The project is the first in a planned regional co-operation to finance the Sponsor’s strategic expansion of its Kaufland discounting hypermarket format in Central and Eastern Europe following its successful experience in Czech Republic, Slovakia and Croatia. The expansion will mainly focus on small and medium sized towns.
The project will contribute to increased competition mostly in the secondary cities and relatively disadvantaged areas which are the focus of the Sponsor’s expansion strategy. It will bring the convenience of discounting hypermarkets shopping to large portions of the population, who do not have access to this type of retail. Procurement of products locally will generate strong backward linkages and encourage local producers to process according to best business practice.
Kaufland Polska Sp. z o.o., a company organised and existing under the laws of Poland, and part of the Schwarz Group, a privately held company based in Germany.
EBRD entered into a financing agreement of EUR 110 million (including syndication) to partially finance the project.
EUR 240 million.
Screening categories and rationale for classification
A retail development such as this project has some environmental impacts which can be readily identified and prevented through adequate mitigation measures. For the above reasons, the EBRD has classified the project B/0 and required an Environmental Analysis of the project. In accordance with the disclosure requirements in EBRD’s Environmental Policy for B-level projects, an environmental review summary for the project was available at Kaufland Polska’s headquarters for public review and comment and a notice hereto was given t by the Sponsor through a Polish newspaper Gazeta Wyboecza Komunikaty on December 7th 2004.
Information reviewed during the environmental appraisal
The environmental due diligence has been based on the completed Environmental Questionnaire and follow-up information gathering and analysis through communication with the Sponsor.
Environmental Impacts and mitigation measures
Potential environmental issues associated with construction of discount hypermarkets are as follows:
corporate environmental policy
environmental due diligence procedures for site selection
safety of construction materials
environmental, health and safety issues associated with construction
environmental and life and fire safety issues associated with the operation of the retailers.
The due diligence showed that the Sponsor is capable of addressing the above issues. The Sponsor is required to ensure each store will meet the relevant Polish and EU environmental, health and safety standards and requirements as well as to submit an annual environmental, health and safety report to the Bank. The Company undertakes environmental impact assessments (EIAs) as required under Polish regulations for such developments.
The company is required to observe applicable Polish laws and standards on employment, as well as standards consistent with the Conventions of the International Labour Organisation relating to the employment of children and young people, discrimination at work, and forced labour.
Following various investigations of the Polish National Labour Inspectorate (NLI) in the retail sector, including Kaufland Polska, the EBRD engaged an independent expert on labour rights, with whom the Bank carried out a monitoring visit in June 2005. The monitoring process also included meetings with the Polish National Labour Inspectorate (NLI) and trade unions. The Company has declared that it now complies with the requirements set out by the NLI and has revised it s operations and management programmes.
The Company reports that since the Bank’s monitoring visit in 2005, it has revised its policies and it has implemented, among others:
New company procedures for the recording and verification of working hours, overtime and remuneration throughout the company
Provision of training for store managers on labour law, work time issues and people management skills
Changes to standard contracts in line with recommendations of Polish labour authorities
Adoption of a new employee communication policy
A reduction in the number of employees engaged through agencies and an increase in those directly employed.
The Bank has been in contact with both NLI and Kaufland Polska management in relation to the actions taken by the Company, and results of NLI inspections undertaken in first half of 2006 indicate that there are only minor non compliance issues.
The Bank will continue to evaluate the project’s compliance with the applicable environmental, health, safety and labour requirements during the lifetime of the project by reviewing annual environmental reports (AER) and any relevant information prepared for the project covering the status of implementation of environmental and labour mitigation measures as well as visits to the project. The first annual report for 2005 has been received by the Bank, and this has summarised the Company’s operations and compliance with national and international standards. The Bank is in contact with the Company following the report in order to clarify some issues and further strengthen the reporting process.
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Text of the PIP