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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.
Southern Europe Region
Europe and Central Asia
Household Appliances (Including Refrigerators, Laundry Machine, Dishwashers, etc.)
Date ESRS disclosed
April 16, 2010
Invested: June 24, 2010
Signed: June 7, 2010
Approved: May 20, 2010
View Summary of Proposed Investment (SPI),
Category & Applicable Standards
Key Issues& Mitigation
Overview of IFC's scope of review
IFC’s environmental and social review of this project included: (i) review of information provided by Gorenje (“the Group” or “the company”) in response to social and environmental questions, (ii) site visits to the company’s production facilities in Velenje, Slovenia and Valjevo, Serbia, (iii) review of the Environmental Impact Assessment for Gorenje plant in Valjevo, prepared in accordance with Serbian regulations and (iv) follow up discussions with Gorenje management. In addition the appraisal assessed EHS aspects associated with Gorenje's Ecology, Energy and Services Division business line activities related to the establishment an integrated network of waste collection and processing plants in the Western Balkans.
The Gorenje Group (“Gorenje” or the “Group”), the largest household appliance manufacturer in former Yugoslavia and among the top 10 manufacturers of appliances in Europe is seeking equity and senior debt financing to (a) support its 2010-2013 modernization, restructuring, and expansion plan; and (b) re-structure debt due to mature in 2010-2011, to enable the Group to achieve its strategic plans following the economic crisis (“the project”). Expansion includes green field development i.e. refrigeration / freezers plant in Valjevo, construction of which started in March 2006 and was completed in October 2006.
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:
- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security
IFC’s due diligence identified that issues covered by other Performance Standards i.e. PS5 Land Acquisition and Involuntary Resettlement, PS6 Biodiversity Conservation and Sustainable Natural Resource Management, PS7 Indigenous Peoples and PS8 Cultural Heritage were not relevant to this proposed investment.
Environmental and social categorization and rationale
IFC’s E&S due diligence has determined that the project has limited site-specific potential adverse environmental and social impacts that are few in number, largely reversible and readily addressed through mitigation measures.
Retrenchment is a concern that Gorenje management will manage according to Slovenian law and IFC PS2. Issues of potential concern include management of routine EHS issues i.e. effluents, solid waste and hazardous material management, working conditions and compliance with national labor laws and employees’ occupational health and safety, fire safety and the company’s approach to community engagement and disclosure of information. This is therefore a Category B project according to IFC’s Policy on Social and Environmental Sustainability.
The project is being developed in accordance with Slovenian and Serbian regulatory requirements. The company is committed to good environmental & social management, following international labor standards, and avoiding any significant pollution. While Gorenje’s Slovenian operation has the appropriate certified EHS managementásystems in place (ISO 17025, 14000, EMAS, OHSAS 18001), its Valjevo plant has developed informal EHS managements system based on policies and procedures of the certified system in the Slovenian operations. Gorenje management is committed to further develop existing EHS systems in Valjevo and to obtain formal certifications for ISO14001 and OHSAS 18001.
Key environmental and social issues and mitigation
Gorenje’s operations in Slovenia were established originally in 1950, gradually expanding its product offer from agriculture machinery to the white good / home appliances product range and its presence throughout Europe. Recently Gorenje acquired Mora Moravia, a.s., cooking appliances producer from Czech Republic and ATAG, a leading Dutch brand of innovative, high quality kitchen appliances. In 2006 opened its greenfield refrigeration / freezers production plant in Valjevo. Gorenje Group’s main production facilities include Velenje plant (refrigerators, cooking appliances, washing & drying appliances), Valjevo plant (refrigerators and freezers) and Mora Moravia plant, Czech Republic (cooking appliances). Besides these Gorenje is involved in production of electric water heaters in its facilities in Ljubljana, Slovenia and Stara Pazova, Serbia, and furniture and ceramic production for kitchens and bathrooms, located in Slovenia.
The company has presented information demonstrating it is aware of EHS issues associated with its current operation. In all its production facilities Gorenje places special attention to the appliances' energy and water efficiency and refrigerant selection for the fridge and freezers. Gorenje has presented plans to ensure that the proposed project will, upon implementation of the few specific agreed measures, as specified in the attached Environmental Social Action Plan (ESAP), comply with host countries environmental and social requirements, as well as IFC’s Environmental and Social Performance Standards and industry guidelines. The information about how these potential impacts are being/will be addressed by the project is summarized in the paragraphs that follow.
PS1: Social and Environmental Assessment and Management Systems
Social and Environmental Assessment: As Gorenje’s production site in Velenje operates installations for surface treatment of metals and plastic materials using an electrolytic or chemical process where the volume of the treatment vats exceeds 30 m│ (Industrial act 2.6) it had to obtained IPPC environmental permit, which it did in 2008. The licence is valid for the next 10 years. All other production sites in Slovenia also hold IPPC permits.
To obtain an environmental operating permit for its greenfield investment in Valjevo an Environmental Impact Assessment (EIA) was conducted in compliance with the national legislative and regulatory requirements. The EIA report was first submitted to the relevant authorities for review. Consequently the report was disclosed locally to interested stakeholders for public debate, which lasted for 10 days. During the disclosure and consultation period all affected parties had the right to raise any concerns or objections. There were no negative resolutions related to the development. Based on the outcome of public debate, and based on the findings of the EIA and capacity of the lacquering installation i.e. vat which is below 30 m3 below the size threshold requiring an IPPC permit, a designated Municipal Authority in charge issued an operating license for the plant. The license included a set of prevention and mitigation measures addressing emission, effluents, OHS, Emergency Response Planning, L&FS systems, which had to be fulfilled, before the operational permit for the plant was issued.
Social and Environmental Management System: Gorenje Slovenian operation has the appropriate EHS managementásystems in place (ISO 17025, ISO 14000, EMAS, OHSAS 18001) while Valjevo plant has developed EHS managements system based on policies and procedures of the certified system in Slovenian operations. Gorenje management is committed to further develop existing EHS systems in Valjevo and to obtain formal certifications for ISO14001 and OHSAS 18001. Gorenje is a member to CECED (European Committee of Domestic Equipment Manufacturers) Code of Conduct, under which is voluntarily complies with fair and responsible workplace standards, such as minimum age, hours of works, health and safety, respect and freedom of association and collective bargaining. CECED promotes the industry's mission to increase the performance while reducing the environmental impact of the appliances.
Management Programs, Organization and Training: Gorenje has well developed corporate EHS management system and organizational structure appropriate for maintaining and continuously improving the environmental, health and safety performance of all its operations as applicable for its business lines. The EHS unit also includes OHS and Fire Safety unit. The environmental management team, through its EHS Manager who is a member of the management board of the company, provides consulting, control, coordination, education, cooperation with authorities and performs operative tasks for the whole Gorenje Group. Environment management of the manufacturing processes of each individual company is defined by internal documents and is responsibility of a designated management team.
Stakeholder Engagement, Monitoring and Reporting: Consultation with local communities and national and local authorities is being conducted regularly, internally and externally, through different communication channels i.e. Gorenje regularly reports on its EHS performances through electronic and printing media including its web portal (www.gorenje.com). These reports include, among others, annual Corporate Social Responsibility Report for Gorenje, d.d. and I.P.C., d.o.o. (Gorenje’s subsidiary that mainly employees workers with different levels of physical invalidity), 2006 EMAS Environmental Statement, EMAS Amendment of the Environmental Statement by Gorenje, d.d. and Gorenje, I.P.C., d.o.o. for the year 2007, EMAS Amendment of the Environmental Statement by Gorenje, d.d. and Gorenje, I.P.C., d.o.o. for the year 2008, draft version of CSR Report according to new EMAS Regulation No. 1221/2009.
Regular inspections, required in Slovenia and Serbia, will ensure continued implementation of the environmental and OHS practices. Environmental inspectors visit the operations 5-7 times/year checking the following environmental areas: waste management, storage of hazardous substances, air emissions, noise pollution, handling of ozone-depleting substances, handling of packaging material, operation and maintenance of oil separators, handling of wastewaters, waste electric and electronic equipment.
PS2: Labor and Working Conditions
Gorenje Group employed 10.675 employees at the end of 2009 across its operations, the bulk of whom (7.865) are based in Slovenia operations and the rest distributed between Serbia, Czech Republic and the Netherlands.
Human Resources Policy and Procedures: Gorenje is currently preparing a Group Human Resource (HR) Strategy. The HR policies, procedures and manuals of Gorenje Group member companies are based on the relevant laws in the company’s countries of operation, namely Serbia and EU member countries Slovenia and Czech Republic; as such, the policies and procedures are already largely consistent with the requirements of IFC Performance Standard 2. The company HR policies define the rights and responsibilities of the employee and employer, including terms of employment and working conditions, grievance mechanisms, and promotion of non-discrimination and equal opportunity, among other matters. Gorenje provides written contracts to staff and management interacts regularly with staff members on workplace issues affecting them.
Working Conditions, Terms of Employment and Workers’ Organization: Terms of employment are defined by collective agreements and labor laws in each country of operation. Around 59 % of workers in Gorenje Slovenian operations are members of the Metal and Electric Industry Trade Union (SKEI), whilst 1 % belong to the Free Trade Union. In Serbia, 63 % of workers have been unionized since 2008 and their working conditions and terms of employment are defined by internal regulations based on a collective agreement that the National Industry Union has signed with Serbian Government. In Mora Moravia, Czech Republic, the company has a metal processing firm named KOVA and 35% of KOVA employees are members of a Trade Union. In both Slovenian and Serbian operations Gorenje provides wages which are above the industry average. The minimum age for employment by Gorenje workforce is 16 or 18 years, depending on the job description. Employees of 16 years of age are eligible to join only if a job description does not include dangerous work situations.
Non-Discriminatory and Equal Opportunity: Gorenje companies utilize a well developed performance evaluation system providing feedback to management on workforce performance. This forms the basis for promotion, progression or general staff member recognition. The company has a policy on non-discrimination in hiring. In hiring new employees Gorenje uses transparent and competitive procedures through public announcements, newspaper and the internet, and interviews with the potential candidates. For higher level positions specialized consultancies are hired to facilitate the selection of the best candidates.
As mentioned above, Gorenje Group had 10,675 employees across its operations in Slovenia, Serbia and Czech Republic at the end of 2009. The company has been steadily reducing its workforce and has reduced its headcount by 707 over the past two years. A further 600 jobs at the Group level will be cut or moved over the next two years, partly through retrenchment and partly through non-replacement of retirees and those leaving the company as well as the use of early retirement and voluntary severance packages. The main reason(s) for the past and forthcoming retrenchments are as follows: (i) the Group’s cost-cutting program, (ii) improved operational efficiency program, (iii) relocation of some plant activities in order to meet cost efficiency requirements and deal with the consequences of the general downturn in the global economy.
The company has taken a responsible approach to this staff reduction to date, maximizing the use of severance packages and early retirement packages and providing various forms of assistance to ex-staff members to aid them to find alternative jobs or become self-employed. The approach to date has involved the various labour unions fully and has been in accordance with the labour regulations in each host country. As a result, there have not been worker or union protests over the past two years although a relatively high number of jobs has been lost.
In order to meet country-specific and IFC labour requirements, Gorenje will as a matter of priority prepare a Group Retrenchment Policy as well as separate Retrenchment Plans for each of its operations in which retrenchment is foreseen, as reflected in the attached Action Plan. Each Retrenchment Plan will provide details on, amongst other matters: a description of the anticipated magnitude of and justification for retrenchment, retrenchment method and procedures, management arrangements including grievance mechanisms, the legal framework including reference to IFC Performance Standard 2 and country labour regulations, anticipated social impacts involving both retrenched workers and their communities (including any remedial measures proposed), compensation and assistance to be offered to retrenched workers, the criteria for selecting those to be retrenched (e.g. qualifications and experience, health, years of service, number of dependents and work quality) and monitoring of the process. These plans will be based on the principle of non-discrimination and will reflect the Group’s consultation with employees, their Unions and the relevant Government agencies in each country. The plans will also demonstrate in advance of further retrenchment that sufficient funds have been set aside to cater for the full costs involved.
Grievance Mechanism: Gorenje companies have disciplinary and grievance procedures as part of their HR framework, incorporating both verbal and written procedures. Complaints submitted by workers are submitted to the respective HR units for consideration. Complaints and corrective actions are discussed and should be settled within a reasonable timeframe. Employees get responses directly from the respective legal or HR department depending on the nature of the issue that needs to be addressed. All complaints, appeals and statements raised by employees are kept on file. If the employees are not satisfied with a decision they may initiate formal grievance proceedings through the relevant labour union(s).
Occupational health and safety: Gorenje is an OHSAS 18001 certified company which is aware of occupational health and safety issues affecting its workforce. Every workplace is audited and potential negative impacts identified and appropriate prevention and mitigation measures implemented. The most important aspects that are regularly monitored are those related to ergonometric characteristics of the workplace, manual carrying of heavy loads, hot working conditions and unexpected breakdowns of equipment. Period measurements of chemical exposures and biological monitoring for selected workplaces are conducted and ventilation systems are designed and implemented accordingly. Monitoring of heat, dust, noise and illumination/light intensity are carried out every three years in all manufacturing sites. Workers in plants use appropriate personal protective equipment as relevant to their job-related risks. All chemicals that are used in the production processes, and which the workforce can be exposed to, are controlled by EHS and OHS managers through MSDS data sheets. In winter workers who work outside wear special winter clothes. Health and safety training programs are conducted according to risk assessments with the aim of reducing the number and seriousness of workplace incidents, reducing the prevalence of occupational diseases and maintaining employee health. In 2009 1,360 employees took part in OHS trainings.
PS3: Pollution Prevention and Abatement
Gorenje complies with all EU and National environmental legislation related to emissions to air, discharge to water, noise pollution, safe storage of dangerous materials, frequency of monitoring emission to air, water, noise. EU has set up several Directives to which all producers of Household appliances including Gorenje must comply: (i) EU RoHS Directive (Restriction of Hazardous Substances), (ii) REACH (Registration, Evaluation, Authorisation and restriction of Chemicals), (iii) ODS (ozone deleting substances) and (iv) FCM (Food Contact Material).
Gorenje has set an ambitious plan for the period 2006 – 2010 to: (i) improve management of waste electrical and electronic equipment (WEEE), (ii) reduce the amount of generated waste and industrial packaging waste and to (iii) improve efficiency of energy resources use (water, electric power, compressed air, natural gas).
The management has invested significant amount of money over the last decade to improve the efficiency and environmental performance of Velenje plant namely installing new technology for powder painting in production of cooking appliances, washing machines and production of refrigerators/freezers, thus reducing water consumption per product significantly and avoiding VOC emissions.
Water Supply and Quality: The municipal water utilities in Velenje and Valjavo supply pre-treated potable water for the production plants. Water is used for surface treatment of metal (i) lacquering (degreasing, rinsing, zinc phosphating or ‘nanoceramics’), (ii) decorative chromium plating and (iii) enameling (degreasing, rinsing) and for cooling in Velenje plant and for lacquering facility in Valjevo plant.
Air Emission: The measurements of CO2, SO2 and particulate matters are performed by third part every three years via 69 monitoring points. Flow and content values of air emissions measured are such that it does not require continuous monitoring. Most of the production is based on natural gas and electric power so that emissions are well below Slovenian, Serbian and IFC maximal allowable limits.
Energy: Power is provided by the nations’ electrical grids and on-site generators, as a backup option, which runs on mazut fuel. Fuel reservoirs are equipped with appropriate secondary containments. In addition natural gas in Velenje plant is used for lacquering, enameling and in packaging production plant.
Energy Efficiency: Gorenje has Energy Label mark, which was developed in EU countries where it has been used for over ten years. In Slovenia the application of energy label has been legally obligatory since June 1, 2002. The label comprises information in regard to energy consumption and operating efficiency of the appliance, which are different depending on particular appliance groups. Results of measuring energy saving are classified in seven classes, from A - the highest efficiency, to G - the lowest efficiency. They also differ by color code indicating energy efficiency. The Energy Label on Gorenje appliances varies from A (highest class) on its cooling, oven, and washing machines equipment, to B in its condenser dryers. Gorenje is committed to making Energy Efficiency investments on existing and new products in 2010-2013. This is expected to raise its energy label from A to A++/A+ in cooling and washing machines, and raise its oven classification to A-20%.
Gorenje Serbian operation (Valjevo) is also included in this scheme.
Investment into improvement of technological procedures and equipment in the last decade resulted in a 42 percent decrease of hazardous waste generated per product, 54 percent decrease in waste disposed per product, 76 percent decrease in total treatment plant load, 65 percent decrease in water consumption per product, and 39 percent decrease in natural gas consumption per appliance produced.
Waste Water: This is the key risk of Gorenje activities. Waste water from production sites in Velenje and Valjevo is treated (reduction of hexavalent chromium, coagulation, flocculation, neutralization, sedimentation, filtration process) in their own wastewater treatment plants. Parameters such as pH, BOD5, COD5, oil and grease, flow, TTS, increase in temperature of discharged water and heavy metals is permanently monitored (continuously, daily and every two months) and are well below IFC maximal allowable levels. Both plants discharge their treated waste water to surface water river Paka in Velenje and in Valjevo city’s sewer system according to Slovenian and Serbian regulations for discharge of sanitary and process waste waters to the public sewers.
Storm water is collected from the pavements, vehicles maneuvering plateaus, parking lots and treated in sand and oil/grease traps and discharged to surface waters.
Solid Waste: Solid wastes consist mainly of scrap metal, cardboard paper, plastic and wooden packaging, polystyrene and is collected, sorted and handed over to the local recyclers. Household solid waste is regularly collected by the local Utilities and disposed off at the designated landfill sites of Velenje and Valjevo region. Recycling schemes for waste electrical and electronic equipment (WEEE) that currently exist only in Slovenia will be extended to the Serbian operations.
Hazardous Material and Waste Management: Gorenje is in compliance with EU and national regulations for storage, handling and treatment of hazardous materials and management of hazardous waste. The company has contracts with authorized agencies in Slovenia and Serbia for collection, transport, treatment and final disposal of hazardous wastes. The project is not using PCBs. Gorenje doesn’t use CFCs or HCFCs in production of household appliances. The refrigerants used in appliances are isobutane (R600a) and tetrafluoroethane HFC134a, used only in appliance for export to the US market. The insulation foam blowing agent is cyclopentane. These hydrocarbons (isobutane and cyclopentane) are stored in separate well ventilated areas equipped with automatic gas detection systems connected with the central fire system control room of the plant.
GHG Emissions: In 2009 the greenhouse gas emission caused by the production at Gorenje plants production plants is estimated at 35,000 tonnes CO2 equivalent. Indirect emissions associated with electricity consumption contributed approximately 90% of this, with the rest being attributable to fuel (LPG, diesel) consumption.
Emergency Preparedness and Response: All plants of Gorenje Group have developed operational procedures for fire safety monitoring to control and ensure adherence to fire safety requirements and for emergency response in case of natural disasters. To minimize the potential risk of fire or explosions Gorenje plants are equipped with series of prevention and fire fighting measures. This includes automatic systems for fire prevention, automatic sprinkler systems, hydrants around the plants and manual extinguishers.
PS4: Community Health, Safety and Security:
The manufacturing site in Velenje is located less than 10 km from urban center of Velenje and there is no community in the proximity of the project sites. The closest associated facilities are TPP Sostanj and around 3,5 km of industrial railroad owned by Gorenje connected to National railroad network. Valjevo plant is located in an industrial zone, which is in relative proximity to the biggest settlement of Valjevo city “Kolubara 2” and close to Railroad Station, all according to the Regulation Plan. According to the 99 years concession agreement with Valjevo, Gorenje was obliged to construct all connecting roads and connections to the existing public city utilities, while Valjevo city was obliged to construct the industrial railroad connection to the public rail road network. The environmental and traffic effects on the local population in both cases are limited.
Both Slovenian and Serbian plants have appropriate Life and Fire Safety (L&FS) systems in place, which meet design criterion of Serbian Fire Code and is in compliance with IFC's guidelines and applicable European Norms for similar industry.
Velenje plant has well developed Fire prevention system managed and supervised by 22 professional fire fighters strong team. The main features of the system include automatic CO2/fire detection system, smoke detectors in all company, sprinkler system in warehouse of the finished products and in the polyester/packaging plant, fire resistant doors, hand extinguishes and about 200 wheeled extinguishers, 36 hydrants, and manual alarm system. Regular drills are evacuation trainings are performed. Serbian plant has a Plan for Fire Prevention and Protection system in place designed and implemented in compliance with Serbian regulation. In case of fire the automatic alarm system activates and notifies in-house L&FS staff and local fire brigade located in Valjevo city. Both plants have procedures in place for regular monitoring of L&FS provision at site level such as ensuring that fire exits are well marked and unlocked with unobstructed access. All employees are made aware of procedures in case of fire or explosion and they are obliged to attend periodical trainings and drills.
Security personnel: Unarmed security personnel are employed through private security contractors. Security personnel are trained in the use of force for defensive purposes.
Client's community engagement
Consultation with local communities and national and local authorities is being conducted regularly, internally and externally, through different communication channels i.e. Gorenje regularly reports of its EHS performances through electronic and printing media including its web portal (www.gorenje.com). Different types of assistance are provided to the local communities, such as employment of local labor force, different joint humanitarian activities and contributions in the area of public health, education, supporting local sport clubs. During the land acquisition process in Valjevo, Gorenje has engaged actively with the municipality; a formal disclosure and public consultation over EIA documentation took place according to Serbian regulations.
Gorenje will also make the current ESRS review available locally as part of their continued interaction with the local community.
This Environmental and Social Review Summary and the associated Environmental and Social Action Plan may be viewed at Gorenje webpage and at the following addresses in Velenje and Valjevo:
Address in Velenje
Ms. Vilma Fece
Ms. Anica Pavlic
Varstvo okolja/Environmental Department
Gorenje, d.d.Partizanska 12, 3503 Velenje, SloveniaTel.: +386 3 899 2228Fax.: +386 3 899 email@example.com
Address in Valjevo
Gorenje d.d. Valjevo
Ms. Aleksandra Kandic
Bulevar palih boraca 91/92 godine
14000 Valjevo, Serbia
+381 14 295 950
Local access of project documentation
The company will carry out a local disclosure of this Environmental and Social Review Summary and the associated Environmental and Social Action Plan (ESAP), in local language, in parallel to IFC’s disclosure. Contact details for the community engagement representative in Gorenje are as follows:
Ms Vilma Fece
Varstvo okolja/Environmental Department
Gorenje, d.d.Partizanska 12, 3503 Velenje, Slovenia
Availability of Full Documentation
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