Environmental and social review summary

#37451 – Ibis Mongolia

Project Description:

Founded by Mr. Battogoo Choidon (the “sponsor”) in 2005, Mongol Micron Cashmere LLC (“MMC”), through its wholly owned subsidiary MMC Polaris LLC (“MMC Polaris” or the “company”), is building a 123-room hotel (the “project”) in Ulaanbaatar, Mongolia’s capital city. The proposed hotel will be operated by Accor Hotels (“Accor”), an internationally renowned hotelier, under its “Ibis Styles” brand.

The project is located in the southwestern part of the city, in close proximity to Mongolia’s biggest expo center – a part of Ulaanbaatar city, where the government is promoting redevelopment of the industrial zone into a new commercial and residential zone, which currently has no quality hotel accommodation and lacks quality retail and food and beverage (F&B) outlets.

The project property is a 12-story building with gross floor area of 17,446 sqm consisting of (i) a 123-room “Ibis” branded hotel with associated F&B outlets and meeting rooms; (ii) 4 stories of retail space with leasable area of 5,500 sqm; and (iii) about 200 parking lots – both underground and outdoors.

At the time of this review (September – October 2015), civil construction was complete and internal fit out and landscaping work was ongoing for the expect commencement of retail operation during the first quarter of 2016, and the hotel opening slated for the second quarter.

IFC is considering to provide up to US$6.5 million of long-term senior loan to support the Project.

Overview of IFC’s scope of review:

The environmental and social (E&S) review of this project included assessment of the capacity and management system of the company to ensure the project’s compliance with IFC’s Performance Standards as well as national environmental, social and occupational health and safety regulatory requirements in Mongolia. The review relied on documents and reports made available by the company, visit to the project site and on interviews with the sponsor’s management team and the company’s project team in Ulaanbaatar.

IFC’s review consisted of appraising technical, environmental, health and safety (EHS) related information provided by the sponsor and the company, including regulatory permits; design specifications and drawings for the proposed project; an E&S due diligence report for the project vis-à-vis IFC Performance Standards prepared by an external consulting firm dated October 2014; operational policies and SOPs from Accor, including those related to life and fire safety (L&FS) management; and the company’s plans for developing E&S and operational management systems.

The review also included a visit to the project site in Ulaanbaatar in September 2015; and discussions with the sponsor’s management team and the company’s project team on site.

Identified Applicable Performance Standards:

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards

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

The project has been already constructed in downtown urban area of Ulaanbaatar. The project site was a vacant plot of land owned by the government in an industrial area, which was acquired by the sponsor through a public tendering process. There are no adverse impacts related to biodiversity, sustainable natural resource management or Indigenous People. No evidence of the presence or impact on issues associated with cultural heritage was identified.

Accordingly, the findings of the project review indicate that there are no impacts related to Land Acquisition and Involuntary Settlement (PS5), Biodiversity Conservation and Natural Resources Management (PS6), Indigenous Peoples (PS7) or Cultural Heritage (PS8).

If IFC’s investment proceeds, IFC will periodically review the project’s ongoing compliance with The Performance Standards.

Environmental & Social Categorization and Rationale:

Key E&S risks and issues associated with this project include: the company’s capacity, systems and performance to date in terms of E&S management during construction of the project; design plans for the hotel development and the use of an internationally recognized L&FS code for such; efficiency of construction materials, water and energy use in hotel design, construction and operations; emissions and waste management; labor and working conditions; management of contractors and suppliers (during construction and operational phases) and impacts of the project on the nearby communities, including those due to traffic.

The project has a limited number of potentially adverse environmental and social impacts, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. On this basis, this project is therefore classified as a Category B project according to IFC’s Policy on Environmental and Social Sustainability.

Environmental and Social Mitigation Measures:

IFC’s appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

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

Environmental and Social Impact Assessment (ESIA):

Prior to construction the company had duly applied for all the necessary permits and approvals for construction of the project, which included land possession certificate, land use agreement, permits for power, water, network and heating, building design and request for environmental evaluation.

The company received its permit to construct in May 2013, including the approval for architectural drawings, and accordingly started the construction in July 2013. ESIA was not required as a pre-condition for the commencement of construction. Subsequently, during the construction phase, the Special Inspection Agency of the district suggested to conclude the ESIA study prior to the commencement of operations. MMC Polaris is, therefore, coordinating with the Office of Environment on its request for environmental evaluation and accordingly granting the final environmental permit. At the time of this review, the company was preparing additional documents requested by the Office of Environment, in order to receive the approval from the state commission, and subsequently, the construction completion certificate.

Under the management agreement between Accor and MMC, the building must be constructed to meet Accor standards for an Ibis Styles hotel. These standards comprise of a very detailed guidance and expectations on various design aspects such as structural considerations, layout and design of building systems, fire safety systems, etc. covering over 100 documents. The level of details and expectations articulated in these Accor standards were reviewed by the external consultants, vis-à-vis the objectives and expectations of the Performance Standards and WBG EHS Guidelines; and found to be consistent and comparable.

While a documented environmental management plan was not prepared for construction phase, adequate safeguards were thus implemented during construction – covering labor issues, construction site safety and waste management; in accordance with Accor standards and local regulatory requirements. Moreover, Accor provided oversight to the design and construction process by deputing its own consultants who made frequent visits to Ulaanbaatar during construction phase to ensure the project’s compliance with Accor standards.

A sample based review of the planning and construction status regarding key E&S topics undertaken by the company’s external consultants confirm the project’s compliance with IFC PS objectives and Accor Standards. Specifically, there was not a single reportable accident during the construction phase.

 

Policy, Management Systems and Programs:

The hotel has been designed and will be operated as per Accor’s “Planet 21” sustainable development initiative (http://www.accorhotels-group.com/en/sustainable-development.html), which is structured around 21 commitments under 7 pillars (viz. Health, Nature, Carbon, Innovation, Local, Employment and Dialogue), which are backed by quantifiable objectives that all hotels are expected to meet by 2015. Moreover, Accor’s Procurement Charter 21 passes these commitments down to its suppliers, whereby, Accor’s suppliers must comply with the: National or international regulations relating to its activities; United Nations Universal Declaration of Human Rights; Core Conventions of the International Labour Organization; United Nations Global Compact that Accor joined in 2003. As a participant of these initiatives, the proposed hotel will thus be managed in line with good international industry practices.

As a newly established company, MMC Polaris has developed an EHS policy but has not been implemented and elaborated upon into other aspects of functional E&S management system as expected by IFC PS1. Going forward, as Accor takes over the operation of the proposed Ibis Styles hotel, the company will adopt and implement Accor’s policies and management systems.

ORGANIZATION:

MMC Polaris has a project team responsible for construction activities and monitoring of construction contractors; with an oversight from Accor. For the operational phase, the General Manager (GM) will be appointed by Accor, about 6 months before hotel opening. The GM will be responsible for recruiting and training the employees for the hotel, as per the staffing plans and other relevant operational policies under Accor standards. EHS team for the project will thus be recruited and trained accordingly.

Accor has its corporate Sustainable Development department, which works at two levels: first, it initiates projects for the group and, second, it assists operations and support services (HR, Purchasing, Technology, Design, Marketing, and Quality) in the implementation of sustainable development at individual hotel level. The Sustainable Development Department relies on an extended network of about one hundred agents worldwide. These agents facilitate the integration of sustainable development into the Accor hotels’ daily operations, and ensure the consistency of the Accor Group’s policy in all its activities.

For managing the retail operations, MMC Polaris will have a separate dedicated team of about 12 people comprising housekeeping, cleaning and maintenance staff, while security will be outsourced. This team will report directly to the management of MMC Polaris; but for day to day operational matters, it will adopt and follow Accor’s relevant operational procedures, especially those related to EHS issues, such as housekeeping, maintenance, energy and water conservation, waste management, fire safety, etc.

Monitoring and Reporting:

In 2008, Accor implemented a Sustainable Development Reporting Protocol in order to clarify and improve the organization of the environmental and social information’s consolidation. This protocol presents Accor’s Sustainable Development indicators, their calculation and the organization set up to consolidate. All Accor hotels are thus required to monitor several EHS related parameters according to this protocol and submit the data to the corporate team for consolidation and reporting, using its internal AccorLive platform. The consolidated results of these sustainability initiative are publicly reported on Accor’s website: http://www.accorhotels-group.com/en/sustainable-development/planet-21-research/environmental-footprint.html.

Emergency Preparedness and Response:

As per its corporate standards and requirements, elaborate L&FS provisions have been incorporated in the design of Ibis Styles hotel being developed under the project, and adequate firefighting equipment is installed in the hotel.

Accor has requirements to document crisis management / emergency response plans for each hotel and training of the hotel staff on these plans. Accordingly, Ibis Styles hotel under the project will develop its own emergency response plans prior to commencement of operations. Regular training and fire drills will be an important aspect of emergency preparedness and response, as per the Accor standards, which will be implemented once the hotel is operational.

     PS2: Labor and Working Conditions

With more than 180,000 employees in over 3,700 hotels, Accor is a major employer globally. Once fully operational, the project will have 84 employees, which will include up to a maximum of 2 expatriates. All employees will be regular employees, while security services will be outsourced to a licensed agency.

As a service organization, employees are a very important asset for Accor’s operation. Accor’s HR policies are therefore considered international best practices, which go well beyond the requirements of local labor laws, ILO conventions and even IFC’s PS2 requirements, and focus on a competitive compensation and benefits package; training, professional progression, global mobility, diversity and work life balance.

As mentioned earlier, the GM appointed by Accor will be responsible for the recruitment of staff as per the approved organizational structure. Building upon Accor’s corporate HR policies and the requirements of the local Labor laws, HR manual for the project – comprising formal and documented HR policies and procedures – will be developed, consistent with IFC’s PS2 requirements.

Neither Accor, nor the company restrict the formation of workers’ union. Moreover, a documented grievance mechanism will be developed as per the Accor standards, for all the employees to raise any concerns and grievances. All employees will have social insurance as per Mongolian law; and if major retrenchment is needed, labor law has stipulations on retrenchment procedures.

PS3: Resource Efficiency and Pollution Prevention

RESOURCE EFFICIENCY:

The hotel building has adopted several green building principles and practices in its design. The materials used for floor slabs and roof construction are in-situ concrete slab with phosphor-gypsum panel with fiber insulation and laminated wooden flooring and polyurethane wall and roof insulation. The embodied energy savings reached 40% compared to traditional design, according to IFC’s EDGE Green Building tool (www.ifc.org/EDGE).

The water heating boiler has efficiency of 90%, and with other measures such as variable speed drives of pumps and energy-saving light bulbs for internal and external spaces, the building boasts of an environmentally efficient design with estimated savings 541 t CO2 and 728 MJ of energy per square meter per year.

With low-flow showerheads and faucets, water efficient urinals in all bathrooms, aerators and auto shit-off faucets, water savings are also estimated at 40% compared with the traditional design, as per the EDGE tool.

Water, Wastewater and SOLID WASTE:

Water for the proposed hotels is sourced from the local municipal sources. The raw water will be further treated with double filters. Separate water tanks are provided – one for daily consumption and other to store fire water. Wastewater will be discharged to city sewer system for treatment in the central wastewater treatment plant, as per the permit condition.

As regards solid waste management, the food waste will be disposed of either through municipal waste disposal system or provided as animal feed. The other solid waste (paper waste, packaging materials, plastics etc.) is sorted and sold to local agencies that in turn recycle these waste. Used oil (from the back-up diesel generator maintenance) is disposed of through authorized contractors.

HVAC, UTILITES:

Hot water for heating will be procured from the district hot water utility company. In addition, the project has installed 3 water boilers: one for hot water bath, another for reheating the hot water for indoor heating and the third one for regulating heating ventilation and air conditioning (HVAC) system. In order to maintain the indoor air quality, the company has provided German-made air filters with automatic indoor air quality monitoring. The company is currently exploring the possibility for installing smart LED lighting systems, and is in discussion with specialized suppliers for the same. A backup generator will also be provided for use in case of power failure.

Ventilation and air conditioning system, together with all other utilities such as lighting, elevators, fire detection and firefighting systems as well as CCTV cameras for security system will be connected to fully automated Building Management System (BMS). This will also help in monitoring the various EHS related information for reporting to Accor’s corporate team, as part of its Planet 21 program.

ENERGY AND GHG EMISSIONS:

The electricity is sourced from the grid. Moreover, diesel generators (DG) are provided as back-up in case of grid power cuts.

Based on the available information on estimated energy consumption of proposed Ibis Styles hotel and the retail floors, the GHG emissions for the project are expected to be 1,200 t CO2equivalent/year.

PS4: Community Health, Safety and Security

The Ibis Styles hotel under the project is located in a commercial area of Ulaanbaatar, surrounded by other industrial and commercial installations and buildings including the convention center. There are not many residential communities in the immediate vicinity of the project, and hence the impacts on community health, safety and security due to the project’s operations will be minimal.

The project is located on the wide main road connecting the international airport and the downtown. Currently, the project has a provision of about 200 parking spaces, which are deemed adequate for coming years. If utmost necessary, the company can explore the possibility of installing multi-story mechanical car parks to increase the available parking spaces. As such, the impacts due to the vehicular traffic to and from the project are not expected to be significant.

The hotel was designed by an Italian firm, as per the requirements of Accor standards. The fire safety design of the project is based on European requirements with state-of-the-art equipment and infrastructure, including smoke detectors, fire alarms, sprinklers, compartmentation, and ample evacuation capacity. The design and L&FS infrastructure provided has been vetted by Accor’s own consultants and staff before and after the construction respectively, to ensure compliance with Accor standards. Fire alarm, CCTV and firefighting systems are all integrated in hi-tech BMS, which will be monitored 24X7 by trained staff once the hotel is operational.

The project will have unarmed security guards, who will be trained for handling of fire and other emergency situations.

Stakeholder Engagement:

As part of its Planet 21 Sustainable Development program and its Ethics and Corporate Social Responsibility (CSR) Charter, Accor has articulated its commitment to “launching, encouraging and federating initiatives designed to support the economic and social development of its host communities.”

Accordingly, Accor promotes the hiring of local hotel staff; offers training programs to develop the skills and employability of local employees; promotes the culture, architectural heritage and cuisine of our host communities; encourages hotels to purchase and promote local products; and supports partnerships and ties with the local communities.

Further, through its Solidarity Accor Endowment Fund, Accor encourages its employees to get involved in community outreach initiatives and supports NGOs or local associations that help people in the local communities.

Through its Plant for the Planet, Accor builds on the commitment of its employees and its customers to plant trees. This unique program in the hospitality industry helps reduce the environmental impact of hotels, regenerate fragile ecosystems and support local communities.

Once the proposed project is operational in Ulaanbaatar, the company will develop its own stakeholder engagement program in line with Accor’s corporate policies and CSR programs described above, and will also include a formal grievance mechanism for the stakeholders to reach out to the company with any feedback or grievances.

Local access of project documentation

The company will disclose this ESRS locally at the following address:

Hotel Entrance Door of MMC Polaris

2nd Khoroo, Khan-Uul District,

Ulaanbaatar, Mongolia

And on its website: http://localhost/backup
All inquiries and comments may be directed to:
Name:    Battogoo Choidon

Tel:         976 -99116011

Fax:        976 – 345723

Email:    cbattogoo@yahoo.com

http://ifchq21.ifc.org/ifcext/spiwebsite1.nsf/0/35C78AEF3992C1D485257EFA0062FC01?OpenDocument

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