Information concerning how these potential impacts are addressed by the Group is summarized in the paragraphs that follow.
- Social and Environmental (S&E)Assessment and Management Systems:
IFC’s assessment considered the Group’s management of its environmental, health and safety performance in the establishment and operation of its facilities; compliance with national and local permitting requirements; and the Group’s engagement with local communities regarding environmental, health and safety performance and corporate social responsibility.
Environmental and Social Assessment:
This glass manufacturing restructuring and relocation project is being undertaken in the context of the document “A Whole Urban Planning of Qinghuangdao (2001-2020) and other city-level planning schemes. In this context the glass production relocations in Qinghuangdao will be subject to environmental impact assessment meeting the requirements of the Chinese authorities. These assessments will be phased as the relocation project proceeds over the next three years and were not available for review at IFC’s appraisal.
IFC’s assessment as reported in the following paragraphs is based upon discussion of design specifications for the new lines. Assessment also included modeling of emissions to air from the new furnaces to be developed in Qinghuangdao. In addition, IFC has made independent analysis of the land acquisition process and of the employment impacts of the restructuring.
EIAs will be provided by NYH to IFC as they are made available, and any additional mitigation of S&E impacts not anticipated in this ESRS and Action Plan will be incorporated into these documents following EIA review.
Management Systems:
All existing manufacturing sites under Beifang and Yaohua have formal systems to manage quality assurance and environmental issues certified compliant with ISO 9002. All except Yaohua’s Shenyang site have ISO 14001 certification of environmental management systems while Shenyang expects this certification in early 2009. Yaohua’s Lisco site in Qinghuangdao has ISO 18001 certification of its occupational health and safety management system, Shenyang will develop this certification after certification of its environmental management system.
New Yaohua will develop an environmental management system certified to ISO 14001 or equivalent, and Yaohua’s Industrial Park site will maintain this certification. Both sites will develop occupational health and safety management systems certified compliant with OHSAS 18001 or equivalent.
Yaohua will appoint an appropriately qualified individual to the position of Environmental and Occupational Health and Safety Director, or equivalent. This person shall have overall responsibility for environmental and OHS management at the anticipated three production sites, shall be provided adequate financial and human resources to discharge these duties and shall report to the Chief Operating Officer.
Environmental monitoring today is typically undertaken on an infrequent basis by the local regulator rather than the company. NYH will undertake its own regular environmental monitoring rather than relying on external agencies.
Community Engagement:
There is no formal public consultation required for greenfield industrial projects in China. Potentially affected communities are informed of impending projects by local authorities who act as intermediaries for project sponsors in the acquisition of land and access rights of way. Affected communities have the opportunity to raise grievances with local authorities. Details of the land acquisition process for the proposed New Yaohua Glass plant are discussed below in Section 5. Details of the engagement of employees in the discussion of restructuring and privatization by the management of Yaohua and Beifang are described in the following sections.
- Human resources and working conditions
IFC’s assessment considered the Yaohua and Beifang groups’ operations with regard to fair, safe and healthy working conditions in construction and operation of facilities in all business segments.
Human Resource Policy and Management:
The Beifang Group and each of the Yaohua Group’s companies adhere to the requirements of the national Labor Law in the management of its workforce. Employee relations with management, wages rates and benefits are governed by the national Labor Law but discretion is given to local labor bureaus for the establishment of minimum wage rates. Both Groups have established human resources (HR) departments that manage employee remuneration and benefits as well as training and promotion. At a minimum, all employees are provided with medical insurance and workman’s compensation (accident insurance), unemployment insurance, maternity leave, housing allowance and pension. After restructuring, all future employees will sign individual employment contracts with the restructured enterprises in line with the labor law and the new labor contact law ratified on January 1st 2008.
Worker’s Organizations:
Yaohua and Beifang employees are represented in labor unions at the individual enterprise level, at the Group level and at the local government level. All labor unions are affiliated with the All-China Federation of Labor Unions, which is a government body.
Labor standards for industrial workers are maintained by the local Labor Bureau, which sanctions working hours and leave, remuneration, dispute procedures, disciplinary procedures and benefits. At the individual plant level, all non-management employees are enrolled in a workers organization, which nominates plant members to represent their interests. It is not untypical for these representatives to be selected from among employee supervisors or management. The terms of employment maintained by both the government as well as individual enterprises provides for mechanisms by which workers can raise and resolve grievances in the workplace with plant management. Employee grievances that cannot be redressed through HR department mediation are referred to a Labor Dispute Settlement Committee in each Group that comprises representatives of management, labor unions and other external parties.
Non-discrimination and Equal Opportunity:
The Groups’ HR departments maintain general guidelines for promotion that are merit-based, taking into account work experience, education and training and leadership potential. All senior-level management promotions are reviewed by Municipal Communist Party committee and the middle level management promotions are reviewed by corporate group level Communist Party Committee. The influence of Communist Party Committee in HR management will be phased out with the privatization of the two Groups’ operations.
Retrenchment:
Together, the Yaohua and Beifang groups have an active workforce of 6,774 employees. As state owned enterprises, the two groups together are responsible for another 8,382 “non-active” employees. Of this category of employee, 5,437 are retired and receiving full pension benefits. Another 2,068 employees in the “non-active” category are receiving monthly early-retirement compensation according to the number of years they were actively employed until they reach the retirement age. Both Yaohua and Beifang groups also continue to provide benefits to disabled employees, employees on long-term sick leave and to families of deceased employees. As part of their restructuring, the two groups will provide a lump sum cash settlement to all categories of qualified “non-active employees, equivalent to the value of benefits to which each category of employee is entitled up to the age of retirement. After the restructuring is completed, local government will assume responsibility for providing all benefits to which all affected employees are entitled as pensioners. All pensioned and semi-retired employees are registered with the equivalent of a Social Welfare department in the Qinhuangdao municipal government. With the payment of this settlement, the Yaohua and Beifang groups will no longer be responsible for providing benefits to these employees subsequent to restructuring.
In preparation for the privatization of its glass manufacturing operations, the Yaohua Group has been divesting itself of a number of non-core businesses including a garment manufacturing unit, a machinery manufacturing unit, a real estate unit, a tempered glass manufacturing unit, a textile manufacturing unit, a furnace manufacturing unit, a truck transportation unit, a packaging unit, a design house and some social functions like hospitals and schools. These non-core businesses have been restructured and are currently operating as private enterprises under management and ownership independent of the Yaohua Group. Approximately 2,838 (including social functions) are employed in these non-core enterprises, 332 of whom have taken early retirement and received the similar monthly benefits package as a settlement as that described above and 1,031 are retired employees.
All remaining active employees of Yaohua and Beifang will have their existing contracts terminated. Each of these employees will receive a compensation payment commensurate with salary level and length of service. Local labor regulations require that at least 85% of the terminated employees from the former state-owned enterprises be hired by NYH. Because of the increased capacity of the new plant, the proponents of the NYH anticipate a labor requirement of 6,800 employees, or slightly more than are currently employed in the two groups’ glass lines. Therefore, the future New consolidated company will be able to the offer the opportunity of employment to the entire active workforce of the Yaohua and Beifang glass plants and make up the labor deficit by hiring new employees.
The employee retrenchment plans proposed by the Yaohua and Beifang will require the approval of both the employees’ representatives and the local Labor bureau before they are implemented. As part of its pre-investment due diligence, IFC engaged an independent specialist consultancy to assess the adequacy of the proposed employee retrenchment to meet the objectives of its Performance Standard on Labor and Working Conditions (PS5). The consultant interviewed staff and management of the non-core units divested by the Yaohua Group as well as the management of the Yaohua and Beifang glass manufacturing units that will be consolidated and privatized. With few exceptions, the consultants found the retrenchment procedures and compensation packages offered to active and non-active categories of employees to comply with national and local labor regulations and to be consistent with IFC’s requirements. All entitlements provided by new employment contracts at least match those provided by previous terms of employment. The consultants have recommended, and discussed with the management of both groups, a number of actions by which the two groups can bring their retrenchment procedures into full compliance with PS5. These recommendations have been included in an Action Plan. IFC will confirm the commitment of both groups to the implementation of these recommendations prior to committing financing to the proposed project.
Protection of the Workforce:
Child labor or forced labor is not employed directly in the production of glass or in the supply chain by either of the Yaohua or Beifang group companies.
Occupational Health & Safety (OHS):
The main OHS issue in float glass production is the risk of cuts arising during manual handling of glass, particularly if a large piece breaks unexpectedly during lifting. Other hazards, such as risks presented by moving machinery are present in this as in many other industries.
OHS management will be improved by the development of the certified management systems as described earlier. The new manufacturing sites will include mechanized rather than manual handling of large glass pieces, which will reduce the risk of cuts. As an interim solution, all ongoing operations will review provision of personal protective equipment to workers handling glass and will identify and replicate existing best practices through all manufacturing sites.
- Pollution Prevention and Abatement
IFC’s assessment considered the Group’s operations with regard to efforts to control emissions as well as optimize resource inputs, including energy efficiency and waste minimization practices as well as the storage, handling hazardous materials used in the construction and operations of facilities. In glass manufacturing, the main issues are those of emission to air and the effect of these emissions on ambient air quality, and energy efficiency.
Air Emissions:
Existing furnaces use either heavy fuel oil or coal tar as fuel, because natural gas is not available. No existing furnace has secondary control of air emissions.
Emissions of particulate matter from existing furnaces have been reported to be between 70 and 130 mg/Nm3. Emissions of around 100 mg/Nm3 without secondary control are considered good practice. Sulphur dioxide emissions, arising substantially from the sulphur content of fuel are reported to be between 360 and 1160 mg/Nm3.
All glass furnaces to be installed as part of this project under discussion will be equipped with secondary control particulate and SO2 emissions. Sulphur oxides will be removed by passing furnace exhaust gases through a circulating alkaline solution, and this will be followed by bag filtration. As a result of these technologies, emissions to air of SO2 and particulate matter will be less than 300 and 20 mg/Nm3 respectively, both figures well within Chinese and IFC guidelines. As a result of the introduction of these pollution control technologies, emissions to air of SO2 and particulate matter are expected to be reduced by around 1800and 200 tonnes respectively, despite the production capacity increase.
Production lines at Yaohua’s Industrial Park and Shenyang sites will not be affected by this project. However secondary SO2 and particulate control will be installed on these furnaces during the next cold repair, the last of which is scheduled for 2012.
The project will not include secondary control of NOx because although NOx is a parameter included in Chinese air quality standards, NOx emissions by industrial enterprises are not currently regulated. Yaohua has modeled expected NOx concentrations around the two new industrial campuses to be developed in Qinghuangdao by this project, at the North Industrial Park. This modeling, which assumed NOx emissions from the furnace of 1800 mg/Nm3 showed that ambient air quality standards in respect of NOx will remain well within local standards and that the additional ambient NOx concentration is modest.
Subsequently to the air emissions modeling, Yaohua confirmed an expected NOx emissions concentration of 1450 mg/Nm3 and measured NOx emission from one furnace at 850 mg/Nm3, indicating that the emissions model is conservative. New furnaces will be much more efficient than those they replace, so despite the production increase total NOx emissions in Qinghuangdao will decrease by some 1100 tonnes/year as a result of the project.
Ambient NOx concentrations in the airshed influenced by the Shenyang factory will be measured, and actions to reduce this, if necessary by NOx control at the factory will be implemented if shown necessary by this modeling.
Energy Efficiency:
The new production lines include multiple measures to improve energy efficiency, and will achieve specific energy consumption some 10% higher than worldwide best practice. NHY’s furnaces will be among the most efficient in China, the difference between worldwide best practice being attributable to lack of availability of some specialized high temperature refractory materials in China. New production lines will also make extensive use of variable speed drives for large fans and pumps, thus saving electricity.
The NYH site will be equipped with a nominal 6 MWe waste-heat driven steam turbine based power generation system, to exploit remaining waste heat in furnace flue gases after their exit from the regenerators. Condensing turbine cooling water will be used for low-temperature applications such as space heating of offices. If successful a similar power generation system will be considered for retrofit at the Industrial Park and Shenyang sites.
Total GHG emissions arising from Yaohua’s glass making in Shenyang and Qinghuangdao are estimated at around 1 million tonnes/year CO2 with present activities. As a result of the project, production is expected to increase by some 35% but GHG emissions will increase to around 1.2 million tonnes/year CO2.
Of the six new production lines, two will produce low emissivity (low-E) glass which limits heat losses in building glazing applications, and another will produce glass for use in solar cell manufacture. Hence there are intrinsic energy efficiency features of some of the project’s anticipated products.
Solid Waste:
Solid waste will be limited to used refractories which will be returned to the manufacturer. NYH anticipates the recovery and sale of materials recovered from the flue gas desulphurization (FGD) process. Off-specification glass if any will of course be remelted.
Hazardous Materials:
Yaohua has existing procedures governing the production and use of hazardous materials such as inert atmosphere and coating gases, and the ammonia from which these are produced. These procedures will be adapted to new site circumstances and will consider the need if any for notification of external agencies in the event of a leak. Procedures will also be adopted for the safe handling of the caustic solutions to be used in the FGD process.
- Community Health Safety and Security
IFC’s assessment considered the impacts of the construction and operation of its facilities on surrounding communities.
Community impacts in manufacturing essentially derive from raw material and finished goods transfer. These will be much more benign than at present, because the factories are to be sited along side major roads in an established and a developing industrial zone, rather than in a city–centre location.
The possible involvement of communities in NYH’s emergency response procedures will be evaluated.
- Land Acquisition and Involuntary Resettlement
IFC’s assessment considered the potential displacement and compensation of occupants and/or users of land acquired for the construction and operation of the new glass production facilities. In 2001, the municipal government of Qinghuangdao acquired 12.6 km2 of mixed-use agricultural and grazing land in the northern suburbs of the city to establish the Qinghuangdao Northern Industrial Administration Area. This area was established to accommodate heavy industrial units required to relocate from the Qinghuangdao city center as well as commercial office space for new enterprises promoted by the municipality. Approximately 2000 households in six villages were notified of the municipality’s intent to acquire their land in 2001 and compensation payments for land commenced at that time. The area designated for the development of the NYH will affect the agricultural holdings of two villages with a total population of approximately 1,600 people.
The industrial area has been developed in phases. Land holders have not been required to relocate until the area in which their dwellings or land holdings are situated is required for development by a specific industrial unit. As such, no physical displacement of any household has occurred to date. In addition to compensation for standing crops and buildings, each household is entitled to a monthly compensation payment that is pro rated against the area of land acquired. Rates of compensation are considered equal or superior to the average return on the same land through cultivation. Affected households are further entitled to a range of education, vocational training, employment and health benefits. In addition, the Qinghuangdao municipality has begun the development of a 200,000 m2 residential development within the city’s limits that will accommodate all households displaced by the eventual development of the industrial area. Affected households will be entitled to swap the total area of their original dwelling for the equivalent area in a flat in this development, and to purchase the balance of a flat’s floor space at a cost below market value. (In other words, to obtain a 160 m2 flat in this residential complex, a household vacating a 150 m2 dwelling would be required to purchase only the balance of 10 m2). In addition, with the relocation to this residential development, affected households will have their residential classification converted from “rural” to “urban”, which will provide them with a range of social services, including pensions for retired household members that are not available to rural populations.
As such, the outcomes of the land acquisition undertaken by the municipal government of Qinghuangdao on behalf of the NYH are consistent with the objectives and requirements of IFC’s Performance Standard for Land Acquisition and Involuntary Resettlement.
