Working Conditions and Management of Worker Relationship: Management of the worker relationship is compliant to PS2. HR management is administered from the holding company (XN) that sets the policies and procedures and then applies these to each of the subsidiaries. Each subsidiary retained its own HR function that was supervised by the respective general managers but reported to XN HR function. The group do not source any outsourced labor with direct recruitment for all staffs including security, cleaning and drivers. Working conditions are seen during the site visit were considered as meeting the more stringent of either PS requirements of those found in applicable national/regional or local labor law and regulation. The group employed ~1,100 employees over the four locations with a gender ratio split of 1:1 for male and female for three entities of XN, HKY and ZXN. KXV was the exception with a gender ratio split of 7:1 male to female. It as stated that this imbalance in KXV was due to the persons who applied for the position.
Human Resources Policies and Procedures: XN, HKY and ZXN maintain employment policies and procedures that are approved by the local government department of manpower and compliant to PRC regulations. It was stated in discussions that apart from the expansion of the HR function to cover the new company and facility (ZXN, and KXV), there had been no material change in the HR functions policies and procedures since the previous investment #38881. The HR function complied with PRC labor law divided in to five functions covering: i) recruitment; ii) renumeration; iii) benefits; iv) training; and v) HR relations. These five areas implemented in part by a team of 30 HR professionals and administrative support. KXV has a decentralized HR function, with recruitment decisions approved by the holding company HR function. The group have adopted an anti-discrimination and anti-sexual harassment and anti Gender-Based Violence (GBV) policies and procedures.
Working Conditions and Terms of Employment: HKY and XN workers received and sign for a copy of the approved company Staff HR handbook. Induction training is conducted, and proof of delivery is maintained in worker’s employment files. Working hours are based on eight-hour shifts rotating every three weeks through night shift, with breaks every two hours and a maximum of forty-eight working hours per week. All overtime requests are voluntary. Interviews with workers at both ZXN and KXV locations highlighted that: i) salaries were more than city-level minimum wage; and, ii) benefits include housing (optional workers accommodation), and social insurance, paid annual leave (in accordance with PRC regulations). Working conditions at both ZXN, and KXV were considered aligned with the requirements of this PS.
Workers’ Organization: HKY and XN workers have a right to unionize. Membership with the union is voluntarily. The XN HR department engage with the XN union on a monthly basis to discuss any pending challenges, known grievances and future activities planned by XN. There is no union presence at ZXN, nor KXV. The policy of the group is to allow a union if the workers request it in accordance with the labor regulations of the PRC.
Non-discrimination and Equal Opportunity: XN HR function has a policy of nondiscrimination with a focus on identifying the best qualified person for the job. The policy includes a commitment to ensure no discrimination based on ethnicity, religion, sexual orientation, age, gender or disability. All applications are passed through the HR function at the holding company and all rejected applications are reviewed by the director of HR to identify reasons for rejection. The group works in the Special Administrative Region (SAR) of Xinjiang with two production lines employing a total of 35 persons, 12 of which are XN Nangyang workers brought in for technical and managerial supervision purposes with 20 workers locally recruited. Of these 15 are ethnic Han Chinese, three ethnic Uighurs and two Muslims. It was noted that one of the local ethnic groups had been recruited in to the role of HR assistant responsible for recruitment. All workers interviewed during the site visit confirmed that the company applied a transparent recruitment process. All workers expressed satisfaction with the company with no workers interviewed experiencing any form of discrimination during their time with the group.
Grievance Mechanism: The group has in place multiple channels for grievance. These include: i) drop boxes; ii) direct messaging through “Wei” Chat; and, iii) complaint to manager and/or supervisor. All complaints are referred to a central complaints unit that administer the issue based on the severity. The group also has in place a specific sexual harassment and GBV reporting hotline (that is open to anonymous reports). This reporting hot line is accessible through a social media platform with complaints passed to a dedicated officer within the holding company HR function who evaluates and reports to the head of HR. All reports are confidentially handled and investigated with appropriate action taken. The harassment and GBV hotline are managed independently of the facility level management.
Protecting the Work Force: KXV and ZXN confirmed that the group do not employ any individuals under the age of 18 years old. Verification of age is achieved by reviewing the identity cards of employees. The site visit at both ZXN and KXV indicated no obvious signs of underage workers. All workers interviewed highlighted the benefits of working with the group and a commitment for working towards the company ethos to produce healthy good nutritious foods highlighting this was one of the reasons for choosing to work for the group.
Occupational Health and Safety: The group has achieved OHSAS18001 certification for both its HKY and XN operations with a plan to roll this out to the ZXN and KXV facilities. A review of the HIRA process highlighted that the group considered, monitored for risks and applied control measures. However, guidelines appeared generic and lacked detailed guidance on: i) specifics on standards for monitoring, what is monitored and the limits to this; and, ii) details on procedures to track and ensure that the mitigation of the risks is managed, to a specific standard, with defined responsibilities, data captured, evaluated, and stored. It was noted that the HIRA was not connected to the remedial actions with cross references to generic management documents. (See ESAP #1). In addition to operational working measures the group has in place specific procedures for: i) working in confined space through the Grain Storage Management procedure; ii) WAH, and; iii) lock out tag out for electrical maintenance. The group has ERPs for each facility (see PS4). All workers accommodation observed had fire safety equipment installed, sprinklers, smoke alarms and alarm systems with testing done monthly, and two sets of stairwells. Fire drills for staffs were conducted on an annual basis. It was noted that the new facility had not been issued with a Fire Safety Certificate. ZXN stated that the original fire suppression plan was approved by the local fire department at the point of construction of the new facility. That the company would be subject to periodic fire inspections by an appointed consultancy to ensure that the building was compliant. As set forth in the ESAP#5 ZXN shall engage a recognized L&FS consultancy in the PRC to assess the combustible dust explosion risk with focus on preventive measures, including cleaning excess dust, housekeeping, electrically classified equipment, management of static electricity and prevention of ignition points. The company installed L&FS prevention and protection systems and has implemented evacuation training and procedures. This analysis shall be against the PRC standard for L&FS for commercial premises relevant to the bakery and milling sector.
The company monitors occupational labor related levels of dust and heat within the work place. Sample data sourced for one facility confirmed that work place monitoring in terms of illumination, temperature and air quality was consistent to WBG general EHS guidelines.
Supply Chain: The group supply chain is made up of three main sources: i) wheat from PRC (Henan Province); ii) Flour (from HKY mill and COFCO (PRC)); and iii) Flour (Kazakhstan based traders). For 2018, the group sourced ~180,000 tons of wheat with: i) 10% sourced from small holder farmers; ii) 30% sourced from big farmers/aggregators; iii) 60% from co-operative farms. The wheat is milled by the HKY and supplied back to the noodle factories with ~40% of milled flour sold to third parties. The balance of flour needs sourced in the PRC was acquired from state owned traders and IFC client COFCO. The flour supply entering KXV facility is sourced from a Kazakhstan based aggregator that sources directly from mills.
For the PRC sourcing the group sources wheat from 1,109 suppliers with a total number of farmers ~70,000, with the group giving basic training on chemical use and safety to selected suppliers to promote food safety needs. Prior to any supplier becoming adopted notification on the supplier’s code of conduct is done. This supplier code includes the need to ensure that no forced/child labor is used and that the supplier adheres to PRC labor law meeting minimum wage standards, and applies appropriate approaches to management of OHS risks. This is supported with an annual audit of the suppliers by group buyers. This assessment focuses on quality of equipment, storage warehousing and a visual assessment of farm operations. Although this approach is considered as reasonable it is not adequate to address potential OHS and labor related risks. As set forth in the ESAP #6 the group shall develop an audit checklist to assess supplier compliance, and a process for annual supplier self-assessment of compliance and periodic audits of co-operatives, to ensure that approaches to management of OHS and labor risks is consistently applied. This audit process shall be linked to supplier commitments and shall assess: i) quality of the supplier OHS management systems and standards; ii) approach to the supervision and management of labor (both daily workers and contractors); and, iii) infrastructure in place for transport, storage and disposal of hazardous materials.
An IFC GMAP assessment of wheat supplies from Kazakhstan highlight significant risks relating to use of harmful child or forced labor, with OHS risks relating to production considered as severe relating to transportation, storage, and explosive dust risks. As at the date of the appraisal KXV and the group had limited to no oversight on risks within the Kazakhstan supply chain. As set forth in ESAP #7 the group (under KXV) shall implement its procurement policy to wheat supplies originating from Kazakhstan and conduct audits on the supply chain to ensure that all sourcing is compliant with the group’s minimum standards. The trader engagement approach must include: i) communication to the trader concerning the groups requirements on minimum labor standards; ii) assessment of trader systems for monitoring the supply chain (in accordance with XN procurement needs) and systems to review, evaluate and if necessary remove sources that are non-compliant to XN requirements iii) contractual clauses with traders that allow the group to conduct audits on this supply chain to mill and to location of source to verify compliance; iv) process for trader to submit annual reports on the supply chain of the flour to the company, confirming results of the internal assessments.
