Environmental and Social Compliance Audit Report · PDF fileThis environmental and social...

Environmental and Social Compliance Audit Report

Project Number: 46944 March 2013

KAZ: RG Brands Agribusiness Project

Prepared by DG Consulting Ltd for RG Brands

This environmental and social compliance audit report is a document of the borrower. The views

expressed herein do not necessarily represent those of ADB's Board of Directors, Management,

or staff, and may be preliminary in nature. Your attention is directed to the “Term of Use”

section of this website.

D G C o n s u l t i n g L t d Address: 1. Mitrophane Lagidze Street, 0108, Tbilisi, Georgia;

Registered office: 5 Shevardenidze Street, 0177, Tbilisi, Georgia; Reg No 205 280 998; Tel: +995 322 997 497; +995 599 500 778;

e-mail: [email protected]; [email protected]

ENVIRONMENTAL AND SOCIAL DUE DILIGENCE

REPORT

RG BRANDS AGRIBUSINESS PROJECT

Final Version

41140_R1_Eng

January 2013

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D G C o n s u l t i n g L t d

Signatures chapter Prepared by: The present Report is prepared by DG Consulting Ltd Project Manager – David Girgvliani

Revision Table chapter

Revision # Revised Part of Document Reason of Revision

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TABLE OF CONTENTS

Executive Summary ..................................................................................................................................... 8

1 Nature of the Project ........................................................................................................................... 18

1.1 Introduction ............................................................................................................................................ 18

1.2 Description of the Proposed Project ....................................................................................................... 19

2 The Existing Company/Facilities ...................................................................................................... 21

2.1 The RG brands – corporate level ............................................................................................................. 21

2.1.2 Overview of RGB organizational structure ........................................................................ 24

2.2 Aksengir Plant ......................................................................................................................................... 26

2.2.2 Baseline environmental conditions in vicinity of Aksengir plant ..................................... 30

2.3 Kosmis Plant ............................................................................................................................................ 35

2.3.2 Baseline Environmental and Social information for Kosmis Plant ................................. 38

2.4 Other production sites and distribution network ................................................................................... 42

2.4.1 Tealand Plant ......................................................................................................................... 42

2.4.2 Almaty Snack and Food Plant (ASF) .................................................................................. 42

2.4.3 The warehouse infrastructure .............................................................................................. 42

2.5 Potential Impact Area ............................................................................................................................. 43

3 Regulatory Requirements .................................................................................................................. 44

3.1 National Legislation ................................................................................................................................. 44

3.1.1 The Environmental impact assessment ............................................................................. 44

3.1.2 The air emissions .................................................................................................................. 44

3.1.3 The waste management ....................................................................................................... 45

3.1.4 Water extraction or supply ................................................................................................... 45

3.1.5 Wastewater discharge .......................................................................................................... 45

3.2 The ADB requirements applicable to funded projects ............................................................................ 45

4 The RGB Environmental Performance ............................................................................................ 47

4.1 Corporate environmental policies and management ............................................................................. 47

4.1 EHS Organization and Management ....................................................................................................... 49

4.2 Compliance to Regulatory Requirements ............................................................................................... 50

4.2.1 Compliance to National Regulations .................................................................................. 50

4.2.1 Compliance to ADB Requirements ..................................................................................... 51

4.3 Environmental Management at Aksengir Plant ...................................................................................... 52

4.3.1 Atmosphere Air emission ..................................................................................................... 52

4.3.2 Soil pollution ........................................................................................................................... 55

4.3.3 Water and wastewater management .................................................................................. 58

4.3.4 Waste management .............................................................................................................. 60

4.3.5 Housekeeping ........................................................................................................................ 60

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4.3.6 Sanitary management ........................................................................................................... 62

4.3.1 Pest management ................................................................................................................. 63

4.4 Environmental Management at Kosmis Plant ......................................................................................... 64

4.4.1 Atmosphere air emissions .................................................................................................... 65

4.4.2 Soil pollution ........................................................................................................................... 67

4.4.3 Water and Wastewater Management ................................................................................. 68

4.4.4 Waste management .............................................................................................................. 70

4.4.5 The housekeeping ................................................................................................................. 71

4.4.6 Sanitary management ........................................................................................................... 72

4.4.7 Pest management ................................................................................................................. 73

5 The Company’s Occupational Health and Safety Performance .................................................. 75

5.1 Human Resources Management and Gender ......................................................................................... 75

5.2 Key Occupational Health and Safety Issues ............................................................................................ 76

5.2.1 The Health and safety at facility level ................................................................................. 77

5.2.1 First aid systems .................................................................................................................... 82

5.2.1 Safety records ........................................................................................................................ 82

5.3 Fire Protection ......................................................................................................................................... 83

5.1 Emergency situation action plans ........................................................................................................... 85

6 External Social Performance and Management ............................................................................. 86

6.1 Potentially Affected Communities .......................................................................................................... 86

6.2 Community Health, Safety and Security ................................................................................................. 87

6.3 Involuntary Resettlement & Displacement ............................................................................................. 88

6.4 Impact on Vulnerable Groups ................................................................................................................. 89

6.5 Impact on Cultural Heritage .................................................................................................................... 89

6.6 Social Projects for Potentially Affected Communities............................................................................. 89

6.7 External Stakeholder Engagement .......................................................................................................... 90

7 Anticipated Environmental Impacts and Mitigation Measures ................................................... 91

7.1 Environmental and Social impacts from Aksengir Plant development ................................................... 91

7.1.1 The impacts on physical environment ................................................................................ 91

7.1.2 Impact on ambient air ........................................................................................................... 91

7.1.3 Impact on the land ................................................................................................................. 92

7.1.4 Impact on water ..................................................................................................................... 93

7.1.5 Impact on natural environment ............................................................................................... 94

7.1.6 Impact on cultural heritage ...................................................................................................... 95

7.1.7 Impact on Social environment .................................................................................................. 95

7.2 Environmental and Social impacts from Kosmis Plant development ...................................................... 95

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7.2.1 The impacts on physical environment ................................................................................ 96

7.2.2 Impact on ambient air ........................................................................................................... 96

7.2.3 Impact on the land ................................................................................................................. 97

7.2.4 Impact on water ..................................................................................................................... 97

7.2.5 Impact on natural environment ............................................................................................... 98

7.2.6 Impact on cultural heritage ...................................................................................................... 98

7.2.7 Impact on Social environment .................................................................................................. 98

7.3 Increase efficiency in distribution and production ................................................................................. 98

8 Environmental Management and Monitoring Plan ................................................................................ 100

9 Information Disclosure, Consultation, and Participation ........................................................... 106

10 Grievance Redress Mechanism (GRM) ....................................................................................... 107

11 Corrective action plan .................................................................................................................... 108

12 Conclusions and recommendations ............................................................................................ 111

FIGURES

Figure 2.1.1 The location of RG Brands facilities within the country ......................................................... 21

Figure 2.1.2 RGB Corporate Development history ...................................................................................... 22

Figure 2.1.3 RGB Distribution and logistics .................................................................................................. 23

Figure 2.1.4 Corporate organization Chart ................................................................................................... 25

Figure 2.2.1 Location of Aksengir Plant on Satellite Photo ....................................................................... 28

Figure 2.2.2 General Layout of Aksengir Plant ............................................................................................ 29

Figure 2.2.3 The vicinity of Aksengir Plant ........................................................................................................ 30

Figure 2.3.1 Satellite view of Kosmis plant ................................................................................................... 36

Figure 2.3.2 View of Kosmis plant .................................................................................................................. 37

Figure 2.3.3 Kostanay Plant location within the city .................................................................................... 38

Figure 4.1.1 HSE development plan .............................................................................................................. 48

Figure 4.3.1 Ventilation pipes on the plant building wall ............................................................................. 52

Figure 4.3.2 Air ventilation pipe from the production building .................................................................... 53

Figure 4.3.3 Carbon Dioxide generation unit with related air emission sources ..................................... 53

Figure 4.3.4 Diesel Generator unit ................................................................................................................. 54

Figure 4.3.5 Power generation unit ................................................................................................................ 54

Figure 4.3.6 The plant territory, well managed and paved ......................................................................... 56

Figure 4.3.7 The compressor unit is located on special concrete foundation .......................................... 56

Figure 4.3.8 The top access for underground fuel storage tanks .............................................................. 57

Figure 4.3.9 The view of the underground water reservoirs and oil barrels ............................................. 57

Figure 4.3.10 The area polluted with diesel fuel ............................................................................................. 58

Figure 4.3.11 The borehole headwork and area inside the borehole hut ................................................... 59

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Figure 4.3.12 The cleaning tools located in special area .............................................................................. 61

Figure 4.3.13 Indication of dedicated areas on the floor of production facility ........................................... 62

Figure 4.3.14 The flow management panel with CIP system ....................................................................... 62

Figure 4.3.15 The sanitation equipment ready to use ................................................................................... 63

Figure 4.3.16 The rodent trap on outer perimeter of the building ................................................................ 64

Figure 4.3.17 The rodent trap inside the production building ....................................................................... 64

Figure 4.3.18 The insect control UV lamp and entrance of production building ........................................ 64

Figure 4.4.1 The boiler house of Kosmis plant ............................................................................................. 66

Figure 4.4.2 The boiler used for steam production ...................................................................................... 66

Figure 4.4.3 The hot water pipes .................................................................................................................... 66

Figure 4.4.4 The plant territory ....................................................................................................................... 67

Figure 4.4.5 The plant territory view with water storage tanks – the area is asphalt paved .................. 67

Figure 4.4.6 The milk trucks at washing and sanitation stage ................................................................... 69

Figure 4.4.7 The milk reception process ....................................................................................................... 69

Figure 4.4.8 The wastewater collection well on site .................................................................................... 70

Figure 4.4.9 Debris on Factory territory ......................................................................................................... 71

Figure 4.4.10 Debris, scrap metal and truck spare parts on Factory territory ............................................ 71

Figure 4.4.11 The cleaning tools location stand ............................................................................................. 72

Figure 4.4.12 The cleaning tools and firefighting equipment location stand .............................................. 72

Figure 4.4.13 The flow management panel with CIP system ....................................................................... 73

Figure 4.4.14 The rodent trap on outer perimeter of the building ................................................................ 74

Figure 5.2.1 Warning sign indicating wet floor in Aksengir Plant ............................................................... 77

Figure 5.2.2 The walking and danger zones are indicated on the floor, warning painting on column

basement (Aksengir plant) ................................................................................................................................ 78

Figure 5.2.3 The demarcated corridor for forklift movement (Aksengir plant) ......................................... 78

Figure 5.2.4 The entrance door with safety demarcation against access blocking, warning signs and

foot sanitation pad (Aksengir plant) ................................................................................................................. 79

Figure 5.2.5 The information signs requesting usage of specific PPEs ................................................... 79

Figure 5.2.6 The signs requiring headwear, preventing jewellery (rings) and cameras ......................... 80

Figure 5.2.7 The stand presenting basic safety rules for Kosmis plant .................................................... 81

Figure 5.2.8 The stand presenting basic safety rules for Aksengir plant.................................................. 81

Figure 5.2.9 The guidance for eye washout ................................................................................................. 82

Figure 5.3.1 The fire-fighting measures in Kosmis ...................................................................................... 84

Figure 5.3.2 The automatic sprinkler system for warehouse in Aksengir ................................................. 85

Figure 6.1.1 Layout of Aksengir Plant and Aksengir Settlement .............................................................. 86

Figure 6.1.2 Kosmis Plant in the Industrial Area of Kostanay City ............................................................ 87

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TABLES

Table 2.2.1 Baseline air quality for the Aksengir Plant ............................................................................. 33

Table 2.2.2 Emissions of air born pollutants as of Q3 2012 according to the plant‟s air monitoring

data 33

Table 2.3.1 Ambieqnt air pollution indicators for Kostanay City .............................................................. 40

Table 2.3.2 Emission norms for Kosmis Plant‟s current operations ........................................................ 41

Table 8.1.1 Environmental management and monitoring ....................................................................... 101

Table 11.1.1 Corrective action plan ........................................................................................................... 108

Annexes

Annex 1 List of RG Brands Main personnel interviewed during site visits Annex 2 List of reviewed documents

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Executive Summary

Introduction The Environmental and Social Due Diligence Report provides information regarding environmental and social performance of RG Brands corporation and its production facilities. The report covers the RG Brands current operations and Agribusiness Project envisaging expansion of production in two plants owned and operated by the corporation in the Republic of Kazakhstan. The Report is prepared by DG Consulting Ltd for Asian Development Bank (ADB), which was addressed by the RG Brands for funding. The Report is based on finding of a site visit undertaken in October 2012 and review of documentation provided by the RG Brands management. RG Brands environmental and social performance has been reviewed in respect of ADB Safeguards Policy Statement 2009. Recommendations and the Corrective Action Plan (CAP) were developed to meet major environmental and social issues identified and improve the corporation‟s performance. Description of the Project Business sector of the RG Brands includes production and distribution of beverage and snacks. The corporation is one of the leading companies of Kazakhstan in this sector. Demand on its production constantly increases. Due to this the RG Brands has planned to increase juice and milk production and increase efficiency of its distribution network. In particular, the company intends to invest into:

Aksengir Plant, which is located in ca 70 km from Almaty City which produces juices and beverages

Kosmis Plant in the Kostanay City, in the northern part of the country. The plant produces milk products and beverages;

The planned investment considers establishment of milk production at Aksengir and juice production at Kosmis, upgrading of the plant‟s existing infrastructure and enhancement of distribution network during 2013-2016. In particular, the following works are planned: Component 1 - Upgrade of existing milk capacity and establishment of new milk production Item 11 Upgrading of milk collecting trucks and milk reception area at Kosmis Plant - 2013-

2016 Item 12 Installation of new milk tanks, cooling systems and processing modules at Kosmis

Plant - 2013-2015 Item 13 Launching milk production at Aksengir Plant. Milk collection infrastructure (cooling

system, separation and pasteurization equipment) will be installed at the plant in 2015

Item 14 Installation of new 2 MW gas generation unit at Aksengir Plant Component 2 - Establishment of new juice production and upgrade of existing infrastructure Item 21 Lunching of juice production at Kosmis plant including installation of pasteurization,

blending, syrup preparation sections in 2015-2016 Item 22 Installation of new HotFill production at Kosmis Plant - 2013 Component 3 - Increase efficiency in distribution and production Item 31 Procurement of distribution trucks in 2013-2014

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Item 32 Provision of coolers to the retail shops in 2013-2015 The project does not include spatial expansion of the existing facilities and all activities will be implemented within the existing footprint of the plant. Respectively, land acquisition is not planned. It is expected that the project‟s adverse environmental and social impact will not be significant, and following ADB‟s Operations Manual OMF1 2010, the project is categorized as B for Environment, and C for both Involuntary Resettlement and Indigenous People.

The location of RG Brands facilities within the country

Regulatory Requirements National Legislation The main law of the Republic of Kazakhstan regulating environmental issues is the Environmental Code, which was adopted in 2007. The Code regulates many aspects of environmental protection and management, including environmental impact assessment procedure. According to the Environmental Code, environmental impact assessment is obligatory for all types of businesses and activates, which are likely to have direct or indirect environmental and social impacts. Existing facilities are subject to EIA if EIA was not implemented for the facility during design stage, the purpose of the facility changes or it is upgraded. Aksengir and Kosmis plants have EIA and environmental permits. However, according to the Kazakhstan‟s Environmental Code, both facilities need new EIA or EIA amendment to satisfy national requirements, if the planned upgrade was not included in the initial project documentation. The ADB requirements applicable to funded projects Borrowers/clients are required to meet ADB‟s Safeguard Policy Statement (SPS) 2009 to address environmental and social impacts and risks. The SPS 2009 comprises the following environmental and social safeguard requirements:

(i) Safeguard Requirements 1 (SP1): Environment – sets overall environmental and social standards that should be meet throughout project planning and implementation to ensure good environmental and social performance.

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(ii) Safeguard Requirements 2 (SP2): Involuntary Resettlement – regulates issues related with physical and/or economic displacement, sets requirements to land acquisition and compensation for physical/economic displacement.

(iii) Safeguard Requirements 3 (SP3): Indigenous Peoples – sets requirements how indigenous communities should be dealt with to preserve their cultural and social identity.

SPS 2009 requires either implementation of an Environmental Impact Assessment for greenfield development, or an Environmental Audit for existing activities/facilities. The RG Brand‟s planned project includes expansion of the company‟s existing activities/facilities. Respectively, the planned project is subject to the environmental audit, to satisfy ADB‟s requirements. According to the SPS 2009, when the project involves existing activities/facilities, external experts should perform environmental audits to determine the existence of any areas where the project may cause or is causing environmental and social risks or impacts. If the project does not foresee any new major expansion, the audit constitutes the environmental assessment for the project and delivers information about existing facilities, current and planned activities. Findings of environmental audit and site investigation are used to develop a Corrective Action Plan with the aim to improve company performance and meet required standards. RG Brands Environmental Performance at Corporate Level Environmental performance of the corporation is established at the level to meet national requirement. These requirements mainly include compliance with environmental permit terms, air emission standards and water abstraction terms. Environmental monitoring at facilities according to approved monitoring plan and respective reporting is also required. Management of resources and waste is also regulated by the national law, which sets certain standards for that; however, these are not strict and not always meet best practices. Major issues identified at corporate and facility levels are mainly related with environmental management. These include absence of formalized ESMS, environmental policy, environmental management plans including waste management, pollution prevention, material management, etc. Such documentation and system is not requirement of the national policy, however this is required to meet ADB standards. The existing EHS procedures and documentation partly cover the ESMS. The corporation does not have ESH units, and respective responsibilities are shared between the technical team and facility managers. This group ensures development and implementation of ESH procedures and respective recordkeeping. The company has „Mid-term vision and targets for the period 2012-2016‟, according to which the company plans to improve its EHS performance and get ISO 14000 and OHSAS 18001 for Aksengir, Kosmis, Tealand and ASF plants. Environmental Management at Aksengir and Kosmis Plants

Environmental issues and management activities discussed in the Due Diligence Report include air emissions, soil pollution, water and waste water management, waste management, housekeeping, sanitation activities, fire and emergency planning. Main gaps in environmental management identified for both plants and addressed in the CAP.

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The specific section of report is dedicated to the description of existing situation on sites for proposed project implementation. Taking into account the baseline conditions the impacts on each environmental component are evaluated and mitigation measures proposed for each type of impact. Air emissions – air emissions of the facilities should be in line with the emission standards approved by the state ecological services and regular emission monitoring should be ensured according to the approved monitoring plan. According to the available documentation, air emissions of the plants meet standards and regular air emission monitoring according with the monitoring plan is in place. The new project considers installation of gas generator and new production lines, which will increase the number of air emission sources and their emissions. It is expected that upgrade of the emission documentation will be required for the project. Soil Pollution – soil protection measures including asphalt paving and drainage system are in place in the plants‟ yard. The plants‟ territory is mainly clean; however: At Aksengri Plant - small scale soil pollution with oil products is found near the generator. This area should be reclaimed, cleaned up and polluted material should be disposed in accordance with the Kazakhstan legislation and international best practices. Besides, the plant has two underground diesel tanks of 15 m3 capacity each. The tanks are potential pollution sources. It is recommended to remove these tanks and clean up the territory. If required, a new diesel oil storage facility should be installed above ground, within pollution prevention measures up to best international practices. At Kosmis Plant - Certain risk of soil pollution exists due to poor waste management. Waste collection and temporarily storage is not up to required standard and imposes soil pollution risk. The site needs more handling and cleaning in order to remove and properly store different waste or spare materials, and keep the territory clean and tidy. Risks of soil pollution from neighboring facilities can be assessed as relatively high, since all neighboring facilities are industrial and there is district heating plant in vicinity, which most probably was using either diesel fuel or coke. Water and wastewater – water supply of Aksengir plant is based on ground water. The total capacity of the plant‟s boreholes is 3,600 m3/day. The water extraction rate is managed in accordance with water extraction documentation and monitored using cumulative water meters. Water to the Kosmis Plant is supplied from the municipal system. The plant‟s water consumption comprised 620 ths. m3 in 2012. Water efficiency at the plants is questionable as soon as water minimization technologies (e.g. recycling) are not utilized. Through the facilities do not face water deficit, implementation of water efficiency program is recommended. Wastewater management is similar for both plants. Wastewater is connected to the municipal wastewater collection systems. Quality and quantity of wastewater discharged to the municipal sewer collector is also not controlled, because this is not required by the national law. The plant uses diluted chemicals to ensure production safety; therefore, their concentration in wastewater should be low. However, it is recommended if the facility management investigate possibilities for wastewater monitoring and treatment to be ready for stricter state regulations.

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Waste management – Waste management is at certain standards at the plants. Waste collection points are arranged. Waste disposal is ensured through contractors. Recyclable waste is managed through recycling companies. Waste collection and temporary storage at Aksengir are sufficiently managed; however, this is an issue for Kosmis plant. There are several spots on site where various types of waste and spares are kept mixed. These areas should be inspected and debris removed in order to maintain good housekeeping, material management and waste management. Important is to arrange waste collection sites so that to prevent environmental pollution. Waste management documentation does not exist in the facilities and the management does not have estimates regarding volume of generated waste, or records on waste flow. It is recommended that accurate record keeping of waste flows is established in the plant. The plant management should develop approaches for waste prevention, minimization and recycling, as recommended by best practices. The waste management plan should be developed to ensure proper management of all waste types generated in the plant. Housekeeping - The housekeeping at the facilities is managed in accordance with the Good manufacturing practices and requirements of HACCP system. In general it should be stated, that housekeeping is at good standard and facilities are well maintained. Documentation support to housekeeping activities include job descriptions of employees where all responsibilities are clearly defined and records on implemented sanitation procedures. All mentioned documents have been presented to our team during the site visit. In general, major housekeeping issues are managed at good standard and we do not have any particular recommendations for improved housekeeping. However, the plant management and other designated persons should insure that after adoption of the corporate ESMS housekeeping is upgraded up to required standards. This is likely at least to include improved waste management. Sanitary Management - The sanitation program in the facilities is managed in accordance with the Good manufacturing practices manual and HACCP plan for the facility operation. The production lines are equipped with CIP systems and sanitation is accomplished automatically. Materials used in sanitary purposes are properly stored in accordance with the corporation‟s food safety manual. Only required portions of materials are given to appropriate staff who conducts sanitary cleaning. The production lines have clean sanitary zones, where the entrance for workers and visitors is strictly regulated and all personnel entering to the clean zones have to follow the sanitary rules. There are no major improvements needed in terms of sanitation and cleaning, as soon the factory is maintained at high standard of sanitary. The sanitation is regularly monitored and audited by designated personnel including plant management, technical department and quality management. Records on performed sanitation operations, monitoring and audit are maintained and available. Pest Management - The pest management system is in place in order to meet requirements of the food safety and good manufacturing practices. The factory uses services of specialized company for pest control activities and supplying of chemicals and materials acceptable for food production facilities. Most of areas requiring high pest control standards are equipped with special screens on ventilation systems to avoid the presence of insects inside the plant. In addition there is special UV equipment to control insects. The rat traps are available practically on all territory of the facility and the entire perimeter of building is completely protected from outside. In addition pest control units are located inside the plant. The special maintenance logbook is

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processed with aim to register all activities related with pest control, usage of the chemicals maintenance of traps, etc. Occupational Health and Safety Performance

Occupational Health and Safety system in RG Brands is based on requirements of Kazakhstan legislation and international best practices for food production facilities. The existing HS system and procedures are developed on corporate level, and all facilities are responsible to ensure implementation of the corporate system. On corporate level the health and safety system is managed in line with the HS Manual of the corporation. This document establishes main HS standards for facility operations and creates the basis for HS trainings and inspections. Implementation of procedures delivered in the Manual is obligatory for all units involved in RG Brands operation. In accordance with RG Brands HS system and requirements of Kazakhstan legislation, all enterprises are obliged to maintain safety records. Safety records logbook is available at each site. Personnel regularly attend HS trainings. They are provided with personal closing, footwear and headwear in order to meet required food safety standards and ensure high level HS. All visited premises are provided with warning and information signs, which are inspected during regular HS inspections. Fire- fighting equipment is also provided. The corporation has the action plan for emergency situations, which is approved by top management. The document defines emergency situations and covers practically all scenarios which can happen in all facilities and even outside of production sites. These include accidents, fires, demolition of buildings, floods, earthquakes and transport accidents, terrorist acts and attack (robbing). All employees are aware of described regulations and know how to act in such situations. External Social Performance and Management

External social performance of the RG Brands in the context of the planned investment will include health and safety of potentially impacted communities (Aksengir and Kostanay population), and management of impacts on vulnerable groups. According to the available information, potentially affected communities should not be exposed to significant adverse impacts. Main potential impacts on local community include noise and dust disturbance and safety risks due to transportation operations. These impact factors are managed through vehicle management and safe driving. Considering that all works are planned within the existing footprint and the project does not require additional land acquisition, physical or economic displacement is not envisaged. Also no specific impact on vulnerable groups, including indigenous peoples, is expected during construction and operations. Due to these, in line with ADB Operational Manual, the project is given Category C both for Indigenous Peoples and Involuntary Resettlement. According to provided information, about 30% of personnel in these facilities are recruited from neighboring communities, which could be considered beneficiary for potentially impacted population. Besides the corporation regularly plans and implements social programs for local communities. For instance, a football stadium was built and community roads were rehabilitated in Aksengir. Delivery of ambulance is planned in 2013 for this community.

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Conclusions The Prepared report provides information regarding environmental, social and health and safety performance of RG Brands corporation and production facilities. The environmental and HS performance was screened against national legislation, ADB SPS and best practices. Documentation available on each site was studied in detail, project related production facilities were visited and the main environmental and health and safety issues identified. Major issues identified at corporate and facility levels are mainly related with environmental management. These include absence of formalized ESMS, environmental policy, environmental management plans including waste management, pollution prevention, material management, etc. It should be mentioned that such documentation is not requirement of national policy, however this is required to meet ADB standards. Based on detailed analysis of existing information and site visits, the recommendations were prepared for each plant which will enable improvement of the corporation and plant‟s performance up to the required ADB standards. The time bound corrective action plan was prepared to guide the corporation during the implementation of proposed project (see Table 1). The CAP addresses all major EHS issues identified during DD and reflects all recommendations provided throughout the report text. The CAP delivers assessment criteria for each proposed action to be used for evaluation of achieved results.

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Table 1 Corrective action plan

Description of issues and proposed action

Assessment criteria Implementation schedule

Improvement of Environmental and health and safety performance at corporate level

Modification of corporate structure responsible for HSE issues in order to increase team capability; appoint person responsible for environmental issues at corporate level; clearly define roles and responsibilities of departments and personnel involved in EHS management; establish system for preparation of environmental and HS performance monitoring reports for presentation to lenders

The personnel responsible for HS and environmental issues appointed;

Lender‟s performance report preparation started; Internal monitoring reports including

measures implemented and to be summarized in the six month Environmental and Social Performance Report (ESPR) to ADB

three month after the project launch (May 2013)

Upgrade of formal ESMS system in place, incorporation of environmental issues in existing HS policy documentation, preparation of corporate environmental management plans inclusive pollution prevention, waste management plans; upgrade of the existing plans

Corporate environmental and health and safety policy document prepared and approved;

ESMS system documents updated to include waste management and pollution prevention plans

June 2013

Establishment of updated waste management procedures to include hazardous materials management, establishment of hazardous waste temporary storage areas on site – this should be incorporated in the Waste Management Plan

The waste management procedures in place, hazardous waste temporary accumulation area in place

August 2013

Preparation of golden driving rules for corporate fleet and implementation of traffic management issues

The golden rules and traffic management rules delivered to drivers

August 2013

Establishment of internal environmental auditing of facilities and incorporation with HS auditing activities already in place

The environmental issues included in internal audits; The audit reports available

August 2013

Implementation of raw material usage minimization technologies, especially water saving and energy efficient and cleaner production technologies in the production.

The activities for implementation of water saving and energy efficient and cleaner production technologies in place. The documents available

End of 2013

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Consideration of CO2 and methane emission assessment and monitoring in internal environmental monitoring of the corporation

Methods for assessment of CO2 and methane emissions are identified

CO2 and methane emission monitoring is in place

End of 2013

Verification and implementation of the national legal requirements pertinent to the project, in particular verification if updating of the existing EIA studies and air emission standards are required, and implement necessary actions.

Requirements of national legislation regarding EIA amendment and air emission standards are verified

Respective documentation is updated if required

Prior launching the project

Solving Environmental issues on sites

Decommissioning of the underground fuel storage facility at Aksengir plant with further cleanup of polluted land and if necessary construction of new, above ground fuel storage facility with secondary containment.

The fuel storage facility decommissioned; polluted land removed and disposed appropriately

Efficiency of clean up assessed

October 2013 or prior to installation of new gas generation units

Clean-up and reclamation of generator‟s site, treatment/disposal of removed polluted material in line with national requirements and best practices

Pollution not detected in soil tests after clean up

All removed material disposed according to requirements

End of 2013

Preparation of Environmental documentation required for installation of new equipment at Aksengir plant

The air emission documentation prepared and approved

prior to installation of new gas generation units

Construction of concrete reservoirs dedicated to storm water management in accordance to the requirements set for Aksengir plant.

Four water collection reservoirs in place dedicated for collection of surface run off water

End of 2014

Evaluation of necessity for wastewater pre-treatment prior to discharge to municipal sewer – for both plants

The report on necessity of pre-treatment available; The wastewater pre-treatment plant documentation in place

Prior to installation of new equipment at plants.

Upgrading of waste management at plants to the standard established by the new corporate Waste Management Plan

Waste management at plants are in compliance with Waste Management Plan

Respective recordkeeping and reporting is ensured

August 2013

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Development of improved housekeeping plan for Kosmis Plan

The plan developed and implemented

The plant‟s yard is kept clean and neat

August 2013

Improvement of corporation social performance

Establishment of grievance mechanism inclusive claim recording and registration systems to ensure proper collection of grievances and claims from corporation employees

The grievance procedure in place;

All claims and grievances recorded and addressed

April 2013

Introduce tracking of gender related statistics to assess implementation of gender policy.

If necessary planning and implementation of corrective measures (e.g. vocational trainings for women, gender trainings, etc) to promote gender equality

Statistics enabling assessment of gender policy is readily available.

Corrective actions planned if necessary

August 2013

Establishment of grievance mechanism inclusive claim recording and registration systems to ensure proper collection of grievances and claims from local population



April 2013

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1 Nature of the Project

1.1 Introduction The Present Environmental and Social due diligence Report is prepared by DG Consulting Ltd („Consultant‟) for RG Brands (RGB) Facilities located in the Republic of Kazakhstan. The report is based on a site visit undertaken in October 2012 and documentation provided by the RG Brands management. The site visit was accomplished together with representative delegation of Asian Development Bank (ADB).

The works have been implemented in accordance with the Project TOR prepared by the ADB. The TOR includes following the following:

1. Corporate ESMS Audit and Compliance Audit:

a. Conduct a corporate audit of RGB‟s current Environmental and Social Management System (ESMS) and the company‟s past and current performance against the objectives, principles, and requirements of ADB‟s 2009 Safeguard Policy Statement (SPS). The audit will: (i) assess RGB‟s ability to manage and address all relevant social and environmental risks and impacts of its business and the proposed Project, in particular, the issues identified in the SPS Safeguard Requirements 1–3; (ii) assess RGB‟s compliance record with applicable national and local laws and regulations of the jurisdictions in which the Project operates that pertain to environmental and social matters, including those laws implementing host country obligations under international law; and (iii) identify RGB‟s main stakeholder groups and current stakeholder engagement activities.

b. Conduct an environmental and social compliance audit, including on site assessment, to identify past or present concerns related to impacts on the environment, involuntary resettlement, and Indigenous Peoples. The objective of the compliance audit is to determine whether actions were accordance with ADB‟s safeguard principles and requirements. The consultant will inspect business operation, facilities and activities of RGB in its Aksengir and Kosmis plants as well as visit sample small and medium retail shops.

c. If there are any issues and concerns identified during the corporate ESMS and compliance audit, the Consultant will prepare a corrective action plan (CAP) to address any gaps in the RGB ESMS to ensure that environment and social issues to be addressed adequately. The CAP will specify time-bound measures to achieve and maintain compliance with the objectives, principles, and requirements of ADB‟s SPS and other social requirements within a reasonable time frame. The CAP will be incorporated into RGB‟s corporate ESMS.

2. New ESMS.

In case RGB has no existing ESMS or equivalent environmental and social review (E&S) procedures, the Consultant will assist RGB in preparing an ESMS commensurate to the risks and impacts based on the nature, type, scale, and location of its business operations. The ESMS will incorporate the following elements: (i) environmental (including health and safety) and social policies, and applicable legal and other requirements; (ii) identification of risks and impacts of RGB‟s business operations (materials, processes and services); (iii) organizational structure and staffing including skills and competencies on environmental and social safeguard-related areas; (iv) staff training and awareness; (v) monitoring and measurement of air emission, wastewater effluent, occupational noise, safety inspection, and work

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environment measurement; (vi) audit and corrective action plan, as maybe required; and (vii) reporting arrangement including to ADB.

The requirements outlined in the TOR cover the RGB corporation inclusive the bottling plants of Aksengir located in the vicinity of Almaty City, the south part of the country and Kosmis Plant in Kostanay city, the north part of Kazakhstan.

The main activities of RG Brands include production and distribution of some beverage and snacks. During the last decade of 20th Century, the company established distribution of the products, produced by global brands in Kazakhstan and Kyrgyzstan. The followings global brands are included in RGB portfolio: Johnson & Johnson, SC Johnson, Gillette, Ferrero, Nestle, Reckitt Benckiser, GlaxoSmithKline and Wrigley.

Later on the corporation launched its own Juice production and signed agreement with Pepsico to start production and distribution of Pepsico products. RGB entered into the milk market via acquisition of Kosmis Plant in the north of Kazakhstan; afterwards the agreement was signed with Pepsi Lipton for expansion of activities in soft drinks. Later RGB entered into snack and packaged tea market launching Brand Grizzly.

At last stage RGB has launched Aksengir plant, the largest beverages facility in Kazakhstan. The plant started production of beverages and launched its own mineral water A‟su production.

In order to fulfil requirements of the assignment the consultant team has reviewed all available documentation presented by the facilities as part of environmental and social consultancy work. The results of review and findings collected in the field are presented in details in present report. The Corrective Action Plan (CAP) was prepared in order to enhance RG Brands institutional and technical capabilities to address all environmental and social issues associated with its activities, to ensure that ADB requirements in environmental and social field are met, and to ensure that consortium‟s environmental and social team has capabilities to properly manage environmental and social risks.

1.2 Description of the Proposed Project The RG Brands (RGB) is a consortium engaged with production and distribution of food and beverage products in Kazakhstan and the Region. In particular, the company is a leading producer of milk, juice and other food and beverage products.

RG Brands market study has demonstrated growing demand on the company‟s milk and juice products. Therefore, RGB is planning to expand its milk and juice businesses, to improve production and distribution efficiency. At present the RG Brands juice production is concentrated in Aksengir Plant in the south part of the country and milk production is concentrated in Kosmis Plant (Kostanay) in the north part of the country. Due to this distribution of juice and milk is rather costly and ineffective.

To meet growing demand on its products and make products distribution more effective, the company has planned installation of juice production lines in Kostanay plant and milk production line in Aksengir Plant. The both plants have sufficient space to accommodate additional production lines and production capacity of the plants could be increased without spatial expansion. Besides, dispersion of juice and milk production will enable more effective distribution and penetration in new markets. At the same time the corporation plans to upgrade operations of the both plants through re-equipment to ensure quality and safety of products and operations.

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The project does not envisage construction of new facilities, or spatial expansion of the existing ones. The investments will be made within the existing footprint of the facilities, and accordingly no land acquisition or expansion of facilities geographic borders is considered. Based on the above mentioned, the project is categorized as B for environment1, and C for both involuntary resettlement and Indigenous Peoples.

The project considers the following activities: Component 1 - Upgrade of existing milk capacity and new production Item 11 The item considers development of Milk collection system for Kosmis Plant, which

includes upgrade (purchase) of the milk collecting trucks and reconstruction of milk reception area in Kosmis plant. The item will be implemented step by step during the four years, from 2013-2016.

Item 12 Improving milk processing in Kosmis Plant considering installation of new tanks, milk cooling systems and processing modules. The activities are planned during 3 years period from 2013-2015.

Item 13 Launch milk production in Aksengir Plant inclusive establishment of milk collection infrastructure inclusive cooling system separation and pasteurization equipment – the activities will be implemented in 2015

Item 14 Installation of new gas generation units with installed capacity 2MW and modernisation of existing New gas generator set (2MW) and system modernization in Aksengir Plant

Component 2 - New juice production and upgrade of existing infrastructure Item 21 Juice production improvement upgrade/installation of pasteurization, blending, syrup

preparation sections in Kostanay plant. Works will be implemented in 2015-2016.

Item 22 Installation and launching of New HotFill production at Kostanay Plant which will be implemented in 2013.

Component 3 - Increase efficiency in distribution and production Item 31 Procurement of delivery trucks to increase the distribution fleet. The item will be

implemented during 2013-2014;

Item 32 Provision of coolers to the retail shops which is planned during 2013-2015.

1 A proposed project is classified as category B if its potential adverse environmental impacts are less adverse

than those of category A projects. These impacts are site-specific, few if any of them are irreversible, and in most cases mitigation measures can be designed more readily than for category A projects. An initial environmental examination (IEE), including an EMP, is required.

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2 The Existing Company/Facilities

2.1 The RG brands – corporate level The RG Brands is a leading food and beverage player in Kazakhstan. The Company owns and operates four plants and a distribution network in Kazakhstan with branches in neighbouring countries of the Central Asia. The core business of the corporation was started from distribution of consumer goods and food products. Later on the corporation started own production of beverages, food products, juices and milk. Recently the company installed one major new plant in Aksengir, in the vicinity of Almaty City, which is designed for production of beverages. Later on bottling of spring water was started in Aksengir plant, where a new brand of bottled water was created. The Kosmis Plant, the former milk plant was completely restructured and reequipped for milk production in the north part of Kazakhstan, in Kostanay City. Besides, some plants were launched in Almaty for tea production as well as production of chips. All plants owned and operated by RGB are one of the strongest facilities in Kazakhstan. The location of main production and warehousing facilities within the Kazakhstan is given on Figure 2.1.1

Figure 2.1.1 The location of RG Brands facilities within the country More detailed history of the corporate development, showing exact timeframes for each plant and products is given on Figure 2.1.2.

Kostanay

Almaty

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Figure 2.1.2 RGB Corporate Development history

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Figure 2.1.3 RGB Distribution and logistics

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At the moment the corporation is a diversified player, with a balanced portfolio of complimentary products and strategic focus on product innovation. In the Kazakhstan the Corporation is: #1 juice producer, #1 tea brand producer, #2 player in carbonated drinks and UHT milk brand production, #3 player in potato chips production. The beverage sector of the company includes exclusive bottler partnership with PepsiCo and Pepsi Lipton. The products under both Brands are produced in both major factories operated by the RGB. The distribution network under the operation of RGB covers practically whole Kazakhstan and is quickly expanding in developing markets of the Central Asian countries and the south-east part of Russia. The Corporation is operating number of warehouses in the country – they are mainly located within the production facilities. These include 4 warehouses plus two logistic centres in Kosmis and Aksengir. Besides, the company operates two own and 6 leased regional warehouses. More coverage is ensured through outsourced logistics services. The general scheme of distribution system is presented on Figure 2.1.3. The main transportation of bulk products is managed via rail transport (70%) and 30% by own fleet of large size trucks. In addition there is fleet of distribution vehicles operated by the corporation. 2.1.2 Overview of RGB organizational structure The RGB corporation management is responsible for overall operation of the production facilities, warehouses and distribution network. According to the information provided by RGB the management system, the corporation is headed by the Executive Manager who directly supervises 8 departments including: operations, financial, commercial, marketing, manufacturing, human resources, legal and security departments. Each department, except the human resources, legal and security departments, is managed by Chief Officers. The officers are responsible for their sector on corporate level and they coordinate operations at each production facility on the corporate level. The Manufacturing department is led by the Chief Manufacturing Officer who is in charge of all company production facilities inclusive the packaging and bottling plants in Aksangir and Kostanay. He is responsible for coordination with plants, development of production capabilities inclusive infrastructure, environmental and HS performance of the company, and overall development of production facilities and plants. The development job is shared with Chief Operations Manager who is also responsible for purchasing and logistic issues. Both factories (Aksengir and Kosmis) and overall operation of RG Brands is ISO 9001:2000 certified with company management structure and respective documentation system established in accordance with this internationally recognised standards. In addition the corporation has implemented HACCP system (Hazard analysis and critical control points) methodology in its two major facilities (Aksengir and Kosmis) and obtained Good Manufacturing Practice (GMP) certificate. The HACCP and GMP systems in place are focused towards the highest quality and safety of food products produced. The Corporation was also awarded the highest quality certificate of Kazakhstan “Altin Sapa” indicating the leading position of its products within the Kazakhstan. The organisation chart of RG Brands is presented on Figure 2.1.4. As the organization chart shows, there is no special structure at the corporate level, which is responsible for EHS issues; however other structures including Manufacturing, HR and Security departments are sharing respective responsibilities, partly covering the EHS field.

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Figure 2.1.4 Corporate organization Chart

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2.2 Aksengir Plant The facility in Aksengir was built by RG Brands as a greenfield development project in the vicinity of the Aksengir Settlement. The plant is located about 70 km northwest of Almaty City. The plant is designed for production of non-alcoholic beverages and juices. The goods produced in Aksengir plant include:

Natural Juice in Tetrapack packaging – Gracio;

Nectars in in Tetrapack packaging - Da-Da and Nectar Solnechniy (Солнечный);

Juice in PET – Gracio;

Nectars in PET - Da-Da-Day juice drinks;

Drinks in PET - Lipton Ice Tea, Pepsi, Mirinda, 7Up;

Mineral Water in PET - ASU and Aquafina The plant‟s construction started in 2006 and was launched in 2009 after infrastructure was developed and bottling and packaging lines were installed. The plant is a modern facility, with multi-functional production-and-logistic complex, and allows RG Brands to increase production capacity and to consolidate production capabilities on one site. It has increased logistic effectiveness and infrastructure quality of the whole company. The total area of the complex is 210,000 sq.m, with more than 60,000 sq.m. of production and warehouse areas. Aksengir provides itself with the necessary electricity and steam, and sources water from own boreholes, so it is fully independently operating infrastructure. In particular, the utilities of the plant have the following operational parameters:

Boiler for CO2 generation - one 5.8 MW unit

Gas boiler for steam generation – operational, 6.5 MW and 10 t/hr steam capacity

Gas boiler for steam generation – operational, 3.3 MW and 5 t/hr steam capacity

Gas/diesel boiler for steam generation - stand-by, 3.7 MW, 6 t/hr steam capacity

Groundwater boreholes – 3,690 m3/day total capacity. The production lines installed are following:

Production of carbonated beverages and water on 4 lines with the total capacity of 80 t/h of bottling;

Production of juice drinks and ice-tea on 2 lines with total capacity of 25 t/h.

Production of juices and nectars on 5 lines with total production of 32 t/h. The mentioned lines are produced by the worldwide leaders of the food production and packaging equipment producers: Tetra Pack, Sidel, Krones and KHS. The plant has access to railway lines, so most of the raw materials and products are transported through railway network. The general view from Satellite and layout of plan is provided on Figure 2.2.1 and Figure 2.2.2. The main production building is split on two main parts dedicated to the PET or Tetra pack packaging sections, in order to avoid crossing of the main streams of raw materials and final products. The central corridor is used for access road by transporters and forklifts in order to ensure stabile and normal operation of production lines. The same corridor connects the

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bottling and packaging facilities with main warehouse, where the final product is stored. In separate building there are Tea packaging and Chips production facilities. The auxiliary infrastructure includes power generation units working on natural gas, carbon dioxide production and purification plant and boiler house. The main power supply is based on medium voltage connection line. The facility operates its own power transformers shown on the layout plan.

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Figure 2.2.1 Location of Aksengir Plant on Satellite Photo

Beverage and juice production halls

Tea and Chips Production site

Warehouse

Railway Shuttling line

Raw water boreholes

Boiler house, CO2 plant

Power generator

Wastewater pumping house

Water Reservoirs

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Figure 2.2.2 General Layout of Aksengir Plant

2. Juice Packaging hall

1. Pepsi Bottling Hall

4. Tea and Chips Production site

3. Warehouses

1. Pepsi Bottling hall 2. Juice Packaging hall 3. Finished product warehouse 4. Tea, Chips production hall 5. Power Generation Unit 6. Carbon dioxide plant 7. Boiler house 8. Borehole hut 9. Borehole hut 10. Borehole hut 11. Transformer house 12. Security Booth 13. Wastewater pumping station

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The plant‟s water supply is based on underground water sources. Three boreholes are drilled on site and extracted water is supplied to the production facility for production, household needs, boiler house water supply and for fire-fighting reserve. The underground water deposit exploitation is based on hydrogeological conclusions and water extraction documentation. The boiler water is treated in boiler house. The process water treatment facilities are located within the main bottling halls and include several stages of water filtration and purification systems. Capacity of reverse osmosis system is 50 m3/hr, and capacity of ion exchange system is 75 m3/hr. The wastewater system is connected via pumping main to the existing wastewater collection facilities connected to the municipal wastewater systems. There are fuel storage facilities on site, where the diesel fuel is stored and supplied for operation needs, mainly in emergency situations. In particular, the plant has two underground diesel tanks of 15 m3 capacity each. The territory is fully demarcated and secured in order to ensure restriction of unauthorised access to the facility and provide adequate protection to food products. 2.2.2 Baseline environmental conditions in vicinity of Aksengir plant Location The Aksengir Plant is located in the south part of the Republic of Kazakhstan, near Aksengir Settlement of Karasay District, Almaty Province. Karasay District occupies the south-west part of the Almaty Province. The Vicinity of Aksengir plant is indicated on Figure 2.2.3.

Figure 2.2.3 The vicinity of Aksengir Plant

Aksengir Plant

Almaty City

Borolday

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The figure shows area of plant location in connection to Almaty City and Borolday settlement; small villages and settlements are also indicated. Relief and Landscapes The territory of the Borolday district comprises the northern foothills of the Trans-Ili Alatau Mountains (part of the Northern Tian Shan Mountain system) and plain land part of the Kopa-Ili depression. Respectively, topography of terrain significantly varies between the mountain foothills and relatively flatlands of the depression, between 600-3000 m datum. The foothills of the Trans-Ili Alatau Mountains are situated in the southern part of the district. At higher elevations mountainous landscapes are presented with alpine and sub-alpine meadows, followed by forest stipe at lower elevations down to ca. 1000 m. These are mostly virgin coniferous and deciduous forests, part of which belongs to Ile-Altay National Park. Areas at lower elevations, from about 1000 m datum, have undergone human interference as a result of urbanization and agricultural activity. Some large settlements could be found immediately below the forested zone. Mountain brown and mountain chernozem soils are characteristic to the area. The Kopa-Ili depression occupies the north part of the Karasay District. The altitude of this area is around 600-700 m. This area is distinguished with harsher continental climate and low precipitation. Landscapes in these areas are presented by semi-deserts and dry steppes. Chernozem and brown soils in this area are favourable for agriculture. Therefore, this part of the district is intensively developed under agriculture, mostly crop growing and respectively, dominant landscapes are agricultural. These areas are relatively sparsely populated. The Aksengir Plant is built on the Kopa-Ili depression, at 690 m datum. In nearest 15-20 km distance from Aksengir plant the area is mostly flat, sometimes cut with streams and artificial channels. The small depressions related with river and dry crick channels are observed. The area is mostly covered with grass and small vegetation.The plant‟s territory is surrounded by agricultural landscapes. Climate The climate of Karasay District is harsh continental. Mean temperature of the coldest month, January is around (-)6°C – (-)9°C; mean temperature of the hottest month, July is (+)22°C -(+)24°C. Annual precipitation comprises 300 – 500 mm in lower areas, though in mountains it reaches 1000 mm. Hydrology and Hydrogeology Major surface water bodies in the district are the rivers of Kaskelen and its large tributaries Large Almatinka and Lesser Almatinka, and the Great Channel of Almaty. These rivers belong to the Balkash-Alakol Basin. They originate in the Trans-Ili Alatau Mountains and are recharged by snow and glacier melt water. They are characterized with spring and summer floods. The project site itself is away from large rivers. Through some small size creeks could be found in 2-3 km from the plant. The closest surface water body to the Aksengir Plant is a small lake Getisu, which is in ca. 900 m distance.

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Groundwater aquifer used for the plant‟s water supply is a part of the Borolday groundwater deposit, which on its hand belongs to the Ili artesian groundwater basin. The aquifer is recharged by dense network of small and large size rivers flowing from the northern slopes of the Trans-Ili Alatau Mountains, as well as relatively high atmospheric precipitation in these mountain foothills. Due to above mentioned the project region is characterized with abundant renewable groundwater resources. Water bearing strata of Borolday aquifer are presented by unconsolidated cobble, pebble and sand. The aquifer is slightly pressurized. Groundwater table level comprises 7-44 m. Water yield of boreholes varies greatly depending on construction of boreholes and extraction system. The low flow boreholes can provide 0.2 l/sec and high productivity can reach up to 4 l/sec with significant drawdown of water level. The static level of groundwater is between 10-20 meters depending on location of the borehole. Groundwater for the Aksengir Plant is extracted from 150 m depth. Water yield of the Aksengir Plant‟s borehole is 63 m3/hr. Ecology Flora over the Kopa-Ili depression, which is distinguished with dry climate, is presented by mid-mountain semideserts and dry steppes in which wormwood, feather grass, and fescue grow in chestnut soils. Riparian forests (dominated by willows) could be found in river valleys. Foothills of the Trans-Ili Alatau Mountains starting from 800 m altitude up to 1700 m are covered with meadows developed over chernozem and deciduous forests. 1500 - 1700 m zone is presented with a belt of subalpine meadows and coniferous forests, in which the Tien-Shan spruce, silver fir and juniper grow. Above 2800 m spread alpine meadows with low grass and shrubbery. The fauna of steps includes many rodents (gerbils, field mice, and tolai hare) and predators (wolves, foxes, and badgers). The reptiles include snakes, turtles, lizards, invertebrate phalanx, and karacurt spiders. Lynx and snow leopard live in the mountains. Part of mountainous forests in the Trans-Ili Alatau Mountains is protected and included in the Ile-Altay National Park. The project area is not distinguished with flora and fauna biodiversity, as soon the territory is intensively developed under agriculture and industrial facilities. Only some islands of dry steppe vegetation and fragments of riparian forests in river valleys could be found in this area. Only synanthropic fauna species could be found near the project site due to intensive anthropogenic load. The Ile-Altay National Park is in over 25 km distance. Air Quality Some data about the baseline air quality for the project surrounding are available in the Aksengir Plant‟s EIA (2010). These air quality characteristics are provided in Table 1 below.

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Table 2.2.1 Baseline air quality for the Aksengir Plant

Pollutant Baseline

Concentration, mg/m3

Maximum Permissible Concentration (MPC),

mg/m3

Portion of MPC

Particulates 0.265 0.5 0.53

Sulfur dioxide 0.0145 0.5 0.03

Carbon monoxide 2.48 5.0 0.5

Nitrogen dioxide 0.066 0.085 0.78

As the table shows, air quality in the project area is quite good. Air pollution sources in the project area are rather limited as the territory is sparsely populated and mostly agricultural. Table 2 provides air emission values for the Aksengir‟s existing operations, as of Quarter 3 of 2012 and emission limits established for the plant. As the table shows, actual emissions of the plant are far below the limits set for the facility. Table 2.2.2 Emissions of air born pollutants as of Q3 2012 according to the plant’s

air monitoring data

Pollutant Pollutant emissions limit, t/year

Actual emissions, t/year

Acetic acid 29.1466 1.1695

Nitrogen oxide 8.1799 1.1124

Benzapyrene 0.0000135 0.0000035

Carbon monoxide 129.89 13.3308

Mineral oil 1.01 0.2115

Sugar dust 0.7282 0.11765

Food dust 0.212 -

Caproic acid 0.0144 -

Chloramine 0.0834 0.0144

Manganese and its compounds 0.0022 0.00048

Soot 0.1258 0.0109

Propanol 0.0234 -

Hydrogen peroxide 0.0221 0.0044

Ethanol 0.0577 0.0133

Flour dust 0.0016 0.0004

Hydrocarbons limit. C12-19 0.8336 0.1556

Inorganic dust 70-20% 0.0034 0.000685

Acrolein 0.0021 0.00042

Iron (II, III) oxide 0.0144 0.00314

Monoethanolamine 0.001 0.00006

Freon 0.0284 0.003275

Vegetable oil 0.0001 -

Caustic soda 0.002 0.00005

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Soda dust 0.0024 0.00012

Nitrogen dioxide 50.5676 6.9028

Sulfur dioxide 2.2059 0.1232

Formaldehyde 0.0244 0.00452

Azotic acid 0.0004 0.0001

Sulfuric acid 0.0053 0.000114

Ozone 0.0263 0.00004

Ethyl acetate 0.0012 0.0003

Acetaldehyde 0.0006 0.000135

Fluoride gaseous compounds 0.00001 0.000003

Hydrogen sulfide 0.0385 0.1378

Total 223.0044 23.318096

Socio-Economic Environment

Population. Almaty Province is one of the most densely populated parts of Kazakhstan. Its population is over 1.5 million people and average density of population is 13.4 people per km2. However, population is distributed rather unevenly there. About 49% of population lives in Almaty City. Population density varies between 0.3 inhabitants per km2 (in desert areas) and 100 inhabitants per km2 for Almaty City and suburbs. The urban population makes up 60 percent of the population. The greater part of the population is concentrated in the foothill zone - 500-900 m datum. Population is multinational, ethnic groups are presented by Kazakhs, Russians, Ukrainians, Uigurs, Koreans, Tatars and others.

Population of Karasay District comprises 170 495 people. Among them major ethnic groups are Kazakh - 58%, Russian - 22%, Turks - 6% and Azeri – 3.5% (Census 2010).

Economy. Economic activity in the Almaty Province is presented dominated by agriculture and industry. Each sector is described below.

Agriculture is represented by crop growing and cattle breading. Crop growing is based on irrigation. Dominant crop is wheat. Other crops include barley, oats, millet, corn, rice, etc. Large areas are covered by orchards, berries, vineyards and vegetable gardens. Crop growing is intensively practiced in the suburban part of Almaty City, in the mountain foothills.

Livestock breading is mainly presented with sheep and goat; though, other livestock include cattle, pig, horse and camel are also kept there. Livestock farming is mostly spread in the northern part of the province.

Industry is represented by metal working, machine building, light industry (textile, leather), food industry (flour milling, buttermaking, winemaking, canning), woodworking, etc. Most of industrial enterprises are concentrated in Almaty City and its suburbs. The Aksengir plant is located in area developed specially to support movement of the industrial facilities outside of Almaty City. As soon the good quality groundwater is available in the area, the food productions facilities especially breweries and soft drink production sites have been moved to Borolday and Karasay districts.

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2.3 Kosmis Plant The Kosmis plant is established in Kostanay City and was formerly the milk processing facility for “KostanaiMoloko” (Kostanay Milk). In 1995 the Turkish-Kazakh enterprise Cosmis was established based on former Kostanay Moloko plant, which in 2001 was overtaken by Nestle Group with aim to improve unpasteurised milk collection and quality of produced goods. The UHT-Milk production was launched at that time. Later, in 2004 the plant‟s owner became DG Brands Kazakhstan, which expanded production covering juices and carbonated beverages. Since then the Kosmis plant has become one of the strongest non-alcoholic beverage production facilities in the north of Kazakhstan. At present the plant produces the following goods:

UHT-milk “Moe” (Моѐ),

natural nectars and Da-Da juice drinks and Nectar Solnechniy (Солнечный) in tetra-package

Pepsi, Mirinda, and 7Up soft carbonated drinks.

The total area of plant is around 54,000 sq.m.; the roofed area (i.e. area occupied by production unit, office buildings and auxiliary facilities) is up to 26,000 sq.m. The warehouses are approximately 25% of the buildings, with the total area equaling 5,500 sq.m. The warehouses dedicated to raw materials are about 1,700 sq.m. The main bottling and packaging facilities are located inside the production building, which also accommodates the main warehouses dedicated to the finished product storage. The special section is dedicated to milk trucks, where they discharge milk to factory reservoirs and the truck cylinders are maintained, washed and disinfected. The raw materials (concentrate barrels) are stored in special area dedicated to juice concentrates. The factory also operates sugar storage facilities (dry warehouse).

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Figure 2.3.1 Satellite view of Kosmis plant

Facility Border

Production and warehouse building

Boiler house

Railway Shuttle line

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Figure 2.3.2 View of Kosmis plant

Kosmis Plant

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The factory bottling and packaging equipment consists of the main production lines from Tetra Pack and Krones. Auxiliary infrastructure includes water treatment facilities, warehouse, transformer station and carbon dioxide production plant. Total water use of the Kosmis plant was around 620 ths. m3 in 2012. The power is supplied from Kostanay City power distribution network and electricity consumption for the plant comprised 4.4 GW in 2012; natural gas is also supplied from the city systems and its consumption in 2012 comprised 3.4 mln m3. Wastewater is connected to the city wastewater collection system. 2.3.2 Baseline Environmental and Social information for Kosmis Plant Location The Kosmis Plant is located in Kostanay City, in the northern part of the Republic of Kazakhstan. Kostanay City is the capital city of the Kostanay Province, which borders the Russian Federation. Kostanay with the total area of 197 thousand square kilometers is one of the biggest provinces of Kazakhstan. Kostanay City is built in the northern part of the province. The Plant is located in Industrial part of the city located to the north from city centre.

Figure 2.3.3 Kostanay Plant location within the city

Aksengir Plant

Industrial Area

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Relief and Landscapes The Kostanay Province occupies the south-east part of the Siberian Lowland and the Turgai Plateau, which is bounded by the Southern Urals and the Mogudzhar Mountain Range from the west and so called the Kazakh Melkosopochik (low mountainous area) from the east. Mean elevation of the plateau is 200-300 m above the sea level. The Turgai Plateau is formed by marine and continental clay and sand deposits of the Paleogene and Neogene. The northern plateau is weakly dissected with low hills, ridges and shallow lake basins. The southern part of the plateau is dissected by a system of deep depressions. The plain is cut by a network of ravines and valleys formed by dried-up rivers. Salt lakes are found in gently sloped sinks. The northern part of the plateau is presented with steppe zone. The southern plateau belongs to the semi desert zone, used for pasture. The city is situated within the steppe area, the landscape is flat. The plant is located in northern part of the city dedicated mostly for industrial facilities. Climate Climate of Kostanay Province is dry continental, with strongly pronounced seasons. The climate is increasingly dry to the south. Average temperatures for the coldest month, January is from (-)18°C to (-)19°С, meantime average temperature of the warmest month, July comprises (+)19°C – (+)22°С. In the winter the temperature can fall to (-)30°C-(-)35°C and in the summer it may reach (+)35°C-(+)45°C. Annual amount of precipitation is 300–350 mm in the northern areas. The southern part of the province is even dryer and precipitation there is as low as 240- 80 mm. Part of these precipitates as snow. Snow cover duration is 5 months. Due to thin snow cover soil freezes down to 1.6-1.8 m. The plant growing season is about 150 to 175 days in the north and 180 days in the south. The region is known for strong winds, which are most pronounced in winter. Annual mean wind velocity is 4.5-5.1 m/sec. Hydrology and Hydrogeology Hydrologic network of the Kostanay Province is mainly presented with the Tobol River basin. In total around 300 small rivers are reported there. The Tobol River is a transboundary river, which flow in the Russian Federation downstream. The catchment of the Tobol River is 426 000 km2 and its major part is in Kostanay Province. The river length comprises 591 km on the Kazakh part. The river recharge area comprises the eastern slopes of the Southern Ural and Turgay Mountains. Major tributaries of the River Tobol are Ui, Iset, Tura, Tavda and Ubagan. Several reservoirs are built on the river, including Verkhnetobolskoye, Karatomar and Amangeldy Reservoirs. The Region is known for small size shallow lakes. Over five thousand lakes are recorded located in the region. The biggest of them are Kusmuryn, Teniz, Koibagor, Akkol, Sarykol and Alakol.

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Certain groundwater resources are available in the Kostanay Province; however, their recharge rate is rather low due to desert terrain. Groundwater resources are intensively used for water supply. Water supply of Kostanay City and respectively the Kosmis Plant is based on Amangeldinsky water basin (estimated resources of the deposit is 6.7 million cubic meters) and Kostanay deposit (estimated exploitable stocks - 33.5 million cubic meters). Ecology The northern part of the province is presented with steps with chernozem soil. These territories are very favorable for agriculture and are completely farmed. The southern part of the province is partly semi-desert; through, some forest lands with total area about 270 ha could be also found there. Forests mostly grow over the Southern Urals, the Mugojar Hills and the Tobol River floodplain. Riparian forest is mainly formed by willow, pseudo-acacia or Siberian pea tree (Caragana microphyla). Shrubbery is presented with wild cherry (Cerasus chamaecerasus) and the dwarf almond (Amygdalus nana), which grow over the hill slopes. Steppe vegetation is dominated by feather grass (Stipa pennata). Deserts and semi-deserts is covered with congener (Stipa capillata), wormwood (Artemisia fragrans, A. monogyna). Steppe and desert fauna is presented with rodents: jerboa (Dipus jaculus), marmot (Spermophilus rufescens), tarbagan (Arctomys bobac). Steppe fox (Canis corsac) is common for these areas. Occasionally could be encountered saiga antelope. Air Quality Comprehensive air quality baseline is not established for Kostanay City. Very scant information is available air quality. According to the Overseas Environmental Cooperation Center of Japan (2006), various air born pollutants were monitored in Kostanay City during 2003-2005. These pollutants include carbon monoxide, NOx, SO2, particulates, lead, copper, etc. According to the monitoring results, ambient air pollution index for Kostanay City reduced from 3.6 to 3.3 from 2003 to 2005; to compare, the air pollution index averaged for the country comprised 5.9 in 2003 and increased to 6.2 in 2005. The Concentrations of all pollutants except carbon monoxide and nitrogen dioxide were found within permissible limits. Table 3 gives values of daily mean concentration of carbon monoxide and nitrogen dioxide for 2005 for Kostanay City. As the table shows, nitrogen dioxide pollution could be considered an issue for the city, as mean maximum concentration of these pollutants 3.4 time exceeded MPL and exceedance rate comprised 16%. According to the study, main air pollution sources in the city were considered to be energy generation and city transport.

Table 2.3.1 Ambient air pollution indicators for Kostanay City (as of January-September 2005)

Pollutant

MPC, mg/m3

Daily Mean Concentration

Maximum Concentration

% of excess

over the standard

Daily Mean

Per hour mg/m3 In MPCs mg/m

3 In MPCs

Carbon monoxide

3 5 1.5 0.5 23 4.6 1

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Nitrogen dioxide 0.04 0.085 0.06 1.5 0.29 3.4 16

Table 2.3.2 provides air emission standards established for Kostanay Plant‟s current options. According to the plant‟s air emission modelling ground level concentration of these pollutants are within permissible standard in 100 m distance from the plant. Respectively, the sanitary zone for the plant is established at 100 m. Residential areas from the plant are in about 1 km radius.

Table 2.3.2 Emission norms for Kosmis Plant’s current operations

Pollutant

Air Emission Norms

Maximum Permissible Emission for 2012

Maximum Permissible Emission for 2012-2017

g/sec t/y g/sec t/y

Nitrogen dioxide 0.3145 4.1763 0.3145 4.1763

Carbon monoxide 1.2437 16.6550 1.2437 16.6550

Particulates 0.0002 0.0002 0.0002 0.0002

Manganese and compounds

0.0002 0.0002 0.0002 0.0002

Iron oxide 0.0014 0.0010 0.0014 0.0010

Fluoride containing compounds

0.0000 0.00004 0.0000 0.00004

Monoethanolamine 0.0436 0.9794 0.0436 0.9794

Sodium hydroxide 0.0004 0.0087 0.0004 0.0087

Socio-Economic Data

Population. The population of the Kostanay Province is around 0.9 million. Population density in the province is 4.5 inhabitants per square kilometre. Population of Kostanay City comprises 207,000 and makes 23 % of the population of the province.

As of 2009 the major ethnic groups were presented by Kazakhs (46%) and Russians (28%); minorities are presented by Ukrainian, German, Byelorussian, Tatar, etc.

Economy. Leading economic activities in the Kostanay Province are agriculture and mining industry.

Mostly chernozem soils in the region are very favourable for grain cultivation. The region is the biggest wheat producer in the country. Land cultivation is mainly practiced in the northern part of the region, where climate is not so dry. Livestock keeping is also developed there to certain extent.

The Kostanay Province is rich in minerals, especially iron ores, brown coal, asbestos, bauxite, gold, fire-resistant and brick clay, flux and cement limestone, glass sand, a building stone, etc. Mining in the regions is being developed since the 1950s.

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2.4 Other production sites and distribution network 2.4.1 Tealand Plant The Tealand plant was launched in 2004, when RG Brands acquired the Tealand production site and shifted tea production to mentioned facility. The facilities have been upgraded in 2005 after the significant investment in the facility and installation of new equipment. Later on the tea bag production lines have been installed in the facility, and new type of produces was launched. The tea bag production was established on completely new production line in 2005. Later the lines have been installed in 2009 and 2010 to increase production capacity and improve the product quality. The tea production facility is located in industrial area of Almaty city. The total area of plant is 2800 square meters with efficient plant area of 2000 square meters. There are 7 production lines in the facility, the first tree is producing packed leaf tea in different sizes from 50g up to the 500g packs (in total 65mln packs/year) producing tea brand Piala; The lines 4-6 are producing tea bags in different format (25 and 100 tea bags in the pack) in total with capacity of 7 million packs/year and smaller capacity tea bag production line with production capacity 0.7 million packs/year. 2.4.2 Almaty Snack and Food Plant (ASF) The Almaty Snack and Food Plant was acquired and launched in 2005. In 2007, the plant started production of the brand “Grizzly”. There is only one line for production and packaging for the chips. The total area of plant site is 10,000 square meters and production building is occupying 1,400 square meters. At present the production capacity of the plant is utilized only at low percentage, however RGB is planning to increase the utilization of installed line capacity. The Tealand plant and Almaty snack factory were not visited during the site visit. However documentation available at the corporate level was reviewed. 2.4.3 The warehouse infrastructure The warehousing infrastructure of RG Brands includes storage facilities at Aksengir and Kosmis Plants. They have been described in previous chapters. RG Brands also operates own logistic centres in Ust-Kamenogorsk, Kizil Orda, Pavlodar, Taldikorgan, Uralsk and Bishkek. The total capacity of the storage area is around 12,000 pallets. RG Brands does not operate their own retail structures and goods are delivered to the different retailers around the country. In some cases, mainly in large size supermarkets the stands and coolers are supplied by RG Brands distribution in order to promote sales of the products. In other cases the products are supplied to the shops based on agreement. Shops are responsible for proper handling and storage of supplied goods; however, the RG Brands distributors ensure supervising and controlling over the process. In case of any non-compliances to requirements from the retailer, RG Brands has rights to cancel the supply to specific shop.

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During the site visit we visited few supermarkets, small retailing shops and food markets. The main purpose was to understand how the distribution and retailing process works and what are the main problems or circumstances important in terms of Environmental and HS performance.

2.5 Potential Impact Area Aksengir Plant Aksengir is a small settlement near Almaty City, in ca 70 km distance from it. Kazakh and Russian comprise main population of the settlement. The Aksengir Plant is situated in an isolated area, surrounded with agricultural lands from the northwest to the southeast. Sparse population of Aksengir surrounds the plant in other areas. In particular, using the Google Earth satellite image about 50 households could be identified the west from the plant. Minimum distance between this area and the plant‟s territory comprises about 200 m. Brownfield sites and some other industrial facilities separate the plant and the community in this direction. Another small populated area of Aksengir is located the south from the plant, about 250 m from the plant‟s territory. A railway and its shuttling line separate the population and the plant. Kosmis Plant

Kosmis Plant is built in Kostanay City. Kostanay City is the center of Kastanay Region, in the north part of the country. Population the city is over 200,000 people. Population is dominated by Kazakh and Russian people. The Kosmis Plant of the RG Brand is located in the northeast outskirt of the city, in the industrial area. The plant is surrounded with industrial facilities from all directions. Closest residential houses are in about 500 m distance from the plant.

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3 Regulatory Requirements

3.1 National Legislation The main law of the Republic of Kazakhstan regulating environmental issues is the Environmental Code, which was adopted in 2007. The Code regulates many aspects of environmental protection and management, including environmental impact assessment procedure. According to Article 36 of the Environmental Code, environmental impact assessment is obligatory for all types of businesses and activates, which are likely to have direct or indirect environmental and social impacts. 3.1.1 The Environmental impact assessment Existing facilities are subject to EIA and assessment studies were implemented for all facilities; Besides, article 44 of the Code stipulates that any upgrading of existing facilities is subject to EIA, if such upgrade is not envisaged in the initial project documentation. In additions all facilities in Kazakhstan republic having air emissions are subject to the air emission inventory and maximum permitted level limit calculations. Such limits should be submitted to relevant authorities (Usually local representative office of the ministry of environment protection) for approval. If facility is using the raw water from independent water source (different from municipal water supply), all facilities are obliged to have all documentation regarding water extraction and wastewater discharge. In our case Aksengir plant is using the underground water source located on the same parcel as plant. Accordingly the documentation related with ground water extraction is on site. 3.1.2 The air emissions In terms of air emissions, the emission limits are established for each facility in accordance to the actual situation with air emissions, height of emission sources etc. The countrywide requirements for each pollutant are established only for ambient air, and each facility is responsible to ensure, that at the border of Sanitary zone of facility, the maximum levels of pollutants should not exceed established norms during the most unfavourable climate conditions for pollutant dispersion. This methodology is common for post Soviet countries. In accordance to the technical characteristics of pollution sources the dispersion is simulated using the specific software. The methodology for calculation of maximum emission levels are published in the following document approved by the minister of environment. The new rules were launched in 2012 by the order of the prime minister. The order is dated 11/06/2012. (Приказ Министра охраны окружающей среды Республики Казахстан от 16 апреля 2012 года № 110-п). The calculations are based on existing baseline pollution levels plus cumulative effect of the emission from specific enterprise. The modelling includes variation for wind directions and maximum speed. Usually the wind roses for each specific areas are included in calculations to define which conditions are less favourable. The sanitary – epidemiologic norms for atmosphere air in the cities and populated areas are set by the ordinance of the Kazakhstan Republic Government in 2012. (Постановление Правительства Республики Казахстан от 25 января 2012 года № 168 Об утверждении

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Санитарных правил «Санитарно-эпидемиологические требования к атмосферному воздуху в городских и сельских населенных пунктах, почвам и их безопасности, содержанию территорий городских и сельских населенных пунктов, условиям работы с источниками физических факторов, оказывающих воздействие на человека). 3.1.3 The waste management The waste management in country is regulated by the environmental law mentioned above. The household waste should be collected by authorised municipal companies responsible for collection and disposal of the city household waste. The hazardous and specific wastes should be managed in accordance to the hazard class of each substance or material to be disposed. The companies operating on the territory of Kazakhstan are responsible for collection and proper temporary storage of material on site and responsible for removal, transportation and disposal of the wastes in accordance to Kazakh rules. Hazardous waste management should be accomplished by the authorized companies having the special permission for implementation of such work. 3.1.4 Water extraction or supply The rules for usage from groundwater resources are regulated by the Kazakh Water code. The license is issued for the certain amount of water to be exploited per day and per year. The underground water sources should be protected in accordance to sanitary norms. The resources of underground water deposit should be assessed and approved by the state resource committee. The water sage and conditions of underground water deposit is strictly monitored by the regional environmental bodies. The water user is obliged to submit statistical information every year to state authorities regarding the qualitative and quantitative parameters of water used. In cases when the water supply is arranged from public water supply system, the water user has established limits for the quantity of water used and pays to public water supply company in accordance to the actual consumption of water recorded at supply point. The quality of such water is monitored for conformance with the drinking water standards of Kazakhstan. 3.1.5 Wastewater discharge The effluent standards depends on type of the discharge. In most cases, the wastewater is discharged to public wastewater collection system, like in Case of Aksengir and Kosmis plants. The quality of wastewater is managed in accordance to the technical requirements for operation of wastewater systems. Usually the payment to wastewater discharge is covered together with water supply in accordance to water consumption. .

3.2 The ADB requirements applicable to funded projects The main ADB requirements pertinent to the RG Brand‟s planned development are given in the ADB‟s Safeguard Policy Statement (SPS) 2009, which delivers a set of requirements that borrowers/clients are required to meet to address environmental and social impacts and risks. The Policy Statement is developed with the aim to help borrowers/clients and their projects to achieve the desired outcomes and meet required standards.

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According to the SPS 2009, ADB should ensure borrowers‟/clients‟ compliance with the requirements throughout project planning and implementation. This should be achieved through environmental due diligence and supervision of their activities. The SPS 2009 comprises the following environmental and social safeguard requirements:

(i) Safeguard Requirements 1 (SP1): Environment – sets overall environmental and social standards that should be meet throughout project planning and implementation to ensure good environmental and social performance.

To meet the ADB’s SPS 2009, the RG Brand’s current and planned activities should comply with the requirements of the SP1. In line with the ADB’s Operations Manual (2010), the project is given Category B for Environment.

(ii) Safeguard Requirements 2 (SP2): Involuntary Resettlement – regulates issues related with physical and/or economic displacement, sets requirements to land acquisition and compensation for physical/economic displacement.

Physical or economic displacement will not have place in case of the RG Brand’s planned development and according to the ADB’s Operation Policies (2010), the project is given Category C for Involuntary Resettlement.

(iii) Safeguard Requirements 3 (SP3): Indigenous Peoples – sets requirements how indigenous communities should be dealt with to preserve their cultural and social identity.

No indigenous communities were identified in close proximity to the planned activities. Respectively, this SP is not pertinent to the RG Brand’s project. In line with the ADB’s Operations Policy (2010), the project is assigned Category C for Indigenous People.

The objectives of ADB‟s safeguards are to:

avoid adverse impacts of projects on the environment and affected people, where possible;

minimize, mitigate and/or compensate for adverse project impacts on the environment and affected people when avoidance is not possible; and

help borrowers/clients to strengthen their safeguard systems and develop the capacity to manage environmental and social risks.

To achieve these objectives the SPS 2009 requires either implementation of an Environmental Impact Assessment for greenfield development, or an Environmental Audit for existing activities/facilities. The RG Brand‟s planned project includes expansion of the company‟s existing activities/facilities. Respectively, the planned project is subject to the environmental audit, to satisfy ADB‟s requirements. According to the SPS 2009, when the project involves existing activities/facilities, external experts should perform environmental audits to determine the existence of any areas where the project may cause or is causing environmental and social risks or impacts. If the project does not foresee any new major expansion, the audit constitutes the environmental assessment for the project and delivers information about existing facilities, current and planned activities, findings of environmental audit and site investigation and areas of concern, which are used to develop a corrective action plan with the aim to improve company performance and meet required standards.

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4 The RGB Environmental Performance

4.1 Corporate environmental policies and management Corporate environmental policies and management of the RG Brands have been reviewed in respect of the relevant ADB Safeguards Policy Statement (SPS) 2009 Safeguards Requirements (SR) 1 on Environment. This was accomplished by the review of information provided by the RGB, and a visit to the Kosmis and Aksengir facilities. The visit took place in October 2012 together with Bank representative delegation. The site visits to each plant included: walk through audit, interviews with management representatives and employees, verification of documentation on site, review of environmental, health and safety issues in terms of compliance with local regulations, banks standards and best practice. According to the obtained information, corporate environmental, health and safety policy document is not available and approved; however, the company representatives presented „Mid-term vision and targets for the period 2012-2016‟ with step by step approach to reach overall target – ISO 14000 and OHSAS 18001 in Aksengir, Kosmis, Tealand and ASF plants, that is to ensure world class safety level and established „green philosophy‟ in the company. This is the main corporate document, which is used as a basis for upgrading of environmental, health and safety management in the corporation. This plan for development of corporate HSE performance was presented by the corporation management during the October visit. The main items of the plan are given on Error! Reference source not found.. It should be stated that even though there is a lack of management documentation at corporate level, the specific actions and plans aiming at improvement of environmental performance of the whole corporation are in place, and in most cases are effectively implemented and monitored. The system and actions used in the corporation and facilities are described in detail in chapters below; recommendations are given in order to ensure that all system works in complex way and all implemented measures are logical continuation of each other. The brief summary of the major findings and recommendations regarding the corporations HSE performance and planned improvement is provided below. Health and Safety Performance During the period 2012-2013 the corporation will develop a health and safety manual for operation of all facilities. This mostly will cover required standards to be maintained by the employees and improved safety conditions in operation. It is expected that all staff will be trained on required health and safety rules, provided with specific and safety footwear and clothing. All personal protective equipment (PPE) will be inspected and updated as required in order to ensure, that all employees are properly dressed. The manual will provide golden rules to the employees in accordance with general safety of operation. This information will be provided to the staff who will also receive specific training in safe operation rules. An important component of the plan is provision of information and safety signs on site. The signage location and types will be defined in advance by the safety teams on site. It was noted during the site visit was that in most cases safety signs were already provided. This definitely has an important role in terms of passive safety. The important task for the first stage is assessment of all facilities in terms of safety and establishment of system for safety auditing by internal and external auditors. This will definitely contribute to establishment of high level safety at corporate level and later on sites.

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Previous audit reports were requested. However, these were not available, as there were no formal HSE audits implemented in past. It is recommended to make future audit reports available at all sites and keep copies in the head office as well. The system implemented at corporate level during the first step will be spread to whole production/ distribution network at stage 2, which covers period of 2013 -2014. This will increase safety in all units involved in operations and will contribute to establishment of better standards in the country. For the period of 2014 the implementation of OHSAS 18001 standard in Aksengir plant is planned as a pilot project. After successful implementation this system will be expanded to other production facilities, covering Kosmis, Tealand and ASF plants in 2015.

Figure 4.1.1 HSE development plan

Environmental Performance Environmental performance of the corporation is established at the level to meet national requirements. These mainly include compliance with environmental permit terms, air emission standards and water abstraction terms. Environmental monitoring at facilities according to approved monitoring plan and respective reporting is also required. Management of resources and waste is also regulated by the national law, which sets certain standards for that; however, these are not strict and not always meet best practices. Kazakhstan‟s environmental law does not require ESMS. Respectively, the corporation does not have and maintain formalized ESM system; though, existing EHS procedures and documentation partly cover the system.

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As mentioned, to upgrade environmental performance the corporation has developed „Mid-term vision and targets for the period 2012-2016‟. For 2013 it is planned to implement energy saving program in the facilities. RG Brands is large energy consumer, as considerable energy resources are required to operate boilers, pasteurization units, other gas and electrical devices, ensure housekeeping etc. We do believe that there is significant potential for improvement of overall energy consumption per unit of finished product. This will improve environmental performance on one hand, and on the other hand will enable production facilities and warehouses to minimize their operation costs and accordingly reduce self-price of finished products. In terms of waste management, the improvement is definitely needed. The initial actions towards waste minimization and waste recycling are already in place, as required by legislation of the Kazakhstan Republic. However it is recommended that the waste management be upgraded to higher level. Special attention should be devoted for improvement of hazardous waste management. Waste minimization actions are required to improve operation parameters and reach the waste minimization targets set internationally for similar type operations. For improving of environmental performance it is planned to implement ISO 14000 in Aksengir plant in 2015. This will be challenging job; however, we had an impression that step by step approach taken from present date will enable plant to reach mentioned standards. Similarly, adoption of ISO14000 is planned in Kosmis, ASF and Tealand plants in 2016. RGB needs to develop the environmental and social management system (ESMS) and respective policy statement. The ESMS should be adopted at corporative level and implemented at each facility. The ESMS can have pyramid structure and can be managed top-to-down to the particular plants and distribution units. The ESMS should consider main principles established by ISO 14001, including management, monitoring and auditing plans. The ESMS should incorporate the corporation‟s current EHS objective, targets and programs discussed above. The existing ESH procedures and practices including EHS procedures, recordkeeping, monitoring and reporting should be incorporated in the new system. However, the ESMS should upgraded to ensure that it includes all aspects covered in recommendations and corrective measures proposed below. Formalized ESM system inclusive all pertinent documentation and specific plans should comply with national legislation and ADB requirements. It is also recommended to upgrade the ESMS complying with ISO 14000 requirements to ensure gradual achievement of the corporate target. Trainings on new ESMS should be delivered to the personnel involved in environmental and social management to ensure that they properly understand principles and requirements of ESMS and are capable to properly implement relevant procedures. The detailed information regarding situation in the plants and how it can be developed is provided in chapters below.

4.1 EHS Organization and Management As the organization chart (Figure 2.1.4) shows, there is no ESH structure specially dedicated to handle related issues and aspects. Despite this, the staff at corporate level is well aware about the environmental, health and safety issues and effectively management of these aspects. The overall responsibility on EHS falls under the Chief Manufacturing Officer, who is

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supported by technical team and facility managers. This group ensures development and implementation of ESH procedures and respective recordkeeping. Most part of environmental documentation and HS records is kept on site. This is probably correct, as local structures are responsible for EHS monitoring and inspection of production facilities, and accordingly the original documentation should be available there. This is also the requirement of Kazakh legislation. Though EHS issues are managed in RG Brands to certain extent, the company should ensure that roles and responsibilities of departments and personnel involved in EHS management and implementation of ESMS are clearly defined. A clear organization structure in this regard should be established on the corporate and facility levels as well. Besides, the corporation should delver ESMS and EHS trainings to all EHS personnel to ensure that they clearly understand the management system and their role in its implementation, and are aware about EHS aspects in facility operations.

4.2 Compliance to Regulatory Requirements 4.2.1 Compliance to National Regulations The Kazakh legislation does not require presence of formalized ESMS. The requirements for permitting the plants, environmental management and minimization of pollutants released are managed by the specific legislative acts. The environmental monitoring requirements are set by the environmental permit, plus specific regulations are applied to the water extraction, water discharge, waste management, air emissions etc. Whenever the Kazakh legislative requirements differ from the requirements of international conventions ratified by Kazakhstan, then the requirements of these international conventions prevail. The main environmental requirements are set by the Environmental Code of the Kazakhstan Republic, which delivers main principles of environmental management, as well as sets specific requirements and gives detailed description of the system. The Environmental Code regulates aspects of environmental impact assessment and environmental permitting. As described in Section 3.1, all facilities with inherent environmental and/or social impacts are required to have EIA statement and environmental permit - Aksengir and Kosmis plants have these documentation. According to the Environmental Code, if existing facilities are upgraded and such upgrade was not considered in the initial EIA statement, facility operator should ensure implementation of new EIA study, or respective amendment of the existing document; these changes are reflected in environmental/emission permits. To ensure compliance with this requirement RG Brands management and legal entity should verify with respective state authority what procedures are required for the planned project and respectively implement them. The issues related with water extraction, discharge, protection of water bodies etc are managed by the Water Code of Kazakhstan republic. The Water Code provides general regulations in this field. Specific water abstraction terms are regulated through the Water Abstraction Permit. Aksengir Plant owns such permit, which limits water abstraction by the plant by 3690 m3/day. Kosmis Plant takes water from Kostanay Municipal system and does not require water permit. Water is supplied on contractual basis. Both plants discharge wastewater in municipal sewage collectors and wastewater discharge is regulated by contract as well. All facilities operating under the RG Brands have their operation permissions as well as approved documentation by the legal bodies of Kazakh republic, which include the ministry of

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environment protection and regional bodies of the ministry (regional Department of environment). 4.2.1 Compliance to ADB Requirements The RG Brands current activities and proposed project have been screened against requirements of ADB‟s Safeguard Policy Statement 2009, including SR1 on Environment, SR2 on Involuntary Resettlement, SR3 on Indigenous People and Prohibited Investment Activities List. The proposed investment was categorized according to ADB Operation Manual 2010. According to the screening results, RG Brands current business and the planned investment do not envisage any activities included in the ADB‟s Prohibited Investment Activity List. As mentioned, the investment includes improvement of the existing production without spatial expansion of the existing facilities. Land acquisition and/or economic displacement are not required for the project. Due to this and based on the nature and level of the facilities current environmental and social issues, it is expected that the planned investment should not have significant adverse impact on environment and population, and all potential impact could be kept at the acceptable level if properly managed. Respectively, according to the ADB‟s SPS 2009, the project is classified as Category B for environment and Category C for Involuntary Resettlement. Category C is assigned for Indigenous Peoples as well, because such communities are not identified among potentially impacted people. Respectively, according to the ADB‟s policies, the investment does not require Environmental Impact Assessment if such requirement is not set by national law, and potential environmental and social issues should be identified through due diligence procedure.

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4.3 Environmental Management at Aksengir Plant The environmental performance of Aksengir plant was screened against the ADB‟s Safeguard Policy Statements 2009 and guidelines applicable for facilities producing food products, beverages and juices. It should be stated, that the project considers development of the existing facilities through modernization of facilities and installation of new lines within existing structures. The main issue which should be considered within the present project is the launching of milk production at Aksengir plant in 2015. It is also planned to install 2 MW gas generator unit in order to ensure increased production capacity. Taking into account specifics of plant operation it is not considered as a major environmental pollution source and the environmental impacts from the facility are limited to the few types. The planned production expansion is not likely to change significance of the plant‟s current environmental impacts. However, installation of 2 MW gas generator is likely to significantly contribute to the plant‟s air emissions. It is likely that material consumption, waste generation, consumption of electricity, gas and water will also notably increase. The sections below delivers information about current major environmental aspects related with the Aksengir Plant‟s operations. 4.3.1 Atmosphere Air emission Current air emission sources of the plant include the boiler house, carbon dioxide production unit, facility heating system and PET blowing equipment. These major air emission sources are considered and registered in the air emission documentation and Program for Operational Environmental Control for Aksengir plant, approved by the Balakhash-Alakol Department of Ecology in 2011 and valid until 2015. In accordance with the plant‟s EIA the facility has to monitor 29 air pollution sources. The air emission monitoring points includes air ventilation system outlets, PET blowers and production facility ventilators, the workshop for the juice production and production of juice containing materials, ventilation pipes used for emission evacuation from juice packing machines, battery recharge workshop used for recharging the forklifts, blowing machines Sidel and Kronnes, ventilation pipe from CIP section and laboratory complex as well as emissions from compressor units and mechanical workshop.

Figure 4.3.1 Ventilation pipes on the plant building wall

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From the support infrastructure two points are included in the air emission monitoring: those are ventilation pipes for finished products and canteen dedicated for the workers.

Figure 4.3.2 Air ventilation pipe from the production building

Heat production facilities include natural gas fired boiler „Baderus‟ and Loos-s-5000 and boiler produced by the Erensan.

Figure 4.3.3 Carbon Dioxide generation unit with related air emission sources

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Figure 4.3.4 Diesel Generator unit

Air emission from carbon dioxide production unit is generated from exhaust of absorber and ventilation system. There are also diesel generators and gas generator units which serve as emergency units to work in case of power cuts from electric grid. Air emission is addressed by a filtration system or a bag filter with 96% filtration efficiency. The regular maintenance is obligation of Aksengir plant.

Figure 4.3.5 Power generation unit

Main parameters which should be monitored in the plant‟s exhaust gases depend on emission sources. Nitrogen oxides, carbon monoxide, soot and benz(a)pyrene should be

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monitored in case of boilers. Pollutants to be monitored at the outlets of ventilation systems are different for individual monitoring points and depend on purpose of vented space. Ventilation systems monitoring parameters may include ozone, chloramine, iron oxide, ethyl spirit, sugar and flower dust, etc. Respectively, air emission standards are set for these pollutants. In line with the national law, estimation of CO2 emission is not obligatory and CO2 emission is not monitored. The air emission documentation in accordance with local legislation contains only information regarding maximum permissible emissions; however, no emission control methods are advised. According to the Quarterly Report for Q3 2012 on Implementation of Operational Environmental Monitoring, total air emission and emission of each pollutant is within allocated quota for the Aksengir Plant. Despite this, implementation of measures enabling minimization of air emissions is advisable. This could be achieved through improvement of operational management and implementation of cleaner production methods, which will enable reduction of CO2 emissions and prevention of methane leakage. The information regarding air emissions inclusive greenhouse air emissions should be included in monitoring reports, though this is not required by the national law. Installation of new gas generator and production lines will increase number of air emission sources and atmospheric emissions of the Aksengir Plant. Respectively, it is expected that upgrade of the emission documentation will be required for the project. The local contractor should be hired in order to prepare new documentation. The documentation should be presented to the Balakhash-Alakol Department of Ecology and approved for next five years. 4.3.2 Soil pollution Initially when the environmental impacts assessment was conducted, the soil pollution assessment was carried out. No significant pollution was identified at that time. After the plant was constructed, the territory was reinstated and paved, accordingly it is not expected that significant historical pollution exists. With regards to soil pollution prevention, the factory design considers pavement of the territory and drainage of storm water runoffs from the plant‟s territory in the way to minimize the possibility for ground and soil pollution (Figure 4.3.6). Certain chemicals are required for the plant‟s operation. However, their quantities are not large, and they are stored and used inside the facilities. The management of chemicals is accomplished in accordance with the requirements of good manufacturing practices. Wastewater streams generated in the facilities are collected in the drainage system and discharged in the municipal sewage collector. Accordingly soil pollution problems related with those chemicals is not likely. The risks of soil pollution may arise if storm water washes away incidentally spilt chemicals, as well as fuel and lubricants from auxiliary infrastructure installed and operated within the territory.

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Figure 4.3.6 The plant territory, well managed and paved

The possibility of soil pollution through the polluted storm water is discussed in next sub-chapter dedicated to the water management issues.

Figure 4.3.7 The compressor unit is located on special concrete foundation

Specific attention should be given to fuel and lubricants management. The quantity of lubricants required for the plant operation should not be large and can be easily managed. However, the system for collection and management of used oils from different operational units needs improvement. Special dedicated place should be arranged to store used oils and to dispose it to specific organizations authorized for used oil recycling or disposal. An

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alternative measure will be engagement of special contractors for maintenance of equipment requiring oil replacement.

Figure 4.3.8 The top access for underground fuel storage tanks

Another important issue is diesel fuel management. RG Brands does not have truck refueling facilities on site. However, two underground diesel tanks of 15 m3 capacity each are installed to store fuel for generators (Figure 4.3.9). At present the condition and management of diesel storage site is very poor and it can be assumed as a potential pollution source.

Figure 4.3.9 The view of the underground water reservoirs and oil barrels

The best solution for the problem can be improvement or overhaul of the fuel storage facility. In particular, the existing underground diesel reservoir should be removed and disposed properly. The manhole used for location of pump should be demounted as well. Soil under the reservoir and operational manhole should be checked for oil pollution, which is most likely. In this case, the territory should be cleaned up in accordance with a method statement tailored specifically for such operation. If required, a new diesel oil storage facility should be constructed up to best practices. In particular, the fuel reservoir should be installed above ground, within impermeable containment (in accordance with best practice guidelines the containment capacity should be not less than 110% of the reservoir capacity). The secondary containment should be equipped with rain water management system, or it should be placed under a roof.

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Figure 4.3.10 The area polluted with diesel fuel

In addition, there is also soil pollution at the generator site. Soil pollution with fuel and oil materials is clearly visible in this area (Figure 4.3.10). This area should be reclaimed, cleaned up and polluted material should be disposed or treated in accordance with the Kazakhstan legislation and international best practice requirements. The cleanup should ensure that no pollution is in place and the pollution will not move in deeper layers of soil and will not influence groundwater on site. To avoid such problems in future, the evaluation of soil pollution status should be included in internal environmental auditing scope to ensure that pollution is timely detected and adequate actions are taken to minimize impacts. It is also recommended to improve management of waste collection areas. In particular, the soil protection should be ensured in places where the potential pollutants are accumulated. 4.3.3 Water and wastewater management Water supply The water supply of Aksengir Plant is sourced from underground water. Three boreholes are drilled on the territory of Aksengir plant. The sanitary protection zones are organized around the boreholes in accordance with the requirements of Kazakhstan Legislation. In particular, the sanitary protection zones are fenced and all activities, except the activities related with repair or maintenance of the boreholes are restricted within the sanitary protection zones of boreholes. In addition, boreholes security is ensured by the plant security system. Each borehole is cased and equipped with wellheads and equipment required for the normal operation. The flooring inside the borehole hut is concrete. The piping system is standard with equipment including washout valves, manometer and cumulative water counter stamped by the responsible government structure. The boreholes are registered in state register of boreholes under the numbers ##1253, 1254 and 1264. The overall water consumption of plant varies in accordance to the seasonal demand in products. The planned water consumption is estimated as 3,600 m3/day. This amount of water is supplied from two operational boreholes, while the third one is on stand-by. The water extraction rate is managed in accordance with water extraction documentation and monitored using water meters. According to the information provided by the management, the Aksengir Plant has not had any incompliance related with water consumption.

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At present the plant does not face water deficit. However, water efficiency in the plant operations needs to be improved such as use of water minimization technologies (e.g. recycling). In this regard, the facility management should develop and implement water efficiency program to improve its environmental performance. This should be in line with the corporate ESMS and environmental programs.

Figure 4.3.11 The borehole headwork and area inside the borehole hut

Waste Water The waste water from the facility is managed through the local wastewater collection pipework and discharged to the existing wastewater collection system of the region. The household wastewater discharge is not controlled; such requirement does not exist in Kazakhstan. The water quality discharged to the municipal sewer collector is also not controlled, because there are no requirements to the quality of effluent. Process wastewater is mainly generated through water softening at boiler house, water preparation/treatment and washing and sanitation of production hall, lines and equipment. Sanitation production lines have CIP (cleaning in place) systems. Sanitation wastewater is contaminated with chemicals. However, the concentration levels of these chemicals in the wastewater are low as only diluted chemical are used in the process to ensure production safety. In accordance with the environmental monitoring plan of the facility, the significant pollution of waste water is not identified and wastewater monitoring is not included in the current monitoring plan. According to the information provided by the plant management, the plant has never had any noncompliance related with wastewater quality. However, it is recommended if the facility management investigate possibilities for wastewater monitoring and treatment to be ready for stricter state regulations. The storm water from the facility is assumed to be „not polluted‟. Therefore, storm water runoff is discharged naturally to the adjacent areas. It is planned to construct 4 concrete reservoirs to collect surface runoff for irrigation of plant territory and greenery. This will contribute to the efficient use of water resources.

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4.3.4 Waste management Waste management in Aksengir Plant is accomplished through collection points. The main document establishing waste collection and management issues at the Aksengir Plant is „Program for Operational Environmental Control‟ referred to in previous chapters as well. Solid waste from office is collected in waste bins and stored temporarily within the territory of the plant. Then the wastes are removed from site and disposed to the municipal landfill by the „KZ Building Co Ltd‟, a licensed waste management company. The documentation sets maximum time for household waste storage on site in cold period of the year. In warm season the waste is removed from site with higher frequency – practically every day. Low quality products which cannot pass through internal quality control are also disposed through the same waste management company. The food waste from canteen is collected and provided to the local population to feed cattle. Other types of waste generated are packaging materials used for raw material packaging. Unused or extra wood is given to the local population while cartoon and corrugated sheets are re-used for packaging of final product in railway carriages. Metal barrels under raw material are provided to the subcontractor „AsiaAgroFood‟. Cloth from the packaging is returned to suppliers. Additionally the used lamps are collected in special closed bins and disposed by the subcontractor specially assigned for such operation. The mentioned subcontractor is officially recognized by relevant state organizations and has rights for recycling/disposal of such materials. As described, part of waste is reused and other part is disposed to the municipal landfill. However waste management documentation does not exist in the facility and the management does not have estimates regarding volume of generated waste, or records on waste flow. It is recommended that accurate record keeping of waste flows is established in the plant. This will enable planning and upgrading of waste management practices. In particular, the plant management should develop approaches and ways for waste prevention, minimization and recycling, as recommended by best practices. The waste management plan should be developed to ensure proper management of all waste types generated in the plant. The plant‟s waste management plan should comply with the waste management principles and plan adopted on the corporate level. 4.3.5 Housekeeping The housekeeping at Aksengir plant is managed in accordance with the good manufacturing practices and requirements of HACCP system. In general it should be stated, that housekeeping is at good standard and facilities are well maintained. Documentation support to housekeeping activities include job descriptions of employees where all responsibilities are clearly defined and records on implemented sanitation procedures. All mentioned documents have been presented to our team during the site visit.

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All chemicals and cleaning materials used in housekeeping activities are approved and as specified in the food products safety plan. The equipment used for housekeeping is located in specially dedicated areas (Figure 4.3.12) and used only after the permissions for special usage are granted. The areas outside the production buildings also look clean and tidy. These areas seemed frequently cleaned and all collected wastes and materials are managed in accordance with material and waste management practices of the corporation. In general, major housekeeping issues are managed at good standard and we do not have any particular recommendations for improved housekeeping. However, the plant management and other designated persons should insure that after adoption of the corporate ESMS housekeeping is upgraded up to required standards. This is likely at least to include improved waste management.

Figure 4.3.12 The cleaning tools located in special area

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Figure 4.3.13 Indication of dedicated areas on the floor of production facility

4.3.6 Sanitary management The sanitation program in the facility is managed in accordance with the good manufacturing practices manual and HACCP plan for the facility operation. Most of the production lines and units used in food product processing are equipped with CIP systems (cleaning in place). Therefore, sanitation is accomplished automatically in special regime of equipment operation. Materials used in sanitary purposes are also adopted, registered and properly stored in accordance with the corporation‟s food safety manual. Only required portions of materials are given to appropriate staff who conducts sanitary cleaning.

Figure 4.3.14 The flow management panel with CIP system

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The production lines have clean sanitary zones, where the entrance for workers and visitors is strictly regulated and all personnel entering to the clean zones have to follow the sanitary rules. The toilets and shower rooms are also well maintained in order to fulfill sanitary requirements set for the factory. Access to such facilities is demarcated from the food product production area. All personnel working in clean zones are required to sanitize their footwear, wash hands and wear the cloth in accordance with internal rules.

Figure 4.3.15 The sanitation equipment ready to use

There are no major improvements needed in terms of sanitation and cleaning, as the factory is maintained at high standard of sanitary. The sanitation is regularly monitored and audited by designated personnel including plant management, technical department and quality management. Records on performed sanitation operations, monitoring and audit are maintained and available.

4.3.1 Pest management The pest management system is in place in order to meet requirements of the food safety and good manufacturing practices. The factory uses services of specialized company for pest control activities and supplying of chemicals and materials acceptable for food production facilities. Most of areas requiring high pest control standards are equipped with special screens on ventilation systems to avoid the presence of insects inside the plant. In addition there is special UV equipment to control insects (Figure 4.3.18). The rat traps are available practically on all territory of the facility and the entire perimeter of building is completely protected from outside (Figure 4.3.16). In addition pest control units are located inside the plant (Figure 4.3.17). The special maintenance logbook is processed with aim to register all activities related with pest control, usage of the chemicals maintenance of traps etc. No major improvements are required to implement in terms of pest control.

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Figure 4.3.16 The rodent trap on outer perimeter of the building

Figure 4.3.17 The rodent trap inside the production building

Figure 4.3.18 The insect control UV lamp and entrance of production building

4.4 Environmental Management at Kosmis Plant The Kosmis plant was visited by the DD team as part of the planned activities during the site visit. The Kosmis plant, as it was mentioned previously, is located in Kostanay City. The plant was developed in place of fresh milk processing enterprise. The modern equipment and lines were installed in the factory in order to meet standards and requirements applicable to food production facilities. It should be stated that factory follows high environmental performance

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standards. Details of current activities in environmental field are described in details in subchapters below. The planned upgrade of Kosmis plant envisages improvement of milk collection process, replacement of milk transportation trucks, upgrade of the milk reception facilities; Improvement of milk processing system via installation of new cooling equipment etc. These upgrades are not likely to change the character of the current environmental aspects related with the plant‟s operations. 4.4.1 Atmosphere air emissions Air emissions caused by the factory are similar to the air emissions of Aksengir plant; main stationary sources of air born pollutants are boiler house with two large size boilers, PET blowing equipment and emergency generators of the factory. The plant has documentation for the air emission sources where the detailed information on sources, pollution levels, parameters of chimneys and exhaust pipes are provided. All equipment is natural gas fired. The boilers in boiler house are of modern type and in accordance with the documentation do not cause any significant impact on atmosphere air. Monitoring of air emission sources is required by the national legislation and is implemented in the plant within the frames of environmental monitoring program approved by the regional structures of the ministry of ecology and submitted to latter on regular basis. The statistical data regarding the atmosphere air pollution is calculated based on natural gas consumption and actual production. All required documentation is in place. According to the company information, the plant‟s air emissions are always within the emission standards established for the plant. As in case of the Aksengir Plant, CO2 emissions of the plant are not estimated or monitored, as this is not required by the national law. According to the provided information, certain emission reduction activities are implemented at the plant. This includes regular maintenance of boilers and generators. Some activities were implemented in terms of energy efficiency to increase insulation efficiency of steam and hot water pipes which enables the factory to use the raw materials in more efficient way and reduce air emissions. The plant‟s management should investigate further possibilities to reduce consumption of energy carriers per production unit and further reduce air emissions. The increase of plant capacity and additional equipment will increase the number of the plant‟s emission sources and the total air emissions as more energy, steam and hot water will be required. The plant‟s management should ensure respective updating of air emission documentation and its approval by authorized governmental bodies to ensure compliance with national legislation. It is recommended to estimate CO2 emissions as a result of the plant‟s operations and include this parameter in the plant‟s internal monitoring program.

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Figure 4.4.1 The boiler house of Kosmis plant

Figure 4.4.2 The boiler used for steam production

Figure 4.4.3 The hot water pipes

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4.4.2 Soil pollution The factory is brownfield and historic data regarding soil pollution and pollution prevention measures within the territory is not available. There is no evidence of significant fuel or oil storage on the territory happened in the past. However, there is a railway line entering into the plant territory. Usually railway lines and especially dead ends are considered as sources of environmental pollution due to leakages of fuel and mainly oil. The facility has been processing milk and it is expected that the environmental issues and especially pollution prevention has been always maintained. Taking into account the milk factory operation and pollution prevention measures in place, soil pollution from fuel or oil is not expected to be an issue as there are no significant impacts from such operation. The factory is not using underground fuel or oil storage facilities. As such pollution risks are considered small scale. Most of the territory is asphalt paved (Figure 4.4.5) and accordingly, the risk for soil pollution from the factory operations is low.

Figure 4.4.4 The plant territory

Figure 4.4.5 The plant territory view with water storage tanks – the area is asphalt

paved

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Certain risk of soil pollution exists due to poor waste management, which is also discussed in Section 4.4.4. In particular, waste collection and temporarily storage is not up to standard and packaging materials, used spares, etc. are scattered around in the plant‟s backyard (Figure 4.4.9, Figure 4.4.10), posing soil pollution risk. The site definitely needs more handling and cleaning in order to remove and properly store different waste or spare materials, and keep the territory clean and tidy. Additional recommendations in this regard are provided in Section 4.4.4 „Waste Management‟. Risks of soil pollution from neighboring facilities can be assessed as relatively high, since all neighboring facilities are industrial and there is district heating plant in vicinity, which most probably was using either diesel fuel or coke. Storm water which is potential soil pollution source can be theoretically assumed as low or not polluted, as it is discussed in sub-chapter dedicated to the water management. 4.4.3 Water and Wastewater Management

Water Supply The water supply of the factory is sourced from the municipal water system. Water from municipal system is filtered, treated and stored in reservoirs. Inlet water quantity is controlled by water meters on site which are also used by municipal water supply company for billing. The total water consumption by the plant comprised 620,000 m3 in 2012. Inlet water quality is controlled by the local laboratory in accordance with the monitoring plan defined by the plant‟s food safety programs. Water saving measures are not implemented at the plant. It is recommended that the plant‟s management and technical personnel study opportunities to increase the plant‟s water effectiveness. At least, water recycling potential should be assessed. Wastewater The plant‟s wastewater consists of few types of wastewater: domestic, process and storm water. The domestic wastewater collection system is integrated with process wastewater system. Water is collected through the underground sewer system, which is connected to the municipal sewer collector. The requirements to the discharged water quality is not enforced; accordingly, there is no monitoring system to record the discharged water volume and quality. The process water pollution sources are related with sanitary activities and cleaning processes for production lines and milk reception section, which is equipped with system dedicated to sanitization of milk trucks (Figure 4.4.6). Usually, chemicals used for sanitation process are diluted before sanitation and strong, concentrated chemicals and disinfectants are not used in these processes. So it could be assumed that main pollutant of the wastewater is fat and milk washes out from trucks, pasteurization tanks and other milk processing units, as well as low concentrations of washing agents (mainly caustic soda) and disinfectants (less than 1% in wastewater). Other pollution sources are water softener at boiler house, water discharged from water preparation hall and washout water from walls and floors of clean zone of the production facility. The most part of lines have CIP systems, based on hot caustic and chemicals. Finally steam is used for polishing of the systems. Impact from discharge of wastewater is considered to be low. In accordance with the environmental monitoring plan of the facility, the significant pollution of waste water is not identified and wastewater monitoring is not included in the monitoring plant.

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Figure 4.4.6 The milk trucks at washing and sanitation stage

Figure 4.4.7 The milk reception process

Stormwater runoffs from the site could be assumed as not polluted as all processes with pollution potential are equipped with facilities for wastewater collection systems. However, certain pollution risk exists due to various waste and spares are scattered around the plant yard. As recommended, improved housekeeping and waste management are required to prevent environmental pollution.

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Figure 4.4.8 The wastewater collection well on site

As mentioned, the plant‟s wastewater is not monitored and treated prior discharging to the municipal sewage collector, as this is not required by local regulations. Respectively, the plant should not face any incompliance related with wastewater discharge. This is confirmed by the plant‟s management as well.

4.4.4 Waste management The waste management system is similar to the system in Aksengir plant. Household waste is collected on site, stored in temporary containers and removed by specialized companies for disposal into the municipal solid waste landfill. Industrial waste mainly consists of packaging materials and non-conditioned products. Polymer materials are given to the specialized companies for recycling, corrugated carton is used for own needs i.e. in railway wagons to protect finished products. Metal cans and scrap metal are also collected and recycled through specialized scrap metal collection companies. Pallets are used for own needs. Hazardous wastes of the plant include mostly used and damaged lamps which are collected in metal barrels and shipped to the company for disposal and utilization. However, waste management on site is not always up to standard. There are several spots on site where various types of waste and spares are kept mixed. These areas should be inspected and debris removed in order to maintain good housekeeping, material management and waste management. Important is to arrange waste collection sites to prevent environmental pollution. As described, part of waste is reused and other part is disposed to the municipal landfill. However, like Aksengir plant, records on waste flow are not maintained by the plant.

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Figure 4.4.9 Debris on Factory territory

Figure 4.4.10 Debris, scrap metal and truck spare parts on Factory territory

The plant‟s management should ensure development and implementation of waste management plan, which should be in line with corporate waste management plan. Particular should be made on proper collection and safe storage of various wastes prior to handling over approved waste management companies for further management. Record keeping on waste generation should be made a requirement as well. It is recommended to investigate possibilities for waste prevention and reduction to improve the plant‟s environmental performance and cost effectiveness. 4.4.5 The housekeeping

With regards to housekeeping, the Kosmis plant‟s production building is old and several times reconstructed. In general, housekeeping system is similar to the one described in Section 4.3.5. Floors and walls of the clean area of production site are washed regularly using high pressure water-air mix. There are several cleaning machines present on site, all of them are

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in good condition and regularly used. Necessary cleaning equipment is provided on site and properly stored. Employees are well trained for usage of mentioned equipment.

Floors, walls and auxiliary infrastructure anneare maintained clean and tidy. Floors are demarcated clearly to show clean zones, equipment and waste bin areas, etc. and all equipment are stored in appropriate places. In general, major housekeeping issues within the production facility are managed at good standard and we do not have any particular recommendations for improved housekeeping. However, the plant management and other designated persons should ensure that after adoption of the corporate ESMS housekeeping is upgraded up to standards. This is likely at least to include improved waste management. Housekeeping issues for the plant‟s outside space is discussed in the previous sections, where related problems are described and respective corrective measures are proposed.

Figure 4.4.11 The cleaning tools location stand

Figure 4.4.12 The cleaning tools and firefighting equipment location stand

4.4.6 Sanitary management

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Like the Aksengir Plant, the sanitation program in the facility is managed in accordance with the good manufacturing practices manual and HACCP plan for the facility operation. The sanitary management system is very similar to the system at Aksengir plant, and is in compliance with the corporate standard. Most of the production lines and units used in food product preparation is equipped with CIP systems (cleaning in place). They ensure automatic sanitation of equipment in special regime. Materials used for sanitary purposes are registered and properly stored in accordance with food safety manual. Only required portions of materials are given to staff responsible for sanitary cleaning. The production lines have clean sanitary zones, where the entrance for workers and visitors is strictly regulated and all personnel entering to the clean zones have to follow the sanitary rules. The toilets and shower rooms are well maintained in order to fulfill sanitary requirements set for the factory. Access to such facilities is demarcated from the food production area. All personnel working in clean zones are required to sanitize their footwear, wash hands and wear the cloth in accordance with internal rules.

Figure 4.4.13 The flow management panel with CIP system

There are no major improvements needed in terms of sanitation and cleaning, since the factory maintained high standard of sanitation. The sanitation is regularly monitored and audited, and respective recordkeeping and reporting is ensured. The plant‟s management and quality management personnel should ensure that same sanitation standards are implemented for new installations after the project implementation. Any changes and upgrades in the corporate sanitation procedures should be timely implemented at the plant as well.

4.4.7 Pest management The pest management system is in place in order to meet requirements of the food safety and good manufacturing practice. Like Aksengir Plant, the Kosmis uses services of specialized company to implement pest control activities, and supply chemicals and materials acceptable for food production facilities.

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Areas requiring high pest control standards are equipped with special screens on ventilation systems to avoid penetration of insects inside the plant. In addition, there is UV equipment for this purpose.

Figure 4.4.14 The rodent trap on outer perimeter of the building

Rat traps are available practically on all territory of the facility and the outer perimeter of the production building is completely protected. Rat control units are located inside the plant as well. The special logbook is maintained with aim to register all activities related with pest control, usage of the chemicals, maintenance of traps, etc. In our opinion no major improvements are required in terms of pest control.

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5 The Company’s Occupational Health and Safety Performance Occupational Health and Safety performance of the RG Brands has been reviewed in respect of the relevant ADB‟s SPS 2009 and Social Protection Strategy 2001 Requirements.

5.1 Human Resources Management and Gender General labour related issues in RG Brands are managed by HR Department, which has HR unit at each plant. These units are responsible for contract management, keeping of personal files on employees, etc. Human resources management is in line with the Labour Code of Kazakhstan, which on its turn is in line with major international principles in this field. Personnel of RG Brands enjoy all labour rights and benefits granted by the national law. Among obligatory benefits are annual leave, paid sick leave, maternity leave and medical insurance. Besides, the corporation has established own benefits system for its employees. This includes welfare support for family events and meal reimbursement. To comply with national law, the corporation‟s HR policy ensures equal rights for men and women. In particular, the RG Brands provides equal opportunities for employment, promotion and vocational trainings for male and female. Payment rates for personnel are based on their qualification and job they perform; differentiation on gender basis does not have place. Besides, female staff has specific benefits including maternity leave and longer lunch breaks for women having infant age child. According to the provided information, 65% of operational staff of plants is male; percent of female among administrative staff is 50%. However, more detailed gender related statistics (e.g. ratio of women/men on decision making positions, comparison of male/female payment rates, etc) is not readily available and tracked. It is recommended that detailed gender related statistics be tracked within the corporation and on each facility level to enable assessment how gender issues are regulated and managed within the corporation. In particular, this should include number of female and male employees in each facility, position they occupy, ratio of women/men on managing and decision making positions, salary rates paid to man and woman on same position, ratio of man/woman in the corporations vocational trainings, other gender related information. If statistics show any inequities, the company should ensure corrective measures, e.g. vocational trainings for women for empowering, gender trainings for awareness rising among personnel, etc. It is recommended if the corporation will ensures promotion of gender equality approaches among milk and fruit supplier farmers. For instance, gender related trainings could be organized for milk and fruit farmers to increase their awareness. It should be stated, that consortium does not have a formal grievance system at corporate level tailored for the employees and designed to collect grievances and suggestions from all the employers working at different facilities. Establishment of an internal grievance mechanism for employees is recommended.

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5.2 Key Occupational Health and Safety Issues The existing Health and safety system in RG Brands facilities is based on requirements of Kazakhstan legislation and international best practices for food production facilities. The existing HS system and procedures are developed and maintained on corporate level, and all facilities are responsible to ensure implementation of the corporate system. On the corporate level, HS management is under the responsibility of the Chief Manufacturing Officer and health and safety managers at production sites. The technical directors of production sites are responsible for overall implementation of health and safety measures, supervision of health and safety activities on site. The managers responsible have to maintain documentation system, monitor implementation of HS procedures in facilities, provide support in preparation of safety training, collect information regarding delivered trainings and control operation of training officers in each production facility. On corporate level the health and safety system starts from the initial HS Manual prepared by the technical department of RG Brands. The Manual is agreed with by the HR and law departments and finally approved by the CEO and General Director of RG Brands. This document establishes main HS standards and requirements of the corporation, as well as rights of personnel employed by the RG Brands Kazakhstan. The first section of the HS Manual covers main requirements applicable to all employees, including especially work time, holidays, terms of employment contract, special provisions for female workers, i.e. maternity leave issues etc. The standards are prepared in accordance with international best practice and the national legislation, and fully cover the HS issues for employees. The section 4 is dedicated to internal safety rules, which should be respected by all workers. This includes all factors with potential to impacting workers health and creating some risk during the operation. Document covers issues related with noise, moving parts of equipment and machinery, works with high pressure equipment, internal transport movement issues, power system their operation and maintenance, working at heights, power safety. The next sections are dedicated to:

Personal hygiene requirements and sanitary rules inside the facilities

Personal protection equipment (PPEs)

Record keeping system for accidents and near misses,

The system for investigation of accidents and occupational illnesses

Fire safety

First aid issues. This corporate guideline creates the basis for all HS trainings and inspections to check implementation of occupational health and safety rules. Implementation of procedures delivered in the Manual is obligatory for all units involved in RG Brands operation. The Manual delivers instruction for HS engineers as well, which are responsible for supervising operations on site and ensuring that operational issues are safe for workers health and safety. As no new facilities will be constructed and only additional production lines and auxiliary equipment will be provided, it is expected that the existing occupational health and safety management system and procedures sufficiently cover new installations and processes, or they could be easily upgraded to required level.

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In our opinion the manual covers all major HS aspects of the plants‟ operations. The main recommendation will be to periodically review the manual on the basis of HS audits and safety records practiced in the facilities to ensure that HS procedures address all operational HS risks. 5.2.1 The Health and safety at facility level During the site visit and walk through audit the DD team has reviewed the HS system used on sites. Overall impression on HS management on facility level is positive. RG brands facilities deliver introductory health and safety training to all visitors prior to giving access to site. The same procedure is maintained for personnel as well. Plant‟s personnel also regularly attend HS trainings. All visitors and employees are provided with personal closing, footwear and headwear in order to meet required food safety standards and ensure high level HS for all people on site. Warning signs HS signage is provided practically in all places. This covers wet floors, indication of entrances and exit doors, crossing with internal traffic, forklift roads, warehousing routes, heat and power hazards, etc. So all employees are informed regarding safety provisions on site. The warning signs package includes a whole range of standard signage starting from simple signs up to special marking of hazardous chemicals. Full inspection was not possible within the scope of the present assignment and accordingly, it was not possible to check status of all places where the warning signs should be placed.

Figure 5.2.1 Warning sign indicating wet floor in Aksengir Plant

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Figure 5.2.2 The walking and danger zones are indicated on the floor, warning

painting on column basement (Aksengir plant) The factories‟ floors are demarcated with warning lines, separating the corridors for forklift movement from the personnel‟s work space. Each equipment has own demarcation line to show an area of operation and warn workers not to cross inside the lines. The examples of demarcation lines are presented on the photos.

Figure 5.2.3 The demarcated corridor for forklift movement (Aksengir plant)

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Figure 5.2.4 The entrance door with safety demarcation against access blocking, warning signs and foot sanitation pad (Aksengir plant)

Information signs The information signs reminding about requirements for usage of personal protection equipment is also available inside the production facilities. These include the signs for wear gloves, safety glasses and respirator mask, etc, which are given on photo below.

Figure 5.2.5 The information signs requesting usage of specific PPEs

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Figure 5.2.6 The signs requiring headwear, preventing jewellery (rings) and cameras The signs presented on Figure 5.2.6 are placed on entrance door to the clean room where usage of jewellery and taking photos are forbidden, and wearing of the headwear is obligatory. In addition to information signs, there are also evacuation routes indicated inside the operation buildings with indication of the direction to exits and emergency situation muster points. The signages within the factories were found satisfactory. These are regularly checked and updated during the routine inspections and internal auditing of the facilities, which is conducted on quarterly basis. The description of HS internal auditing system is presented in paragraph below.

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Figure 5.2.7 The stand presenting basic safety rules for Kosmis plant

Figure 5.2.8 The stand presenting basic safety rules for Aksengir plant

As mentioned above, a comprehensive HS audit was not within the scope of the present assignment. In general, it could be said that warning and information signs are provided in all inspected premises. HS inspections which among other issues include signage assessment are regularly implemented at both plants. This is definitely good practice. The existing signage system could be improved based on findings from incident records and

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investigations, to ensure that personnel are adequately warned about potential HS risks and hazards.

5.2.1 First aid systems Each worker employed by the RG Brands must pass first aid training and be prepared to provide help in case of emergency situation or accident. First aid kits are available at each facility. First aid kits are available in all workshops and other support/auxiliary infrastructure buildings. They are regularly check and replaced as necessary. In addition to first aid kits in specific locations, specific instructions are provided for acts in response to injury by physical or chemical factors. RG Brands has system and guidance posters for first aid procedures in specific situations. The posters are placed in the areas with respective risk. Such information is very useful and important to ensure that all personnel receive adequate first aid from the colleagues in emergency situations. The example of guidance for chemical impact on eyes is presented on photo below. First aid trainings are delivered to all employees of the corporation to comply with the corporate policy and requirements of Kazakhstan legislation. This is a standard first aid training for the employees working in similar conditions.

Figure 5.2.9 The guidance for eye washout

5.2.1 Safety records In accordance with RG Brands safety system and requirements of Kazakhstan legislation, all enterprises are obliged to maintain safety records. Safety records can be split in two categories. One is a logbook for safety trainings delivered to employees and the second is records on accidents and near misses. These types of records are also recommended to be

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maintained in accordance with international best practice. Safety records logbook is available at each site. They are maintained by HS engineers. The corporate HS manual also includes the rules and guidance for investigation of causes of accidents and injuries. This guidance is prepared in accordance with the requirements of Kazakhstan legislation and best international practice. It is advisable that safety records and investigation results should be periodically analysed to identify challenging operational risks, risk factors and risk zones, and design actions addressing these challenges. All safety records should be available on corporate level as well either in electronic format or hard copy to enable comprehensive review and updating of the existing HS system.

5.3 Fire Protection Fire safety of the facilities is managed on corporate and facility levels. On the corporate level fire protection issues are managed by the Technical Department. The Technical Department determines, implements and supervises fire protection measures which should be in place at each facility. Fire safety measures are planned and implemented and based in construction drawings for particular facility. The Kazakhstan legislation requires approval of fire safety design by representative of governmental fire safety structures to be consistent with other systems used in the country. The Technical Department together with facility HS engineer and staff designs fire emergency plans, checks implementation of fire safety standards and requirements at each level, and determines need for improvement. According to the RGB‟s fire protection policy each facility under high fire risk (boilers, power generators, carbon dioxide plants, offices etc) should have an approved fire response plan and fire-fighting procedures for each high risk facility, fire extinguishers and other fire-fighting equipment; personnel should periodically receive fire safety instructions. Fire response plans should be reviewed and updated periodically. Technical tools for fire safety, hydrants, water reserve for fire safety and special fire-fighting stands are available on site. Within the framework of present assignment it was not possible to consistently check the fire-fighting systems in place; however, it can be stated that the system exists and is operating.

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Figure 5.3.1 The fire-fighting measures in Kosmis

As the visits showed fire safety measures are factually standard for both plants. These mainly include:

Approved fire response plans and procedures, which are available at both plants and for all high risk areas, including facilities with higher risk. The fire response plans show access routes to be used for fire-fighting. Fire-fighting procedures describe safety measures which should be implemented before or during fire extinguishing to avoid escalation. Scheme showing layout of fire-fighting equipment provided at each facility.

Fire extinguishers which are provided for specific areas of plants. Majority of them are in good shape and equipped with information regarding shelf life and date for the next maintenance. According to the company information, extinguishers are checked periodically by the technical department as well as respective state service.

Buildings have an emergency exit. Some facilities in Aksengir Plant are also provided with automatic sprinkler system. Some examples of fire-fighting systems in place are presented on the photos.

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Figure 5.3.2 The automatic sprinkler system for warehouse in Aksengir

5.1 Emergency situation action plans The action plan for emergency situations is prepared by the HS manager and approved by the company top management. The document is prepared at corporate level and is obligatory for implementation in all facilities operated by RG Brands. The document defines emergency situations and covers practically all scenarios which can happen in all facilities and even outside of production sites. The main principles for actions are following: The employee who has noticed or is involved in emergency situations should inform immediate supervisor who informs three units of the corporation immediate supervisor, HS manager and Head of economic safety department. The information is spread up one level and through Technical director and immediate supervisor, then information reaches Head of production department and CEO. The actions of each individual in emergency situations are defined in accordance with the types of emergency situations. This includes general emergency situation, in case of accidents, fires, demolition of buildings, floods, earthquakes and transport accidents. The document also covers scenarios in case of terrorist acts and attack (robbing). All employees are aware of described regulations and know how to act in such situations.

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6 External Social Performance and Management

6.1 Potentially Affected Communities The planned activities of the RG Brand comprise expansion of operations at the Aksengir Plant in the Aksengir Settlement and Kosmis Plant in the Kostanay City. Respectively population of these two settlements could be considered as potentially affected. Aksengir is a very small settlement near Almaty City, in ca 70 km distance from it. The settlement has irregular boundaries and population is rather there. Kazakh and Russian comprise main population of the settlement. The Aksengir Plant is situated in an isolated area, surrounded with agricultural lands from the north-west to the south-east clockwise. Sparse population of Aksengir surrounds the plant in other areas. In particular, using the Google Earth satellite image about 50 households could be identified the west from the plant. Minimum distance between this area and the plant‟s territory comprises about 200 m. Brownfield sites and some other industrial facilities separate the plant and the community in this direction. Another small populated area of Aksengir is located the south from the plant, in ca 250 m from the plant‟s territory. A railway and its shuttling line separate the population and the plant.

Figure 6.1.1 Layout of Aksengir Plant and Aksengir Settlement

Kostanay City is the center of Kastanay Region, in the north part of Kazakhstan. Its population is over 200,000 people. Population is dominated by Kazakh and Russian people. The Kosmis Plant of the RG Brand is located in the north-east outskirt of the city, in the industrial area. The plant is surrounded with industrial facilities from all directions. Closest residential houses are in about 500 m distance from the plant.

Aksengir Plant

Residential Area

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Railw

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Figure 6.1.2 Kosmis Plant in the Industrial Area of Kostanay City

6.2 Community Health, Safety and Security Community Health, Safety and Security management by the RG Brand has been reviewed in respect with the ADB Safeguards Policy Statement 2009, SR1 on Environment. The planned project considers production expansion without spatial expansion of the existing facilities and essential changes in the plant‟s operations are not anticipated. Due to this major public health, safety and security issues are likely to be the same for the both plant‟s current operations and planned expansion, and they are discussed together. Aksengir Plant As described above, the Aksengir plant is about 200 m from the nearest residential houses. Other industrial facilities and a railway are between the plant and the population or local community. The plant‟s all production lines and equipment are installed in enclosed facilities. Only some material supply, warehousing and final products transportation operation could be carried out outside buildings. Due to this, neighbouring population should not directly impacted by the production process. However, certain community disturbance and safety risks are likely to have place. Main disturbance factors are likely to be related with transportation operations as the railway line and motor road run very close to residential houses. Noise, vibration and dust are most likely disturbance factors associated with transportation operations. Transportation operations also impose community safety risks, if not adequately managed. According to the provided information, observance of vehicle management and safe driving rules is obligatory for company vehicles. These include regular check and maintenance of vehicles, speed limitation in populated areas. These measures are directed control disturbance factors and community safety risks.

Industrial Area

Kosmis Plant

Residential Area

Residential Area

Resid

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As mentioned, the plant‟s production lines and equipment are enclosed within production buildings, and their noise and vibration is not an issue for outer spaces. Here should be noted that according to the plant‟s management, no community claims regarding these disturbances have been delivered the company. The major air emission source of the Askengir Plant is a gas fired boiler, ventilation system, PET blowing system and emergency generator. Air emission sources are provided with stacks to ensure proper dissipation of air born pollutants. Air quality assessment and modelling of pollutants‟ air dissipation was implemented for the plant‟s EIA study, which found that air emissions meet the country standards. Besides, air quality monitoring is performed by the plant. Therefore, air quality should not be an issue for neighbouring community. As mentioned, the plant‟s effluents are discharged into the municipal sewage system and could not impose health and safety risks on the local community. Solid waste management is also ensured at the plant at the level to avoid impact on local community. In general, it could be said that the Askengir Plant does not causes major community health and safety risks, requiring corrective actions. Kosmis Plant The plant is built in the industrial area of Kostanay City, which is in its north-east outskirts. Closest residential houses are in ca. 500 m from the plant. The plant and residential areas are separated with number of other industrial facilities, which buffer the plant and population is not within the plant‟s direct impact area. The plant‟s air emission sources (gas fired boiler, diesel generator) are provided with stacks to ensure sufficient dissipation of air pollutants. The plant has air quality monitoring in place. Therefore, air pollution by the plant does not seem to be an issue for neighbouring population. Different from the Aksengir Plant, potential community impacts due to transportation operations could not be assessed as the plant is surrounded with great number of other industries with similar impact. Here should be noted that like the Aksengir plant, all production lines and machinery are enclosed within the production buildings, which controls disturbance factors such are noise and vibration. According to the plant‟s management, claims or grievances from community members or neighbouring industries regarding the plant‟s operation have not been submitted to the management. As a summary it could be said that the Kosmis Plant does not causes major community health and safety risks, requiring corrective actions.

6.3 Involuntary Resettlement & Displacement Involuntary resettlement & displacement issues have been reviewed in respect of ADB 2009 SPS SR2 on Involuntary Resettlement. The RG Brand‟s Kosmis plant was built in 1990s by the Turkish-Kazakh enterprise Cosmis. RG Brands became an owner in 2004. According to the company information, no land related claims have been submitted to the company since then.

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The Askengir Plant is even was built by the RG Brands during 2006-2009 in state owned greenfield area. The company purchased the required land parcel from the state, paying appropriate price for it. As described, the RG Brand‟s planned project does not include spatial expansion of the existing facilities. Respectively, the company does not intend land acquisition for the project and involuntary physical or economic displacement are not an issue. Respectively, the project is assigned Category C for Involuntary Resettlement, according to the project classification system of the ADB Operations Policy 2010. Due to the described, involuntary resettlement should not be considered as issue in respect with the company‟s current operations and planned project, and no respective corrective actions are proposed.

6.4 Impact on Vulnerable Groups As described above, potentially affected communities are population of the Aksengi Settlement and Kostanay City. Indigenous people are not identified in these settlements and according to the ADB‟s Operations Policy 2010, the project is assigned Category C for Indigenous People. Sufficient land stripe separates the plants‟ territories from neighbouring population, preventing the later against direct impacts. Therefore, no particular vulnerable group is identified for the project among the potentially affected communities. According to provided information, about 30% of personnel in these facilities are recruited from neighboring communities, which could be considered beneficiary for potentially impacted population.

6.5 Impact on Cultural Heritage Cultural heritage sites were not readily identifiable in surroundings of the Aksengir and Kosmis Plants. As soon as the project does not imply spatial expansion of the existing facilities, potential impact on cultural heritage was not studied.

6.6 Social Projects for Potentially Affected Communities Recognizing its social responsibility for potentially affected communities the RG Brands had planned and implemented several social programs for them. In particular, the following social projects were implemented in the past two years:

Construction of football stadium in Aksengir

Rehabilitation of roads in Aksengir Besides, according to the corporate social policy, members of potentially affected communities are given priority whilst recruitment for production facility personnel. For instance, about 30% of personnel in Aksengir Plant, which is in rural area, is recruited from locals. For 2013 the corporation has planned to deliver ambulance to Aksengir community.

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6.7 External Stakeholder Engagement Stakeholders engagement and public communication procedures are reviewed in respect with ADB‟s 2011 Public Communications Policy. The policy requires engagement of stakeholders and interested groups in all stage of company activities. Besides, borrowers are required to have a grievance mechanism for community to facilitate to delivery of community concerns to the attention of the project owners. As learnt from the interview with the company staff, stakeholder engagement is ensured by the plant‟s staff, as required. Though, this has a spontaneous character and is implemented if community members address the plants. The RG Brand has not special polity or procedures for engagement with neighbouring communities and other stakeholders. Nor formalized grievance submission procedures are in place for stakeholders. The company needs to develop a stakeholder engagement procedures for all stakeholders to ensure effective communication with them. A person responsible for community engagement should be appointed in the company. Besides, a formal grievance procedure should be introduced by the company for community members to ensure that all their concerns are timely delivered and effectively responded. Grievance procedures, timeframes and responsibilities of persons involved in grievance review should be clearly defined. These issues should be incorporated in the corporate ESMS.

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7 Anticipated Environmental Impacts and Mitigation Measures The project envisages further development of the Aksengir and Kosmis facilities in order to develop production capabilities in both plants and increase capabilities of the corporation in terms of production volumes. The chapter below provides discussion on planned development, related environmental and social impacts, and measures employed to mitigate the estimated impacts.

7.1 Environmental and Social impacts from Aksengir Plant development The following measures are planned to be implemented for the modernization and further development of Aksengir plant:

Launch milk production in Aksengir Plant inclusive establishment of milk collection infrastructure inclusive cooling system separation and pasteurization equipment – the activities will be implemented in 2015

Installation of new gas generation units with installed capacity 2MW

The potential environmental and social impacts from the project implementation will likely occur during construction and operation phases. The impacts anticipated with each activity are following 7.1.1 The impacts on physical environment The facility modernization is planned within existing footprint of the facility. Therefore, the territory of plant will not be increased and existing facilities will be used to accommodate the milk collection and production facilities as well as installation of new gas generator unit. The physical set up will not be changed and accordingly, there will be no change in landscape of the site. Accordingly the mitigation measures to minimize impact on physical environment are not required. 7.1.2 Impact on ambient air Construction phase – The construction activities related with the plant modernization includes installation of equipment within the existing facilities and transport of construction materials. The project does not consider large scale civil or construction works to be implemented. The estimated impact on ambient air during the construction phase is limited and short term as the emissions from transportation of materials and equipment will be related with a few number of delivery trucks and frequency of deliveries. The impact is considered not significant as the number of deliveries will not be more than few containers with equipment during the three years period. Accordingly there will be increase of traffic during the delivery date and this activity will not have noticeable impact on local traffic. The air emissions related with installation of the equipment will be also minimum, so no specific mitigation measures are required to minimize the effect from installation. In terms of environmental impacts estimated for the operation phase, the impacts will be related with:

additional heating and cooling operations of the milk collection facilities;

impacts form steam production required for cleaning and sanitation;

impacts from the steam production for pasteurization of collected milk

Impact from the transport involved in milk collection

impact from the operation of 2MW gas generation unit. The last item is most important, as soon the generation of 2 MW power using natural gas burning system will significantly increase the atmosphere air emissions. This will mainly be

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related with increase of NOx emissions. It is assumed that the generation unit selected will be of modern type with systems designed to effectively manage the burning process and accordingly manage the generation of main pollutants related with combustion processes. It is very important to carry out modeling of the atmosphere air emissions during the design phase, in order to ensure construction and height of stacks in order to ensure that the main parameters of the newly established stationery sources of air emissions will not affect the atmosphere air quality and will not cause any noticeable degradation of the air quality. As the facility location is far from the dwelling area, it is not expected that the air pollution and dispersion modeling results will indicate any problems for meeting with existing Kazakhstan standards and requirements in accordance to the international best practice for establishment of such facilities. The impacts anticipated from additional energy requirements for cooling of collected milk, additional sanitation requirements in order to maintain milk production lines and equipment will not be significant as soon the major increase of steam production facilities is also not expected. There will be increase of approximately 10% in natural gas consumption, however it is difficult to estimate how much additional heat will be required. Another important and effective way to minimize impact on atmosphere air is employment of the effective management tools addressed to minimize the energy consumption in the processes through energy efficiency and cleaner production measures. The significant resources can be estimated in the field of energy efficiency and cleaner production. The factory definitely has capability to enhance the operation parameters of sanitation and cleaning system without any harm to the product quality and food security. The establishment of such management systems will definitely allow the production facility to minimize the effect of increased energy requirements. The traffic increase caused by the milk collection system is estimated as not significant as soon the quantities of collected milk require 2-3 additional trucks movement per day. The trucks employed in milk collection and transportation of produced extra goods can have cumulative effect as soon there is already traffic related with Aksengir plant operation and additional transport can cause the additional press on local transport. In order to mitigate the impacts from additional transport two main directions can be employed: upgrade of transport fleet with modern trucks having more efficient engines causing less pollution and effective planning of transport fleet operations. The upgrade of the transport fleet with modern trucks is already planned, however the establishment of effective planning is advisable. The greenhouse gas emission increase is also estimated as soon the facility will increase the natural gas consumption and new equipment will be installed for power generation. It is not estimated, that the impact on atmosphere air quality will cause any negative impact on employees and local population and in accordance to the requirements of local legislation and international best practice, the detailed study of air emission and air dispersion model is required. It is assumed, that the study will be a part of environmental impact assessment study carried out when the technical parameters and design of the modernization will be available. The monitoring system for atmosphere air control should be modified to take into account new instalations and changed parameters of existing equipment. 7.1.3 Impact on the land Impacts on the land can be also split in two main parts: impact on land resources and soil pollution.

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The impact on land resources is not considered as soon the modernization will take place within the existing footprint of Aksengir plant. Accordingly the loss of agricultural or other types of land is not expected. In terms of land pollution, the pollution possibilities will remain the same and mostly it will be dependent on activities carried out during the construction and operation of Aksengir plant. The modernization of plant will decrease the operations involving liquid fuel and most of the operations will be based on usage of natural gas. The project recommended removal of the underground diesel storage facilities and clean up the land in vicinity of existing storage. During the additional construction activities on the territory of Aksengir plant the soil protection and pollution prevention measures will be required in order to minimize the potential impact on soil quality. The soil loss or pollution during the construction activities can be related with improper management on site. The pollution can be related with spillage of fuel, oil and grease from construction machinery. Mostly this can be related with installation of the new 2 MW power generation unit. During the preparatory works the topsoil should be stripped and properly stockpiled; after the finalization of works the stockpiled material should be used for the reinstatement of territory affected by construction works. The working area is small in comparison with plant territory, so the potential impact will have localized and can not impact large territories. All other activities related with installation of milk processing infrastructure, reservoirs, CIP systems, packaging lines etc. will be minimum, as soon all activities will be performed within the existing buildings with paved floors and constructed drainage. The pollution prevention measures will be required during removal and disposal of generated wastes; The special specialized companies responsible for hazardous waste collection and disposal should be employed in order to ensure, that construction contractors, environmental and pollution prevention practices are at required level. The household waste will be collected in plant‟s existing system. The household solid waste will be transported and landfilled by the municipal waste management company. The non hazardous construct materials will be managed by the construction contractor or by the specialized waste management company. The construction waste quantities will be very small as soon the project does not consider demolition or reconstruction of large scale facilities. Due to the specifics of facility operation, the pollutants impacting land quality is not generated, the territory of plant is mostly paved, and other territory (not paved and grassed) is not used during the operation. The land pollution can be caused by the chemicals used during the cleaning and sanitation procedures, however the spillage is practically excluded as soon the chemicals are used in closed systems as called CIP (Cleaning in place) and the solutions are stored in especially dedicated reservoirs. Accordingly the pollution risk is very low. There is some risk of soil pollution during the emergency situations. In such cases if chemicals will be spilled, the contractor should act in accordance to the emergency situation management plan, which is included in company/corporation ESMS system. 7.1.4 Impact on water The impact on water environment from Aksengir plant rehabilitation is also different during the construction and operation phases of the project.

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Impact on raw water consumption during the construction/ installation process is not expected as soon the normal operation of plant will continue and no additional raw water will be needed. The impact caused by construction activities on surface run off (stormwater) is negligible, as soon there will be very limited amount of the soil works and other activities will be held inside existing buildings. The very minor impact is estimated on surface water quality during the excavation of foundations under the generator unit and installation of stack. No specific measures will be required other than normal surface run off water management on site. The wastewater quantities and quality also will not change during the construction and line installation activities, accordingly no specific measures are required in this regards. The wastewater is discharged to the municipal wastewater collection system in accordance with the agreement with local municipal water system, and service will continue during the construction process. Different situation will occur during the operation of plant after the rehabilitation reconstruction is finished. The milk processing and packaging section will require much more water then currently used in production process. Depending on the milk quantities handled, the water consumption pattern will be increasing together with increase of milk quantities collected and packed. The raw water will be required for washing and sanitation purposes, it will be required for increased capacity of the produced steam which is used for system sanitation. The groundwater resource and license which is available at the moment will be sufficient only up to first two years of operation, and afterwards the plant will be required to renew the license, however groundwater resource available is sufficient to increased demand and it is expected, that no more drilling works will be required. The surface run off (stormwater) will not be affected with project implementation, because all operations related with milk processing will be inside the production buildings. Therefore, no impact is anticipated from surface runoff water. At the moment, factory wastewater is not polluted with fat substances. During the operation, the fat containing substances, washed out during the sanitation and cleaning processes will be much higher. The quantitative characteristics of expected increase cannot be estimated and will be known as soon the exact technical parameters and capacity of milk processing is determined. In order to mitigate such impact, the strict environmental management will be required for the plant operation. The installation of fat traps and separators will be required to ensure proper pretreatment of the process water used in milk production. The plant staff should ensure that the pretreatment is effective. The impact from washing and sanitation chemical is also anticipared. The list of chemicals used in the factory at the moment will be significantly increased and part of it will reach the wastewater collection system. It is assumed that new line will be equipped with automatic CIP systems, so most part of chemicals and washing solutions will be reused minimizing the quantities of active substances discharges to the wastewater collection system does not contain high concentrations of biologically active substances and washing chemicals. 7.1.5 Impact on natural environment

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In order to estimate the impacts on natural environment caused by the actions implemented in Aksengir plant, we have collected baseline information regarding flora and fauna species in the direct impact zone of Aksengir plant. It should be stated, that the estimated impact will not be significant as the reconstruction of plant is planned within the existing footprint and accordingly no greenfield development is planned. The area, where Aksengir plant is located is not known as specific area for biodiversity, practically no species of flora and fauna in the area can be affected by the new development. During the construction or operation of the plant after the project activities are finished will impact any natural environment. The special activities, addressed for protection of flora and fauna species are not required during the construction and operation. Some activities related with reinstatement of the environmental conditions in case of plant decommissioning will be required. However this is not likely to happen. In any case, if plant will be decommissioned, the special project should be prepared for removal of all installations and reinstatement of natural environment. 7.1.6 Impact on cultural heritage The Aksengir plant originally was located in the specific area dedicated to industrial development of the region. The area was not developed and no cultural heritage objects have been affected during the plant construction and commissioning. The records during the greenfield development did not indicated any facts of archaeological presence, so the impacts were estimated as – no impact. As soon all development will be within existing footprint practically no impact is estimated for cultural heritage field. 7.1.7 Impact on Social environment The project will not cause any changes in social environment in the project area. The area was developed as industrial zone, and there was no population present in the area. The closest settlements are within 5-10 km range and they are established in the middle of 20th Century. Accordingly the impact on indigenous people is assumed to be zero, as soon no indigenous people in the area. The impact on local population can be assumed from „no impact‟ to the small scale positive impacts, as soon expansion of the plant will created additional employment opportunities for local population willing to work. The project scope and it‟s implementation does not require large scale labor force to be involved in the works, so there will be no requirement in establishing workers camps, bringing international construction teams. Accordingly the impact on local population from the international work force with all negative effects of such projects is not a case. In terms of Gender issues, also no effect on community is estimated. The corporation have rules in place for provision of equal opportunities to potential employees and has the system to support women workers employed. During the exploitation the impacts on social environment will be also similar to impacts during the construction phase. There will be increase of employment opportunities as soon the number of people working in the facility will be increased. No negative impacts are expected.

7.2 Environmental and Social impacts from Kosmis Plant development

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The following measures are planned to implement for the modernization and further development of Kosmis plant: Item 11 The item considers development of Milk collection system for Kosmis Plant, which includes

upgrade (purchase) of the milk collecting trucks and reconstruction of milk reception area in Kosmis plant. The item will be implemented step by step during the four years, from 2013-2016.

Item 12 Improving milk processing in Kosmis Plant considering installation of new tanks, milk cooling systems and processing modules. The activities are planned during 3 years period from 2013-2015.

Item 21 Juice production improvement upgrade/installation of pasteurization, blending, syrup preparation sections in Kostanay plant. Works will be implemented in 2015-2016.

Item 22 Installation and launching of New HotFill production at Kostanay Plant which will be implemented in 2013.

The estimated environmental and social impacts from the project implementation can be split to construction and operation phases. The impacts anticipated with each activity are following 7.2.1 The impacts on physical environment The facility modernization is planned within existing footprint. The territory of facility will not be increased, all installations will be arranged within existing boundaries of the plant. Based on above mentioned no activities are required to minimize the impact of physical environment. 7.2.2 Impact on ambient air Construction phase – The construction activities related with plant modernization will not cause any air emissions. The activities will include only provision and installation of bottling and packaging equipment. As the nature of works to be implemented does not include any activities causing impact on ambient air, the risks associated with ambient air pollution will be very very low. Some impact on ambient air will be related with increase of transport movement related with reconstruction of plant, but this type of impact is very low can be considered as negligible. There will be increased air emissions during the operation phase from most probably when new boiler plant will be required, or operation regime of existing one will be significantly changed. A new assessment for impacts on ambient air quality will be required in order to establish new standards for the maximum permitted emissions. It should be considered, that the plant is located within industrial area of Kostanay city, accordingly there will be cumulative effect of existing atmosphere air pollution. The new dispersion model should be used during the design of plant reconstruction. If new stationary sources of air emissions will be installed, the dispersion model should be used in order to define technical characteristics and height of emission stacks.

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Some negative impact on air emission is also estimated from increased transport fleet of distribution system. The procurement of new distribution tracks will increase summary emissions from the consortium operation, however the number of trucks is low, and they can not cause significant increase in air emissions. The main pollutants from increased emissions will be nitrogen oxide, as soon the main changes will be related system consuming natural gas. No changes are expected towards more use of liquid fuels. The monitoring plan should be updated accordingly to follow the changes expected in atmosphere air pollution and ensure safe environment at the boundaries of plant (sanitary protection zone). It will be important to enhance management of air emissions expected from operation of upgraded plant. The effective management can help in minimization of air emissions. The enhancement of energy efficiency in the plant as well as implementation of cleaner production practices will allow plant reach step by step minimization of the emissions or at leas to have less increase in emission quantities. 7.2.3 Impact on the land The impact on the land resources is not expected during construction or exploitation periods of the plant. All rehabilitation works will be accomplished within the factory premises and current boundaries. The Kosmis plant is located within industrial zone of the Kostanay city. The project will not cause loss of agricultural or protected land. Due to the specifics of facility operation, the pollutants impacting land quality is practically not generated, the territory of plant is mostly paved, and other territory (not paved and grassed) is not use during the operation. The land pollution can be caused by the chemicals used during the cleaning and sanitation procedures, however the spillage is practically excluded as soon the chemicals are used in closed systems as called CIP (Cleaning in place) and the solutions are stored in specially dedicated reservoirs, accordingly the pollution risk is very low. There is some risk of soil pollution during the emergency situations. In such cases if chemicals will be spilled, the contractor should act in accordance to the emergency situation management plan, which is included in company/corporation ESMS system. 7.2.4 Impact on water The reconstruction of Kosmis facilities will not cause any changes in raw water consumption. Even the water consumption will be decreased during the implementation of project because the production will be reduced during the reconstruction activities, accordingly the water demand will be decreased. The plant is using raw water from municipal water supply system. it is expected, that the raw water consumption will be increased, however the city water supply system is able to provide more quantity of raw water. The Water supply company is definitely the stakeholder for the project and will be involved stakeholder consultation process. Accordingly company will be aware regarding expected increased demand. The impact on surface run off (storm water) is not expected as soon as the storm water management is in place and all storm water is collected on facility territory and discharged to municipal storm water collection system. The impact on wastewater quality and quantity during the reconstruction is not expected, however the wastewater quantity will be increased during the operation phase. The

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enhanced milk collection and production facilities as well as syrup and juice production will require more raw water and accordingly the wastewater quantity will be increased. The qualitative characteristics of the wastewater will be changed. as soon there will be some increase in organic matter discharge, this will increase the BOD of wastewater. The Kosmis plant does not have specific requirements to the wastewater discharge as soon the wastewater is discharged to the municipal waste water collection system. 7.2.5 Impact on natural environment The impact on natural environment is not expected as soon the project activities at Kosmis plant will be implemented within the industrial area of Kostanay city, accordingly impact on natural environment inclusive landscape change, visibility issues, impacts on flora and fauna etc can not be accounted noticeable or significant. . 7.2.6 Impact on cultural heritage The project envisages development of the plant within its actual boundaries. The cultural heritage sites can not be influenced by the project, accordingly no further actions are required in regard to cultural heritage protection. 7.2.7 Impact on Social environment The impact on social environment by the Kosmis plant development will be mostly related with increase of employment possibilities of local people. The plant is located within industrial area, so development can not change the social sphere in project area. There is no indigenous population around, so the negative impact on indigenous people is not expected.

7.3 Increase efficiency in distribution and production The Component 3 of proposed project includes following activities:

Item 31 Procurement of delivery trucks to increase the distribution fleet. The item will be implemented during 2013-2014;

Item 32 Provision of coolers to the retail shops which is planned during 2013-2015.

The impacts related with mentioned items are very limited and can be described and assessed as follows: The increased number of trucks can impact public traffic with negative effects on safety and blockage of public transport. The operation of fleet also has potential on pollution of environment caused by the bad fuel and lubricants management, potential of pollution from accidents, pollution caused by the improper maintenance etc. The biggest risks with operation of distribution fleet is risk of accidents and impact on public safety – in order to ensure the efficient and safe operation of fleet in accordance to the international best practice the proper training of the drivers is required as well as establishment of company or corporation rules setting up internal requirements to be fulfilled by the drivers.

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In order to minimize the risk of accidents as part of corporation environmental and social system the transport management plan should be established. Usually such plans include strict speed limits in accordance to the type of transportation area. Especially in populated places low speed limit can be established, usually this is 50km/h within the cities instead of 60 km/h. This usually reduces the number of incidents. The second important issue is involvement of the drivers and distributors in safe driving training course, which is focusing on potential negative effects and delivers to trainee basic safe driving rules. Usually frequent training has a positive effect on statistics of safe driving within the company. The safe driving program can also include establishment of as called „golden rules‟ for drivers and vehicle exploitation. All mentioned items should be included in company management system to ensure that impacts from company fleet operation is appropriately managed. At present company fleet is maintained and serviced in especially dedicated service organization. The refueling system is also based on contract with local fuel distribution network. This enables RG Brands to avoid storage of fuel on site as well. The service provider is responsible for the proper management of pollutants generated by fleet. This includes used oil inclusive engine, hydraulic and other oil, grease. Hazardous materials like batteries, cooling agents and other chemicals. All hazardous material generated during the service operations are managed by the subcontractor in accordance to existing rules. There will be some impacts on social environment. The project implementation will create additional jobs for the local population. The number of positions is not large, however the employment of local staff will improve economic and employment situation at local level and will support local communities. Accordingly impact on social environment can be assumed as positive.

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8 Environmental Management and Monitoring Plan This section deals with the set of mitigation and management measures to be taken during project implementation to avoid, reduce, mitigate, or compensate for adverse environmental impacts. It may include multiple management plans and actions. It includes the following key components. The main environmental and social management issues are summarized in the management and monitoring plan. The monitoring activities included in the table is considering monitoring activities different from the official monitoring activities and official environmental monitoring reports to be submitted to local authorities in Kazakhstan, however some items included in the monitoring overlaps each other.

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Table 8.1.1 Environmental management and monitoring

Phases and Issues Proposed Mitigation Measures Performance Indicators

(Parameters) Monitoring Locations and

Frequency Responsible Entity

Pre-construction Phase

Aksengir and Kosmis Plants

Preparation of detailed technical design for implementation of the project in Aksengir Plant taking into consideration existing situation and environmental requirements

All project facilities are to be designed taking into consideration the Kazakhstan and international requirements especially technical requirements applicable to food processing facilities. Attention should be drawn to the air emission standards in order to ensure that new installations will not lead to non conformance with standards.

Technical and engineering design is available and environmental considerations are included in the design

Upon submission of the final output from the engineering design firm

RG Brands Technical Department/ external Consultant

Lack of environmental management at the start of project

Development of environmental management plans, especially pollution prevention, Health and safety, waste management plan

The detailed approaches for environmental and HS developed and documented. management plans available and approved by the management

Prior to procurement of equipment and installation start

RG Brands Technical Department/ external Consultant

Receiving legal permissions from state authorities

All documentation required in accordance to Kazakhstan legislation prepared and all permits received for the plant reconstruction

The environmental permits, agreements and other required documents in place

Prior to the installation start RG Brands with support of external consultant

Construction Phase

Soil protection The operations should be accomplished in accordance to international good practices, the top soil should be stripped and stored for future use; method statements should

The method statements available for soil management

Prior to commencement of soil works

Construction contractor or RG Brands

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be prepared for top soil management and spoil disposal

Increased vehicle movement for supply of goods and support of reconstruction activities

The traffic management in place and requirements respected

The vehicles movement in accordance to traffic management requirements

Vehicle movement routes/ every month during construction phase


Increased noise and disturbance of the local population due to the increased vehicle movement

Restriction of vehicle movement time to day hours

No vehicle movement during the night time

Vehicle movement routes/ every month during construction phase


Increased risk of soil pollution with fuel, oil and Lubricants

Proper management of refueling operations, use of external contractors or refueling on site using special refueling equipment. Special storage facilities for used oil and lubricants

Refueling and waste oil lubricants management in accordance to pollution prevention plan

Refueling operation and storage facilities up to standard in place/ Every month and during site inspections


Increased risk of surface run off pollution

Proper site management, implementation of pollution prevention measures

The construction area clean and tidy, pollution prevention measures in place

The surface run off discharge points/ quarterly during whole reconstruction period


Increase of waste generation Proper collection system for non-hazardous, construction and hazardous wastes. Temporary accumulation facilities provided

No wastes collected out of the specially dedicated places; The waste collection areas provided and clearly marked

The waste collection containers provided. All wastes collected and segregated as required


Increased HS risks for workers Implementation of personnel health and safety and first aid trainings

The training materials (modules) available for workers. Should include different scope for different professions

The training materials in place; Training log book available operations in accordance to the training / monthly during reconstruction period


Increased HS risks for workers Provision of adequate Personal Protection equipment to workers/ safety shoes, glasses, dressing helmet (if required)

The PPE’s provided, All workers following the rules for PPE usage

The PPE in place, All workers wear the PPE’s / Every month and during site inspections


Public disturbance, increased Grievance mechanism in place and The public grievance The claim collection system Construction contractor

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number of public claims operating effectively mechanism in place, the claim collection means available

available at the entrance to facility/ monthly during whole reconstruction period

or RG Brands

Operation phase

Aksengir and Kosmis Plants

Monitoring of actual environmental impacts

Implementation of environmental monitoring activities in accordance to approved monitoring plans for each facility

The monitoring system in place, periodical measurements taken; Quarterly monitoring reports available and submitted to relevant authorities

At least monthly testing in accordance to the environmental monitoring plan/ monthly during whole operation period.

RG Brands or special consulting/monitoring contractors

Increased air pollution Implementation of air emission management and monitoring activities

The stack emissions measured; actual emissions are in compliance with approved maximum emission limits; corrective actions implemented as necessary



Compliance with wastewater quality standards

Implementation of wastewater qualitative quantitative monitoring activities, special measures for reduction of wastewater pollution levels

The wastewater quantity and quality assessed in accordance to monitoring plan; reports available; compliance with wastewater discharge standards ensured



Efficient consumption of raw water The raw water consumption minimization program in place; The targets for raw water usage per unit established Water consumption minimization measures implemented Established raw water recycling programs

Internal monitoring of raw water consumption; analysis and planning for future actions



Efficient processing Implementation of Cleaner production CP projects planned and whole plant RG Brands or special

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programs addressed towards increase of process efficiency

implemented projects assessed. the CP implementation reports in place

/Annual reports for CP implementation in place

consulting/monitoring contractors

Energy efficiency Implementation of energy efficiency measures in order to reduce overall energy consumption per unit product

Energy efficiency measures planned and implemented. execution of specific monitoring to evaluate the mitigation effect

whole plant /Annual reports for EE measure implementation in place


Increased waste generation Implementation of proper waste management practices in accordance to the waste management plan

The programs for prevention and minimization of waste generation in place; implementation of programs for waste recycling and reuse

whole plant /Annual reports for Waste generation in place


Pollution caused by hazardous waste generation

Implementation of proper waste management practices in accordance to the waste management plan

The programs for minimization of processes causing hazardous waste generation in place / Targets for minimization of hazardous waste generation established

whole plant /Annual reports on implemented activities and results reached


Increased HS risks for workers Implementation of personnel health and safety and first aid trainings

The training materials (modules) available for employees. Should include different scope for different professions

The training materials in place; Training log book available operations in accordance to the training / in accordance to monitoring plan


Increased HS risks for workers Provision of adequate Personal Protection equipment to workers in accordance to working conditions

The PPE’s provided, All workers following the rules for PPE usage

Throughout the facility / in accordance to monitoring plan


Public disturbance, increased number of public claims

Grievance mechanism in place and operating effectively

The public grievance mechanism in place, the

The claim collection system available at the entrance to

RG Brands

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claim collection means available

facility/ in accordance to monitoring plan

Employee claims Grievance mechanism tailored for employees in place and operating effectively

The employee grievance mechanism in place, the claim collection means available

The claim collection system/ in accordance to monitoring plan

RG Brands

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9 Information Disclosure, Consultation, and Participation While the proposed expansion activities will occur within the current footprint of the existing facilities and the sites are either within an industrial area with similar activities (in the case of Kostanay) or at an effective distance from inhabited areas (in the case of Aksinger), the project will engage, consult and provide information to relevant stakeholders. Based on the audit, there are no affected people and other stakeholders who could be potentially adversely affected at the sites. Even then, project design and mitigation measures will incorporate environmental and social concerns if any is observed to adversely affect the stakeholders during the final technical design stage of the expansion activities. Meetings with relevant local regulatory authorities involved in the permit requirements of the facilities will be conducted and their recommendations will be incorporated in the design and management of the project‟s environmental and social issues. As applicable, the project will inform and consult with the community and neighboring industries on the construction and operation of the plant which may affect access to operation of public utilities such as water and electricity supply or in the management of solid and liquid wastes. As appropriate, relevant project information and measures will be posted at the company premises or in company‟s web site. Internally, RG Brands will ensure that communication of information about environmental and social management will be regularly delivered to personnel to ensure that they are sufficiently informed and are able to fulfil their responsibility in a manner compliant with the corporate environmental, health and safety (EHS) regulations. Appropriate information and trainings will be provided to personnel depending on the level of their involvement in EHS activities and their respective responsibilities. All RG Brand personnel will be informed of the corporate EHS policies, regulations, procedures and programs pertinent to their job. Trainings will be organized and periodic information may be developed to communicate information on progress made by the company in environmental and social management. Externally, stakeholders will be engaged to ensure that they are adequately informed about the company‟s environmental and social performance. In particular, the company‟s environmental and social policy will be made publically available through RG Brands‟ web-site to demonstrate the company‟s willingness to implement environmental and social safeguards. In addition, the company will also prepare annual environmental and social performance reports. The company will also periodically prepare information bulletins to inform stakeholders and the public on environmental and social aspects. The extent of information to be communicated to specific external stakeholder groups (e.g. governmental bodies, monitoring agencies, etc.) and the communication methods will be defined by the management depending on the separate requirements of each stakeholder. A mechanism for feedback from external stakeholders will be available through access to the company‟s web page, through e-mails, letters and/or phone calls. Feedback of external stakeholders will be collected and periodically analyzed to improve the project‟s and the company‟s environmental and social management procedures.

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10 Grievance Redress Mechanism (GRM) At the plant levels, environmental and social concerns during the construction stage can be lodged initially by affected stakeholders directly with the contractor(s). If the issues are resolved and the complainants are satisfied with the provided management option, no further action will be required. To this end, contractor(s) will be required to set up a grievance redress unit within its staff to handle concerns from its workers, RG Brands employees as well as affected community and relevant stakeholders. The contractors will be required to establish and maintain a grievance register to document all complaints. The contractors will be required to respond to the complainant in writing within one week on its proposed management measure and the manner by which it will be addressed. The contractors will be required to report handled complaints, resolved and unresolved to RG Brands‟ grievance redress unit (GRU) personnel. Any grievance recorded will be discussed in the regular meetings conducted by RG Brands‟ management personnel on site. Environmental and social issues not resolved at the contractor(s) level can be elevated to the grievance redress unit (GRU) of RG Brands at the site. On receiving the concerns, the GRU will document the complaint in writing in a grievance register and respond to each concern in writing within two weeks on the proposed management measure and the manner by which it will be addressed. If the problems are resolved and affected stakeholders are satisfied with the resolution of the concerns, the GRU will document the concerns and the management of the concerns in the grievance register. This will be reported in the regular meetings conducted by RG Brands‟ management personnel on site. Unresolved concerns at the plant levels will be brought to the corporate level‟s attention by the Chief Manufacturing Officer who is in charge of all company production facilities in Aksengir and Kostanay. He will be responsible for coordination of the plants, development of production capabilities inclusive of infrastructure, environmental, health and safety performance of the company, and overall development of production facilities and plants. Issues will be discussed together with other concerned departments such as Manufacturing, Human Resources and Security departments which shares environmental, health and safety issues. Issues unresolved at the plant levels as well as those with reputational risks will be undertaken at the corporate level. If the decision arrived at this level is not acceptable to the affected stakeholders, legal remedies outside of the mechanism described here can be explored. The issues registered at this level will be resolved within four weeks from the date of registration of the concern. During operations, the above mechanism except at the contractor level will be employed. Schematic diagram of the project‟s Grievance Redress Mechanism.

Affected Stakeholders

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11 Corrective action plan Based on the information presented in previous sections of the document the corrective action plan was prepared in order to update the existing ESMS system in place and upgrade it to the level necessary for fulfilment of ADB‟s 2009 Safeguard Policy Statement (SPS) requirements.

Table 11.1.1 Corrective action plan

Description of issues and proposed action Assessment criteria Implementation

schedule

Improvement of Environmental and health and safety performance at corporate level

Modification of corporate structure responsible for HSE issues in order to increase team capability; appoint person responsible for environmental issues at corporate level; clearly define roles and responsibilities of departments and personnel involved in EHS management; establish system for preparation of environmental and HS performance monitoring reports for presentation to lenders

The personnel responsible for HS and environmental issues appointed;

Lender‟s performance report preparation started; Internal monitoring reports including

measures implemented and to be summarized in the six month Environmental and Social Performance Report (AESPR) to ADB

three month after the project launch (May 2013)

Upgrade of formal ESMS system in place, incorporation of environmental issues in existing HS policy documentation, preparation of corporate environmental management plans inclusive pollution prevention, waste management plans; upgrade of the existing plans

Corporate environmental and health and safety policy document prepared and approved;

ESMS system documents updated to include waste management and pollution prevention plans

June 2013

Establishment of updated waste management procedures to include hazardous materials management, establishment of hazardous waste temporary storage areas on site – this should be incorporated in the Waste Management Plan

The waste management procedures in place, hazardous waste temporary accumulation area in place

August 2013

Preparation of golden driving rules for corporate fleet and implementation of traffic management issues

The golden rules and traffic management rules delivered to drivers

August 2013

Establishment of internal environmental auditing of facilities and incorporation with HS auditing activities already in place

The environmental issues included in internal audits; The audit reports available

August 2013

Implementation of raw material usage minimization technologies, especially water saving and energy efficient and cleaner

The activities for implementation of water saving and energy efficient

End of 2013

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production technologies in the production. and cleaner production technologies in place. The documents available

Consideration of CO2 and methane emission assessment and monitoring in internal environmental monitoring of the corporation

Methods for assessment of CO2 and methane emissions are identified

CO2 and methane emission monitoring is in place

End of 2013

Verification and implementation of the national legal requirements pertinent to the project, in particular verification if updating of the existing EIA studies and air emission standards are required, and implement necessary actions.

Requirements of national legislation regarding EIA amendment and air emission standards are verified

Respective documentation is updated if required

Prior launching the project

Solving Environmental issues on sites

Decommissioning of the underground fuel storage facility at Aksengir plant with further cleanup of polluted land and if necessary construction of new, above ground fuel storage facility with secondary containment.

The fuel storage facility decommissioned; polluted land removed and disposed appropriately

Efficiency of clean up assessed

October 2013 or prior to installation of new gas generation units

Clean-up and reclamation of generator‟s site, treatment/disposal of removed polluted material in line with national requirements and best practices

Pollution not detected in soil tests after clean up

All removed material disposed according to requirements

End of 2013

Preparation of Environmental documentation required for installation of new equipment at Aksengir plant

The air emission documentation prepared and approved

prior to installation of new gas generation units

Construction of concrete reservoirs dedicated to storm water management in accordance to the requirements set for Aksengir plant.

Four water collection reservoirs in place dedicated for collection of surface run off water

End of 2014

Evaluation of necessity for wastewater pre-treatment prior to discharge to municipal sewer – for both plants

The report on necessity of pre-treatment available; The wastewater pre-treatment plant documentation in place

Prior to installation of new equipment at plants.

Upgrading of waste management at plants to the standard established by the new corporate Waste Management Plan

Waste management at plants are in compliance with Waste Management Plan

Respective recordkeeping and reporting is ensured

August 2013

Development of improved housekeeping plan for The plan developed and August 2013

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Kosmis Plan implemented

The plant‟s yard is kept clean and neat

Improvement of corporation social performance

Establishment of grievance mechanism inclusive claim recording and registration systems to ensure proper collection of grievances and claims from corporation employees



April 2013

Introduce tracking of gender related statistics to assess implementation of gender policy.

If necessary planning and implementation of corrective measures (e.g. vocational trainings for women, gender trainings, etc) to promote gender equality

Statistics enabling assessment of gender policy is readily available.

Corrective actions planned if necessary

August 2013

Establishment of grievance mechanism inclusive claim recording and registration systems to ensure proper collection of grievances and claims from local population



April 2013

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12 Conclusions and recommendations The present report provides information regarding environmental, social and health and safety performance of RG Brands corporation and production facilities. The environmental and HS performance was screened against national legislation, ADB SPS and best practices. Documentation available on each site was studied in detail, project related production facilities were visited and the main environmental and health and safety issues identified. According to the information obtained during the Due Diligence, RG Brands has certain standard for management of environmental and occupational health and safety issues. ESH aspects are managed in the way to meet national requirements. It should be stated that all the company operations is in line with national requirements. It should be stated that the corporation up to now was more focusing on HS performance than environmental issues, since it was assumed that the production facilities would manage environmental issues themselves. For occupational health and safety management the corporation has unified HS procedures, which are documented in HS Manual. HS program including upgrading of safety equipment, PPEs, warning signs has been implemented recently in the facilities. Most part of activities and procedures required is already under implementation; however, in some cases the actions are not well documented and managed at corporate level. Major issues identified at corporate and facility levels are mainly related with environmental management. These include absence of formalized ESMS, environmental policy, environmental management plans including waste management, pollution prevention, material management, etc. It should be mentioned that such documentation is not requirement of national policy, however this is required to meet ADB standards. Based on detailed analysis of existing information and site visits, the recommendations were prepared for each plant which will enable improvement of the corporation and plant‟s performance up to the required ADB standards. The time bound corrective action plan was prepared to guide the corporation during the implementation of proposed project. The CAP addresses all major EHS issues identified during DD and reflects all recommendations provided throughout the report text. The CAP delivers assessment criteria for each proposed action to be used for evaluation of achieved results. The CAP and recommendations to the RG brands will ensure that the efficiency of the project operation will increase and will improve overall corporate environmental and HS performance.

41140_R1_Eng Annexes


Annex 1: List of RG Brands personnel interviewed during site visits



List of RG Brands main personnel interviewed during site visits RG Brands Head Office (Almaty) Askhat Agibaev – Chief Manufacturing officer Alibek Ungarbayev - Head of Corporate Finance and Treasury Ilyas Akhmetasafa – Engineer Ecologist Alex Boezaart - Technical Director Kaligash Bisengalyeva – Chief legal Officer Aksengir Plant Alex Boezaart - Technical Director Andrey Khalyapin – Director of Aksengir Branch Temur Kaltaev – Water purification unit Ruslan Bayazirov – Technical department Gulchikhra Oblezova – QA director Kosmis Plant (Kostanay) Assykbek Altay – Director of Kosmis Brach Lubov Bikbusinova – Milk and Juice Production Manager Lilia Voitsekh – Laboratory Head Rinat Abucev – Chief Engineer Elena Rechkina – Quality Manager Sergey Afanasyev – Chief Power Engineer Jangeldi Kokushev – Safety Engineer



Annex 2: The List of reviewed documents



The List of reviewed documents

1) RG Brands‟ Communication Matrix and Conduct in Emergency Situations

2) RG Brands‟ training plan for 2012

3) RG Brands‟ organization chart

4) RG Brands Policy for Personnel‟s Performance Assessment and Skills Development

5) RG Brands‟ Health and Safety Induction Instruction

6) RG Brands Mid Term Vision and Targets for 2012-2016

7) RG Brands‟ Working Instructions for incoming inspection of production of carbonated

and non-carbonated beverages, juices, juice drinks and iced tea

8) RB Brands Working Instructions for Microbiological Control of Production of

carbonated beverages

9) RG Brands Risk Management Policy

10) Process of Decommissioning and Disposal of Defective Raw Materials in

Manufacturing Branches of RG Brands

11) Process of Decommissioning and Disposal of Non-Standard Finished Goods in

Manufacturing Branches of RG Brands

12) Job description of HS Engineer

13) EIA for Expansion and Re-equipment of Aksengir Plant, 2010

14) Environmental monitoring program for 2011-2015, Aksengir Plant

15) Report on Implementation of Environmental Monitoring Program at Aksengir Plant,

Reporting period Quarter 3, 2012

16) Aksengir Plant‟s HSE inspection results for 2012

17) Incident statistics for Aksengir Plant for 2011

18) Sanitary program for Aksengir Plant for 2012

19) Quality Safety Policy of Aksengir Plant, 2012

20) Regulations for Organization of Access and In-Plant Security of Aksengir Plant

21) Safety Management System for Soft Drinks, Aksengir Plant

22) Report on Protection of Ambient Air – Kosmis Plant

In addition to listed documents the DD team has reviewed the logbooks available on sites inclusive: Logbook for environmental monitoring, Laboratory logbooks, HS records, Initial induction books etc. The reviewed documents also includes documentation for QA and sanitation, MSDS for chemicals and ingredients etc.

Environmental and Social Compliance Audit Report · PDF fileThis environmental and social...

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