Environmental and Social Review Summary
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Environmental and Social Review Summary Mercator This Environmental and Social Review Summary (ESRS) is prepared by MIGA staff and disclosed prior to the date on which MIGA’s Board of Directors considers the proposed issuance of a Contract of Guarantee. Its purpose is to enhance the transparency of MIGA’s activities. This document should not be construed as presuming the outcome of the decision by MIGA’s Board of Directors. Board dates are estimates only. Any documentation that is attached to this ESRS has been prepared by the project sponsor, and authorization has been given for public release. MIGA has reviewed the attached documentation as provided by the applicant, and considers it of adequate quality to be released to the public, but does not endorse the content. Country: Bosnia & Herzegovina, Croatia and Serbia Sector: Services Project Enterprise: Mercator Environmental Category: B Date ESRS Disclosed: May 15, 2015 Status: Due Diligence A. Project Description MIGA provided reinsurance to the guarantee holder: Slovenska Izvozna in Razvojna Banka, d.d. (SID), for a set of contracts covering the operations of Mercator in Serbia, Croatia, and Bosnia- Herzegovina. The reinsured contracts cover equity from the Mercator parent company in Slovenia as well as bank loans. Mercator is a Slovenian retail chain based in Ljubljana that was founded in 1949 as ‘Ljubljana Groceries’ becoming Mercator four years later. Originally operating only in Slovenia until the 1990s, Mercator opened retail stores in Croatia and Bosnia and Herzegovina in 2000, Serbia in 2002, and Montenegro in 2007. At the end of 2009, Mercator opened stores in Albania and Bulgaria, later exiting these markets by 2013 due to poor business conditions. Mercator was acquired by Agrokor d.d. (Croatia) with a 53.1% stake in June 2014 followed by an additional 27.6% in September, 2014. Agrokor is the largest retail company in Croatia. Originally founded in 1976 as a company producing flowers and flower seedlings, it greatly expanded operations in the following decades through acquisitions in Croatia and Southeast Europe. Agrokor's core businesses are the production and distribution of food and drinks and retail. Mercator group remains as a separate corporate group headquartered in Slovenia. The company continues to operate in Slovenia, Serbia, and Montenegro where it remains the retailer with the highest market share. In Croatia and Bosnia and Herzegovina Mercator retail units have been leased out to Agrokor and in these two markets the stores will operate under the Agrokor/Konzum retail brand. Mercator will continue to be present as a real estate management company leasing out its property to Agrokor. B. Environmental and Social Categorization Environmental and Social Review Summary -2 - May 15, 2015 Mercator / Bosnia & Herzegovina, Croatia and Serbia: The project is categorized as B under MIGA’s Policy on Environmental and Social Sustainability (2013), because the potential social and environmental impacts are limited, few in number, site- specific, largely reversible and readily addressed through mitigation measures. The project is expected to contribute positively to trade among Balkan countries by carrying goods from the region in each retail location, thereby supporting suppliers and providing employment and retail training opportunities. Given the nature of Mercator’s retail and supermarket food businesses the key E&S risks include: overall environmental and social risk assessment and management; employee health and safety; food safety; life and fire safety of premises; resource use and management; waste management. MIGA conducted an E&S site monitoring mission to Mercator premises in Croatia (April 2014) Slovenia (July 2012) and Bosnia and Herzegovina July 2012 and again in April 2014) and did not identify any E&S issues at these site visits. Information on how these E&S issues are, or will be, addressed by the Project to comply with MIGA’s Performance Standards and WBG EHS Guidelines is contained in the following sections. C. Applicable Standards While all Performance Standards (PS) are applicable to this investment project, based on our current information the project will have impacts that must be managed in a manner consistent with the following Performance Standards: PS1: Assessment and Management of Environmental and Social Risks and Impacts PS2: Labor and Working Conditions PS3: Resource Efficiency and Pollution Prevention PS4: Community Health, Safety and Security The following standards have not been triggered: PS5: Land Acquisition and Involuntary Resettlement (the Project involves no physical or economic displacement); PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resource (there are no known impacts on conservation or biodiversity); PS7: Indigenous Peoples (there are no known indigenous peoples within the project areas); PS8: Cultural Heritage (the Project is not located in areas of known historical or cultural significance, and involves no construction activities). In addition, the following World Bank Group Environmental, Health and Safety (EHS) Guidelines are applicable to this project: General EHS Guidelines D. Key Documents and Scope of MIGA Review The review of this project consisted of appraising the technical, environmental, health, safety and social information and annual monitoring reports submitted by the project enterprise, review of Environmental and Social Review Summary -3 - May 15, 2015 Mercator / Bosnia & Herzegovina, Croatia and Serbia: company’s environmental systems and a field visit to Mercator facilities in Bosnia and Herzegovina, and Croatia conducted by MIGA’s Consultant Environmental Specialist in April 2014. MIGA also conducted visits to Mercator premises in Slovenia and Bosnia and Herzegovina in July 2012. Mercator’s Annual Report 2013 contains a detailed overview of the company’s environmental, social health and safety practices and resource conservation programs. MIGA has reviewed the following documents: Mercator Environment Policy Mercator Annual Report/Sustainability Report, 2013 Agrokor Sustainability Report 2012 /2013 MIGA: Back to Office Reports, 2012 and 2014 IEG: Project Evaluation Report, Mercator, Serbia E. Key Issues and Mitigation PS1: Assessment and Management of Environmental and Social Risks and Impacts Environmental and Social Assessment: Both Mercator and Agrokor have comprehensive environmental policies and conduct assessment of E&S risks in accordance with their policies. Environmental due diligence is conducted on prospective sites (leasing or purchasing), with store designs generally standardized, though according to Mercator, adaptations are made to account for differences in legislative requirements. Environmental risk assessment is conducted yearly and includes: potential for improvements, environmental emergencies, environmental fines and negative publicity. Management Program and Monitoring: Mercator’s sustainability reports indicate that the company places social and environmental issues at the core of its business activities and has committed to sustainable development. Mercator actively engages in environmental and social management, energy management in construction and operations, and waste management. Mercator has a comprehensive set of operational Environmental, Health and Safety (EHS) policies and procedures in place under its integrated management system. The MIGA visits to Mercator premises in Croatia, Slovenia and Bosnia and Herzegovina demonstrated that the company does implement an effective E&S management system that meets MIGA's E&S requirements in this respect. The company performs routine monitoring and keeps accurate records that are submitted to the authorities. Each individual premises is subject to independent EHS audit. Agrokor/Konzum has hired Mercator’s employees and also operates a comprehensive set of environmental and social policies similar to Mercator. Agrokor’s environmental and social management system is certified to ISO14001. Konzum Bosnia & Herzegovina is certified to ISO14001:2004 and Konzum Croatia has HACCP; ISO 14001:2004; OHSAS 18001:2007; ISO 22000:2005, and ISO/TEC 27001:2005. Mercator has corporate level certifications to ISO 9001 and ISO14001 and Mercator Serbia has adopted HACCP Food Safety Management in its supermarkets. Organizational Capacity and Competency: Mercator has an EHS team at its HQ with environment and safety managers appointed at each site. All staff members receive routine training on EHS matters, fire drills and emergency response. Mercator has established an e-classroom on the Environmental and Social Review Summary -4 - May 15, 2015 Mercator / Bosnia & Herzegovina, Croatia and Serbia: company’s intranet, allowing the employees a user-friendly approach to receiving training and education materials. Reporting: Both Mercator and Agrokor produce company sustainability reports. Mercator’s report is contained as a large section within the corporate annual report. Agrokor publishes a separate sustainability report produced to Global Reporting Initiative (GRI) guidelines. Both companies monitor and report on greenhouse gas emissions. For 2013, Mercator reported carbon dioxide emissions of 267,709 tCO2e (6% lower than in 2011), principally through the implementation of energy efficiency measures In addition to annual sustainability reports, Mercator will also be required to submit an annual monitoring report to MIGA summarizing the monitoring and environmental audit data at each of the individual