The Project has limited potential adverse E&S impacts. The main E&S risks and issues include the management of solid and liquid wastes and air emissions; resource efficiency; assurance of fair, safe and healthy working conditions for all workers during construction and operations; and sustainable management of living natural resources related to the supply chain of animal feed, in particular fish and shrimp feed. All these risks can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. As such, this project is classified as a Category B project per IFC’s Policy on Environmental and Social Sustainability.

 Environmental and Social Policies: Alpha’s commitment to food safety and environment is reflected in its corporate social responsibility statement (https://www.alphafeed.com/csr/mission.html) (currently in Chinese and an English version will be available soon), and its various actions ranging from procurement of state-of-the-art equipment for improved resource efficiency to investing in pollution control technologies including odor removal. However, presently it does not have an overarching policy that defines its environmental and social objectives and principles in line with IFC PSs. As set forth in the ESAP #1, going forward the Company will formalize its existing commitment to sustainability and to meeting EHS requirements through the adoption of corporate EHS policies at existing and future operations. Policies will make a direct reference to compliance with IFC PSs and relevant EHS Guidelines and will be available on its website and posted throughout its operations.

E&S Risks Identification and Assessment: E&S risks identification and assessment for new feed mill operations is done by hiring E&S consultant firms. Prior to the construction of a new feed mill, Alpha hires a qualified consulting firm to conduct an environmental impact assessment (EIA) and occupational health and safety (OHS) study in accordance to Chinese regulatory requirements. The EIA report identifies environmental impacts and OHS risks from a typical feed operation, including accidents, dust explosions, noises and smells, and recommend mitigation measures that must be incorporated into the building design and operational procedures. After local environmental protection agency (EPA) approves the EIA and discloses it to the public, the construction can start. The new feed mill will not be commissioned until EPA inspects and verifies that the required environmental mitigation measures are in place.  For ongoing operations, E&S risks assessment is undertaken at the operational level and reviewed by management.

Management programs, organizational capacity and competency: Alpha currently doesn’t have an integrated environmental, social and occupational health and safety (ESHS) management system,  although elements of such a system are present and managed by different parts of the company management team, including operations (related to quality, pollution control, energy efficiencies, and OHS), Human Resources (HR) (related to labor and working conditions), internal audit (employee grievances), and R&D (resources efficiency, sustainable fish meal/oil). Some of the elements are managed more effectively than others, notably the quality aspect. Six of the Alpha’s feed mills achieved ISO 9001 certifications and the same management framework is applied across all operational units in the company, regardless of the actual certification status. In addition, the Company follows the decree stipulated by the Chinese Department of Agriculture “Animal Feed Quality Management Standards” and “6S” standards, with a set of comprehensive procedures in place for quality management.

IFC’s appraisal identified some gaps in its management of E&S matters. In particular, OHS seems to be an area that requires special attention. This will be further discussed in the relevant section under PS2. Going forward, Alpha will be required to formalize an ESHS management system with a focus on 1) installing organizational capacity and competency, including the appointment of an EHS officer to ensure EHS policy and procedures are implemented at all operations; 2) establishing and/or strengthening management programs where gaps are identified, including OHS, internal audits, sustainable procurement of fish meal/oil, and community engagement. This will be addressed in ESAP #2 and #3.

Emergency Preparedness and Response: The potential EHS incidents that could result in emergency situations include grain dust explosions and fires at the feed mills, fatal or serious accidents, and strike/riots/civil unrests. In accordance to Chinese regulatory requirements, the Company formulated and implemented an emergency preparedness and response plan, covering emergencies typical to its operations including emergency weather conditions (typhon), explosions, electricity strikes, fires, and injuries due to mechanical failures. Emergency drills and fire drills are conducted regularly, records were provided for IFC review at the appraisal.  

Monitoring and Review: Monitoring of the environmental elements, including noises, smell, dust, and air emission parameters, are conducted by local EPAs on a quarterly or annual basis, depending on locality and parameter in question. No non-compliance has been reported to date. Production input, including raw material usage, water and energy consumption, are recorded and monitored closely for efficiency improvement. Safety units from local governments conduct inspections regularly and issue reports on any safety hazard found. These reports are sent to the company and acted upon on a specified timeline. During the appraisal a safety inspection report was shared, and Alpha confirmed that all issues identified had been corrected. Workplace accident/incidents are recorded in accordance to Chinese regulatory requirements, and only incidents/accidents resulting in more than 1000 RMB medical insurance claims are recorded, suggesting substantial underreporting comparing to what is required under the WBG EHS guidelines. Corrective action related to OHS monitoring will be further discussed in relevant section under PS2. Going forward Alpha will be required to establish procedures to monitor and measure the effectiveness of its EHS management programs. This will be addressed in ESAP #3.

Supply Chain Risk Assessment and Management: In 2018, Alpha’s main raw materials procured by volume were as follows: (i) soy bean meal, soy and soy oil, (ii) corn, (iii) wheat and wheat flour, (iv) rapeseed meal, (v) Distiller’s dried grains with soluble (DDGS), and (vi) animal protein including fish meal and chicken meal. Corn and wheat/wheat flour come from domestic markets, soy bean meal is purchased from local soy bean processing plants although soy beans are originally imported. Alpha has limited management control and leverage over the sourcing of the soy beans. Chicken meal is mainly from China, with a small portion being imported from US. Fish meal including shrimp meal, fish pulp and squid meal is mostly domestically procured from Shandong, Liaoning and Zhejiang provinces in China, with a small amount imported mainly from South America (Peru and Chile), and some import from South East Asia and West Africa via traders.

When screening suppliers for raw material procurement, Alpha first looks at the quality of raw material in question and the qualifications of its supplier, including if the supplier has the necessary production license or import permit, and if the supplier has a management system to ensure the quality control of the products.

Chinese regulation requires that fish meal importers obtain import registration from the Department of Agriculture, and Chinese General Administration of Customs maintains a list of feed raw materials/supplements allowable for import as well as their source countries/regions. The current list (dated March 1st, 2018) allows fishmeal imports from countries such as Mauritania, Vietnam and Thailand where fisheries are not sustainably managed.

Mindful of the growing scarcity of the fish meal supply and to stay competitive, Alpha has been investing in fish meal substitute research and development. Over the years the Company has reduced the fish meal content due to these R&S while maintaining the feed quality. In 2018, Alpha participated for the first time in a global competition organized by Fish Free Feed (3F) to create a fish free (fish oil) substitute.

To ensure that the risks related to its supply chain be effectively managed in the face of the planned expansion, Alpha will be required to formalize a procurement policy articulating its position for sustainability and to gradually phase out procurement of fish meal/oil from unsustainable sources. This policy will be approved by its board and be communicated to all its stakeholders. This will be addressed in ESAP #4.

 Human Resources (HR) Policy and Management: Alpha currently employs a total of 2,499 workers, with 80% (Alpha please confirm) being male, and 20% being female. Most of the workers (75%) work at sales and production lines in feed mills. All employees are directly hired by the company. The company also hires contracted workers via contracting agencies for jobs such as loading/downloading and packaging and the number of which ranges from 15 to 50 per feed mill depending on production cycle and volume. The feed mills at Guangxi and Huai’an hire about 10 temporary workers each at the peak of their production season.  

Alpha has a set of comprehensive management processes and procedures in place including those governing HR management. Every employee signs a written contract before starting employment. Information on terms of employment, HR policy and procedures are communicated to workers/potential workers through job interviews, onboard trainings, company meetings and bulletin boards. A review of the HR policy and procedures obtained at the appraisal found that they follow Chinese labor regulations, with clear provisions on salary scales, working hours, leaves and other benefits, overtime, hiring and promotion processes as well as termination of employment. Depending on job location, in general Alpha’s pay scale is at least 1.5 time higher than local minimum wage with highest being 6 times.

Alpha provides accommodation services for workers at feed mills, including cafeteria and dormitories. The dormitories meet PS2 requirements, with 2-4 persons sharing a room with separate beds, shared toilet and provisions of hot water, space to store personal belongings, as well as firefighting equipment.

Workers’ organization: Chinese law allows workers to be organized in enterprise-level trade unions affiliated with All-China Federation of Trade Unions (ACFTU), and it is the sole legal trade union that workers can join. Alpha follows the state regulations and does not interfere if workers wish to organize or join such organization. Five of its subsidiaries (in Shenzhen, Sihui, Jiangmen, Wuhan and Huai’an respectively) have ACFTU-affiliated trade unions, and two of them (in Jiangmen and Wuhan) have workers’ assemblies. The unions organize recreational activities for workers and give out gifts at special occasions as part of the Company welfare programs. Union leaders are elected by workers and then nominated and appointed by the Company management. Alpha stated that the union /workers’ assemblies participate in management discussions including working hours, renumeration, OHS and disciplinary actions. 

Non-discrimination and equal opportunity: Chinese Labor Law prohibits discrimination in employment on the grounds of nationality, race, sex and religious beliefs. Alpha follows the law and there are no discrimination practices identified during the appraisal. The company doesn’t have an anti-sexual harassment policy at this moment and will establish such a policy going forward as part of the E&S action plan. This will be addressed in ESAP #6.

Grievance mechanism: Alpha has an Audit and Inspection Center which reports directly to the board. One of the functions of this Center is to collect and to follow up on any suggestions/complaints received from the workers. The contact info of the Center is posted on bulletin boards at all Alpha’s subsidiaries, and there is a suggestion box at each of the company’s locations. Suggestion boxes are checked regularly to ensure that suggestions/complaints are received. anonymous complaints are allowed. In total the Center received 6 complaints in 2018, covering issues ranging from allegations of unfair treatment to accusations of a sale person receiving kickbacks. The Company stated that all complaints were dealt with in a timely manner. 

Protecting the Work Force: The minimum working age in China is 16. Alpha does not hire anybody under the age of 18 and age info is verified by providing national identification card which is required for signing the labor contract before starting employment.

Occupational Health and Safety (OHS):  The main OHS issues associated with feed mill operation are dust, noise, fork lift operation, machinery operation and heavy lifting. These risks and associated job hazards are identified during the EIA phase when the Company applies to open a new facility. Mitigation measures accordingly are incorporated in feed mill building design and managed through proper operational procedures, onboard training and refresher trainings. Alpha has a management system certified to GBT 28001-2011, a Chinese standard closely aligning with OHSAS 18001: 2008. It has designated personnel in charge of OHS at corporate level and a production safety team at each facility. Safety inspections are conducted regularly by local governments, and inspection findings are issued for management action. Licenses are required to operate special machinery and personal protection equipment (PPE) including ear plugs and dust masks are mandated and provided for jobs where deemed necessary. Dust is contained in enclosed hood at each processing point and collected with ventilation system and filter bags.  During the site visit of an existing feed mill facility in Jiangmen, Guangdong, it was observed that safety signs/procedures were clearly in display and factory floor clean and in order, even though the equipment showed obvious signs of wear and tear. The factory will be closed down in 2 years due to a zoning change on the part of the local government. 

The company does not conduct its own noise and dust level monitoring, rather, it relies on the local safety inspection agencies to do the monitoring at irregular intervals. Workers undergo annual health checks paid by the Company at local health facilities. Sales staff is exposed to traffic accidents and therefore receive driver training to minimize this risk.

Alpha reported 23 incidents in 2018 across its operations, with a total of 426.5 lost workdays. Lost time injury frequency rate is therefore calculated at 4.95 for per million hours worked for Alpha, comparing favorably with international standard of 10.5 for animal food manufacturing sector. However, interviews during the appraisal suggested that the actual incident rates might be higher if following international standards as only incidents with medical treatment costs over 1000 yuan were reported and recorded. Systematic incidents investigation and follow-up are lacking as well, as in most of the cases workers’ negligence were put as the cause of the accidents. Going forward Alpha will be required to align its incidents monitoring and recording system with international standards and to improve its OHS management. This will be addressed in ESAP #7.

Third party workers: Alpha hires 15-50 third-party workers through contractors for loading/unloading and packing jobs at each feed mill. The OHS aspect of these workers are left with the contracting agencies and Alpha does not track their incident rates. Going forward Alpha will include contracted workers in its ESHS management system, including incident monitoring. Labor and OHS requirements will be included in contractual agreements and Alpha will monitor compliance with national labor law and ensure OHS requirements are implemented. This will be addressed in ESAP #8.

OHS issues during the construction phase are managed in accordance to Chinese regulatory requirements. As mentioned previously new feed mills are all located in industrial parks or zones set by local governments. Only qualified building contractors are invited to bid for any new construction, and safety records are part of the contractor selection criteria. During the construction stage safety and quality inspectors are on site every day, and safety management team review safety performance regularly. As per above, Alpha will include specific labor and OHS requirements in contracts and ensure implementation and monitoring.

 Resource Efficiency: Alpha constantly looks for ways to improve resource efficiency. It has a Technology Innovation unit under the Operations Department with 2 full-time engineers leading the efforts. Every year the unit sets 2-3 objectives ranging from improving raw material utilization to reducing energy consumption. Recent achievements include pre-treating soy bean meal to improve protein absorption rate by fish and fermenting certain low-grade raw material input to improve usability.

Aqua feed requires more energy to produce comparing to feed for pig or poultry, and energy efficiency measures implemented by the company include the following: the use of new, more energy efficient machinery (mixers, boilers, etc) in new facilities; heat exchange from mill cooling and drying processes; constantly adjusting processes configurations to maximize efficiency while maintaining the quality standards; and, the adoption of energy efficient lighting. Alpha estimated that by adjusting processes configuration and using heat exchange technology, it was able to produce more expanded feed for every unit of the energy consumed comparing to its competitors.  

Electricity is purchased from the grid with specific energy consumption being 134 kwh for each metric ton of feed produced in 2018. Boilers are fired by biomass at most of the mills with total consumption in 2018 being 23,531 metric tons a year, and by natural gas in Tanshan feed mill with annual consumption being 97,172 m3. Diesel usage (for folk lift and backup generators) in 2018 was 54,680 liters. Diesel tanks at mills are located in a separate and isolated building with controlled access. The company doesn’t own any transportation fleet. 

Annual CO2-equivalent emissions from electric energy consumption and direct fuel use for all operations are estimated at 63,528 metric tons (MT) a year in 2018.

Pollution prevention: The main environmental impacts associated with feed mill operations are related to air emission from the boilers, dust, odor, and noise from production processes. Boiler emissions are controlled through filter and scrubbing. Exhaust from production processes first go through dust filters to remove dust, and then is neutralized through scrubbing and an ozone reactor. The resulting exhaust is eventually discharged through a high chimney, with very little odor remaining. Boiler emission is monitored by local environmental protection agencies at irregular intervals as boilers used at Alpha’s feed mills are below the regulatory threshold required for 24-hours monitoring. Alpha stated that boiler emissions meet Chinese regulatory requirements and no non-compliances have been reported.

Water use and efficiency: As feed mill operations is a dry process, water supply is mostly required for steam generation (cooking raw materials or conditioning feed) and sanitary purpose. Water volume is monitored and usage in 2018 was reported at 375,757 m3.

Wastewater treatment: A small amount of production wastewater is generated from steam generation and odor removal processes. The wastewater is treated for reuse/recycle and the sludge go through biodegradation processes, meeting WBG EHS guideline requirements. No wastewater is discharged. Sanitary wastewater is discharged into municipal sewage network

Management of solid and hazardous wastes: Solid wastes from Alpha’s operations are categorized as the following: domestic waste, non-hazardous industrial waste including packing materials and ash from the boiler. There are very little hazardous wastes generated such as used oils from machinery maintenance. All wastes are collected and disposed of by licensed providers.

Pest Management: Alpha retains the service of a professional pest management company for rodents’ control. Birds proof nests are installed at relevant locations to deter birds.

 Community Health and Safety: Although all Alpha’s feed mills are in industrial parks or neighborhoods zoned for industrial purpose, with rapid urbanization in China, some of the feed mills have found themselves surrounded by residential development over time. As a result, there have been complaints received from neighboring communities about odor and noises. Going forward Alpha will be required to establish a mechanism to receive feedback from these neighboring communities, and to communicate information on these impacts and on the emergency preparedness and response plan. This will be addressed in ESAP #5.

Security Personnel: Alpha uses its own employees to control access to feed mills and to safeguard company properties. The guards are not armed and are trained for defensive measures.

 Alpha has an existing mechanism where distributors and end users/growers can register their complaints/concerns through public Wechat account, telephone hotline, and emails. Sales department regularly check these feedbacks and respond with necessary actions. All the feed mills are in industry parks/zone therefore impacts on the community are limited. Individual complaints, if any, from the public would be directed to the industrial park’s management team, who in turn engages with the relevant enterprises in the park for follow-up action.

As mentioned previously, with rapid urbanization, some of the old feed mills have found that they are surrounded by residential development, and there have been complaints received from neighboring community about odor and noises. As part of the ESAP, Alpha will be required to establish a formal channel going forward to receive and respond to community concerns.