include toll manufacturing plants in HR reviews described below in PS2.
External Communications and Grievance Mechanisms
Each product from Garudafood contains an email address and a telephone number which consumers can call to raise an issue/make a complaint, etc. The production plants visited were in a variety of locations, such as rural areas bounded on three sides by farmland. One plant was bounded by company-owned land. Others were in purpose built industrial areas adjacent to similar non-GPPJ owned operations. As such, the opportunity for impacting communities is limited. Despite this, the Company does maintain a system at plants to receive and respond to issues if they arise.
PS 2: Labor and Working Conditions
There are well developed policies, procedures and practices that govern the management of human resources within GPPJ. Taken as a whole, these actions comply with Indonesian labor law, which is founded on the ILO Declaration on Fundamental Principles and Rights at Work and therefore compliant with PS2. For example, each employee receives a written contract detailing working conditions and terms of employment the Company has in place either a company regulation or a collective bargaining agreement negotiated with the union found at the plant. The Company complies with matters of non-discrimination and equal opportunity, follows transparent and communicated procedures with respect to recruitment and promotion, has complied with the recent changes that resulted in raising the minimum wage, does not employ anyone under the age of 18 or engage in forced labor, has a well developed grievance mechanism in place and follows legal requirements if circumstances require a reduction in the workforce. The government manpower agency conducts periodic audits of company facilities to determine compliance with regulatory norms.
Occupational Health and Safety
Staff at the plant level map hazards and risks associated with particular jobs (using a hazard identification, risk assessment and risk control approach) and determine the measures – such as the personal protective equipment (“PPE”), training on the safe operation of equipment, etc. – that must be followed when undertaking these tasks. For example, the SHE training program for 2013 included training on forklift and boiler operations. In addition, strategic initiatives targeting matters of safety and health are implemented at plants and are used to rate individual performance. Despite these measures, IFC observed some instances for future improvement for both the Company’s workers and contractors, e.g.: improving working environment and better uniformity and consistency of the use of PPE Note: Contractors do receive a SHE induction briefing prior to commencing work.
The Company reported no fatalities in 2011 and 2012. The injury rate from occupational accidents is 12.99 and 11.93 injuries per million hours worked in 2011 and 2012, respectively. By comparison, figures from 2008 in the US Sugar and Confectionary sector are 7 injuries per million hours worked. Occupational accident records that were reviewed by IFC described, among others, injuries from moving equipment and accidental exposure to chemicals. The same records included descriptions of why these accidents occurred, what was to be done (or had been done) as a corrective and preventive action, including the need to retrain staff as appropriate, and (if completed and appropriate) photographic evidence of this issue having been resolved.
Given the SHE coordinator will in the future focus solely on health and safety matters at the plants, it would be expected that this renewed focus on OHS will lead to an improvement in overall performance a
t plants and will reduce the number of workplace accidents. The need to extend the OHS management program so as to provide a safe and healthy work environment for all those working for or on behalf of the Company is addressed in the ESAP.
Workers Engaged by Third Parties
As described above, the Company uses toll manufacturing to produce some of its products. These are 3rd party owned and operated plants that have their own management and staff. GPPJ does maintain a presence onsite to ensure quality parameters are met, but does not assess these plants for their HR management. Whereas enforcement of Indonesian labor law is comprehensive, the Company will develop a mechanism to provide assurance that labor within all toll manufacturing plants is managed in compliance with national labor law and in accordance with the requirements of PS2. This is addressed in the ESAP.
PS 3: Resource Efficiency and Pollution Prevention
The Director of Production stated that benchmarking data for energy and water consumption was not available in Indonesia for the types of products the Company produces. However, the Company does record the amount of energy and water used in production and normalizes this data against production rates. Targets for reduction of both energy and water use at GPPJ plants are developed and included in yearly strategic environmental initiatives. For example, a project to reduce the amount of energy required to process groundnuts, a pilot project to reduce the gas consumed in the baking machines and an energy conservation project based on heat recovery are underway. Reducing water consumption has also been done, i.e., by modifying the cleaning process and mechanism used in processing groundnuts.
The Company provided summary information on amounts and types of fuel used in all operations, amount of electricity consumed and wastes generated. This data for 2012 was input into IFC’s Carbon Emissions Estimation Tool (CEET) and returned an annual GHG equivalent output of greater than 25,000 tons. The Company will therefore quantify direct emissions from their facilities, as well as indirect emissions associated with the offsite production of energy used by the project (e.g. electricity) and report this amount in the annual monitoring report.
Solid and hazardous wastes are managed, and disposed of, according to local regulation. Records (of amounts generated, copies of receipts of waste by licensed contractors, etc.) are maintained at the plants.
Wastewater is monitored using both in-house laboratories and licensed third party laboratories. Results from operations visited indicated compliance with local and WBG EHS Guideline limits whereas other operations, which regulatory audits have identified as needing to improve performance, are subject to upgrades to their WWTP. The requirement to complete these upgrades and then demonstrate compliance with both Indonesian and WBG EHS Guideline limits is addressed in the ESAP.
Combustion equipment (boilers, back-up generators, etc.) are subject to monitoring under Indonesian regulation. Different boilers are fired on more than one type of fuel, e.g. natural gas, fuel oil and/or coal. Results reviewed by IFC from direct emissions indicated compliance with nitrous oxides (“NOX”) and sulfur dioxide (“SO2”) and for particulate matter when viewed alongside ambient air quality monitoring results. Similar results were reviewed from the coal fired boiler located at the plant in West Java. Boilers at other plants run exclusively on natural gas and demonstrated compliance with all relevant local regulatory parameters. Going forward, the Company will include WBG EHS Guidelines limits in all air emissions reporting and where necessary conduct additional ambient monitoring so as to assess compliance with those limits. Where compliance cannot be achieved ba
sed on current practices the Company will review and implement options (fuel source, additional pollution control equipment, etc.) to ensure compliance with both Indonesian and the WBG EHS Guideline limits. This requirement is addressed in the ESAP.
Pesticide Use and Management
The small application of chemicals (e.g., for rodent control,) is contracted out and managed by a recognized third party company that operates according to local regulations. Rodent traps found at plants are marked with hazard warnings to prevent accidental contact by workers.
PS 4: Community Health, Safety and Security
Community Health and Safety
The plants are located within industrial zones, surrounded by similar activities. Where there is a lot of truck traffic coming and going to the plants, this is a normal activity within the industrial zones which were designed to manage such receipt and management of road traffic. Industrial zones are well connected by main roads which are of a good standard in Indonesia.
The plants use their own, unarmed personnel for security.
The plants do not impact any communities given their locations within large industrial zones. As such, the plants both reported that no complaints regarding their operations have been received
As part of its continued engagement with stakeholders, the Company will make this report accessible on its website and make its publication there known to interested parties.
Local Access of Project Documentation
Company Secretary: Mr. Mursosan Wiguna
Wisma Garudafood, Jalan Bintaro Raya No. 10A, Jakarta 12240.
IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring them to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities.
In addition, Affected Communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC. The CAO is mandated to address complaints from people affected by IFC-supported business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of IFC.
Independent of IFC management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of IFC’s environmental and social performance through its compliance arm.
Complaints may relate to any aspect of IFC-supported business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC-financed business activity. Complaints can be submitted to the CAO in writing to the address below:
Compliance Advisor Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue NW
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400
The CAO receives and addresses complaints in accordance with the criteria set out in its Operational Guidelines which are available at: www.cao-ombudsman.org
Broad Community Support is not applicable for this project
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