This is a Category B project as per IFC’s Policy on Environmental and Social Sustainability (2012). Key E&S risks associated with the project include: (i) the company's management and monitoring systems to assess and manage E&S risks and impacts from its operations,; (ii) consistent management of labor and working conditions and occupational health and safety (OHS) policies and practices, retrenchment,  grievance mechanism for workers (iii) monitoring and management of air emissions, hazardous wastes, wastewater and hazardous materials; emergency planning and response; and resource efficiency measures; and (iv) stakeholder engagement related to E&S aspects.  

 Napino has established an integrated E&S management systems (ESMS) certified to ISO 14001:2015 and ISO 45001:2018 Standards. As part of the ESMS, Napino has established and maintains management programs consisting of documented manuals, operational control procedures, training management systems, reporting templates, checklists, audits, monitoring and reporting mechanisms integrated to its integrated management systems. Every department has been given sustainability, health and safety targets covering accidents, energy, water, and training aspects. Based on the documents provided and discussions with EHS compliance team, the Company’s E&S management systems is broadly aligned with PS1 requirements and commensurate with the scale and E&S impacts of its operations.

The Company’s capex project proposals to expand production of products such as battery management system, motor controller, DC-DC converter, and battery chargers do not require prior environmental clearance as per prevailing regulations. As per the consent management regulations across different States in India where Napino is operating, the operations have been mostly classified as “green” category (no or less polluting) by State Pollution Control Boards (SPCB) (e.g Bhiwadi and Hardiwar) while some Plants (e.g Sector 8 unit at Manesar) has been categorized under “Orange” category (moderately polluting). Corporate human resources department manages E&S permits and compliances of all facilities and is planning to upgrade these systems by March 2024. Company maintains applicable legal registers that are updated quarterly using internal resources. 

Napino identifies and manages E&S risks and impacts associated with its operations through compliance with applicable national standards and E&S regulatory permits and requirements. As part of the ESMS, the Company uses multiple risk assessment tools that includes process-wise health safety review (HSR) procedure; hazard identification and risk assessment (HIRA) to identify and assess E&S risks in manufacturing operations and processes; environmental aspect-impact analysis (AIA) tool; and Process Failure Mode and Effects Analysis (PFMEA) tool to evaluate and identify potential failures related to operational processes in manufacturing.

Company has an environment, health, and safety (EHS) organizational structure in place with defined roles, responsibilities, and authority to implement the ESMS. The personnel with direct responsibility for the environmental and social performance have the knowledge, skills, and experience necessary to perform the work. A dedicated Corporate EHS governance unit has been established under a Corporate EHS Manager. At the manufacturing facilities level, EHS function is managed by the maintenance team wherein appropriately qualified and experienced staff has been identified and entrusted with EHS/ Safety officer role.

Napino’s manufacturing facilities have documented emergency preparedness and response plan (EPRP) in place that is commensurate to accidental and emergency situations associated with the company operations and mitigate any harm to people and/or the environment. The EPRP covers life and fire safety (LFS) aspects in line with the national building and fire safety codes. The LFS passive and active infrastructure systems are established and maintained as per national fire safety codes and regulations that are applicable to Industrial buildings. The Napino plants undertakes regular testing of crisis/emergency management plan through periodical mock and LFS drills.

Monitoring and reporting systems to assess facility-wise E&S performance and verify legal compliances are in place. The monitoring and review elements comprise of periodical internal reporting on E&S performance, monitoring of performance through inspections and audits, and periodical senior management reviews.                                                 

As of March 2023, the company employs 4830 people (669 female and 4161 male), which includes management staff, workmen (direct- roll), Fixed Term Contract (FTC) workers, trainees, apprentice), workers hired through manpower contractors as well as contract workers working under third party service contract (such as housekeeping/ security etc.). The company has around 802 management staffs and 97 workmen on the direct- roll of the company. The company also hires trainees (currently - 869) as per the categorization in approved employee standing order. In addition, the Company has 231 workers on FTC. Napino has also hired ~600 apprentices, either registered through National Apprenticeship Training Scheme (NATS) or National Apprenticeship Promotion Scheme (NAPS); both schemes are operated by different ministries of Government of India (GoI). while the remaining workforce (currently 2301) is through third party contractors including manpower suppliers.

The company has separate Human Resource (HR) and Industrial Relations (IR) department. The corporate HR department (currently with 15-HR staff) oversees the following: talent retention and management, training and organization development, induction and onboarding, digitization and HR automation, talent acquisition and employer branding, R&D centre business partner. The corporate governance, EMS and CSR also fall under the HR department. Similarly, the corporate IR department (8-member team) oversees time office, labour relations, employee welfare and relations, public affairs, legal labour compliances, overtime, Prevention of sexual harassment (POSH) implementation, grievance mechanism, salary processing, leave, contractor compliance, and supply chain labour compliance. Each of the units have around 3-5 HR staff and IR representatives (in total around 34 HR staff and IR representatives across all the Napino operations).

The administration function is under the respective plant/ unit heads. The company uses “Complinity”- a compliance management software for all statutory and regulatory compliances; third party contractor compliance is monitored manually. Napino is also in the process of implementing a Human Resources Management System (HRMS), which is currently under testing and review process. Additionally, a learning application tracking system is also under pipeline.

HR policies: Napino has a documented HR policies and procedures that set out its approach to managing its employees in line with the host country’s requirements. The company HR policies addressed working hours policy, over staying policy for management staff, employee leave policy, suggestion scheme policy, safety committee policy, higher education policy, retention policy, mobile usage policy, domestic and international travel policy, local conveyance, mediclaim policy.

Terms of employment: The management staff, FTC, and trainees are provided joining letter articulating terms and condition of employment. The employees are also provided an employee handbook which apart from company and process introduction captures brief overview of company’s HR policies and procedures. The company has a code of conduct and business ethics which apart from other provisions include prohibition of child labour and forced labour as per the local regulatory provisions, payment of minimum wages and other benefits as per law, right of workers to collective bargaining and freedom of association, prohibition of human trafficking, non- discrimination and anti-harassment, monitoring and compliance of these provisions directly or through third parties.

The workmen category employees (terms and condition of employment are guided by the employee standing order which is approved by the state HR department at respective production facility. Additionally in one of the units where union exist, the approved settlement agreement with union supplements additional benefits for the union members. The trainees are covered under the provisions of the employee standing order. The apprentices under NAPS and NATS are guided by the provisions stipulated by the apprenticeship scheme, the Apprenticeship Act, 1961 and subsequent amendments. The contract workers hired through manpower agencies and the contract workers under service- based contract are guided by their contract agreements which refers to applicable national laws and regulations. The client will update the terms and conditions of employment for all the categories of workforce (especially for FTC, trainees, and the workmen category, and apprentices) in line with local regulations as well as IFC PS2 requirements as part of ESAP#1.

Training: The company has an induction process in place which includes a 2-day induction including joining formalities, company introduction, HR& IR introduction, Income tax deductions, plant visit, and department handover. Additional trainings are conducted from time to time on HR policies including policy on prevention of sexual harassment (POSH)and grievance mechanism. 

Non-Discrimination: Non-discrimination and equal opportunities provisions are broadly covered in the code of conduct and no discrimination was observed during the appraisal. 

Grievance Mechanism: Napino has an internal grievance mechanism which include multiple grievance intake points such as by mail, in person, grievance box, etc. to raise and address allegations including anonymously, if complainants so prefer, with provision of grievance committee. The company as per the local regulations has developed and implemented POSH and has constituted an Internal complaints committee (ICC) as per applicable regulations. The GM and POSH provisions (especially procedural aspects) will be further strengthened in line with IFC PS 2 requirements, and adequately communicated to all categories of employees including contract workers as part of ESAP#1.

Freedom of Association and Collective Bargaining: The company does not have a policy on collective bargaining and freedom of association; however, at the same time the company does not discourage union formation and complies with the legal provisions regarding union formation (also articulated in the employee code of conduct). The company has a union in one of the units since 2011 and had two settlement agreements in 2014 and 2017; these agreements included benefits like assured increment over the period of settlement period (3 years), attendance bonus, service award, marriage bonus (self as well as the children), entitlement for dress and shoes every year, medical policy coverage, accidental insurance, transport facility, loan, festival gift, bonus etc. The last meeting with the union was undertaken at the labour commissioner office in 2022, and as per Napino, the matter of revision of the 2017 settlement agreement is currently sub-judice which has further delayed signing of a new settlement agreement with the Union. Currently, the plant with union has 30 workmen and all of them continue to be part of the union. As part of ESAP#1, Napino will develop and adopt a policy regarding Freedom of Association and Collective Bargaining and will communicate it to employees.

Retrenchment: The company had union protests in the month of July/August 2022 (around 21 days) allegedly over the revision of long-term settlement jointly agreed with management in 2017.The matter was referred by the labour commissioner office to labour court, after the issue could not be settled. The protest by the workers over time resulted in loss of orders for the plant, and company resorted to retrenchment after informing the labour authorities about the challenges being faced by the company. Around 167 workmen operators took final payment/ settlement under the provisions of Section 18 (1) Industrial dispute act. The company offered similar settlement options to the remaining 74 workmen (out of 104) in Oct 2022, but once they refused, the company retrenched them after completing full and final payment as per the provisions of the Industrial Dispute Act, 1974 and informing the labour department. The company however does not have a retrenchment policy in line with IFC PS 2 requirements. The company (as per ESAP #1) will update its retrenchment and freedom of association policies and implement corrective actions based on the review of the union protest related issues as part of the third party audit findings.

Third party workers: In relation to third party workers, the company ensures that the third parties who engage these workers are legitimate enterprises and have appropriate systems in place to manage working conditions in line with local regulations. The contract agreement specifies the laws and regulation to be complied by the contractor submission of compliance records with Napino for verification. As per ESAP#2, the client will strengthen its oversight of contractor management practices and assess the adequacy of the contractor management system in ensuring that all compliance requirements under the national labor and employment laws and PS2 covering its third party workers including on terms of employment, minimum age, non-discrimination and equal opportunity, freedom of association, occupational health and safety; grievance mechanism; etc. are implemented. As part of ESAP#2 Napino will develop a contractor management system with dedicated staff to ensure contractors policies and procedures are aligned with Napino’s and PS2.

Occupational Health & Safety (OHS) Management: Napino has established Occupational Health & Safety (OHS) Management System certified as per ISO 45001 Standards across all its plants. To evaluate the performance of the OHS management system, the Company conducts regular internal and external fire, electrical safety and OHS audits. In the past 3 years, Napino reports that there was no fatal workplace accident or incident at any of the Company’s plants. All accidents and incidents are analyzed by the designated EHS team to identify the root causes and the appropriate action plan to mitigate as a result. The Company conducts OHS trainings as per the frequency stipulated by the regional regulations. Fire and emergency preparedness training, and first aid training are conducted at all operational sites.

Work zone air quality monitoring program is in place and the parameters monitored correspond to critical pollutants that can be expected/emitted from the process operations. Accordingly, pollutant parameters such as particulate matter (PM), acid mist as sulfuric acid, hydrocarbons, Lead, and Tin are monitored against the relevant OSHA/Indian Factory regulations/Standards. Employees exposed to lead especially soldering operators are subjected to annual medical surveillance/check-up and the lead levels in blood (µg/dL or microgram/dL of blood) is monitored against environmental/occupational exposure levels (OEL) prescribed by OSHA (40 µg/dL) and ACGIH Biological Exposure Indices (BEI) for blood lead at 30 µg/dL. Sample reports shared by the Company indicates compliance to OELs of OSHA and ACGIH BEI values for Lead. In the workplace, based on the indoor work zone environmental quality and noise level monitoring results, appropriate PPE is enforced through stringent monitoring, training, and awareness building among workers.

Supply chain: Napino has established supply chain management systems that are complying to PS2 requirements. The company has published and enforces its supplier code of conduct that meets PS requirements on prohibition of child and forced labor practices and maintaining occupational health & safety management systems. Company has established a comprehensive supplier screening, selection, and performance audit check list. There are about 60-65 mechanical vendors (85% of them are local) and 40 electrical and electronics part suppliers (80% is overseas).                                        

Napino operations consumes resources such as electricity, diesel, and water (only for domestic needs). Napino has been implementing continual improvement projects at every plant aimed towards resource efficiency and energy conservation that are technically and financially feasible and cost effective. Resource efficiency project key performance indicators (KPI) have been formulated, monitored, and reviewed for assessing the efficacy of continual improvement projects. Based on last 3 years consumption, the annual average resource consumption covering all plants is around: 7.8 million units (kWH) of electricity; 62 kilo liters (KL) of diesel; 57,333 cubic meter of water; and 23,718 cubic meter of wastewater.

Neither the current company operations or the IFC funded project is expected to or currently produce more than 25,000 tonnes of (Scope 1 and Scope 2 emissions) CO2-equivalent annually. Nevertheless, Napino has started to collate all required data for estimating Scope 1 and Scope 2 GHG emissions due to its business operations and will publish the independently verified GHG emission report by FY24. As part of GHG emission reduction strategies, Napino has started renewable energy sourcing and has installed small rooftop solar plants.

Napino’s production operations across all the Plants do not require water in any of the processes as the nature of production is largely electrical and electronic assembling of product parts. Water consumption is mainly for domestic purposes and is sourced through piped supply provided by Industrial authorities or groundwater abstraction tube wells with appropriate permission. Rainwater harvesting (RWH) facilities have been created across all the facility roofs.

In electronic part manufacturing and assembling printed circuit boards using surface mount technology (SMT), there are no major air pollution sources. At Napino facilities, the air emissions from oven and wave soldering machines are controlled through extraction and filtration systems and the filtered air is discharged into ambient air using appropriately designed dispersion stacks. For minor desk based manual soldering operations, there are small, table top, lead smoke extraction (sucking hoods) and air filters to treat them onsite at workplace itself.

As part of the ESMS, Napino has established monitoring program for air emission in line with permit conditions wherein process and DG set stack emissions and ambient air quality are monitored annually using independent, accredited, 3rd party labs and quarterly (only DG set emissions) using internal resources. Monitoring of air emissions includes parameters such as PM, SOx, NOx and carbon monoxide (CO) while in the stack attached to lead soldering machine, the PM, SOx, Lead and Cadmium. Review of the sample air emission monitoring reports indicate compliance to permit conditions, India’s National ambient air quality standards, occupational exposure levels recommended by OSHA and factory regulations. There are no noise generating equipment’s or process in Napino Plants. Napino monitors ambient noise levels internally on a quarterly frequency and using independent 3rd party labs on an annual frequency.

As only domestic sewage is generated from Company operations, almost all Napino Plants have sewage treatment plants (STPs) designed and installed with zero liquid discharge (ZLD) treatment scheme while few Plants discharge sewage into industrial estate sewerage system. The treated wastewater is reused for gardening and flushing purposes. Wastewater quality monitoring program is in place wherein 30 water pollutant parameters are monitored annually using independent, accredited, 3rd party lab as per permit conditions. Review of the sample wastewater quality monitoring reports indicate compliance to permit conditions, National regulations and WBG General EHS Guideline specified wastewater discharge standards (Refer to Table 1.3.1 Indicative Values for Treated Sanitary Sewage Discharges) specified in WBG General Environmental, Health, and Safety (EHS) Guidelines, April 2007. 

Napino operations generates e-wastes, hazardous and non-hazardous wastes which are managed as per permit conditions. Napino has entered into legal agreement with authorized waste management companies for waste management and disposal across all the Plants. Napino has established an operational procedure pertaining to management, control, and minimization of use of hazardous substances, wastes and chemicals. Napino Plants handle limited quantities of hazardous materials such as high-speed diesel and liquid nitrogen which are transported, stored and handled as per national regulations and permit conditions. Emergency plan for handling of hazardous chemicals has been developed to minimize the severity of damage to human health and the environment in the event of an unexpected hazardous materials release. 

Napino’s manufacturing Plants are located within established Industrial zones. Napino has established an infrastructure and equipment testing regime in compliance to local factory regulations. A testing inventory is maintained for various industrial equipment along with a testing schedule and the most recent copies of independent certification at each plant are available. All high-pressure vessels, lifting equipment, tools and tackles are tested half yearly by competent authority as per govt norms. Due to the less hazardous nature of production operations and the processes involved, the community health and safety risks are assessed to be low.

All the manufacturing plants have adequate access roads and are typically located close to the highways/wide roads with basic infrastructure available for attending to emergency scenarios. Each plant has dedicated and adequate parking space for transport fleet operators to park their vehicles inside the plant premises.  The company does not store any hazardous material on site in such large quantities that could cause neighborhood community health & safety risks.

Unarmed security personnel have been deployed across all manufacturing plants through licensed, third party, security vendors. There has been no security related incidents or events reported in the last 3 years. The Company briefs security personnel about policies on prevention of child labour to be verified among contractor/transport fleet workers at gate and provides training on basic safety, first-aid, fire safety and emergency response. The security team at each Plant is led by an on-roll, Company Security Officer working in the Industrial Relations Department. However, as part of IFC investment and as per ESAP#3, the Company will review and strengthen its security management plan in line with para 12 of IFC PS 4. This plan will be guided by the principles of proportionality and good international practice and include procedures to: assess risks posed by  security arrangements; ensure hiring, rules of conduct, training, equipping, and monitoring of security personnel ; provide for background verification on security personnel's individual character with no incidents of past abuses; train security personnel  to exhibit appropriate conduct towards plant workers and neighboring communities; train security personnel  to manage mock sessions of labor unrest and protests; and to receive and resolve grievances about the security arrangements and acts of security personnel. 

 Napino's engagement with the neighborhood communities is limited as all of the facilities are located inside designated industrial areas. The Industrial Relations (IR) department at Corporate and Facility level is responsible for public affairs, and regular engagement with the labour department and other regulatory authorities. Napino engages with the regulators on compliances as well as meeting the local requirements. Company’ engagement also includes partnership with various foundations, associations, etc. Redressal of external grievances is managed as per external grievance management policy promulgated and published on in Jan 2023 by Corporate HR department. The policy objectives includes providing avenues and procedures for stakeholders to voice their concerns and achieve a fair, consistent and prompt handling of grievances, if any. Napino is working with independent consultants to develop the first sustainability report issue in line with the GRI guidelines.

As part of ESAP #4, Napino will develop a stakeholder engagement plan (SEP), to apply to the entire company, including (i) stakeholder identification, analysis, and planning, (ii) disclosure and dissemination of information, (iii) updating the community grievance mechanism, and (iv) ongoing reporting to affected communities and stakeholders, in a manner aligned with IFC PS1 requirements. Napino has an active Corporate Social responsibility (CSR) program aligned to its sustainability commitments.