Fosun Pharma has provided information on its current practices and policies that address E&S risks and impacts to ensure that the proposed project complies with or, will upon implementation of specific additional agreed measures, comply with host country laws and regulations and the IFC Performance Standards and applicable requirements of environmental, health and safety guidelines. Environmental, social and health and safety issues that require ameliorative measures will be addressed by the Company as part of IFC’s investment agreements.
Social and Environmental Assessment and Management Systems:
Fosun Pharma has 21 sole owned or majority held subsidiaries in China. The Company has an Environmental Health and Safety (EHS) committee at the Corporate level (Fosun Pharma Development Company) which provides effective oversight and technical support to subsidiaries to ensure continued material compliance with applicable Chinese national and local regulatory requirements and standards. The Corporate has established procedure to guide its E&S due diligence of potential acquisitions and has an authorized power for rejection based on E&S considerations. The E&S management structure at corporate level is headed by a dedicated director for Technical, Quality and Operations who has an authorized right to stop production activity at any facility, including those of its subsidiaries. An effective occupational health and safety system has also been established at corporate level and subsidiary level, lost time incident records are kept in at subsidiary level (including minor incidents), no major incidents nor fatality reported. Oversight is provided by a team of headquarters designated staff working in the areas of environmental, safety, certification, monitoring, etc. Each operational subsidiary has an EHS department lead by a director supported by a designated team of staff. In addition to the regular inspections from local regulators, the headquarter team undertake random, unannounced checks of manufacturing facilities to verify compliance.
There are a total of nineteen key manufacturing subsidiaries under the administrative of the EHS committee, seventeen of which are pharmaceutical producers and are certified compliant with Chinese Good Manufacturing Practice (GMP) and “Clean Production” for pharmaceutical manufacturing; seven have GMP certification in other jurisdictions, such as in the USA and European Union. In addition, five sites have environmental management systems certified compliant with ISO (ISO14001, ISO9001) and Chinese GB/T28001 (OHS management system). Fosun Pharma is working towards having all its facilities certified to ISO standards by the end of 2012. Shine Star is certified for ISO9001 and 14000. In preparation for the share offering, an external environmental audit was undertaken at all manufacturing sites, and the audit report published on the website of the Ministry of Environmental Protection at the following links:
HYPERLINK "http://wfs.mep.gov.cn/gywrfz/hbhc/hcpx/201107/t20110715_215054.htm" http://wfs.mep.gov.cn/gywrfz/hbhc/hcpx/201107/t20110715_215054.htm; HYPERLINK "http://www.mep.gov.cn/gkml/hbb/bh/201109/t20110902_216902.htm" http://www.mep.gov.cn/gkml/hbb/bh/201109/t20110902_216902.htm. This review confirmed that those subsidiaries are in compliance with local regulatory requirements.
Human resources are managed at the corporate level with oversight of 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 recorded, and follow up action taken when required. Training, monitoring and reporting framework is documented and consistent with Chinese requirements, and good international industry practice. The Company has an active community engagement program, and activities related to corporate social responsibility are implemented at the national and local levels by participating in various outreach programs and regional initiatives promoting environmental, social welfare and disaster relief.
Labor and Working Conditions:
Human resources (HR) at corporate level is managed by a senior Vice president who is responsible for developing overarching corporate wide HR policies, strategies, principles and best practice in China. Policies on recruitment, promotion, career development, term of employment are established at corporate level in compliance with Chinese labor laws and regulation and IFC PS2 requirements. Programs on career development and training program and other incentive programs serve to increase and maintain competitiveness of Fosun Pharma. Equal opportunity and non-discrimination are widely communicated with employees and non-employee workers. Fosun Pharma is in the process of optimizing and documenting its HR policies in compliance with IFC PS2 requirements. A written HR policy will be published and communicated with all its employees and non-employee workers.
HR at subsidiary level is managed by each subsidiary based on the corporate policy and strategy. Workers salaries are based on job/skill specifications and are significantly above the regulated local minimum wage and are generally above the average for industrial type employment in the local market. The majority of production workers are locals from the same province where the subsidiary located, with a small number of expatriate workers from other part of the China. Employment contracts have been developed at each subsidiary level according to provincial compulsory requirements and their specific circumstance in line with Fosun Pharma’s corporate requirements. Employees typically receive a Contract of Employment when commencing service that provides details such as on the contract period, basis of working hours, overtime compensation, insurance, fringe benefits, and leave conditions. All relevant regulations governing the term of contract are clearly listed in the contract. Employees are also provided with job training, as well as company’s general policies on safety and corporate cultural and values.
Fosun Pharma (including its fully and majority owned subsidiaries) employed 11,484 full time employees as of end of 2010. Labor practices and working conditions, including occupational health and safety, comply with local regulatory requirements and are largely consistent with IFC policies and applicable WBG EHS guidelines for the sector. Fosun Pharma has an informal Human Resources policy that is consistent with local and national regulatory requirements. The policy addresses working conditions, terms of employment, and wages and benefits, promotion and career development. This information is provided at the time of induction and employee annual meetings. Employment relationships recognize the principals of non-discrimination and equal opportunity. All employees at Fosun Pharma are union members. The main function of the worker’s union is to improve worker’s welfare, promote an enterprise cultural and serves as an additional channel for the grievance mechanism, which is otherwise served by an open door policy at corporate and subsidiary level. Employees have the opportunity to represent to the management any issues or grievances that they may have. Any employee who dissents or has doubts about any company policy or has complaints against the company management has the opportunity to have the problem resolved either directly by communicating with the line manager, emailing to or delivering letters to the company suggestion box, or indirectly reporting to the worker’s union through worker representatives.
The minimum employment age at Fosun Pharma is 18 years. Fosun Pharma ensures that child labor or forced labor is not employed directly or by subcontractors through verification of relevant documents. Subcontractors are expected to comply with all local labor requirements specified in contractual arrangements. For its manufacturing operations, employees work on shifts and no more than 40 hours a week which is in compliance with China labor laws. Wages are paid on a monthly basis and calculated based on hours worked, inclusive of overtime.
Occupational health and safety at Fosun Pharma facilities are managed by designated health and safety staff. Facilities are audited twice a year by regulatory agencies to monitor compliance with labor regulations. There is a plan for accident prevention and worker safety consistent with local regulatory requirements. All employees in the company have to undergo a full training program at induction and subsequently regarding worker health and safety relevant to their job activity. New employees are required to have a health examination before induction, and all the employees of the Company have annual health examinations during the course of their employment. Fosun Pharma provides appropriate personal protection equipment (PPE) including masks, uniform, safety glasses, shoes, etc. and ensures proper usage at its facilities. The Company also regularly monitors its workplace air quality against relevant standards for exposure to industrial chemicals and vapor. Workplace air quality and noise is monitored annually and is within acceptable limits. Facilities and associated infrastructure are largely well maintained. Fire drills and emergency procedures drills are routinely held at the manufacturing facilities. The OHS performance of the Company is in compliance with regulatory requirements, consistent with requirements of IFC PS2 on Labor and Working Conditions.
Pollution Prevention and Abatement:
Liquid emissions from Fosun Pharma facilities are primarily wastewater from pharmaceutical manufacturing operations which includes a diverse mix of Active Pharmaceutical Ingredients (API), formulations, tabletting and other associated operations; sanitary wastewater, and storm water. In compliance with national and local regulatory requirements, the Company operates pretreatment facilities which treat wastewater prior to discharge to secondary wastewater treatment facilities, which in turn may discharge to a public sewer system. The Company is in compliance with applicable regulatory requirements for discharge of treated effluents at all its facilities. However, compliance with applicable IFC guidelines for the sector cannot be confirmed since no monitoring data is available for parameters not regulated by local standards, examples of which include APIs, organic solvents etc. As agreed in the ESAP, the Company will establish emission performance standards to be consistent with applicable WBG EHS Guidelines for the sector, for all liquid effluents discharged to surface water. Fosun Pharma has also agreed to develop a Companywide program to adopt performance standards to minimize discharge of pollutants to the environment along lines adopted by other reputable international pharmaceutical and biotechnology companies. Fosun Pharma will review wastewater discharge from all its facilities and those of its subsidiaries for compliance with applicable IFC requirements, prioritize by risk posed, and implement remedial action as necessary. Water consumption at Fosun Pharma (including wholly and majority owned subsidiaries) is estimated to be about 1,604,000 cubic meters, which includes water used for process, non-contact cooling and sanitary usage. The Company will commission an audit of its water usage at all its facilities to identify potential areas of water savings including those from reuse, recycle and reduction by benchmarking to relevant international standards.
Air emissions from Fosun Pharma facilities primarily include emissions from process operations which may include volatile and semi-volatile organic compounds, APIs, acid and alkaline vapors, etc. Various engineering and operational controls ensure compliance with a diverse set of air quality requirements which vary across facilities based on nature of product. Air emissions from the Company’s facilities are in compliance with host country regulations, but no monitoring data is available to determine compliance with applicable WBG EHS guidelines. Fosun Pharma will review air emissions from its facilities for compliance with applicable IFC requirements, prioritize by risk posed, and implement remedial action as necessary.
Management of solid and hazardous materials, wastes and residuals at Fosun Pharma’s facilities complies with local regulatory requirements. Licensed subcontractors are used for the collection and disposal of solid and hazardous materials. Fosun Pharma procurement procedures contractually require that its suppliers and subcontractors comply with national regulatory requirements and Fosun Pharma's ESH&S policies.
Fosun Pharma (including its fully and majority owned subsidiaries) consumes about 190 MWh of electric energy annually, all of which is obtained from the public service grid. Net green house gas (GHG) emissions attributable to Fosun Pharma’s annual consumption of electricity, is estimated to be in excess of 145,000 metric tons of carbon dioxide equivalents per year. Consistent with IFC PS3 requirements on GHG emissions, Fosun Pharma will monitor and quantify GHG emissions annually in accordance with internationally recognized methodologies. In addition, the Company will evaluate technically and financially feasible and cost-effective options to reduce or offset project-related GHG emissions during the design and operation of the project.
Land Acquisition and Involuntary Resettlement
Fosun Pharma has had recent land acquisitions, and has plans to acquire more land to support expansion of existing facilities and development of new ones. All land acquisition in China is through a government lead process by which land is acquired by the local government for the development/expansion of Fosun Pharma subsidiaries. Land acquisition process starts with subsidiary’s application request for additional land, and when approved, the local government agency manages land acquisition, compensation and resettlement in compliance with Chinese requirements. The compensation and resettlement in rural areas mainly comprises of: 1) compensation at local regulated rates for loss of land varied mainly by land types and production yield in rural area; 2) compensation for land attachment (green crops and residential structures); and, 3) resettlement allowance. Resettlement allowance is provision of cash to assist workforce in seeking for new livelihood. In addition, those farmers who lost agricultural land are entitled to be benefited by a national rural pension scheme post land acquisition. Land acquisition and resettlement planning and implementation are varied by region/area. Local capacity in restoring livelihood of project affected people post land acquisition is differentiated by local economic development status and capacity of local authorities and farmers.
Fosun Pharma and its subsidiaries track development of industrial land in which it is interested, and as part of its due diligence process, informs itself of previous land users and usage, and completion of an adequate compensation disbursement process before acquiring or developing the land. Following this evaluation, the subsidiary pays for land use fee if in its judgment the land acquisition and compensation process was operated legally, without controversy and appropriate compensation was paid in full. As an example, for the Shine Star facility, the local authorized governmental agency approved its application for land in 2010, Shine Star obtained land use certification in February 2011. A total of 600 Mu (40 hectare) land was acquired for the expansion which impacted three village units in Qingji village. It is estimated that a total of 210 households, or 891 people were affected physically and economically from this acquisition. A land acquisition agreement was signed between the industrial zone and Qingji village in April 2010 in which compensation rates were disclosed publically. Compensations were paid in full in March 2011 with finger tip print approved the acceptance of villagers. Post land acquisition, villagers were eligible to participate in the national wide rural pension program of which pension fund is one of the measures to ensure the livelihood of those elderly villagers following governmental document GongZhengFa [2008] 43#. Given the advantage of being in the expended developed area, villagers have shifted their livelihood from land based to non-land related activities long ago and have developed the skills necessary for industrial work. Shine Star as an example has hired approximately 1,000 local villagers as direct employees. For those relocated, replacement housing in designated areas with much improved facilities are allocated based on agreement signed with each household. There has been no conflict over the relocation and resettlement process and arraignment. As such, the reported outcomes of the land acquisition for the Fosun Pharma subsidiary were consistent with the objectives and requirements of IFC’s Performance Standard 5 for Land Acquisition and Involuntary Resettlement.
As part of its overall environmental and social management system, Fosun Pharma will continue to programmatically assess, monitor and report land acquisition by the Company and its subsidiaries to ensure that the Company is in material compliance with IFC’s PS5 on land acquisition and involuntary resettlement.
