All stores under the project are currently and those in the future will be leased, and this similarly applies to all the existing and new logistics centers aside from one existing national logistics center which is located within an economic development zone. Thus, no expropriation of land or physical or economic displacement is anticipated as a result of the company’s activities. Consequently, PS5: Land Acquisition and Involuntary Resettlement is not applicable to the project.

This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. 

 Identification of E&S Risks and Impacts:

The company identifies and manages E&S risks and impacts associated with its operations including store and logistics centers through ensuring compliance with applicable national standards and regulatory permits including Pharmaceutical Management Standards and by meeting the Good Supply Practice (GSP) requirements. The company has the latest GSP certification which ensures that pharmaceutical products are provided in accordance with the applicable standards as stipulated by the China Food and Drug Administration.  The company is not required to undertake an Environmental Impact Assessment (EIA) for any project activities.

E&S policy and management programs:

LBX has a set of EHS related policies and procedures including that related to quality control, energy and waste management, fire safety, safety management, auditing at the corporate level that are applied to all direct and franchise stores and logistics centers alike.  The corporate quality control is based on the GSP system and this also includes training and personal safety for employees.

EHS risk management and document control system has been designed to closely align with GSP and applicable regulatory requirements. All policies and procedures are available on the company’s IT based information system and accessible to all employees and stores. The policies and quality control systems are fully functional and adequately implemented by experienced staffs across all the regions.

LBX signed a MOU with United Nations Global Compact in 2009 which requires companies to support and implement a set of ten basic principles including human rights, labor standards, environment and anti-corruption within their respective areas of influence. In response to the COVID-19 pandemic, the company has prepared COVID-19 infection prevention and control policies.

Organizational capacity and competency:

The company has a quality control department with 100 quality managers and quality control specialists (some 20 specialists in head office and 80 specialists allocated to provincial head offices) who are responsible for risk management and quality control. Their role includes assessing and ensuring that the company develops and implements the quality control system at all the operations in line with corporate policy requirements including EHS related policies/procedures.

The quality control department at each provincial office cooperates with relevant departments to implement continual quality improvement programs and monitor quality performance of each direct and franchise store. Quality control meetings are organized periodically, and the key performance indicators (KPIs) are reviewed every month.

The company also has internal auditors in terms of implementation of GSP including EHS related policies/procedures and other related laws, regulations and conducting on-site inspections including safety investigations.

Emergency Preparedness and Response:

As part of corporate risk management, LBX has developed response plans for different emergency scenarios based on the location of the assets including logistics centers, drug storage and transportation which define processes to be applied and decision making should evacuation be required. Thus, the roles and responsibilities for various teams responsible for evacuation, rescue, firefighting, first-aid etc. are clearly defined.

Fire drills and safety training are conducted as required per local government regulations. The district level emergency task forces are organized to cover the location of the company’s operation and the respective regional management team is responsible for emergency situations at each regional store.

Monitoring & Reporting:

The company monitors all direct and franchise stores and logistic centers in accordance with KPIs such as accidents, labor compliance (working hours, overtime payment, grievances), energy and water efficiency, waste management etc.

All incidents are summarized and discussed in the monthly quality control meeting and the quality control department analyses the root cause and implements corrective actions if required. No major incidents have been reported in the past three years. An online based supervision system through video cameras is installed in every store observing the key areas.

Under the corporate quality assurance strategy, the company monitors the service quality performance of the staff, products, shops and warehouses including daily inspection and monthly internal audits. These are supplemented by site inspections by local Government agencies.

 The company has 23,109 employees as of December 31, 2019 and the gender split of staff is roughly 20% male and 80% female as the majority of pharmacist graduates are female. All the workers in LBX are directly employed by the company and there are no third-party workers. A small number of employees are outsourced mainly for the security services at large stores. The company’s HR and OHS related policies and procedures apply to the workers in all stores.

HR Policies and Procedures, Working Conditions and Terms of Employment:

LBX has prepared an employee handbook. The handbook and contract term include employee benefits, payment and overtime, social insurance etc. The company has a non-discrimination and equal opportunity policy including that prohibiting child and forced labor.  However, it is noted that anti-sexual harassment is not described in the document.

Assuming the company is satisfied with performance, all employees are given a permanent position after the probation period, with written appointment letters which explain their employment terms and conditions. No pregnancy tests are required when hiring employee. Working hours are monitored through an IT based attendance management system at every store including franchise.  Salaries paid are higher than the minimum wage and overtime payment are aligned with the requirements of national regulation. The company did not conduct nor plan lay-offs of any workers due to the COVID-19 pandemic, and only made temporary shop closures in some affected cities for 15 days in accordance with the local legislation. No reduction on salary has been planned nor implemented previously.

As part of the ESAP the company will update the corporate HR related policy/guideline covering all stores to include policies on prevention of sexual harassment and a grievance mechanism for purposes of sexual harassment in line with Performance Standard 2.

Freedom of Association & Grievance Mechanism:

A labor union is in place and most of the employees have voluntarily joined the union. The company holds monthly meeting with the union and discussions mainly focuses on staff welfare and recreational activities. There is no collective bargaining agreement and there have been no major disputes with the labor union to date.

The company has a corporate grievance handling procedure. As per the procedure, all employees are expected to use the grievance mechanism and grievances are verified and handled by the Internal Control and Compliance department. No significant grievances, disputes, court cases were noted by the company and there is an anonymous grievance mechanism functional via an IT based reporting system.

Occupational, Health and Safety (OHS):

The company has developed corporate safety procedures stating key operating principles and requirements for each stores (direct and franchise) and logistics centers to follow as part of the GSP system including that related to labor protection management, employee health and hygiene management,  facilities and equipment management, warehouse safety management etc. Corporate wide trainings for all employees on various safety related topics including the GSP system, working safety, employee health and job responsibilities are provided every year and all new employee are required to receive induction training. Several specific trainings are provided based on individual departmental requirement.

All employees undergo annual health checks and are provided with insurance.  OHS statistics (fatalities, incidents records) are monitored at least monthly by the quality control department and no major injuries have occurred over the past three years.

The company has implemented several COVID-19 response measures for its operations including: social distancing, provision of masks and protection tools, ensuring employee and visitors health, cleaning and disinfecting in line with governmental requirements. There has been no significant health impact thus far due to the pandemic and no recorded cases of COVID-19 with workers.

No construction will result due to the project other than minor store renovation/shop fittings which will be conducted by approved contractors managed under each provincial central office who will supervise renovations to be in line with legal requirements. The company has quality assurance agreements with third party contractors including that for transport to ensure compliance with the corporate quality control requirements including EHS related polices/procedures, safety management and the performance thereof is monitored by the quality control department.  The company also has a supplier management system including suppler assessment and review mechanism as part of GSP.

 Resource Efficiency:

The company assesses operations to ensure they align with the corporate level energy and water resource policy including that related to water consumption saving, electricity use and reduction in the use thereof, encouraging a paperless office environment etc.  Each facility tracks electricity usage and looks for opportunities to achieve a reduction. Some of the resource efficiency initiatives implemented at some stores include installation of LED lighting.

The company uses R134a for all the air conditioners, however the Changsha national logistics center currently utilize R22 for cold storage compressors. As part of ESAP, the company will ensure that all new facilities do not utilize R22 or other refrigerants that have been phased out, and for existing facilities the company will explore technically and financially feasible options to switch from R22 to another refrigerant with a much lower global warming potential e.g., HFC134a or R404.

Based on these numbers and other data from the company’s existing energy consumption for the year 2019, the expected GHG emissions from the project are expected to be less than 25,000 tons CO2 eq/annum.

Energy Supply and Air Emissions:

Electricity is sourced from the national public grid for all stores and logistics centers, and no major air pollutant emission occurs from the operations. As standard back-up systems for grid failure, diesel generator sets are installed for some stores and distribution centers, but their use is not common.

Water and Wastewater:

Water for all the stores is sourced from local utility supply service. The engineering and quality control department inspects drinking water quality at stores and the results have been found to be compliant with applicable permit conditions. There is no process wastewater from the store and logistics center operations. Domestic wastewater of a sanitary nature is discharged to the public drainage system for treatment.

Waste Management:

LBX has medical waste management procedures mainly for expired medical product including a system of appropriate handling, storage and disposal and this is consistent with the applicable legal requirements. All the waste is collected for disposal by an authorized public service external agency (local environmental sanitation department and private sector) specialized in each type of waste. No stores and logistic centers deal with hazardous materials.

 A small number of securities are employed who are not armed only at some large stores and logistic centers. There have been no known security incidents at company facilities.

Life and Fire Safety Management:

LBX has a set of fire safety procedures describing actions to be taken at every store and logistics centers, mechanisms for fire detection and prevention, evacuation procedures, roles and responsibilities of the various staff and these are reviewed regularly. The requirement incorporates a daily routine inspection including ensuring emergency exit pathways are clear; ban on flammable items; regular checks on electrical appliances etc.

All stores and logistics centers undertake fire drills at a minimum per that defined by local government regulation. Each drill is followed by an assessment of observed gaps with corrective actions sent to the corporate quality control department for confirmation. There have been no major fire accidents in the past three years at any shops or logistics centers. Stores received regular fire inspection from the local authority and no major issues reported.

Images of the shops and logistic centers indicated the presence of appropriate life and fire safety infrastructure and systems including fire extinguishers, smoke detectors and fire alarms, emergency exit signs and sprinklers depending on the types of shops.

Traffic safety management:

The company has a distribution and transportation management system. The company does not own a transportation fleet, but rather this is contracted to third-party truck fleet operators and they need to comply with the corporate quality control requirements including that related to road and driving safety management. Day to day safety performance is monitored and no major traffic incidents in the past three years have been reported.

 LBX publishes its annual Corporate Social Responsibility report every year available on-line. The company also provides monetary support, a charitable foundation for children and elderly people as well as COVID-19 responses for the local community.

The company has a call center accessible to all stakeholders including the public/local community to express their concerns. No major EHS related complaints have been received to date. Nonetheless, the company will ensure there is a formal stakeholder grievance mechanism such that when complaints are received, they are appropriately managed; this is defined in the ESAP.

 Contact Person: Shini Feng

Company Name: Laobaixing Pharmacy Chain Joint Stock Company

Email: ir@lbxdrugs.com

Phone: +86 731 8403 5189