25099 - Weigao

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Environmental & Social Review Summary

Project Number

25099

Company Name

Shandong Weigao Group Medical Polymer Co., Ltd.

Date ESRS Disclosed

Nov 30, 2006

Country

China

Region

East Asia and the Pacific

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Feb 23, 2007
Signed : Mar 2, 2007
Invested : Jan 25, 2008

Sector

Pharmaceuticals and Medicine

Industry

Health, Education and Life Sciences

Department

Gbl Ind, Manufact, Agribus & Services

Project Description

Weigao Holding Company Limited (Weigao Holding), the majority shareholder of the company, was founded in 1988 in Weihai, Shandong Province as a collectively owned enterprise making single use sterile infusion sets. That first factory was started by the chairman and fellow co-founders in the 1980s. Since then it continued to grow and expand its product range within the disposable medical device sector. In 2000, Weigao Holding set up the company as an operating subsidiary to tap the capital markets.

Weigao is the leading manufacturer of single-use medical supplies in China and currently makes syringes, sterile infusion sets, blood bags, IV catheters and medical-grade PVC granules. Weigao has plan to:

- expand capacity in its existing product ranges;
- introduce new blood purification products, dialysis products, and establish a chain of dialysis centers;
- expand its production of higher margin orthopedic products (e.g. surgical screws, bone plates, nails); and
- expand its production of drug eluting stents.

Weigao’s objective is to expand into more technologically sophisticated, branded medical products that would have the quality of world-class imported devices but with substantially lower production costs, while continuing to be the leader in manufacturing disposable medical device products.

Overview of IFC's Scope of Review

IFC has visited existing production facilities of Shandong Weigao Group Medical Polymer Company Limited (Weigao or the company), and has reviewed its current operation records with respect to environmental performance and workers health and safety practice. IFC has also interacted with Weigao’s Human Resource officials to review their hiring and social practices, as well as visited the local Land Bureau for review of the documentation in relation to past land acquisitions.

Finally IFC and the company have agreed a set of principles to ensure the company’s continued compliance with IFC Policies and Performance Standards during its expansion projects, including the use of land acquisition audits for any future land take.

E & S Project Categorization and Applicable Standard

Review Procedure and the following Performance Standards has been found relevant to the project:

- PS1: Social and Environmental Assessment and Management Systems with respect to the company’s management of its environmental, health and safety performance in the construction and operation of all facilities; compliance with national and local permitting requirements, and its engagement with local communities regarding environmental, health and safety performance;

- PS2: Labor and Working Conditions with regard to fair, safe and healthy working conditions in the manufacturing and dialysis facilities;

- PS3: Pollution Prevention and Abatement with regard to: emissions to air and water arising from the manufacturing facilities, and disposal of solid and hazardous wastes, including potentially bio-hazardous and radioactive medical wastes arising from future dialysis centers, and justification for production material selections;

- PS4: Community Health, Safety and Security in respect of manufacturing practices and hygiene assurance and emergency response, and life and fire safety aspects of dialysis centers’ building design;

- PS5: Land Acquisition and Involuntary Resettlement with regard to the company’s land acquisition process for manufacturing expansion and development of dialysis centers;

The following Performance Standards do not apply to the project:

- PS6: Biodiversity Conservation and Sustainable Natural Resource Management does not apply to this project given the location of the new facilities (i.e. urban settings);
- PS7: Indigenous Peoples does not apply as there is no IPs involved or impacted by this project;
- PS8: Cultural Heritage does not apply as there is no cultural heritage impacted by this project.

The relevant PSs have been provided to and discussed with the client, as have the relevant IFC Guidelines (i.e. Healthcare Facilities Guidelines, May 2003; General Environmental Guidelines, July 1998; Hazardous Materials Management Guidelines, December 2001; Occupational Health and Safety Guidelines, June 2003; and Life and Fire Safety Guidelines, December 2002).

IFC did not identify any gaps which would require the development of an Action Plan, but has agreed on measures to be taken to ensure the continued compliance with all Performance Standards and the relevant sector guidelines.

All Weigao’s current operations are all in full compliance with the relevant Performance Standards, including the relevant sector guidelines, and their past land acquisition practice has been reviewed and found acceptable. The future expansion projects are also expected to comply with all Policies, Performance Standards and relevant sector guidelines. The future expansion projects will require the company to obtain land or land leases, and to ensure these activities will not violate the Performance Standard 5 a series of documentation criteria has been agreed. With this in mind the project has potentially limited adverse environmental or social impacts that are few in number, site-specific, largely reversible, and readily addressed through mitigation measures. As a result this is a Category B Project according to IFC’s environmental and social review procedures.

Environmental and Social Mitigation Measures

Key environmental and social issues are presented below. Weigao has presented plans to address these issues to ensure that the proposed project comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC Performance Standards and the applicable 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.

- Social and Environmental Assessment and Management Systems:

Weigao’s current productions facilities are all located on 660 mu (44 ha) within one block of the existing High Tech Industrial Development Zone (HTIDZ) in Weihai City, a 2.5 million inhabitant coastal city of the Shandong Province located where the Bo Hai and the Yellow Sea meet. The HTIDZ, which covers 20 square kilometers (2,000 ha) started to develop in 1993. Weigao initially acquired approximately 68mu (4.5 ha) for its production. Later, as Weigao continued its successful production expansion, it bought extra land within the same block, and also took over land initially owned by other companies. As a result Weigao is now, in practical terms controlling one block within the HTIDZ.

Weigao has all the needed certification for complying with Chinese SFDA (State Food and Drug Administration). Some of its products, either being exported or considered for export are approved by the US FDA (United States, Food and Drug Administration) and European regulators for quality and safety in the production of medical device products. Weigao is also ISO9001 certified and is in the process of preparing for ISO14000 certification.

- Labor and Working Conditions:

Weigao has about 5,500 employees. The workforce is partly native Weihai residents and partly from surrounding provinces, where Weigao has active hiring programs to make up for the scarcity of workforce in Weihai. The female/male employee ratio is approximately 70/30, and although there are no gender requirements in any of the jobs, mainly male employees take jobs in the machining operations, while female employees dominate in the assembly line operations.

According to Chinese regulation the employees have not created traditional labor unions, but a staff union electing 20 representatives take part in staff surveys, benefit and salary discussions, as well as arrange cultural and social networking. The company has also implemented strict safety procedures. The safety performance is part of the evaluation process for all managers, and employees have means to bypass their managers, should they feel that appropriate attention is not given to a safety issue. Finally the employment market in Weihai is competitive and Weigao needs to be able to maintain the stable skilled workforce needed for the high quality work processes. The accident rates at Weigao has been reviewed for the period January 2004 to May 2006, and the accident rates have been consistently low, with an average of 0.31 LDA/MMH (Lost-Day-Accidents/Million-Man-Hours).

Based on this, IFC believes that Weigao fulfills Performance Standard (PS2) requirements for enabling alternative means of expressing grievances and protect employee’s rights regarding working conditions and terms of employment.

- Pollution Prevention and Abatement:

The HTIDZ is fully serviced by public utilities, including power, water and sewage treatment, and solid and hazardous waste management. The sewage treatment facility, serving the HTIDZ, treats all waste water to comply with the following limits: pH 6-9; COD 60 mg/liter; BOD 20 mg/liter; Suspended Solids 20 mg/liter. This is well within the World Bank guideline requirements for discharge from Weigao’s type of production. In the HTIDZ both solid and hazardous wastes are collected by a specialized municipal company.

Weigao’s main products are based on metal parts (needles and orthopedic products) and plastic parts (containers/bags and moveable parts). The metal parts are all surgical quality stainless steel or titanium and are handled in special workshops carrying out the needed cutting and grinding operations before the parts are transferred to the assembly lines where the needles are combined with the remaining plastic parts. The plastic parts are mainly produced of medical grade PVC, although since 2005, Weigao has carried out tests allowing them to substitute PVC with TPE (Thermo Plastic Elastomer) for a series of products. Although Weigao is ready to change its production to these new alternative materials, the market for medical devices is not yet ready for these alternative materials, which carry an extra cost. Further some products, like the blood bags, cannot yet be produced in alternative materials as they are subject to specific treatments while filled with blood.

All plastic materials used (primarily PVC) are internally recycled. The medical grade PVC granule is first used for forming of the most critical components. Cuttings and waste from this forming process is then used together with fresh raw materials in the next forming process, and practically no plastic/PVC waste will be generated. Based on this the usage of PVC in Weigao’s products is justified.

All Weigao’s operations in medical consumables, such as infusion/transfusion sets and syringes, are carried out under sterile conditions to ensure the safety of the final products. This means that all air entering and leaving the buildings are being controlled through filtering processes.

Further, due to Weigao’s production being limited to light metal processing and forming of plastic products from granulated raw materials there are practically no air emissions from the production. The only air emissions are diffuse evaporation of cyclohexanone, a chemical solvent used to “vulcanize” plastic parts together during the assembly process. These emissions are minor. However, it is important to control the concentrations in the working environment, as all evaporation takes place during manual operations. Weigao has a program for frequent checking of the concentrations of cyclohexanone in the working environment and are taking initiatives to limit the exposure to this solvent.

Weigao is considering several location options for the future expansions. Among the options is to establish the expansions within an industrial area fully developed with roads, power, water and sewage treatment, and telecommunication infrastructure. For this option IFC has verified that the industrial estate will be operated in accordance with the principles used in the existing Weigao production areas, and in full compliance with the relevant IFC Performance Standards and sector guidelines. Weigao will ensure, and document to IFC, that similar standards would be applied should an alternative location be preferred.

- Community Health, Safety and Security:

The community health, safety and security risks associated with the Weigao operations are minimal. Weigao is a light industry operation with minimal emissions, as described above in the pollution prevention and abatement section. Further Weigao, in practical terms, only produce wastewater in the form of domestic wastewater, which in turn is treated at the central wastewater treatment facility before being discharged. Finally Weigao’s operations do not carry other major risks, like large scale fires of toxic substances or explosions.

- Land Acquisition and Involuntary Resettlement:

During the appraisal IFC specialists visited the local land bureau to check documentation for Weigao’s land acquisitions in the HTIDZ, since its first purchase in 1993. The documentation presented was found to be well organized, consistent and indicated a good assurance that the compensation awarded to prior land users was channeled correctly through the land bureau and back to the original owner’s representatives.

As mentioned above Weigao is considering several land purchase options for its expansion project and IFC has during its appraisal seen one of the potential areas, and have discussed the background for this area with the authorities. IFC has been assured that the previous users of this specific area has received adequately monetary compensation for the land and has had their status converted from rural dwellers to city dwellers. The change of status has given them the right to apply for jobs within the local main city, which has a deficit of workforce and therefore rich employment opportunities. According to the listing rules for The Stock Exchange of Hong Kong Limited (“Stock Exchange”), Weigao will make the announcement on the Stock Exchange’s website, at the time when a firm land acquisition decision has been taken and it constitutes a notifiable transaction. Weigao has therefore agreed that, wherever the actual additional land for the expansion projects will be acquired, the Company will retain a qualified independent consultant to review the land acquisition procedures to ensure satisfactory compliance with all requirements of PS5 (Land Acquisition and Involuntary Resettlement). Weigao has agreed to take corrective actions should the outcome of the land acquisition fall short of IFC''s requirements.

- Dialysis Treatment Centers:

Weigao is considering setting up a network of dialysis treatment centers to provide service on an outpatient basis. These centers will gradually be established where such service is in demand. The dialysis centers will, to the extent possible, be located in buildings designed for health care facilities, but might also be located in other commercial buildings suitable for the purpose. Weigao does not expect any need for resettlement in connection with the establishment of these centers, and their local environmental impact will be minimal as the operations do not result in air emissions or wastewater discharges, besides normal domestic waste waters. Dialysis waste will be treated through specialized companies, which will ensure proper destruction of blood contaminated materials.

Stakeholder Engagement

Publication of this ESRS constitutes the client’s first community engagement related to its project plans. Such engagement is not required by the Chinese authorities having regard for the limited potential for adverse social and environmental impacts arising from the project.

Aside from the proposed project plans, Weigao has significant community engagement activities. For example, Weigao donates products for used at medical facilities where the patients can not afford to pay for high quality products. Weigao also carries out active hiring campaigns both within Weihai City and in the surrounding provinces. The hiring practices include active employment policies for disabled people. Weigao Jierui, a subsidiary engaged in the PVC blending and machining of needles has pioneered this initiative, and now employs 316 disabled people equivalent to more than 50% of Weigao Jierui’s workforce.

It is expected that the new dialysis centers will also be part of the community engagement initiatives through advertising and brand-building to establish themselves as a viable and reliable alternative to existing services. Weigao’s future dialysis centers might also take part in outreach programs for vulnerable and underprivileged groups.

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and 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 an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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