Novus Logistics Center

MIGA was requested by UAB Consul Trade House (the Guarantee Holder or GH) to provide guarantees in Ukraine for its equity (quasi-equity/shareholder loans) investments in Serviceautotrading LLC (SAT, Project Enterprise, or PE) for a period of up to 3 years. 

The project consists of the operation and maintenance of SAT’s 50,000 m2 logistics center (including the building, operational offices, dry storage, cold storage, deep freeze, packaging warehouse, and unit picking). SAT is responsible for maintaining the offices, warehouse, and facilities, and for managing its tenant. The logistics center is being leased by the Novus supermarket chain, which is also owned by the Guarantee Holder, to store its inventories. Although SAT and Novus are distinct companies, they share the same management team, as all employees of SAT are also employed by Novus. The logistics center became fully operational at the end of June 2024. 

The Project is located in a mixed residential and industrial zone, about one kilometer away from the west border of Kyiv International Airport (Zhuliany) and about seven kilometers from the Kyiv city center. There are residents directly across the Project site’s northern border. The Project is currently leasing land from the Kyiv local government for 15 years and the Project did not cause any physical and economic displacement. The Project site does not overlap with any protected area or key biodiversity area.

The Project is categorized as Category B according to MIGA’s Policy on Environmental and Social Sustainability (2013). The Project is expected to have limited site-specific environmental and social (E&S) impacts and risks. These impacts and risks can be avoided or mitigated by adhering to recognized Performance Standards (PSs), Environmental, Health and Safety (EHS) guidelines, and design criteria. Key E&S risks associated with this investment include: (i) corporate EHS management structure and systems and capacity to manage E&S risks and impacts; (ii) life, fire and safety; (iii) labor and working conditions including adequate occupational health and safety (OHS) practices in the supply chain; (iv) community health and safety; and (v) emergency preparedness and response.

While all E&S Performance Standards (PSs) are applicable to this investment, based on current information, the investment will have impacts which must be managed in a manner consistent with the following PSs:

• PS1: Assessment and Management of Environmental and Social Risks and Impacts
• PS2: Labor and Working Conditions
• PS3: Resource Efficiency and Pollution Prevention
• PS4: Community Health, Safety and Security

There are no impacts related to the following PSs thus they are not triggered for the Project: PS5 Land Acquisition and Involuntary Resettlement; PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources; PS7 Indigenous Peoples, and PS8 Cultural Heritage. 

In addition, the World Bank Group General Environmental, Health, and Safety (WBG EHS) Guidelines are applicable to the Project.

The following key documents were reviewed by MIGA: 

• Environmental Impact Assessment Construction of a warehouse complex between Yakova Kachury Street and Myr Street in Sviatoshynskyi district of Kyiv, 2020 (EIA)
• Site and warehouse video, site photos of fire safety training (taken approximately October / November 2024??)
• Summary of the Occupational Health and Safety Management System, 2018
• Waste management procedures, 2023
• Accident data 2022-2024
• Employee grievance procedures, 2024
• HR policy and procedures, employee code of conduct, 2021
• Collective agreement, 2016
• Regulations on contractual work, 2024
• Procedure for managing electronic procurement of goods, works and services, 2024
• Supplier selection and evaluation procedure, 2022

In addition to reviewing the above documents from Novus, MIGA conducted virtual calls with the SAT and Novus which included meetings with key E&S staff and management. 

MIGA’s due diligence review considered the E&S management planning process and documentation for the Projects and identified gaps between these and MIGA’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and in the Environmental and Social Action Plan (ESAP) attached to this ESRS.  Through the implementation of these measures, the Project is expected to be operated in accordance with the Performance Standards.

Key E&S issues associated with the Project business activities are summarized in the paragraphs that follow.

PS1:  Assessment and Management of Environmental and Social Risks and Impacts

Environmental and Social Assessment and Management System: The Project’s E&S management system (ESMS) is still in the development stage and currently consists of a set of standalone procedures developed at corporate level which are yet to be implemented at the logistics center (LC). The Project will develop and implement an ESMS and associated plans and procedures in line with the requirements of the MIGA PSs and appropriate to the nature and scale of its operations. The ESMS will specify compliance with applicable E&S laws and standards, and incorporate the following elements: (i) policy; (ii) identification of risks and impacts; (iii) management programs; (iv) organizational capacity and competency; (v) emergency preparedness and response; (vi) stakeholder engagement; (vii) monitoring and review, and (viii) contractor management (ESAP item 1).

Policy. At the group level, SAT will develop and implement an E&S policy covering its logistics center (ESAP item 1).

Identification of Risks and Impacts. As per Ukraine regulatory requirements, a comprehensive EIA was prepared for the facility in 2020. This summarized the key potential impacts and included a set of environmental management actions to be completed during construction and operation. Under State planning regulations, the plot is designated for construction and operation of trade buildings and warehouse infrastructure.

Management Programs: SAT has developed a set of policies and operating procedures which address key E&S risks associated with the company’s activities. SAT will develop a specific set of plans and procedures under the new ESMS to address all the various E&S risks associated on site in the form of an Operational E&S Management Plan. (ESAP item 1). Some of these plans and procedures will build upon those already developed by Novus.

Organizational Capacity and Competency: Currently there is no individual with overall responsibility for E&S management. SAT will hire an ESG Specialist to ensure implementation of the project’s ESMS (ESAP item 2).  Although there is no separate department specifically covering E&S management, SAT’s Asset Management Directorate states that each department is required to support EHS within the scope of its functions. Novus has a separate department for occupational health and safety, the Occupational Safety Department, which is under the Human Resources Management Directorate. 

Emergency Preparedness and Response The site is bounded by a 2m perimeter fence, video surveillance, checkpoint entry, and has 24/7 onsite security personnel. The logistics center is equipped with firefighting equipment and the facility is fitted with automatic sprinklers, fire extinguishers, hoses, smoke detectors, and a fire alarm system, which has valid inspection stickers. Emergency exits and fire assembly points are clearly marked and smoking is prohibited. SAT has developed an emergency procedure and emergency response instructions (including for airstrikes) are posted in specially designated areas. SAT carries out routine fire safety training. There is also an emergency procedure for all employees with instructions clearly displayed. 

SAT will develop and implement an Emergency Preparedness and Response Plan during operations (ESAP item 3), which will describe emergency situations and measures to prepare for and respond to these events, such as the emergency response team members, their responsibilities, internal and external communication protocols, reporting lines, training requirements, evacuation routes and areas as a minimum.

Monitoring and Review: Due to situation in the country there have been no regulatory monitoring visits by the authorities to the facility since 2022 under the "Introduction of martial law by Resolution No. 303 of the Cabinet of Ministers of Ukraine dated 13.03.2022". A moratorium was introduced on scheduled and unscheduled inspections of control bodies for the period of martial law. Novus monitors emissions, water quality, waste and occupational safety. As per the ESAP, under the new ESMS, SAT will conduct periodic performance reviews of the implementation of the ESMS including the related procedures and will ensure that procedures, practices, and plans are being implemented. SAT will develop an E&S monitoring plan that describes responsibilities, standards, and will include actions to monitor and improve performance (ESAP item 4). In addition, SAT will develop and submit annual E&S monitoring reports to MIGA. 

Stakeholder Engagement: Currently there is no formal Stakeholder Engagement Plan (SEP) in place. SAT will develop one in line with MIGA PS1 requirements that will include the following elements: stakeholder mapping and analysis, reference to local regulations and international standards, description of risks and impacts, summary of ongoing and previous engagement, participation of the vulnerable groups, description of its Grievance Redress Mechanisms (GRM), list of time-bound activities, and resources and responsibilities (ESAP item 5).

External Communication and Grievance Mechanisms: Customer complaints are delivered through the telephone hotline, monitoring of social networks, and submission of complaints via QR code. For grievances that extend beyond customer service, such as those involving the community, SAT will update its external grievance redress mechanism in line with PS 1 and describe the process for receiving, addressing, and recording/documenting complaints and communications from external stakeholders (ESAP item 5). This will be included in the SEP.

PS2: Labor and Working Conditions

There are six employees in SAT, all of whom are also Novus employees. SAT does not have any temporary employees. Two SAT employees work directly at the logistics center - the Chief Engineer and the Occupational Health and Safety (OHS) Engineer. All other 330 staff onsite are Novus employees.   

Working Conditions and Management of Worker Relationship: Novus/SAT has developed an HR policy, associated sets of procedures and an employee code of conduct manual, which cover performance management, remuneration, leave, termination of employment, internal grievance mechanism, sexual harassment, whistleblowing policy, overtime policy, salary advance policy, requirements of Ukraine. This includes a commitment to diversity, equity & inclusion, drug & alcohol policy, recruitment health and safety policy, and social media policy. The collective bargaining agreement is currently being updated. The HR policy and procedures will be updated to fully align with requirements of PS2 and cover such issues as retrenchment, worker organizations, gender-based violence, and prohibition of child and forced labor (ESAP item 6). 

Grievance Mechanism: The employee grievance procedure describes the mechanism for internal grievances management and resolution and is accessible to all employees and contractors. The Policy also provides an opportunity to file grievances confidentially and/or anonymously. The grievance mechanism will be updated to accommodate and manage gender violence and sexual harassment related complaints (ESAP item 6)            

Occupational Health and Safety: Key hazards include typical warehouse safety including manual handling, slips, trips and falls, forklift operations and falling objects, materials and waste handling. as well as ergonomic issues of the staff working in the offices. The existing Novus/SAT’s health and safety management system is comprehensive. This will be updated in accordance with the relevant provisions of MIGA PS2 to ensure that all of the facility operations have procedures covering warehouse safety (ESAP item 7). There is an OHS manual for employees that specify a formal procedure for investigating and recording incidents. In addition, Novus carries out appropriate health and safety training for its employees and the records of these trainings are kept.

Workers Engaged by Third Parties: Contractors were primarily engaged during the construction period. SAT has procedures in place for managing contractors. SAT will include compliance with applicable Performance Standards requirements and WBG EHS Guidelines in the agreements with contractors, including provisions that will require contractors to regularly report and provide documentation to demonstrate compliance with applicable E&S laws and Performance Standards (ESAP item 8).

Supply Chain: Novus' Commercial Department, with the help of the Security Department, is responsible for selecting and evaluating suppliers based on a documented process and criteria. SAT/Novus will include E&S criteria in the selection and evaluation of suppliers and stipulate relevant PS requirements in agreements with primary suppliers (ESAP item 9).

PS3:  Resource Efficiency and Pollution Prevention

Resource Efficiency:  The center is a state-of-the-art logistics facility that was constructed in accordance with Building Research Establishment Environmental Assessment Method (BREEAM) principles for the construction of environmentally sustainable buildings. Freon and ammonia-free refrigeration systems have been installed. Sanitation, cleaning, and firefighting water is sourced from groundwater and mains supplied by Vodokanal, the water utility. Water consumption is 1000 m3 per month on average. Efficient plumbing has been installed and the facility operates at lower water temperatures to minimize energy consumption. Annual energy and utilities consumption is monitored. 

Pollution Prevention:  To reduce air emissions and noise, all ventilation units of the logistics center are equipped with filters, which are replaced according to the maintenance schedule of the equipment (quarterly). To reduce the noise level, the entire fence on the residential side of the area has been constructed as a noise barrier. SAT obtained an air emissions permit for boilers, diesel and gas generators, and pumps. It is required to monitor and report emissions to the regulatory authority once a year. SAT is engaging a third party to measure the project’s noise levels (occupational and perimeter noise) to confirm compliance with regulatory limits (ESAP item 10). Wastewater discharge is monitored by a third-party which conducts periodic compliance sampling and analysis of wastewater discharge. A wastewater permit will be required after signing a permanent water supply contract with the utility company. 

In addition, there is a detailed set of waste management procedures (2023) covering waste segregation, handling, collection, handling and disposal, that also covers hazardous substances and emergency situations. The main bulk of waste includes plastic, film, wood, and paper. There are compactors on site for cardboard, film and organic waste. Waste is separated and collected in containers for solid household waste, wood and glass. A specialist waste contractor removes, transports and disposes of residual waste to landfill following segregation of plastic, cardboard and glass which is recycled. 

Hazardous Materials Management and Safety: On site, there are above-ground double skinned diesel storage tanks that are currently unbunded. SAT will install containment bunds around these storage tanks to prevent any potential spillages (ESAP item 11). In addition to diesel, the LC has waste fat that accumulates in grease traps. A contractor collects and removes this waste to specialized companies that have the appropriate permits. 

PS4:  Community Health, Safety and Security

Community Health and Safety: Deliveries to the LC are made by suppliers that use their own vehicles and drivers. Goods are then transported to stores through transport companies that are contracted by Novus. To prevent traffic jams, Novus has developed a traffic flow scheme. SAT/Novus will develop and implement a Traffic Management Plan for the facility that will identify traffic-related health and safety risks and corresponding mitigation measures (ESAP item 12). The Plan will specify regulatory requirements, responsible staff, EHS requirements for suppliers and contractors, including but not limited to training for drivers and regular maintenance of vehicles.

Infrastructure and Equipment Design and Safety: The facility has been constructed to a high standard with modern fire suppression systems installed.  A road interchange was constructed on the main highway which increased the number of lanes from 2 to 4 to facilitate access and egress to/from the LC. Water supply was reconstructed with two mains water supply lines laid and connected to the facility. The facility is also connected to the municipal mains sewage system. New electrical cables were connected to the existing district substation. 

Security Personnel: Novus employs its own security personnel and also outsources security to licensed security companies. Novus evaluates and conducts background check of the security company prior to contracting and it ensures regular training of the security personnel.  

The documentation listed below is available electronically as PDF attachments to ESRS at www.miga.org. 

• E&S Impact Assessment (Ukrainian), 2020

For additional information about the Project, please contact: 

• Podielets Dmytro, Head of International Financial Reporting Standards 

Dmitriy.Podjelets@novus.ua

MIGA supports its clients (as defined in MIGA Policy on Environmental and Social Sustainability) in addressing environmental and social issues arising from their business activities by requiring them to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities.

In addition, Affected Communities have unrestricted access to the Compliance Advisor/Ombudsman (CAO), the independent accountability mechanism for MIGA. The CAO is mandated to address complaints from people affected by MIGA-guaranteed business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of MIGA.

Independent of MIGA management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of MIGA’s environmental and social performance through its compliance arm.

Complaints may relate to any aspect of MIGA-guaranteed business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of a MIGA-guaranteed business activity. Complaints can be submitted to the CAO in writing to the address below:

Compliance Advisor/Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue NW
Room F11K-232
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400
E-mail: cao-compliance@ifc.org