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

The key environmental and social issues identified during previous IFC’s E&S due diligence activities included the following: (i) the continuous development and implementation of the environmental and social management system (ESMS), particularly with respect to how it is expanded – and staffed – to include construction sites and newly commissioned operations; (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 the regulatory required construction and operation of biogas facilities and use of stabilized wastes as fertilizers and/or fertigation.

Given that this investment is to be used to support similar operations to those previously appraised, namely the development of additional farms and associated support infrastructure, such as feed mills that will be designed and operated as prior farms have been, this appraisal found that these above issues are still relevant to the Company operations.

The potential adverse environmental and social impacts associated with this investment, and in particular the development of the new project sites, are relatively few in number, site-specific and can be readily addressed through mitigation measures the likes of which have been previously developed and 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.

Social and Environmental Assessment:



Muyuan continues to expand the number of farms, and therefore number of pigs raised, year-on-year. Current operations include 25 breeding and hog production farms and one feed mill while multiple facilities, including Wolong, Dengzhou and Xi Yin He farms and two feed mills (Jiu Kou and Lu Ying) are under construction. All facilities currently under construction have been subject to an EIA which has been reviewed and accepted by the relevant local authority (in compliance with the action plan item of the #29089 investment); this practice has been consistently applied following IFC’s first equity investment. The major environmental issue identified in such documents is the need to manage effluents generated by the farms; as noted above this is a regulatory requirement and an industry standard in China.



Additional in-house assessments (and monitoring) take place as per the action plan associated with the 29089 investment; this includes a review of the performance of the biogas facilities and monitoring the limited number of coal-fired boilers to ensure compliance with Chinese air emission limits. Note that the farms that are being partially funded by IFC under this investment (and also that of 32156) will not utilize coal-fired boilers. The Company has evolved its design with respect to providing heat and now uses different technology, such as heat exchangers. Please refer to PS3 for further analysis on the current efficiency of biogas generation – and its use to produce electrical power – and the potential to increase the amount produced.



Emergency preparedness (such as for flooding in the summer and fire hazards in the winter) remain the responsibility of the safety department. Vehicles and other equipment are still subjected to third party preventative maintenance inspections. Regarding evidence of emergency preparedness (including fire prevention and what to do if an emergency occurs) the company reported the local fire department is engaged to undertake initial inspection of facilities and upon the successful completion of this inspection will issue a certificate allowing operations to commence. In addition, subsequent irregular (i.e. unplanned) inspections are carried out by the State Administration of Work Safety. Similarly, worker dormitories are inspected; the company reports no issues with respect to these audits, i.e. that there are in compliance with all relevant requirements. Other parts of the farms are subject to internal inspections (i.e. conducted by trained company staff) who review placement and operability of fire extinguishers) and who conduct bi-annual fire drills.



Management program



The operational requirements of Muyuan farms continue to be 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) quali
ty control; (g) sales; (h) purchasing; (i) finance(including project); (j) construction/engineering management.



The company’s ISO 14001 environmental management system has been independently certified since 2010 with a scope that continues to include operating farms, feed mill production and associated management activities.



Documented procedures covering various aspects of the management system, including staff training; environmental aspect identification and risk assessment, objective and target setting, emergency preparedness procedure and response plans (for fire and liquid ammonia leakage from cooling systems), fire prevention procedures, chemical management, and control procedures for solid wastes, wastewater, air emissions and noise and odor discharges were reviewed. Development of these general procedures had been the subject of previous Environmental and Social Action Plan (ESAP) items; further refinement of procedures (characteristic of any management system subject to continual improvement such as ISO 14001), against for example, the requirements contained in the WBG/IFC’s EH&S Guidelines is currently being undertaken by the Company and will be reported upon in a subsequent Annual Monitoring Report (AMR).



As noted above, the E&S risk assessment and permitting procedure required of new developments is judged to be fully operational. It remains part of the Company’s overall management system and is incorporated as “Muyuan’s Process Flow for Regional Development.” Each department continues to undertake a 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. Regarding evidence of the functioning of this project application and review process (as was required by an action item under the first IFC investment), IFC reviewed a list of projects for which an EIA (i.e. new farm) and/or permit (i.e. wastewater permit) had been submitted and for which permission had been received. The process includes a number of steps (e.g., project siting, feasibility study, development of an EIA by a pre-qualified consultant, acceptance of EIA and granting of permission to begin construction, application for a permit to operate the project, etc.) For example, documents pertaining to the process for Farm 17 were reviewed by IFC including the application and acceptance of the EIA, and the permits required for discharges to the environment that had been issued by the relevant provincial authorities in the province where the farm is located.



The Company has an OHS policy and various management procedures for its operations. Muyuan has developed both a management level document for supervisors (the Safety Production and Management Manual) and a staff booklet (the Staff Safety Manual); between them they provide an overview of the OHS hazards f
ound within Muyuan operations and address the control of risks and describe the responsibilities of different departments/personnel within the Company to manage OHS. The company engages a local hospital to conduct surveillance for workers. IFC observed documented evidence showing medical reports having been conducted (these are kept by the employee due to privacy issues). The company keeps a master list to ensure compliance with relevant national regulations.



Construction site activity is monitored with the oversight of contractors being the responsibility of the designated Muyuan site manager. Contractors are first selected based on successful records of OHS management. As noted above, two construction sites were visited by IFC during this appraisal. Both were feed mills; one was little more than a concrete pad and some steel superstructure whereas the other was nearing completion. Workers were observed at both sites (although the mill nearing completion was not overly active at the time of the visit, work having been halted the previous day due to thunderstorms in the area making working at heights unsafe and workers had yet to start work again). Workers were seen at both sites with appropriate personnel protective equipment (PPE). Site managers both reported no incidents. Construction contracts stipulate compliance with national regulations which, in addition to being enforced by the company, are subject to review by the State Administration of Work Safety which conducts their own inspection of construction activities. An example contract was provided for review and deemed to include appropriate provisions to protect the health and safety of those engaged at construction sites. Wastes at construction sites are either separated for recycling or sent to licensed disposal sites; records are maintained for regulatory purposes. Security of sites is maintained by using fences and unarmed security guards. The above requirements are included in contracts between the Company and those engaged to build new facilities.



Such an evolution of OHS management – which includes the above described oversight of those involved in construction – is judged to address previously identified ESAP action items.



Feed mills remain certified to the Hazard Analysis and Critical Control Points (HACCP) standard. Farms and mills are certified to ISO 22000, the international food safety standard. Responsibility for maintaining the above systems continues to lie with the Quality department.



The production department is responsible for animal welfare. During past appraisals, the Company was 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, remains as one area that, albeit subject to a small scale pilot program (currently at 400 sows but proposed to increase to include 2,400 sows) could be reviewed by the company to be
tter align it with contemporary practices in the industry elsewhere in the world. The pilot program, using Electronic Sow Feeding (ESF) systems supplied from Europe and designed to allow for group housing of sows has not had a material impact upon productivity according to the company. As such, the expansion of this program, in support of animal welfare, while maintaining required levels of productivity is a possibility. IFC will therefore 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 Logistics Department assumes responsibility for a variety of services: 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 47 employees (including both those at HQ and those full time farm-level environmental coordinators.). The main responsibilities of the farm-level environmental coordinators include: the 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 has broadened job descriptions for farm-level environmental coordinators, as part of its evolving ESMS, to include greater responsibilities in environmental management, including environmental monitoring for facilities, other than biogas/ wastewater treatment system, in response to a prior ESAP item.



The OHS Unit has 7 staff who oversees health and safety management within the company from the corporate level. Farm-level coordinators are responsible for monthly safety inspections at the farms (a comprehensive company-wide undertaking). They also conduct more narrowly-focused daily and weekly safety inspections. The feed mill manager is ultimately responsible for OHS matters at that operation; a safety supervisor (a group leader position) provides day to day implementation support. As noted above, the Company has dedicated farm/project-level management on site at construction sites; these individuals have been trained by the local authority on construction site safety and report to the Construction Unit within the Logistics Department.



Monitoring and Reporting



The Company collects 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. Permits for existing operations do not require wholesale E&S monitoring of activities and s
ubmission 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 adjacent fields or tree plantations. Regardless, and in response to prior ESAP requirements, the Company has continued to develop its monitoring program to include monitoring of groundwater, soil quality and ability of soil to absorb applications of effluent. The company works with farmers and shares such data to ensure management of this practice. See data on water consumption, for example, normalized to production in the discussion on PS3 below.

Organizational capacity



As of July 2013, the total workforce was 3,400, the vast majority of whom are farm workers located on the 25 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 recently upgraded HR Manual; the Company’s practices are judged to be compliant with national labor law and those requirements of PS2.



Worker Welfare



The majority of farm workers are still recruited from local populations 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 with 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 towns to visit them over weekends.



The pig production cycle requires that farm workers work irregular hours. 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



As was observed, Muyuan uses third party contractors for the construction of new farms and feed mills. 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 projects under construction (including the Wolong project that was subject to IFC finance under IFC’s second investment in Muyuan - #32156), general safety rules (including the need to wear PPE) were posted onsite; workers were observed carrying out some work at height and fall protection and harnesses were observed being used. Overall, there were no operations being conducted that raised safety concerns. Construction operations are regularly inspected for adherence to required health and safety practices by local authorities. Muyuan conducts annual health check-ups of all farm workers in accordance with standard international food safety practice.



Muyuan reports farm-related accidents/ incidents, conducts safety site inspections and implements root cause analysis and corrective action when incidents occur in order to promote safety improvements. With respect to farming operations, work place incidents that result in time away from work for those involved are monitored. For example, five lost time injuries were reported during 2012 (from within a workforce of 2726 employees). This equates to a very low lost time incident frequency rate (LTIFR) of 0.92 LTI per million hours worked (industry averages would be expected to be around 10 incidents). When the issue of reporting was further discussed, the company referred to the reporting requirement it has developed (which is based on and governed by Chinese labor regulation) and is contained in a company document transliterated as “Ascertainment Standards of Work-Related Injuries and Cases.”



Farms are constructed using fire proof walls and roofs and fire extinguishers are provided. Biogas facilities are constructed with fire safety precautions built-in such as water seal containers.

Each farm is either equipped with its own covered bio-digestion system, or shares a system with an adjacent farm, which is used to treat manure. After anaerobic digestion, the wastewater is treated aerobically in an oxidation pond and then is used for irrigation (fertigation) and/or agriculture/woodland irrigation on farmland/woods located adjacent 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 for a nominal fee to local farmers for use as fertilizer. Solids provided to local farmers are tested before being used; tests for nutrient levels (nitrogen and phosphorus) and for the presence of heavy metals are undertaken as is required by national regulation.



The Company uses the following estimates for the amounts of electricity that it produces from converting manure to electrical power: 100,000 pigs produce 1,000 m3/day of biogas which can be used to generate 2,800kWh/day of electrical power. Whereas the use of manure to generate biogas is a widespread practice in China (due to regulatory requirements), IFC Advisory Services will work with the Company to explore whether more gas can be produced (and therefore power generated). For example, possible retrofitting of simple covered digesters with more advanced technology (to include pre-heating the influent and agitation of the mixture to be digested) may facilitate more efficient digestion. This could be especially useful in the colder months when farms only produce enough biogas to generate a third of their electricity needs; these same farms can generate enough gas in the warmer months to generate 100% of their electricity needs.



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). The Company has normalized consumption of water against production; after converting the drinking water consumed by boars, spare sows, pregnant sows and nursing sows, every pig sent to the market consumes on average 994.9L of potable water which the company reports are comparing very favorably with other operators in the pork sector in China. As the farms are purposely located in agricultural settings away from local villages, groundwater abstraction at the farms does not create direct competitive water usage issues with communities. Of equal importance, provision of treated effluent (containing nutrients for plant growth) to local farmers (i.e. as fertigation) also negates direct competitive uses and reduces consumption of raw water by those rural users.



As per an action item from a prior investment, the company has reviewed and improved its storag
e of hazardous materials (e.g. diesel fuels) and where physical relocation was required (i.e. to move them away from accommodation) has done so. New procedures have been incorporated into the ISO 14001 management system documentation.



Based on the review of environmental management system documentation, the Company continues to monitor and target recycling of hazardous and general wastes; when generated, hazardous waste (e.g., oils and lubricants drained from back-up generators) are required to be properly managed (stored separately from other non-hazardous wastes, etc.) in areas that are required to display appropriate signs (i.e. warning of the potential hazard therein). IFC reviewed a master list of solid wastes generated to see evidence of the practice; whereas the company uses licensed waste disposal operators they do not currently maintain records (i.e. copies of manifests). They will incorporate this practice in their EMS going forward and document the practice in future AMRs.



The company continues to meet the Chinese particulate air emission standards for the small number of coal-fired boilers that are used for the coldest three months of the year. As is noted above, the new farm projects subject to IFC financing will not use coal-fired boilers. The need to determine whether the boilers to be installed in the feed mills (that are currently under construction) will require monitoring, as per the requirements of the WBG General EHS Guidelines, will be undertaken by the Company and the outcome, and if needed monitoring results, will be reported in the AMR following commissioning of the feed mills.



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 of the two farms visited.



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 recently completed construction of stormwater runoff mitigation measures for coal storage areas on all of the farms that use coal as per a prior ESAP item.



Chemicals and medicines (for animals including vaccine and nutritional products) are centrally stored in a warehouse in Guanzhang Feedmill as well as at the accommodation/ office area of farms. Muyuan has recently enhanced procedures to manage centralized and farm-level facilities for storage of medicines and chemicals. The Company will review the requirements contained in the Mammalian Livestock EHS Guidelines against these procedures to ensure all WBG requirements are met and report upon outcomes in the AMR.



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 maintains records on types and amounts of waste disposal. The Company generated approximately 58,000 tons of CO2 equivalents in 2012 from all production processes; as such, they will continue to quantify their equivalent GHG emissions on an annual basis and report to IFC using the AMR.

Muyuan farms are located in rural counties. 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. Company employees man these gates; such employees are not armed. 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. As per IFC’s requirements, a minimum of 3 fire drills are performed yearly; the company reviews the performance of staff during these drills and makes changes to procedures as and when necessary.



IFC had previously reviewed the findings from a safety report for the feed mill operation (dated May 2011) as part of a prior investment. The report had detailed the need for follow up/corrective actions regarding some aspects of the operation (e.g., dust control, fire prevention, exposure to electric shocks, exposure to moving machinery, and falling from heights) which had become action items for the company to complete. Since that review, and the IFC requirement to address those issues, the company has worked to correct the identified shortcomings. IFC was provided with evidence of the completion of these items in the form of a summary statement to that effect from the Henan Polytechnic University Institute of Security Technology Engineering, which is the designated and authorized body to conduct such a review and who determines that operations are being conducted in accordance to required safety regulations.

Muyuan interacts with affected communities primarily through employment of farm laborers from these local villages, the supply of solids resulting from the bio-digestion process and corporate social responsibility program activities. Local village houses are generally located more than 500 meters from farms for bio-security reasons. EIA’s produced for new projects are required to be made publicly available. The Company also works with local authorities as well as representatives from local villages to inform them of project activities. The new projects visited had large billboards announcing the nature of the new farms and included depictions of the projects to be developed.

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 in the past 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 will be made available (in Chinese) in the Sponsor’s office in Neixiang County and on the Sponsor’s webpage: http://www.hnnxmy.com.

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

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.