If provided by the financial institution, the Early Warning System Team writes a short summary describing the purported development objective of the project and project components. Review the complete project documentation for a detailed description.
PROJECT DESCRIPTION
The project will expand and upgrade pork growing operations of Norson Holdings S. de R.L. de C.V. ("Norson" or the "Company"), one of the leading integrated pork producers and processors in Mexico. The project includes: (i) modernizing Norson's swine farms; (ii) increasing nursery capacity; (iii) expanding cold storage capacity; (iv) increasing slaughter, processing and value added capacity; (v) continuation of the implementation of its master sustainability program, including installing liners for waste water lagoons and an updated effluent treatment plant at the processing facility; and (vi) refinancing of the existing debt. On completion of the project, Norson's processing facilities will have an annual capacity of some 700,000 hogs, with around 85% of these sourced from Norson's own farms. Norson is a vertically integrated company, operating, manufacturing feed, which is supplied to its own farms, which in turn provide the majority of the hogs to the processing facility.
OVERVIEW OF IFC'S SCOPE OF REVIEW
IFC's review was based upon meetings and site visits with the Company in Hermosillo Mexico, and review of documents supplied by the Company. IFC visited Norson's feedmill in Hermosillo, a farrow-to-finish and a finishing farm, outside Hermosillo, and the Company's slaughterhouse and value added meat processing facilities in Hermosillo.These site inspections were supported by presentations from and meetings with Norson's environmental, occupational health and safety (EHS) and human resources management teams, and review of written information submitted in these meetings in response to an environmental and social (E&S) questionnaire.
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 ImpactsPS 2 - Labor and working conditionsPS 3 - Resource Efficiency and Pollution PreventionPS 4 - Community Health, Safety and SecurityPS 6 - Biodiversity Conservation and Sustainable Management of Living Natural ResourcesIf IFC's investment proceeds, IFC will periodically review the the project's ongoing compliance with the Performance Standards
ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE
The proposed project is essentially an expansion of existing farming and processing facilities, and the marginal environmental and social risks and impacts of the expansion are not significant. It is being developed in accordance with all applicable Mexican standards, and to standards that the US shareholder would expect in its own operations. Environmental and social risks and adverse impacts are readily managed by the Company, and are reversible. This is therefore an environmental and social category B project, in accordance with IFC's Policy on Environmental and Social Sustainability.The key environmental and social issues associated with the existing and expanded operations are: assessment and management of E&S risks, labor and working conditions, including occupational health and safety, use of energy and water in the farms and processing sites, effluent treatment and disposal, control of hazardous chemicals, and biosecurity and assurance of food safety.
**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
PolicyNorson's approach to sustainability is set out in its Code of Ethics, which was adopted by Norson's Board of Directors in October 2011, and had been signed by all staff by March 2012. This code has 150 areas of guidance in five themes, corporate ethics, quality of life for personnel, community relationships, corporate social responsibility and environmental management.Identification of Risks and ImpactsFull legal compliance is one of the requirements of Norson's ethics code. The expansion project, therefore, has been planned in full compliance with local regulatory requirements and Norson is in the process of applying for Environment Licenses from the appropriate authorities for the new investments. Existing operations already have appropriate environmental licenses.Norson maintains a register of applicable federal, state and city regulatory requirements, and manages its operations in a manner that brings about complete and continuous compliance. In the environmental area, applicable regulations include the general law of ecological equilibrium and environmental protection, with additional regulations covering prevention and management of waste and the law on national waters. The working relationship is covered by the Federal Work Law, and federal consumer protection regulations are also applicable. Farming operations are required to be compliant with the Federal Law of Animal Health and the general heath law.Management ProgramNorson has separate management structures for environmental and occupational health and safety (OHS) matters. OHS is managed through the human resources department. A coordinator reports directly to the Company's HR director. Within the farms, two safety officers, guided by the coordinator, report to the Farms HR manager, and there is also a medical officer. The safety coordinator leads at the manufacturing sites, reporting to the Foods HR manager. Medical services and a nurse are available. Environmental management in the farms is the responsibility of the Chief of Environment, supported by two environmental supervisors, while a Regulations Manager and Analyst have this role within the Foods business. The main roles of these officers are to ensure ongoing regulatory compliance of the businesses.Improvement in environmental performance, such as reduction in specific use of energy and water is brought about by project teams from the operation and engineering departments. This continuous improvement work is supported by reporting of Key Performance Indicators (KPIs) related to, for example, utility use, feed conversion, and occupational accidents and lost time incidents.Norson places high emphasis on animal welfare, and has an Animal Welfare Policy and Procedure manual that is part of the company's training manual and must be read and signed by each employee. All new employees receive an induction in humane animal treatment. Norson's animal welfare policies consider the basic needs of the pigs (water, shelter, feed); good husbandry practices; timely medication treatments; euthanasia procedures; humane treatment during transport and contingency planning for any accidents fires, etc. Currently 70% of sows are placed in stalls (gestation crates) and 30% in group accommodation. The company has started a program to implement full conversion from stalls to group housing changes, and expects to complete this change by 2022.External CommunicationsThe farms are in areas remote from communities, the better to promote biosecurity.The feedmill and processing site are located separately on industrial estates within Hermosillo, without close proximity to any stakeholders, except other users of the industrial park.
PS 2: LABOR AND WORKING CONDITIONS
Working Conditions and Terms of EmploymentNorson's corporate Code of Ethics and Professional Conduct includes sufficient coverage of issues of labor and working conditions, that it can be considered to consider the elements of a Human Resources policy.Norson's has a corporate policy requiring 100% compliance with law at all time: compliance with Mexican labor law does bring about compliance with the labor and working conditions requirements of Performance Standard 2.Norson's feed materials are soy from the US and local grain, production of which is highly mechanized and not considered to present high risk of child labor.Occupational Health and SafetyNorson has a well established safety policy framework contained within the code of ethics. Risk analysis has been undertaken for the slaughterhouse and value added processing operations, and personal protective equipment (PPEs), dedicated to the particular workplace is provided and worn by workers. This may include protective gloves, chest protectors, and ear or eye protection, according to workplace risk. Some cutting operations have been adapted to guard saw-blades, substantially reducing injury risk, though this has not been completed. When there is a workplace injury, formalized systems of review are used, with the objectives to identify the type of risk, nature of the accident, injured area of the body, causes of the accident, and areas of follow-up which are allocated to individuals and tracked until completed. Norson will complete installation of its saw-blade guarding enclosures at work stations and will set continuous improvement targets aimed to reduce the lost time injury frequency to levels meeting international standards.
PS 3: RESOURCE EFFICIENCY AND POLLUTION PREVENTION
Resource EfficiencyNorson's energy use is dominated by use of electricity in its farms and abattoir and meat processing plants. At the farms, the main users of electricity are lighting, manure management and seasonal cooling, while refrigeration is the major user in the processing plant. In this area, observation suggests areas in which system efficiency may be enhanced. Norson will commission an experienced consultant to undertake an energy and water efficiency audit of the processing plant, with particulate emphasis on the refrigeration systems.In the farms, a continuous improvement based program has been effective in reducing water use, through recycling in the manure management system, and avoidance of water sprays for animal cooling, as tunnel ventilation and evaporative pad cooling systems are being progressively introduced.Norson pays considerable attention to feed conversion ratio and to animal mortality and can demonstrate improvement in both. The farm investments that this project will support should drive further improvement.Norson has capped a number of the farms' effluent lagoons, and is flaring the methane thus collected, so as to reduce the GHG emissions from its operations. Further work will be done to assess potential to use this methane beneficially for electricity production at the farms. Possible use of solar PV will also be explored.The annual GHG footprint of Norson's expanded operation is estimated at around 86,000 tonnes CO2 equivalent. This figure accounts for energy-based emissions in the feedmills, farms and processing, transport energy and emissions from livestock.Water ConsumptionAlthough Norson's operations are located in Sonora, an arid region of Mexico, there is no evidence that its operations contribute to water stress. The major use of water in rural Sonora appears to be flood irrigation for cultivation of wheat, tree nuts, citrus fruit and vegetables.Liquid Effluent ManagementAt the farms, pig excreta are collected and transported by water circulation systems to large effluent lagoons, the 77 farms having a total of 210 lagoons. These lagoons are made by excavation and compacting of earth, in compliance with local regulations, and they are not currently lined. Norson has measured soil infiltration from these lagoons and detected little loss to the ground, and the lagoons are not considered to present any threat to ground water which is more than 100 m deep. Nevertheless, Norson has embarked upon a program to line all lagoons at all farms. This is the major component of the master environmental plan. Work has already started and is scheduled for completion in 2016.Lagoon levels are managed at a level of not less than 18 inches below the sides. The lagoon walls are raised above the surrounding land which means that storm water collecting on such land will not flow into the lagoons. Effluent quality entering the first lagoon at each farm is monitored. Water is re-circulatedfrom the lagoons for excreta management. There is no effluent discharge from the farms, water loss is by evaporation from the lagoons whjch matches water use in all cases.Lagoons are periodically emptied and solid residues spread on local farmland.At the processing site, there is presently effluent pre-treatment by sieve, homogenization and dissolved air flotation, before liquid effluents are discharged to the municipal sewer for further treatment. This system will be expanded to support proposed expansion of production capacity.Emissions to AirThe main combustion equipment comprises two gas-fired steam boilers at the processing plant. Monitoring data shows no significant emissions to air. Norson has reported that it has received no complaints about odor, and none was observed by IFC during the visits at times when the processing plants were operating normally.Solid Waste ManagementEach farm has a composting area for dead animals some way from the main farm operations. These are pits: carcasses are bisected, placed in the pit and limed, then covered temporarily with straw. When the pit is full it is filled with earth and the process repeated. The composting areas is fenced to prevent access by scavenging wild animals.At the processing plant, slaughterhouse pen wastes are firstly sieved, collected in a tank then are sent to the landfill. Inedible offal, blood, rejected meat and carcasses are collected in tanks and sent daily to a licensed rendering plant. Sludge from wastewater pre-treatment plant is collected and sent to an authorized landfill.Both the feed mill and value added processing plant have well established waste minimization programs to minimize waste generation and maximize recycling potential. Used cardboard boxes, metallic wastes, damaged wood pallets are recycled with licensed providers. Hazardous materials such as used lights and maintenance wastes are disposed of by a licensed contractor in an authorized hazardous material landfill. All waste carriers provide receipts, enabling Norson to track carriage of its waste from its sites to the authorized disposal points.PesticidesNorson contracts with a licensed pest-management company for control of insects and rodents at the farms. A list of pesticides employed has been reviewed: all are commonly used Class II or Class III substances.
PS 4: COMMUNITY HEALTH, SAFETY AND SECURITY
Norson has a HACCP-based food safety management system in its processing plants, with full food traceability and recall procedures in place. Norson has the Safe Quality Food certification SQF-2.The company also has comprehensive systems of biosecurity at the farms, which will be further improved when the all-in, all-out system of farming has been completed.The main threats to bio-security are breaches by trucks, people, feed, pests and cleanout. During the appraisal disinfectant barriers for vehicles entering and leaving the farms and feed mill were evident - with perimeter fencing to maintain separation. Employees pass through disinfection as warm water showers and clean clothes are provided.Norson transports pigs and feed with its own designated fleet of trucks that are subject to intensive washing requirements.In addition to the audit by the Mexican government, Norson conducts its internal bio-security audit on a quarterly basis. Every farm holds an environmental license and is under obligation to perform up to the licensing standards.
PS 6: BIODIVERSITY CONSERVATION AND SUSTAINABLE MANAGEMENT OF LIVING NATURAL RESOURCES
Feed mill raw materials are predominantly Sonoran wheat and US-grown soy, with increasing use of sorghum. These materials are purchased by Norson through its local agricultural cooperative, the Union of Porcicultores. Since it is buying aggregated commodity crops through an intermediary, Norson does not have management control over the farms from which it sources grains. However, Sonoran wheat is not known to encroach on areas of significance for biodiversity protection.
