25299 - Guangxi Huanjiang Fenglin Fiberboard Corporation, Ltd.

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Environmental & Social Review Summary

Project Number

25299

Company Name

Guangxi Huanjiang Fenglin Fiberboard Corporation, Ltd.

Date ESRS Disclosed

Jan 29, 2007

Country

China

Region

East Asia and the Pacific

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 27, 2006
Signed : Jun 9, 2006
Invested : Feb 2, 2007

Sector

Wood Panels and Engineered Wood Products

Industry

other

Department

Regional Industry - MAS Asia & Pac

Project Description

Fenglin International Limited (Fenglin International or the company) is one of the largest medium-density fiberboard (MDF) manufacturers in China and is also engaged in the plantation of forestry products. Fenglin International is the holding company of three subsidiaries in Guangxi Province, including Guangxi Fenglin, Baise Fenglin and Huanjiang Fenglin (collectively, the Fenglin Group). Fenglin International is 88% owned by Mr. Y.C. Liu, the founder and chairman. Currently, IFC owns a 12% equity stake in Fenglin International, and has provided loan financing for Baise Fenglin. Fenglin’s operations in Baise and Nanning were appraised by IFC in late 2003, and public disclosure documents released on 10 February, 2004, may be accessed at IFC’s web site:

Environmental Review Summary (Project #22165), Fenglin MDF

In 2004, Fenglin revised its investment strategy and developed a 50,000 m3/year MDF line (line 7) at the town of Huanjiang.

Overview of IFC's Scope of Review

IFC’s Environment and Social Specialist conducted an on-site review of the project on December 6, 2005, including the MDF processing plant site, staff dormitories, surrounding lands and the Sponsor’s eucalyptus plantation. Interviews were conducted with the relevant operational managers and local government officials. Monitoring data for existing operations was reviewed, as well as a consultant’s report on the status and plans towards achieving Forest Stewardship Council certification, as well as information on the company’s regulatory compliance and EHS performance. As this review was conducted prior to April 30, 2006, its scope was based on IFC’s applicable Environmental and Social Policies and Guidelines (see below).

E & S Project Categorization and Applicable Standard

As this review was completed prior to the implementation of IFC’s Performance Standards, the following Safeguard Policies and Guidelines are applicable to the project:

- IFC Policy on Environmental Assessment (OP 4.01), dated October 1998;
- IFC Policy on Natural Habitats (OP 4.04), dated November 1998;
- IFC Policy on Pest Management (OP 4.09), dated November 1998;
- IFC Policy on Forestry (OP 4.36), dated November 1998;
- World Bank General Environmental Guidelines, dated July 1998;
- IFC Environmental and Social Guidelines for Occupational Health and Safety, dated June 2003;
- IFC Environmental and Social Guidelines for Forestry Operations, dated July 1998;
- IFC Environmental and Social Guidelines for Wood Products Industries, dated July 1998;
- IFC Environmental and Social Guidelines for Pesticide Handling and Application, dated July 1998;
- IFC Hazardous Materials Management Guidelines, dated December 2001;
- IFC Life and Fire Safety Guidelines, dated October 2002;
- World Bank Operational Directive on Involuntary Resettlement (OD 4.30), dated June 1990;
- IFC Policy Statement on Forced Labor and Harmful Child Labor, dated March 1998;
- IFC’s Policy on Disclosure of Information, dated September 1998.

Environmental and Social Mitigation Measures

The following potential environment, health and safety and social impacts of the projects were analyzed:

- land acquisition, land use, resettlement compensation and employment;
- air emissions from process operations;
- liquid effluent treatment and disposal;
- management of hazardous materials and solid and hazardous wastes; and
- management systems for plantation forestry, environment, health and safety, fire prevention and response and workplace conditions.

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.

- Land Acquisition, Land Use, Resettlement Compensation and Employment:

The Huanjiang project site comprises 125 mu (slightly more that 8 hectares) of land outside of Huanjiang town in a rural, hilly area. The majority of the nearby land is used for small-scale sugar cane farming by individual villagers with some existing industrial activity, such as brick production plants. New land is currently being marked out adjacent to the project site in anticipation of additional economic development.

The land for the site was acquired from the local Huanjiang Land Bureau. It contained a warehouse of a local product company and brickyard, unused land and small parcels of land from five existing villages/companies that was previously unused or farmed. No physical resettlement was required for the project. Records provided to IFC show that three village teams and two local companies were compensated for land that was required for the site in compliance with IFC''s resettlement requirements. On average RMB 10,420 per mu was provided to each village/company which was considered adequate compensation. It was confirmed with the local government that the compensation was given directly to village families who had owned the land based on the area of the land that they owned. It was also confirmed that local villagers are still engaged in farming other lands with an average annual income of RMB 2,100.

Out of the 1,600 villagers, half are employed and the remainder comprises children or senior citizens. Most of the villagers are farmers, around 200 of the younger villagers are employed in Guangzhou, and others are employed in local brick factories or Huanjiang. The villagers that are farming cultivate rice, sugar cane and silk worm trees. Eighty out of Fenglin’s 200 employees are from these villages (40 are employed at the factory in non-technical positions and 40 are employed at the plantations). Eighteen of Fenglin’s employees are from the Fenglin Group’s Nanning operations and the remainder is employed from Huanjiang. As noted above, the average annual income per person in the villages is RMB 2,100. Fenglin employees receive an average wage of RMB 500-600 per month which is substantially higher that their previous income and the current incomes of other villagers. Technical staff receive an average monthly wage of RMB 800-1,000.

Fenglin is progressively expanding its plantation operations in areas with barren hills. The company is acquiring land use rights from the Huanjiang County Forest Bureau (2, 200 mu acquired to-date), the Hua Shan Forest Farm (2, 400 mu to-date) that is operated by the local government, and local villagers through long-term leases with either upfront or annual payments. In some cases villagers enter into profit sharing arrangements where the land is provided for Fenglin to manage and villagers receive 25% of the profits from the stumpage volume. The leasing and profit-sharing ventures have been established with the local forestry bureau or villagers in compliance with IFC''s compensation requirements. The company directly manages 10% of the plantations that supply its wood (mainly eucalyptus but including some pine) and it plans to acquire up to 50% of the local plantations. The company plans to hire local villagers to manage the plantations. Wood purchased from plantations managed by the local authorities is mostly pine.

- Air Emissions from Process Operations:

The main emissions to air from the Huanjiang project arise from the operation of the coal and wood waste-fired, hot gas heaters, equipped with cyclones for flue gas cleaning. The pollution control technology is equivalent to that used at another Fenglin facility which does not meet IFC air emissions requirements, although the local Environmental Protection Bureau has conducted air quality monitoring of the facility’s emissions and the company stated that emissions are in compliance with local regulations. Huanjiang Fenglin plans to replace the boiler by a wood-fired heat generation center whose air emissions will meet IFC and local requirements during 2006.

- Liquid Effluent Treatment and Disposal:

Wastewater is used to irrigate on-site vegetation and treated for equipment cooling purposes. Remaining wastewater is discharged to the local stream following on-site treatment. The local Environmental Protection Bureau has conducted water quality monitoring of the facility’s discharges which shows that discharges are in compliance with local and IFC requirements.

- Management of Hazardous Materials, Solid and Hazardous Wastes:

Huanjiang Fenglin manages hazardous materials and wastes in accordance with local requirements. Emergency response and safety drills are conducted and these procedures will be formalized in the company’s EHS management system. The main chemical input to the process, formaldehyde, is delivered by the supplier and directly input to process holding tanks. An above-ground oil tank is under construction to store oil accordance with local safety requirements which will include secondary containment. Coal waste from the boiler operations is sold to local brick manufacturers for use in their production. Oil drums are collected by the supplier and solid wastes are collected by licensed operators for disposal.

- Management Systems for Plantation Forestry, Environment, Health and Safety, Fire Prevention and Response and Workplace Conditions:

As part of a corporate-wide effort, Huanjiang is preparing to undertake independent third-party auditing of plantation management and expects to receive certification that the plantation operations meet Forest Stewardship Council criteria for sustainable plantation management by the end of 2006. The company has prepared a report and action plan for achieving certification and is actively working on this task with the other Fenglin plantation operations.

The company is also preparing to implement environmental and health and safety (EHS) management systems at Huanjiang for certification to ISO 14001 and OHSAS 18001/State Standard 28001, respectively, in 2006, once replicable systems have been developed by the company’s Nanning facility. Overall, the Huanjiang project has adopted adequate housekeeping, dust extraction and site management practices. On-site fire extinguishers are provided in all working and dormitory areas and periodic fire drills are conducted. No significant safety incidents have been recorded and the company conducts both classroom and practical training on EHS for employees. However, further improvements, related to the installation of machine guarding, railings and the use of personal protective equipment (i.e. eye and ear protection) are required.

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 following agreed mitigation measures.

- Huanjiang Fenglin - Corrective Action Plan:

- Implementation of Action Plan for certification of sustainable plantation management. To be completed by end 2006.
- Obtain third-party certification of plantation management practices. To be completed by end 2006.
- Undertake an OHS audit and develop a timed safety-improvement action plan, including actions to install machine guards and railings and to improve use of personal protection equipment (PPE). Early 2006.
- Develop occupational health and safety and environmental management systems, and obtain certification of these systems to OHSAS 18001 and ISO 14001 or equivalents respectively. To be completed by end of 2006.
- Replace process heating systems by waste-wood fired hot gas generator meeting local and IFC air emissions requirements. December 2006.

Stakeholder Engagement

The client consulted with local government, community officials and affected villagers regarding the project. A notice was placed in the local newspaper informing residents and stakeholders that the Environmental Review Summary (ERS) of the project was disclosed locally as of February 26, 2006, on public notice boards outside the Sponsor’s facility (Guangxi Huanjiang Fenglin Fibreboard Company Ltd.) and at the Huanjiang Government Office. Both the notice and the ERS where printed in English and Chinese for local disclosure. The ERS for the original Fenglin MDF project was disclosed locally, as well as through the World Bank’s InfoShop and IFC’s website on February 10, 2004.

**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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