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 previous appraisals have confirmed that PS 5 (Land Acquisition and Involuntary Resettlement) is not applicable for Muyuan’s process; processes for obtaining leases for new farm locations are the same hence this appraisal finds that same. The farms are located in rural areas and raw materials for the feed (mainly wheat and corn) are purchased from the local farmers (through traders and aggregators) thus no risks and impacts considered under PS6 (Biodiversity Conservation and Sustainable Natural Resource Management) are applicable. Similarly, the type of risks and impacts envisaged in PS7 (Indigenous Peoples) and PS8 (Cultural Heritage) do not apply.

The key E&S 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. Also, waste management plants are established in each of the subsidiaries to treat and dispose of the animal carcasses.

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 and waste management plants that will be designed and operated as prior farms have been, this appraisal found that these above issues are still relevant to the companies’ operations.

Similar to the previous investments, 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 which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

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: As has been reviewed and confirmed in previous appraisals, all new facilities undergo an environment impact assessment (EIA), which is reviewed and approved by the relevant local authority. It was noted during this appraisal that a similar EIA study has been conducted for the under-construction farm of one of the companies (Fugou.) The major environmental issue identified in such documents is the need to manage effluents generated by the farms, which is a regulatory requirement and an industry standard in China and the same will be completed for all new facilities of the companies.



Policy and Management programs: Muyuan has a corporate environment as well as an occupational, health and safety (OHS) policy which is implemented at all operations including the various subsidiaries’. All operational facilities (included the visited farms) have an environmental management system (EMS) which has been independently certified since 2010; the scope of this EMS continues to include operating farms, feed mill production and associated management activities. All required procedures, training records, monitoring and review documentation were noted to be in place.



Though not an externally certified system, the company has documented its safety requirements in its “Safety Production and Management Policy.” The policy identifies the key potential risks by each department (e.g. bio-gas area, construction area, electrical department, transport), describes the safety management systems to be implemented at each facility and explains roles and responsibilities of different departments/personnel within the company to manage matters related to OHS. The policy also includes key operational control procedures for workers involved in special operations like electricians, crane operators, construction workers, etc.



Additionally, the feed mills have systems certified to the Hazard Analysis and Critical Control Points (HACCP) standard. The farms and mills are certified to ISO 22000, the international food safety standard.



Organizational capacity and competency: The quality department of Muyuan is responsible to implement the abovementioned management systems at all facilities. The corporate Logistics/Operations support department continues to be responsible for the following: environmental management; OHS management; maintenance, construction and development; electricity and water utilities; landscaping; and, catering. The corporate environment and construction management unit ensures that all farms and mills undertake the required EIA studies, conduct all the environmental monitoring required under the national standards and explore various new technology options to make the operations more environmentally efficient.



The farm-level environmental coordinators are found at each farm. They have responsibility for the following elements: the operation of wastewater treatment and biogas facilities; ensuring maximum so
lid 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 and monitoring farm’s/mill’s performance against the corporate benchmarks on energy and water use.



The farm/feed mill manager is ultimately responsible for OHS matters at that operation. He is supported by the staff of the OHS unit within the corporate logistics/operations support departments as well as farm-level safety coordinators. The corporate OHS unit as well as these safety coordinators undertake monthly safety inspections. The corporate environment and construction department and farm/project level coordinators manage various construction sites, so as to ensure their compliance against Muyuan’s OHS requirements for such sites.



The production department is responsible for animal welfare. 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 while some improvements were identified in housing of sows. Since the previous appraisal in 2014 when the company had started a pilot on improved housing with 400 sows, the company has expanded group housing of sows to 9600. The company has plans in place to expand the group housing to 20000 sows in next 3 to 5 years and will continue to implement improvements in this area.



Emergency Preparedness and Response: Muyuan provides fire safety systems at all facilities including fire extinguishers and fire hoses in accordance with the local requirements. 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. Additionally all mills have a fire alarm system. The systems are inspected and certified by the local fire department. Also, the internal safety inspections cover adequate maintenance of these systems.



In line with the corporate “Safety Production and Management Policy,” each facility documents and implements an emergency response plan covering all potential emergencies. Regular training programs and mock drills are conducted to raise awareness among workers.



Monitoring and Reporting: The corporate environment and construction department prepares an annual environmental monitoring plan in line with the applicable national standards. All facilities conduct environmental monitoring as per the plan. All farms conduct monitoring of groundwater quality, wastewater quality, soil quality (for farm lands receiving post-digested wastewater for fertigation), ambient air quality, ambient noise and stack emissions. The monitoring results are discussed in the PS3 below. All farms and mills additionally monitor the water and energy consumption with respect to established corporate b
enchmarks



Also, as mentioned above, safety inspections are carried out by the logistics/operations support department which are reported to the farm managers, Muyuan’s head of production and logistics/operations support, who then follow-up with the respective farms to ensure implementation of required corrective actions. All accidents/incidents are recorded and investigated for their root causes and corrective actions. Most of the above mentioned data is currently collected and reported at a farm/mill level. In order to ensure consolidation at the corporate level, as per the ESAP, Muyuan will develop a E&S monitoring and reporting procedure which will specify a set of environment, health and safety (EHS) key performance indicators (KPIs) along with their targets/goals (revised every year) on a corporate and subsidiary level. The data from all the facilities will be consolidated for these KPIs on a subsidiary and corporate level which will help assess the overall EHS performance. Also, the procedure will include mechanisms of reporting to, and review by, the senior management. The procedure will cover all operations of Muyuan including all subsidiaries.



All the above described management systems and procedures are being implemented at the operations of the companies as well.

As of May 2016, the total workforce of Muyuan is 10,866, the vast majority of whom are farm workers located on the various pig breeding and production farms and feed mills. Regarding Fugou and Zhengyang, the current workforce is 476 people and is expected to increase to 4000 people once the project is fully implemented.



Human Resource (HR) policy, working conditions and terms of employment: The corporate HR department is responsible for development and implementation of HR policies. The HR policies and practices of the company have been judged to be compliant with national labor law and PS2 requirements in the previous appraisals and no significant changes are reported in this appraisal.



The majority of farm workers are still recruited from local populations in the immediate vicinity of the farm. All workers sign a standard written contract with the company which describes a general description of the position and terms and conditions of employment. Workers are essentially paid on a production basis and the wages are above the minimum wage. 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, the workers are provided with no-cost accommodation on the farm and subsidized meals in the canteen.



The pig production cycle requires farm workers to maintain the equipment, ensure adequacy of feed and water, cleaning, monitoring the health of the pigs. Generally workers work for irregular hours with three stretches of low intensity work during a day between 8 am to 10 pm. They have more work in the morning whereas the evening/nights are essentially walk-throughs for monitoring.



Child Labor: The minimum age for employment is 18 years. Proof of age is collected for all workers to ensure compliance with the same.



Freedom of Association: Muyuan does not restrict freedom of association of its employees and the workers are free to join the All China Federation of Trade Unions (ACFTU).



Occupational, health and safety: As described above, Muyuan has a “Safety Production and Management Policy,” which identifies the key potential risks by each department, describes the safety management systems to be implemented at each facility, explains roles and responsibilities of different departments/personnel within the company to manage OHS and also includes key operational control procedures for workers involved in special operations. Regular safety inspections are carried out by both the corporate and facility level staff. Based on the observations during the visits, the policy and procedures were noted to be adequately implemented.



Muyuan records and investigates the accidents/incidents and implements root cause analysis and corrective actions. In 2015, Muyuan reported two vehicular acci
dents with injuries to workers which is a fairly low incident rate considering the workforce of more than 10,000. Areas of improvements are noted in the accident recording system as the benchmark used for categorizing the accident/incident as a “lost work incident” is based on applicable legal requirements. Based on these benchmarks, only accidents/incidents with a minimum number of days away from work are captured as “lost work accidents.” As per the ESAP, the company will modify its accident/incident investigation system to ensure that all accidents/incidents with any loss of work are also recorded and reported internally as well as to IFC (through the AMR).



Third Party Workers: Muyuan hires third party contract workers for the construction/expansion of facilities. The safety requirements for these workers are also covered in the “Safety Production and Management Policy” and are implemented by the corporate construction department through its project managers and facility level site managers. Construction contracts require the contractors to comply with national regulations on safety. During the appraisal, construction of a warehouse was being undertaken at one of the visited mills. The construction workers were noted to be working with the required personal protective equipment (PPE) including safety belts for fall protections during work at height.



Supply Chain: The basic raw materials for the feed are grains such as maize and wheat. The feed mills source these grains from their nearby areas. The grains are sourced mainly through traders and aggregators. Considering the agri-commodities involved in this case and the fact that they sourced locally, the probability of harmful labor practices or significant conversion of critical or natural habitats in the supply chain is very low. Also, considering that the company is buying these grains from a number of traders who are in turn buying from a network of aggregators, the company is expected to have no or very limited leverage on practices in the direct supply chain.



The above described OHS management systems, HR policies and procedures are being implemented at the operations of the companies as well.

Water supply and Wastewater treatment: The farms rely on nearby reservoirs and onsite groundwater wells as their sources of water. The quantity of water use is regulated by applicable legal requirements and permits. Muyuan has benchmarks for water consumption for each stage of the pig life cycle e.g. nursery, piglets, growth as well as for the dormitory and other general uses for each month of the year. All farms monitor water consumption and report to corporate. In case of exceedance, the farms implement improvement measures in order to comply with the benchmarks. 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, continued 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. However, in order to reduce water footprint, Muyuan has collaborated with the IFC Advisory team and has undertaken a water footprint assessment, a draft of which has been presented to the company. Based on the assessment, a number of strategies have been identified for reduction in direct water footprint and an increase in the reuse of wastewater. The report is under consideration by the company and feasibility of the strategies will be reviewed for their implementation by Muyuan. The implementation of strategies is expected to reduce Muyuan’s water footprint. Therefore, as per the ESAP, based on strategies identified in the assessment report, Muyuan will prepare a water footprint reduction plan with timelines and share the same with IFC. The plan will be implemented within agreed timelines.



For wastewater management, the farms have a bio-digestion system in which, 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 in the digestion process is used as cooking gas or for generating electricity and in some cases, when the gas quantity is not sufficient for these purposes (e.g. when farms are operating at low capacity or under commissioning), the gas is flared. Solid waste from the bio-digestion process (after testing for nutrient levels and absence of heavy metals as per national standards) is provided for a nominal fee to local farmers for use as fertilizer. The wastewater quality is regularly monitored and the reviewed results during the appraisal showed compliance against the national standards as well as WBG EHS Guidelines.



No wastewater is typically generated at the feed mills.



Hazardous materials management: Diesel used in the back-up diesel generator (DG) sets was noted to be stored in tanks in covered areas with secondary containment at the visited farms. Chemica
ls and medicines (for animals including vaccine and nutritional products) are stored in a protected areas at the accommodation/office area of farms.



Regarding hazardous waste, used oil (generated from the DG sets), and used syringes, needles and vaccine containers used for animal care are disposed of through authorized agencies. The used syringes, needles and vaccine containers are disposed of by high temperature disinfection and land disposal.



The animal carcasses generated at the farms are treated at the waste treatment plants installed by Muyuan and its subsidiaries. The carcasses are dried with high temperature steam and all the fat in the steam is recovered and sold for use in bio-diesel manufacturing. The dried carcasses are pulverized and converted to fertilizers. The waste disposal records are shared with IFC as part of the AMRs submitted by Muyuan.



Similar waste disposal methodologies will be adopted by the companies for their facilities.



Air Emissions: 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.



For new farms, the company does not use any boilers and for heating (for the coldest months of the year), heat exchanger technology with electric heating is utilized. The new feed mills also do not use coal as the fuel for boilers and instead use natural gas. One of the feed mills visited during the appraisal was noted to have a gas fired boiler. The reviewed emissions monitoring results during the appraisal showed compliance against the national standards as well as WBG EHS Guidelines.



GHG emissions: Based on available estimates on electricity and fuel (diesel and natural gas) consumption for Fugou and Zhengyang considering full implementation of the project, total annual direct GHG emissions are expected to be approximately 850 tons of CO2 equivalent (tCO2e) while total indirect GHG emissions are expected to 350,000 tCO2e.

Transport safety: The farms (including those of the companies) are located in rural counties 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 farms and their distribution throughout the country, Muyuan has developed driver procedures and undertakes training on the basics of safe driving and avoidance of driving while tired. The same are implemented by the companies. As noted above, in the last year (2015), Muyuan reported two vehicular accidents though without any injuries to the community members. Both the accidents were subject to root cause analysis and required corrective actions (mainly more road safety awareness training) implemented.



Security: Muyuan has implemented strict biosecurity procedures on all its farms. Farms are fully fenced and gated thereby restricting access. Unarmed security guards have been provided at all facilities (farms and feed mills).



Community exposure to disease: 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.



The same procedures are implemented by the companies for their farms.

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. Muyuan 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 (CSR) policy, it 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, Muyuan 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. One of the components of the IFC advisory project (on water footprint reduction) is to support Muyuan in development of a CSR policy and strategy.

Muyuan will disclose this ESRS and the ESAP at the following address:

Muyuan Foodstuff Co. Ltd.
Shuitian Village, Neixiang County
Nanyang, Henan Province, China
Tel: 0377-65239559

Any queries and/or comments about the project may be directed to:

Mr. Qin Jun
Secretary of Board
Muyuan Foodstuff Co. Ltd
Shuitian Village, Neixiang County
Nanyang, Henan Province, China
Tel: 0377-65239559
E-mail: mailto:myzqb@mu-yuan.com
Website: http://www.muyuanfoods.com

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
Develop and implement an E&S monitoring and reporting procedure which will specify a set of environment, health and safety (EHS) key performance indicators (KPIs) alongwith their targets/goals (revised every year) on a corporate and subsidiary level. The data from all the facilities to be consolidated for these KPIs on a subsidiary and corporate level which will help assess the EHS performance. Also, the procedure to include mechanisms of reporting to and review by the senior management. The procedure will cover all operations of Muyuan including all subsidiaries.	12/31/2016
Modify the accident/incident investigation system to ensure that all accidents/incidents with any loss of work are also recorded and reported internally as well as to IFC (through the AMR).	12/31/2016
(a) Develop a water footprint reduction plan with timelines. (b) Implement the action plan within agreed timelines. [As agreed with IFC]	12/31/2016