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Corporacion Dinant S.A. de C.V.
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.
Latin America and the Caribbean
Palm Vegetable Oil
Corporacion Dinant S.A. de C.V.
Date ESRS disclosed
November 13, 2008
Invested: November 5, 2009
Signed: April 3, 2009
Approved: January 26, 2009
View Summary of Proposed Investment (SPI),
Category & Applicable Standards
Key Issues& Mitigation
Overview of IFC's scope of review
The appraisal of this project consisted of a review of technical, environmental and social information prepared by an independent consultant, interviews with company management, staff, and representatives of several local communities, as well as site visits to the company’s industrial and agricultural operations in Honduras.
The project will consist of a corporate loan to Corporacion Dinant S.A. de C.V., a vertically-integrated palm oil and food company in Honduras. The company is seeking funds primarily to:
- increase production capacity in its snacks and edible oils divisions;
- expand and upgrade its distribution network;
- develop young palm oil plantations; and
- build a biogas facility to generate electricity for own and third-party consumption.
Identified applicable performance standards
All Performance Standards are applicable to this investment.
- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security
- PS5: Land Acquisition and Involuntary Resettlement
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management
- PS7: Indigenous Peoples
- PS8: Cultural Heritage
Environmental and social categorization and rationale
This is a Category B project under IFC’s Policy on Social and Environmental Sustainability because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to good international industry practice, guidelines, design criteria, local regulations and industry certification schemes. Oil palm plantation development is occurring on existing, cleared agricultural land, and there is no destruction of or impact on critical habitat involved. Land acquisition is on a willing buyer-willing seller basis, and there is no involuntary displacement of any people. There are no indigenous peoples’ ancestral lands in the area and the Pech community near the company’s Aguan operations is not expected to be adversely affected by the project. The company is working to actively upgrade its environmental protection capabilities, and will ensure that its operations meet international standards for the sector. As a result, the Category B designation is appropriate.
Key environmental and social issues and mitigation
The company has presented information which indicates that the proposed project will be developed to comply with IFC’s environmental and social requirements, including host country laws and regulations and IFC’s Policy and Performance Standards on Social and Environmental Sustainability, and the applicable environmental, health and safety guidelines. The information about how any potential impacts will be addressed by the Project is summarized in the paragraphs that follow.
SOCIAL AND ENVIRONMENTAL ASSESSMENT AND MANAGEMENT SYSTEMS:
Environmental and Social Assessment: An Environmental Assessment of Agricultural Plantations was carried out in May 1997 on behalf of the IFC; more recently, an environmental and social assessment covering both agricultural and industrial operations of Dinant was undertaken by an independent consultant to identify the company’s current environmental and social impacts. The recommendations therein will be instrumental in guiding the development of the company’s Environmental and Social Management Systems. Mitigation of impacts will primarily focus on sustainable agriculture, as well as management of waste and of hazardous materials in both their industrial and agricultural operations. The primary social impact of Dinant’s expansion will be the creation of more direct and indirect employment. This project does not require any additional formal impact assessment.
Management System: At the corporate level, responsibility for environmental and social issues lie with the Vice-President of Environmental Planning and the Vice-President for Human Resources, supported by a newly-hired Corporate Social Responsibility professional. Responsibilities for environmental and social matters are highly decentralized at the plant or business unit level. The company started the process of preparing for ISO 14001 (environmental management system) certification in 2003, encountering some delays due to lack of necessary financial and human resources. The company will engage again in the ISO 14001 process and will strive to achieve certification within an agreed upon timeframe. The company will also build on the ISO process to obtain OSHAS 18001 (occupational health and safety) certification within a similar timeframe.
More than 75% of Dinant’s land (16,500 ha) is planted in African palm and the company has a commercial relationship with independent palm producers owning another 12,750 ha. The company has expressed interest in joining the Roundtable on Sustainable Palm Oil (RSPO), and will prepare a strategy and schedule to work towards sustainable practices in oil palm cultivation and ultimately obtain RSPO certification. Similarly, good agricultural management will be developed and applied for all other crops aiming, in time, at the independent verification of such practices. As growth of palm oil production will mainly rely on the increased sourcing from independent producers, Dinant will develop environmental and social criteria for the evaluation of existing and prospective independent growers and, in time, develop and deliver a training program on pesticide management and other sustainable agricultural practices. Dinant has also already achieved HACCP certification for its processing operations in Comayagua.
LABOR AND WORKING CONDITIONS:
Human Resource (HR) Policy and Management: Dinant employs approximately 4,500 permanent and 2,500 temporary workers, 30% of which are women, and are currently in the process of transitioning the majority of temporary workers in the agricultural operations of Lean and Aguan into permanent staff. This transformation represents an important step towards compliance with national labor law and international standards. In addition, the revision by the company of the Labor Manual and related procedures includes key changes such as the cessation of pregnancy testing as condition of employment, the formalization of a grievance mechanism for workers, and the enforcement of work shifts that do not exceed national regulations. Excessive working hours were identified as a concern during appraisal, and the company has committed to address this issue and to develop an alternative working model taking into account production, work organization, quantity, quality, and costs, in order to find a better option to regulate the maximum allowed working hours per shift (day and night) and per week.
Dinant has also made a special effort to encourage the active participation of the existing union in the company’s affairs. This union is now seeking to better define their role and engaging with senior management to address workers’ concerns. Overall, workers interviews were positive with regards to working conditions.
Occupational Health and Safety: In general, all the plants are clean, organized, and well maintained. A health and safety commission (including workers and management) is in place. Some areas need further improvement, however, such as the development of policies and procedures to handle hazardous materials, especially pesticides in agricultural activities, signage, ensuring the proper use of PPE and providing periodic training. Better documentation and monitoring of incidents and accidents is necessary.
POLLUTION PREVENTION AND ABATEMENT:
Pollution Prevention, Resource Conservation and Energy Efficiency: Process wastewater from Dinant’s plants is generally treated in aerobic lagoon systems, which are undersized for the demand and load of the effluent. Dinant has committed to upgrading their wastewater treatment to ensure that all plants meet national discharge limits as well as IFC guidelines. As part of this upgrading, Dinant has already installed a biogas recovery unit in Aguan and will do the same at their plants in Lean, which will further improve effluent quality to meet IFC guideline limits. Construction of a new system has also been completed at the Dixie plant.
Conventional solid wastes are handled focusing on the recovery and reuse of materials and by-products. Plastics and cardboard packaging is recycled, and rejected food products are sold for animal feed. On the plantation, empty fruit bunches are used as mulch, and other organic nutrients from processing of kernels are used for animal feed.
Air emissions are principally from stationary power sources which run on biomass or bunker fuel. These generate adequate power for their own operations and a percentage is sold back to the grid. Stack monitoring results are variable and in some cases particulate emissions exceed allowable limits. The company will upgrade its sampling program for stack emissions and will bring all facilities into compliance with national regulations and IFC guidelines according to an agreed schedule.
The company has been upgrading its existing biodiesel plant at Aguan, and will use this output for all of their vehicle needs and for irrigation pumps and other generating equipment. This will reduce overall company emissions accordingly. In addition, the company is installing biogas recovery facilities in order to use the methane to fuel boilers for electricity generation, which will improve energy efficiency, lower emissions and improve wastewater quality.
Pesticide Management: Dinant’s Good Agricultural Practices policy includes a commitment to implementing an Integrated Pest Management Program. The commitment to develop a formal Pesticide Management Plan is yet to be carried out and it will cover the areas of pesticide selection and handling, application and storage, staff training, safety requirements, and disposal, consistent with national laws and regulations, IFC policies and guidelines and FAO guidance. The company will immediately suspend the use of all pesticides that are listed in the Stockholm Convention, and properly dispose of any remaining stocks.
COMMUNITY HEALTH, SAFETY AND SECURITY
Community Health and Safety: With the exception of the urban Dixie plant site in San Pedro Sula, Dinant’s plants are surrounded by small, agricultural communities. Impacts on community health and safety are limited but need to be analyzed and mitigated more systematically, including risks posed by the company’s security arrangements. In general, grievances are related to dust, traffic, noise, smells, and flies. The current system for handling grievances needs to be further formalized to ensure adequate and prompt handling of complaints.
Security Personnel Requirements. Dinant has over 300 security staff, which consists of its own security personnel, trained in house and managed by the HR vice-presidency, as well as a private security company used in the operations in Comayagua and various security companies outside Honduras. The majority of the security personnel are associated with the distribution centers in Honduras and other Central American countries and most are armed. Private security subcontractors have a contractual requirement to comply with Basic Principles on the Use of Force and Firearms by Law Enforcement Officials.
LAND ACQUISITION AND INVOLUNTARY RESETTLEMENT
The last land purchase made by Dinant was the Tumbador farm located near Trujillo in 2003. This property was devoted to cattle ranching and is now being converted to oil palm plantation. Company policies on land acquisition and land use rule out acquisition of land in protected areas, with archeological sites, or with indigenous settlements. They also exclude cultivation in protected areas, wetlands or wildlife refuges, as well as substitution of native forests with plantations. The company will develop a procedure ensuring that these policies are implemented as well as taking into account IFC Performance Standard 5.
Dinant’s oil palm plantations are planted on already converted land that was previously dedicated to other agricultural uses such as cattle ranching and banana plantations. The company will prepare a strategy and schedule to work towards sustainable practices in oil palm cultivation and ultimately obtain RSPO certification. Similarly, good agricultural management will be developed and applied for all other crops aiming, in time, at the independent verification of such practices.
There is an indigenous community of about 26 families located about 12 km from Dinant’s largest plantation in Aguan Valley. Dinant’s main impact is provision of indirect employment in an “inclusive business” project that will create linkages between the company’s oil extraction operations and the supply of corozo fruit. This initiative should increase community incomes and provide resources to further assert their cultural identity. An additional indigenous community of Tolupan families lives in the buffer zone of Texiguat National Park, about 20 km east of Finca Florida, which is owned by Dinant. It is not expected that Dinant’s farming activities could have any impact on this indigenous group but the company will include these two different indigenous communities, as well as the Garifuna community in a community risk analysis to ensure that there are no adverse impacts or mitigate them if needed. Currently, no Tolupan peoples are employed by the company.
Dinant has committed to protect any archeological sites and will include this policy in its land acquisition protocol. In the past the Company has set aside 10 ha at its Comayagua site under the direction of local archeological authorities for the preservation of an archeological site at that location.
Client's community engagement
Dinant understands the importance of having good relationships with their neighboring communities and are quite proactive in this regard. Most of the workforce comes from small villages close to their plantations and company management regularly visits with municipal officials, the Pech indigenous community, and other local stakeholders. Dinant participates in townhall meetings regularly organized by the municipalities, who most commonly receive any inquiries or grievances related to the company. Dinant often helps municipalities with small infrastructure or school projects (e.g. road maintenance, school roof repair, etc.) and provides financial support for important cultural events.
Local access of project documentation
Spanish versions of the Environmental and Social Review Summary and the Environmental and Social Action Plan will be disclosed by the Company and made available to the public locally in the municipalities of Cortes (San Pedro Sula), Atlantida (Tela, Arizona, Esparta), Colon (Saba, Tocoa, Trujillo, Limon), Comayagua (Comayagua, San Sebastian, Villa), and Francisco Morazan (Tegucigalpa).
Apartado Postal 684
Attention: Olvin Francisco Andino
Vicepresidente de Asuntos Ambientales y Sociales
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
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