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
PS 5 – Land Acquisition and Involuntary Resettlement
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
PS 6 is not considered applicable as the project facilities and ancillary facilities are located in urban areas; PS 7 is not considered applicable as no Indigenous Peoples or ethnic minorities are known to reside in the project facility areas and to be adversely impacted; and there is no expected adverse impacts on cultural heritage within the project’s footprint hence PS 8 is not considered applicable.

The investment has been classified as Category B according to IFC’s environmental and social review procedures. Key issues and impacts, discussed in more detail in the following paragraphs, include: labor and working conditions including occupational health and safety; traffic and transport safety management; contractor management; and land acquisition.

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.

E&S Assessment and Management System:



The two types of facilities operated by the company, namely product distribution centers and warehouses, are not required under national laws to have E&S Impact Assessments undertaken before their commissioning. Hence ESIA’s have not been prepared for any company facilities. The company manages its day to day E&S risks throughout a system consisting of: a series of operational Key Performance Indicators (e.g. no fire incidents) tied to performance evaluations at departmental and employee levels; a set of Environmental, Health, and Safety (EHS) and fire safety procedures (covering aspects such as safe use of fork lifts and lifting equipment; emergency response; workplace noise reduction; energy efficiency) and a 6S procedure (specifying requirements on operational aspects such as having proper signage, proper placement and access control of equipment, fire safety, facility tidiness and cleanliness, etc); and daily site inspection routines by assigned 6S and EHS personnel at each facility against an inspection checklist. These three elements are applied universally to all of the company’s facilities. The EHS procedures were distributed to each facility, which were required to review them in detail and revert with customized documents befitting localized conditions of each facility. The EHS procedures at the headquarter level are controlled documents developed based on ISO9001 requirements, to which the company is currently certified. KPI related performance data is reported at regular intervals by facilities to company headquarter personnel, while performance is verified by regular/monthly KPI performance reviews, and site inspections by headquarter personnel. External ISO9001 annual audits cover some aspects of the KPIs, although not with a focus on EHS and mainly on document control. Occupational health and safety data in particular is reported on an exception basis i.e. if significant lost time accidents were to occur.



Organizational Capacity and Competency:



At the company headquarter in Hangzhou, the Security and Safety department, the Industry and Engineering department, the Vehicle Management department, the Human Resource department, and the Administrative department are key departments responsible for development, updating, and implementation of EHS related documentation and performance monitoring against KPI’s and procedures. New site identification and land leasing is undertaken by the Industrial and Engineering department, and a number of E&S considerations are taken into account during site selection e.g. (i) whether a potential site has direct steam and/or natural gas supply from local municipality to minimize construction costs and energy bills; (ii) whether fire engines can quickly access a site in case of a fire; and (iii) whether the site has known unresolved compensation issues,



At the facility level, the heads of facility are responsible for ensuring that facility operations meet
KPI targets and that all EHS and 6S procedures are duly followed, and who receive technical support from company headquarter personnel (e.g. Industrial Engineering department). This relies to a large extent on a system of site inspections and training, during which internal safety inspectors would use a pre-developed checklist as a basis to conduct site inspections and detect non-compliances if any, and administer training programs accordingly. The 6S checklist contains 21 indicators (e.g. fire-fighting equipment is functional and regularly inspected; fire safety related signage are clearly displayed; no combustibles placed near electrical distribution control boxes; worker dormitory resident registration records are up to date;), against which a score is assigned upon inspection.



Emergency Preparedness and Response:



The company’s emergency preparedness and response process, as part of its EHS procedures, focuses on two aspects: fire safety and site security. Fire drills are conducted on a quarterly basis in concert with the local fire department or brigade of each facility. There have been no known incidents of emergencies and evacuation since company operations commenced.

The company has a workforce of about 7,000 directly employed full time workers at its facilities, and additionally 25,000 (excluding third party drivers) temporary or part time persons working at its facilities who are employed by third party contractors or labor intermediaries, a portion of whom are brought in to work during peak periods of business demand. The above are mostly front line employees at the company’s warehouses and product distribution centers. In the past 2 years, the company’s directly hired workforce have experienced a 20% turnover, while turnover was about 100% for the 25,000 third party workers. There have not been any large scale retrenchment since the company commenced operations in 2007 and none is expected in the foreseeable future. As per the company, the high turnover of the contracted workforce has been largely due to the nature of the industry which generally experiences high turnover rates for front line unskilled positions.



The company’s human resource practices are dictated by a set of HR related KPI’s and procedural document. Levels of remuneration and benefits are determined through market surveys by the HR department. Terms of employment are written into employment contracts consistent with requirements of national labor laws. The company provides worker accommodation able to house up to 560 workers at each facility, using a standardized company-level template for construction which specifies dormitory size (i.e. living space per person), sanitary, and other conditions. Workers are provided meals at on-site canteens. The company’s engineering department provides a construction template / master plan to warehouse developers specifying construction specifications and requirements such as those on fire safety (e.g. escape routes), layouts, the provision of separate sewage and rainwater ducts, etc.



All workers, regardless of whether they are holders of urban or rural hukou’s (i.e. residence location status), are enrolled in the mandatory social security insurance scheme and also commercial accident insurance schemes. The company follows a policy of non-discrimination and equal opportunity in its human resource management practices, and there are no signs of the use of child or forced labor in the direct or contracted workforces. The company has a system in place to record the identification information of incoming workers (for the purpose of helping them to apply for work permits) which include checking that they are of legal working age. There have been no instances of labor related litigations in the past few years. Key means to collect and address opinions from staff are: drop boxes, an email address which reaches the Vice President of HR of the company directly, a HR hotline into which staff can dial, regular supervisor-worker and employee group meetings, and monthly employee open forum meetings. All opinions collected and subsequently addressed are treated confidentially and consistent with principles of
non-retribution. Workers submitting ideas which lead to operational improvements receive cash rewards. In terms of formal grievance mechanisms, once a complaint is received from a staff member, the company’s HR department will look into it in detail; if needed/unresolved the case will be escalated to higher management; if those steps do not resolve the issue, the final means of resolution is for the worker to file a court case, as per national legal provisions.



Through on-site worker interviews and documentation requests made to third party labor intermediaries, the HR department of the company regularly verifies that employment contracts and practices between those intermediaries and contracted workers are consistent with national labor regulatory requirements.



At present about 10% of the company’s direct workforce are members of a labor union. The company is not opposed to any worker joining or initiating a labor union or entering into a collective bargaining agreement. In the past two years, there have been 17 cases of mostly minor lost time accidents, 4 of which involved directly hired staff members. As part of its on-site safety and security monitoring, safety and security supervisors assigned by the company regularly monitor occupational health and monitoring performance (on an exception-basis i.e. when accidents occur they are then reported to the company headquarter) and look for signs of non-compliances, and staff are enrolled in OHS related training sessions and briefings.

Pollution Prevention:



The company’s facilities are all located within municipal areas whereby waste water generated on site are discharged to municipal sewer systems and subsequently waste water treatment plants. Waste water generated on site are limited to sanitary waste water from offices and dormitories, oil and grease from canteen kitchens, and limited amounts of machine oils from trucks parked on site. There are no boilers in use at facilities, which mostly receive steam from municipal steam companies for indoor heating, or use grid electricity for heating purposes. Backup generators use diesel as fuel during electricity blackouts. Hazardous materials are limited to natural gas piped from municipal suppliers or in the form of gas canisters used at canteen kitchens, which are access controlled. Unused or damaged product packaging materials and dormitory food or other solid wastes are the key type of solid waste generated – these are collected by external recyclers or taken to landfill. Damaged products are sent back to manufacturers/traders.



Greenhouse Gas Emissions:



The project’s total greenhouse gas (GHG) emission is estimated at 600,000 tons CO2 equivalent on an annual basis, attributable to the following key sources: emissions from diesel as fuel for the roughly 2,800 fixed-route third party trucks which regularly do transport runs for the company - this constitutes two-thirds of total emissions; consumption of natural gas at facility kitchens constituting one-quarter of emissions; grid-electricity consumption; and use of diesel as fuel for backup generators at company facilities. Best Logistics is looking at potential technically and financially feasible information technology solutions to help improve transport efficiencies of its third party truck fleet, and these could potentially lead to vehicle fuel savings and therefore reduction in associated GHG emissions. Given that total estimated emissions exceed 25,000 tons CO2e per year, the company will use an internationally recognized estimation methodology to calculate its GHG emissions, and report this annually.

The company engages external contractors who provide security guards at its facilities. All guards are unarmed and there have been no major reported security incidents at facilities. In relation to the fleet of about 2,800 trucks transporting goods and packages for the company, the road accident incidence rate as tracked by Best Logistics for the year 2015 to date, is recorded as 2.94 accidents per 1 million kilometers traveled. The company requires its truck transport contractors to demonstrate that their transport fleets follow national regulatory requirements on road safety e.g. having two drivers taking turns to drive a vehicle for any journey exceeding a certain physical distance; mandatory rest hours after a certain distance traveled; etc. Training is provided to drivers by contractors on safe driving requirements. The company is currently exploring technically and financially feasible information technology solutions to track travel statistics and data real-time, which have the potential to further reduce the incidence rate, by for example pre-emptively discouraging potential instances of tired and/or dangerous driving.



The company will develop and implement formal procedures, KPI’s, and explicit requirements built into transport contractor agreements, related to the road safety management including emergency preparedness and response aspects. Refer to the ESAP for details.

As described under PS5, the company leases existing buildings or commissions to-be-constructed buildings for its new facilities predominantly through third party commercial/industrial developers, which in turn acquire land through local Governments. During land acquisition processes, the company has direct interactions with community members and other land users/owners to an extent. For future site identification and leasing activities, the company will reinforce measures and develop procedures, to directly engage with local communities during new-site reconnaissance work, and to receive, document, and redress stakeholder grievances. It will ask third party developers to provide land related screening information and follow the same measures and procedures. Refer to PS5 and the ESAP for details.

Contact Person: Ms. Angel Wan
Company Name: Best Logistics Technology (China). Co., Ltd.
Address: 5/F, Block A, Huaxing Modern Industrial Park
18 Tang Miao Road, Hangzhou, Zhejiang
P.R. China
Phone: +86 571 88995656
Facsimile: +86 571 88270027
http://www.800best.com

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
The company will use an internationally recognized estimation methodology to calculate its GHG emissions, and report this annually as an annex to the Annual Monitoring Report (AMR).	03/31/2016
The company will develop and implement formal procedures, KPI’s, and explicit requirements built into transport contractor agreements, related to the road safety management (including emergency preparedness and response) aspects.	05/31/2016
The company will develop a set of practicable screening procedures and requirements, consistent with PS1 and PS5, to be applied to all future sites to be leased. These will include appropriate measures by company personnel to directly engage with local communities and persons affected by land acquisition, and to receive, document, and redress stakholder grievances. Key screening elements will include but not be limited to the following: (i) Compensation consistent with prevailing market values plus transaction costs i.e. full replacement value; (ii) compensation paid on time and to all affected persons; (iii) adequate post-land-acquisition livelihood restoration assistance provided; (iv) due consultation, information disclosure, and grievance process was broadly exercised; (v) no unresolved issues including no known coercive practices during land acquisition; (vi) land users without legally recognized rights and other vulnerable groups are also properly compensated according to PS5; (vii) the following information is properly documented: total number of affected persons and land area affected at each new site.	03/31/2016
During its general on-site due diligence work, Best Logistics team members will also carry out such screening work (in concert with third party developers where appropriate), and the above mentioned screening results (together with all available supporting documents such as original compensation agreements, documents displaying villager two-thirds consent thumb prints, etc.) will be documented into a centralized screening information database to be maintained and updated regularly by the company. Where screening of a site finds risks and unresolved issues, the company will require the developer to ensure corrective actions; or where risks are regarded to be significant and/or too difficult to mitigate, to not pursue the leasing process of that given site further.	04/01/2016