This project has been categorized as B according to IFC’s Policy on Environmental and Social Sustainability because a limited number of specific environmental and social (E&S) impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards and guidelines.

Identification of Risks and Impacts:
 

As per national regulatory requirements, the company’s manufacturing facilities commissioned qualified third party technical institutes to undertake environmental impact assessments, copies of which have been shared with IFC. At logistics centers, the company undertook appropriately detailed risk assessments of its facilities and operations to identify key areas of potential risk and developed mitigations accordingly. The E&S focus areas of mitigation and monitoring at manufacturing facilities are related to life and fire safety, air emissions and waste water management, occupational health and safety (OHS), and hazardous material and waste management. Logistics centers focus on traffic risk and safety management (including that related to third party truck fleets), OHS, and life and fire safety. Similar review and risk assessment will be undertaken for the new logistics centers to be developed under the project.

Policy and Management Systems:

The company has put in place an overarching policy statement (and an associated performance pledge document) related to OHS and traffic risk management. These are widely publicized to all staff (including drivers and third-party truck fleet operators) and all its subsidiary companies and facilities are required to conduct facility-wide training on these and related standard operating procedures, and to sign the performance pledge as a formal indication of commitment to the company policy and requirements. The company has also been publishing an annual corporate social responsibility report since 2010 articulating its E&S related policy intentions and performance.

The company’s manufacturing facilities have met GMP requirements (in 2018) and its logistics centers have attained Good Supply Practice (GSP) certifications as of 2014. GMP (Good manufacturing Practice) is a system to ensure that pharmaceutical products are consistently produced according to defined quality standards. It covers all aspects of production; from raw materials, premises and equipment to the training and personal hygiene of staff. Detailed, written procedures are essential for each process that could affect the quality of the finished product. Documented evidence is essential to confirm that correct procedures are consistently followed at each step in the manufacturing process - every time a product is made. Several aspects of EHS are covered under the requirements of GMP – especially those related to the occupational health and safety (OHS) of employees. Conformance to GMP requirements is closely linked to meeting regulatory requirements stipulated by the China Food and Drug Administration (FDA) – the Government regulatory body which monitors the operations of all pharmaceutical entities in China. GSP is similarly regulated by the China FDA.

As of June 2018, the company also attained certifications for ISO9001 (Quality management – in 2009) and OHSAS18001 (occupational health and safety - also referred to as the GB/T28001-2011 standard in China) . Its overall E&S risk management and document control system has been designed to closely reference GMP, GSP, ISO9001, and OHSAS18001 auditing requirements, and applicable national and local level Government regulatory requirements (e.g. those related to waste discharge). On this basis, the company at its headquarter has developed a set of detailed standard operating procedures (SOP) under a document control system, linked to a set of operational and safety related key performance indicators (KPI). Each subsidiary company and facility was then required to develop facility and departmental level SOPs and KPIs which reflected corporate level procedures and indicators. Once reviewed by corporate senior management and finalized, departments and sub-departments at each facility would then develop detailed day-to-day operating instructions, and KPIs would be tied to each department, sub-department, and staff member, as the basis for annual target-setting and year-end performance evaluations. Daily, weekly, and monthly on-site inspections are carried out across departments to verify performance and compliance. These are supplemented by routine and unannounced site inspections by local Government agencies (e.g. safety, fire safety, and environmental agencies), as well as by corporate level safety teams. Performance data is collected, summarized, and reported to responsible oversight personnel and the safety committee at the company headquarter; and is also used for public disclosures.

Organizational Capacity and Monitoring & Reporting:

At the corporate level, the company has established a safety committee comprising members of senior management, responsible for setting overall policy, goals, KPIs, and procedures. The head of each facility is responsible for safety, waste management, resource efficiency, life and fire safety, and OHS performance of the facility, and is supported by a facility management and administrative department (comprising electricians and other qualified technical personnel) and a head of safety and security. At the production line level, qualified staff are assigned as safety supervisors responsible for daily and weekly inspections. An overall safety department at the company headquarter performs three main functions: (i) compliance monitoring of all facilities across China against agreed KPIs and SOP requirements; (ii) keeping abreast of new safety laws and regulatory requirements, and updating SOPs and KPIs as required to reflect any regulatory updates; (iii) as well as providing technical support to facility level technical personnel in discharging their duties in a dotted line reporting relationship.

The company directly employs a total of about 29,600 employees at its product distribution and manufacturing centers and truck fleets with a male-female ratio of 56% to 44% and with a large majority being full-time employees. All employees have a signed employment contract in place as per national labor laws. A small percentage of workers in support functions are hired through labor intermediaries. About 60% or the company’s workforce are holders of rural residence permits (“hukou”). All workers enjoy the same benefits and are subject to the same recruitment, performance evaluation, and promotion procedures and considerations regardless of hukou status. The company has shared with IFC its human resource (HR) policies and employee manual. Terms of employment including wages and benefits are competitively determined through referencing the results of labor market surveys. Worker rights and responsibilities, consistent with national labor law requirements, are written into employment contracts and into the company’s human resource (HR) policies, procedures, and manual. Work and overtime hours adhere to national labor law limits. The company’s HR policies are consistent with principles of non-discrimination and equal opportunity, and the company has an anti-discrimination policy in place governing its hiring, promotion, and general HR management practices. Turnover in front line positions in the past 3 years averaged about 15%-20%, mainly attributable to voluntary movements by workers for family and career reasons. The company has an extensive HR training program which is managed by the HR department, and which includes EHS/OHS content delivery.

The company provides dormitories and family housing units for its workers, or rental-subsidy in-lieu-of. Many non-local employees choose to rent their own accommodation in townships or cities near the facilities. The company has requirements in terms of dormitory safety, hygiene, and availability of cleaning, washing, and other essential facilities. IFC’s visit to worker accommodation buildings confirmed housing conditions to be reasonable, safe, and clean.

Worker Organization and Grievance Mechanism:

A labor union is in place at company facilities with most workers having voluntarily opted to join as members. The labor union, consisting of representatives elected by staff, organize staff activities, and interface with company management on matters such as those related to staff benefits and in mediating potential grievances. There is no evidence of any obstacles hindering Jointown staff from forming or joining a labor union or from entering into collective bargaining agreements. Employees can raise grievances to management through their supervisors, through the labor union, through the HR department, anonymously by using drop boxes, and through email. The HR department maintains statistics of incoming grievances and how they have been addressed.

Occupational Health and Safety (OHS):

The company at the headquarter level has developed an overarching safety policy statement stating key operating principles and requirements and requires each facility to counter-sign against the policy statement (as well as a safety contract annexed to the statement) and disseminate the signed document to all facility-level workers as a formal acknowledgement and endorsement of the group-level commitment to safety. Detailed OHS related SOPs are in place and have been shared with IFC, while staff at all levels and at all locations have OHS-related KPIs linked to their performance evaluations. The OHS department at the company headquarter conducts unannounced and pre-scheduled OHS inspections at a number of sampled facilities every year. In each province, the provincial-level subsidiary company of Jointown is responsible for ensuring and inspecting safety performance of facilities in that province located in second and third tiered cities and prefectures.

Development and implementation of OHS operating procedures at Jointown facilities are based on several steps: (i) The safety department at the company’s headquarter in Wuhan developed a set of corporate-wide safety policy, requirements, procedures, and KPIs, based on national OHS laws and regulatory requirements and befitting the company’s work processes; (ii) each facility reviewed the corporate-wide documents and developed a corresponding facility-level set of OHS requirements and SOPs; (iii) each department and sub-unit within a facility developed its own OHS SOPs, inspection checklists, and other relevant documents, down to the worker-level with involvement from workers; these were subsequently reviewed by the facility senior management; (iv) the headquarter safety and HR departments reviewed facility-level OHS documents and changes were made until a set of final documents were concluded; (v) facility-level OHS documents and SOPs were then submitted to local Government safety regulators for review and comments, and finalized based on feedback from regulators; (vi) once finalized, day to day implementation and monitoring/inspection would commence based on facility-level and sub-unit level finalized SOPs, KPIs, and inspection checklists.

In addition, the company has adopted a joint-responsibility system comprising two key practices: (i) it organizes all its employees into sub-department level OHS teams. Every year several teams will be selected to undertake 4x cross-cutting safety inspection at other sub-departments and in other facilities, with results shared across the whole company to highlight areas of strong performance and of required improvements for all staff to see, and with facility-level and worker-level performance evaluations linked to the results; (ii) if a department experienced an OHS non-compliance event, all other departments within the same facility, and other facilities to a lesser extent, will also receive a negative review in their year-end OHS performance evaluation. The company uses these practices to promote mutual OHS supervision and shared-responsibilities across its facilities in China and between departments.

The Beijing/Wuhan logistics centers and manufacturing facilities have not had any major work related lost time accidents since start of operation. Production areas at all facilities visited by IFC appeared well organized. PPE’s such as gloves, safety shoes, masks and glasses are provided to all workers in the production areas and were in use, commensurate with the nature of operations and potential safety hazards; there was clear OHS related signage throughout production line areas and other sections of the facilities. Jointown facilities require construction contractors to meet its OHS requirements, including appointment of on-site safety inspectors, and stipulations are written into contractual agreements. Annual health check-ups are arranged for staff and electrical and equipment inspections by suppliers and qualified electricians are undertaken to ensure normal functioning. There are procedures and requirements in place in relation to working at heights and in confined or semi-confined spaces.

Pollution Abatement:

Limited air emissions arise from the company’s logistics centers stemming from the occasional use of diesel backup power generators, and from limited quantities of LPG used in cafeteria kitchens as cooking fuel. Most of these centers are powered by grid electricity, and steam supplied by municipal steam companies for indoor heating. Some centers have natural-gas-based boilers for facility heating purposes, and given the use of natural gas as fuel, resulting air emissions are low in Sulphur content. Where boilers are in use, there are appropriate air emission treatment measures and monitoring regimes in place meeting national and local regulatory requirements on energy related air emissions.

The company’s logistics operations utilize limited amounts of water mainly for staff and sanitary purposes, with water supplied by municipal or industrial park water provision companies. Waste water (WW) is limited to sanitary wastewater and effluent generated from staff canteens, dormitories, or other staff and operational/storage areas, and is discharged to the local municipal sewers for treatment. Solid wastes at product distribution centers mainly consist of paper cartons and packaging materials. Most of these are reused for product packaging, or in some cases returned to suppliers, as the company has a policy of minimizing solid waste generation and maximizing re-use.

At the Beijing and Shandong manufacturing plants, WW generated is treated by on-site waste water treatment plants (WWTP), by a process comprising Fenton oxidation, sedimentation, anaerobic biological treatment, and aerobic treatment, before being discharged to the municipal/township WWTP for further treatment. Monitoring is achieved in four ways: (i) company technical staff sample WW for testing on-site; (i) the local environmental protection department (EPD) conducts unannounced spot-checks by taking waste water samples and inspecting internal monitoring results retained by the company; (ii) annual sampling and monitoring is conducted by a third party licensed technical institute; and (iii) the on-site WWTP is connected to the local environmental authority through real-time monitoring equipment enabling monitoring by the authorities at all times of a number of discharge parameters. Post-treatment WW monitoring results by a third party technical monitoring institute (dated October and December 2018 with samples collected at the point of discharge from the on-site WWTP) indicated the following: (i) Beijing plant (TSS, COD, BOD5): materially compliant with national and World Bank Group (WBG) Environmental Health and Safety (Pharmaceuticals and Biotechnology Manufacturing) Guideline limits; (ii) Shandong plant (phosphorous and ammonia): materially compliant with national and WBG EHS guideline limits.

Process and energy related air emissions at the two manufacturing plants are treated using a combination of methods mainly comprising SNCR de-nitrification, FRP bio-towers (at the on-site WTP), bagged and electrostatic de-dusters, double alkali desulfurization, secondary activated carbon adsorption (for odor treatment at the WWTP). WW monitoring results by third party technical institutes indicated the following results: (i) Beijing plant (non-methane total hydrocarbon, hydrogen sulfide, methanol, particulate matter, ammonia, odor (density), and sulfuric acid mist): compliant with national/WBG EHS guideline limits; (ii) Shandong plant (NOX and odor density): compliant with national and WBG EHS standards.

Hazardous wastes:

The company reported that across its facilities in China, very small quantities of medical products were discarded in 2018 – where discards occurred these were collected and disposed of by the China Food and Drug Administration local offices, strictly as per national regulatory requirements. Sludge generated at the two manufacturing facilities are not classified as hazardous by the local authorities and are either landfilled or sold to brick making or road construction companies. At manufacturing facilities, the company has detailed procedures in place, as shared with IFC, governing the procurement, storage, handling, management, and disposal of ingredients and wastes classified as medical or hazardous. This includes access-controlled, and where required, explosion-proof and concrete lined storage areas for hazardous materials, which are located at a minimum required distance from production and other buildings. IFC’s visit confirmed that hazardous material usage and storage areas clearly displayed material safety data sheets, and handling procedures and emergency preparedness and response information were also clearly indicated in those areas for staff to see and follow.

Resource Efficiency and Greenhouse Gas Emissions (GHG):

Primary energy requirements for the project consist of: electricity procured from the grid, diesel oil used as fuel for the company’s truck fleet, and natural gas used as fuel in boilers at certain product distribution centers. The company’s 125 provincial and prefectural level distribution centers operate standalone commercial cooling units, medium to large sized commercial refrigeration units, transport refrigeration, and chillers, to ensure products are kept at the necessary optimal temperatures while in storage and transit. Some of the units currently utilize R22 as a refrigerant – the company will ensure that all new facilities constructed in future do not utilize R22 or other phased out refrigerants, and for existing facilities, will explore technically and financially feasible ways to switch from R22 to another refrigerant with a much lower global warming potential (GWP) e.g. HFC134a or R401A. Refer to the ESAP.

Based on these numbers and other data from the company for the year 2018, the total annual GHG emission of the company’s facilities under this project is estimated at about 90,000 tons CO2 equivalent, attributable mainly to: (Scope 1) fuel consumption; the use of refrigerants in operating commercial and industrial cooling units and equipment on site; and (Scope 2) grid electricity consumption. Given that this exceeds the 25,000 CO2te threshold as defined in IFC PS3, the company will use an internationally recognized methodology to annually estimate and report its total GHG emission footprint to IFC – to be included in the annual monitoring report submitted to IFC.

Each facility tracks its electricity and fuel usage and looks for opportunities to achieve reduction. For instance, the company’s product distribution center in Wuhan has invested in a solar rooftop power generation project, and a rainwater harvesting project, which has achieved notable savings since their commencement in 2015. In terms of transport fleet fuel efficiency, the company achieves this mainly through transport route optimization, timely vehicle maintenance to ensure that vehicles are in optimal running conditions, and close monitoring of each vehicle’s fuel consumption quantities.

Jointown has in-house facility security teams and together with its inventory management system, ensures all incoming, stored-on-site, and outgoing products are accounted for and stored and transported securely. There have been no known security incidents at company facilities.

Traffic safety management:

The company’s logistics operations emphasize traffic safety and fleet management as one of its highest operational priorities. Each logistical center underwent a detailed risk point identification and analysis process, leading to results which formed the basis for developing and implementing a series of risk minimization and mitigation actions. Specific mitigation measures include but are not limited to: (i) thrice-daily and weekly vehicle inspections and adherence to strict vehicle maintenance and replacement schedules; (ii) repeated training to all drivers on driving safety and etiquette and other road safety related aspects; (iii) installation of GPS devices on each truck and smaller vehicles and the use of smartphone apps by all drivers as an important means to monitor truck movements, routes taken, travel distances, and travel durations. Real time GPS data of the company’s entire truck fleet is centrally monitored at the company’s logistics operational center in Wuhan and smartphone apps enable quick feedback to drivers of any changes in road conditions and other important information; (iv) screening and background checks on driver applicants during recruitment; (v) unannounced spot checks of driver dormitories to check for any signs of alcohol consumption or lack of rest prior to or during work trips; (vi) real-time monitoring of road and weather conditions, and of any sudden changes in traffic arrangements at local levels which may affect transport durations and routes, with such information transmitted at all times to drivers on the road; (vii) adherence to safety rules such as ensuring a 15 minute break for every 3 hours of driving, having 2 drivers alternating if a journey exceeds a certain distance or duration, etc.

The focus of the company’s traffic safety management (as well as on OHS and life and fire safety) is to instill a sense of ownership of safety among all staff and the company achieves this through competitions, rewards, interactive training, and other means. Stringent road and driving safety requirements are similarly applied to the company’s 85 third party truck fleet contractor companies, both in terms of selecting a contractor (by evaluating its past track record on safety) and post-selection monitoring of day to day safety performance. The company reported that there have been no major traffic incidents in the past 3 years of operation of its fleet of 1,700 trucks and vehicles across China.

Hazardous Materials (HAZMAT), life and fire safety (LFS), and Emergency Preparedness & Response Planning (EPRP):

The company reported that there has been no major emergency incident in the past 3 years. There are limited quantities of HAZMAT stored or used at logistical centers. At the company’s manufacturing facilities, there are stringent procedures and requirements implemented to ensure robust management of HAZMAT as per company policy and regulatory requirements. Refer to the PS3 section for further details.

Fire detection and suppression equipment were fitted across the facilities in accordance with potential fire risks. Signage, floor and zoning demarcations, fire exits, and locations of fire extinguishers were clearly marked as were dates of last inspections of equipment. Records were kept of fire-fighting training provided to employees and fire drills conducted.  All equipment, facilities, electrical connections are regularly inspected against a pre-set maintenance schedule. Quarterly EPRP and fire drills are carried out which cover potential emergency scenarios such as: suffocation in confined spaces; fire incidents due to short-circuits or other causes; accidental leakage of medicine products; coping with potential major natural disasters, etc. These drills are based on the results of risk identification and analysis exercises and are designed to simulate real-life occurrences of location-specific risk scenarios. The company’s manufacturing facilities have an on-site fire-station with necessary equipment and personnel on standby to handle potential fire, explosion, and other emergency events, and are in close contact with local fire brigades. There are dedicated fire-fighting water storage tanks and water discharge points located throughout the facilities. All facilities are in reasonable proximity to local fire brigades.

Key stakeholder groups for the project are customers, employees, suppliers, and local residents in the vicinity of each facility. As part of the EIA processes at manufacturing facilities, public consultations with the local residents and other stakeholders were undertaken. During day to day operations, the security entry points at each facility are the key public interfaces to receive external communications including grievances from the public if any; and members of the public can also access the company by email or by calling into the company’s general inquiry phone number to communicate any concerns they may have. The company has an extensive community outreach program across China through which it supports local development e.g. collecting medicines which are past use-by dates from communities for disposal and recycling to contribute to medical product safety in local communities. Starting in 2010, the company publicly disclosed an annual corporate social responsibility report, available for download at http://www.jztey.com/jztey/channels/229.html.

Contact Person: Ms. Yanling CAI

Position: Supervisor of Securities Affairs Center

Jointown Pharmaceutical Co., Ltd.

Address: No. 8, Longyang Avenue, Hanyang District, Wuhan, Hubei, China 430051

Tel: +86 400 8004488

Email: cyl_2009@163.com

http://www.yyjzt.com