The company''s implementation of agreed upon measures from the previous investment was also reviewed as part of the ESHS due diligence for the proposed investment, including (a) adoption of IFC environmental and social Performance Standards as part of the applicable legal and other requirements in its management system, and (b) evidence of formal procedures for environmental and social screening of business opportunities and new projects into its marketing strategy, commercial planning, and project bidding processes. The Company has made progress on all of the action items and continues to work diligently toward resolving outstanding issues. IFC’s review has confirmed that the Company continues to manage its environmental social, health and safety (ESHS) performance of existing operations effectively and addressing potential ESHS impacts of new development projects in a manner that is consistent with IFC’s Performance Standards.
Detailed appraisal findings from previous investments related to the Company can be found on the IFC/World Bank website:
http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/465e8e7a96f4aba1852576ba000e28b3?opendocument&Highlight=0,sound (May 25, 2006); and
http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/5894071aabf5a9fb852576ba000e3304?opendocument&Highlight=0,sound (January 15, 2010).
Since IFC’s investment is to partially support the company’s capital expenditure additional to specific individual projects identified in this review, IFC will review and agree with the company on an overall monitoring and reporting framework of the company’s ESHS performance including those of individual new projects, to confirm ongoing compliance with the IFC’s Performance Standards. The Company will continue to work on the ameliorative measures described in the Environmental and Social Action Plan (ESAP) from the previous investment referenced above (b) as agreed in IFC’s investment documents and any associated agreements.
Social and Environmental Assessment and Management Systems:
For each of the four projects being considered for IFC financing – Yantai city (Shandong province), Yangwu district (Shaanxi), Hongze county (Jiangsu), and Yangxian county (Shaanxi), Environmental and Social Impact Assessments (ESIA) have been completed and approved by the local regulatory authority. Local governments select sites for locating water and wastewater treatment plants, and obtain documented approval from the impacted communities for location of the facility. The impact assessment process included detailed assessment of potential environmental and social impacts, as well as extensive consultation on various aspects of the project – from site selection, land acquisition through conditions for project operation, monitoring and reporting. Through the impact assessment process the government ensures that potential impacts of the project are identified and addressed during the project planning stage, and are used to prepare specific environmental control plans containing identified mitigation measures. The Company''s obligation in the concessions is to comply with requirements set forth in concession documents. The Company’s environmental management team has overall responsibility for obtaining appropriate permits and approvals from various government agencies, and ensuring all operations are consistent with the terms of the concession agreement. The ESIAs undertaken by the Company for the four projects being considered for IFC financing are consistent with IFC PS1 requirements.
Sound Global has a corporate management system which provides limited oversight of environmental, social, health and safety (ESHS) issues. Since the previous IFC investment, Sound Global has designated an individual on the board of the Company to ensure compliance with group policies, procedures and regulatory requirements, and ensure consistency with good international industry practice for ESHS performance, including IFC Performance Standards and applicable guidelines. The Company’s management program includes operational policies and procedures that are implemented at the facilities level by supervisors who report to management on a reactive basis. Policies and procedures comply with applicable local regulatory requirements for operation of these facilities including those for human resources and labor, occupational health and safety, and environmental compliance. As part of the agreed Environmental and Social Action Plan (ESAP) for the previous investment, Sound Global will continue to work towards implementing an effective Environmental and Social Management System (ESMS) to provide consistent oversight of environmental, social and health and safety for all its activities from construction management to operation of facilities, as well as screening of new opportunities in expanding its business.
Human resources are managed at corporate level with oversight of all the Sound Global''s facilities and operations. Training of staff is done on a routine basis in compliance with local workplace regulations. The department of human resources is responsible to ensure that all employees are adequately trained to perform their work safely. Supervisors monitor that standards are met and any reportable incidents are reported and follow up action taken when required. Training, monitoring and reporting framework is consistent with PRC requirements, and is expected to be consistent with IFC requirements after implementation of the ESMS program.
Labor and Working Conditions:
Sound Global employs 707 directly, while the number of sub-contracted employees can vary significantly depending on construction activities from a dozens to hundreds at any given time. Sound Global has a Human Resources policy that complies with local and PRC regulatory requirements, and is applied consistently to all direct employees. As required by law, the policy is included in employment contracts, and addresses working conditions, terms of employment, and wages and benefits. This information is provided in the form of an employee handbook at the time of induction. As is common practice in China, although not explicitly stated, employment relationships recognize the principals of non-discrimination and equal opportunity. Although there is no union at Sound Global, under PRC law, employees have the right to freedom of association and have the opportunity to collectively represent to the management any issues or grievances that they may have.
The minimum employment age at Sound Global is 18 years. Sound Global ensures that child labor or forced labor is not employed directly or by subcontractors through verification of relevant documents. Working hours on site can vary by nature of activity and phase of project, with most labor intensive phases being at the construction phase during which there are continuous operations. Construction activity is largely subcontracted for which unskilled labor is procured from nearby villages. Management of influx of labor into local communities and the responsibility for accommodation is managed by the subcontractor. Regulatory requirements in PRC do not require Sound Global to provide direct oversight of wages, working or living conditions of subcontracted labor. Wages are paid on a monthly basis and calculated with basis on the hours worked, inclusive of overtime. Terms of employment for sub-contractors are as per PRC laws and the Company relies on regulatory agencies for ensuring that sub contractors comply with applicable labor laws. As part of continual improvement, Sound Global continues to review of its human resources policy to ensure consistency with IFC Performance Standard 2 on labor, working and living conditions for any labor employed by Sound Global, either directly or through sub-contractors.
Occupational health and safety of employees at Sound Global is managed by the Human Resources and Administration. There is a plan for accident prevention and worker safety consistent with local regulatory requirements. All employees in the company have to undergo a training program at induction and subsequently regarding worker health and safety relevant to their job activity. Facilities are audited yearly by regulatory agencies to monitor compliance with labor regulations. The Company has been in compliance with regulatory requirements and has recorded no significant lost time incidents or fatalities in its operational history. Although Sound Global has been in compliance with applicable regulatory requirements, there is variance between the Company’s regulatory obligations when compared to IFC Performance Standard 2 and Guidelines on Occupational Health and Safety (OHS). The variance is primarily in reporting requirements and applicable thresholds which are less stringent when compared to international best practice for the sector. As part of the agreed ESAP for the previous IFC investment, Sound Global will implement corrective actions recommended by the OHS consultant retained by the Company on completion of the ongoing review. Corrective measures to improve performance include enhancement of its training programs, and implementation of standard operating procedures that specifically seek to mitigate OHS risks during construction and operation of municipal wastewater treatment plants. It is anticipated that the Company''s occupational health and safety performance will achieve consistency with applicable IFC policies and guidelines for the sector only after recommendations from the external consultant are fully implemented, specifically for adequately monitoring and reporting OHS related incidents.
Pollution Prevention and Abatement
Sound Global primarily uses conventional secondary treatment technology for treatment of municipal wastewater in all the BOT projects under consideration for IFC financing. Treatment plant designs are typically developed by the client for EPC contracts, or specified in most concession agreements. The technology used is fairly basic (screening, primary sedimentation, secondary biological treatment with nutrient removal and secondary sedimentation, optional UV disinfection) and robust to provide reasonable assurance of meeting discharge standards when operated with adequate training. Effluent discharged from wastewater treatment facilities operated by Sound Global under the concession agreements either comply with or for those under construction are designed to comply with local regulatory requirements. Discharge standards are established by the government and vary by project location and receiving water quality standards, and are consistent with IFC guidelines for the discharge of treated municipal wastewater to surface water. However, limited effectiveness of industrial source control programs can result in industrial pollutants to be discharged to wastewater treatment plants (operated by Sound Global) that are not equipped to treat such pollutants, resulting in a potential pass through to receiving bodies of water and contamination of treatment plant residuals. Concession agreements do not require monitoring of industrial chemicals in the influent or effluent. Currently, the Company’s monitoring and reporting requirements are limited to its obligations set forth in individual concessions. Sound Global is reviewing industrial sources of wastewater at each of its operations to implement a monitoring and reporting program for contaminants relevant to the sources of discharge.
Air emissions from Sound Global facilities primarily include nuisance odors which are typical to wastewater treatment operations. The facilities are located away from local communities and odor is not anticipated to be a nuisance in the short term. Through its community engagement program, Sound Global will continually monitor the acceptance level for odors and ensure appropriate provisioning of odor control technology if needed. Emissions of VOCs and other aerosols from wastewater treatment activities are not currently monitored by the Company. For protecting worker health and safety at the wastewater treatment plants, as part of the ongoing OHS review, the Company will assess the risk posed and take any remedial measures if needed.
Significant quantities of solid waste are generated as part of secondary wastewater treatment operations, mainly from primary and secondary clarifiers. Annual production of sludge from the projects under consideration for financing by IFC is estimated to be in excess of 820 dry tons per year. As per terms of the concession agreements, Sound Global is required to deliver sludge at acceptable water content with no additional requirements on chemical or microbiological characteristics. All wastewater treatment plants operated by Sound Global are equipped with sludge dewatering facilities. Dewatered sludge is disposed only in municipal sanitary landfills at no cost to Sound Global. Sound Global will continue to ensure that sludge is disposed solely to sanitary landfills, and not incinerated or reused to mitigate risk from any potential contamination of sludge from uncontrolled/unknown industrial discharges.
Principal energy usage includes electricity procured from the grid (estimated to be about 762 MWh per year for 4 BOTs). Net green house gas (GHG) emissions attributable to Sound Global’s annual consumption of electricity are estimated to be less than 1, 000 metric tons of carbon dioxide equivalents per year. Net GHG emissions associated with secondary sludge is estimated to be about 1,000 tons of carbon dioxide equivalents per year. The Company’s GHG emission across its portfolio of BOT projects exceeds 100,000 tons of carbon dioxide equivalents per year. The Company will continue to explore opportunities for energy efficiency in its operations to reduce operational cost and its carbon foot print. The Company will also monitor and report on an annual basis its net GHG emissions using internationally acceptable methodologies for quantifying such emissions.
Community Health, Safety and Security
Engineering controls and some staff training are provided to mitigate risks and issues associated with Sound Global''s operation of its concessions, which includes transport, storage and use of hazardous chemicals. Sound Global does not use gaseous chlorine at any of its concessions, with the exception of one location where it is currently being phased out in the near term. Handling of chlorine at this facility is in compliance with stringent national requirements and there have been no accidents reported to date. At Sound Global''s facilities, the use and storage of hazardous chemicals are subject to stringent safety standards as required under PRC laws. The company ensures that chemical stores provide for adequate containment and neutralizing systems to minimize the impact of release. Sound Global is required to have an emergency prevention and control plans which specifies responsibilities, ensures appropriate response equipment and materials are in place, and details a set of procedures to be followed to minimize the harm of any potential accident. Sound Global will complete the ongoing review of emergency response plans and update procedures as needed, including drills to test the effectiveness. The plans will include a community involvement component that addresses appropriate behavior and safety measures to be implemented in the event of a hazardous chemical release beyond the plant boundaries.
Land Acquisition and Involuntary Resettlement
IFC’s assessment considered the potential displacement and compensation of occupants and users of land acquired for four Sound Global facilities located in Yantai city (Shandong province), Yangwu district (Shaanxi), Hongze county (Jiangsu), and Yangxian county (Shaanxi) in China. The Company confirmed that none of the sites involved physical relocation of residents. Acquisition of the 84mu land plot where the Yantai facility is sited was conducted in 2009. The plot was previously barren village collective land used by about 75 villagers to grow fruit trees, who derived a small percentage of their overall household income from fruit trees - hence land acquisition has had limited impact on their income levels. Cash compensation at RMB 25,000/mu was paid to affected persons for acquired land. Original land acquisition for the Yangwu site (60mu, collective village land) was conducted in 2009 which economically impacted 232 persons who previously grew vegetables on the plot. Affected persons received a compensation of RMB 40,000/mu. Income from vegetable farms made up a small percentage of their overall household income which was mainly derived from non-agricultural work and growing fruit trees.
At the Hongze site, acquisition of 100mu village collective land in 2009 economically affected 18 villagers who received RMB 50,000/mu compensation. Compared to the pre-land-acquisition annual per capita net income of RMB 7,300, affected persons have seen a general increase in income levels from working at companies in the industrial zone. The Yangxian facility involved acquisition of a 67mu village collective land plot in 2011 which economically displaced 610 persons from the Donglian village. Affected persons received RMB 50,000/mu in compensation. The Company has confirmed through interviews with affected persons and local Government representatives, that compensation funds have reached the intended recipients, and that there are no known concerns about the land acquisition processes. Local Government land acquisition directives reference the Land Management Law of China and local land market values in setting compensation levels. There are programs in place to help affected persons to develop non-agricultural livelihoods and some villagers have used compensation funds to start small businesses.
Based on the above information, IFC concludes that the reported outcomes of land acquisition undertaken by the municipal and county governments are consistent with the objectives and requirements of IFC’s Performance Standard 5.
