PS5 (Land Acquisition and Involuntary Resettlement) is not applicable because most of the Service Centers and Upgrade Plants will be built in the properties of partners. In case Upgrade Projects are built outside of partner’s existing properties, adjacent available industry lands will be leased/purchased from chemical industry parks. All the Service Centers are converted directly from the existing distributors in either commercial or industry area, and all upgrade plants will be built in inside well-developed industrial zones. For the rare case of greenfield development by Jinfeng, the company will develop policies and procedures as part of PS1 requirements, to assess and comply with the applicable PS5 requirements, in case any such developments encounter involuntary resettlement or economic displacement.

Since all the project activities will be located in industry park or such industrial/commercial areas, it is anticipated that the project operations will not be located in or within the area of influence of environmental sensitive areas, PS 6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources) is not applicable. Furthermore,PS7 (Indigenous Peoples) and PS8 (Cultural Heritage) are not applicable to this project because of the absence of those in the area of influence of the company’s operations.

The EHS performances at current manufacturing plants in Kingenta comply with World Bank Group (WBG) EHS Guidelines, and the EHS controls for new upgrade plants will be stricter than the existing plants. Since the manufacturing processes are mainly mixing, formulation, and granulation, water consumption is negligible and there is no wastewater generation expected. Air emissions are well managed and greenhouse gas (GHG) emissions are limited. The application of Kingenta’s special fertilizers will reduce fertilizer consumptions, which will in turn reduce soil/water/air pollutions and reduce GHG emissions from fertilizer manufacturing processes as well as application in the fields and thus the resultant E&S impacts in agriculture sector in China.

 The key E&S issues and risks associated with this project include; i) development and implementation of E&S management system for the newly established Jinfeng Agricultural Services Co., Ltd. ii) Pesticide use and management for service center operations; and iii) occupational health/safety management during construction and operation of the project. 

 Mitigation measures for the potential E&S impacts have been identified and are incorporated into an Environmental and Social Action Plan (ESAP). The potential adverse E&S impacts of this project are considered few in number, of limited significance and readily mitigated through the sponsor’s existing robust systems and procedures. This is therefore a Category B project according to IFC’s Policy on Environmental and Social Sustainability.

Environmental and Social Assessment and Management System

Kingenta hires external experts to conduct E&S assessments for various new projects according to Chinese laws/regulations and its own technical standards. The sponsor also has an established and robust corporate E&S management system that applies to all operations. The main production plants in Linsu and Hezhe are certified to management systems of ISO 9001 (quality), ISO 14001 (environment), and OHSAS 18001 (occupational health/safety) standards. ISO/OHSAS certifications for other plants are under preparation.

For the proposed activities in Jinfeng and as part of this investment, applicable IFC Performance Standards and WBG EHS Guidelines will also be applied in the E&S risk assessments and operations. Once such E&S assessment reports are finalized, the company will disclose those locally as well as on its website as part of its ongoing stakeholder engagement.

Policy

Kingenta’s E&S policy reflects its commitments for the sustainable agricultures and the corporate social responsibility. The E&S policy requires its devotions to develop environmental friendly fertilizers and take the leaderships for low-carbon agricultures. Kingenta’s policy also emphasizes harmonious development and social responsibility. Jinfeng will adopt and apply the same E&S policy as Kingenta and further promote and pursue sustainable agriculture practices.

Identification of Risks and Impacts

EHS risks for any new projects are initially identified and mitigated during preparation phases through Kingenta’s internal procedures of environmental risk identification and safety risk assessment. E&S impact assessments (ESIA) or E&S impact tables (ESIT) are prepared according to regulatory requirements. Cumulative impact assessments are included in all ESIAs for projects built in existing chemical industry parks.

As required in the ESAP, building upon such procedures and policies of Kingenta, Jinfeng will develop its internal E&S due diligent procedures for screening new Upgrade Plants and Service Centers, based on IFC PS and WBG EHS Guidelines. The procedure should include, but not limited to, compliances with local regulatory and IFC requirements, screening for applicability of PS5 (Land Acquisition and Involuntary Resettlement), potential historical contaminations, future operational risk estimation, corrective action plans, etc. The internal E&S due diligence, together with project ESIA/ESIT, will provide overall E&S risks and impacts for Jinfeng management to make project selection decisions.

Management Programs 

There are detailed environmental, occupational health/safety (OHS) requirements in Kingenta EHS management programs. Management at each plant site is responsible for educating, training and motivating employees to understand and comply with corporate EHS procedures and the EHS management systems have been set up to monitor and support this work throughout Kingenta. Kingenta’s EHS management system is well developed and includes detailed technical standards, internal codes for EHS performance, EHS organizational structure, emergency preparedness and response plans, monitoring and review, and an extensive inspection/audit program. Systematic monitoring of environmental performance and process safety measures is in place for air emissions/liquid effluent controls, waste management, occupational health/safety tracking, and process safety management. Non-compliances are monitored and followed up in details by the corporate EHS department and plant EHS units. The management programs for Jinfeng will be developed and implemented similar to Kingenta’s.

Organizational Capacity and Competency:

Kingenta has a corporate EHS committee, led by CEO. A corporate EHS department leads the EHS management and reports to corporate EHS committee. Each plant has its own EHS unit with fulltime EHS engineers, and part-time EHS coordinators are assigned to each manufacturing unit. The EHS unit head reports directly to plant general manager, with dotted reporting lines to corporate EHS manager.

The EHS management structure in Jinfeng will be the same as Kingenta for corporate and upgrade projects. As per ESAP, Jinfeng will establish its corporate EHS team, led by an experienced and competent EHS professional and supported by relevant EHS expert team. While each Upgrade Plant will have its own EHS organization, similar to those for Kingenta, one or two part-time EHS coordinators will be appointed for each service center. The EHS teams at respective facilities should also report to Jinfeng corporate EHS department with dotted reporting lines.

Emergency Preparedness and Response

Kingenta has a well-established emergency response (ER) plan and conducts ER drills routines in three levels. Each manufacturing unit holds its own monthly ER drills oriented to the unit specific issues. Each plant holds quarterly ER drills to test response and coordination among all units in the plants. The plants with hazardous materials hold annual comprehensive ER drills, which involve participations of local fire brigades, environmental protection bureaus, hospitals, and residential representatives. There is no hazardous material in the proposed Jinfeng plants, and the ER management will be similar to Kingenta plants without hazardous materials.

Monitoring and Review

Kingenta’s Corporate EHS department prepares annual EHS improvement targets, and the implementation are monitored monthly. Each plant reports its EHS performances monthly to the corporate EHS department. The EHS department also holds monthly meetings with EHS unit heads of all plants to discuss the corporate-wide EHS performances. The key findings of the monthly reports/meetings will be presented in the monthly corporate management meetings.

The corporate EHS department conducts quarterly inspection/audits to all plants. The corporate auditing team consists of corporate EHS engineers and EHS engineers from other plants. The main purposes of the audits include implementation of annual EHS plan, providing technical supports, and knowledge exchange among different plants. EHS units at plant levels also have its own routine EHS performance inspections. For plants with hazardous materials, external experts are contracted for plant audit.

To enhance EHS management efficiency, better preparation for Jinfeng EHS management, and required in the ESAP, Kingenta and Jinfeng will develop a corporate-wide intranet-based EHS management system, which monitors key performance indicator (KPI), such as emission compliances, training, inspections, emergency responses, etc. The existing EHS monitoring/review procedures and the proposed intranet-based KPI database will also be implemented for Jinfeng.

Moreover, as part of this project, external EHS management experts will be contracted for ongoing EHS monitoring and audits of Jinfeng’s facilities (during construction and operational phase) developed under the project on annual basis as per the agreed monitoring schedule (ESAP#4). 

Kingenta currently has approximately 12,000 employees in its headquarter and 10 plants. Limited number of third party workers are employed in a few supporting activities such as cleaning and canteens. It is estimated that once fully operational, Jinfeng will create approximately 10,000 new jobs across all its Upgrade Plants and Service Centers. An unknown number of labors will also be hired during construction periods.

Human Resources Policies and Procedures

Kingenta has a corporate human resources (HR) policy that specifies the terms of employment and working conditions. These include procedures related to recruitment, probation, training, performance review, promotion, insurance, salary and compensation, resignation, lay-off and firing, vacation, other leave, and retirement. Kingenta has HR policy training that is part of the new employee induction, and all employees have access to this policy.

The corporate HR department leads HR management across Kingenta. Quarterly HR inspections/audits are conducted for all subsidiaries. A part of this project, external labor experts will also be contracted for the labor audits. A similar HR management structure and policies and procedures will be developed and implemented for Jinfeng.  

Working Conditions and Term of Employment

All workers are on Kingenta’s payroll and there is no temporary labor. Under the employment terms that strictly follow the national labor law, workers are employed on fixed term contracts which are renewable subject to satisfactory performance and availability of work. Overtime works are compensated at rates regulated by the national labor authority. All employees have access to the insurance and pension funds as required by labor laws. For employees of construction or other contractors who may work at Kingenta sites, Kingenta requires the contractors to fully comply with national labor laws and HR conducts periodic inspections. Going forward similar will be the case of Jinfeng operations.

Workers’ Organization

A worker union with elected union leaders is set up at Kingenta, as required by the All-China Federation of Trade Unions (ACFTU). Kingenta management is committed to keeping the union independent from management and allows collective bargaining.

Non-discrimination and Equal Opportunity

The HR policy specifies non-discrimination and equal opportunity. No procedures and/or practices have been identified as discriminatory. All the hiring and promotion are merit-based. Currently, 23% of all employees are female. For the proposed Jinfeng projects, Kingenta plans to recruit more female employees and increase the percentage of female employees to 30% or more.

Retrenchment

With significant new job opportunities in Jinfeng projects, no retrenchment is expected in Kingenta.

Grievance Mechanism

Grievance mechanism is introduced during the new employee induction. The employees can report their grievances to either HR managers or labor union leaders. All the grievances and the mitigations are recorded. The HR managers/union leaders shall report to the senior management if they could not solve the grievance. HR email address and social media account are also used for grievances. Besides, suggestion box is available at all plants for anonymous grievances.

Protecting the Work Force

Kingenta complies with national law and does not hire workers below the age of 18 years.  HR checks birth and school certificates during the hiring process. No forced labor practices are used by Kingenta. Kingenta has a strict labor audit program for its major suppliers to ensure no child or forced labor is used by suppliers and the occupational health/safety performances of the major suppliers meets all local regulatory requirements.

Occupational Health and Safety

Kingenta has routine OHS trainings, including new employee training and annual refreshers. Personal protective equipment (PPE) is adequate for most positions. The workplace air quality and noise levels at all Kingenta plants meet both local regulatory requirements and good international industry practice (GIIP).

During the site visits, high noise levels were observed in certain areas. Kingenta will provide ear muffles to all employees working in such high noise sections. Kingenta and Jinfeng will review the possible alternatives to reduce the impacts of high noise levels in the new facilities to be developed facilities under the project, and shall take necessary mitigation actions.

The statistical data of OHS performances meet GIIP. However, there have been fatalities reported in the past three years at Kingenta’s facilities, primarily related to contractor employees. As per the ESAP, Kingenta and Jinfeng will review the existing OHS management procedures – particularly those related to contractor safety management – and shall prepare an OHS improvement plan to reduce accidents and eliminate fatalities. This improved OHS management plan will also be applicable for Jinfeng operations, and will be a part of its EHS management system being developed as per the ESAP.

Workers Engaged by Third Parties

HR and OHS performances are considered when evaluating potential construction or other major contractors. In line with the ESAP, Kingenta will develop a contractor E&S management plan to review and manage HR issues, OHS performances, and other legal aspects of construction contractors and other third parties hired for the project. The contractor management plan will specify the EHS requirements to be met by the potential contractors and third party vendors and shall be used to evaluate all bids for construction contractors of Jinfeng projects. Only qualified contractors are allowed to submit biddings. Once contracted, all contractors are subjected to the same OHS management procedures as Kingenta employees, and the contractor employees also have access to Kingenta HR grievance mechanism.

Supply Chain

The raw materials are mainly from other large chemical companies. Child labor or forced labor are unlikely.

Raw Materials and Resource Efficiency

Kingenta has implemented various energy efficiency projects to reduce energy consumptions and operational costs. Its current energy consumption rate is 218 kWh/t compound fertilizer, which is lower than the compound fertilizer reference benchmark of 244 kWh/t in Shandong Province, China, where Kingenta HQ is based.

Currently, for Kingenta operations, urea is supplied by the suppliers, which is dissolved and mixed with Kingenta’ s fertilizer upgrade packages. The mixed solution will go through drying/granulation processes with steam and hot air produced on-site (mostly from coal-based boilers and ovens). For Jinfeng, the proposed Upgrade Projects will be set up in or adjacent to partner’s ammonia/urea plants. The main raw materials are urea solutions, steam, and natural gas, which are all supplied by the adjacent ammonia/urea plants. Purchasing urea solution and natural gas (to replace coal) directly from the fertilizer plants, will dramatically reduce air pollution/energy consumption and further improve energy efficiency.

As such, water will not be used in the process of Jinfeng upgrade projects and no wastewater will be generated. Similarly, there will be no manufacturing process in service centers. Therefore, the water consumption and wastewater generation for this project is limited.

GHG Emissions

After full implementation, this project will generate approximately 425,000 tons of equivalent CO₂ per annum, mainly from electricity purchase and natural gas consumption. According to Kingenta, the application of specialty fertilizers of SCRF and WSF and precision farming can reduce 25% of fertilizer consumption. Therefore, approximately 377,000 tons of equivalent CO₂ per annum will be avoided through the fertilizer application services by Jinfeng’s crop production service centers.

Pollution Prevention and Compliances

There is no wastewater generated from compound or specialty fertilizer productions. air emissions in Kingenta meet all local regulatory and WBG EHS Guideline limits. For Jinfeng upgrade projects, the air emissions will mainly be from natural gas based boilers/heaters and tail gases from manufacturing processes. The tail gases will go through settlements, cyclone dust collectors, bag filters, and water scrubbers. Based on design parameters and current practices in Kingenta, the air emissions from Jinfeng projects will also meet all local regulatory and WBG EHS Guideline limits.

Hazardous Materials and Operation Hazard

There is no hazardous material in either raw materials or products for compound/specialty fertilizer manufacturing in Kingenta. For the proposed Jinfeng projects, natural gas and steam are supplied from adjacent partner companies through pipelines. There is no natural gas storage onsite. No other hazardous material is used in Jinfeng upgrade projects.

Pesticide Use and Management

There is no pesticide manufacturing in Kingenta operations. However, the proposed Jinfeng service centers will provide pesticide application services for farmers. As part of this project and as required in ESAP, the corporate EHS department in Jinfeng will develop OHS management procedures for pesticide handling. In line with the ESAP, Jinfeng will prepare an integrated pest management (IPM) and integrated vector management (IVM) plans for future pesticide applications. The pesticide handling and IPM/IVM practices will be regularly monitored by Jinfeng EHS department. As required by IFC PS, Jinfeng service centers will not use any pesticides banned in international treaties and toxic pesticides in WHO Hazard Class Ia (extremely hazardous) and Ib (highly hazardous) lists.

Community Health/Safety and Emergency Preparedness/Response

All Kingenta plants are located in chemical industry parks. The proposed Jinfeng plants are planned in existing chemical industry parks. The normal operations at Kingenta/Jinfeng plants have limited impacts to the communities outside of chemical industry parks. All Kingenta/Jinfeng raw materials and products are transported by road tankers. The road conditions are satisfactory. There has been no major transportation accident in Kingenta’s operation history. Jinfeng will only contract transportation companies that have defensive driving programs, acceptable safe driving records, and sufficient emergency response methods. Kingenta has ER plans available, and conducts routine drills for firefighting and potential chemical explosion/releases. Jinfeng will implement similar plans for its operations, together with the pesticide management / IPM-IVM plans developed as per above.

Security Personnel

Kingenta has its own security forces, which bear no weapons. All security personnel are trained and licensed in local public safety bureaus. The responsibilities of the security forces are to conducts routine ID check at the gates, security monitoring, firefighting/ER, etc. The security personnel are also trained for proper engagements with communities. 

Stakeholder mapping and Engagement

Kingenta systematically analyzes its stakeholder structure and views the good relationship with key stakeholders as a benchmark of corporate success. Farmers and communities near its plants are among the key stakeholders. Kingenta has stakeholder engagement plans to reach out to farmers and communities, respectively. Farmer’s training is one of the major community engagement programs in Kingenta. Jinfeng will expand the existing programs with better and broader trainings through the proposed crop production service centers, with the help of its technical staff

Consultation, External Communications, and Grievance Mechanisms

Kingenta has developed extensive agronomic knowledge that it shares with farmers. Jinfeng’s service centers will help farmers to ensure accurate matching of nutrient supply and crop needs to meet good agricultural practices. Through the consultation and external communication, Jinfeng will promote the concept of sustainable agriculture aiming at preserving biodiversity and maintaining soil fertility and water purity.

Jinfeng will hire agronomists to support its farmer engagement programs. As planned, the agronomists will conduct routine visits to farmers in key business regions, give lectures, provide trainings, and conduct trials for farmers. The grievances from farmers will be fed back by agronomists and sales representatives.

Kingenta plants have formal procedures in place to address and resolve concerns or complaints raised by nearby communities, as well as emergency communication procedures to contact relevant stakeholders in a case of a potential accident. Jinfeng will follow the same community grievance mechanism.

Information Disclosure and Ongoing Reporting to Affected Communities

Kingenta published its annual corporate social responsibility report since 2011 (URL: www.kingenta.com/ investor.aspx). The annual report discloses information about operations, corporate strategies/culture, environmental performances, HR issues, social responsivities, etc. As part of this project, Kingenta will follow Global Reporting Initiatives (GRI) format as an information disclosure guide to communicate its principles and results to stakeholders in the future. Once established, Jinfeng will also follow GRI format to disclose E&S information.

Kingenta will disclose this document in Chinese at its website (http://cn.www.kingenta.com/investor.aspx). For inquiries or concerns about the environmental and social impacts of this project please contact:

Contact Person:          Mr. Li Jiguo

Company Name:         Kingenta Ecological Engineering Group Co., Ltd.

Address:                      No. 19, Xingda West Street, Linshu, Shandong, China

Email:                         lijg@kingenta.com

Phone:                         +86 539 6212922

Facsimile:                   +86 539 6202010