This proposed investment focused on improving existing operations (MDF1 and MDF2) which are located in established industrial zone and site. As such, PS5-Land Acquisition and Involuntary Resettlement was not considered as applicable. The Group operations do not pose significant adverse impacts on local ethnic minorities and PS7-Indigenous Peoples does not apply to this project. Similarly, impacts linked to PS8-Cultural Heritage are not expected since there is no presence of known cultural assets or artifacts within the established sites.                                                 

The proposed investment is a Category B project in accordance with IFC’s 2012 Policy on Environmental and Social Sustainability. Key E&S risks and impacts from this project are limited, site-specific, and can be readily addressed through generally accepted mitigation measures described in this document and the attached ESAP. The E&S risks and issues are: (i) adequacy of the company’s E&S management system and capacity for effective implementation; (ii) human resources management, including labor rights and working conditions, existence of workers’ grievance mechanism, and OHS management practices during construction and operations, including emergency preparedness and response; (iii) compliance of third-party wood suppliers with PS2/PS6 supply chain related risks (e.g. child labor, forced labor, significant OHS risks and risks of significant natural habitat conversion); (iv) water and energy use and efficiency; (v) management of air emissions, solid/hazardous wastes, noise and effluent discharge; (vi) stakeholder engagement plan, and community grievance mechanism at direct and sourcing operations.                                                   

 PS1: Assessment and Management of Environmental and Social Risks and Impacts

Environmental & Social Policies. KES adopted an overarching Group-level Corporate Social Responsibility (CSR) policy which is aligned with national laws and regulations and KES’s off-takers requirements (FSC, CARB – Composite Wood Products Regulation – CWP Regulation). The CSR policy describes KES’s overall E&S policy commitments to compliance with local environmental standards, gender equality, occupational health and safety, and labor benefits and advancement. Beside the CSR, KES has a Group-level EHS policy which commit to zero injuries and hazards in workplace, minimization of pollution and energy/waste use and efficiency. The company also expresses several E&S commitments such as (i) customer satisfaction; (ii) ecofriendly products; (iii) respect established moral/ethical standards; (iv) abide by national laws and corporate code of conducts and policies; and (v) highest responsibility and equality for employees, customers, suppliers. The policies, however, are not designed to align KES’s subsidiaries operations, including MDF1 and MDF2, with Good International Industry Practices (GIIP). KES’s E&S policy is only focusing on compliance to E&S laws and regulations in Vietnam. Specifically, KES operations targeted by this IFC investment, particularly MDF1 and MDF2 facilities, underwent an EIA Studies in accordance with Vietnamese E&S legal and regulatory requirements. The Terms and Conditions (T&Cs) prescribed in the environmental licenses issued to these facilities have been successfully implemented (e.g., installation of wastewater treatment systems, dust control measures, monitoring and reporting on key environmental parameters (emissions, effluent, solid waste) to competent authorities, emergency preparedness and response planning). KES maintains legal EHS and labor registry documenting its compliance with relevant national laws and regulations. While KES currently complies with all mandatory EHS and labor requirements stipulated by Vietnamese laws, a formal corporate and/or plant-level Environmental & Social Management System (ESMS) conforming to IFC Performance Standards’ requirements has not yet been established. KES will upgrade its corporate E&S policies, as part of the development of a Group-level and plant-level ESMS, to align its E&S performance against IFC PSs for its projects and operations, including applicable and relevant sections of the WBG EHS Guidelines and sector specific guidelines (Board and Particle-Based Products). The updated policies will be posted at all KES operations and communicated to its contractors, service providers and wood suppliers (ESAP#1).

Identification of E&S Risks and Impacts. Valid Environmental Impact Assessment (EIA) studies for MDF1 and MDF2 have been approved by provincial authorities of Binh Phuoc Province. The review of available EIAs confirmed that key E&S risks and impacts, and mitigation measures for pre-construction, construction and operational stages are defined in these studies. Identified E&S impacts for MDF1/MDF2 operations include air emissions and dust from the transportation vehicles; emissions including particulate matter (PM), volatile organic compounds (VOCs), nitrogen oxides (NOx), and sulfur oxides (SOx) from pressing, drying processes, and from boilers for the on-site thermal energy provision, urea-formaldehyde production and vapor; run-off water through wood waste yard; production wastewater; non-hazardous and hazardous solid waste, etc.

For the glue factory and warehouse which is under construction at MDF2, KES complies with Vietnamese regulatory process for identification and assessment of E&S risks and impacts. The domestic Environmental Permit has been prepared and submitted to competent authorities for approval, which is expected in March 2024. Being considered an associated facility of MDF1 and MDF2, the local EIA Study will benefit from further analysis to comply with IFC PSs requirements and WBG EHS General and Sector-Specific Guidelines, such as (i) biodiversity, community health and safety and cumulative impact assessment; (ii) impacts and mitigation measures for decommissioning phase; (iii) chemical and fire risk and hazard control and mitigation during operation phase; (iv) additional content, data, analysis of impacts, and development of appropriate mitigations and monitoring actions related to workers accommodation, worker influx, waste management at construction site, noise and vibration during construction, and documenting stakeholder engagement activities. KES will engage a qualified E&S consultant for preparing a PS-compliant ESIA Study (ESAP#2).

As mentioned above, all KES manufacturing facilities maintains legal EHS and labor registry of the applicable Vietnamese laws and regulations, including valid environmental permits. The operations are subject to periodic local government environmental audits, conducted by provincial Department of Natural Resources and Environment (DONRE) authorities and audits on labor compliance conducted by provincial Department of Labors, Invalids and Social Affairs (DOLISA) and firefighting and emergency response by Fire Police. These audits verify KES’s operations compliance with the T&Cs of the Environmental Licenses as mentioned above (e.g., wastewater treatment system performance, dust emissions levels, monitoring and reporting on E&S parameters, emergency preparedness/response planning). The local communal People's Committees check the legality of raw wood waste supply utilized at MDF1/MDF2 manufacturing plants.

E&S Management System & Programs. KES has yet to develop and implement a comprehensive ESMS at corporate and plant-level, relying on each manufacturing plant to comply with Vietnamese requirements. MDF1 currently operates under ISO9001:2015 while the existing and planned MDF operations are also planning for certification under the same standard. For the times being, MDF operations are adhering to relevant Vietnamese laws/regulations, and off-takers’ requirements as mentioned above. This E&S management framework will be improved to effectively control environmental, labor/social and OHS risks and impacts within the company’ operations. KES will establish a Group level ESMS to include the full scope of E&S risks in its MDF operations in accordance with IFC PSs, WBG EHS Guidelines, and relevant GIIPs. The Group and facility-level ESMS will incorporate the following elements: (i) policy; (ii) identification of risks and impacts; (iii) management programs (including E&S SOPs in accordance with WBG EHS Guidelines); (iv) organizational capacity and competency; (v) emergency preparedness and response; (vi) stakeholder engagement; and (vii) monitoring and review (ESAP#3). 

E&S Organizational Structure. KES has yet to establish an E&S function and/or assigned E&S officers at Group level. Responsibility for overseeing the effective implementation of the T&Cs of the environmental licenses, KES’s EHS SOPs, internal training at MDF factories lies at plant-level. However, there is no standardized E&S management system across all KES plants. A Work Safety Committee, comprised of 4-5 staff from facility management departments, monitors OHS issues. This committee, chaired by either the Administrative Head or plant deputy manager, reports to the plant manager. Annual training plans are developed at each KES factory, and new employees undergo induction training, general safety training, department safety training (area of work), and job-specific safety training. Verification of training reports at Group-level, evidence of attendance, certificates, and courses at factory-level confirm implementation. However, no documentation of training for chemical safety has been provided during this appraisal. Going forward, KES will establish a Group-level E&S function, including, among others, clearly defining the roles and responsibilities between Group and factory-level E&S functions. KES will recruit a suitably qualified Group-level E&S Technical Executive. This Executive will be responsible to develop and implement the corporate E&S policies (ref. ESAP#1), to coordinate the preparation of the PS-compliant ESIA Studies (ref. ESAP#2), to upgrade KES’s E&S SOPs, to implement Group-level ESMS and oversee implementation of ESMS at all operations (ESAP#3) targeted by IFC financing. He/she will standardize the E&S capacity /competency at plant level and strengthening internal/external E&S monitoring and reporting system across KES brownfield and greenfield operations (ESAP#4). This E&S function at corporate level will develop a 2024-2026 workplan for IFC review, including the assignment of E&S CAPEX/OPEX for the same period.

Emergency Preparedness and Response (EPR). There is a lack of a Group-level emergency management framework, as each plant is employing its own procedures/approaches for managing emergency situations such as dust explosions, boiler explosions, fire in silos/conveyors, hazardous chemical spills (urea formaldehyde and ammonia) during storage/handing. At MDF2, based on risk assessment conducted by the insurance company, potential emergency risks are identified, and mitigation measures are implemented, including annual compulsory training on safety to all staff. The Department of Industrial Safety Techniques and Environment within the Ministry of Labor, Invalids and Social Affairs (MOLISA) also oversees industrial safety issues in Vietnam. The Department of Chemicals under the Ministry of Industry and Trade (MOIT) oversees safe management of hazardous chemicals. Fire response procedures at all MDF plants are developed and approved by local fire police as a prerequisite prior to operation. Routine fire drills and firefighting training involve collaboration with local fire police. Notably, major fires occurred at MDF1 in 2017 and MDF2 in 2020, each with different causes. The local police investigation report for MDF2 attributes the incident to a chemical reaction resulting from unintentional errors; no root cause analysis or corrective action report was provided for review. There is currently no risk assessment process addressing ERP needs across all MDF plants, specifically concerning fire risks. To further strengthen its emergency response, KES will formally develop a documented ERP Procedure, as part of corporate-level ESMS (ref. ESAP#3) while strengthening the internal competency (ref. ESAP#4). KES will conduct a comprehensive OHS audit for hazardous material management and emergency response in all its plants (ref. ESAP#8).

E&S Monitoring/Reporting. Independent E&S consultancies carry out regular supervision and monitoring of KES operations to ensure the effective implementation of environmental mitigation measures for two MDF plants as per T&Cs of the environment license. The approved EIAs specify monitoring parameters and frequencies. External OHS monitoring is also conducted. Analysis of air emissions, effluent, and noise monitoring data are submitted to national authorities for MDF1 and MDF2 plants and demonstrate compliance with Vietnamese regulations and exceedance of PM emissions against WBG EHS Guidelines for Board and Particle Based Products (2007). Upon the establishment of the E&S function at KES Group-level (ref. ESAP#4), internal E&S audit program will be established (cross-audit among KES factories).

Supply Chain Risk Assessment and Management. KES Group and its subsidiaries have a defined wood sourcing procedure, including a risk assessment process. The waste wood fiber utilized by KES plants includes residuals from clearing rubber trees, remnants from harvesting acacia and eucalyptus plantations, trimmed branches from cashew trees, residuals from harvesting other plantation species and wood waste from sawmills and plywood plants. KES’s wood suppliers include 75 wholesale suppliers and 20 retail suppliers with total daily purchase volume of 2,600 tons per day. At the time of the appraisal, KES had not adopted a Supplier Code of Conduct for its sourcing operations, nor undertaken any documented risk assessment and/or audit to confirm compliance with labor, OHS and biodiversity risks. To manage the E&S related risks of its wood sourcing operations against PS2/PS6 supply chain requirements, KES will develop a Supplier Code, including a risk screening procedure operationalizing its commitment to comply with E&S supply chain requirements (ref. PS2/PS6) for its sourcing of raw materials from third-party suppliers. The risk screening procedure mentioned above will define (i) process for evaluating E&S risks within its direct and indirect suppliers, including traceability at site of sourcing of wood products; (ii) evaluation of direct and indirect suppliers and source of raw material inputs through questionnaire and site visits; (iii) assessment of suppliers’ E&S system and capacity to manage PS2/PS6 risks; and (iv) process for periodic reviews of suppliers/source of product based on supply risk assessment. The implementation of this Code, risk screening and management procedures will be under the responsibility of the Global-level E&S Director and the sourcing department (ESAP#5). Independent verification of the Supplier Code by a qualified consultancy for direct and indirect suppliers will take place.

PS2: Labor and Working Conditions

As of December 2023, KES employs a total of 1,313 permanent workers. Among them, 479 are assigned to MDF1 and MDF2, while 834 works in various departments at Group-level. The overall employee distribution comprises 71% male and 29% female.

Human Resources Policies and Procedures. KES adheres to the labor law of Vietnam, as confirmed through a review of the Group’s HR policies and procedures. The review confirms general consistency with IFC PS2 objectives, including, among others, working hours, overtime limits and payments, annual and maternity leave, salary and benefits, social insurance, health insurance, accident insurance, and resolution of labor disputes. Recruitment of middle and senior managers is centralized at KES head office, overseen by a HR Department comprising four staff members. On the other hand, factory workers and other site employees are recruited by HR and administration staff at facility level. Each facility holds responsibility for HR management, with the facility’s director receiving support from the administration teams.

Working Conditions and Terms of Employment. For KES operations, terms of employment and the rights and responsibilities of workers are formalized into employment contracts and communicated to all direct employees along with the Employee HR Manual and Internal Labor Regulations. These employment terms strictly follow the national labor law. All workers employed within KES and its subsidiaries have full time contracts, and their compensation aligns with the labor law’s provisions. Working hours are per labor law requirements, i.e., are not more than 48 hours a week. Employees are enrolled in social insurance, covering pension, unemployment, medical, injury, and maternity. Employees are covered with accident and medical insurance. In addition to basic salary, facility employees are provided with various allowances, including meal allowance, rental allowance, fuel allowance, etc. Furthermore, employees undergo an annual health check. Sampled labor agreements reviewed for KES defined terms and conditions, hours and location of work, benefits and entitlements all aligned to the national labor code and PS2 requirements. Each manufacturing subsidiary has workers’ accommodation blocks and additional infrastructure at a significant distance (2-3 km) from the factories. All employees have the right to obtain accommodation with the Group subsidiaries. Individual employees receive accommodation at no cost, which includes all energy and water expenses. There are also family accommodations which can include spouse and children, comprising of a bedroom apartment with in-suite facilities, including cooking facilities. Observed workers’ accommodation generally aligns with IFC/EBRD Workers’ Accommodation Guidelines.

Non-discrimination and Equal Opportunity. KES maintains a Social Responsibility policy on non-discrimination and equal opportunity. No procedures and/or practices have been identified as discriminatory, nor during the meetings with the workers during this appraisal. The hiring process and promotions are merit-based. There is a specific policy related to workplace harassment in accordance with the current 2019 Labor Code. The company will strengthen its anti-sexual harassment policy and design a dedicated focal point to receive allegations of sexual harassment in the workplace. KES will update its employment T&Cs to include a zero-tolerance approach for proven cases of gender-based violence (GBV) or reports of sexual harassment and shall include a mechanism for receiving complaints that protects the identity of the complainer, investigates the process based on a survivor centered approach, applying remediation in accordance with the HR policies and procedures and national regulations (ESAP#6).

Workers’ Organization. As per the Vietnamese Labor Code, workers have the right for freedom of association and collective bargaining. This provision is explicitly reflected into KES’s Internal Labor Regulations and its existing Collective Bargaining Agreements. About 90% of employees who sign a permanent contract with the company join such union. For MDF1 and MDF2, CBAs were agreed in 2023 and 2022 and registered to the Binh Phuoc Provincial Department of Labors, Invalids and Social Affairs and Binh Phuoc Provincial Economic Zone Management Board respectively. These agreements complement the company’s Internal Labor Regulation and related procedures.

Retrenchment. The employment procedures have no policy and procedure for staff retrenchment. The company will amend its HR policies and procedures to include retrenchment policy and procedure, including the process for selection of workers (ESAP#6).

Protecting the workforce. All KES workers exceed the minimum age of 18 years with records of proof of age are kept. The IFC site visits during this appraisal did not identify forced or under aged labor practices.

Worker’s Grievance Mechanism. HR procedure for workers’ grievance is reflected in the Grievance Receipt and Redress Regulation. As per this procedure, employees can raise their grievances though mailboxes placed at each facility. In addition, employees can raise their grievances through face-to-face meeting, or by talking to HR department or through the labor union. No channel is available for anonymous filing of grievances or concerns nor responses to anonymous grievances. Confidentiality and non-retribution policy are not explicitly mentioned in the existing procedure. The company shall update its worker grievance mechanism procedure which will be available for its permanent, casual and contractual workers, as applicable. This policy will include steps to be taken by workers to manifest any concerns, engage in a mediation process, contact responsible persons, and provide timely feedback. The company will also reinforce the policy of confidentiality and non-retribution, along with ability to raise anonymous grievance (ESAP#6).

Workers Engaged by Third Parties. IFC site visits during this appraisal and documents reviewed did highlight the absence of a formal process for defining minimum standards for labor and OHS in accordance with Vietnamese requirements, including enforcement, oversight, and monitoring of construction contractor’s workers. In addition, loading/unloading, handling of raw waste wood fiber inputs are recruited from service providers. The HR Department will undertake systematic and regular due diligence and mechanism of all contractors to monitor ongoing compliance of any contractors and service providers while Group-level E&S Director (ref. ESAP#4) and plant-level E&S officers will ensure effective implementation of labor rights and OHS training, including strict use of PPEs (ESAP#7).  

Occupational Health and Safety. OHS management regulation and safety procedures have been established at Group and plant-levels, covering electrical and mechanical safety, working at heights, hot works, and chemical safety. Based on IFC review, current available procedural provision (i.e., permit to work system, PPE and training, etc.) were found absent, while implementation arrangements, monitoring and reporting are not clearly defined. OHS risks at workstations are not comprehensively and uniformly identified and managed in the existing MDF plants. It is noted that there is no established hazard and risk identification assessment process in place at plant level and it is unclear how the OHS needs for MDF production are identified, other than applying a national regulation compliance-based approach (ref. ESAP#3 above and ESAP#8 below).

The risk assessment report made for the MDF2 in 2020 after the fire has specific recommendations to address several severe gaps in the operation of the plant and chemical warehouse. They include the lack or improper use of PPE, gas-operated vehicles entering the chemical warehouse, inadequate fire control equipment, improper installation of electrical equipment and wiring, and abnormalities in the automated fire alarm system. KES will engage a qualified and experienced OHS consultancy to (i) review the existing OHS policies and SOPs against relevant industry GIIP, including WBG EHS Guidelines (General and Sector-Specific). This benchmarking and gap analysis will feed into the proposed upgraded of KES E&S function, including competency and capacity, structure and processes at Group-level and plant-level for the improvements of E&S oversight; (ii) assess current working conditions, life and fire safety (L&FS) conditions, hazmat storage facilities conditions and assess procedures for the storage of chemical, flammable and hazardous substances, (iii) review hazmat storage design, fire prevention design and permitting procedures of the glue factory under construction. The OHS consultancy will support KES to improve the current hazmat management and chemical incident response protocols and system (ref. ESAP#3) with key EHS elements including management plan and upgraded procedure, facility layout, hazardous area zoning, risk assessment, hazmat handling and storage, qualification and training of personnel, PPE, accident reporting, permit to work system, audit, monitoring and inspection and emergency response, compliant to relevant national regulations and PS requirements (ESAP#8).

Supply Chain. As part of KES’ supplier selection process, requirements of adherence to national labor laws and regulations including the prohibition of child labor is stipulated. To address the potential risks of child and forced labor within its sourcing activities, KES will implement E&S risk screening platform and independent verification of its sourcing (ref. ESAP#5) to align with IFC PS2 supply chain requirements.

PS3: Resource Efficiency and Pollution Prevention

Resource Efficiency. KES factories source electricity mostly from the national grid and grid-connected solar PV rooftop system with a total capacity of 6-7MW capacity. On-site backup diesel generators are also available to address power shortages. A significant portion of energy consumption in the MDF plants is derived from the use of biomass (waste wood products) as feedstock for the boiler system. Wood dust from the production process is also recycled back as feedstock to the boiler. Average energy consumption per cubic meter (m3) of production is as follows: (i) MDF1 at 201 kwh per m3 of production; (ii) MDF2 at 195 kwh per m3 of production. Water consumption based on m3 consumed to m3 of processing volume is: (i) MDF1 at 0.46 m3 water consumed per m3 of product; (ii) MDF2 at 0.42 m3 of water consumed per m3 of product. These indicators are within the electricity and water consumption rates per m3 of production benchmarks in the WBG EHS Guidelines for Board and Particle Based Products (2007).

Water is sourced from the local water supply scheme to MDF1 and MDF2. Water efficiency initiatives at plant-level include the collection and recovery of run-off water. Surface water from the wood storage yard is collected, treated, and reused for firefighting emergency tank and production purposes. Annual energy audits have been conducted for MDF1 and MDF2 plants, leading to recommendations, such as establishing an energy management committee, installing solar PV rooftops, obtaining ISO 50001 certification, and installing inverters for intake fans and LED lighting, among other measures (ref. ESAP#4).

Greenhouse gas (GHG) emissions. Based on information available for MDF1 and MDF2 for total energy consumption, DO consumption, wood waste consumption, and prediction of transportation emissions, total absolute emissions calculated are 50,246 tCO2e/year, which consist of Scope 1 emissions of 3,776 tCO2e/year, Scope 2 emissions of 35,470 tCO2e/year and Scope 3 emission of 11,100 tCO2e/year. As the GHG emissions during the lifetime of the MDF1 and MDF2 plants will exceed the IFC limits of 25,000t CO2e per annum, KES will report to IFC the level of GHG emissions as part of Annual Monitoring Report.

Air Emissions. All MDF plants have multiple cyclone-based air pollution control to capture and filter dust generated during the MDF manufacturing processes through induction fans. Captured wood dust is reused as input material at MDF plants. All recorded and submitted data on emissions and effluents, noise, Particulate Matter (PM), SO2, NOx, and VOCs, are in line with the levels indicated in the WBG EHS Guidelines for Board and Particle Based Products (2007), except for PM measured at both MDF1 and MDF2 plants which slightly exceeds WBG Guidelines. To address the excessive PM emissions, KES will install additional air filtration units at the emission sources in MDF1 and MDF2 to enhance dust capture efficiency. KES will also optimize maintenance and operating procedures of existing air pollution control equipment to minimize fugitive emissions. Monitoring of emissions against WBG Guideline levels will be included in the quarterly environmental monitoring reports (ref. ESAP#4).

Wastewater Treatment. All MDF plants visited during this appraisal are connected to industrial wastewater treatment (WWT) facilities capable of treating the entire volume of wastewater generated from MDF production process, including proposed expansion, except MDF1 which treats all of its domestic and industrial wastewater on-site. Latest quarterly wastewater monitoring results from these plants, including parameters such as pH, TSS, COD, BOD5, Total Nitrogen, Total Phosphorus, Oil and Grease, Coliform, are compliant with applicable national standards (QCVN 40:2011/BTNMT) and the WBG EHS Guidelines for Board and Particle Based Products (2007). The plants are designed to ensure separation of wastewater and stormwater streams. For MDF2, the outlet is discharged into the industrial estate municipal wastewater system and transported to a centralized wastewater treatment plant for secondary treatment to meet Vietnamese standard before discharging into receiving water bodies.

Solid Waste Management. Solid waste management is limited to waste material (sludge) from the WWT facility which is disposed by a certified waste disposal company. Hazardous waste from the production processes included absorbents, wasted filter material, oiled rags, lubricants, used fluorescent tubes, etc. The plants engage licensed third-party companies to transport and dispose of hazardous wastes at designated disposal/treatment sites and facilities. Non-hazardous solid waste in the form of packaging inputs (PE, paper, wooden packages) is sold to vendors for recycling. Ash from wood fired boilers is tested and certified as non-hazardous before being disposed by certified waste disposal service providers for all KES plants.

Hazardous Materials. The primary adhesive resin used in Particle Board (PB) and MDF manufacturing is urea-formaldehyde (UF) which is considered toxic in concentrations exceeding 3.0 ppm causing a variety of adverse health effects impacting the eyes and respiratory systems. In each KES plant, UF is provided by an on-site UF production unit where chemicals (urea, paraffin, NaOH, HCOOH, HCHO) is stored with controlled access. A fire incident occurred in the chemical storage of MDF2 plant in 2020, attributed to the inappropriate positioning of reactive chemicals in proximity. Although SOPs for chemical safety management and incident response has been developed and updated post-incident, there are still identified shortcomings. These include the absence of proper labelling (ref. Material Substance Data Sheet – MSDS) and storage of hazardous materials in the designated room on-site, the lack of leak detection systems or secondary containment, and the absence of training certificates for chemical safety (ref. ESAP#8).

PS4: Community Health, Safety and Security

Community Health and Safety.  For the current factories, all reported ambient emissions, emissions at sources and effluent levels from are within WBG EHS Guidelines for Board and Particle Based Products (2007), except for PM level which is slightly above WBG limits. All KES operations are located in industrial parks, except for MDF1, with nearby communities in close distance. Potential community health and safety issues include traffic, noise, and emergency preparedness (e.g. chemical spills, fires). There have been major fire incidents at MDF1 and MDF2 in recent years, highlighting the need to strengthen emergency preparedness and response not only for worker safety but also potential community impacts. KES will engage with neighboring communities and authorities on emergency planning and response (ref. ESAP#8 and ESAP#11).

Road Traffic Safety. KES used wood suppliers’ truck fleets for the transportation of raw wood material. The company states that there have been no reported traffic-related incidents at its operating MDF facilities. However, there are no contract-based specific requirements related to equipment used, driver training, and legal permits and other OHS requirements for safety transportation. KES will develop its transport and traffic safety policy requirements and procedures (e.g., loading/unloading requirements), strictly following speed limits, ensuring that vehicles are maintained in serviceable conditions, etc.) and requires that all third-party transport/trucking service providers demonstrate compliance to policy requirements and procedures (ESAP#9).

Life & Fire Safety. With regards to the new distribution showrooms, KES shall set and implement an international L&FS standard approach, i.e., the NFPA 101 Life Safety Code, to be included in all future showrooms. This international L&FS standard will apply to all new distribution showrooms accessed by the public and will be evaluated by an independent suitably qualified consultant (in addition to compliance to the relevant national L&FS standard), consistent with the “Specific Requirements for New Buildings” as described in section 3.3 of WBG General EHS Guidelines (ESAP #10).

Security Personnel. Security personnel are directly employed by KES subsidiary companies. MDF1 and MDF2 maintain secure entry, with boundary fences surrounding the yards and facilities. Unarmed security personnel are deployed and permitted by the local police to use rubber baton for guarding and self-defense purpose. Plant Security Management Plan and Patrolling Procedure are in place for all operating plants. Security personnel received training on basic safety, first-aid, fire safety, and emergency response.

PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

Protection and Conservation of Biodiversity. Waste wood sourcing for KES’s MDF factories include the nine Vietnamese provinces, namely Binh Phuoc, Binh Duong, Tay Ninh, Dong Nai, Ba Ria Vung Tau, Lam Dong, Binh Thuan, Dak Nong, and Dak Lak. Almost all the raw material identified is within 100 km radius of KES’s plants. A rapid biodiversity risk screening of its waste wood sourcing indicates the presence of several protected areas in proximity of KES plants. Interviews with KES’s procurement team and suppliers (ref. plantation companies) indicated there is no overlapping of this wood sourcing with areas of significant biodiversity values as regulated by Vietnamese laws. All land under management of the forest estate is classified as commercial plantation forest land managed by State-Own-Enterprise (SOEs) plantation management companies, local communes, and private entities. No areas of conservation status have been registered.

Sustainable Management of Living Natural Resources.  Raw material supplied to the wood mill gate is followed by a Material Entry Procedure that states (i) origin of the material; (ii) quantity and type of material; (iii) details on delivery truck (including license number) (iv) details of the driver; and (v) date of transport and likely transport route. The company states that 98% of raw waste wood material entering the supply chain, is derived from a designated commercial plantation, and certified by local communal authorities, the remaining 2% is FSC certified. At point of delivery at mill gate, truck, driver and type and volume of the material is recorded, matched and logged (ref. ESAP#5).                                                  

Stakeholders at KES Group-level and plant-level included its employees, suppliers, contractors, clients, consumers, and community residents in the vicinity of its manufacturing and sourcing operations. There is no mechanism in place to record grievances for following up and mitigation. KES will develop/implement a Stakeholder Engagement Plan (SEP), including a Community Grievance Mechanism at MDF1 and MDF2 to (i) receive and register external communications from the affected communities and public; (ii) screen and assess the issues raised and determine how to address them; (iii) provide, track, and document responses, if any; and (iv) analyze systemic issues and adjust its processes, as appropriate (ESAP#11).                                                

The ESRS and ESAP, the available EIA studies of MDF1 and MDF2 and proposed IFC-compliant EIA study for the glue factory will be made available via IFC Project Information Portal and at MDF1 and MDF2 plants.

Name and Address:

Bui Dac Loi

loibui@kimtingroup.com

+84 28 3950 6618

KES Group Corporation

424 Vo Van Kiet, Co Giang Ward, District 1, Ho Chi Minh City, Viet Nam.