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 company follows the principle of leasing vacant land and/or existing industrial land and/or buildings based willing-buyer willing-seller transactions. There has been no physical or economical displacement in the past associated with existing operational facilities and no involuntary resettlement is expected for the future assets to be developed under the project. PS5: Land Acquisition and Involuntary Resettlement is therefore not applicable.

All the facilities being developed or acquired under the project will be located in well-developed urban commercial / industrial / urban areas and there is no material risk of significant conversion of natural and/or critical habitats. Thus PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources is not applicable. No indigenous peoples are affected and there are no expected impacts on any cultural heritage resources. Hence, PS7 – Indigenous Peoples and PS8 – Cultural Heritage do not apply.

The company shall however consider all relevant social and environmental risks and impacts, including the issues identified in PS1 through PS8 while assessing any new business opportunities.

This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards and guidelines.

Key environmental and social (E&S) risks and issues related to this investment include: assessment and mitigation of impacts due to the company’s activities including future projects; the company’s capacity to manage its social, environmental, health and safety performance in accordance with IFC’s Performance Standards and applicable guidelines; assurance of fair, safe and healthy working conditions; utilization of equipment and operational practices that maximize conservation of energy, water and process materials including recycling and reuse initiatives; management of emissions and liquid discharge; handling and management of hazardous materials and hazardous wastes; and the impacts of operations on the local ambient environment.

The company has presented the information about how the environmental and social (E&S) issues and impacts are being addressed, to ensure that the Project complies with the E&S requirements including: the host country laws and regulations; IFC’s Performance Standards; and the relevant World Bank Group (WBG) EHS Guidelines. This information is summarized in the paragraphs that follow.

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.

- Environmental and Social Assessment and Management Systems:



Assessment:



For any potential new projects (acquisition or greenfield development), a formal Environmental Site Assessment (ESA) as per the American Society for Testing and Materials (ASTM) Standard Practice is carried out. The ESA relies on review of available environmental records, site visit and interviews with site representatives to identify any presence or likely presence of potential for contamination at site based on the historical use of the site. Also an environmental baseline assessment is done in-house for each new facility to be developed/acquired.



For the development of any new facilities, as per the local regulatory requirements, the company engages external consultants to conduct an Environmental Impact Assessment (EIA) study and develop an environmental management plan (EMP) covering both the construction and operational phases. For its operational facilities, the company has procured all the regulatory permits, and strictly complies with the mitigation measures as per the permit conditions.



The company has a Risk Committee at the board level and which has members such as the CEO, CFO, senior vice presidents, and legal counsel. The risk committee meets every quarter, and oversees EHS related issues as well.



Management Systems:



JE’s vision is to be the world''s definitive provider of innovative and reliable motion systems and has its core values as MARBLE (M: make customers successful, A: attract and develop great people, R: reach higher, B: believe in practical solutions, L: lead by example and E: excel in execution). (http://www.johnsonelectric.com/en/company/company-vision-and-core-values).



To operationalize these values in the context of EHS, JE has a corporate EHS Policy in place which is followed and adopted at all the operating sites. The facility at Shenzhen has in addition an energy policy in place. JE has developed a global EHS Management System which comprises of a series of globally applicable EHS Standards and an EHS assurance process which are applied to all its operating facilities (http://www.johnsonelectric.com/en/company/environmental-health-and-safety).



The EHS Standards are periodically updated in order to achieve the objective of continuous improvement. The EHS Standards have 22 elements including: 1) incident notification, investigation and reporting; 2) personal protective equipment; 3) electrical safety; 4) machine safety; 5) manual handling; 6) elevated work / working at height; 7) safety committee and safety inspections; 8) vehicle safety; 9) chemical management; 10) hot work; 11) lifting operations; 12) industrial hygiene; 13) occupational health; 14) EHS training and communication; 15) access authorization and control; 16) contractor management; 17) hazard and risk assessment; 18) emergency preparedness and response;19) lock-out / tag-out (LOTO); 20) environmental and energy management; 21) documentation & recor
dkeeping; and 22) audit and assurance.



Most of the existing facilities of JE are certified to ISO 14001 as per the requirements laid out in the EHS management system except a few facilities which are in the process of getting certified as well. Further JE has initiated the process of certification to OHSAS 18001 for all its operating facilities which will be done phase wise and is likely to be completed for all facilities by 2017.



The company will start the Environmental, Social and Governance (ESG) reporting for the Hong Kong Stock Exchange from the next financial year (FY) on the lines of Global Reporting Initiative (GRI) reporting. An ESG report prototype is being drafted and likely to be completed by May 2016.



- Organizational Capacity and Competency:



The company has a well-articulated detailed organization chart with clearly defined roles and responsibilities and reporting lines for staff managing the EHS issues. There is a general manager as the global EHS head with a dedicated EHS team at each facility. The Shajing facility in China has a well-organized EHS team headed by an EHS Director and supported by EHS managers and officers (covering thematic areas of safety, wastewater treatment, industrial hygiene and energy efficiency as relevant). There is a dedicated team of about 50 experienced professionals covering the EHS function across various facilities of the company. The EHS team at the facility level reports to the global EHS head who in turn reports to the Senior Vice President of Human Resources of the company.



- Emergency Preparedness and Response:



Based on the identified hazards and risks, an on-site Emergency Response Plan (ERP) has been developed by the company for each facility. Accordingly, potentially hazardous areas have been identified and evacuation routes and assembly points have been designated and clearly marked. JE also requires its contractors to prepare ERP covering various emergencies during the course of major projects.



- Monitoring & Review:



The company has put in place an elaborate monitoring and reporting program as documented in its EHS management system. This program covers KPIs related to manufacturing, HR and EHS. All the facilities report on standard safety related KPIs such as (lost time accidents, recordable injury, first aid cases, etc.). An audit of EHS management systems is done on a periodic basis and findings acted upon and documented.



Safety inspections are done on a monthly basis for each facility. Environmental monitoring is governed largely by the permit requirements and is done for ambient air quality, stack emissions, ambient noise levels and wastewater quality. The company is in the process of compiling KPIs for various EHS indicators for all its existing facilities globally as part of the ESG reporting to be initiated from next FY and the company is expected to be in compliance with IFC’s PS and relevant environmental, health and safety guidelines.

JE currently employs around 36,000 employees globally of which the Shenzhen facility employs around 25,000 people. Female employees constitute around 60% of the total workforce. Most of the workers are regular employees and temporary hires are small in number, are engaged for at least a month and not on a daily basis and are provided with a copy of contract and terms of employment. Very few workers are temporary hires.



- Human Resource (HR) Policy and Procedures



JE has in place a documented global HR policy and operational procedures which are in line with company’s corporate vision and mission. The global HR policy includes policies on harassment free workplace, equal employment opportunity, open communication, workplace violence and weapons and integrity and ethics. JE also has in place an anti-bribery policy and Code of Ethics and Business Conduct adopted at the corporate level.



Each of the individual facilities have their own dedicated HR team and an employee handbook in place which is in line with the labor law requirements of the respective country in which the facility is operating. The employee handbook is accessible to all the employees, who also receive a copy of the same at the time of joining, together with their appointment letter and contract. JE has a company commitment on non-employment of child and forced labour and which is also included in the standard terms and conditions for JE’s suppliers. The wages paid are above the minimum wages requirement as stipulated for each respective country in which the facility is operating. The company’s HR policies and procedures are consistent with the requirements of PS2.



- Freedom of Association, Grievance Mechanism



JE respects the staff’s Freedom of Association, and, hence does not prevent formation of employee unions. As part of its HR policies, an open communication policy is in place which emphasizes two way communication between management and the employees. The policy documents the manager as the first person to be contact by the employee in case of any grievance and/or HR team or the senior vice president/corporate HR team in case an employee is not satisfied with the level of communication. There is also an option of using the whistleblower / anonymous hotline if the employee feels that open communication is not possible. The relevant links for communication are available on the intranet and accessible to all employees and the hotline number is posted in local languages in a conspicuous location at all sites.



- Training and Human Resources Development



JE has a corporate training department which manages the training program for employees in China as well as extended residential training for overseas technicians and engineers from sites such as Chennai, Nis and Zacatecas. For all other facilities there are site specific training teams who develop their own training calendar. Induction training is however mandatory for all employees. The training team comprises
in China comprises about 35 full time staff who are engaged in developing and implementing training programs for its employees which is a sub-part of the HR department. EHS is an important component of induction training as well as in the ongoing training calendar.



- Occupational Health and Safety



JE has put in place elaborate safety management system and safety orientation is an integral part of the induction training for all the new employees. Out of the 22 elements of the EHS management system, 15 are devoted to safety controls and establish best practices on working at height, lifting operations, working with vehicles, mobile equipment and other higher risk activities. As appropriate, risk assessments are carried out prior to a working process being put into operation.



There is an incident reporting mechanism in place which records all reportable injuries, first aid cases, near misses and lost time accidents along with cause of accident, immediate action taken and correction action required. All incidents are reported and thoroughly investigated through root cause investigation techniques. The lessons learnt from the incidents are communicated and shared through “Cycle of Learning” which is prepared for every incident. There is an occupational health management program which comprises occupational hygiene measures ranging from identification of occupational hazards in the workplace, evaluation and control of job related health risks to pre-employment occupational health checks and on the job medical surveillance to workers. Regular workplace monitoring is done for key hazards such as noise and chemical exposures to ensure the respective engineering controls are appropriate and occupational exposure limits are not exceeded.



All shop floors are neatly organized following the Gemba Kaizen (GK) and 6S principles. All the KPIs, work instructions and SOPs are displayed on the shop floor. Personal protective 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 operations and potential safety hazards.



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. Firefighting training is provided to the employees and fire drills are regularly conducted. JE has not had any major accident involving any employee since last 10 years; those that have occurred relate to minor incidents involving first aid and limited lost time injuries. A management walk-through is done once a week which focusses on operational needs as well as EHS aspects.



JE has also initiated conducting health risk assessment since 2012 and is being done internally. Industrial hygiene monitoring is being done annually and occupational health surveillance is also done for the employees with sampling by third party industrial hygiene asse
ssors.



- Contractors /Construction Safety and Supply Chain



JE has around 2200 suppliers globally for supplying raw material such as steel, resins and copper wire. There is a corporate Supply Chain Services department which sets out the policies, SOPs and the guidelines on supplier management for all locations worldwide. Supply Chain Services department has 600 staff globally who supports in executing these policies.



JE has standard terms and conditions for the supplier which are incorporated as part of the work order and which include provisions of EHS aspects such as restriction on use of hazardous substances in electrical and electronic equipment, adhering to the principles of freedom of association and right of collective bargaining, abolition of child labor and elimination of forced labor/discrimination at work. An annual audit is undertaken for preferred and strategic suppliers. JE also has a system of assigning supplier performance rating and suppliers below a specific threshold rating are advised on improvement measures and failure of compliance by the supplier can lead to work not being awarded in future to that supplier. The C&S division serves as the internal supplier to the Automotive Products Group and Industry Products Group which are the two main divisions/verticals of JE’s business.



At any facility where a number of contractors are involved such as Shenzhen facility, there is a designated contractor safety officer whose responsibility involves review of contractor performance on quarterly basis, carrying out job risk assessment, training contractor staff, site inspections and issuing work permits. The contractors are required to comply with national labor laws, including those governing occupational health and safety.

Most of the manufacturing processes do not require water or chemicals, nor do they result in any wastewater generation except for the plating operations which is done only at a few facilities. The company is aiming to phase out plating operations in the long term and is going for procuring material like steel which would not require plating for finishing operations. To this extent, the company has mandated obtaining CEO approval in case of procurement of material which would require plating for finishing operations.



- Resource Efficiency:



The company has an energy saving committee and energy efficiency is listed as one of the KPIs. Energy efficient measures are being implemented at all operating facilities. As an example, the facility at Shenzhen has achieved energy saving by 10-30% for the energy saving projects they have undertaken in the last three years.



- Water and Wastewater:



Water is used mainly for domestic use and is sourced from the local authorities. For all the operating facilities, the sanitary wastewater is discharged in the municipal sewer managed by the municipal authority. Most of the operating facilities do not generate process wastewater and wastewater is generated mainly for the facilities engaged in plating or similar surface finishing operations. Where this occurs there is tertiary treatment on-site prior to discharge with water recycled or reuse. The company follows online monitoring of various parameters such as COD, heavy metals (nickel, copper and total phosphorous) and pH at each stage of treatment to ensure that discharge parameters are ensured in compliance with applicable requirements.



- Greenhouse Gases (GHG) Emissions:



The primary energy requirement for the project is that of electricity, which is procured from the national grid. Fossil fuels are generally not used in the company. Small capacity diesel generators are installed on site as backup generators, for use in the rare case of power failure. The GHG emissions of the project are therefore dominated by those due to the electricity consumption. The project has an estimated emissions of about 4,000 tons of CO2e per year 2015 for the four facilities under consideration (Brazil, Mexico, Serbia and India).



- Air emissions and Ambient air quality:



The source of air emissions include stacks attached to exhaust ventilation of the plating shop, die casting and powder coating sections, and DG sets which are used only in case of power failure. The emissions monitored as per applicable statutory norms.



-Noise:



The source of noise includes various pumps and motors most of which are provided with acoustic enclosures. Ambient noise monitoring is done regularly and company is in the process of devising upgraded equipment and technologies to reduce the noise levels to the extent possible. There is a continuous monitor display for workplace noise records.



-Solid and Hazardous Waste:



Solid waste is segregated and collected in designated
bins and sent for disposal to municipal operated facility. The hazardous wastes generated (such as wastewater treatment sludge) is stored in designated hazardous waste storage area and sent for disposal to authorized contractor as stipulated by local regulations. Transfer records and chain of custody records are maintained. JE also carries out vendor audits before engaging the vendor for disposal of hazardous waste.

-Traffic and Noise:



JE typically has its facilities located close to the airport / close to the highways and / or access roads. The two main impacts on community that are perceived could be due to increase in traffic and noise. Based on the observations during the site visit at the Shenzhen facility, it was observed that JE has provision for adequate areas for parking internally. The EHS management system covers vehicle safety and speed limits are specified for vehicles which are strictly implemented. Therefore given the latter allied to the location of the facilities, no significant impacts are expected due to movement of vehicles as a result of the company’s operations. Further most of the facilities are typically located in industrial areas and not in close proximity to communities and therefore no significant impact due to noise is anticipated.

JE is in the process of initiating ESG reporting including its activities and performance relating to EHS. The report will also cover Corporate Social Responsibility (CSR) measures. JE however has already been implementing CSR measures for some time. As an example, JE has started a technical college in Shenzhen as part of its CSR program where about 500 students are recruited from remote underdeveloped areas in China and they are trained on technical aspects as well as normal education. After graduation, they will normally be retained and employed by the company. The company has also been working on engineering measures to reduce noise level at the boundary of their facility with special emphasis on nearby community where applicable. The company will start disclosing the sustainability related information publically from next FY. The company plans to implement a community grievance mechanism in line with the IFC PSs in the event that any new facility is located in vicinity to any community.

Johnson Electric will disclose this ESRS locally at the following address:

Johnson Electric Group
6/F, 12 Science Park East Avenue
Hong Kong, Science Park
Shatin, NT, Hongkong

All inquiries and comments may be directed to:

Mr. LAM Wan Choi
General Manager – Global Environmental, Health and Safety,
Johnson Electric Group
6/F, 12 Science Park East Avenue
Hong Kong, Science Park
Shatin, NT, Hongkong
Telefax: +852 2663 6688, E-Mail: mailto:wanchoi.lam@johnsonelectric.com

Broad Community Support is not applicable for this project