IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor, and visiting the Lahore mill and the site of the future Kasur mill. The following potential environment, health and safety and social impacts of the projects were analyzed. - For the Future Kasur Mill - Project land acquisition process - Project planning process - Sustainability of fiber sources - Choice of pulping technology - Choice of bleaching technology - Water abstraction, use, treatment and disposal - Emissions to air - Effect on employment in Lahore and Kasur - Occupational health and safety - Ongoing Operations at Lahore - Effluent treatment and disposal - Emissions to air - Occupational health and safety - Hazardous materials management

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. Further information is provided in the attached documentation. - For the Future Kasur Mill At the time of preparation of this Environmental Review Summary, the Kasur mill remains in a relatively early stage of planning. Packages has taken certain key decisions, particularly related to project siting and technology choices. Other decisions, and detailed engineering have not yet been taken, nor has an environmental and social impact assessment yet been undertaken. The section below reviews such plans as are available and also describes standards which will be applied throughout the as yet undefined areas of the project design. - Project Land Acquisition Process: Packages proposes to construct its new mill on an area of essentially flat and level agricultural land some 15 km outside Kasur. Packages has owned a contiguous parcel of some 44 hectares of land since 1992 when the land was bought on a willing-buyer, willing-seller basis from local farmers. Over recent months, Packages has bought an additional 10 ha of land from local farmers adjacent to and hence expanding the area available for the mill. Agriculture in this area is predominantly of cereal crops (rice and wheat) and relies on irrigation. Since acquisition Packages has let the project land on a short-term basis (i.e. each lease contract has typically covered a 6-month growing season) to local farmers who have continued their farming activities. Packages has also paid villagers to harvest fruit from trees growing on the project site. Over the last six months or so, Packages has not renewed these leases and has suspended irrigation of the land, so enabling it to dry in preparation for construction. Packages will take gas for its power boilers and for other purposes via a dedicated spur from a pipeline serving a new industrial estate in Kasur. Details of the pipeline spur’s route are not yet known, but the spur will cross a rural area and will not affect human habitation. The pipeline will be buried, but it is likely that a service track will be constructed preventing cultivation of a small strip of land. Packages has discussed construction of the spur with the Sui Northern Gas Pipeline Limited (SNGPL) which will construct it. SNGPL has well established procedures governing land acquisition for pipelines which follow the provisions of the 1894 Land Acquisition Act. These include methodologies to define the right of way for the pipeline route, notify affected persons of the pipeline route, make such arrangements as may be required to value and compensate for lost crops and land, and define a grievance procedure. - Project planning process: Permission for the project to proceed is required from the Pakistan Environmental Protection Agency (EPA), and it is expected that this permission would follow a review of the likely environmental impacts of the project. This review will take the form of an Environmental and Social Impact Assessment (ESIA) meeting the requirements of both the Pakistan EPA and IFC. Project construction shall observe environmental and social mitigation measures required by IFC and/or the EPA resulting from the ESIA process. - Sustainability of fiber sources: Packages will obtain 60 -65% of its fiber supplies in the form of wheat straw. This is a by-product of the agricultural industry in Punjab and is in plentiful supply locally to the project site. Much of the remaining pulp will be produced from two additional pulping lines using mixed waste paper and old corrugated cartons as fiber sources. Packages will also purchase some pulp on the international market. - Choice of pulping technology: Wheat straw has a high silica content which causes some technical difficulties when used in paper making. Packages will adopt two straw pulping technologies, an alkaline sulfite process, and chemical thermo-mechanical pulping (CTMP). These are the technologies currently in use at the Lahore site, though they will be developed further for the new project. The Lahore site commissioned its chemical Recovery Plant in 1994, and has been continuously improving its operation ever since. Packages is confident that the operation problems associated with the silica contamination of the recovery systems will be avoided in the new design. The choice of the modified sulfite rather than an alternative process represents further development of systems already known to Packages. Packages also expects to achieve better pulp properties and lower odor, straw and chemical use than if the soda process were adopted. Packages already has a CTMP line at Lahore and will expand and relocate this line to Kasur. Weak black liquor from this process will be processed with the stronger black liquor from the sulfite process, rather than being discharged to the effluent treatment system which is the present practice at Lahore, thus increasing material recovery and reducing effluent system load. - Choice of bleaching technology: Packages proposes to adopt an elemental chlorine free (ECF) chlorine dioxide bleaching sequence [D0(EOP)D1]. Sulfite pulp is relatively bright before bleaching and low use of bleaching chemicals and hence very low AOX emissions are expected. - Water abstraction, use, treatment and disposal: Water consumption of the new mill will be in the region of 30,000 m3/day which will be drawn from boreholes to be located on the project site. Packages has been assured that the aquifer can supply this water quantity on a sustainable basis, though the ESIA will consider this issue in more detail. Nevertheless, this rate of water consumption represents some 34 m3/tonne paper produced which is in line with industry best practice. Specific water consumption will be less than half that at the Lahore site. Packages has proposed an effluent treatment system based upon clarification and then aerobic treatment which will be designed to meet IFC requirements. - Emissions to air: There will be emissions to air from power and recovery boilers and the pulping process. These systems will be designed to meet Pakistani and IFC requirements. The recovery boiler will be equipped with an electrostatic precipitator which will maintain particulate emissions below 100 mg/Nm3. These captured particulates will be recovered to the pulping process. Specific emissions of sulfur dioxide from pulping will meet IFC and local requirements. An odor issue is not expected with the pulping process chosen. Power boilers will be fired by natural gas, with the possibility to use oil as standby fuel during the winter months. Boilers will adopt low NOx burners, and will meet IFC and local air requirements for emissions of NOx, SO2 and particulates. The ESIA will model the effect of project air emissions on the project’s airshed, but these are not expected to be severe. - Effect on employment in Lahore: Packages currently employs around 3,200 persons at Lahore. Of these around 600 work in the pulp and paper mill, and will potentially be affected by the move to Kasur, although around 60 are expected to retire before the project is complete. Packages has undertaken a survey of these workers and found that about 25 – 30% actually live between Lahore and Kasur and therefore will not be adversely affected by the move. Packages will provide transport for skilled process engineers from the Lahore site to Kasur, a journey of around 1 hour each way. Others shall be absorbed in the expanding Packaging Division. - Environmental and Occupational Health and Safety: The new mill will develop an integrated system to manage environmental and occupational health and safety issues, capable of certification to ISO 14001 and OHSAS 18001 or equivalent standards respectively and in full compliance with IFC and local requirements. This system will be developed on the basis of the EHS systems in place in Lahore which are described later in this document. The system will include systems for safe transport, storage, handling, and disposal of hazardous materials meeting IFC and local requirements and will include emergency response plans including community liaison as appropriate. - Social Impacts of new mill: The sponsors already own a large farm in the vicinity of Kasur and already provide social services to this area and to the area around the existing operation in Lahore. For example, young adults from the area are trained as teachers for local schools in an institute managed by the sponsors in Lahore. This facility shall be extended to the areas around the new mill. Also mobile health units from Shalamar Hospital, Lahore (an institution connected to the sponsors) are already visiting the sponsor’s farm for basic health needs. These shall also be extended to the areas near the new mill site. Furthermore sub-contractual employment opportunities for non-technical i.e. food services, janitorial services etc. and technical opportunities shall result because of the needs of the mill at the new site. The new paper mill will expand the market for wheat straw, which is an agricultural by-product whose production far exceeds demand for uses such as animal bedding and food ingredient and which is often disposed of by burning. There has been a significant move, in response to relative scarcity of labor and the need to improve crop yields, towards mechanical rather than manual cutting of wheat. It is local practice to cut the wheat stems just below the ears, leaving long stalks to be burnt. Packages is developing two projects which will mechanically gather this straw, generating income for farmers, by either - using cutting machines behind the harvester, to cut the straw into short lengths to be collected for pulping; and - using combine harvesters and baling machines to bale the straw as it is cut, for transport to the collection center and paper mill. Packages will purchase a number of cutting machines, combine harvesters and balers, in order to demonstrate this technology and that a viable business can be developed by the agricultural machinery hire companies and farmers to gather the straw cleanly for paper making. The mill will generate road traffic of raw materials and finished goods. The effects of this traffic and suitable mitigation measures if required will be discussed in the ESIA. - Ongoing Operations at Lahore Future plans for the Lahore site have not yet been fully developed, though it is expected that after transfer of pulp and paper making to Kasur, Lahore will continue some at least of its cardboard conversion activities, manufacture of tissue from waste paper, and the flexible packaging manufacture, printing and lamination activities. This section of the ERS describes how environmental impacts from these ongoing operations will be mitigated. - Effluent treatment and disposal: Process effluent at Lahore is treated by a settling system only before discharge. This effluent contains process wastes from all manufacturing activities and some unrecovered black-liquor which is discharged to drain as a means to deal with accumulations of silica. The effluent concentrations of COD, BOD and suspended solids exceed local and IFC requirements by wide margins. To a considerable extent, the effluent quality issue at Lahore will be solved by the Kasur project. However, effluent from ongoing tissue operations and from other activities will require to be treated. Packages will design and install suitable effluent treatment systems which, at the conclusion of the transfer of pulping and non-tissue papermaking to Kasur will enable liquid effluents discharged from Lahore to meet local and IFC requirements. - Emissions to air: At the conclusion of the project, ongoing emissions to air will be those from the diesel generators and from the packaging printing operations. The diesel engines use heavy oil as fuel. Recent monitoring showed exhaust concentration of particulates exceeding IFC guidelines, but meeting local requirements. Earlier measurement showed particulates well within IFC’s requirements. NOx emissions from the engines exceed IFC’s requirements. In the short term, Packages will review maintenance of items such as air filters and injectors to reduce particulate emissions. Packages will also study the likely future power demand of the site, and in the light of this and predictions of future fuel pricing determine the feasibility to convert the engines to use natural gas fuel by the conclusion of the Kasur project. Such a conversion is being done at another company and based on the results of that conversion a plan of action shall be made. If after conversion the engines would not meet IFC and local guidelines, the engines will be taken out of service by 2012. - Environmental and Occupational Health and Safety Management: The Lahore site is working to develop an environmental management system with the intention to obtain ISO 14001 certification of at least parts of its operations. Environmental aspects and impacts have been identified and improvement plans are in place. The site is able to document considerable progress in efficient use of energy and water, and yield improvement, reduction in chemical use and better recovery rates in the pulp mill. These improvements have been implemented within a site-wide industrial performance and productivity improvement system. Occupational Health and Safety is managed within this context by a separate team. This has established checklists and regular auditing of production departments, and has developed competition to develop safe working environments between different production departments. Lost time accident rates for the last three years have been around 10 per million man-hours worked, which is not a bad performance though one which could be improved. Despite this work, site observation suggested a number of areas in which improvement is required. These include enforcement of the use of ear defenders in noisy areas, improvements in machine guarding, more systematic enforcement of safety systems such as hot-work permits and lock-out-tag-out, scaffolding standards, inconsistent application of gas safety shut-off valves, and tolerance of lower standards of personal protective equipment among contractors than staff. There has not been a systematic analysis of safety hazards and the risk imposed in the way there has been for environmental hazards. Packages will commission an Occupational Health and Safety audit which will examine current safety hazards and management practices and which will recommend improvements necessary to develop OHS management systems to the point at which certification to OHSAS or similar standards is possible. The audit will also consider the practicality of combining environmental and OHS management in an integrated management system. - Hazardous Materials Management: The pulp mill uses acids, alkalis, chlorinated bleaching agents and hydrogen peroxide while the flexible packaging business makes considerable use of solvent-based inks. Packages has obtained Material Safety Data Sheets for each chemical it uses and has developed operating procedures based on the MSDSs and the chemicals’ manufacturers’ recommendations. However, there are shortcomings in the bulk chemicals loading and storage areas, and examples can be seen of solvents and peroxide drums being stored outside dedicated storage areas. Packages will review its own hazardous materials management guidelines, and develop and implement integrated hazardous materials management procedures taking best practices from individual procedures developed for each chemical. The new procedures will also be developed to comply with IFC’s Hazardous Materials Management Guidelines.

The attached Environmental and Social Action Plan (ESAP) dated April 20, 2005 provides further details of environmental and social issues.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: - the status of implementation of any measures contained in the Environmental and Social Action Plans and - ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.