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Environmental & Social Review Summary
Project Number
31181
Company Name
JIANGXI JINYUAN AGRICULTURE DEVELOPMENT CO., LTD.
Date ESRS Disclosed
Sep 9, 2011
Country
China
Region
East Asia and the Pacific
Last Updated Date
Nov 30, 2016
Environmental Category
B - Limited
Status
Completed
Previous Events
Approved : Nov 29, 2011
Signed : Dec 15, 2011
Invested : Feb 7, 2012
Sector
Fruits and Vegetables
Industry
Agribusiness and Forestry
Department
Regional Industry - MAS Asia & Pac
Project Description
JinYuan is a major manufacturer of processed organic fruits, vegetables, and rice in China whose products are sold in export and domestic markets. The Company’s existing processing plant is located in Wanzai County, Yi Chun City, Jiangxi Province. Organic agricultural production in Wanzai County started around 1999 before the Company came into the area in 2004. This proposed Project consists of a greenfield processing and cold storage facilities in Tanggu County at about 100km away from Wanzai. JinYuan currently works locally with a number of third party organic growers, township organic procurement companies (typically affiliated with local governments), and grower cooperatives. It is continually developing procurement relationships with other growers in Tonggu and nearby countries to expand its organic farm base. IFC has been approached to provide loan and equity financing for the Project.
Overview of IFC's Scope of Review
The scope of review of Jiangxi JinYuan Agriculture Development Co., Ltd (“JinYuan” or “the Company”) included the assessment of the Company’s environmental and social (E&S) capacity to provide oversight and monitor compliance with IFC’s Performance Standards as well as national environmental, social and occupational health and safety (OHS) regulatory requirements in the People’s Republic of China. The review relied on documents made available by JinYuan and on interviews conducted by IFC during visits to the Company’s processing facility as well as farm operations in Wanzai and Tanggu Counties, Yi Chun City, Jiangxi Province, China. IFC met with JinYuan representatives from the management, human resource, environmental, and farm production teams. IFC also visited a number of local rural townships where the organic farming operations of the Company and of third parties, such as farmer cooperatives and township agricultural procurement companies, were located.
E & S Project Categorization and Applicable Standard
While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:
PS1: Social and Environmental Assessment and Management Systems
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement
PS4: Community Health, Safety and Security
PS5: Land Acquisition and Involuntary Resettlement
PS6: Biodiversity Conservation and Natural Resource Management
The population of Jiangxi is predominantly Han-Chinese, the mainstream ethnic group in China. IFC concludes that this Project does not trigger PS7: Indigenous Peoples. The appraisal found no evidence of the presence or impact on issues associated with PS8: Cultural Heritage.
PS1: Social and Environmental Assessment and Management Systems
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement
PS4: Community Health, Safety and Security
PS5: Land Acquisition and Involuntary Resettlement
PS6: Biodiversity Conservation and Natural Resource Management
The population of Jiangxi is predominantly Han-Chinese, the mainstream ethnic group in China. IFC concludes that this Project does not trigger PS7: Indigenous Peoples. The appraisal found no evidence of the presence or impact on issues associated with PS8: Cultural Heritage.
This is a Category B project according to IFC’s Environmental and Social Review Procedures. The Project will result in a limited number of environmental and social (E&S) impacts which can be avoided or mitigated by adhering to generally recognized performance standards, procedures, guidelines or design criteria. Key environmental, health and safety, human resources and social issues that were reviewed included: environmental and social management system (ESMS); contractor and supply chain risk assessment and management; community engagement; labor and working conditions; occupational health and safety; water and energy use and efficiency; greenhouse gas emissions; air emissions, and water and solid waste management; community health and safety; land acquisition; and biodiversity preservation. These issues are discussed in more detail in the following sections.
Environmental and Social Mitigation Measures
PS1: Social and Environmental Assessment and Management System
Jiangxi JinYuan Agriculture Development Co., Ltd (“JinYuan” or “the Company”) completed an Environmental Impact Assessment (EIA) study in July 2008 for its current facility in Wanzai County, Jiangxi. The EIA for the Wanzai facility was completed after the facility came into operation, and its scope did not cover the construction phase of the facility.
The proposed Tonggu facility is currently at an early development stage and an EIA has not been commissioned yet. As per regulatory requirements, the Company will ensure that this is completed and approved before the start of any construction activities, its scope covers the construction and operational phase, and that all EIA recommendations spelled out in the E&S Management Plan are duly fulfilled in accordance with the License’s Terms and Conditions.
The Company’s operations are third-party certified against a number of national and international food safety and quality assurance standards, which form the basis of the Company’s environmental and social management system (ESMS), namely:
i) “Hazard Analysis and Critical Control Point” (HACCP) food safety management certification – attained in 2006 and audited against General Principles CAC/RCP 1-1969 Rev.4-2003 by the China Quality Certification Centre (CQC). The current certificate is valid until March 2012; certificate number CQCC09H10572R1M/3600;
ii) British Retail Consortium (BRC) global auditing standard for suppliers of food products – first certified in 2010, last audited by SGS in April 2011 and with a validity date of May 2012;
iii) Good Manufacturing Practice (GMP) standard with a focus on food processing. The Company achieved GMP certification in 2010. SGS performed the audit and the certificate is valid until March 2013;
iv) ISO22000:2005 Food safety management certification – first attained in 2010, audited by SGS and valid until March 2013;
v) Kosher certified - audited by Star-K and valid until June 2012.
vi) Organic Certifications:
- U.S. Department of Agriculture (USDA) National Organic Program (NOP) Certification – attained in 2006; certificate number 1367CN0900z1ec (US); certified according to USDA NOP Final Rule 7 CFR Part 205. The most recent audit was conducted in October 2010 by the Certification Body (CB) Ecocert S.A. – China and the next audit is planned for September 2011.
- European Union Certificate of Conformity for E.U. Third Country Organic Products – attained in 2006; certificate number 1367CN0900z1ec; certified to Article 29 (1) of Regulation (EC) No 834/2007. The most recent audit was conducted in October 2010 by Ecocert S.A. – China and the next audit is planned for September 2011.
- Japanese Agricultural Standard of Organic Agricultural Products (JAS) – attained in 2006 and certified by Ecocert-QAI Japan Ltd., with the most recent audit conducted in October 2010 and the next audit planned for September 2011; certificate number 1367CN0800zle (JP).
- Chinese National Organic Product Standards GB/T19630.1-2005, GB/T19630.2-2005, GB/T19630.3-2005, and GB/T19630.4-2005 applicable to food production and processing; the most recent audit conducted in July 2009 by Ecocert S.A. - China and the next audit planned for September 2011; certificate number 1367CN0940zle (GB).
The Company is planning to apply for the BCS Oko-Garantie Organic Standard (Germany) in 2011, and has plans to apply for EUREGAP certification in the near future. A number of its employees have attended GAP training sessions and the Company states that while it is not currently GAP-certified, workers have already incorporated key GAP principles from their training into their farm operations.
IFC reviewed JinYuan’s key quality assurance system documents related to organic production and food safety management. The food safety management documents are part of a three-tiered document control system developed according to HACCP requirements:
– the first tier consists of the Company’s Food Safety and Quality Manual adopted in September 2009 which describes broad principles, targets, roles, responsibilities and reporting relationships of key personnel;
- the second tier are food safety policy and procedural documents which describe general requirements and procedures in relation to key work processes; and
- the third tier are standard operating procedures (SOP) and data recording templates. SOPs contain specific instructions for workers as to how they need to carry out specific tasks, while data recording templates define what operational information and data needs to be recorded and retained.
A matrix table provided by JinYuan maps each department to a list of 33 key tasks and work processes (e.g. response in case of product recall, data analysis, etc) as per the requirements of ISO22000 and BRC, specifying which department(s) are mainly or secondarily responsible for each task. Farm Production, Quality Control, Facility and Power; and Human Resources (HR) are the key departments tasked with E&S related responsibilities. Senior members of management sit on a food safety committee to exercise management oversight.
Within Farm Production, the head of the department reports to a Deputy General Manager at the Company. Three deputy managers in that department (Procurement; Crop Production; and Management Systems) report to the department head. The Crop Production Deputy Manager is responsible for day to day management of the Company’s various farm production bases.
There are regular (weekly) operational meetings at management, facility and departmental levels to review performance issues in the previous week and agree on work plans for the following week. Summary performance reports are prepared and submitted to senior management. The Company provided IFC with a list of key performance targets and indicators (KPIs) which are applied to each key department (e.g. Quality Control Department – 100% document and data record control achieved; ≤ 1% inspection mistakes). The list does not include the Farm Production Department – to address this, the Company will develop appropriate KPIs for management endorsement and put them into implementation. Refer to the E&S action plan (ESAP) for details.
Using its KPI and controlled documents as a basis, the Company conducts regular monitoring of its operational performance with a focus on food safety. At present, the Facility and Power Department does not monitor boiler air emission (e.g. SO2, NOX) and waste water discharge performance data (e.g. BOD, COD) and focuses on equipment maintenance and power provisioning. The Company will ensure that this department establishes a regular monitoring program in the future – refer to PS3 for details.
The Company provided a detailed training plan and manual to IFC for review. Training is provided to employees to ensure their operational competence, with a focus on system compliance, such as requirements of GMP, critical control point and hazard identification, industrial hygiene, and safety. The 2010 training plan describes training for production line workers and managers on topics such as fire safety and food-safety related laws and regulations. Each department submits a semi-annual training request to the General Management Department which evaluates and approves the requests and organizes training in concert with the HR department. Records of each worker’s training attendance are kept and linked to subsequent performance evaluation processes.
Organic operations of JinYuan’s Farm Production Department are conducted according to the Company’s “Organic Agricultural Production Process Manual” which came into effect in August 2008. Similar to the Company’s three-tiered HACCP structure, this manual is supported by policies and SOPs which spell out requirements for specific tasks (e.g. setting up buffer zones around the boundaries of organic farms) to be carried out by responsible staff (e.g. the data officer is responsible for recording and tracking product bar code numbers; at each farm, the site officer monitors pests and weed growth, and reports regularly to the farm manager and Farm Production Department Manager, who will selecting the appropriate means of pest control for site application). The “Product Traceability Identification” SOP and HACCP procedural documents describe a coding system by which the Company traces a product batch to its farm origin.
In terms of organic farm selection and compliance monitoring, the Company implements a set of procedures as follows:
- Starting with site selection: potential organic farm bases are evaluated against a number of established criteria, such as i) whether the natural landscape of the site provides natural barriers to minimize cross-contamination and to guard against flooding and other natural disasters; ii) commitment of the local counterparty to organic production principles; iii) soil and water conditions; etc.
- Once a site fulfills preliminary criteria, water (heavy metal content) / soil / residual chemical tests are conducted by external laboratories. Once satisfactory test results and fulfillment of organic requirements are confirmed, the site is selected for organic / organic conversion, and a procurement contract is agreed with the counterparty.
- The Company then assigns a member of its team of 10 farm inspectors to start regular monitoring and spot-checking of the site. Given the large number and scattered nature of farms, company inspectors cannot physically inspect all farms. Therefore, they adopt a sampling approach and also work closely with field extension agents from the country government, township organic procurement companies, or farmer organic cooperatives which supply the Company. These procurement partners in turn assign local inspectors (including a team of 20 inspectors from the Wanzai County Government organic monitoring unit who cover the 9 organic townships) for each key growing area to undertake weekly monitoring. Before the end of each Friday, JinYuan requires that local procurement partners develop inspection plans for the next week.
- Before final procurement at harvest, the Company arranges for water and soil tests at supplier farms, satisfactory results of which are required before procurement is finalized. Overseas buyers of the Company’s products also require these test results.
- To prevent chemical fertilizers from entering production areas, county and township Governments set up road blocks and inspection points, and some townships have only one access road to ensure access control. Controlled documents define steps taken to prevent cross-contamination e.g. trucks transporting products or seeds can only take certain routes to avoid contact with contaminants, and cannot stop at certain locations to fill up on gasoline, etc. Every major location within the county are inspected at least once a month, sometimes weekly.
- Regular product and packaging tests are conducted at the in-house laboratory for levels of E.Coli, Coliform, and Yeast; product samples are also tested by the Jiangxi Entry-Exit Inspection and Quarantine Bureau for levels of Salmonella, nitrite, and Coliform; and by the testing company Sino Analytica (Accredited to the International Standard ISO 17025 with international accreditations--UKAS & CNAS) for levels of Aerobic Colony Count, S.Aureus, Salmonella, Coliform, and E.Coli, and pesticides. There are about 45 test sample collection points throughout the various JinYuan-managed and third party farms.
- Genetically Modified Organisms - The key means by which JinYuan ensures no usage of genetically modified organisms (GMO) in its supply chain is through buying only non-GMO seed varieties from suppliers who provide guarantee their non-GMO status. The Company’s HACCP procedural documents describe means by which the Company limits supply chain exposure to GMOs.
- External certification bodies (CB) confirmed to IFC that they have been working with JinYuan and/or with the Wanzai county and township governments for several years to certify organic and organic-in-conversion farms. Certification work related to third-party farms are mainly based on smallholder group certification schemes which rely on internal control systems (ICS) adopted by grower groups as the key compliance assurance mechanism. In terms of external monitoring, the CB would risk-categorize farms and sample some of them during site visits either randomly or through stratified samples depending on the risk profile of each farm. The administrative village is the basic sampling unit, and GPS and GIS tools are used to facilitate auditing work.
- Accreditation bodies (e.g. USDA-NOP, MAFF-JAS) annually inspect document trails of the CB, and conduct site visits from time to time to verify that the work of the CB is consistent with accreditation requirements e.g. organic farms in Wanzai County have been visited twice in the past 5 years by each of two accreditation bodies.
- Company and local inspectors check site vicinities for i) unauthorized materials, such as chemical inputs, discarded solid wastes; ii) evidence of illegal hunting; iii) signs of soil erosion which would indicate production practices inconsistent with organic requirements; iv) for polluting enterprises and animal grazing activities within a 10km radius of a farm. If any such signs are detected, inspectors would immediately report them to the Company and to the local county organic management office.
The Company stated that since it started operations in 2004, there have been no known cases of organic non-compliance at farms. Interviewed cooperative and government representatives mentioned some incidents of non-compliances (e.g. farmers secretly using chemicals to boost crop yield), and opined that in general the process of getting everyone to strictly observe organic rules has met with various challenges along the way and has taken a number of years to effectively materialize.
Based on the above findings and the existence of third party certification, IFC concludes that there is an adequate organic quality assurance process in place at JinYuan to minimize the likelihood of organic and food safety non-compliances. However, from a risk management perspective, it will be important for the Company to further refine its information collection and reporting system. To this end, JinYuan will provide IFC on a semi-annual basis, a summary report together with relevant statistics, on its supply chain organic and food safety compliance. This will include information, such as a summary of farm production location and acreage statistics, an analysis of key monitoring findings, updates on third party organic certification/accreditation inspection processes, and soil/water test results. Where the report calls for improvement in certain areas, the Company will develop corrective action plans to be duly implemented. Refer to the ESAP for details.
Supply Chain:
JinYuan has about 53,000mu (3,600 hectares) of organic farms under contract – of which 31,000mu are located in Wanzai county; and 22,000mu are in Tonggu county. This involves about 18,000 local farmers participating either as growers or as farm laborers working at JinYuan or third party farms.
Production bases can be categorized into four types:
i) A number of company-operated farms;
ii) Third-party farms operated under several township vegetable procurement companies;
iii) Third-party farms operated under several farmer cooperatives; and
iv) A number of larger third-party growers who have leased land from other smallholders.
JinYuan signs open-ended procurement contracts with third-party growers, cooperatives and township companies, in which the crop production area, procurement unit prices and organic growing requirements are specified. In the planting season, the Company procures organic farm inputs (e.g. organic fertilizer, seeds, bio-pesticides) in bulk and provides these to third party farms as an interest-free loan-in-kind, deducting the costs of these inputs from the final procurement payment at harvest. Prices and technical information of the inputs are advertised to third-party collaborators during the planting season to achieve transparency.
The Company also provides significant amounts of monetary loans to farmer cooperatives and township companies to help them establish organic farms, to be operated according to Company requirements. These loans typically have a repayment period of 3 years and carry an interest cost. The field extension team of the Company provides technical support (e.g. on pest control) to third party farms through frequent field visits and learning events at its demonstration plots attended by farmers.
While JinYuan does not have shareholdings in third-party farms, IFC’s review finds that the Company is the only buyer of organic products in the Project area, and suppliers are almost exclusively selling to the Company (except in the case of rice whereby farmers may sell to non-organic buyers if they have to). Farmers typically derive one third of their household income from organic production, which reflects a degree of reliance on the Company for a significant part of their household income.
The Company also relies strongly on third-party farms to deliver the raw vegetables, fruits and rice of a very high quality which meets organic requirements. The high quality standards that characterize organic agricultural production place the Company and its third party suppliers into a mutually dependent relationship. Through its relationships with third-party farms, the Company has a reasonable degree of commercial leverage on them.
The Company currently tracks two E&S related performance aspects of its third-party farms: i) whether there are any signs of the use of child labor; and ii) water, soil, and residual chemical test results as per organic certification requirements.
Based on the above information, IFC concludes that the Company’s third-party vegetable, fruit, and rice farms and suppliers are a crucial component of its business operations and are considered to be its associated facilities. As such, JinYuan is committed to expanding/refining the metrics which it uses to monitor the E&S performance of third party farms, to include other appropriate metrics as per performance standard requirements. Results of regular monitoring against these metrics will be summarized into semi-annual reports to be provided to IFC (this can be integrated into the semi-annual organic and food safety compliance reports discussed earlier in this section). Where monitoring results indicate needed improvements, the Company will develop corrective action plans and duly implement them. Refer to the ESAP for details.
PS2: Labor and Working Conditions
At the Wanzai facility, JinYuan employs about 370 permanent workers, and up to 200 seasonal/temporary workers including some who work for a total of about 15 days during the summer high season. In the past year, about 600 laborers worked at Company and third party farms. Female employees make up about 80% of the workforce. Workers are mostly aged 20-45 and up to 95% of production staff is from local counties and townships. All workers are directly hired by JinYuan. The Company states that they have provided Government-mandated social insurance coverage for all permanent workers. Remuneration is competitively determined by referencing market rates. Some workers receive a fixed wage while others are paid according to the weight (kg) of products (e.g. beans) they handle.
Terms of employment (e.g. working hours, overtime payment) are described in the Company’s human resource policies and employee manual and are formalized into employment contracts signed by staff. A sample employment contract has language stating that terms abide by the National Labor Contract Law. The Company provided IFC with a matrix listing the roles and responsibilities of each key position with a list of corresponding job descriptions.
Housing on-site is provided for about 70 non-local staff at the Wanzai facility, and the visited dormitory was in reasonable and clean conditions. The Wanzai facility visited by IFC was well maintained overall and a tour confirmed that working conditions were reasonable (e.g. adequate lighting).
In 2010, the Company had an overall turnover rate in the 5-7% range, which is lower compared to other companies in the Wanzai economic development park. The Company has not retrenched or made redundant any workers in the past few years, and does not expect to do so in the near future. In addition, there have been no fatalities or major occupational health and safety incidents since it started operating in Wanzai. Employee health check-up results have not revealed any trends of chronic work-related health problems.
In relation to a grievance mechanism, workers communicate with management through their production line supervisors. They can also approach the HR department in person or by writing a letter, or channel concerns through the union. Daily meetings at the production line level are held to discuss work related issues and for staff to provide feedback to one another and to supervisors. There have been no labor related incidents at the Company since it started operations in Wanzai.
There is a labor union at the Company with all facility workers enrolled as its members. The union performs the following roles: a) conveys employee views to management (for instance – quality of food at the Company cafeteria) and vice versa; and b) organizes extra-curricular activities for staff and arranges hardship assistance to workers in need.
Commissioned by an overseas buyer of JinYuan, a third party organization conducts annual audits of the Company’s labor practices. Results from the 2010 audit indicated the following key findings: i) no instances of workplace abuse or the use of child and forced labor were found; ii) labor contracts and performance-related disciplinary practices were in compliance with applicable labor laws; iii) freedom of association was observed, and interviewed workers reported that they were treated equally and with respect; iv) Employees at Wanzai received coverage corresponding to three components of mandatory social insurance (retirement; illness or injury; unemployment), but no coverage under the other two (disability and occupational disease insurance; child-bearing insurance) ; and v) randomly interviewed workers each performed 40 hours of overtime in July 2010, exceeding the 36 hours per month limit allowed under the national labor law.
The Company will, as stipulated in the third party audit, provide evidence that compliance gaps described under items iv) and v) above have been addressed. Refer to the ESAP for details.
PS3: Pollution Prevention and Abatement
The Wanzai facility produced about 2.5 million m3 of wastewater in 2010, mainly consisting of sanitary wastes and water used for washing products and cleaning equipment. There is no on-site treatment plant, and wastewater enters the Wanzai economic development park’s waste water treatment plant (WWTP) before being discharged into the nearby Jin Jiang River.
From time to time the local Environmental Protection Bureau (EPB) would conduct unannounced spot-checks on waste water discharge at the Wanzai facility, and be in touch with the Company should discharge levels exceed allowed limits. The Company has not been regularly tracking waste water discharge performance data (e.g. BOD level) at the point of discharge, or regularly requesting post-treatment performance data from the local EPB or Park authorities to verify compliance with national limits. During appraisal, the Company provided recent monitoring results from August 2011 by the Yi Chun City Environmental Monitoring Unit. These indicated that BOD, COD, pH, and suspended solid levels at the post-treatment discharge point complied with national and World Bank Group (WBG) Environmental Health and Safety (EHS) guideline limits.
Two steam boilers are in operation at the Wanzai facility. In 2010, about 14,000 tons of coal was consumed as fuel for the boiler which uses a granite-based scrubber as the means of treatment. As is the case with waste water, the Company has not been regularly tracking air emission performance data (e.g. SO2). Results from stack emission monitoring conducted in August 2011 indicated that Particulate Matter and SO2 levels complied with national and WBG EHS guideline limits.
The Company will regularly track air emission and waste water discharge levels and provide annual monitoring data to IFC. Refer to the ESAP for details.
The Tonggu facility is located next to a major river within the Tonggu County – Xiu River, a tributary of the Ding Jiang River. The Company has indicated its commitment to install an on-site WWTP at the facility to ensure that any waste water discharged into the river will be treated to consistently fall under national and WBG effluent limits. IFC will require evidence from the Company of a functional on-site WWTP at Tonggu, as part of the upcoming EIA process. Refer to the ESAP for details.
In terms of solid waste management, some of the 2,800 tons per year of coal cinder generated at the boilers is sold to brick and tile factories in the province, with the rest provided to local farmers as raw materials for village road paving. The Company states that up to 95% of paper cartons and plastic bags used at the Wanzai facility are re-used. Each month about 15 tons of leaves, twigs and other discarded plant biomass are collected by the local EPB for land-filling. At the farms, crop biomass is reused as green fertilizer and ground cover for better soil retention.
Total 2010 Greenhouse Gas (GHG) emissions from JinYuan direct operations are estimated at 41,000 tons CO2-equivalent, arising mainly from grid electricity usage, coal consumption and the use of industrial cooling units and refrigerators. In the same year, the Company consumed 22.7 MWh of grid-supplied electricity (mainly to power the cooling towers for cold storage rooms) and 2.9M m3 of water. Water comes from the county water supply company.
Energy saving initiatives by the Company include: i) running cooling units in the evening; ii) regular equipment maintenance to ensure optimal conditions; and iii) consolidating products into one instead of several cold storage rooms to save electricity. The Company feels that it has already explored feasible options for energy saving, and given that more than 80% of the electricity is consumed by cooling towers, there is little room for further savings as they use state of the art equipment from Germany.
The water consumption index value (m3 water usage / ton processed product) of the Company, calculated based on data from the Company, appears significantly higher than the benchmark value for frozen vegetables (Table 3, WBG EHS Guidelines for Food and Beverage Processing). There is currently one water mains meter at the facility and no sub-meters are installed at each water usage sub-areas, such as processing buildings and the cooling unit areas. Without sub-meters, it will be difficult to pinpoint major areas of usage and identify opportunities for reduction. To address this, the Company will install water sub-meters, and develop feasible water usage reduction options through a water efficiency audit.
PS4: Community Health, Safety and Security
Both the Wanzai and the proposed Tonggu facilities are located in peri-urban settings. The Wanzai facility is located in the county economic development park with a number of residential houses nearby, and the proposed Tonggu facility will be located close to a local village.
The Company states that there have been no complaints or issues raised by local communities regarding its operations in Wanzai – community liaisons are handled by the Park authorities who maintain regular contact with neighboring residents.
An unarmed security workforce of 6 guards works at the Wanzai facility. There have been no security incidents such as any thefts or confrontations since operations started. JinYuan has an emergency preparedness and response plan as part of its controlled document system to handle fire, food safety and environmental emergencies.
The key hazardous materials used at the Wanzai facility are lubricants for coolers (annual usage of about 1 ton) and disinfectant (about 1.2 ton per year). There are clear procedures on their management and storage. A third party company collects unused lubricants from the facility.
The Company has established life and fire safety (L&FS) procedures at its Wanzai facility and the relevant fire service inspection certificate is in place. Fire-fighting equipment, including smoke detectors, extinguishers and fire reel hose as well as proper signage was installed, and a written record of a fire drill conducted in 2010 was provided to IFC. The Company will provide to IFC a copy of the relevant fire service certificate and records of inspection findings provided by the local fire authorities for the Tonggu facility, and ensure that this is available on site for review.
The in-house food safety laboratory is co-located in the dormitory building next to staff quarters and the cafeteria. When IFC visited, the laboratory was left unattended with the front door open, with pools of water on the floor, and with an open lunch box placed next to testing equipment. The Company acknowledges the need to improve management of the laboratory, and has set aside a dedicated room in the main office building to establish a new laboratory in the near future with expanded testing capabilities (e.g. for salmonella) so that it can save the costs of sending samples to external laboratories. The Company is also considering expanding the laboratory in future so that in addition to testing its own samples, it can also offer commercial testing services for other companies as an additional source of income.
The Company will commission a qualified third party to evaluate the design and construction of the new laboratory to verify that its setup, staffing and operational procedures are consistent with national standards and a recognized international standard. Follow up annual external audits will also be required to confirm that operational practices are in compliance. Should the Company decide to also offer commercial testing services to other companies, before proceeding, it will obtain all necessary permits, and an audit by a qualified third party will be needed to verify that the laboratory is properly set up and managed for this purpose. Refer to the ESAP for details.
PS5: Land Acquisition and Involuntary Resettlement
JinYuan has leased about 5,200mu of land in six townships within Wanzai County to set up its six directly-managed organic farms. The land leases are willing-buyer-willing-seller transactions, are typically signed for a 3-5 year period, and involve very few village collective land plots so that two-thirds villager consent is not required. There have been no known issues of land related concerns to date.
Farmers from approximately 1,000 households, who used to farm these plots before leasing them to JinYuan, have subsequently become employed as farm laborers at JinYuan farms. The farmers receive a lease payment from the company, a wage as farm workers, and the fact that they do not need to work at the farms throughout the year means that they have more free time to seek other jobs or small business opportunities elsewhere to earn extra income. After working with JinYuan, farmers typically see an increase in net income of around RMB1,500 per person per year.
Land leasing goes through the following steps: i) The Company evaluates a plot of land against a number of suitability criteria such as water quality, soil conditions, previous experience of villagers in organic production, etc; ii) as part of this process it also conducts household interviews to understand the land related history and social dynamics of the village – if the investigation indicates concerns, the process is not pursued further; iii) if suitability criteria are considered to be met and no concerns are identified, the Company will approach the villager (use rights holder) to express interest and make an offer, at the same time informing the village committee of the potential transaction; iv) despite the fact that these land plots are not collective village land, villagers do come together to meet and discuss the decision to work with the Company or not; v) once there is an expression of interest from the use rights holder and broad consensus from the village to enter into the lease, detailed terms are discussed and agreed and the lease is finalized.
The Wanzai facility is situated on a 280mu land plot as part of the Wanzai County Economic Development Park. This land plot previously belonged to two natural villages of the Shi Zi Bao Administrative Village, and was acquired by the County Government in 2003 for the purpose of setting up the Economic Park. The land acquisition did not involve physical relocation of villagers, and economically displaced about 300 persons. Land was previously used by villagers for paddy rice and vegetable production. Cash compensation at a level of RMB8,500/mu was made to affected villagers by the County Government which included compensation for the land itself as well as the crops grown on the land. Affected persons interviewed by IFC confirmed that all compensation funds have been delivered to affected persons, and that there were no concerns among villagers throughout the process. Most working age members of the affected families have subsequently become employed at JinYuan, and have seen an increase of household income to the current average level of about RMB5,000-6,000 per person per year. With the increased income, villagers have built new houses for themselves.
The proposed Tonggu facility is located at a plot with an area of about 220mu. To date, about 110mu has already been acquired by the County Government – this process started in 2008. According to the local Government, about 40mu of the 110mu plot consisted of collective land belonging to a local village whose members were using it to grow fruit trees, groundnuts and paddy rice, but those activities only made up a small proportion of total household income; while use rights for the other 60mu were held by the county forestry bureau which used the land to operate a nursery for tree seedlings. Residents interviewed by IFC indicated that the 2008 land acquisition process had proceeded without any concerns and did not involve physical resettlement. Economically affected villagers have received in full a cash compensation of RMB23,000/mu, a level set by the County Government according to the prevailing market rate for land and crops in 2008.
According to the local Government and residents, the other 110mu consisted mainly of land held by the county forestry bureau as a nursery, and a smaller portion is farm land held by a local village. However, there is no information at present on details such as the exact holdings, number of villagers affected, proposed compensation levels, land acquisition directive document, etc. This is because the land acquisition is currently at a preliminary stage and affected persons have not been informed yet.
From the above information, IFC concludes that the Project’s land acquisition activities to date are consistent with PS5 requirements. For the 110mu to-be-acquired plot in Tonggu, the Company will provide IFC with relevant details, and will ensure that the acquisition process fulfills PS5 requirements. Refer to the ESAP for details.
PS6: Biodiversity Conservation and Natural Resource Management
The Company states that its organic farming activities contribute positively to the local ecology by improving local water quality, soil fertility and its regenerative capacity; increasing the availability of green manure, and improving the ecosystem balance by refraining from hunting activities thereby harnessing the role of natural predators in pest control. These improvements are also partly attributable to efforts by the Government and local communities to promote forest preservation and bamboo development along river banks since the late 1990’s.
The Company cites several signs of improved ecological conditions: i) the abundance of snakes in mountain areas due to more toads and loaches to feed them; ii) less compaction of soil due to stoppage of chemical use and to crop rotation practices mandated by organic agriculture; iii) that Wanzai and nearby counties seldom suffer from droughts or flooding events, attributable to the regulating ecosystem services provided by well preserved forests and watershed in harmony with organic agricultural practices; iv) clearer water in the river, more fish and cleaner intestines of local fish reflecting water with a much lower level of chemical pollutants. These observations were shared by locals interviewed by IFC.
There were no known areas of natural or critical habitat at or near JinYuan or third party farms, which are not located near major national or provincial conservation areas. IFC found no signs of the introduction of invasive alien species due to Company operations.
Jiangxi JinYuan Agriculture Development Co., Ltd (“JinYuan” or “the Company”) completed an Environmental Impact Assessment (EIA) study in July 2008 for its current facility in Wanzai County, Jiangxi. The EIA for the Wanzai facility was completed after the facility came into operation, and its scope did not cover the construction phase of the facility.
The proposed Tonggu facility is currently at an early development stage and an EIA has not been commissioned yet. As per regulatory requirements, the Company will ensure that this is completed and approved before the start of any construction activities, its scope covers the construction and operational phase, and that all EIA recommendations spelled out in the E&S Management Plan are duly fulfilled in accordance with the License’s Terms and Conditions.
The Company’s operations are third-party certified against a number of national and international food safety and quality assurance standards, which form the basis of the Company’s environmental and social management system (ESMS), namely:
i) “Hazard Analysis and Critical Control Point” (HACCP) food safety management certification – attained in 2006 and audited against General Principles CAC/RCP 1-1969 Rev.4-2003 by the China Quality Certification Centre (CQC). The current certificate is valid until March 2012; certificate number CQCC09H10572R1M/3600;
ii) British Retail Consortium (BRC) global auditing standard for suppliers of food products – first certified in 2010, last audited by SGS in April 2011 and with a validity date of May 2012;
iii) Good Manufacturing Practice (GMP) standard with a focus on food processing. The Company achieved GMP certification in 2010. SGS performed the audit and the certificate is valid until March 2013;
iv) ISO22000:2005 Food safety management certification – first attained in 2010, audited by SGS and valid until March 2013;
v) Kosher certified - audited by Star-K and valid until June 2012.
vi) Organic Certifications:
- U.S. Department of Agriculture (USDA) National Organic Program (NOP) Certification – attained in 2006; certificate number 1367CN0900z1ec (US); certified according to USDA NOP Final Rule 7 CFR Part 205. The most recent audit was conducted in October 2010 by the Certification Body (CB) Ecocert S.A. – China and the next audit is planned for September 2011.
- European Union Certificate of Conformity for E.U. Third Country Organic Products – attained in 2006; certificate number 1367CN0900z1ec; certified to Article 29 (1) of Regulation (EC) No 834/2007. The most recent audit was conducted in October 2010 by Ecocert S.A. – China and the next audit is planned for September 2011.
- Japanese Agricultural Standard of Organic Agricultural Products (JAS) – attained in 2006 and certified by Ecocert-QAI Japan Ltd., with the most recent audit conducted in October 2010 and the next audit planned for September 2011; certificate number 1367CN0800zle (JP).
- Chinese National Organic Product Standards GB/T19630.1-2005, GB/T19630.2-2005, GB/T19630.3-2005, and GB/T19630.4-2005 applicable to food production and processing; the most recent audit conducted in July 2009 by Ecocert S.A. - China and the next audit planned for September 2011; certificate number 1367CN0940zle (GB).
The Company is planning to apply for the BCS Oko-Garantie Organic Standard (Germany) in 2011, and has plans to apply for EUREGAP certification in the near future. A number of its employees have attended GAP training sessions and the Company states that while it is not currently GAP-certified, workers have already incorporated key GAP principles from their training into their farm operations.
IFC reviewed JinYuan’s key quality assurance system documents related to organic production and food safety management. The food safety management documents are part of a three-tiered document control system developed according to HACCP requirements:
– the first tier consists of the Company’s Food Safety and Quality Manual adopted in September 2009 which describes broad principles, targets, roles, responsibilities and reporting relationships of key personnel;
- the second tier are food safety policy and procedural documents which describe general requirements and procedures in relation to key work processes; and
- the third tier are standard operating procedures (SOP) and data recording templates. SOPs contain specific instructions for workers as to how they need to carry out specific tasks, while data recording templates define what operational information and data needs to be recorded and retained.
A matrix table provided by JinYuan maps each department to a list of 33 key tasks and work processes (e.g. response in case of product recall, data analysis, etc) as per the requirements of ISO22000 and BRC, specifying which department(s) are mainly or secondarily responsible for each task. Farm Production, Quality Control, Facility and Power; and Human Resources (HR) are the key departments tasked with E&S related responsibilities. Senior members of management sit on a food safety committee to exercise management oversight.
Within Farm Production, the head of the department reports to a Deputy General Manager at the Company. Three deputy managers in that department (Procurement; Crop Production; and Management Systems) report to the department head. The Crop Production Deputy Manager is responsible for day to day management of the Company’s various farm production bases.
There are regular (weekly) operational meetings at management, facility and departmental levels to review performance issues in the previous week and agree on work plans for the following week. Summary performance reports are prepared and submitted to senior management. The Company provided IFC with a list of key performance targets and indicators (KPIs) which are applied to each key department (e.g. Quality Control Department – 100% document and data record control achieved; ≤ 1% inspection mistakes). The list does not include the Farm Production Department – to address this, the Company will develop appropriate KPIs for management endorsement and put them into implementation. Refer to the E&S action plan (ESAP) for details.
Using its KPI and controlled documents as a basis, the Company conducts regular monitoring of its operational performance with a focus on food safety. At present, the Facility and Power Department does not monitor boiler air emission (e.g. SO2, NOX) and waste water discharge performance data (e.g. BOD, COD) and focuses on equipment maintenance and power provisioning. The Company will ensure that this department establishes a regular monitoring program in the future – refer to PS3 for details.
The Company provided a detailed training plan and manual to IFC for review. Training is provided to employees to ensure their operational competence, with a focus on system compliance, such as requirements of GMP, critical control point and hazard identification, industrial hygiene, and safety. The 2010 training plan describes training for production line workers and managers on topics such as fire safety and food-safety related laws and regulations. Each department submits a semi-annual training request to the General Management Department which evaluates and approves the requests and organizes training in concert with the HR department. Records of each worker’s training attendance are kept and linked to subsequent performance evaluation processes.
Organic operations of JinYuan’s Farm Production Department are conducted according to the Company’s “Organic Agricultural Production Process Manual” which came into effect in August 2008. Similar to the Company’s three-tiered HACCP structure, this manual is supported by policies and SOPs which spell out requirements for specific tasks (e.g. setting up buffer zones around the boundaries of organic farms) to be carried out by responsible staff (e.g. the data officer is responsible for recording and tracking product bar code numbers; at each farm, the site officer monitors pests and weed growth, and reports regularly to the farm manager and Farm Production Department Manager, who will selecting the appropriate means of pest control for site application). The “Product Traceability Identification” SOP and HACCP procedural documents describe a coding system by which the Company traces a product batch to its farm origin.
In terms of organic farm selection and compliance monitoring, the Company implements a set of procedures as follows:
- Starting with site selection: potential organic farm bases are evaluated against a number of established criteria, such as i) whether the natural landscape of the site provides natural barriers to minimize cross-contamination and to guard against flooding and other natural disasters; ii) commitment of the local counterparty to organic production principles; iii) soil and water conditions; etc.
- Once a site fulfills preliminary criteria, water (heavy metal content) / soil / residual chemical tests are conducted by external laboratories. Once satisfactory test results and fulfillment of organic requirements are confirmed, the site is selected for organic / organic conversion, and a procurement contract is agreed with the counterparty.
- The Company then assigns a member of its team of 10 farm inspectors to start regular monitoring and spot-checking of the site. Given the large number and scattered nature of farms, company inspectors cannot physically inspect all farms. Therefore, they adopt a sampling approach and also work closely with field extension agents from the country government, township organic procurement companies, or farmer organic cooperatives which supply the Company. These procurement partners in turn assign local inspectors (including a team of 20 inspectors from the Wanzai County Government organic monitoring unit who cover the 9 organic townships) for each key growing area to undertake weekly monitoring. Before the end of each Friday, JinYuan requires that local procurement partners develop inspection plans for the next week.
- Before final procurement at harvest, the Company arranges for water and soil tests at supplier farms, satisfactory results of which are required before procurement is finalized. Overseas buyers of the Company’s products also require these test results.
- To prevent chemical fertilizers from entering production areas, county and township Governments set up road blocks and inspection points, and some townships have only one access road to ensure access control. Controlled documents define steps taken to prevent cross-contamination e.g. trucks transporting products or seeds can only take certain routes to avoid contact with contaminants, and cannot stop at certain locations to fill up on gasoline, etc. Every major location within the county are inspected at least once a month, sometimes weekly.
- Regular product and packaging tests are conducted at the in-house laboratory for levels of E.Coli, Coliform, and Yeast; product samples are also tested by the Jiangxi Entry-Exit Inspection and Quarantine Bureau for levels of Salmonella, nitrite, and Coliform; and by the testing company Sino Analytica (Accredited to the International Standard ISO 17025 with international accreditations--UKAS & CNAS) for levels of Aerobic Colony Count, S.Aureus, Salmonella, Coliform, and E.Coli, and pesticides. There are about 45 test sample collection points throughout the various JinYuan-managed and third party farms.
- Genetically Modified Organisms - The key means by which JinYuan ensures no usage of genetically modified organisms (GMO) in its supply chain is through buying only non-GMO seed varieties from suppliers who provide guarantee their non-GMO status. The Company’s HACCP procedural documents describe means by which the Company limits supply chain exposure to GMOs.
- External certification bodies (CB) confirmed to IFC that they have been working with JinYuan and/or with the Wanzai county and township governments for several years to certify organic and organic-in-conversion farms. Certification work related to third-party farms are mainly based on smallholder group certification schemes which rely on internal control systems (ICS) adopted by grower groups as the key compliance assurance mechanism. In terms of external monitoring, the CB would risk-categorize farms and sample some of them during site visits either randomly or through stratified samples depending on the risk profile of each farm. The administrative village is the basic sampling unit, and GPS and GIS tools are used to facilitate auditing work.
- Accreditation bodies (e.g. USDA-NOP, MAFF-JAS) annually inspect document trails of the CB, and conduct site visits from time to time to verify that the work of the CB is consistent with accreditation requirements e.g. organic farms in Wanzai County have been visited twice in the past 5 years by each of two accreditation bodies.
- Company and local inspectors check site vicinities for i) unauthorized materials, such as chemical inputs, discarded solid wastes; ii) evidence of illegal hunting; iii) signs of soil erosion which would indicate production practices inconsistent with organic requirements; iv) for polluting enterprises and animal grazing activities within a 10km radius of a farm. If any such signs are detected, inspectors would immediately report them to the Company and to the local county organic management office.
The Company stated that since it started operations in 2004, there have been no known cases of organic non-compliance at farms. Interviewed cooperative and government representatives mentioned some incidents of non-compliances (e.g. farmers secretly using chemicals to boost crop yield), and opined that in general the process of getting everyone to strictly observe organic rules has met with various challenges along the way and has taken a number of years to effectively materialize.
Based on the above findings and the existence of third party certification, IFC concludes that there is an adequate organic quality assurance process in place at JinYuan to minimize the likelihood of organic and food safety non-compliances. However, from a risk management perspective, it will be important for the Company to further refine its information collection and reporting system. To this end, JinYuan will provide IFC on a semi-annual basis, a summary report together with relevant statistics, on its supply chain organic and food safety compliance. This will include information, such as a summary of farm production location and acreage statistics, an analysis of key monitoring findings, updates on third party organic certification/accreditation inspection processes, and soil/water test results. Where the report calls for improvement in certain areas, the Company will develop corrective action plans to be duly implemented. Refer to the ESAP for details.
Supply Chain:
JinYuan has about 53,000mu (3,600 hectares) of organic farms under contract – of which 31,000mu are located in Wanzai county; and 22,000mu are in Tonggu county. This involves about 18,000 local farmers participating either as growers or as farm laborers working at JinYuan or third party farms.
Production bases can be categorized into four types:
i) A number of company-operated farms;
ii) Third-party farms operated under several township vegetable procurement companies;
iii) Third-party farms operated under several farmer cooperatives; and
iv) A number of larger third-party growers who have leased land from other smallholders.
JinYuan signs open-ended procurement contracts with third-party growers, cooperatives and township companies, in which the crop production area, procurement unit prices and organic growing requirements are specified. In the planting season, the Company procures organic farm inputs (e.g. organic fertilizer, seeds, bio-pesticides) in bulk and provides these to third party farms as an interest-free loan-in-kind, deducting the costs of these inputs from the final procurement payment at harvest. Prices and technical information of the inputs are advertised to third-party collaborators during the planting season to achieve transparency.
The Company also provides significant amounts of monetary loans to farmer cooperatives and township companies to help them establish organic farms, to be operated according to Company requirements. These loans typically have a repayment period of 3 years and carry an interest cost. The field extension team of the Company provides technical support (e.g. on pest control) to third party farms through frequent field visits and learning events at its demonstration plots attended by farmers.
While JinYuan does not have shareholdings in third-party farms, IFC’s review finds that the Company is the only buyer of organic products in the Project area, and suppliers are almost exclusively selling to the Company (except in the case of rice whereby farmers may sell to non-organic buyers if they have to). Farmers typically derive one third of their household income from organic production, which reflects a degree of reliance on the Company for a significant part of their household income.
The Company also relies strongly on third-party farms to deliver the raw vegetables, fruits and rice of a very high quality which meets organic requirements. The high quality standards that characterize organic agricultural production place the Company and its third party suppliers into a mutually dependent relationship. Through its relationships with third-party farms, the Company has a reasonable degree of commercial leverage on them.
The Company currently tracks two E&S related performance aspects of its third-party farms: i) whether there are any signs of the use of child labor; and ii) water, soil, and residual chemical test results as per organic certification requirements.
Based on the above information, IFC concludes that the Company’s third-party vegetable, fruit, and rice farms and suppliers are a crucial component of its business operations and are considered to be its associated facilities. As such, JinYuan is committed to expanding/refining the metrics which it uses to monitor the E&S performance of third party farms, to include other appropriate metrics as per performance standard requirements. Results of regular monitoring against these metrics will be summarized into semi-annual reports to be provided to IFC (this can be integrated into the semi-annual organic and food safety compliance reports discussed earlier in this section). Where monitoring results indicate needed improvements, the Company will develop corrective action plans and duly implement them. Refer to the ESAP for details.
PS2: Labor and Working Conditions
At the Wanzai facility, JinYuan employs about 370 permanent workers, and up to 200 seasonal/temporary workers including some who work for a total of about 15 days during the summer high season. In the past year, about 600 laborers worked at Company and third party farms. Female employees make up about 80% of the workforce. Workers are mostly aged 20-45 and up to 95% of production staff is from local counties and townships. All workers are directly hired by JinYuan. The Company states that they have provided Government-mandated social insurance coverage for all permanent workers. Remuneration is competitively determined by referencing market rates. Some workers receive a fixed wage while others are paid according to the weight (kg) of products (e.g. beans) they handle.
Terms of employment (e.g. working hours, overtime payment) are described in the Company’s human resource policies and employee manual and are formalized into employment contracts signed by staff. A sample employment contract has language stating that terms abide by the National Labor Contract Law. The Company provided IFC with a matrix listing the roles and responsibilities of each key position with a list of corresponding job descriptions.
Housing on-site is provided for about 70 non-local staff at the Wanzai facility, and the visited dormitory was in reasonable and clean conditions. The Wanzai facility visited by IFC was well maintained overall and a tour confirmed that working conditions were reasonable (e.g. adequate lighting).
In 2010, the Company had an overall turnover rate in the 5-7% range, which is lower compared to other companies in the Wanzai economic development park. The Company has not retrenched or made redundant any workers in the past few years, and does not expect to do so in the near future. In addition, there have been no fatalities or major occupational health and safety incidents since it started operating in Wanzai. Employee health check-up results have not revealed any trends of chronic work-related health problems.
In relation to a grievance mechanism, workers communicate with management through their production line supervisors. They can also approach the HR department in person or by writing a letter, or channel concerns through the union. Daily meetings at the production line level are held to discuss work related issues and for staff to provide feedback to one another and to supervisors. There have been no labor related incidents at the Company since it started operations in Wanzai.
There is a labor union at the Company with all facility workers enrolled as its members. The union performs the following roles: a) conveys employee views to management (for instance – quality of food at the Company cafeteria) and vice versa; and b) organizes extra-curricular activities for staff and arranges hardship assistance to workers in need.
Commissioned by an overseas buyer of JinYuan, a third party organization conducts annual audits of the Company’s labor practices. Results from the 2010 audit indicated the following key findings: i) no instances of workplace abuse or the use of child and forced labor were found; ii) labor contracts and performance-related disciplinary practices were in compliance with applicable labor laws; iii) freedom of association was observed, and interviewed workers reported that they were treated equally and with respect; iv) Employees at Wanzai received coverage corresponding to three components of mandatory social insurance (retirement; illness or injury; unemployment), but no coverage under the other two (disability and occupational disease insurance; child-bearing insurance) ; and v) randomly interviewed workers each performed 40 hours of overtime in July 2010, exceeding the 36 hours per month limit allowed under the national labor law.
The Company will, as stipulated in the third party audit, provide evidence that compliance gaps described under items iv) and v) above have been addressed. Refer to the ESAP for details.
PS3: Pollution Prevention and Abatement
The Wanzai facility produced about 2.5 million m3 of wastewater in 2010, mainly consisting of sanitary wastes and water used for washing products and cleaning equipment. There is no on-site treatment plant, and wastewater enters the Wanzai economic development park’s waste water treatment plant (WWTP) before being discharged into the nearby Jin Jiang River.
From time to time the local Environmental Protection Bureau (EPB) would conduct unannounced spot-checks on waste water discharge at the Wanzai facility, and be in touch with the Company should discharge levels exceed allowed limits. The Company has not been regularly tracking waste water discharge performance data (e.g. BOD level) at the point of discharge, or regularly requesting post-treatment performance data from the local EPB or Park authorities to verify compliance with national limits. During appraisal, the Company provided recent monitoring results from August 2011 by the Yi Chun City Environmental Monitoring Unit. These indicated that BOD, COD, pH, and suspended solid levels at the post-treatment discharge point complied with national and World Bank Group (WBG) Environmental Health and Safety (EHS) guideline limits.
Two steam boilers are in operation at the Wanzai facility. In 2010, about 14,000 tons of coal was consumed as fuel for the boiler which uses a granite-based scrubber as the means of treatment. As is the case with waste water, the Company has not been regularly tracking air emission performance data (e.g. SO2). Results from stack emission monitoring conducted in August 2011 indicated that Particulate Matter and SO2 levels complied with national and WBG EHS guideline limits.
The Company will regularly track air emission and waste water discharge levels and provide annual monitoring data to IFC. Refer to the ESAP for details.
The Tonggu facility is located next to a major river within the Tonggu County – Xiu River, a tributary of the Ding Jiang River. The Company has indicated its commitment to install an on-site WWTP at the facility to ensure that any waste water discharged into the river will be treated to consistently fall under national and WBG effluent limits. IFC will require evidence from the Company of a functional on-site WWTP at Tonggu, as part of the upcoming EIA process. Refer to the ESAP for details.
In terms of solid waste management, some of the 2,800 tons per year of coal cinder generated at the boilers is sold to brick and tile factories in the province, with the rest provided to local farmers as raw materials for village road paving. The Company states that up to 95% of paper cartons and plastic bags used at the Wanzai facility are re-used. Each month about 15 tons of leaves, twigs and other discarded plant biomass are collected by the local EPB for land-filling. At the farms, crop biomass is reused as green fertilizer and ground cover for better soil retention.
Total 2010 Greenhouse Gas (GHG) emissions from JinYuan direct operations are estimated at 41,000 tons CO2-equivalent, arising mainly from grid electricity usage, coal consumption and the use of industrial cooling units and refrigerators. In the same year, the Company consumed 22.7 MWh of grid-supplied electricity (mainly to power the cooling towers for cold storage rooms) and 2.9M m3 of water. Water comes from the county water supply company.
Energy saving initiatives by the Company include: i) running cooling units in the evening; ii) regular equipment maintenance to ensure optimal conditions; and iii) consolidating products into one instead of several cold storage rooms to save electricity. The Company feels that it has already explored feasible options for energy saving, and given that more than 80% of the electricity is consumed by cooling towers, there is little room for further savings as they use state of the art equipment from Germany.
The water consumption index value (m3 water usage / ton processed product) of the Company, calculated based on data from the Company, appears significantly higher than the benchmark value for frozen vegetables (Table 3, WBG EHS Guidelines for Food and Beverage Processing). There is currently one water mains meter at the facility and no sub-meters are installed at each water usage sub-areas, such as processing buildings and the cooling unit areas. Without sub-meters, it will be difficult to pinpoint major areas of usage and identify opportunities for reduction. To address this, the Company will install water sub-meters, and develop feasible water usage reduction options through a water efficiency audit.
PS4: Community Health, Safety and Security
Both the Wanzai and the proposed Tonggu facilities are located in peri-urban settings. The Wanzai facility is located in the county economic development park with a number of residential houses nearby, and the proposed Tonggu facility will be located close to a local village.
The Company states that there have been no complaints or issues raised by local communities regarding its operations in Wanzai – community liaisons are handled by the Park authorities who maintain regular contact with neighboring residents.
An unarmed security workforce of 6 guards works at the Wanzai facility. There have been no security incidents such as any thefts or confrontations since operations started. JinYuan has an emergency preparedness and response plan as part of its controlled document system to handle fire, food safety and environmental emergencies.
The key hazardous materials used at the Wanzai facility are lubricants for coolers (annual usage of about 1 ton) and disinfectant (about 1.2 ton per year). There are clear procedures on their management and storage. A third party company collects unused lubricants from the facility.
The Company has established life and fire safety (L&FS) procedures at its Wanzai facility and the relevant fire service inspection certificate is in place. Fire-fighting equipment, including smoke detectors, extinguishers and fire reel hose as well as proper signage was installed, and a written record of a fire drill conducted in 2010 was provided to IFC. The Company will provide to IFC a copy of the relevant fire service certificate and records of inspection findings provided by the local fire authorities for the Tonggu facility, and ensure that this is available on site for review.
The in-house food safety laboratory is co-located in the dormitory building next to staff quarters and the cafeteria. When IFC visited, the laboratory was left unattended with the front door open, with pools of water on the floor, and with an open lunch box placed next to testing equipment. The Company acknowledges the need to improve management of the laboratory, and has set aside a dedicated room in the main office building to establish a new laboratory in the near future with expanded testing capabilities (e.g. for salmonella) so that it can save the costs of sending samples to external laboratories. The Company is also considering expanding the laboratory in future so that in addition to testing its own samples, it can also offer commercial testing services for other companies as an additional source of income.
The Company will commission a qualified third party to evaluate the design and construction of the new laboratory to verify that its setup, staffing and operational procedures are consistent with national standards and a recognized international standard. Follow up annual external audits will also be required to confirm that operational practices are in compliance. Should the Company decide to also offer commercial testing services to other companies, before proceeding, it will obtain all necessary permits, and an audit by a qualified third party will be needed to verify that the laboratory is properly set up and managed for this purpose. Refer to the ESAP for details.
PS5: Land Acquisition and Involuntary Resettlement
JinYuan has leased about 5,200mu of land in six townships within Wanzai County to set up its six directly-managed organic farms. The land leases are willing-buyer-willing-seller transactions, are typically signed for a 3-5 year period, and involve very few village collective land plots so that two-thirds villager consent is not required. There have been no known issues of land related concerns to date.
Farmers from approximately 1,000 households, who used to farm these plots before leasing them to JinYuan, have subsequently become employed as farm laborers at JinYuan farms. The farmers receive a lease payment from the company, a wage as farm workers, and the fact that they do not need to work at the farms throughout the year means that they have more free time to seek other jobs or small business opportunities elsewhere to earn extra income. After working with JinYuan, farmers typically see an increase in net income of around RMB1,500 per person per year.
Land leasing goes through the following steps: i) The Company evaluates a plot of land against a number of suitability criteria such as water quality, soil conditions, previous experience of villagers in organic production, etc; ii) as part of this process it also conducts household interviews to understand the land related history and social dynamics of the village – if the investigation indicates concerns, the process is not pursued further; iii) if suitability criteria are considered to be met and no concerns are identified, the Company will approach the villager (use rights holder) to express interest and make an offer, at the same time informing the village committee of the potential transaction; iv) despite the fact that these land plots are not collective village land, villagers do come together to meet and discuss the decision to work with the Company or not; v) once there is an expression of interest from the use rights holder and broad consensus from the village to enter into the lease, detailed terms are discussed and agreed and the lease is finalized.
The Wanzai facility is situated on a 280mu land plot as part of the Wanzai County Economic Development Park. This land plot previously belonged to two natural villages of the Shi Zi Bao Administrative Village, and was acquired by the County Government in 2003 for the purpose of setting up the Economic Park. The land acquisition did not involve physical relocation of villagers, and economically displaced about 300 persons. Land was previously used by villagers for paddy rice and vegetable production. Cash compensation at a level of RMB8,500/mu was made to affected villagers by the County Government which included compensation for the land itself as well as the crops grown on the land. Affected persons interviewed by IFC confirmed that all compensation funds have been delivered to affected persons, and that there were no concerns among villagers throughout the process. Most working age members of the affected families have subsequently become employed at JinYuan, and have seen an increase of household income to the current average level of about RMB5,000-6,000 per person per year. With the increased income, villagers have built new houses for themselves.
The proposed Tonggu facility is located at a plot with an area of about 220mu. To date, about 110mu has already been acquired by the County Government – this process started in 2008. According to the local Government, about 40mu of the 110mu plot consisted of collective land belonging to a local village whose members were using it to grow fruit trees, groundnuts and paddy rice, but those activities only made up a small proportion of total household income; while use rights for the other 60mu were held by the county forestry bureau which used the land to operate a nursery for tree seedlings. Residents interviewed by IFC indicated that the 2008 land acquisition process had proceeded without any concerns and did not involve physical resettlement. Economically affected villagers have received in full a cash compensation of RMB23,000/mu, a level set by the County Government according to the prevailing market rate for land and crops in 2008.
According to the local Government and residents, the other 110mu consisted mainly of land held by the county forestry bureau as a nursery, and a smaller portion is farm land held by a local village. However, there is no information at present on details such as the exact holdings, number of villagers affected, proposed compensation levels, land acquisition directive document, etc. This is because the land acquisition is currently at a preliminary stage and affected persons have not been informed yet.
From the above information, IFC concludes that the Project’s land acquisition activities to date are consistent with PS5 requirements. For the 110mu to-be-acquired plot in Tonggu, the Company will provide IFC with relevant details, and will ensure that the acquisition process fulfills PS5 requirements. Refer to the ESAP for details.
PS6: Biodiversity Conservation and Natural Resource Management
The Company states that its organic farming activities contribute positively to the local ecology by improving local water quality, soil fertility and its regenerative capacity; increasing the availability of green manure, and improving the ecosystem balance by refraining from hunting activities thereby harnessing the role of natural predators in pest control. These improvements are also partly attributable to efforts by the Government and local communities to promote forest preservation and bamboo development along river banks since the late 1990’s.
The Company cites several signs of improved ecological conditions: i) the abundance of snakes in mountain areas due to more toads and loaches to feed them; ii) less compaction of soil due to stoppage of chemical use and to crop rotation practices mandated by organic agriculture; iii) that Wanzai and nearby counties seldom suffer from droughts or flooding events, attributable to the regulating ecosystem services provided by well preserved forests and watershed in harmony with organic agricultural practices; iv) clearer water in the river, more fish and cleaner intestines of local fish reflecting water with a much lower level of chemical pollutants. These observations were shared by locals interviewed by IFC.
There were no known areas of natural or critical habitat at or near JinYuan or third party farms, which are not located near major national or provincial conservation areas. IFC found no signs of the introduction of invasive alien species due to Company operations.
Stakeholder Engagement
No local communities near JinYuan’s facility or farms / third-party farms have been significantly affected by environmental risks or impacts from the Company’s operations. At the Wanzai facility, community liaisons are handled by the Park authorities who maintain regular contact with neighboring residents. The Company is a major contributor to local employment creation and supply chains through its organic production and procurement activities. In its business operations, it actively engages with local stakeholders, such as local agricultural bureaus, growers, farmer cooperatives, and organic seed suppliers e.g. throughout the year and particularly during the planting and harvesting seasons, it interacts with organic farmers to understand their viewpoints and concerns, and conducts field learning sessions to help farmers adopt new growing techniques. Regular liaison with villagers happens both directly and through farmer cooperatives and township procurement companies and their field extension agents. The Company has supported philanthropic activities such as providing rice to rural families in need during the spring festival.
The following Company representative will be able to provide further information on the Project:
Mr. YU Zun Ning
Jiangxi JinYuan Agriculture Development Co., Ltd
Address: Wanzai Industrial Park, Yichun City, Jiangxi, China 336100
Tel: +86-795-8913913
Fax: +86-795-8913177
http://www.jyorganic.net
JinYuan will place an advertisement in a major newspaper in Yichun and Wanzai to inform the public that results from IFC’s environmental and social review is available for access. It will also post the local language version of the environmental & social review summary (ESRS) and environmental & social action plan (ESAP) outside both its Wanzai facility and local offices near its farms; and the same on its corporate website or provide a web-link to IFC’s disclosed ESRS and ESAP.
Mr. YU Zun Ning
Jiangxi JinYuan Agriculture Development Co., Ltd
Address: Wanzai Industrial Park, Yichun City, Jiangxi, China 336100
Tel: +86-795-8913913
Fax: +86-795-8913177
http://www.jyorganic.net
JinYuan will place an advertisement in a major newspaper in Yichun and Wanzai to inform the public that results from IFC’s environmental and social review is available for access. It will also post the local language version of the environmental & social review summary (ESRS) and environmental & social action plan (ESAP) outside both its Wanzai facility and local offices near its farms; and the same on its corporate website or provide a web-link to IFC’s disclosed ESRS and ESAP.
**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:
CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.
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.
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.