Issues related PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources, PS7: Indigenous Peoples, and PS8: Cultural Heritage are not triggered as there is no known critical or natural habitats, IPs or known cultural artifacts within the company’s direct and/or sourcing operations. Phases I and II are located within the Changle Economic Development Zone and surrounded by industrial facilities. The closest household is approximately 250m from the western boundary of the facility. Households are highly scattered by agricultural lands. If the issues anticipated by these Performance Standards arise, the Company will promptly inform IFC.                                                   

This is a Category B project according to IFC’s 2012 Policy on Environmental and Social Sustainability due to limited E&S risks and/or impacts, which are expected to be site-specific and mitigated by adhering to Good International Industry Practice (GIIP) as described in the following sections. Key E&S risks and issues for this investment are: (i) implementation effectiveness of SCSPG/SKBP’s E&S management system; (ii) adequacy of HR / OHS management systems for assurance of fair and safe working conditions for permanent employees, contractors and supply chain labor, including GBV risks; (iii) water and energy efficiency; (iv) solid and liquid waste (incl. hazardous waste) treatment and disposal; (v) traceability and robustness of the E&S risk screening of wheat straw Tier I and II suppliers; (vi) government-led land acquisition; (vii) stakeholder engagement and community grievance mechanism.                                                     

Environmental and Social Policies. SKBP’s E&S policy is focusing on compliance to national E&S laws and regulations in China. A corporate-level policy for E&S management has been established by SCSPG and applied to all its subsidiaries, including SKBP and Huamai Paper (the subsidiary operating the WWTP). A formal structure and management system of E&S aspects is also present. SKBP will upgrade its E&S policy to benchmark company’s performance against PS requirements for its direct and sourcing operations, including the commitment to abide to core International Labor Organization (ILO) conventions (ESAP#1). The policy will also apply to Huamai Paper.

Identification of Risks and Impacts. SKBP is compliant with national E&S regulations for its operations, through completion of Environmental Impact Assessments (EIA) reports for Phase I and II. Key permits obtained include the environmental license, land use certificates, and land use planning permits. Key environmental impacts identified in the EIA report are the management of solid and hazardous waste, wastewater and its byproducts (e.g., sludge), fugitive dust emission, odor, noise and emergency situations (e.g., especially fire and explosion). A land acquisition audit was conducted in October - November 2022 to assess social impacts by Project-related land acquisition and resettlement. Findings and recommendation from this audit are found in PS5 section below. Huamai Paper is also compliant with national regulations, including environmental/ wastewater discharge permit.     

E&S Management System and Programs. The Company’s management programs focus on environmental protection, life & fire safety (L&FS), and occupational health and safety (OHS) aspects. For every Group’s new facility, an EHS team is established during the construction phase to manage the EHS-related issues and needed mitigation measures identified either through the EIA process or from SCSPG’s E&S policies. SKBP has not yet defined its own EHS procedures for the construction phase. In the interim, SKBP follows SCSPG’s E&S requirements as defined in its environmental and OHS management system. For SKBP Phase I, ISO 14001:2015 and ISO 45001:2018 certification has been achieved. SKBP is also planning to certify its energy management system against ISO 5001 certification. As part of establishing its E&S management system, Quality, Environmental and OHS (QEOHS) Manual of Procedures and management program are being implemented. This QEOHS Manual can be considered equivalent to an E&S Management System framework. However, it still lacks components of the ESMS as per IFC PS1 requirements, e.g., legal register for environment, OHS and labor issues, stakeholder engagement plan (SEP), community grievance mechanism (CGM) and traceability, risk screening and management plans for SKBP’s wheat straw sourcing operations. Social management system and manuals, aside from HR policy and procedure, have not yet been established. Similarly, Huamai Paper has obtained ISO 9001:2015, ISO 14001:2015, ISO 45001:2018 certification, and has developed an equivalent QEOHS Manual of Procedures. SKBP will address E&S risk management through the establishment of an E&S Management System (ESMS). The Company shall upgrade the current QEOHS manual to a PS1-compliant ESMS (ESAP#2). Among others, the ESMS will include updates including (i) sufficient EHS and social resources to manage the ESMS and performance, including supply chain management for Phase II expansion; (ii) specific organization, roles and responsibilities for social aspects; (iii) EHS incident investigation and reporting procedures; (iv) Project-specific SEP and CGM, which will also cover supply chain stakeholders, livelihood and grievance monitoring of Project-affected persons from land acquisition. This ESMS will be applying to SKBP’s Phase I and II operations and for Huamai Paper’ operations.  

E&S Organizational Capacity, Competency & Training. The overall accountability for the EHS function is under a General Manager/Factory Director position. The EHS responsibilities are shared among various departments, including the Production Director, heads of Security, Safety, and Production Sections, and an environmental specialist. The Workshop Director has the support from deputy directors and is responsible for workshop safety and daily management. The heads of Purchasing Departments are responsible for purchasing wheat straw materials. The EHS management roles and responsibilities of Phase II expansion project will be integrated into the current EHS organization. Huamai Paper applies a similar approach of EHS management organization, as defined in its QEOHS manual.

The Company has a comprehensive E&S training program for all its employees. New employees received an extensive induction training (i.e., factory visit, security, environmental and safety management system, SOPs and work permit, hazard identification and risk assessment, occupational illnesses, fire prevention and firefighting). Environmental staff additionally receive trainings on laws and regulations, including Terms and Conditions of permits, solid/hazardous wastes, wastewater, emission and GHG, noise, monitoring and reporting, emergency plan. Employees generally receive refresher trainings at least every year. Huamai Paper is implementing similar induction and training programs for its new employees, which are part of corporate training requirement. 

However, there is limited information on organization, roles and responsibilities, and trainings for personnel in charge of social aspects, aside from the HR function. With the increase in total production capacity to 500,000 tons of pulp per year, and the requirements for implementing a supply chain management system, additional EHS and social resources will be required. SKBP will ensure sufficient EHS and social resources to manage the ESMS, including supply chain for Phase II expansion. Specific organization, roles and responsibilities for social aspects will be established in SKBP and Huamai Paper, including labor management (HR), supply chain management system, stakeholder engagement and community grievance mechanism. The social management organization, roles and responsibilities will be integrated within the ESMS (ref. ESAP#2). Additional requirements for social aspects will be integrated into current E&S training programs and inducted to all employees.

Emergency Preparedness and Response. SKBP emergency response procedures (ERP) are in accordance with national regulation. SKBP maintains procedures for management and responses in emergency situations, such as (i) emergency risk assessment report, response resources, and ERP; (ii) hazardous substance release/leakage and response procedure; (iii) ERP for fire events; (iv) ERP for dust explosion accidents; (v) ERP for diesel leakage (fire) accidents; and (vi) ERP for typhoon and flood control. SKBP conducts annual training on safety, security, fire prevention and firefighting, dust explosion, and firefighting drill and competition with training records. Huamai Paper has developed and implemented similar emergency response plans necessary to support its operations in accordance with national regulations and risk assessment.

E&S Monitoring & Reporting. SKBP and Huamai Paper both have a set of QEOHS objectives within its QEOHS Manual that includes objectives for environmental (waste disposal, noise, wastewater discharge), and OHS aspects. SKBP and Huamai Paper conduct EHS monitoring, and reporting mechanisms based on permit and voluntary certification requirements. Environmental monitoring includes (i) quarterly point source emission and ambient air quality monitoring; (ii) quarterly ambient noise monitoring; (iii) continuous monitoring system and quarterly wastewater monitoring; (iv) solid waste (including hazardous waste) monitoring; and (v) annual GHG emission estimate, which inform its annual environmental monitoring report to local authorities.  Records of waste straw and sewage sludge transfer to the co-generation thermal power plant are also collected. Regarding OHS issues, SKBP has developed a production safety accident management system, which includes (i) OHS accident classification; (ii) OHS accident notification and rescue procedures; and (iii) OHS accident investigation and reporting. No accident log is available to date although the investigation report and evidence of corrective actions are available.

Supply Chain. SKBP is sourcing its wheat straw materials from 50 suppliers, which are local SMEs/Cooperatives located in Shandong, Henan and Jiangsu Provinces, within a radius of 10 km to 750 km from SKBP facility. The SMEs may have up to 15 long-term employees (either family members or labor from market) and up to 20 seasonal workers (only in harvesting time in June). These suppliers do not have their own wheat growing areas but source wheat straw materials from surrounding farmers. The SMEs generally provide harvesting services to the contracted farmers and then collect the wheat straw either for free (as exchange for harvesting services) or for an agreed market fee. Each SME signs contract with 2,000 – 3,000 farmer households with wheat cultivation area of up to 16,000 mu (1,072 ha) to supply SKBP. The Cooperatives are formed by at least five farmer households. They also lease farming lands from other farmers through the village head/committee to form a large wheat cultivation area, varying from 2000 mu (134 ha) to 8000 mu (536 ha). The Cooperatives also source wheat straw from other surrounding farmers as exchanges of agricultural machinery maintenance services. As such, the Company’s supply chain includes local SMEs/Cooperatives (Tier I suppliers) and farmers (Tier II suppliers). Local Cooperatives and SMEs will arrange seasonal labors to secure the straw on the field (up to two – three days for natural drying) from burning, straw bundling, loading and transporting to the stations. Refer to PS 2 and PS 6 sections below for further details.                                                   

At the time of this appraisal, SKBP directly employed 130 workers for its operations. No seasonal workers are currently being employed. The percentage of women in the workforce is ranging from 25%-30%. The facility operates either on long day shift and three shifts at 8 hours per shift with breaks and five days per week. An estimated additional 150 jobs will be created with proposed Phase II expansion.

Human Resources Policies and Procedures. SKBP has a dedicated Human Resources (HR) function that reports to the General Manager. HR policies and manuals have been developed in 2022 at SCSPG level to be compliant with PRC regulations. SKBP utilizes SCSPG HR policies and manuals as guidance for its labor management. A corporate-level New Employee Orientation Handbook has been developed and communicated to all SKBP and Huamai Paper’ workers. Other main HR policies and manuals include a recruitment, interview and entry management procedure, employees’ Codes of Conduct, and policies on subsidy/incentive and talent management system. HR policies are communicated with all employees through recruitment process, orientation, provision of New Employee Orientation Handbook, presentation on notice board. SKBP will develop its own HR policy and procedures in line with SCSPG-HR policy and PS2. The HR policy and procedures will integrate the requirements including the (i) commitments to core International Labor Organization (ILO) conventions; and (ii) a company-specific worker grievance mechanism. SKBP will disclose its HR policy/procedures during worker’s induction session (ESAP#3). This HR policy will also be applied to Huamai Paper.

Working Conditions and Terms of Employment. Labor contracts includes relevant information related to terms and conditions of the employment. These include (i) contracting and trial/probation period; (ii) work scope and workplace; (ii) working conditions (i.e., occupational hazards); (iii) working hours and resting time; (iv) remuneration and payment time; (v) statutory leaves; (vi) social insurance; (vii) OHS and training. Working conditions includes no more than eight hours a day, and 40 hours per week, and at least one day off each week. The labor contract also includes the right to refuse the work scope if it is against regulations, forced risky tasks or issues with personal safety.

Workers’ Accommodation. The Company provides accommodation free of charge through a registration procedure for the workers living at distance from its plant. The Company confirmed that current capacities of dormitories exceed the total number of registered workers. The visited workers’ accommodation compound was found to be in alignment with IFC/EBRD workers’ accommodation guidelines. The Company provides living allowances sufficient to cover the meals. SKBP also maintains food safety procedures for canteen including obtaining (i) food business license; (ii) chef professional qualification; and (iii) health certification for food processing staff.

Workers’ Organization. A Trade Union Committee was elected at SCSPG level, approved by governmental Trade Unions, including women worker representatives, labor compensation committee, labor arbitration committee, and representatives of subsidiaries, including SKBP and Huamai Paper. All employees have a right to join the union voluntarily. However, current HR policy and induction training documents have not captured such workers’ right, which should be addressed (ref. ESAP#3). The Company’s HR department engage with the union regularly to discuss any pending grievances. Workers can also contact a psychological advisory department under the Trade Union anytime.

Non-discrimination & Equal Opportunity. The Company has adopted SCSPG policy commitment to ensure equal rights and non-discrimination, including sexual harassment, provided in the New Employee Orientation Handbook, and the Anti-discrimination and Anti-harassment Management Regulations document. These are applicable to all employees of SCSPG and its subsidiaries, including SKBP and Huamai Paper. This handbook is communicated to all workers during worker’s induction.

Worker Grievance Mechanism (WGM). A corporate-level employee complaint mechanism has been set up, and employees can provide feedback on discriminatory incidents or unfair treatment through telephone, text message, mailbox, QR code, opinion box and other channels. The Corporate Management and Inspection Department is responsible for in-depth investigation. Interviews with Company’s workers indicated that the WGM is in place and implemented. Grievances emanating from the workforce can be brought in person to the HR manager, through the trade union, or anonymously through a comment box located within the factory. Through the interview with the suppliers (SMEs and Cooperatives), the contracts signed with SKBP has an appendix with anticorruption and telephone for informing the corruption issues only. Suppliers are not informed of the channels for grievance submission. A company-specific WGM will be developed in line with corporate-level WGM and IFC PS2 and will be integrated to HR Policy/Procedures (ref. ESAP#3). The WGM will be publicized at the Company’s facilities and the accessibility extended to include third-party contractor’s and suppliers’ employees. The WGM should have specific mechanism for anonymous grievance and complaints regarding gender-based violence, including sexual harassment. Huamai Paper will also maintain a WGM for its employees.

Protecting the Work Force.  The Company does not employ any individual under the age of 18 years old. The Interview Organization Operating Procedure includes resume screening process for job seeker’s age, through presentation of original ID card. Based on IFC field appraisal, there is no indication of forced labor within SKBP’s workforce. Such commitments on prohibition of child and forced labor have not been explicitly stated in SCSPG and/or SKBP policies. SKBP and Huamai Paper will have specific commitments to core International Labor Organization (ILO) conventions, including (i) right to voluntarily join worker unions or collective bargaining; and (ii) commitment to avoid use of forced or child labor. These commitments will be outlined into the E&S Policy (ref. ESAP#1) and HR Policy (ref. ESAP#3).

Occupational Health and Safety. SKBP has developed an Occupational Health and Safety (OHS) management system, which has been ISO 450001 certified and integrated in their QEOHS management system. This system includes specific elements such as: (i) OHS policy; (ii) identification of OHS risks; (iii) Standard Operation Procedures (SOPs) for the management of high-risk activities, including work permit system; (vi) emergency response planning; (v) internal audit; (vi) incident investigation and reporting; and (vii) management review.  Following the serious gas explosion incident (i.e., from accumulated methane and hydrogen sulfide triggered by sparks from metal cutting maintenance activity nearby) in November 2021 causing two fatalities, SKBP has identified a series of corrective actions to further improve the safety of its operations. These include (i) strengthening the risk identification, assessment, analysis and control; (ii) accident warning; (iii) regular safety management meetings; (iv) strengthening roles and responsibilities for safe production; (v) improvement of safety management system and operating procedures; (vi) strengthening safety training and education. In addition, SKBP issued (i) more stringent regulations on the factory access control; (ii) the safety management with contractors accessing the facility; and (iii) contractor task review and risks assessment. However, the current hazard classification and medical incident classification have not classified medical treatment cases, first aid cases, and near misses and thus, these would not be investigated. SKBP will further develop its incident investigation and reporting procedures to include (i) the investigation of all incidents (i.e., near miss incidents, first aid incidents and medical treatment cases); (ii) root cause analysis and improvement; and (iii) assess the performance of their OHS management system using indicators. Such actions will be integrated as part of its ESMS (ref. ESAP#2). Huamai Paper will apply a similar procedure. 

SKBP’s production process inherently includes hazardous activities that could lead to dust explosion and exposure to flammable or toxic by-products (e.g., methane and hydrogen sulfide). The risks related to these activities have been assessed by SKBP during the EIA process. Mitigation measures include (i) development of hot work and confined space entry procedures; (ii) implementation of engineering control (e.g., explosion proof dust collectors and grounding of electrical equipment); (iii) verification of the effectiveness of these measures; and (iv) training of its staff and contractors on these hazards. In addition, the OHS roles and responsibilities have been defined in the QEOHS. Annual training plan is developed and implemented by HR Department for various aspects, including OHS. All employees receive induction and training for safety and management system, hazard identification and risk assessment, fire prevention and firefighting, dust explosion, including explosion and firefighting drills. SKBP will engage a third-party auditor to assess if additional mitigation measures taken to prevent dust explosion are required to reduce the risks to an acceptable level. This audit would further review the completeness of the OHS risk assessment of all activities and effectiveness of the proposed control measures (ESAP#4). SKBP will conduct dust explosion risk evaluation and monitoring and provide a report in a form of annual monitoring report (AMR) annually.

Supply Chain Labor Risk Assessment and Management. The supplier due diligence indicated communication on no child and forced labor, and requirements to follow national regulation on OHS and L&FS between SKBP and Tier I suppliers, mainly through legal/supplying capacity screening and contract provisions. Such provisions are enforced through monthly monitoring and auditing checklist evaluation, using various methods (i.e., document review, interview with management and observation) by SKBP’s procurement staff (one per province). Each procurement staff has to cover 9 to 26 suppliers. These persons in charge may not have formal labor and OHS training and mainly focus on legal status and the supplying capacity of the suppliers. Permanent and seasonal workers all have contracts with specific terms and conditions. Workers also indicated a systematic training on OHS risk identification, assessment and response measures. Interviews with farmers (Tier II suppliers), however, indicated limited to no oversight from both SKBP and Tier I suppliers regarding use of child or forced labors or OHS aspects. Review of contracts’ provisions between SMEs/Cooperatives and farmers only indicated business aspects. The farmers also confirmed that wheat cultivation is highly mechanized, and children are not involved. Going forward, SKBP will formalize supply chain management procedures. The procedures will include (i) a Supplier Code; (ii) traceability of cooperatives and SMEs; (iii) risk assessment of Tiers I and II suppliers on harmful use of child labor, forced labor and OHS aspects, using evaluation criteria; (v) training requirements; (vi) supplier monitoring, auditing, verification system and reporting requirements; and (vii) roles and responsibilities (ESAP#5). The Supplier Code should clearly define the commitment to purchase inputs from primary suppliers prohibiting use of child/forced labor and significant OHS risk. SKBP will integrate such measures into its existing procurement practices with their primary suppliers, to increase awareness of the risks associated with wheat cultivation activities and wheat straw handling, collection, storage. Once established, SKBP will report on measures taken in support of this policy in an ongoing basis. Huamai Paper should apply a similar approach.                                                   

Resource Efficiency. SCSPG’s environmental management system (EMS) includes a resource efficiency policy as part of its sustainable development strategy and cleaner production. This EMS is applicable to all subsidiaries, including SKBP and Huamai Paper. SKBP is planning to obtain ISO 50001 for energy management system certification by May 2023. Aside from this objective, there are currently no operational efficiency targets or objectives to track and reduce consumption of water, energy and/or raw materials. The Company’s electricity is from grid and heat is drawn from the coal-fired co-generation power supply (i.e., Shengshi Cogen), which consumes the by-products (i.e., biomass residue, dry sludge) of SKBP as part of its feedstock. Water is drawn directly from the municipal water supply. No groundwater is used for the Company’s production activities. Based on current data from SKBP, electricity and steam consumptions equate to 1004.38 kWh/ton of dried pulp, and 2.29 GJ of steam per ton of dried pulp, respectively. Water consumption equates to about 3.4 tons of fresh water per ton of paper. These water and energy consumption figures are within the standards for mechanical pulping referenced in the WBG EHS Guidelines for Pulp and Paper Mills (2007). SKBP will develop objectives and targets for improving resource efficiency, based on benchmark from good industry international practices, monitoring and performance evaluation within its ESMS (ref. ESAP#1).

Greenhouse Gases. GHG emissions have been being estimated at SCSPG and SKBP/Huamai Paper levels. The Company uses the GHG emission estimation method/equation provided by the Chinese Ministry of Ecology and Environment to calculate the GHG emission. Once calculated, a third-party auditing agency appointed by the government will verify the data and results. GHG emission estimate for SKBP has been calculated but it has not been verified. The GHG emission estimate for 2021 was 9,912 tons CO2 equivalent, corresponding to 2021 total cumulative production of approximately 8660.5 tons of products. Based on a full capacity utilization, the total GHG emission would reach approximately 228,901 tons CO2 equivalent per year for Phase I capacity of 200,000 tons products per year. With the proposed Phase II’ additional capacity of 300,000 tons products per year, total GHG emission would reach approximately 572,253 tons CO2 equivalent. SCSPG and SKBP are implementing initiatives to reduce its GHG emissions, such as (i) transferring waste straw/biomass and sludge/paper mud as feedstock to a Shengshi Cogen, which currently make annual savings of 1458.6 and 14,991 tons of standard coal, respectively; (ii) building roof-based photovoltaic power stations (in all Group’s subsidiaries) with capacities of up to 40 million kwh per year.

Wastewater Treatment. All wastewater from SKBP will be treated by the wastewater treatment plant (WWTP) located within Huamai Paper, another SCSPG’s subsidiary, with a contractual agreement. The same volume of treated wastewater will be recirculated back to SKBP for reuse for its production line. Therefore, zero discharge from SKBP is expected leading to a neutral water balance. After treatment at Huamai Paper’s WWTP, treated wastewater will be discharged to a WWTP of the Shandong Baochang Water Co., Ltd. (SBWC) in Changle County. The wastewater effluent standard will comply with Chinese national guideline values (the Water Quality Standard for Sewage Discharged into Urban Sewers - GB/T31962-2015). As treated effluent from Huamai Paper’ WWTP is not discharged directly to the environment, the wastewater quality requirements of SBWC applies. However, there is currently no signed agreement between SKBP/Huamai Paper and SBWC regarding receiving wastewater standards. SKBP and Huamai Paper will ensure that an agreement with SBWC. regarding receiving wastewater standards is signed. SKBP and Huamai Paper will ensure to treat its wastewater to meet the agreed entry standards of the WWTP of the SBWC in Changle County (ESAP#6). Currently, wastewater discharge quality monitoring from Huamai Paper includes two mechanisms (i) automatic real-time monitoring system; and (ii) quarterly monitoring. The results are submitted to the competent authorities. Quarterly wastewater monitoring results indicate compliance with the applicable local effluent quality standard.

Air Emissions and Ambient Air Quality. SKBP is currently complying with national standards for the main emissions from its production process, including particulate matter, hydrogen sulfide, odor, and ammonia. Air emission is monitored on a quarterly basis and results be submitted to competent authorities. However, PM10 and PM2.5 are not currently being monitored as required by WBG General EHS Guidelines. SKBP will monitor PM10 and PM2.5 and benchmark with the WHO Ambient Air Quality Guidelines values (ESAP#7).                

Noise. SKBP is following national regulations on noise emission limits at the boundary of its facility during the construction phase and during the operation phase which are considered aligned with the WBG General EHS Guidelines requirements for industrial receptors, considering the surrounding industrial facilities. The closest residential facility is approximately 250m from the western boundary of the Project. The latest quarterly noise monitoring results (June 2022) indicated no exceedance above national standards. Thus, the noise impacts to the surrounding community are considered limited. SKBP will utilize its existing community grievance mechanism to monitor any grievances on noise impacts and address them accordingly.

Waste and Hazardous Waste (HW) Management. Solid wastes are mainly characterized by (i) waste straw, sand and gravel and sludge from WWTP at Huamai Paper; and (ii) hazardous wastes (HW) from laboratory testing, waste oil, filter element, used batteries, etc. Solid wastes and HW are being managed in accordance with national waste management standards. Both SKBP and Huamai Paper have annual HW management plans. The onsite HW storage is having relevant design and emergency preparedness equipment. All non-hazardous solid wastes, including sludge from WWTP will be transferred to the 116MW Co-generation Shengshi Cogen plant for incineration.                                                   

Material Transportation. The Company has no raw material transportation fleet. Supplier contracts include provisions on straw transportation roles and responsibilities, cost, and traffic safety. Raw materials are transported and delivered to the SKBP’s facilities by the suppliers’ vehicles. Raw material transport safety requires the compliance with the national laws and regulations and specific rules set by SKBP, including (i) strict prohibition of flammable and explosive goods; (ii) compliance with the supervision and inspection of SKBP; (iii) strict compliance with traffic regulations for drivers’ health conditions and speed limits; (iv) maximum speed limits within the SKBP’s boundary. SKBP will develop, as part of its ESMS (ref. ESAP#2), a raw materials transportation policy with (i) materials transportation planning/arrangement; (ii) risk assessment; (iii) safe transportation principles; (iv) roles and responsibilities; (v) training requirements; and (vi) monitoring and auditing procedures on supplier’s safe transportation performance (ESAP#8). Such policy shall be communicated to all suppliers and included as provisions in the wheat straw supply contracts.

Security Personnel. All security personnel are direct employees of the Company, under the internal security department, and subject to the standard employee recruitment process. Security staff carry no weapons. The roles and responsibilities of Security Section are to support the OHS management, safety training and education, accident prevention and response. The security personnel have no right of detention or body search, with task mainly to observe movements in and out of facility, protect company property, monitoring for violations and or acts against the company and report these to the authorities and or senior management.                                                   

A review of the sourcing location of wheat straw used in the production of pulp did not identify risk to the significant conversion of natural or critical habitats. Analysis of the locations of the fifty suppliers’ farms where wheat straw is sourced against Global Forest Watch indicated that forests had not been cleared within 5km of these farms within the last 10 years. To ensure that the risks to natural/critical habitat conversion remain low, SKBP will be required to check their supply chain periodically. SKBP will develop and implement a Supplier Code (ref. ESAP#5) that includes a commitment to explicitly prohibit any conversion of natural habitats in its wheat straw sourcing operations. SKBP will develop and implement a traceability system that monitors and verifies (every 3 years) that wheat straw suppliers are not causing any habitat conversion.                                                   

The Company inherits a corporate-level public consultation management system and a social complaint system, applicable to surrounding communities of all facilities/subsidiaries, to deal with issues, including (i) policies and regulations; (ii) employment; (iii) impacts and mitigation measures. The External Liaison Department is responsible for collection of any public consultation questions, and collaboration with other departments, if required, to provide feedbacks. Community can access the system through (i) a telephone publicly disclosed with dedicated personnel assigned; (ii) email; (iii) external suggestion boxes; and (iv) social consultation forums with surrounding villagers.  A complaint handling committee and an Appeal, Complaint and Dispute Procedure have been established. At the time of this appraisal, the Company has not received any complaints. These public consultation and social complaint system have not covered the supply chain farmers. These systems only set out principles for a stakeholder engagement and community grievance mechanism, and not fully complied with PS1 requirements. As part of the ESMS requirements for Phase II expansion, SKBP will implement a Project-specific stakeholder engagement plan (SEP) and community grievance mechanism (CGM) in line with SCSPG social consultation management system and in compliance with PS1 (refer to ESAP#2). The SEP will include stakeholder identification/analysis and engagement programs, including supply chain stakeholders and PAHs from land acquisition, E&S risks/impacts and awareness, and the CGM. The CGM will be disseminated at supplier level. The CGM should have a mechanism to connect with the corporate-level social consultation management for information exchange.