PS 1 – Assessment and Management of Environmental and Social Risks and Impacts

Identification of Risks and Impacts:

Desano China:

Desano commissions qualified third-party technical institutes to undertake environmental impact assessments (EIA) for the Zhangshu Phase 1 facility in accordance with national requirements. In addition to preparation of EIA, as per <Hazardous Chemicals Project Safety Monitoring and Management Regulation No. 45, January 2012 and revision No. 73, 2015> applicable to API production facilities in China, in 2020, the Company commissioned an independent third-party safety auditor to undertake a Project Safety Factor Evaluation and an Equipment Safety Evaluation of the Zhangshu Phase 1 ARV API Facility, with reports produced in January 2021. These reports included detailed facility hazard point identification and risk rating result matrices, which list risk points and all chemicals stored and utilized on-site in each sub-production area and required mitigations. This exercise is updated annually to ensure risk identification and rating capture facility setup and work process changes.

The Zhangshu Phase 2 ARV API facility is in early planning. As per ESAP #1-PS1, the Company will commission an Environmental and Social Impact Assessment (ESIA) for the expansion of Zhangshu ARV API facility ( Phase 2), in accordance with national law, the requirements of IFC Performance Standards (2012), World Bank Group (WBG) General Environmental Health and Safety (EHS) Guidelines (2007), WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007), WBG EHS Guidelines for Waste Management Facilities (2007) and relevant Company SOPs. The Company will also prepare a site-specific construction environmental and social management plan (CESMP) as part of the ESIA, which will specify ongoing risk management and monitoring activities to be carried out.

Desano Harohalli (India):

Desano Harohalli 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. The Company has prepared the EIA in accordance with national law and received environmental clearance from the Karnataka State Level Impact Assessment Authority (SEIAA) in August 2020. Due to gaps identified, the Company will augment the EIA in accordance with requirements of IFC PS (2012), WBG General EHS Guidelines (2007), WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007), and WBG EHS Guidelines for Waste Management Facilities (2007) (ESAP #2-PS1).

Policy and Management Programs:

Desano China:

Desano has established a corporate environmental, health, and safety (EHS) function, EHS policy, Standard Operating Procedures (SOPs) and Manuals (e.g. Operational manual on facility central fire control panel; SOPs on occupational health management); and monitoring procedures are in place. The E&S management system is commensurate with facility operational E&S risks and impacts and consistent with the objectives of IFC PSs. The Zhangshu Phase 1 facility has established EHS policy, SOPs, and manuals that are compliant with national law and materially consistent with the requirements of IFC PSs.

Desano Harohalli:

The Desano Harohalli facility has been designed in accordance with U.S. Food and Drug Administration (FDA), World Health Organization, E.U. GMP, and India FDA guideline requirements in terms of product quality and control. Desano India adopted a safety, health, and environment (SHE) policy in April 2023.  Based on the SHE policy, the Company has established EHS/OHS key performance indicators (KPI), classified as leading and lagging indicators. From the KPIs, various EHS SOPs have been developed, which are grouped under several main categories: (1) Work permitting related; (2) Hazardous waste management; (3) First aid treatment; (4) OHS and Near Miss Incident Reporting and Investigation; (5) EHS and OHS Organizational Setup; and (6) Fire Fighting. As part of its overall ongoing E&S management system (ESMS) development efforts, Desano Harohalli will augment its list of SOPs in accordance with the requirements of IFC PSs (2012), WBG General EHS Guidelines (2007), WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007), and WBG EHS Guidelines for Waste Management Facilities (2007) (refer to ESAP #3-PS1). These will include, at a minimum, SOPs and management plans for stakeholder engagement and grievance mechanism, security management, internal and third-party audit, and contractor/sub-contractor management.

Organizational Capacity and Training:

Desano China:

The EHS/OHS (Occupational Health & Safety) leadership committee at the Zhangshu facility is responsible for high-level EHS/OHS decision-making, including budget approvals. The EHS/OHS department reports to the head of the facility, comprising three staff members, including the head of the department, to whom the OHS manager and EHS manager report. Facility EHS/OHS departments compile and report monthly EHS/OHS performance data to heads of the facility. Facility-level KPIs cascade down to KPIs for each role and department, with KPI results connected to performance reviews of staff and departments. Staff with EHS/OHS responsibilities are regularly trained on technical and E&S risk management topics.

Desano Harohalli:

At the senior management level, Desano Harohalli has a Safety Committee responsible for high-level EHS/OHS decision making, including budget decisions. EHS and Engineering and Projects are Reporting to this Committee, the two key departments at Desano Harohalli with E&S responsibilities in day-to-day operations. Currently, the EHS department is headed up by an Assistant General Manager of the facility, who has 30 years of pharmaceutical industry and EHS/OHS experience and is supported by an EHS officer. The Harohalli facility has prepared an expanded EHS/OHS organizational chart in anticipation of expansion. Based on this, it will expand its EHS/OHS capacities by recruiting, besides others already included in the expanded organizational chart, additional EHS/OHS support staff and a dedicated Life and Fire Safety Officer, who will possess adequate qualification and experience in the API production industry in on-site storage and use of hazardous chemicals (ESAP #3-PS1).

Monitoring and Reporting:

Desano China:

All Company facilities conduct annual EHS/OHS, waste emissions and management, and resource efficiency monitoring as per environmental management plans and environmental permitting requirements. Summary EHS/OHS performance data is prepared by facility EHS/OHS departments and reported to the heads of facility.

Desano Harohalli:

The regulatory EIA for the Desano Harohalli facility has defined environmental monitoring requirements and parameters. To date, the Company has commissioned an external test laboratory to undertake early-stage air emission and wastewater discharge monitoring as per the national KSPCB standards and ambient air quality monitoring as per the national NAAQ standards. As part of ESAP #3-PS1 and its overall facility-level ESMS update, Desano Harohalli will develop a site-specific EHS/OHS monitoring plan.

Emergency Preparedness and Response (EPR):

Desano China:

The Zhangshu facility’s design, construction, and post-construction verification audits comply with the national and local fire safety permitting requirements. The Zhangshu facility has documented EPR plans based on facility hazard point analysis and risk rating results, which list likely emergency scenarios that may arise at that facility (e.g., accidental leakage of HAZMAT, flooding), with clearly defined roles and responsibilities. EPR drills are conducted semi-annually with full staff participation and coordination with local fire brigades.

Desano Harohalli:

The Harohalli facility has documented an on-site emergency plan (OEP) in accordance with national law. This plan has identified processes and facilities where accidents and emergency situations are more likely to occur, leading to EHS and OHS impacts. As part of its ESMS development (ESAP #3-PS1), the Company will augment its OEP in accordance with section 3.7 of the WBG General EHS Guidelines (2007).

PS 2 – Labor and Working Conditions

Working Conditions, Human Resources Policies, and Management of Worker Relationships:

Desano China:

Currently, the Company has a headcount of about 4,200 employees in China – all direct full-time workers – of whom about 82% are in non-managerial positions. The male-to-female ratio is 66%:34%. The Zhangshu ARV API facility has about 310 direct workers, expected to double after facility expansion. The Company has corporate-level human resource (HR) policies and procedures that comply with national law and are consistent with IFC PS2 requirements. Hiring and employment practices recognize merit-based, non-discrimination, equal opportunity, and anti-harassment principles described in the Company’s employment code of conduct and employee manual. Depending on location and proximity to local housing, certain Company facilities provide non-local staff with on-site staff housing, which Desano inspects to ensure that it meets national law requirements and consistency with EBRD/IFC guidance: Workers’ accommodation processes and standards (2009).

Desano Harohalli:

The Harohalli facility employs 122 workers including 62 direct workers (60 male and 2 female) and 60 contracted workers (40 male and 20 female) through third parties. The number of third-party employees is projected to be up to 230 persons during peak construction period, while directly hired staff will increase to 130 during the operational phase. HR management is guided by a set of policies, rules, and code of conduct. These include policies on leave and attendance, medical checkups, performance management and incentives, and other HR operational aspects. Employees are informed about these policies during induction and can access them anytime during employment. The Company also has policies on equal opportunity, non-discrimination, prevention of sexual harassment (POSH), grievance handling, whistleblower, freedom of association, and prohibition of child labor and forced labor. The nondiscrimination policy also considers requirements as stipulated under the national ‘Rights of Persons with Disabilities, Rules 2017’ in the recruitment procedures adopted by the company.

The Company is developing policies on overtime work and Company standards on worker accommodation (including accommodation at construction worker camps). It will ensure consistency with national labor regulations and IFC PS2 requirements. The Harohalli facility will consolidate all its HR-related policies into an HR manual aligned with national labor regulations and IFC PS2 requirements. It will ensure that this is made accessible to all staff at induction and during employment, in hard or soft copy form (Refer to ESAP #4-PS2).

Workers’ Organizations and Grievance Mechanisms:

Desano China:

Most staff members are members of the labor union at the company, and no restrictions are placed on freedom of association. The labor union functions as a channel to collect suggestions to improve the overall working environment and as one of several employee grievance redress channels. Other anonymous and non-anonymous channels are through the HR department, the company WeChat (social media app) account, drop boxes, and the CEO and head of facility email addresses publicized to all staff. Grievance logs are maintained by the HR department. The Corporate HR department conducts employee interviews regularly to understand staff views, and the Company has procedures in place describing processes involved in filing and handling worker grievances.

Desano Harohalli:

Given the relatively early stage of the Harohalli Project, no workers’ organization or labor union is in place. There is no evidence that the Company is restricting workers’ freedom of association and rights to collective bargaining, and the Company confirms its commitment to complying with relevant laws of India related to worker unions/organizations. The Company has formal complaint procedures under its whistle-blower policy and prevention of sexual harassment policy. The whistle-blower policy provides for protection from retaliation and reprisals. Employees can register complaints by email or in person with concerned senior staff or the HR division. The Company will, as part of its HR Policy and Procedures Manual (ESAP #4-PS2), establish formal anonymous and non-anonymous employee grievance redress mechanisms in line with the requirements of IFC PS2, The Company will also ensure that its worker GRMs will be made accessible to workers employed by contractors if in case contractors do not have functional GRMs in place.

Protecting the Workforce:

Desano China:

There is no evidence of child or forced labor in the Company’s workforce. The company has clear hiring procedures and requirements regarding the minimum age for employment. As per China’s labor laws, maximum working and overtime hours are observed. Desano requires its EPC construction contractors to abide by all aspects of the national laws and the Company’s HR and OHS requirements in managing their workforces, with compliance verified through random and regular site inspections. All employees involved in operations or duty stations (e.g., electricians) considered to entail higher OHS risks are required to present valid technical qualifications (e.g., licensed electrician qualifications) and to attend ongoing OHS-related training.

Desano Harohalli:

There is no evidence of child or forced labor practices at the Harohalli facility. The Company has policies in place on the prohibition of child labor and forced labor at its facilities or outside of it, directly by the Company or the contractors. The Company will, as part of its HR Policy and Procedures Manual development (refer to ESAP #4-PS2), review, update, and implement its policies and procedures relating to the prevention of child labor and forced labor, consistent with the national law and the requirements of and IFC PS2.

Occupational Health and Safety (OHS):

Desano China:

Based on statistics in the last 12 months, the lost time injury frequency rate (LTIFR – defined as the number of work injuries per 200,000 hours worked) of Desano China operations and the Desano Zhangshu ARV API Phase 1 facility has been calculated to be 0.3 and 0.27 respectively, which are substantially below the 2019 pharmaceutical and medicine manufacturing industry benchmark as per U.S. Bureau of Labor Statistics. The Company’s OHS management system is detailed in its EHS policy and SOPs. The following have been undertaken at the Zhangshu ARV API facility concerning OHS risk identification, prevention, mitigation, staff health checkup, and indoor air quality monitoring:

(1) As part of the Zhangshu facility’s January 2021 Safety Factor Evaluation, occupational hazards have been analyzed, categorized, and documented in detail. For example, hazards from potential worker exposure to chemicals have been identified and categorized per national regulation GBZ230-2010.

(2) The Company prepared an OHS risk identification and rating report based on the LEC methodology, which analyzed and ranked the likelihood (L), exposure (E), and consequence (C) of each identified OHS hazard, leading to required preventative and mitigative actions for each hazard at each workstation.

(3) As per Clauses 17-18 of the National Occupational Illness Prevention Law, the Zhangshu facility prepared OHS risk factor control results pre-evaluation and evaluation reports, which identified all OHS hazards workers would be exposed to at the facility, the resulting potential adverse health consequences on workers, and required prevention and mitigation actions (including detailed lists of required personal protective equipment).

(4) Based on the above results, worker pre-assignment, and ongoing health checkups have been designed to address specific health hazards that workers would be exposed to and are consistent with requirements of WBG EHS Guideline for Pharmaceutical and Biotechnology Manufacturing (2007) on occupational health monitoring.

Desano Harohalli:

There have been zero cases of lost time accidents and work-related fatalities at the Harohalli facility in the past 12 months. An OHS hazard identification and ranking exercise was undertaken at the facility, with hazard points identified and rated at the workstation level, leading to point-specific mitigation and EPR measures. These results form the basis of day-to-day OHS risk management actions required of all workers. The Company has an SOP in place for staff medical checkups and has shared sample anonymous staff health checkup reports, with health checkup content being refined to reflect task- and workstation-specific risk exposures as the facility progresses toward commercial operation. Daily safety observations (including unsafe work behaviors and non-compliances) are recorded by facility OHS officers, and the Company implements a work permit application system, with permits issued by authorized personnel (e.g. for staff to enter confined spaces) only after required safety actions and precautions have been undertaken. During daily toolbox and monthly staff meetings, OHS requirements are re-iterated to all operational staff. OHS training is provided to construction contractor teams and their staff.

As part of ESAP #5-PS2, the Harohalli facility will undertake the following to ensure that all relevant OHS hazards in its ARV API production lines and related operational activities are fully included: (1) update and refine the abovementioned OHS hazard identification and ranking results; (2) update its OHS related SOPs and work permitting documents; (3) develop a training program based on classroom modules and risk-scenario-simulated training sessions; (4) develop a detailed OHS risk monitoring matrix and associated daily OHS site inspection checklists; (5) [related to (1)] update the full list of occupational exposure limits (OEL), and adjust the facility’s worker health monitoring and checkup programs, in such a way that health monitoring and performance reporting will be able to pinpoint exact hazards that each worker will be exposed to base on their workstations and nature of work. The Desano Harohalli will augment its facility OHS management system in accordance with the requirements of IFC PSs, WBG General EHS Guidelines (2007), and WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007).

PS 3 – Resource Efficiency and Pollution Prevention

Energy and Water Consumption and Efficiencies and Greenhouse Gas (GHG) Emissions:

Desano China:

The Zhangshu ARV API Phase 1 facility procures electricity, steam, and natural gas (to operate the on-site incinerator – see air emissions section below) from local utility companies to meet its operational needs. It only operates on-site boilers to generate steam as a backup. Key production equipment that utilizes steam and electricity on-site are autoclaves, reciprocating and root pumps, automatic centrifuges, production area ventilators, and raw material dryers. For the 12 months of 2023, the Zhangshu ARV API Phase 1 facility consumed about 15,350 MWh of grid-purchased electricity, about 41,000 tons of purchased steam (from the industrial zone utility company utilizing coal as fuel to generate steam), and about 140,000 cubic meters of water. Once operational GHG data from the Zhangshu ARV API Phase 2 facility (calculated based on an internationally recognized methodology) becomes available, the Company will share such data and resulting GHG emission quantification results in Annual Monitoring Reports (AMR) to be submitted to IFC.

Desano Harohalli:

The plant will procure electricity from a national power grid and will also have boilers installed on site using diesel as fuel, expecting to utilize about 2,8 million liters annually to generate the steam needed for production. Once in operation, the facility is expected to consume about 6,570 MWh of electricity annually. The IBR boilers will be retrofitted with an economizer and air preheaters for heat recovery of flue gases, with expected energy savings of 25,500 kWh per annum. Backup generator sets using diesel as fuel will be kept as stand-by fuel in case of electricity supply disruptions. Water will be sourced from the Karnataka Industrial Areas Development Board (KIADB) and treated for utilization in the plant. The facility is expected to consume 1.7 million liters of water annually. The Company expects to recover about 3,574 m3/year of water from the AHU Chilled water Condensate water system built on site. The Company is required, as per the environmental clearance issued by the authorities, to harvest rainwater and has constructed an 800,000 Liters capacity rainwater harvesting and recharge pond system, which it will utilize for dust suppression, premise greenery development, and washing/cleaning, etc. Once operational GHG data from the Harohalli facility (based on an internationally recognized methodology) becomes available, the Company will share data and GHG emission quantification results in AMRs to be submitted to IFC.

Pollution Prevention (Energy and Production Process Air Emissions):

Desano China:

The process air emission at the Zhangshu facility will primarily contain volatile organic compounds (VOC) and acid gases. The expansion of the facility will include construction and operation of a collection network for all production and process-related air emissions (i.e., VOCs) and an onsite industrial incinerator. The process gases will be pumped to the on-site industrial incinerator via the network of enclosed pipes.  The incinerator's design and operational air emission standards will comply with national regulatory and WBG EHS Guidelines for Waste Management Facilities (2007) air emission limits. The natural-gas-fired incinerator will be operated continuously to ensure an operational temperature of 900 degrees Celsius to minimize dioxin generation as an air pollutant from incineration. The incinerator will have a continuous air emission monitoring system connected to the local Environmental Protection Bureau (EPB). As part of the incinerator pre-commissioning testing, the Company will monitor the incinerator's air emissions to confirm compliance with national air emission standards (GB18484-2020 for parameters: TSS; CO; NOx; SO2; HF; HCl; Hg; Cd; Pb; total metals)  and WBG EHS Guidelines for Waste Management Facilities air emission standards (which as per Tables 1 and 2 specifies a dioxin emission limit of 0.1 ng TEQ/m3 based on 6-8 hour average sampling time: https://www.ifc.org/content/dam/ifc/doc/2000/2007-waste-management-facilities-ehs-guidelines-en.pdf) (Refer to ESAP #6-PS3).

Desano Harohalli:

The facility design will not include the installation of a centralized on-site incinerator. The main process-related air emission sources at the facility will be the API block and the solvent storage areas, where various gases, e.g., volatile organic compounds (VOCs), NOX, CO2, SO2, acidic mists, aromatic compounds, and malodor, etc., will be released due to the chemical reactions and extractions during the manufacturing phase. Underground solvent storage tanks will have breather valves to minimize fugitive emissions. The Company will provide evidence that underground solvent storage tanks have auto-leakage detectors installed between the first and secondary containment sections (refer to ESAP #7-PS3).

According to the plant design, all reactors will have reflux condensers, vent condensers, and sub-coolers to control fugitive emissions. According to the facility design, energy-related air emission limits (NOx, PM, SO2) will comply with national air emission standards and WBG General EHS Guidelines (2007) air emission limits (Table 1.12).  As per ESAP #7-PS3, once the Project EIA has been augmented to a GIIP version and before the start of facility operations, the Company will provide monitoring data from a qualified independent third party to confirm that energy and production related point source air emissions (for parameters: Volatile Organic Compounds; total organic carbon; active ingredient (each); class A and B compounds; benzene, vinyl chloride, and dichloroethane (each); bromides as HBr; chlorides as HCl; ammonia; arsenic; and ethylene oxide) and fence-line ambient air quality monitoring results comply with national ambient air quality and air emission standards and WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007). If monitoring results indicate non-compliance, the Company will augment pollution abatement measures in line with GIIP.

Pollution Prevention (Wastewater and Effluent):

Desano China:

The Zhangshu facility has separate rainwater and process wastewater collection and discharge systems. The on-site wastewater treatment facility (WWTP) has a maximum daily throughput of 500 m3/d. It utilizes several treatment stages: membrane bioreactors, multi-stage sedimentation, anoxic denitrification tanks, and aerobic and anaerobic treatment. Recent monitoring results of effluent quality at the facility’s discharge points into municipal wastewater collection system (for parameters: COD, BOD5, suspended solids, total phosphorous, total nitrogen, chlorobenzene, toluene/VOC)  indicate compliance with national sectoral regulatory limits (wastewater quality standard of GB18918-2002 discharge standard of pollutants for municipal wastewater treatment plants) and with effluents levels (Table 2) of  WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007). Odors arising at on-site WWTP are treated using a combination of spraying towers and ultraviolet light disintegration technology. Sludge generated from the on-site WWTP is classified as hazardous waste, regularly collected by licensed third-party companies and taken to specialized disposal sites per regulatory requirements.

Desano Harohalli:

Process wastewater will be treated at the on -site WWTP using Sequencing batch reactors (SBR) technology.  The design and efficiency of the WWTP will meet national standards and effluent levels (Table 2) of the WBG EHS Guideline limits for Pharmaceutical and Biotechnology Manufacturing (2007). Desano Harohalli plans to reuse treated effluent on site within the facility premises for gardening and greenbelt development. Sludge and salts generated from the WWTP will be handed over to Karnataka State Pollution Control Board (KSPCB) authorized vendors/TSDF (Treatment Storage Disposal facility) facility. Domestic sewage will be treated in the same WWTP consisting of biological, chemical, and physical treatment stages, and treated water shall be reused. Facility design treated wastewater limits (for parameters: pH, O&G, TSS, COD, BOD, total nitrogen) are consistent with applicable national and WBG EHS Guideline standards.

Pollution Prevention (Hazardous and Non-hazardous Solid and Wastes):

Desano China:

At the Zhangshu facility, non-hazardous wastes and hazardous wastes are stored in separate access-controlled locations, as per requirements specified in applicable national standards for each of these three classes of materials and wastes (e.g., in the national standard for hazardous waste management pollution control standard GB18597-2001). On-site storage locations for hazardous wastes visited by IFC are designed with anti-explosion and anti-static features, temperature-controlled, and structurally reinforced to minimize potential leakage to the ambient. All hazardous materials and wastes have material safety data sheets (MSDS) displayed clearly, and the maximum amount of each material and waste that can be stored on-site, as well as the maximum on-site storage duration, is stipulated as part of the facility’s environmental permitting conditions. Hazardous material and waste transfer and safe handling to and from the Company facilities are managed by licensed third parties, with detailed audit trails maintained. As per regulatory requirements, Company EHS staff is required to regularly accompany licensed third parties to disposal locations to verify that audit trail requirements have been met.

Desano Harohalli:

The operations of Desano Harohalli will generate hazardous wastes such as process residue, distillation residue, spent carbon, spent catalyst, spent organic solvent, WWTP sludge & sludge from the stack wet scrubber and waste oil from backup generator sets which will be stored in a secured manner & handed over to KSPCB authorized vendors/TSDF, as per Company SOPs. Non-hazardous wastes (containers, packing materials, discarded liners/bottles/barrels etc.) will be decontaminated before disposing to authorized buyers. The Company will develop a waste management plan and monitoring program (as part of its ESMS update that would comply with permit conditions, national law, WBG General EHS Guidelines (2007), WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007), and WBG EHS Guidelines Waste Management Facilities (2007) (refer to ESAP#3-PS1).

Pollution Prevention (Hazardous Materials Management):

Desano China:

Hazardous material management at Desano China facilities is subject to risk assessment and permitting requirements regarding storage space conditions and reinforcement, delivery and handling by government-licensed third parties, audit trails, display of MSDSs, and on-site storage quantities and durations.

Desano Harohalli:

Harohalli operations will involve use, storage, and handling of diesel, natural gas, gas cylinders, paints, and other hazardous materials. Quantitative risk assessment (QRA) and a Hazard and Operability (HAZOP) study have been undertaken as part of regulatory EIA. As part of ESAP#3-PS1 and as part of the Company’s overall ESMS refinement, Desano Harohalli will update the existing QRA and HAZOP to be consistent with GIIP, and will develop a comprehensive hazardous materials management plan, as part of the facility ESMS, that would comply with permit conditions, national law, IFC PSs, and the following WBG General EHS Guidelines (2007): WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007), and WBG EHS Guidelines Waste Management Facilities (2007) (refer to ESAP#3-PS1).

PS 4 – Community Health, Safety and Security

Desano China:

The Zhangshu ARV API facility is positioned at least 750m from the nearest local communities within the established industrial zone, as per regulatory requirements on minimum setbacks for API facilities (considering dispersion radius in case of chemical leakage and other potential emergency scenarios). Given the setback, dust, noise, and odors from the Project facilities during the construction phase are not expected to disturb residents. Transport of hazardous and medical raw materials and finished products to and from the Zhangshu Phase 1 facility during construction and operational phases are subject to national requirements on safe transport and accidental leakage prevention (e.g. transport vehicles need to be retrofitted with sealed stowage compartments as per their design and are regularly inspected by the national authorities to ensure proper functionality). The Company will develop a transportation and traffic road safety management plan (refer to ESAP #10-PS4).

Desano Harohalli:

The Harohalli facility site is also situated within an industrial area at 1km away from the nearest resident area.  The nearest village is Chujalegowdanadoddi located at 1km from the plant towards the southeast direction. The facility buildings are designed, constructed, and will be operated and maintained as per national building and fire safety codes. The Company has undertaken QRA studies to determine hazardous chemicals related risks to local sensitive receptors as part of its regulatory EIA study. The Company will commission qualified independent third-party consultants to conduct regular fence-line ambient air quality monitoring as per local regulations and WBG EHS General Guidelines requirements and will develop and implement an infrastructure and equipment safety related testing program and asset integrity management plan that would comply with local factory regulations and applicable WBG General EHS Guidelines. Process equipment will be inspected and maintained based on Original Equipment Manufacturer (OEM) requirements (ref. ESAP#3-PS1).

Security personnel: At Zhangshu and Harohalli ARV API facilities, the Company employs unarmed security guards to secure its premises, and there have been no known security or fire incidents to date.

Hazardous Chemicals Management:

Desano China:

The Zhangshu ARV API facility will store and use about 240 hazardous chemicals on site. Key production processes and chemical reactions with the potential for significant chemical related safety risks are chlorination, amination, oxidation, hydrogenation, fluorination, diazotization, alkylation, and metal reaction. As per regulatory requirements applicable to API production:

(1) All production processes, including utilities and chemical storage buildings, are required to be equipped with safety instrumented systems (SIS) as a key part of the overall facility critical process safety systems, with the SIS serving as the last resort shutdown system to avoid catastrophic outcomes under emergency scenarios. The SIS involves automated detection meters and equipment (broadly comprising the following types: temperature gauges, pressure gauges, flow meters, liquid level gauges; and regulating valves) installed in all buildings connected to a software system at the facility's central control room to enable real-time monitoring, automation, and control of operational and safety conditions of all parts of the facility. The facility SIS system underwent a Safety Integrity Level (SIL) assessment conducted by a qualified third-party functional safety engineering consultant, per the IEC61511-3 standard and the Layers of Protection Analysis (LOPA) assessment methodology. A SIL assessment report was finalized in May 2021 as an outcome.

(2) As per applicable national regulations and guidelines (e.g. National Safety Administration Guideline on Reinforcing Chemicals Industry Process Safety Management (2013) Directive No. 88), a Hazard and Operability (HAZOP) study was undertaken to identify potential process safety and operability issues. This was undertaken by the same third-party functional safety engineering consultant that conducted the SIL assessment, leading to a final HAZOP report dated May 2021, which established a total of 208 potential hazard incident scenarios with 104 resulting engineering and management mitigations required to be undertaken by Desano to achieve as-low-as-reasonably-practicable risk management outcomes.

The SIL and HAZOP reports and the Zhangshu facility’s Safety Factor and Equipment Safety Evaluation Reports were prepared in January and May 2021. On this basis, the Zhangshu facility EHS/OHS and operational teams have developed detailed chemical process safety SOPs, which all facility staff are required to follow.

Desano Harohalli:

The Harohalli facility has received the PESO (Petroleum and Explosives Safety Organization) license as per the Explosives Act 1884 and Petroleum Act 1934 of India. Various hazardous materials like chemicals, solvents, APIs, diesel, natural gas, and gas cylinders, paint, etc., and hazardous wastes shall be generated during facility operations. The Company has undertaken QRA and HAZOP studies to determine the risks as part of the regulatory EIA study and has prepared a site-level ERP, which shall be updated before the start of operations. As part of ESAP #3-PS1 and the facility’s overall ESMS update, the Company will identify all hazardous materials during the operation period that may be released by the Project and adopt appropriate prevention systems and a hazardous material management plan.

As per ESAP #8-PS4, for both the Zhangshu and Harohalli ARV API Project facilities, the Company will; (a) update and submit respective safety studies i.e., Quantitative Risk Assessment (QRA), Hazard and Operability (HAZOP), Layer of Protection Analysis (LOPA) and Safety Integrity Level (SIL) reports which will need to be completed to GIIP standards, (b) complete a Dust Hazard Analysis (DHA) per the requirements of U.S. National Fire Protection Association (NFPA) 652 Standard on the Fundamentals of Combustible Dust), and (c) provide evidence that recommendations from the safety assessments and hazard studies have been fully implemented across all Project facilities and sites.

Life & Fire Safety (L&FS):

Desano China:

There have been no L&FS incidents at the Zhangshu Phase 1 facility since the commencement of operation. L&FS, process safety, anti-explosion, and chemical control are all integral parts of the Zhangshu facility’s overall safety controls and risk containment management. All major buildings, areas, and sub-areas within buildings at the Zhangshu facility have temperature and smoke detectors installed at ceilings and an automatic sprinkler system installed, which are connected to the facility’s central fire control panel room. The central room is staffed 24/7 to monitor all parts of the facility. Any potential fire or smoke event can be immediately traced to a sub-area. It will trigger control and mitigation actions defined in the Company’s EPR and fire safety SOPs. The fire control room is staffed with firefighters trained by the local fire brigade. Dedicated fire-fighting water is available from on-site reservoirs and from the municipal fire-fighting water supply connected to the premises by underground water pipes. All production buildings are designed with smoke ventilation ducts powered by electric pumps. These pumps are triggered to evacuate smoke from within building spaces whenever the smoke or temperature level has been detected to exceed a preset level. EPR drills are carried out quarterly with full staff participation to prepare for potential emergency scenarios, including fire and smoke events. The Zhangshu Phase 2 facility will require national building and fire safety codes to go through a detailed pre-construction fire safety design review and post-construction verification audit by local fire department inspectors before notice-to-proceed permits are issued for construction and subsequent operations to commence.

Desano Harohalli:

The Harohalli facility, as per national permitting requirements, has received the Fire NOC (No Objection Certificate) issued by the municipal Fire Department Authority. There have been no L&FS incidents at the Desano Harohalli facility, which is currently testing equipment and is in the ongoing construction stage. The L&FS design of the facility will conform to requirements of National Building Code 2016 Part 04 (Fire Protection) and relevant Bureau of Indian Standards (BIS) L&FS codes (e.g. Design & Installation of Fixed Automatic Sprinkler Fire Extinguishing Systems I.S:15105:2002). The facility design includes an automatic sprinkler system and automatically operated fire hydrant system connected through a software system to the central fire control panel of the facility and will have dedicated fire-fighting water reservoirs with a design capacity for 4 hours of firefighting before the local fire brigade from the industrial park arrives on site. Trained L&FS personnel will be stationed on-site, and all facility staff will be trained on L&FS knowledge as part of regular L&FS and EPR drills. All fire-fighting equipment (including portable fire extinguishers) will be regularly maintained and inspected.

Before commencing Harohalli facility operations, the Company will engage a suitably qualified L&FS professional to conduct a post-construction review of constructed life and fire safety systems & infrastructure, with a goal of: (1) certifying that construction of these systems has indeed met all applicable national building and fire code requirements, and; (2) that the facility has robust L&FS procedures and practices in place, and that all operational staff are adequately trained, to ensure that potential L&FS risks at the facility are adequately managed and monitored at all times during facility operations. The L&FS infrastructure and management systems through the Project life cycle will be managed by a qualified and experienced L&FS officer to be appointed by the Company before start of operations (refer to ESAP#9-PS4).

Desano China:

Key stakeholder groups for the Company are its employees, local community members, contractors, customers, and local authorities. Licensed consultants commissioned by the Company conducts stakeholder consultation activities during the environmental impact assessment preparation process for each of the Company’s facilities in China as per requirements of applicable regulations of China. To date, there have been no known grievances or public concern associated with the Project facility in China. During Project construction and operation, security entry points at the Project facility front gates will be the key public interfaces to receive external communications including grievances from the public if any; and members of the public can also contact the company at its website or send messages to the company’s social media account to communicate concerns if any. The Company facilities maintain records of grievances received from local stakeholders, monitored regularly to ensure that all grievances are addressed per Company procedures.

Desano Harohalli:

Since the Project is located within a notified industrial area, it is exempted from public hearing as per national regulations for obtaining the Environmental Clearance (EC). The Project regulatory EIA is required to be disclosed by MoEF and CC, and by the Company on their websites. The Company maintains a grievance box and register. No complaints have been received since the facility started construction and equipment testing.

Separately for each of the Zhangshu China and Desano Harohalli ARV API Project facilities, the Company will develop a Project stakeholder engagement plan (SEP) and community grievance mechanism (CGM) appropriate to the extent and type of risks and impacts associated with its operations to address potential community grievances about the facility. The Company will provide SEP/CGM implementation status updates within Annual Monitoring Reports shared with IFC (refer to ESAP #11-PS1).

Shanghai Desano Bio-Pharmaceutical Co., Ltd.

Contact Person: Hong Guoliang

Address: No.1479 Zhangheng Road, Zhangjiang High-tech Park, Shanghai, China

Tel: +86-21-51323300

Email: hongguoliang@desano.com

Website: www.desano.com