25459 - Tianrui Cement

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Environmental & Social Review Summary

Project Number

25459

Company Name

Tianrui Group Co., Ltd.

Date ESRS Disclosed

Feb 15, 2007

Country

China

Region

East Asia and the Pacific

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Apr 5, 2007
Signed : Jun 27, 2007
Invested : Jul 10, 2007

Sector

Cement

Industry

Manufacturing

Department

Regional Industry - MAS Asia & Pac

Project Description

The company, a large private cement company in Henan Province, is implementing an expansion program through a combination of an organic and inorganic growth.

Overview of IFC's Scope of Review

Environmental and social specialists from IFC have reviewed plant documentation provided by Tianrui Cement (Tianrui or the company) and have visited a majority of the operations owned and managed by the company. During these visits the specialists has checked actual performance parameters of the operations, including extracting information from the plant’s operating systems and process controls. Surrounding communities has also been interviewed at selected locations. IFC specialists also visited the company’s main coal supplier (including underground coal mine inspections) as well as two joint venture operations established together with this company. The IFC environmental, health and social appraisal has focused on Tianrui’s current ability to manage its environmental and social performance, comply with the IFC Performance Standards, and the company’s ability to extend this compliance to new assets as it expands its operating base.

E & S Project Categorization and Applicable Standard

This project was reviewed as a Direct Investment according to IFC’s Environmental and Social Review Procedure, and the following Performance Standards (PS) were found to be relevant:

- 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. Tianrui’s supply chain for coal was also evaluated for mutual dependency (PS 1, sect. 5 (ii)) during the appraisal and associated facility requirements was introduced.

- PS2: Labor and Working Conditions with regard to fair, safe and healthy working conditions.

- PS3: Pollution Prevention and Abatement especially with regard to emissions to air and water arising from the cement manufacturing facilities and the quarry operations.

- PS4: Community Health, Safety and Security in respect of the manufacturing practices and emission controls, the quarry operations including their quarry management operations, and infrastructure for raw material and product transportation.

- PS5: Land Acquisition and Involuntary Resettlement is not a direct consequence of the project. Due to the company’s expansions and land takes within the last few years it was though found relevant to audit selected land acquisitions for compliance with this PS, and to suggest methods to ensure continued compliance in any potential future land acquisition.

The following Performance Standards were not found relevant at this time:

- PS6: Biodiversity Conservation and Sustainable Natural Resource Management was not found relevant in respect to existing quarry operations but can be relevant in relation to potential future expansions requiring new land take for quarries and plants.

- PS7: Indigenous People was not found relevant (but was screened for) due to the activities being located in some of the most populated provinces of China.

- PS8: Cultural Heritage was not found relevant, but can be relevant in case of “chance finds”.

IFC has, together with Tianrui, developed an Action Plan to ensure the company’s continued development in consistence with local requirements and the relevant Performance Standards.

The proposed project is to improve and expand Tianrui’s production based within its existing operation sites. The project does not require additional land take, and the project review has concluded that all operations either already are, or as a consequence of the project will be in full compliance with the local regulations and IFC Policies, Performance Standards, and environmental and social guidelines. Based on the company’s current material compliance with the above the project has been reviewed as a Category B project.

Environmental and Social Mitigation Measures

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.

- PS1: Social and Environmental Assessment and Management Systems:

Tianrui is a rapidly expanding regional cement company with a need for a flexible and continuously expanding management system to ensure compliance with all relevant environmental, health and safety, and social requirements at all operations.

Tianrui and IFC have therefore agreed that Tianrui will establish a centralized capacity for environmental monitoring and reporting in the form of an Environmental Management System (EMS). This ISO 14,001 based EMS will allow the Tianrui management to continuously monitor the performance of its subsidiaries, and will enable the company to ensure continuous compliance of all subsidiaries with relevant environmental, health and safety requirements. It is planned to have the first plant ISO 14,001 certified by the end of 2007, and have all currently existing operation certified within three years. Any new plants to be build in the future will be certified within two years of operational start.

As part of the establishment of the corporate EMS, Tianrui 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.

While there is no formal requirement for the submission of a quarry reclamation plan to obtain limestone usage rights from the government, Tianrui 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. Tianrui acquires other raw materials used in the cement manufacturing process (e.g. iron ore, gypsum, clay) on the open market.

Tianrui’s supply chain for coal was also evaluated for mutual dependency (PS 1, sect. 5 (ii)) during the appraisal. Tianrui is not in a situation where only one coal supplier can deliver the coal needed for its operations. Tianrui has however engaged in a close corporation with its main coal supplier, PingDing Coal, which is one of the best operated local mines, with strict adherence to the codes for safe and environmentally acceptable coal mining in the area. The corporation with PingDing Coal covers the supply of coal and power, including Joint Venture (JV) projects controlled by Ping Ding Coal in this respect, and also a JV for the construction and operation of a cement plant (controlled by Tianrui). Ping Ding Coal was visited by the IFC appraisal team and PingDing Coal’s underground operations were evaluated based on extensive underground visits to their main mine, with a capacity of 4 Million tons per year, and a review of safety statistics for the mine. The underground operations were found to be of high standard with strong emphasis on safe operations. As a consequence the mine has not; during more than 50 years of operations experienced a methane explosion caused accident, despite high methane concentrations in the coal and low permeability of the coal phases. The mine has also achieved a low frequency of fatalities caused by other accident types. The Ping Ding Coal mine had at the time of the visit reached more than 30,000 man years since the last fatal accident (a single person fatality) at the mine. This fatality rate is well below what is seen in coal mines around the World, and based on this PingDing Coal is considered an appropriate and responsible business partner for the Tianrui operation.

Social issues related to land acquisition and compensation have been traditionally handled by local governmental authorities with localized implementing practices. As part of the corporative capacity building process, Tianrui will also develop a corporate social management system with committed resources in a form either separated from the EMS or integrated to overlook any future acquisition and ensure social issues will be managed accordingly with the local regulations and the IFC Performance standards.

- PS2: Labor and Working Conditions:

A significant number of Tianrui’s production plants were visited during IFC’s appraisal and all plants, except for the older LuShan Antai Cement plant, which will need to be closed down, were found in good conditions with clean working surfaces, handrails, machine guarding and other safety equipment in place. The company has an occupational health and safety system, and provides PPE and trainings. As part of IFC investment, Tianrui will establish a monitoring mechanism to ensure proper use of PPE among its employees and contract workers. Accident statistics for the company were also analyzed during the appraisal and the accident frequencies were found to be within the normal range for the cement industry. Tianrui will ensure that the corporate accident reporting standards, to be covered under the EMS system will be compatible with the ILO based standards, including Lost-Day-Accidents/ Million-Man-Hours or similar, to allow IFC to easily compare the Tianrui operation with other international cement operators on a regular basis and provide Tianrui with feed-back on its operational results.

Tianrui group has developed a very comprehensive human resources policies and management system in recent years. This includes a human resources policy and guidelines on recruitment, daily management, training, changes of job location, employment termination, time recording, salary increase and deduction, and performance management. The minimum age of hiring is 18 years old in accordance with national law. All policies are corporate wide applied. Disciplinary procedures are specified in the human resources policy, and as part of IFC investment, Tianrui Group will implement best practice examples.

A written contract is signed for each employee upon hiring, and is renewable upon satisfactory performance. Responsibility for communicating the company’s policies with workers is at each plant level and management staff at plant level explained that any grievance raise by an employee will report one level up until solved or dropped.

A mandatory worker’s association has been formed, but at plant level not all workers have knowledge of the existence of this association or other form of worker’s organization. Traditionally the line manager is the first person to be contacted for any grievance. Tianrui has agreed to implement a formal system to ensure that workers opinions and concerns will be passed through to the management team for proper handling.

Tianrui Group does not have any discriminatory practices. Migrant workers are treated in equal terms as local workers. Housing is provided for free and dormitories are new and in compliance with best practice seen in other countries. As part of this investment and in accordance with the ESAP, Tianrui Group will update their human resources policy to include a reference to non-discrimination and equal opportunity. Hereby, Tianrui will follow international best practice to ensure its human resources procedure provide equal opportunities for recruitment and promotion while meeting national requirements on remuneration and compulsory benefits.

With its fast track of development, it is anticipated that the Tianrui group will provide continuously increased employment opportunities and no retrenchments are foreseen in the immediate future.

As part of IFC investment, Tianrui Group will also ensure that onsite contractors implement terms of employment that comply with national law and IFC Performance Standards; prevent unacceptable forms of labor (e.g. child labor and forced labor); and promote a safe and healthy work environment.

- PS3: Pollution Prevention and Abatement:

All the plants are operating modern pre-heater and pre-calciner dry process kilns and all the operations are designed to emit below 30-50 mg particulate/Ncm, and are hereby in compliance with the applicable 50 mg/Ncm World Bank Group guidelines for particulate. Due to the low sulfur content in the coal used, it has also been possible to design all the operations to have sulfur dioxide emissions below 200 – 400 mg SO2/Ncm, within the 400 mg/Ncm World Bank group guidelines for SO2. The plants are all designed for a guaranteed NOx emission below 800 mg/Ncm. This value is above the World Bank group guideline value of 600 mg NOx/Ncm, but as the NOx-emissions are not yet continuously monitored on any of the plants, and all plants are relatively new with minimal control tests made, it is not clear if the operations are within the World Bank group guideline for NOx or slightly above. If any NOx exceedence is continuous or dominant on a yearly average basis, once the continuous monitoring become effective, Tianrui will present plant specific Corrective Action Plans (CAP) to IFC for approval. The CAPs may, based on local condition, allow for exceedence 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. Current Chinese emissions regulations for Cement operations are equivalent to, or more stringent than, the World Bank guidelines except for NOx emissions where the Chinese regulation accept up to 800 mg NOx/NM3, while the World Bank guidelines stipulate a maximum of 600 mg NOx/NM3. Consequently, all Tianrui’s new or planned clinker production lines will be designed according to the Chinese regulation, but with the more stringent World Bank guideline limit for NOx.

- PS4: Community Health, Safety and Security:

Each of the cement plants are separated from its nearby communities by a concrete fence, and during the appraisal it was found that initiatives has been carried out to improve the local environment. Such local initiatives included implementation of closed transfer systems for ash from adjacent power plants for use as cement additive.

A majority of the raw materials and final products are transported by trucks to and from each plant. The road conditions are generally good, and the access roads avoid passing through the local communities. At the local level many villagers are heavily engaged in transporting raw material and products driving their own trucks. As part of establishment of the EMS system, Tianrui will look into opportunities to ensure road safety.

- PS5: Land Acquisition and Involuntary Resettlement:

Tianrui Cement has grown quickly in the past three years and currently posses six cement plants and three grinding facilities, wide spread in Henan province with 1 cement plant in Liaojing province China. A total of 2700 Mu (180 hectare) of land had been acquired since 2004. These ten facilities, either solely owned by Tianrui or jointed owned with other shareholders have independent operating companies.

In order to ensure that land acquired for these recent develops follows both Chinese regulation and IFC’s Performance Standard #5 for land acquisition and involuntary resettlement, it has been agreed that Tianrui will contract a qualified consultant firm to carry out a post land acquisition audit of selected sites that was found relevant to be audited. If deficiencies are revealed by the audit a corrective action plan will be developed to mitigate these deficiencies. The consultant will also help Tianrui develop methods to ensure continued compliance in any future, not yet identified, expansion projects undertaken by the company.

- PS6: Biodiversity Conservation and Sustainable Natural Resource Management:

No issues were found during the evaluation of the existing quarry operations, and this Performance Standard could become relevant in relation to future, not yet identified, expansions requiring new land take for quarries and plants.

Stakeholder Engagement

Tianrui Group is one of the main private companies in the area and is perceived by the community as a good employer. The strongest relationship is through employment generation. Tianrui supports specific projects with regards to improving access roads, and donations to schools and health providers.

At the local level, some plants have undertaken a number of activities to support local communities, although this engagement is based on goodwill and not a systematic approach. Within a timeframe to be agreed with IFC, Tianrui cement group will hire a qualified community relationship manager to lead a strategy development, which should form the basis for local community engagement and public consultation and disclosure plans to be implemented at plant level. This manager will also be responsible for ensuring implementation of a formal consultation process with affected communities for future land acquisition.

Client Documentation

File Name	Actions
Tianrui Cement ESAP Final.pdf

**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
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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.
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