Social and Environmental Assessment and Management Systems
Social and Environmental Policies – The sponsor is the longest operating forest products company in the world and has established a global reputation for building and operating facilities which produce high-quality products under controlled circumstances. SFC is fully integrated with its Building Materials and Housing Construction Divisions which encourages the employment of an integrated and lifecycle-based approach. Per its Environmental Philosophy and Policies, VECO, as a wholly-owned subsidiary, will adhere to environmental laws, rules and regulations, voluntary standards, and accords with stakeholders and other environmental conventions. VECO will also demonstrate the legality of wood procurement and product traceability, and deploy systems to continually improve product and corporate performance. SFC’s progressive policies, substantially revised in April 2011, require each operating unit “to establish environmental budgets and make ongoing improvements to environmental management systems through reviews conducted at least once a year.” At VECO, the environmental and social policies and verification systems currently fall under the direction of the Procurement Manager. The Company will nominate a qualified manager to supervise all aspects of environmental, health and safety and ensure effectiveness and timely reporting.
Management & Organizational Capacity - The Company’s Managing Director and Quality Assurance Team came from SFC subsidiary in Indonesia (PT. Rimba Partikel Indonesia) with particularly relevant skills and experience with a nearly identical plant design and similar supply chain. During the construction phase, VECO is using one general and six specialty contractors under the day-to-day supervision of the VECO management team. The contractors were well integrated and there was a clear sense of common purpose. Frequent management meetings were held to ensure meshing of schedules and ensuring that EHS messages and procedures were appropriately communicated and effectively implemented. Many of the general contractors and several of the specialty contractor supervisors are from Ho Chi Minh City but nearly all of the 580 skilled and casual laborers at the site are from the Long An Province.
Environmental & Social Assessment - An Environmental Impact Assessment was conducted by a local company (Green World Environmental Technology Corp., International, Ho Chi Minh City) in 2009 in accordance with the 2005 Environmental Protection Law as amended by Governmental Decision No. 80\2006\ND-CP and amended by 21/2008/ND-CP. The EIA was approved by the Long An Industrial Zone Authorities in accordance with Decision No. 726/QD-BTNMT (2010) issued by the Ministry of Natural Resources and Environment. The assessment provided appropriately detailed information about the proposed plant’s specifications, location, and direct environmental impacts and mitigation measures. The assessment provided a reasonable review of mitigation options and worked with the Company to define the “best fit” solutions for mitigating plant impacts. The assessment provided a monitoring plan and estimated budget for the operation phase as required by Vietnam’s laws and best practice. While the EIA did not directly address transboundary impacts, there are no anticipated impacts with regard to water or air pollution and the use of renewable energy from biomass and stimulation of new forestry production will largely, if not completely, off-set GHG emissions. An EIA of the Phu An Thanh Industrial Park was also conducted and approved by the Long An Provincial Environmental Secretariat which specifies National permissible limits for effluent discharged to the Vam Co Dong River from the Industrial Park’s secondary water treatment facilities. Based on the EIA and national regulations the industrial park has developed a detailed “Statutes of Environmental Protection” which describes occupants’ obligations and sets the limits for receivable liquid effluents from the plant’s treatment facility and ambient air emissions as part of the rental agreement.
E&S Management Systems and Proposed Actions – The Company’s managements system during the design and construction phase has been routine and mechanical with tight quality, environmental and social controls established through SFC headquarters system procedures and policies. Detailed workflow instructions and engineering sequencing have been supported through continuous supervision from corporate EHS specialists and management staff who previously managed the Indonesia facility. EHS requirements were deliberately included in the site selection, equipment design and procurement decisions, and construction contractor selection. During operations, the Company proposes to install several internationally-recognized and independently-verified management systems, including: ISO 9001 for quality assurance and supply chain integration; JIS A-5908 for technical quality assurance (surface characteristics, bending strength, and adhesive types); ISO 14001 for environmental management of water, energy and waste management; and the California Air Resources Board (CARB) standard for formaldehyde emissions from final products. SFC operates a corporate Chain-of-Custody systems currently certified by the Forest Stewardship Council (FSC-CO10739 ) and the Programme for Endorsement of Forest certification (PEFC) and produces products labeled and marketed under both certificates. Sustainability of wood supplies is further addressed under PS6 – Biodiversity Conservation and Sustainable Natural Resources Management, below.
PS2 - Labor and Working Conditions
Working Conditions and Management of Worker Relationship – Plant construction is being realized through a general contractor and six specialized construction subcontractors. The perimeter of the plant is secured access gated and controlled by a security company under the General Contractors oversight. Identification cards are checked daily and no minors were observed. Although the Company affirmed its compliance with all Vietnamese labor laws, and the parent company SFC is adamant in subsidiary inclusion of freedom of association and unfettered workers organizations, the Company reported that there were no workers organizations on the premises. Currently the work force of 580 is 74% men and 26% women. VECO executives explained that construction contractors were well aware of Vietnam’s Equal Opportunity and Non-discrimination requirements and that their supervisors were trained on these issues. Grievance procedures were handled by respective contractors through team leaders and during morning team meetings. When production begins, VECO will have a more significant role in HR management and it will have a comprehensive HR policy which will be publicly posted and available to all prospective employees and which will indicate redundant grievance procedures.
Human Resources Policy - The Company has strong policy-level commitment to meeting national labor requirements and internationally-recognized best practices. Interviews with the Company and contractors, and observations at the work site, indicated awareness and adherence to labor laws. Most of the unskilled workers are from the Long An Province and have been hired under fixed-term contracts which include required workers compensation, health insurance social security benefits. Most skilled workers and managers return to their homes in the Ho Chi Minh City area some 30 km away and casual laborers return to their residences. There is no lodging on the site and the company will not provide housing to the estimated 200 workers during operations. In order to ensure that wood suppliers conduct themselves in accordance with the Company policies, and adhere to Vietnam’s labor laws, the Company with develop plans, procedures and communication to ensure that wood assemblers adhere to VECO’s HR Policy. The Company will develop wood supplier procedures which will include contract guidelines pricing, labor and social practices consistent with SFC’s Environmental Philosophy and Policy and IFC’s Performance Standard 2.
Grievance Mechanisms were established for work crews and contractors during construction through contractors responsible for the work which included suggestion boxes, an “open” and approachable chain of command, and daily team meetings. The sponsor’s prior history (in Indonesia and elsewhere) and corporate policy indicate grievance channel and mechanisms will become more formalized during the operational phase and fully described in recruitment and employment materials which will be reviewed during supervisions and requested within Annual Monitoring Reports (AMRs).
Occupational Health and Safety – There was a clear appreciation of occupational health and worker safety. Emergency procedures, contacts and medical facilities were posted in several places and the team leaders were aware of the procedures. All personnel were equipped with appropriate personal protective equipment (PPE) and a high degree of proper use was observed. Signage was appropriate and hazards were roped off. During 2010 there were 11 minor accidents (no work loss) amongst 464 workers. Accidents were logged in at a central location which is reviewed by the construction manager weekly. No root cause analysis was available for review at the work site although there was clear evidence of cognitive prevention and all items identified in the EIA appeared to have been closed.
The most significant OHS risks during plant operations originate from dust accumulations and potential fires and human exposure to volatile organic compounds (“VOC” and formaldehyde in particular). Both are inherent to particleboard and panel manufacturing. The layout and design of the plant, positive air ventilation, and proper maintenance procedures are the first defense against dust explosions and fires. During appraisal, IFC reviewed the plant design and the Company provided specifications of the equipment it intends to purchase which is state-of-the-art, including integrated dust vacuum and spark detection systems, distributed cyclones and automated dust collection, and active fire suppression system. The Company will provide a copy of the fire prevention and suppression control system specifications to IFC for review and comment when equipment orders are finalized.
Particleboard is manufactured by mixing wood flakes together with a formaldehyde-based resin and forming the mix into a sheet. The Company may also use Urea Melamine resins when water resistance is required by a buyer and other chemicals — including wax, dyes, wetting agents, release agents — may be used to make the final product water resistant, fireproof, or insect proof. Prolonged exposure to many of these chemicals is dangerous and there are limits established for workplace exposure in Vietnam, which is included in the EIA. The Company will control such exposure through appropriate housing, negative air flow around the forming, pressing and drying lines, reducing the time needed in these areas through routine maintenance and provision of proper PPE for workers which are exposed. The Company has agreed to develop a workplace monitoring system that is described in the EIA and will be finalized and provided to IFC for comments. The Company will maintain active documentation of all accidents and near-misses according to its internal procedures and IFCs PS. An annual review of performance will be provided within the AMR.
PS3 - Pollution Prevention and Abatement
Pollution Prevention, Resource Conservation and Energy Efficiency – During the construction phase, the principle sources of pollution are dust from earthworks, GHG’s from construction equipment and stationary power, storm water runoff, and transportation of construction materials. Noise and ground vibration are also impacts associated with construction. During appraisal, the Company was observed to be aggressively mitigating these through standard operating procedures, including: road wetting to reduce dust; minimizing the use of heavy equipment and stationary power generation to reduce VOC’s; storm water channeling and sediment ponding; and erection of noise barriers to reduce noise.
During operations, the primary source of pollutants will be dust from the chipping, flaking and sanding lines; air emissions from the biomass furnace/boiler and within the blending/forming and pressing processes; and disposal of biomass furnace ash. The Company’s engineering specifications and proposed equipment suppliers are considered “state of the art” and will be compliant with national and WBG’s air and water emission requirements. The particleboard production and biomass power systems have been integrated from the design through installation phase and offer a “closed loop” process which minimizes emissions and waste. Dust from the chipping, flaking and sanding lines will be collected through a distributed vacuum and cyclone system and dust returned to either the hot oil furnace or the biomass furnace/boiler complex when operational. Combustion in the furnaces will be electronically controlled and flue gases recycled. Stack emissions will be electro statically scrubbed for particulates and the proposed equipment will meet permissible limits for particulates (PM10) and VOC’s NO2, SOX and CO as described in the approved EIA in conformance with the industrial park requirements. The off-loading of wood from barges and transfer to the wood storage area (roughly 500m) is another point of potential pollution which will be managed through development of a 70m dock, mechanical grappling, and a vehicular transfer system. The plans for the dock and equipment requirements had not yet been finalized at appraisal.
Wastes & Hazardous Materials – During the construction phase, the largest volume of waste comes from periodic emptying of sanitation facilities through a commercial contractor. Other solid wastes from packaging and refuse are collected and centralized for expedition to the Long An municipal land fill by the industrial zone. Hazardous materials are limited to fuels for construction equipment and specialty gases for welding which are managed through a specialty contractor. During operations, the EIA identified additional lubricants and empty barrels for the various particleboard lines (approximately 100 l/mo), ash from boiler furnace (1,500 kg/day), scaling sludge from the drying lines, and primary waste water treatment sludge (50 kg/mo). The single largest non-wood input to particleboard is liquid urea-formaldehyde which is blended with other catalysts and wood fiber prior to forming. Urea-formaldehyde will be delivered in bulk by truck and stored in a controlled and well ventilated area. Other chemicals used for buffering or product finishing will be stored in appropriate areas. Solid wastes associated with these chemicals will be disposed of by the industrial park and the Company will maintain complete MSDS information on site. Debarking at local loading areas may pose an additional solid waste issue that will be reviewed with assemblers. Any use of fertilizers and pesticides in Company-supported horticulture or forestry tree nurseries will be and will meet Vietnam’s regulations and WBG’s standards. Solid wastes will be managed directly by the industrial park which uses contractors to manage solid and hazardous wastes. The Company will review its waste management procedures annually during which it will also assess any risks associated with industrial park waste disposition.
Water use and treatment – Water requirements during operations are estimated at: 44 m3/ for sanitation; 333 m3/day for processing and wash down; and 2,500 m3/day for biomass power generation requirements. Water is delivered by the industrial zone from a series of lined deep wells through a water treatment facility which is routinely tested for quality and portability. The Company will provide primary wastewater treatment to industrial and sanitation waters and deliver them to the industrial zone’s secondary treatment facilities which are under construction but were designed to handle a large volume of wastewater from a variety of industrial sources. More than 80% of the water discharged from the Company will be as steam vented from the biomass generators. Manufacturing and sanitation discharge will be decanted and aerated according to design specifications and be well within the limits established by industrial zone. While discharges from the Company to the industrial park will be routinely managed, the condition of receiving waters to which the industrial park will discharge need to be more carefully reviewed. Water quality in the Vam Co Dong River is already stressed and analyses indicated a high seasonal fluctuation in Chlorine, NH4 and NO2. VECO should place a priority on ensuring that its discharges to the industrial zone and the industrial zone discharges to the Vam Co Dong River are in compliance with national limits and WBG’s general receiving water discharges limits. The Company will assess the industrial park’s wastewater treatment facility, now under construction, to ensure ability to treat VECO effluents and meet limits for discharge to the river prior to operations.
Emergency Preparedness and Response – During construction, the prime contractor and subcontractors were observed to have good understanding of their respective roles and types of interventions which would minimize risk to their employees. Contact information and maps for first responders and medical facilities were posted in several locations and there was a medical doctor on site for first aid. Precautions and response plans were discussed with the general contractor and security subcontractor responsible for civil engineering and security. Procedures for emergencies were appropriate and there was familiarity with the location of medical facilities and contact information for first responders. Signage for accidents and emergency instructions were evident throughout the construction project. The Company has not yet standardized procedures for preparedness during operations, including training requirements for contactors, which will be reviewed during the first supervision.
Energy & Greenhouse Gas Emissions – The company proposes an innovative greenhouse gas (GHG) emissions tracking program using a life cycle or “cradle to grave” approach which will measure and actually label total GHG emissions associated with production including Scope II (indirect) and Scope III (life cycle including product disposal). Direct GHG emissions from the plant, including purchased electricity, are estimated at 25,000 tCO2e for the first year of operations with a substantial reduction as the 11 MW biomass plant begins operating in year two. SFC’s affiliate in Indonesia obtained the first and only CDM registration of GHG emission reduction credits in the forest products industry in Indonesia in 2008.
PS4 - Community Health, Safety and Security
The Phu An Thanh Industrial Park is located in a largely rural setting surrounded by agrarian communities. The surrounding community has no water or sanitation services but most have access to electricity. The park is accessed from either a well-traveled two lane road or through 15m wide canals which come along the southern side of the zone. The largest risk to the contiguous community is vehicular traffic during construction and the vehicular and waterway transportation to occur during operations. At capacity the Company will purchase and process an estimated 1,000 m3 of wood per day which will be supplied by trucks and barges. The Company will mitigate risks by training its own staff and directly contracted logistics providers as well as reviewing the safety performance of independent suppliers. Provincial and National authorities have also identified typhoons and flooding as significant risks to communities in Long An and Tien Giang and the National Strategy for Natural Disaster Prevention 2010-2020 calls for substantially increasing tree planting and protection of mangroves and Melaleuca forests in the Mekong through joint stock companies. By stimulating wood markets and provision of seedlings and extension support the Company will respond directly to this climate adaptation mandate.
Security Personnel –Security personnel (15) were provided by the general contractor and are well organized and are well integrated and openly conversational with other contractors, workers and staff. Uniformed personnel were active along the construction perimeter, diligently controlled gate access, and were seen to be moving through the construction site. During appraisal, the team had the opportunity to discuss their activities and modus operandi for ensuring a safe operation and it was observed that the contractor was familiar with international security procedures and is materially compliant with the IFC Performance Standard 4 requirements.
Biodiversity Conservation and Sustainable Natural Resources Management
Natural Resources Management & Climate Risk – Long An and its neighboring Provinces in the Mekong Delta are some of the most modified landscapes in the World due to the area’s natural fertility and high population densities which generally exceed 500/km2. The region produces roughly half of Vietnam''s rice output, a third of the fruit exports, and is home to most of the country’s aquaculture industry. Increased water demands in the Upper Mekong and sea level rise are resulting in increasing surface water salinity, soil acidification and natural resource stress. The soils in the region are organic alluvial clays with poor drainage and high vulnerability to acidification and infertility. Melaleuca is often grown as a fallow crop to rehabilitate acid sulfate soils and return the areas to rice. However, the relatively high costs of Melaleuca plantations (6-7 year rotation length combined with low wood prices) have discouraged broader planting and the area of Melaleuca plantations, used largely as a fallow rotation to de-toxify acid sulfate soils, has declined by at least 50% over the past 20 years by conversion and arson.
Plantations and Natural Forests – At peak production operation of the plant will require approximately 460,000 ton of wood per year between the particleboard production line (330,000 ton) and the biomass power plant (130,000 ton). The source of raw wood is approximately: 50% from mature fruit tree waste wood (e.g. mango, long an, jackfruit, pomelo etc.) from smallholder production systems and waste wood collected from municipal landfills and construction projects; 30% from the 66,000 ha of established Melaleuca plantations located in Long An, Tien Giang and Dong Thap Provinces; and 20% from renovation of rubber and coffee plantations in southern Vietnam. Findings from the Company’s assessment of wood plantation and waste wood availability were confirmed during interviews with Department of Agriculture and Rural Development (DARD) officials as well as research conducted by the Southern Horticulture Research Institute in Tien Giang. It is estimated that there are 300,000 ha of fruit tree and forest plantations producing some 2.3M ton of waste wood annually which currently has limited markets. The volume of fruit tree waste from smallholder systems is increasing as orchards mature and new varieties are planted with no markets for waste. By increasing demand and regular collection for such wood, and increasing the availability of seedlings to new areas, the Company and local experts reasonably believe that farmers and communal authorities will redouble their efforts in plantations. SFC has a stated policy goal to “expand use of timber and timber products made of wood harvested from sustainably managed forests and focus on plantation forestry to preserve natural forests and contribute to the revitalization of lost forests”. The Company will not directly operate plantations however it is proposing to develop a fruit tree improvement program and introduction of new genetic material to assess potential on the difficult sites in the region. The Company will develop a Memorandum of Understanding with the Southern Forestry Research Institute and Ministry of Forestry to identify multi-year support to forestry research and extension in order to improve sustainable wood production.
Protection and Conservation of Biodiversity –
The Greater Mekong region is one of the most biologically diverse places on earth and includes 16 of WWF’s Global 200 ecoregions. The Mekong’s biodiversity is rooted in its extreme seasonal water level changes which create a great variety of wetlands and seasonally inundated habitats. Virtually all of the Lower Mekong Delta consists of highly modified habitats that have been converted to farming during the past 100 years and the majority of it within the past 30 years. Only two protected areas are proximate to the Company’s 100 km wood catchment radius: Cat Tien National Park which is 120 km to the north east and Tram Chim National Park which is approximately 100 km west of the processing facility. Beyond these two areas only a small number of isolated natural reed and mangrove wetlands remain protected in a small number of Biosphere Reserves along coastal areas. Population density and farming practices are intensifying just as climate variability and upland water demands for irrigation and hydropower are affecting tidal ground and surface water regimes.
Supply Chain Sustainability - Waste wood prices have declined over recent years in the Delta slowing the timely replacement of mature fruit tree stock. Prices of Melaleuca are also declining slowing the use of Melaleuca for acid soil reclamation. Given low wood prices and high logistical costs forestry and wood products have been disadvantaged and declined in the landscape at a time when booming construction economies and climate change risks would suggest otherwise. The Company carefully selected its site to secure its access to a fiber sources it can help stimulate. Information indicates this “woodshed” is well within the Delta region and that water transport is a key mitigant to removing the threats to natural forests outside the Delta. Meetings with DARD verified the interest and availability of wood and joint venture agreements will be able to help bring in waste wood and assist VECO to provide growers with new and improved planting stock. These officials also verified that inter and intra-provincial wood movements must be documented. SFC originally established its Timber Procurement Policy & Philosophy in June 2007 and has recently revised the Policy, Principles and Action Plan to promote sustainable forestry throughout its entire timber supply chain and distribution process. The Policy is explicit and impressive in its aims for legality, traceability, life-cycle assessment and stakeholder engagement. SFC requires all operating units and subsidiaries to annually examine its suppliers of timber and timber products for legal compliance and claims to ensure the legality of wood procurement and product traceability. The Company will purchase wood from public and private wood suppliers which originates from fruit tree orchards, mature Melaleuca plantations and municipal waste. A public forestry company, Dong Thap IV, is expected to supply most Melaleuca and reclaimed wood fiber and fruit tree waste wood purchased largely from independent sellers. Dong Thap IV is a division of the Dong Thap Trading Corporation which has wide distribution networks for agriculture and aquaculture inputs, product purchasing and consolidation, and also owns a variety of fruit, rubber and Melaleuca plantations. To ensure that wood suppliers meet the sponsor’s own policies and the IFC Performance Standards the Company will implement inspection procedures and practices to verify that wood purchased is only from cultivated fruit trees, mature tree crops or Melaleuca plantations, or from reused or recycled wood. These practices will be included as part of the Company’s externally-assessed quality assurance system (ISO 9001) and reviewed annually.
