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
IFC’s environmental and social due diligence indicates that the following Performance Standards are, or have the potential to be, applicable to this investment, namely:

- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labour and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4 Community Health, Safety and Security

A review of Muyuan processes for identifying and securing land concluded that PS 5 Land Acquisition and Involuntary Resettlement was not applicable for any land transaction that had occurred at the time of the equity investment in 2010; this appraisal finds that still to be the case. Issues associated with the following PS were also assessed but found to be not applicable to the Project: PS6: No adverse impacts to biodiversity or sustainable natural resource management were found; PS7: No Indigenous People are known to have been in the area or affected by the project; PS8: No evidence of the presence or impact to issues associated with Cultural Heritage. The Company site selection manual indicates that it will avoid occupying the core and buffer zones of drinking water protection area, scenic spots, and natural reserve areas. A sample review of farm site selections made to date confirms this practice.

The key environmental and social issues have been identified as: (i) the continuous development and implementation of the environmental and social management system (ESMS); (ii) management of the development of whole-farm environmental and social impact assessments and relevant local permitting; and, (iii) on-going development of an appropriate standardised E&S monitoring framework applicable to operations. Specific concerns with regard to waste management typical of operations in this sector are addressed through construction and operation of biogas facilities.

The potential adverse environmental and social impacts associated with this investment, and in particular the development of the project site, are relatively few in number, site-specific and can be readily addressed through mitigation measures the likes of which are utilized elsewhere in Muyuan operations as standard practice. This is a Category B project in accordance with IFC’s Policy on Environmental and Social Sustainability.

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.

PS1 Social and Environmental Assessment and Management System



Social and Environmental Assessment:



Muyuan has constantly expanded the number of farms, and therefore number of pigs raised, between 1992 and now. Current operations number 17 breeding and hog production farms and one feed mill while eight facilities, including Wolong and Dengzhou farms and two feed mills, are under construction. All facilities currently under construction have been subject to an EIA.



Documents reviewed associated with the EIA process (the EIA approval and comment document from the relevant government authority) provided for the Company to begin construction of the projects; they also highlight the E&S issues that are expected to be of the greatest importance and hence prioritized by the Company for management. Issues such as wastewater management, for example, are singled out.



Additional in-house assessments (and monitoring) take place such as review of the performance of the biogas facilities, and monitoring the coal-fired boilers to ensure compliance with Chinese air emission limits. Emergency preparedness (such as for flooding in the summer and fire hazards in the winter) are undertaken by the safety department. Vehicles and other equipment are subject to third party preventative maintenance inspections.



Management program:



The operational requirements of Muyuan farms are managed by a central corporate office that includes the following departments: (a) general manager office (including environment and OHS management); (b) human resources; (c) production; (d) animal nutrition; (e) veterinary; (f) quality control; (g) sales; (h) purchasing; (i) finance(including project); (j) construction/engineering management.



Through 2009, the Company operated an informal environmental and social assessment and management system. This has now been formalized culminating in the system being independently certified in 2010 to ISO 14001:2004 with a scope that includes operating farms, feed mill production and associated management activities.



The Environmental Management Manual (a key part of the ISO 14001 EMS) is a high level structural document that makes reference to a variety of procedures which are applied, as needed, at each facility. These environmental procedures cover various aspects of the management system, including staff training; chemical management, environmental aspect identification, objective and target setting, emergency preparedness procedure and response plans (for fire and liquid ammonia leakage from cooling systems), fire prevention procedures and control procedures for solid wastes, wastewater, air emissions and noise and odor discharges. Further development of these general procedures, to include specifics (including organizational roles and responsibilities) is addressed in the ESAP, akin to the more developed procedures the Company has already implemented those for front line staff managing manure and farm wastewater.



A
s part of its management system, the Company utilizes a process flow document, “Muyuan’s Process Flow for Regional Development”, to ensure that new development and construction projects integrate and complete the necessary E&S actions. Each department has its own specific requirements as part of the process; for example, the process flow includes the need for the environmental department to complete tasks related to environmental and social issues (land acquisition) and apply for the necessary permits and licenses, such as EIA approval documents.



The Company’s current plans do not include obtaining an OHSAS 18001 management system certification; however, the Company has developed a policy and various operating procedures for the management of OHS issues within its operations. Muyuan has developed both a management level document (the Safety Production and Management Manual) for supervisors and a staff booklet (the Staff Safety Manual); between them they provide an overview of the OHS hazards found within Muyuan operations and address the control of risks and the responsibilities of different departments/ personnel within the Company in terms of managing OHS by implementing safe operating procedures. Muyuan maintains summary reports/ records on work related accidents/ incidents, conducts safety site inspections and implements corrective action closeout of required safety improvements. Specific Job Hazard analyses (JHA) are not conducted and accident/ incident statistics are not currently maintained. As part of the continued evolution of the workplace safety program, and as spelt out in the attached ESAP, Muyuan will undertake JHA’s of higher risk operations, develop more detailed records of workplace incidents and accidents, conduct detail root cause analysis so as to determine cause, identify overall safety trends and implement control measures to further reduce incident/ accident rates in areas requiring attention.



All operating farms are certified to the Hazard Analysis and Critical Control Points (HACCP) standard; in addition the feed mill is certified to ISO 22000.



The production department is responsible for animal welfare. The company is judged to have exemplary standards for the vast majority of animal welfare issues, including animal handling, feeding systems, nutrition, animal health and transport. The housing of sows, however, is the one area that could be subject to a change in practice to better align it with contemporary practices in the industry elsewhere in the world. In recognition of this opportunity, the company has been piloting a new approach based upon the use of Electronic Sow Feeding (ESF) systems supplied from Europe and designed to provide more room for the animals while providing them individually tailored nutrition that promotes productivity. This pilot scheme is in keeping with other pig producers in the country who are trying out this approach and, as noted above, is a practice already adopted in othe
r countries. IFC will continue to work with the company to promote such practices, in keeping with its commitment to improving all matters of animal welfare as described in the IFC Good Practice Note on Animal Welfare.



Organizational capacity:



The Service Department assumes responsibility for environmental management; occupational health and safety; maintenance, construction and development; electricity and water utilities; landscaping; and, catering. The Environmental Management Unit within this department comprises 24 employees who oversee the work of full time farm-level environmental coordinators (3 to 5 persons per farm depending on the farm size). The main responsibilities of the farm-level environmental coordinators include: operation of wastewater treatment and biogas facilities; ensuring maximum solid and liquid waste segregation (for manure); ensuring no discharge of wastewater other than use for cleaning of pig housing and irrigation of adjacent fields; ensuring proper maintenance of equipment and normal operation of power generation from biogas. Muyuan is working to broaden job descriptions for farm-level environmental coordinators (or coordinators at the higher level) so as to include responsibilities in environmental management, including environmental monitoring for facilities other than biogas/ wastewater treatment system.



The OHS Unit has 6 staff who oversees health and safety management within the company from the corporate level. At the farm-level, there are 25 individuals who, amongst other duties, are tasked with coordinating OH&S management. These coordinators are also involved in the monthly safety inspections at the farms (a comprehensive company-wide undertaking). They also conduct daily and weekly safety inspections. The mill manager is ultimately responsible for OHS matters at that operation; a safety supervisor (a group leader position) provides day to day implementation support. The Company has dedicated farm/project-level safety personnel for the construction sites who are trained by the local authority on construction site safety; they are managed from the Construction Unit within the Service Department.



Monitoring and Reporting:



The Company uses pre-qualified and licensed consultants to collect environmental data from various operations such as those that consume surface and ground water, that generate ambient air impacts and noise, as well as those that use waste water derived from the biogas facility for irrigation i.e., wastewater quality and receptor soil fertility analyses. This data is used internally to understand existing operations but is also used in the EIA process to characterize proposed projects. Permits for existing operations do not require wholesale E&S monitoring of activities and submission of data such as the amount of quality of effluent discharges from the aerobic/finishing ponds (i.e. the process step following solids removal and anaerobic digestion) used in adja
cent fields or tree plantations. Regardless of the absence of the requirement to submit data locally, the Company will continue development of its monitoring program to inform its management program and to ensure it is in compliance with the stricter of either national Chinese or WBG/IFC’s limits for all its operations, e.g., farms, feed mill and slaughterhouse. This is addressed in the ESAP.



A previously developed Clean Development Mechanism (CDM) project involved building biogas digesters for 6 farms; this required Muyuan to monitor emissions from bio digesters so as to manage their operation. Data collected as part of that project has since been used as a basis for subsequent biogas developments at all other farms.

PS2 Labor and Working Conditions



Organizational capacity:



The total workforce is over 2000 of which approximately 80% are farm workers located on the pig breeding and production farms. The Human Resource Department is managed by nine staff responsible for application of HR policy, procedures and administration. Activities of the Department are guided by a HR Manual. This manual is currently being updated to include sections on working hours, benefits, staff grievance mechanism, staff training and development, safety, and a code of conduct. The revision is scheduled to be completed before June of this year; the completion of the manual to ensure compliance with PS2 is addressed in the ESAP.



Worker Welfare:



The majority of farm workers are recruited from the local population in the immediate vicinity of the farm. The minimum age for employment is 18 years. All workers sign a standard written contract with the Company which describes a general description of the position and terms and conditions of employment. During the first three months of employment, they are assigned to a mentor thereby receiving on-the-job training. Workers are essentially paid on a production basis; average monthly wage is 2,500 RMB. In addition, all employees receive social insurance (which covers pension, unemployment, medical, injury, and maternity) and 11 days of public holidays in accordance to the regulatory requirements. Given biosecurity concerns and lengthy quarantine periods associated with gaining access to and working in the farms, farmers are provided with no-cost accommodation on the farm and subsidized meals in the canteen. In general, the single workers are provided with accommodation in shared two-or more bunk rooms, while married workers will have a room for the couple. According to Muyuan, the majority of the workers are from local villages and family members are allowed to visit the workers. The Company also provides a service to fetch workers’ children studying in other town to visit them over weekends.



Farm workers are required to work irregular hours determined by the pig production cycle (i.e., farrowing, weaners, growers). Farm workers assigned to delivery work in three shifts. Farmers assigned to looking after the sow and piglets during lactation (i.e., until the piglets are 18 days of age), during weaning (i.e., until the piglets are 52-55 days of age) and as growers (until pigs are 100-110 days of age) are required to maintain the equipment, ensure adequacy of feed and water, cleaning, monitoring the health of the pigs. Typically this implies relatively low intensity work spread over a long day i.e., from 8 am to 10 pm. To ensure compliance with labor laws, Muyuan has submitted notification to and received approval of the local labor department regarding irregular working hours. Finally, an ACFTU union chapter is active and Company workers are free to participate therein.



Worker Health and Safety:



Muyuan uses thi
rd party contractors for the construction of new farms. Contractors recruit workers from local villages for construction work. Health and safety issues are jointly managed by Muyuan and Contractor personnel. The workers receive training for health and safety requirements related to construction activities from Muyuan safety personnel as well as the contractor. During the site visit to the Wolong project which was under construction, general safety rules were observed posted onsite; only low risk work was being carried out at the time (e.g., applying mortar to the end of one of the pig houses), so overall management of hazards could not be field-verified. Construction operations are regularly inspected for adherence to required health and safety practices by local authorities. Muyuan conducts annual health check up of all farm workers in accordance with standard international practice.



Fire safety control measures are required for the feed mill under Chinese regulation. An as-built approval by the local fire safety department dated December 2010 was reviewed during the appraisal. Farms are constructed using fire proof walls and roofs and fire extinguishers are provided; inspections of farms are not required under local regulation. Biogas facilities are constructed with fire safety precautions built-in such as water seal containers.

PS3 Pollution Prevention and Abatement



Each farm is equipped with a bio digestion system to treat manure and preclude the need for effluent discharge to surface waters. After anaerobic digestion, the wastewater is treated aerobically in an oxidation pond and then is used for on-farm use, on-farm irrigation and agriculture/woodland irrigation on land located close to the farms. Methane produced by the treatment process is used to generate electricity at each farm. Total electricity generated (i.e. company-wide) is currently 1.44MW. Solid waste from the bio-digestion process is provided free-of-charge to farmers for use as fertilizer.



Muyuan relies on nearby reservoirs and onsite groundwater wells for its sources of water at the farms. Water from surface sources and wells is subject to permit limits; data supplied by the Company indicated compliance with the permitted rates (the Company is subject to one permit for all extraction but does monitor individual farm use) with a total consumption of 3,037 m3/d for all 18 farms. As the farms maintain certain distance from the local villages, groundwater abstraction at the farms in general does not create competitive water usage issues.



Based on the review of environmental management system documentation, the Company continues to monitor and target recycling of hazardous and general wastes, attain zero fire incidents and meet a particulate air emission standard of less than 200mg/m3 for coal-fired boilers. Muyuan will implement measures to ensure that emissions from boilers subject to regulation comply with the stricter of Chinese and IFC/WBG limits.



The farms utilize natural and forced ventilation for odor control at the pig housings; for example, pig pens are elevated allowing air to flow through the housing. Odor is allowed to disperse into atmosphere without further chemical/ physical treatment. Extreme odor was not noted during the site visit to any one of two farms visited.



Muyuan utilizes coal as fuel for hot water boilers, steam boilers, and cooking activities in the dormitory/ canteen. The hot water boilers at the farms are equipped with cyclones for dust removal from the coal burning process.



The EIA for the feed mill in Guanzhang listed the use of dust collectors to mitigate dust generated from the feed production processes (e.g. from milling) while the on-site boiler is equipped with a dust removal system. Muyuan has designed and constructed flooring and stormwater runoff mitigation measures for coal storage areas on some farms; the completion of suitable coal storage facilities for all farms is addressed in the ESAP.



Chemicals and medicines (for animals including vaccine and nutritional products) are centrally stored in a warehouse in Guanzhang Feed Mill as well as at the accommodation/ office area of farms. Muyuan has begun development of procedures to manage centralized and farm-level facilities for storage of medicines and chemicals; this procedure will be
enhanced to include reference to better storage practices, hazards to be identified and emergency measures to be determined. This is addressed in the ESAP.



A biowaste disposal and treatment site with 2 incinerators used for the disposal of carcasses and other wastes is located near Farm #2. Carcasses are typically temporary stored in cold storage at the farms before being transported to the treatment site for incineration. The incinerators have a capacity of 100-200kg/hr/incinerator and are fired by diesel for initial burning with an operational temperature of between 850oC to 1100oC. The exhaust is treated with wet scrubbing particulate removal before being discharged to the atmosphere.



At the slaughterhouse, unwanted parts from the animal such as blood, head, fat, skin and intestines are sold to local third party meat, feed and tannery processors for further processing. Meat or animal parts that are not fit for further processing (or potentially containing diseases) are burnt in a small incinerator within the slaughterhouse. The incinerator operates on diesel with emissions subject to particulate removal cyclone before discharge. Site personnel indicated a disposal of approximately 10kg/week via the incinerator.



Used syringes, needles and vaccine containers used for animal care are centrally managed and disposed of by high temperature disinfection and land disposal. The company will maintain records on types and amounts of waste disposal going forward, as set forth in the ESAP.

PS4 Community Health, Safety and Security

Muyuan farms are located in rural areas throughout Neixiang County. Muyuan site selection and screening criteria are used to identify sites located on poor quality agricultural lands distant from settlements. As such interaction between farms and adjacent communities is dominated by employment of local people on the farms and the passage of Muyuan-related vehicular traffic (e.g., delivering feed, transporting pigs to slaughter) on smaller rural roads. Given the large number of Muyuan farms and their distribution throughout the County, Muyuan has developed driver procedures and undertakes training on the basics of safe driving and avoidance of driving while tired.



Muyuan has implemented strict biosecurity procedures on all its farms. Farms are fully fenced and gated thereby restricting access. As described above, farm workers are required to follow strict quarantine procedures governing their access to and ready movement to and from the farms, with these requirements becoming progressively more severe in moving from hog farms to breeding (parent, grandparent and great grandparent) farms. All vehicular access to and movement within farms requires passage through dips.



Muyuan has developed various emergency response plans to address potential emergencies including fire and biogas leakage.



The feed mill located in Guanzhang Town is surrounded by commercial and residential establishments. At the time of the first investment appraisal, fire protection/ control measures within the mill was observed to be minimal, including the lack of fire alarm system and appropriate dust control. Muyuan since conducted a comprehensive safety assessment/ review for its feed mill operation. Whereas most of the recommended corrective actions have now been completed, those remaining regarding prevention of explosions and some fire prevention requirements remain to be finally closed out; the completion of these recommended items is addressed in the ESAP.

Muyuan interacts with affected communities primarily through employment of farm laborers from these local villages, the free supply of biogas dregs (from the bio digestion operation) and corporate social responsibility program activities. Local village houses are generally located more than 500 meters from farms. EIA’s produced for new projects are required to be made publicly available. The Company will ensure that land transactions going forward are informed from the lessons learned at Dengzhou and ensure that village committees fully disclose and display proposed agreements with individual villagers so as to promote the fullest form of engagement and transparency with those parties to land deals. This will be included in a formalized community grievance mechanism developed as part of the ESAP.

While Muyuan does not have an established policy regarding corporate social responsibility policy, the Company is active in supporting a range of activities. Core social responsibility activities supported by Muyuan are primarily related to education and include the on-going support of primary schools (infrastructure development and operations) and the support of further education through the provision of scholarships for the poor. Project development is often associated with improvement in rural roads and the preferential employment for local people. In addition to these initiatives, the Company has also supported broader social welfare/ humanitarian issues in Neixiang County, e.g., life support for disabled people, earthquake area reconstruction, and farmer assistance for crop failure.

This Environmental and Social Review Summary, the associated Environmental and Social Action Plan and relevant Project documentation should be made available (in Chinese) in the Sponsor’s office in Neixiang County and on the Sponsor’s webpage.

Contacts within Muyuan:
Mr. PAN, Jinwan
Muyuan Foodstuff Co., Ltd
Guanzhang Town, Neixiang County,
Henan Province, China
Tel: 0086 377 65230888

Company website/webpage:
http://www.hnnxmy.com

Broad Community Support is not applicable for this project

Title	Anticipated completion Date	Status	Comments	Completion Date
Management and Monitoring Program. The Company will continue to develop and implement an environmental and social management and monitoring framework compliant with relevant Chinese laws and the requirements of the IFC Performance Standards and applicable WBG EHS Guidelines. Specifically, the monitoring will include but not be limited to the following: air emission for various boilers and cooking facilities utilizing coal; air emissions from incinerators; worker exposure to chemical substances.Reference shall be made to Chinese regulations including Emission Standard of Air Pollutants from Boilers GB 13271-2001; Integrated Emission Standards of Air Pollutants GB 16297-1996; Emission Standards for Cooking Fumes (Interim Standards) GB 18483-2001; Occupational Exposure Limit for Hazardous Agents in the Workplace - GBZ2.1-2007; Pollution Prevention and Management Methods for Livestock and Poultry Farms; and IFC’s EHS Guidelines (General and Mammalian Production and Meat Processing).	12/31/2012 12:00:00 AM	In Progress	Under discussion with IFC client
Roles and Responsibilities The Company will add to current job descriptions for the environmental coordinators (or coordinators at the higher level) by including broader responsibilities in environmental management, including environmental monitoring for facilities other than biogas/ wastewater treatment system.	09/30/2012 12:00:00 AM	Completed	Completed	07/17/2013 12:00:00 AM
Community Grievance Mechanism. The Company will formalize a community grievance mechanism to provide for community engagement beyond that provided for in the EIS process and to ensure future land transactions are conducted in the most transparent manner.	09/30/2012 12:00:00 AM	Completed	Completed	07/17/2013 12:00:00 AM
Human Resources Manual The Company will complete the revision of the Human Resource Manual to ensure compliance with PS2:	12/31/2012 12:00:00 AM	Completed	Completed	07/17/2013 12:00:00 AM
Work Place Safety Program The Company will expand its work place safety program to include 1) Job hazard analysis (or its equivalent) to ensure higher risk jobs are appropriately managed and 2) contractors and those doing work on behalf of the company to provide for collection of statistics of the incident/ accident occurrence, conduct detail root cause analysis, identify safety trend and implement appropriate measures to further reduce incident/ accident rates.	03/31/2013 12:00:00 AM	Completed	Completed	07/17/2013 12:00:00 AM
Chemical Storage The Company will review its chemical storage management procedure to ensure it meets the requirements of the WBG’s EHS Guidelines	09/30/2012 12:00:00 AM	In Progress	Under discussion with IFC client
Emissions limits The Company will implement corrective measures to ensure that emissions from boilers subject to regulation comply with the stricter of Chinese and IFC limits.	12/31/2012 12:00:00 AM	In Progress	Under discussion with IFC client
Coal Storage Complete the construction of appropriate facilities for coal storage	06/30/2013 12:00:00 AM	Completed	Completed	07/17/2013 12:00:00 AM
Feed Mill Safety Study The Company will complete the outstanding recommendations made in the comprehensive safety assessment/ review for the feed mill operations.	12/24/2012 12:00:00 AM	Completed	Completed	07/17/2013 12:00:00 AM