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 site visits, consultations with the project sponsor’s management, and appraising technical and environmental information submitted by the project sponsor. The following environmental, social, health and safety issues and potential impacts of the project were analyzed. - Environmental performance of existing operations; - Corporate environmental, health, safety and social management systems; - Limestone quarry operations and reclamation plans; - Occupational health and safety performance at existing operations; - Social impacts of existing facilities and principles governing acquisition of facilities in the future.

The sponsor has presented plans to address the impacts outlined above to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with host country environmental and social requirements as well as World Bank Group environment, social, health and safety policies and guidelines. The information about how these potential impacts are being/will be addressed by the SSG is summarized in the paragraphs that follow. - Environmental performance of existing operations As part of its expansion since 1996, SSG has acquired a number of vertical shaft kiln clinker operations. Shaft kiln operations are known to be heavily polluting because of the high concentration of particulate matter in emissions to the air, and incapable of producing high quality clinker. With the exception of one facility, SSG has replaced the shaft kilns with modern pre-heater and pre-calciner dry process kilns. These new installations have increased the production of high quality cement and has cut particulate air pollution to well within World Bank Group limit of 50 mg particulate/Ncm. The company has equipped the remaining vertical shaft kiln with filters to reduce particulate emissions to below the World Bank Group limit. Sulfur dioxide emissions of all kilns are also low, averaging 22 mg SO2/Ncm, due to the use of low sulfur coal, while nitrogen oxide levels average 594 mg NOx/Ncm (565-612), which are generally compliant with the WBG limit of 600 mg NOx/Ncm. Monitoring of air emissions at each facility is carried out on an annual basis by the Chinese authorities. - Corporate environmental, health, safety and social management systems SSG meets the World Bank Group limits for particulate emissions at all plants even though the current Chinese regulation allowing significant higher concentrations. SSG has also achieved an ISO 14001 (Environmental Management System) certification of its oldest and largest operation known as “Shandong” located near Jinan. SSG has agreed that SSG will develop a corporate Environmental Management System (EMS) based on the ISO 14001 procedures used at the Shandong plant. In addition, SSG has committed to seeking ISO 14001 certification for all existing facilities within the next three years. As part of its establishment of the corporate EMS, SSG will introduce continuous oxygen, carbon monoxide, particulate, sulfur dioxide and nitrogen oxides control of the kiln emissions. Oxygen and carbon monoxide measurements will be linked to the process controls to optimize the energy utilization, while the particulate, sulfur dioxide and nitrogen oxides monitoring will be used to ensure compliance with the local regulations and World Bank Group guidelines on a continuous basis. Since the previously monitored nitrogen oxide concentrations are generally compliant with World Bank Group guidelines, it is likely that some of the operations will exceed these guidelines once continuous measurements are available. SSG will present plant specific Corrective Action Plans (CAP) to IFC for approval if any exceedence is continuous or dominant on a yearly average basis. The CAPs may, based on local condition, allow for exceedences from existing operations if ambient concentrations are acceptable. However, the CAPs will commit the company to achieve compliance with emission limits according to a practical schedule for implementation. All new clinker production facilities will be designed with continuous emission monitoring and full compliance from plant commissioning. - Limestone quarry operations and reclamation plans SSG has acquired limestone usage rights in areas designated by the government for cement production in accordance with all local regulations. The granting of such rights is subject to the approval of a provincial commission that ensures that all previous users of the land have been duly compensated and have relocated from the designated areas. SSG has paid to the local and provincial authorities all fees related to the government’s acquisition of lands and resettlement of any inhabitants. In addition, the company has paid fees to the authorities to be used to reestablish vegetation at the limestone quarries at the end of their operation. While there is no formal requirement for the submission of a quarry reclamation plan to obtain usage rights from the government, SSG has agreed to prepare quarry reclamation plans for all new quarries before operations begin and will also include the development of such reclamation plans in the CAP for EMS implementation. SSG acquires other raw materials used in the cement manufacturing process (e.g. iron ore, gypsum, clay) on the open market. - Occupational health and safety performance at existing operations SSG maintains workplace accident statistics for its existing operations. These statistics are not directly comparable with ILO standards but they do indicate very low accident frequencies. SSG has agreed to expand its current reporting system to include ILO based reporting standards, including Lost-Day-Accidents/ Million-Man-Hours or similar, to allow IFC to compare the SSG operation with other international cement operators on a regular basis and provide SSG with feed-back on its operational results. SSG also maintains good housekeeping standards at its facilities as well as greenery within and around its facilities as a matter of corporate policy. - Social impacts of existing facilities and principles governing acquisition of facilities in the future SSG has had a positive social impact in creating local employment in and around its facilities. The company provides direct employment to 3,647 people in its operating facilities. Additional employment is generated by its operations through quarry, transport and distribution operations that are contracted to local companies. SSG’s acquisition of land use rights for expansion of its existing facilities and construction of new facilities has resulted in economic and physical displacement of people utilizing those lands. Resettlement and compensation for lost assets in all cases was carried out by local and provincial government authorities. At IFC’s request, the company has undertaken to confirm that all due compensation to people displaced by land use rights acquisition has been paid. Projects to be completed under the proposed IFC financing for the company do not include acquisition of additional land use rights. However, involuntary economic and physical displacement may occur in connection with future, not yet identified, expansion projects undertaken by the company. In such cases, SSG has agreed to ensure full compliance with IFC’s policy on involuntary resettlement.

This ERS contains the full environmental and social documentation prepared for public disclosure on this project.

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 Action Plans (CAPs) to be prepared under the loan conditions; and - ongoing performance of project-specific environmental, health and safety and social activities. Periodic site supervision visits will also be conducted.