While all Performance Standards are applicable to this investment, IFCs 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. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
Land required for the Project has been purchased from Hemaraj Land And Development Public Company Limited (“Hemaraj” - http://www.hemaraj.com), a private developer of industrial estates, with necessary approvals from Industrial Estate Authority of Thailand (IEAT) and Board of Investments (BOI). The Project is under construction in a designated and established industrial zone covering 6,700 acres on the eastern seaboard of Thailand. As mentioned on Hemaraj''s website,there are more than 420 factories in this industrial zone including over 113 automotive original equipment manufacturers (OEM), parts and components manufacturers, operational in this area since 1996.. There is no farmland or residential area near the Project site. There are neither any ecologically sensitive areas nor indigenous people in the vicinity of the project.

Accordingly, the findings of the Project review indicate that there are no impacts related to Land Acquisition and Involuntary Settlement (PS5), Biodiversity Conservation and Natural Resources Management (PS6), Indigenous Peoples (PS7) or Cultural Heritage (PS8).

Key environmental and social (E&S) issues and risks related to project include: assessment and mitigation of the impacts of the Project; the Company’s capacity to manage its social, environmental, health and safety performance, and engage with local communities in accordance with local requirements and IFC Performance Standards and applicable World Bank Group (WBG) Environmental Health and Safety (EHS) Guideline; assurance of fair, safe and healthy working conditions; utilization of equipment and operational practices that maximizes conservation of energy, water and process materials including recycling and reuse initiatives; management of waste emissions and discharge; handling and management of hazardous materials and hazardous wastes; and the impacts of operations on local ambient environment.

The potential adverse E&S impacts of this project are few in number and limited to the project site; and can be avoided or mitigated by adhering to generally recognized performance standards and guidelines. This is therefore a category B project according to IFC’s Procedure for Environmental and Social (E&S) Review of Projects.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives. The Company has presented the information about how the E&S issues and impacts are being addressed, to ensure that the Project complies with the environmental and social requirements including: the host country laws and regulations; IFC’s Performance Standards; and the relevant WBG EHS guidelines. This information is summarized in the paragraphs that follow.

IFC’s assessment considered the Company’s management of its EHS performance in the establishment and operation of the facility in Thailand; compliance with national and local permit requirements; and SRF Thailand’s engagement with local communities, regarding EHS performance.

- Environmental & Social Assessment:

The Company has received approval from IEAT through its single window clearance facility, covering various environmental and land clearances. Utilities and road infrastructure is part of the facilities available at HESIE.

Hemaraj conducted a detailed environmental impact assessment (EIA) study for the entire industrial area covering the cumulative impacts of the units that it will host. As noted on Hemaraj’s website, Hemaraj’s industrial estates have received the Best Environmental Management EIA Award from the Ministry of Science, Technology and Environment.

As such, a formal EIA was not required for the Project as it is located inside an industrial area and is not classified as polluting unit according to the Thai law. However, the Company has procured all the regulatory permits from relevant authorities, and complies with the mitigation measures stipulated by the industrial area authority and the permit conditions.

- Management Systems:

The Sponsor has articulated its EHS policy covering all its operations worldwide. This forms the basis of the EHS management system implemented at the facilities in Thailand.

The Company’s operational nylon tire cord facility in Thailand has quality and environmental management systems certified compliant with ISO9001 and ISO14001 requirements. In addition, this facility has implemented a certified quality management system as per the ISO/TS16949:2009. This technical specification aims to develop a quality management system tailored for automobile sector, emphasizing defect prevention and the reduction of variation and waste.

The Sponsor’s operational packaging film manufacturing facilities in India have implemented certified management systems for quality (ISO9001), environmental (ISO14001) occupational health and safety (OHSAS 18001) social accountability SA 8000 & food safety (ISO22001). The Company plans to implement and certify similar management systems for the proposed Project, after it becomes operational in mid-2013.

Once the Project is operational, Company will largely rely on the environmental management infrastructure and systems offered by the industrial estate developer, Hemaraj. HESIE together with the neighboring Eastern Seaboard Industrial Estate (ESIE) – also developed by Hemaraj and managed jointly with IEAT - have implemented certified environmental (ISO14001) and quality (ISO9001) management systems. In 2010, ESIE was selected by IEAT to serve as the pioneer private industrial estate for demonstrating superior environmental management practices.

- Organization:

SRF has instituted a multi-level EHS organization structure for all its facilities, which comprises of dedicated teams at different levels, with the ultimate oversight by Director (Safety & Environment) in the Board of Directors.

As per this corporate structure, SRF Thailand has developed a formal EHS management organization for its operational facility in Thailand and shall endeavor to replicate the same for the proposed Project, once it is operational.

Accordingly, team of EHS professionals undertakes day-to-day activities related to EHS aspects. Standard operating procedures, work instructions etc. have been prepared for this purpose in the existing operations and will be prepared for the project as well, once it becomes operational in May 2013.

A senior official (usually a department head) is designated as Management Representative and is responsible for EHS management systems at unit level, together with the core EHS team which has representation. A steering committee comprising of all department heads guides the EHS activities and management systems at unit level, with oversight from Unit Leadership Team, and also the Business Leadership Team.

- Monitoring & Reporting:

The company has put in place an elaborate monitoring and reporting program as documented in the management system manual. This program covers air emissions, wastewater, solid and hazardous waste and workplace monitoring for volatile organic compounds (VOCs), noise, and luminance. In addition, water and energy consumption are regularly monitored for internal benchmarking and reporting.

SRF’s monitoring program is consistent with IFC requirements and the review of the monitoring records confirms SRF Thailand’s operational facility is in material compliance with relevant WBG EHS Guidelines.

In addition to environmental and safety monitoring program at unit level, an elaborate corporate level monitoring and reporting system is in place, where the EHS performance of the Unit is reviewed monthly at the business level. Department heads review the EHS performance every 3 months and Unit Leadership Team reviews it every 6 months.

SRF Thailand currently employs nearly 450 employees in its nylon tire cord operations, comprising shop-floor workers, operators and management staff. Female employees constitute approx. 30% of total workforce. The new project expects to recruit 170 regular and 150 contract employees (for non-core activities such as housekeeping, gardening, security, canteen and loading/unloading etc). In addition expatriate specialist technicians and engineers from SRF’s operational facilities will be deployed during the Project commissioning phase.

- Human Resource (HR) Policy, Management

According to SRF values articulated on its website, “..anyone who is associated with SRF, is like a family member. Everyone is equal irrespective or their gender, background and designation. Equal opportunity is a right and shall remain so for every SRFite.”

SRF has a corporate human resources (HR) policy that specifies the terms of employment and working conditions. These include procedures related to recruitment, probation, training, performance review, promotion, insurance, salary and compensation, resignation, lay-off and firing, vacation, other leave, and retirement. This corporate policy is suitably customized to meet the local regulatory requirements and is accordingly applied to SRFIT.

SRF Thailand’s HR policies and procedures are available online (http://www.srf.co.th/images/human/policy.htm), though all new employees receive a copy of the same at the time of joining, together with their appointment letter and contract.

Workers’ Organization, Grievance Mechanism:

Currently, there is no registered workers’ union at SRF Thailand’s operational facility, though the Company would permit this were it requested by employees. However, as per Thai labor law, workers’ Welfare Committee comprising of elected representatives of the workers has been constituted and is active at the Company, which also serves as a grievance mechanism for the workers.

In addition, Company has established another channel viz. Red Book Complaints – whereby employees can share their grievances with the management by simply sending an email. A documented procedure is in place to address and resolve such grievances, which also includes an oversight by the senior management.

- Training and Human Resources Development

SRF has an extensive human resource development and training program for its employees, managed by the HR department. Several structured training programs are developed for different levels of employees.

The Thai labor law requires minimum 6 hours of training every year for each worker, but SRF Thailand’s training programs for its employees well surpasses this requirement. For its operational nylon tire cord facility, Company has set up a target of 28 hours/person/year, though this figure has already been exceeded. On an aggregate basis, during 2011-12 Company delivered a total of 4,625 person-hours of training to all its employees, and plans to deliver 5,000 hours of training during 2012-13. Similar training calendar, as per needs, will be implemented for the new Project, once it becomes operational.

- Occupational Health and Safety

Workers’ safety is of prime importance for SRF, which is evident from the fact that it has a Director on its Board to oversee safety and environmental issues. In line with this commitment, an elaborate safety management system is in place at the Company operational facility, and similar systems will be implemented for the Project.

For its operational facility, Company has conducted a detailed job safety analysis for all the key jobs and accordingly has developed risk mitigation measures including appropriate personal protective equipment (PPE) and training. These have been documented through work instructions and standard operating procedures, and are prominently displayed throughout the facility – with a strong emphasis on visual communication (illustrations, photos etc).

Personal protection equipment (such as gloves, safety shoes, masks and glasses) is provided to all the workers on the shop floor, which is commensurate with the nature of operation and potential safety hazards. To encourage proper use of PPE, Company has instituted an award for workers who regularly use the appropriate PPE on the shop floor.

For the proposed Project, Company is in the process of procuring hi-technology; high precision machines designed and built in Europe, with automated operations. All the moving parts are enclosed and normal operation of the machines requires minimal contact with human body parts, thus reducing the chances for an accident.

Adequate fire detection and suppression equipment is fitted across the facility in accordance with the potential fire risks. Fire exits and the locations of fire extinguishers are clearly marked. Company has a team of around 60 trained fire fighters and fire drills are regularly conducted. Company has a clinic on its premises with a nurse available round the clock, and a visiting doctor once a week.

Company regularly monitors and records the accidents and incidents, including minor and near misses, and takes necessary follow-up actions to minimize safety risks in its operations. As a result of all its efforts, there have been no major accidents in the past 3 years at the Company’s operational facility in Maptaphut. Regular health check-up is conducted for all its employees, in accordance with their job.

- On-site Emergency Response Plan:

Based on the identified hazards and risks, an on-site emergency response plan has been developed by the Company for its nylon tire cord operations. Accordingly, potentially hazardous areas have been identified and evacuation routes and assembly points have been designated and clearly marked.

IFC’s assessment considered the Company’s operations with regard to resources consumption (water, energy), efforts to optimize resource inputs, waste minimization and management practices as well as the storage and handling of hazardous materials and wastes.

The raw material (Polyester) in the form of bright chips and silica in the form of additive chips are fed to the main extruder and co-extruders respectively. The chips form a melt in the extruders, the output of which is a multi layer film. The middle layer is formed by bright chips & recycled chips while the two outer layers are of Bright & silica which provides haze or necessary friction in the film. The film then enters the Machine Direction Orienter where the film is stretched in the machine direction. The film is then sent to Transverse Direction Orientation where stretching of film in transverse direction takes place. In order to improve the permeation properties of film, the BOPET film can further be metalized with a very thin (around 110 to 300 Angstroms) film of aluminum, under vacuum. The output is an 8.7 meter wide film, which is then passed through the slitting machine and finally the roles of various sizes and widths are sent to the packing section.

The waste film generated in the process, is melted and regranulated into chips, which are then fed into the main extruder along with the bright PET chips. As such, there is very little solid waste generated from the process.

- Pollution Prevention and Resource Conservation:

SRF has articulated its commitment “to minimize the impact on the environment by reducing waste and emissions from its operations. Reducing carbon footprints, energy conservation, water conservation, replenishment of groundwater and resource conservation are some of the areas where the company has been working proactively to minimize waste and enhance resource efficiency”.

For operations in Thailand, Company is actively implementing several energy conservation measures for its nylon tire cord manufacturing operations and has reduced its unit electricity consumption by 20% during 2011-12 and has set a target to further reduce it by 5% during 2012-13.

- Process Inputs

The manufacturing process for the Project is not resource intensive and the primary inputs are PET chips, silica and electrical energy & Thermal energy. Company will source the PET chips locally from the nearby companies and through imports. Water will be supplied by HESIE.

After the Project is fully operational, the annual resource consumptions at SRF Thailand will be 29.7 MWh electricity; 1,550 ton furnace fuel for heaters; 108,300 cubic meter of water. The proposed energy consumption per unit product is 1.0 kWh/kg for the main line, which meets the energy efficiency benchmark proposed in WBG EHS Guideline for Metal, Plastic, and Rubber Products Manufacturing.

- Wastes and Emissions

For the proposed Project, the main source of air emissions will be the liquid /gas fuel based heaters. The combustion controls are expected to maintain these emissions within WBG guideline values.

The wastewater – which will be primarily domestic – shall be discharged in the sewers of HSIE, which will be further treated in HESIE’s centralized effluent treatment plant.

SRF complies with all relevant regulations for the storage, handling and disposal of solid and hazardous materials used in the production process. The notified hazardous wastes shall be disposed of through licensed waste management contractors, as per the regulatory authorizations. Adequate controls during the storage and handling shall be in place and the quantities of solid waste thus generated and disposed of shall be regularly monitored, documented and reported to Thai authorities through the mandatory online manifest system.

- Energy Sources and GHG Emissions:

The energy consumption is mainly for extrusion and stretching of film and metalizing processes, and required electricity shall be procured from the provincial grid; with small quantities of furnace oil/gas for heating.

The GHG emissions of the Project, therefore, shall be dominated by those due to the electricity consumption, with a small contribution from loss of refrigerant from HVAC systems. The Project’s estimated annual GHG emissions are expected to be around 21,000 t CO2e once fully operational at full capacity.

As the project is located in the well established major industrial area HESIE, there are no communities in the vicinity of the Project. As such, impacts on the communities – including increased vehicular traffic - due to Project operations are expected to be minimal. However, in line with its corporate safety policies and practices, Company shall develop an Emergency Response Plan and shall conduct regular mock drills once the Project is operational.

SRF Thailand will hire an external agency for plant site security that conducts routine ID check at the gates and security monitoring. The guards will not carry firearms.

On the basis of the above information, it is concluded that the Project has been designed and will be operated in compliance with IFC’s PS and relevant environmental, health and safety guidelines.

SRF has identified four areas for its community partnership program: viz. Education, Health Care - HIV AIDS, Natural Resource Management and Affirmative action. SRF delivers its community engagement and partnership activities through SRF Foundation and respective business units.

In line with corporate philosophy, SRF Thailand organizes activities to engage with the local communities on regular basis. Recently, Company, its staff and families, actively volunteered to rehabilitate a school in Ayutthaya province which was damaged during the 2011 floods in Thailand. Various other activities such as blood donation camps, donations to nearby schools are regularly organized.

SRF has prepared Sustainability Report for its chemical business (Compliant with Global Reporting Initiative G3, Application level: A+) for the years 2007, 2009 & 2011.

SRF Industries (Thailand) Limited
PLOT NO-D20
HEMRAJ EASTERN SEA BOARD INDUSTRIAL ESTATE HIGH WAY 3138
PLUAK DAENG, RAYONG
THAILAND

All inquiries and comments may be directed to:

Mr. Rajendra Singh Chauhan
SRF Industries Limited (Thailand)
Tel: +66845420681
E mail:- mailto:chauhanr@srf.com

Broad Community Support is not applicable for this project

Current client performance is aligned with applicable Performance Standards and EHS Guideline requirements. No ESAP is required.