Land Acquisition and Involuntary Resettlement is not applicable. It was stated that Daintee had no expansion plan beyond its existing operational footprint. Sunshine Energy investment is ringfenced to roof top solar projects with all offtake infrastructure utilizing existing power networks. PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources is not applicable. The Daintee operations are in designated industrial zones. Sunshine Energy install roof top solar panels on existing industrial buildings. PS7: Indigenous Peoples and PS8: Cultural Heritage are not considered applicable to this project.                                                  

 This is a Category B project according to IFC’s 2012 Policy on Environmental and Social Sustainability. The E&S risks and impacts associated with this project are limited, site-specific and can be readily addressed through generally accepted mitigation measures as described in this document and the attached Environmental and Social Action Plan (ESAP).

Key E&S issues associated with this project, as identified during IFC’s review, are related to the existence and implementation effectiveness of Watawala Tea Ceylon and Sunshine Energy’ EHS and HR management systems for the proposed Daintee acquisition and solar panel expansion, including legally required ESIA studies and/or permits, as needed; (ii) respective organizational capacity for implementing, monitoring and reporting on company’s Environmental and Social Management System (ESMS); (iii) labor and safe working conditions of direct employees and contractors, including OHS standards; (iv) emergency preparedness and response; (v) compliance of contractors with applicable national EHS/labor requirements; (vi) monitoring of EHS parameters (air emissions, effluents, and water and energy efficiency); (vi) stakeholder engagement and community grievance mechanism. Applicable World Bank Group (WBG) Environmental, Health and Safety (EHS) Guidelines for this investment include the General and Sector-Specific (Food and Beverage Processing).

Environmental and Social Assessment and Management System: Sunshine Group approach to management of E&S risks is devolved to the respective operating subsidiary. As such, the ESMS at the subsidiary level is contingent on the specific risks and impacts of that business.

The Technical Audit highlights that Daintee has in place an ISO 9001 (2015) Quality management system and is certified for its products to Sri Lanka Standards Institute requirements. According to the audit, Daintee has in place hazard and critical control point procedures (HACCP) which include assessment of third-party suppliers, customer complaints, quality procedure and control of non-confirming products. IFC PS1 requires an ESMS appropriate to the nature and scale of the project and commensurate with the level of its E&S risks and impacts. The ESMS must incorporate the following elements: (i) policy; (ii) identification of risks and impacts; (iii) management programs; (iv) organizational capacity and competency; (v) emergency preparedness and response; (vi) stakeholder engagement; and (vii) monitoring and review.

The available information highlighted that: (i) Daintee is ISO 9001 (2015) Quality management certified (including aforementioned HACCP procedures); (ii) is in possession of environmental permits for its operations; (iii) is conducting internal monitoring for environmental parameters; (iv) is non-compliant for discharged treated waste water pollutant levels (discharged in to municipal waste water system); (iv) its organizational structure includes a Human Resources (HR) function, while nature and comprehensiveness of HR policy is unclear, (v) its organizational structure does not include an EHS function for compliance or EHS monitoring; (vi) the presence of firefighting appliances and that the factory is registered with the local fire authority; (vii) improvements in safety practices are required; (viii) the company has workers accommodation.

Findings from discussions with Watawala Tea Ceylon Company teams who have been engaged with Daintee acquisition process highlighted that the : (i) company has limited knowledge of its E&S risks, especially as these relate to its sourcing of raw material; (ii) management system for monitoring and control on environmental parameters require material improvement; (iii) general management of materials, including hazardous material and storage of these, needs to be improved; (iv) goal is to apply standards, as per the Sunshine Group, and in particular Sunshine Tea (which includes compliance to ISO 22001), and to establish EHS/HR management functions (with supporting system) as well as applying sustainable approaches in raw material sourcing. As highlighted by the Technical Audit, and the legal due diligence, some elements of IFC Performance Standards needs are known, but significant knowledge gaps remain.

As set forth in ESAP #1, Sunshine Group shall commission a qualified independent consultant to undertake an in-depth E&S appraisal of the Daintee factories, including EHS and labor management systems’ policies/procedures of the factories and warehousing/distribution operations against the applicable national legal and regulatory requirements, IFC Performance Standards, and WBG general and specific (Food and Beverage Processing) EHS guidelines. This assessment must be benchmarked against recognized Good International Industry Practice (GIIP) and be consistent with ISO 14001, ISO 45001 and ISO 22001 standards. The resulting Corrective Action Plan (CAP), with associated CAPEX and OPEX, shall guide the closure of all identified gaps in terms of policy commitments, systems and procedures, human resource capacity/training, infrastructure, management systems and monitoring needs, compliance to prevailing regulations for labor, OHS and environmental monitoring, including management of COVID-19 related risks. This assessment shall ensure that any non-compliances in terms of EHS, labor and supply chain actions are identified with remediation measures against above-mentioned performance requirements.

Sunshine Energy finances renewable energy projects, outsourcing all installation and O&M to its EPC partner. Sunshine Energy relies heavily on its EPC partner to undertake all related activities in compliance to applicable local EHS and labor legal and regulatory requirements. A review of sample O&M agreements confirm such, there is no oversight nor formal communication from Sunshine Energy to the EPC on compliance needs for HR or EHS needs. The EPC partner has in place construction safety manual which includes identification of key risks and the relevant protocols to be followed. Roof top solar operations risks are predominately related to OHS during installation, and ongoing O&M (including cleaning) (refer to PS2 section below) and structural assessment of roof’s due to risks related to the integrity of the roof top and risks/impacts resulting from high winds, earthquakes, or an event that affects structural integrity of the building (earthquake, flood, or fire). Sunshine Energy has yet to define its policies on minimum EHS/labor standards, and management systems to ensure the EPC is compliant to these standards. As set forth in ESAP#2, Sunshine Energy shall develop an ESMS based on recognized GIIPs and which would include standard operating procedures, organizational structure to manage E&S and monitoring protocol to be adopted by the EPC contractor. This ESMS shall include: (i) policy defining minimum EHS/labor standards (especially for and Working Permits (e.g. Working at Heights (WAH), Lifting, and Electrical Work); (ii) assessment of risks and impacts, roof structural integrity, including assessment of hazards relating to roofing materials (i.e. Asbestos); (iii) management of hazardous wastes (including end of life for photovoltaic cells); (iv) Emergency preparedness and response; (v) risk assessment (including OHS considerations for COVID-19);  (vi) communicating and monitoring EPC compliance to EHS needs; and (vii) specific management plans as identified based on assessment of risks and impacts and including but not limited to waste management, OHS, pollution prevention, water efficiency etc.

Environmental and Social Policies: Sunshine Group E&S policy is based on four pillars defining its vision, mission, purpose and values. This is reflected in a general policy commitment to apply sustainable practices on a business by business basis. The Group are committed to be an ethical and responsible business operator, while deferring responsibility to subsidiary levels to develop its own applicable policies and commitments on its specific operations. Both entities under this investment, (Daintee and Sunshine Energy), commit to compliance with applicable Sri Lanka’s legal and regulatory requirements. As set forth in ESAP#3, Daintee and Sunshine Energy shall develop a corporate EHS/HR policy and standards applicable to its operations highlighting that, in addition to regulatory commitments, they will ensure compliance with IFC Performance Standards and WBG general EHS guidelines, including applying best OHS/labor practices and resource use efficiency to its own staff and contractors (EPC). The EPC contractor will also be required to develop its own EHS policy. This policy shall be communicated to all staffs and contractors and be independently verified through annual audits.

Identification of Risks and Impacts: Daintee has two factory operations (Anura Mawatha with 13 production lines, and the Kandawala Road with three production lines) and one warehouse (Maligawa Mawatha), all located in Sri Lanka. A review of the legal due diligence Report for the Watawala Tea Ceylon Limited on the Due Diligence Study of the Legal Aspects of Daintee Limited confirms that all three facilities had valid environment permits. The Technical Audit for Daintee presents an overview of the Daintee operations against national compliance with the following findings: (i) wastewater effluent treatment plants, and releases are non-compliant to minimum standards under Sri Lankan regulations; (ii) although the facilities operated oil fueled furnaces, gas ovens, and diesel powered generators, no environmental monitoring data was confirmed with inhouse air emissions monitoring conducted (as stated in the Technical Audit), no monitoring results nor information on frequency nor methodology for data collection is stated; (iii) there is no in house EHS function tasked with monitoring and reporting on EHS compliance; and, (iv) no E&S screening/considerations for sourcing raw material for production inputs.

Daintee legal due diligence confirms key E&S compliance data/gaps, along with the technical review, but as at the date of the appraisal there is no knowledge on the full level of E&S related risks present with the Technical Audit questioning legality of some current operational activities (for example discharged treated waste water). As IFC investment is proposed for the acquisition of Daintee, it is required that all Daintee operations are assessed against IFC Performance Standards with an audit report highlighting specific gaps and a timewise action plan (including CAPEX and OPEX) for closure of these gaps (See ESAP #1 above).

For roof top installation, Sunshine Energy relies on its EPC to identify all related environmental risks and impacts, as these are applicable to its proposed projects. The EPC partner has in place construction safety manual and which includes identification of key risks and the relevant protocols to be followed. As included in ESAP #2, Sunshine Energy will develop an ESMS based on recognized GIIPs to manage E&S risks from its EPC partner. 

Management Programs: Sunshine Group have no defined management programs in place, with no knowledge on specific EHS management programs at the Daintee. Going forward, Sunshine Group shall commission a qualified independent consultant to undertake an in-depth E&S appraisal of the Daintee factories (ref. ESAP #1 above). Sunshine Energy also does not have any EHS management programs in place. A review of the contractual agreement with the EPC confirms that Sunshine Energy requires its contractor to comply with prevailing laws and operate in a safe efficient manner. There is no reference to minimum standards for labor and EHS compliance needs. To address the above, Sunshine Energy will develop and implement an ESMS based on recognized GIIPs to manage E&S risks from its EPC (ref. ESAP #2).

Organizational Capacity and Competency: Based on the Technical Audit, Daintee do not have a compliance nor an EHS function. For the rooftop solar, Sunshine Energy outsource all EHS and labor responsibilities to the EPC. It is recognized that the installation of rooftop solar arrays that risks relate to OHS, structural integrity of surfaces and roofs, handling of materials (photovoltaics are live at all times in sunlight), electric shock risks, and associated risks with structural integrity of roof panels coming detached in extreme events (e.g. earthquake and typhoons). It is stated in the ESAP#2 that the client needs to develop a management system to ensure adequate oversight is applied to its EPC to comply with the policy commitments and needs. As set forth in ESAP#4, both Sunshine Energy and Daintee shall recruit suitably qualified EHS officer tasked to manage all EHS aspects to their respective operations and ensure that all operations are compliant to prevailing regulations and IFC PS requirements.  

Emergency Preparedness and Response: Sunshine Group has a commitment to comply with applicable Sri Lankan’ laws and regulations for emergency response with each subsidiary required to demonstrate compliance and have preparedness plans in place for the management of fires, terrorist attacks, and serious incidents. For Daintee, the Technical Audit highlights existence of firefighting extinguishers and infers compliance to prevailing regulations. Legal review report highlights that fire insurance is valid but does not confirm whether a valid fire safety certificate is held by the Daintee facilities. This will be covered as part of ESAP #1 which requires Sunshine Group to commission a qualified independent consultant to undertake an in-depth E&S appraisal of the Daintee factories.

Sunshine Energy relies on the EPC to manage all emergency situations as these emerge from the roof top solar projects. Going forward, the company will develop an ESMS including the requirement of developing emergency preparedness and response procedure as outlined in ESAP #2, and PS2 section below.

COVID Impact: Daintee operations were closed from March 20th, 2020 until April 20th, 2020 and have since gradually reopened operations with only ~50% of staffs. The management of factories and manufacturing facilities are governed by the Government of Sri Lanka COVID-19 circulars, this requires all manufacturing companies to: (i) limit operations to essential needs; (ii) alternate work days or apply extra shifts; (iii) apply social distancing within the work place; (iv) apply a minimum level of temperature checks and hygiene needs at points of entry in to the work place; and, (v) all workers are required to wear face masks.

Sunshine Energy adopt the same approaches as per Sunshine Group which includes a suite of COVID-19 specific risk assessments and approaches. An example of “Workplace Preparedness Matrix” (for the Watawala Tea Ceylon) was shared during appraisal. The approach is an internal review to determine needs, gaps and corrective actions to manage COVID-19 risks. Contingency actions are defined on the basis of category of staff into essential, non-essential, as well as actions to ensure protection of customers from interaction (through adoption of teleconferencing approaches) and assessing health risks with the distribution teams (such as screening staffs with pre-existing conditions), as required. The Group confirmed that no staffs have been retrenched due to COVID-19, and that any staffs, removed from duty due to infection, would continue to receive full benefits. To date, there has been no reported cases of COVID-19 within the Sunshine Energy. Sunshine Energy have yet to communicate these contingency measures to the EPC. As included in ESAP#2, Sunshine Energy shall develop an ESMS and which would include, amongst others, procedure for risk assessment (including OHS considerations for COVID-19) and as included in ESAP#3, Daintee and Sunshine Energy shall develop a corporate EHS/HR policy and standards applicable to its operations and which shall be communicated to all staffs and contractors and be independently verified through annual audits.

Monitoring and Review: Daintee Technical Audit states that internal monitoring on workplace air quality, noise, and heat is taken place. Air quality monitoring of boiler furnace, gas ovens or generator stack emissions are not stated as being monitored. The Technical Audit states that treated wastewater effluent levels at point of discharge (when compared to acceptable WBG effluent levels for release to surface water) exceed allowable levels for COD, BOD, and Total Suspended Solids (TSS). The current effluent discharge is released into a municipal wastewater treatment system and further clarity on permissible levels, agreements with the local municipal authority (and their capacity to manage the wastewater in terms of volume), and current level of monitoring at all Daintee factories is required. This will be covered as part of ESAP #1 which requires Sunshine Group to commission a qualified independent consultant to undertake an in-depth E&S appraisal of the Daintee factories (See ESAP #1 and PS3 section below).

For Sunshine Energy, all monitoring on the roof top solar projects is included within the EPC O&M contracts. Going forward, this will be included as per of ESMS to be developed in order to manage E&S risks from its EPC partner (See ESAP #2).

Supply Chain Risk Assessment and Management: As applicable, Group entities apply sustainable sourcing polices driven by a combination of Group sourcing policy on ensuring ethnical supply chains are maintained and in response to customer demands. The Group own an oil palm plantation and mill, and it was verbally confirmed no material from this operation currently, or in future would enter the primary material supply chain of Daintee. The main ingredients for Daintee confectionary are: (i) cocoa powder (imported from Malaysia); (ii) refined sugar (imported from India), and (iii) glucose (imported from India). A GMAP toolkit assessment for sugar production from India highlights a high risk of child and forced labor. Within the Daintee Technical Audit, lack of information on the supply chain for Daintee is identified as an operational risk with a stated intention to evaluate and improve oversight on the raw material inputs. As set forth in ESAP#5, Daintee shall develop a risk based procurement policy defining its commitment to comply with specific E&S requirements (ref. PS2 and PS6) for its sourcing of raw materials from third-party suppliers, and shall develop (as part of the ESMS) a procurement procedure that defines: (i) process for evaluating E&S risks within the primary supply chain based on production material; (ii) evaluation of suppliers and source of raw material inputs; (iii) assessment of suppliers E&S systems and capacity to manage risks; and (iv) process for annual reviews of suppliers/source of product based on material production input supply risk assessments.

Sunshine Energy sources the solar panels directly from EPC manufacturing plants based in Sri Lanka.                                                   

 Daintee Technical Audit employs ~320 workers. No information is available on the gender split. Sunshine Energy employs 31 persons assigned to administrative and technical functions.

Human Resources Policies and Procedures: For Daintee, HR policies and procedures will be aligned to the Sunshine Holding policies and procedures. The Legal review Report for Watawala Tea Ceylon Limited on the Due Diligence Study for the Legal Aspects of Daintee Limited highlights the Daintee has yet to define an HR policy with a reported number of employees exceeding 320 (including 150 contract staff). A review of the standard employment contract notes that the contract reviewed was compliant to Sri Lanka labor laws and regulations. The review identified that procedural gaps exists for: (i) definition on working hours and working times; (ii) clarity on compliance of salaries to Sri Lankan rules on minimum wage; (iii) access to information for employment rights/responsibilities (such as employee handbook); and, (iv) information on discipline, termination and rights to appeal. During the appraisal, the Group HR function confirmed that comprehensive assessment of the Daintee HR function was pending, with the plan to integrate the function into the Group approach and apply the same Group HR standards moving forwards.

The employment policies and procedures for Sunshine Energy are based on the Sunshine Holdings PLC Human Resources Procedures Manual and are compliant to the labor laws of Sri Lanka. These policies and procedures cover working hours, overtime, payments, entitlements, maternity and sick leave, salary, health and accident insurance, grievance, and management of sexual harassment. The HR regulations and procedures are communicated during job induction sessions through the Sunshine Orientation program which includes information on the Group vision, mission and core values (integrity, trust, innovation, perseverance and responsibility). Every new employee is issued with the employment handbook that includes working guidelines and rules, probation, benefits, entitlements, performance review, career opportunities, disciplinary procedures, termination and retirement. It also includes grievances, complaints, company Code of Conduct, and policy on harassment (including sexual harassment).  This manual is backed up with a suite of HR procedures within the Human Resources Procedure Manual which include (among others) approaches for manpower planning, recruitment, salary and wage allowance, grievance handling, and discipline. All HR policies and procedures are centralized with a Relationship Manager (function allocated to the Sunshine Energy General Manager) responsible for HR needs at the Sunshine Energy. This assigned role reports to HR function at the Group-level. All payroll and administrative functions are also centralized at the Group level.

The HR procedures cover all key aspects for labor management including, recruitment, probation, working hours, salary and allowances, performance evaluation, training and development, transfers, grievance, discipline and conduct, and termination. The requirements of right to freedom of association, collective bargaining and sexual harassment are covered under the legal requirements of the country and therefore the HR procedures do not specifically mention of those. Sexual harassment is included as a zero-tolerance offence as misconduct and misdemeanors of a sexual nature. However, there is no process for management of sexual harassment nor gender-based violence complaints.

As set forth in ESAP#6, Sunshine Energy shall amend its HR’s employee handbook to specifically include the requirements as stipulated by national laws: i) right to freedom of association and collective bargaining; ii) right to refusal of overtime; and, iii) a process for reporting of sexual harassment and/or reports of instances of gender-based violence within the workplace. This will be backed up with a HR procedure to ensure reports received are managed in an appropriate manner. Also, Sunshine Energy shall amend its employment terms and conditions to include a zero-tolerance approach for proven cases of gender-based violence or sexual harassment and shall include a mechanism for receiving complaints that protects the identity of the complainant, investigates the process with a victim centered based approach applying remediation in accordance with the HR policies and procedures and prevailing national regulations. This complaints channel should be open to all staffs, outsourced and contracted workers (ESAP#7). 

Working Conditions and Terms of Employment: For Daintee, assessment of terms of employment was based on the legal due diligence available at the time of appraisal. Verbal discussions with the Group-level HR management confirmed that post acquisition Daintee will be subject to a HR assessment, and integration plan assessment, with Group HR standards being applied and functions being centralized. Going forward, as included in ESAP#1, Sunshine Group shall commission a qualified independent consultant to undertake an in-depth E&S appraisal of the Daintee factories which would also cover labor aspects.

Sunshine Energy’ terms of employment are considered to be compliant with PS2 objectives, with the rights and responsibilities of workers are based on the Group-level approaches, formalized into the employment contracts, and communicated to all direct employees along with labor regulations prior to signing the employment agreement. All terms and conditions (T&Cs) adhere to the prevailing labor regulations. Based on the Group-level approaches, all workers are subject to a statutory probation period of up to nine months and engaged in open ended contracts. Working days are 21 days per month, working five and half days per week to a total of 40 hours per week. All employees are paid overtime in accordance with the labor law and this is communicated through the employee handbook with supporting HR procedures. All employees are entitled to seven days casual leave and 14 days annual leave (pro rata based on month of joining) in any calendar year. Maternity leave is in accordance with prevailing regulations. In addition, all employees and their families are covered with accident insurance, life insurance, and medical insurance. All employees receive health checks at time of recruitment, and annually. Blood tests are taken for communicable diseases. 

Migrant workers are not known to be present in Daintee. It was stated that workers accommodation was present, however this could not be confirmed. Regarding Sunshine Energy, there are no migrant workers, nor workers accommodation. 

Workers’ Organization: For Daintee, verbal discussions with the Group HR management confirmed that post acquisition Daintee will be subject to a HR assessment, and integration plan assessment, with Group HR standards being applied and functions being centralized.

The Group have unionized workforce within its subsidiaries, and these are managed in accordance with the prevailing labor regulations. It was stated, at the Group level, that proactive engagement with the workforce was the key approach to ensure that all grievances and issues are addressed to avoid the necessity for the workers to engage with labor associations. As included in ESAP#6, Sunshine Energy shall amend its HR’s employee handbook to specifically include the requirements as stipulated by national laws: i) right to freedom of association and collective bargaining; ii) right to refusal of overtime; and, iii) a process for reporting of sexual harassment and or reports of instances of gender-based violence within the workplace.

Non-discrimination and Equal Opportunity: For Daintee, Group HR management confirmed that post acquisition Daintee will be subject to a HR assessment, and integration plan assessment, with Group HR standards being applied and functions being centralized. As included in ESAP#1, a qualified independent consultant will be commissioned to undertake an in-depth E&S appraisal of the Daintee factories.

Sunshine Energy has adopted the Group-level approach, having a defined policy within the Code of Conduct, for Discrimination and Harassment. No procedures and/or practices have been identified as discriminatory. All the hiring and promotion are merit-based with a transparent performance appraisal process.

Retrenchment: For Daintee, Group HR management confirmed that post acquisition Daintee will be subject to a HR assessment, and integration plan assessment, with Group HR standards being applied and functions being centralized (as included in ESAP #1). It was stated at the Group level that there is no retrenchment plan at Daintee factories following Sunshine Group’s acquisition. To the contrary, plans are in place to increase employment in this asset by expanding shift times to maximize use of current machinery and infrastructure.

Sunshine Energy does not have a retrenchment procedure and, as stated by the Group HR function, would default to the national labor regulations in the event of any retrenchment needs. It has been stated that the Sunshine Energy have no retrenchment plan of its workforce and aim to increase recruitment going forward.

Grievance Mechanism: For Daintee, Group HR management confirmed that post acquisition Daintee will be subject to a HR assessment, and integration plan assessment, with Group HR standards being applied and functions being centralized. As included in ESAP#1, a qualified independent consultant will be commissioned to undertake an in-depth E&S appraisal of the Daintee factories.

The Sunshine Energy adopted Group-level Grievance and Complaints Policy and Procedure, which includes a description of submission of the grievances, response time, and approach to management. The process does include a commitment to confidentiality but does not include the option for anonymous grievances, nor is the grievance channel open to outsourced workers or contractors. As set forth in ESAP#8, Sunshine Energy shall amend its grievance process to enable anonymous grievances to be received, allow access to grievance for outsourced labor and contractors, with complaints reviewed in accordance with existing procedures.

Protecting the Work Force: For Daintee, this cannot be confirmed. It is a requirement that the company shall in place adequate systems and checks to ensure that only workers of legal age are present, and that the facility does not engage in forced labor practices. The legal due diligence report did not highlight any notable violations. Sunshine Energy does not employ any worker under the legal working age through verification of the national identify card at time of recruitment as per the group procedures.  Oversight on EPC needs to be improved to ensure compliance to this requirement and this will be included as part of ESAP#2 – development of ESMS to manage risks from EPC partner.

Occupational Health and Safety: There is no information on the status or otherwise of OHS within the Daintee factories. The Technical Audit does highlight the need for safety improvements. Going forward, Sunshine Group shall commission a qualified independent consultant to undertake an in-depth E&S appraisal of the Daintee factories including OHS aspects (See ESAP #1).

Sunshine Energy adopts the nascent Group-level OHS policy Health and Safety Policy which outlines the responsibility of the employee and the company and includes procedure for fire safety, reporting of incidents and emergency evacuation protocol for identified hazards (including emergency contact numbers). The policy sets the foundation of the Group and employee responsibilities, requirements for safe practices at the workplace and covers all major OHS considerations, for example: (i) manual handling; (ii) machinery operating; (iii) hygiene health and safety; (iv) minimum standards for fire safety and fire response; (v) hazard analysis; (vi) First Aid; (vii) training; (viii) reporting of accidents; and (ix) maintenance. Although the document sets a solid basis for OHS policy, there is no specific mechanism for implementation of these needs, nor reference to benchmarks. It was highlighted at the Group-level that OHS is the responsibility of each subsidiary applying OHS needs based on subsidiary specific workplace risk assessment. Sunshine Energy, although not engaged in direct installation and operation of the rooftop solar, does have a responsibility under the IFC PS2 to ensure that its contractors (EPC) are compliant with applicable OHS regulatory provisions and IFC Performance Standards requirements. As part of the ESMS (refer to ESAP #2), Sunshine Energy shall strengthen its OHS and labor requirements and implement a verification and compliance auditing procedure (with benchmarks and definitions based on GIIP) for the EPC. This procedure shall assign internal responsibilities for: (i) monitoring of the EPC workers (periodic and random OHS inspections on site safety) including safety checks permits/capabilities/certified training, preventative measures applied on site, PPE usage, its suitability and fitness for purpose; (ii) process for notification of minimum standards of PPE to the EPC; (iii) process for data capture and supporting evidence for EPC OHS audits; (iv) enforcement and penalties on the EPC for identified OHS or labor violations; (v) a process for both random inspections on labor compliance (including interviews with workers to ensure minimum wage, benefits and no use of child or bonded labor) and verification on age and identity of  EPC workers; and, (vi) penalties for continual or severe violation of OHS and labor requirements. The scope of this process shall apply to all EPC contractors and any sub-contractors engaged in Sunshine Energy rooftop solar projects.

Supply Chain: Daintee have exposure through commodities acquired in India (sugar and glucose), as well as Malaysia (cocoa powder). GMAP tool check highlighted significant risks in respect to child and forced labor, OHS risks for sugar production and in general the agricultural sector in India. No specific sourcing data on Daintee raw material inputs was available at the time of appraisal                                                  

 Resource Efficiency: A review of the Technical Audit, legal due diligence, and discussions with the Group teams highlighted there is limited information available to assess the compliance of this requirement. Going forward, as included in ESAP#1, Sunshine Group shall commission a qualified independent consultant to undertake an in-depth E&S appraisal of the Daintee factories, including EHS aspects and the assessment must be benchmarked against recognized GIIP and be consistent with ISO14000 and ISO45001 standards.

Energy and Material Efficiency Projects: There is no statement within the Daintee Technical Audit to assess and identify energy and material and efficiency saving measures. It is noted that the Group has undertaken analysis on water and energy costs for production of confectionary with a view to improve efficiency of the operations, and verbally stated that both monitoring and control on operations required improvement. This will be assessed as part of E&S appraisal to be undertaken by qualified third-party consultant (See ESAP #1).

Water: Daintee Technical Audit highlights that the company consumes ~12,000 m3 per annum sourced from ground water wells. Based on initial estimates, 1.6 liters of water per m2 of PV modules would be required for cleaning purposes. All water used in production at Daintee is treated through a reverse osmosis system. Within the Technical Audit, it is highlighted that expansion of the Wastewater Treatment Plant (WWTP) would be required to manage planned increases in working time for the factories due to proposed extended working hours of the plant and increase production volumes, consumption of water, and volumes of wastewater generated.

GHG Emissions: The Daintee Technical Audit highlights that the energy consumption on average for the production facilities ~1.1 million KWH per annum, with 235,000 liters of oil to fuel boilers. Gas consumption for baking in wafer lines is estimated at ~110,000 kgs per annum. Based on the Daintee Technical Audit information the volume of energy and inputs averaged for a 12-month period the Daintee does not exceed 25,000 tCO2e per annum.

Air Emissions and Ambient Air Quality: It is stated in the Technical Audit that Daintee conducts internal monitoring on air pollution, sound, light, and temperatures. However, no data on collection method nor results is stated in the report. The Group stated that external consultants would be required to initiate monitoring of key environmental permit parameters and which would be confirmed as part of in-depth E&S appraisal of the Daintee factories to be undertaken by third party qualified consultant (See ESAP #1).

Wastewater Treatment: It is known that confectionary manufacturing wastewater is high in BODs and CODs. Information provided within the Daintee Technical Audit does state that current wastewater treatment systems are not compliant to prevailing local regulations. Within the Technical Audit it is highlighted that wastewater generation is ~20,000 liters per day with the WWTP discharging 15,000 liters per day, and ~5,000 liters of sanitary waste discharged directly into the municipal system.  The Technical Audit report stated that volume of WWTP sludge averages around 30 tons per annum and is removed by contractors. Management of wastewater effluent by EPC will be reviewed as part of in-depth E&S appraisal of the Daintee factories (See ESAP #1).

Solid Waste Management: Solid waste is generated from raw material inputs packaging and waste food (i.e. quality control failures or damaged product). No information is presented on this for the Daintee. Management of solid waste by EPC will be reviewed as part of in-depth E&S appraisal of the Daintee factories (See ESAP #1).

Hazardous Materials: Daintee Technical Audit states that the company stores at each site gas (volume of storage unknown), diesel and oil fuels for generators and furnace operations respectively. It is stated that both diesel and furnace oil stores are 22,500-liter tanks. No information is presented on the type of storage containment i.e. above or below ground tanks, nor secondary containment measures.  The broken solar panels will be returned to the vendor through buy back arrangement.

Pesticide Use and Management: Verbally stated that pest control is contracted out to a licensed commercial pest control company for the Daintee                                                  

 Infrastructure and Equipment Design and Safety: Sunshine Energy develops rooftop solar systems which involves the following risks to the community: (i) factory roof collapse due to weight overloading affecting roof integrity; (ii) risks to community members inadvertently gaining access to roof spaces and exposing to electrocution; and, (iii) risks from falling panels due to inadequate installation, or due to extreme weather or geological events. The roof stability is assessed and verified through an independent engineer although no records of formal communication between Sunshine Energy and EPC were made available for review. Going forward, this will be included as part of ESMS to be developed to manage risks from EPC partner (See ESAP #2).

Emergency Preparedness and Response: The Technical Audit states that Daintee has in place firefighting appliances such as extinguishers, hose reel system, and fire detector and alarm systems and states that the factory is registered with the local fire department. It is not known if the factories or warehouses have in place valid fire permits, nor any information on frequency of inspection, or maintenance. No information on emergency preparedness and response plan is present. Going forward, this will be included as part of scope of E&S appraisal to be conducted by third party consultant (See ESAP #1).

Sunshine Energy adopts the approaches of the Group, which highlights the management of risks at locations of operations but does not have a process for management of emergency situations that may occur as a result of an incident. This will be included as part of ESMS to be developed (See ESAP #2).

Security Personnel: Daintee employs licensed outsourced service providers, none of these are armed. Some sites of Sunshine Energy also employ third party security personnel but none of those are armed                                                  

External Communications and Grievance Mechanisms: Based on the Technical Audit, Daintee has in place a customer complaints hot line with root cause analysis for investigation of customer grievances. There is no information on the setting of the facilities and proximity of local communities. Nor any knowledge on community grievance channels. As included in ESAP#8, Sunshine Energy shall amend its grievance process to enable anonymous grievances to be received, allow access to grievance for outsourced labor and contractors, with complaints reviewed in accordance with existing procedures                                                   

Company: Sunshine Holdings PLC

Name: Hiran Samarasinghe

Title: Head of Investor Relations & Strategy

Telephone: +94 114702416

Address: No.60, Dharmapala Mawatha, Colombo 03, Sri Lanka.

Email: hiran.samarasinghe@sunshineholdings.lk

Website: https://www.sunshineholdings.lk/