IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS 1 - Assessment and Management of Environmental and Social Risks and Impacts
Policy and Management Programs:
3SBio has a corporate level environmental, health, and safety (EHS) function, EHS policy, Standard Operating Procedures (SOP) and Manuals (e.g. Operational manual on facility central fire control panel; SOP on occupational health management); and monitoring procedures in place. These documents: (i) describe the Company’s overall EHS goals and objectives; (ii) delineate EHS roles and responsibilities of all staff (from senior management to working level staff, such as safety officers), departments, and subsidiaries, and their reporting lines and relationships, together with organizational charts; (iii) cover key EHS risks at facility level, including mitigation requirements reflecting pharmaceutical production processes at Company facilities (e.g. life and fire safety; workplace risk assessment to minimize injuries from working in high temperature environments; hazard point identification and risk rating procedures; hazardous waste safety and management requirements); (iv) lists EHS related Key Performance Indicators (KPIs) and how they are utilized in day-to-day performance monitoring and reporting.
The Dongguan Phase 2 facility EIA, Company EHS policy, SOPs, manuals, and monitoring procedures reviewed by IFC are materially compliant with the requirements of IFC PSs and applicable World Bank Group (WBG) Environmental Health and Safety (EHS) Guidelines. Each Project facility, based on guidance from the corporate EHS function and on performance-based benchmarks, develops finetuned EHS SOPs which reflect local conditions and local regulatory requirements. EHS policy and SOP updates are communicated by each facility’s EHS team to headquarters for review and clearance. Phase 2 Project facilities aim to attain ISO14001 and ISO45001 certifications after operational commencement.
Identification of Risks and Impacts:
As per Chinese environmental permitting requirements and Company SOPs, 3SBio facilities, including the Phase 2 Dongguan facility, have commissioned qualified third-party technical institutes to undertake environmental impact assessment (EIA). The Dongguan Phase 2 facility EIA reviewed by IFC identifies sensitive social and environmental receptors, assesses project alternatives, describes baseline conditions with baseline data documented, lists and analyzes key identified E&S risks and impacts, and includes required management and monitoring plans during pre-construction, construction, and operational stages to manage and mitigate identified E&S risks and impacts. Environmental, life & fire safety (L&FS), and occupational health and safety (OHS) permits have been secured for each operating facility, which stipulate ongoing compliance with relevant national regulations and monitoring requirements. The Company regularly monitors its regulatory and permitting compliance status.
In line with Company SOPs, each 3SBio facility at pre-commissioning and EHS permitting stages, undergoes a hazard point identification and risk rating exercise as part of EHS, OHS, and L&FS permitting requirements. The outcome forms the basis of construction and operational phase E&S risk management plans, mitigation measures, and site inspections at each facility. The detailed Dongguan Phase 2 facility hazard point identification and risk rating results matrix, which lists risk points in each sub-production area, was shared with IFC to illustrate work undertaken. At each Company facility, this exercise is updated annually to ensure risk identification and rating captures any changes to facility setup and work processes each year.
As per ESAP #1-PS1, the Company will commission an Environmental and Social Impact Assessment (ESIA) for the Shenyang Phase 2 facility, to be prepared by licensed third-party technical consultants, and whose content and format will be in line with national law, requirements of IFC Performance Standards (2012), and relevant Company SOPs. The Company will also prepare a site-specific construction environmental and social management plan (ESMP) as part of the ESIA, which will specify ongoing risk management and monitoring activities to be carried out.
Organizational Capacity and Monitoring and Reporting:
The EHS/OHS (Occupational Health & Safety) leadership committee at Dongguan Phase 1 facility is responsible for high level EHS/OHS decision-making including budget approvals. Reporting to head of facility is the EHS/OHS department comprising three staff including head of department who also acts as head of operational assurance. Each department (e.g. production department; facility and equipment maintenance department; project works department; etc) has annually assigned EHS/OHS KPIs and staff with EHS responsibilities who carry out EHS related tasks (e.g. OHS site inspections). All staff are required to sign an OHS commitment pledge document. Facility EHS/OHS departments compile and report monthly EHS/OHS performance data to heads of facility. Facility level KPIs cascade down to KPIs for each role and department, with KPI results connected to performance reviews of staff and departments.
All 3SBio facilities conduct regular annual EHS/OHS, waste management, and resource efficiency monitoring as per environmental management plans in facility EIAs, with the January 2024 monthly waste management monitoring results of Dongguan Phase 1 facility shared with IFC to illustrate data collected and monitored. Summary EHS/OHS performance data is prepared by facility EHS/OHS departments and reported to the heads of facility. During day-to-day monitoring and site inspections, any non-compliances or deviations from KPI targets lead to time-bound requirements at a facility to take corrective actions and report on implementation status to the facility EHS team and head of facility.
Staff with EHS/OHS responsibilities are regularly trained on technical topics. Those in specialized job functions (e.g. electricians) must pass annual tests to maintain their professional qualifications. All EHS training sessions end with written tests to ensure practical knowledge uptake by trainees. Staff with EHS responsibilities meet annually to discuss good practice, problem solving experiences, and new technologies which could improve EHS performance. The same interactions and team learning also happen within internal Company chat app groups.
Once a new facility has passed the feasibility study stage and enters detailed planning, the corporate Human Resource (HR) department advertises management and operational openings to staff at existing facilities and selects and assembles a team through an internal competitive process, or recruits from external sources if internal personnel could not be identified. This approach maximizes transfer of existing knowledge and experience to new facilities to facilitate consistent application of corporate EHS and OHS requirements across facilities. The appointed team, during transition, becomes fully involved in a new facility’s planning, design, and construction, through to construction completion, at which point they formally take over operation and management of the new facility and further recruit local staff.
Emergency Preparedness and Response (EPR):
Each Company facility has developed EPR plans based on facility hazard point analysis and risk rating results, which list likely emergency scenarios which may arise at that facility (e.g. accidental leakage of HAZMAT; flooding; etc.), with clearly defined roles and responsibilities including EPR chains of command to respond to each potential emergency scenario. EPR drills are conducted on a semi-annual basis with full participation from staff and in coordination with local fire brigades. A sample emergency environmental incident risk evaluation report prepared by a third-party consultant (commissioned by the 3SBio Dongguan facility) was shared with IFC. This included detailed analyses of potential emergency scenarios and required mitigations developed to prepare for and manage risks from each scenario in case it transpires.
Given the Company’s plans to potentially construct greenfield pharmaceutical production facilities at currently unidentified overseas locations outside China, or to acquire existing overseas facilities, before proceeding with such plans, it will demonstrate a robust E&S management system (ESMS) and in-house capacity/teams/personnel at the China headquarter and overseas facility/operation levels, capable of managing potential E&S risks and impacts in overseas operations. Refer to ESAP #2-PS1 in the Project E&S action plan for details.
PS 2 – Labor and Working Conditions
Working Conditions and Management of Worker Relationships:
At present the Company has a headcount of about 5,200 employees in China – all direct full-time workers - of whom about 82% are in non-managerial and non-supervisory roles. The male-to-female staff ratio is 47%:53%, which reflects the availability of talents and graduates in the sector in which the Company operates. Phase 1 of the Dongguan facility currently has a headcount of about 200 staff and is expected to add another 50 under Phase 2. The expected additional headcount at Shenyang Phase 2 facility is not known given its early pre-planning stage.
3SBio has a set of corporate level human resource (HR) policies and procedures consistent with national law and requirements of IFC PS2. These can be accessed by staff via the Company’s intranet, and they describe recruitment policy, attendance record management, social insurance, remuneration and overtime policies, benefits, training and development, leave arrangements, performance evaluation, and rewards and disciplinary procedures. Hiring and employment practices recognize merit based, non-discrimination, equal opportunity, and anti-harassment principles, which are described in the Company’s corporate employment code of conduct and employee manual documents. Each facility adopts the same set of HR policies and procedures for their day-to-day HR operations with adjustments made to reflect local requirements (e.g. different minimum wage levels across provinces). All staff sign an employment contract with the Company whose terms comply with national labor regulations.
The Company is expanding and there is no plan for any major workforce retrenchment. Depending on location and proximity to local housing, certain Company facilities provide non-local staff with on-site staff housing, which are inspected to ensure they meet Company standards in terms of construction quality, sanitary condition, safety, space-per-person, availability of washing facilities and amenities, and protection from the elements.
Workers’ Organization and Grievance Mechanisms:
Most staff are members of the labor union at the Company with membership being completely voluntary, with no restrictions placed on freedom of association. The labor union functions as a channel to collect suggestions to improve the overall working environment e.g. on canteen food quality, staff benefits, etc., and also as one of several important employee grievance redress channels. Other anonymous and non-anonymous channels are: through the HR and Risk Management and Internal Audit departments; through the Company WeChat (social media app) account; and the CEO and head of facility email addresses publicized to all staff. Grievance logs are maintained by the Internal Audit department. The same departments also conduct employee interviews regularly to understand staff views, and the Company’s corporate Grievance Reporting Procedures describe steps involved in filing and handling worker grievances.
Protecting the Workforce:
There is no evidence of child or forced labor in the Company’s workforce. The Company has clear hiring procedures and requirements on minimum age for employment. Maximum working and overtime hours as per China’s labor laws are observed. 3SBio requires its EPC construction contractors to abide by all aspects of the national laws and the Company’s HR and OHS requirements in the management of their workforces, with compliance verified through random and regular site inspections. All employees involved in operations or at duty stations (e.g. boiler maintenance staff) considered to entail higher OHS risks are required to possess valid technical qualifications (e.g. licensed electrician qualifications) and to attend ongoing OHS related training. Construction OHS and fire safety training is provided by the EHS/OHS department to all contractor construction workers and daily toolbox meetings are held at construction sites.
Occupational Health and Safety (OHS):
Based on data provided by the Company, in 2022, collectively, Company facilities and operations had zero incidents of work fatalities, falling from heights, and electric shocks, and had a lost time injury frequency rate (LTIFR - defined as number of work injuries per 200,000 hours worked) of 0.06 which is significantly lower than the international reference value (U.S. OSHA 2019 “Pharmaceutical and medicine manufacturing” sector reference value). The Company’s OHS management system is defined in detail in its EHS policy and SOPs. Examples of key elements and day to day practices of this system are as follows: (i) during hazard identification and analysis stage, identification and description of various potential OHS scenarios (e.g. mechanical and electrical injuries), classifying them into different levels in terms of severity, developing and implementing required mitigations under each scenario, and specifying pre-emptive measures required in day to day operations to minimize risk events before they transpire; (ii) incident analysis and reporting; (iii) monitoring of indoor air quality, ensuring the use of personal protective equipment, and providing for annual health checkups for all staff (with sample anonymous staff checkup reports shared with IFC); (iv) facility staff at each functional department assigned and trained as OHS officers who conduct daily and weekly OHS site inspections to identify potential non-compliances and improvement actions; (v) preparation and implement of an EPRP to mitigate against various OHS emergency scenarios; and (vi) defined lock out tag out procedures which need to be followed by staff before entry into confined spaces – details of the procedures and required clearances were explained to IFC at the Dongguan Phase 1 facility boiler room confined space as an illustration of on-site practice.
PS 3 – Resource Efficiency and Pollution Prevention
Energy and Water Consumption and Efficiencies and Greenhouse Gas (GHG) Emissions:
In the year 2023, the Dongguan Phase 1 facility consumed about 13,000 MWh of grid-purchased electricity, about 1.28 million cubic meters of natural gas as boiler fuel, and approximately 184,000 tons of water to meet production and sanitary needs and has an estimated annual GHG emissions footprint as follows: Scope 1 3465 tCO2eqv and Scope 2 6348 tCO2eqv. Once operational GHG related data from the two greenfield Phase 2 Project facilities (calculated based on an internationally recognized methodology) become available, the Company will share such data and resulting GHG emission quantification in Annual Monitoring Reports submitted to IFC.
The Dongguan Phase 1 facility has incorporated resource conservation (engineering and management) measures into its design and operations e.g. use of electricity and water sub-meters; and installation and operation of an off peak cold water storage system (using electricity to produce and store cold water during off-peak hours, to be utilized during day time hours to meet production cooling needs thereby leading to reduced electricity usage during peak hours, equivalent to savings of 1.5 million kWh equivalent in 2022). Phase 2 of the Dongguan facility, based on early design specifications, will likely adopt the same cold water storage system, as well as other energy and water efficiency measures e.g. operation of a condensate water waste heat recovery and water re-use system - expected to achieve water savings of circa 69,000 cbm per year and energy conservation equivalent to reduced boiler natural gas fuel consumption of about 120,000 cbm per year. The Shanghai facility visited by IFC also operates a similar condensate steam water waste heat recovery and water re-use system as Dongguan Phase 1 and is planning to retrofit its facility to re-use treated wastewater in its cooling towers. Energy and water efficiency measures have not been articulated for the Shenyang Phase 2 facility which is at an early planning stage.
Pollution Prevention:
Company facilities have separate rainwater and process wastewater collection and discharge systems to prevent rainwater contamination by effluents. Wastewater (parameters pH, COD, BOD5, TSS, oil and grease, phenol, total phosphorous, total nitrogen, and acetonitrile) generated from the Dongguan Phase 1 facility (production and sanitary sources) is treated at the on-site wastewater treatment facility (WWTP) which utilizes several treatment stages: membrane bioreactors, sedimentation, aerobic and anaerobic treatment stages, chemical-based sterilization, and further sedimentation. Treated wastewater meets the national GB21907-2008 (Biopharmaceutical industry wastewater discharge standard) and Guangdong provincial DB44/26-2001 standards - limits in these standards are consistent with levels in WBG EHS Guideline for Pharmaceutical and Biotechnology Manufacturing (2007). Wastewater monitoring results from the December 2023 monitoring report submitted by third party technical institute (as commissioned by Dongguan facility) were consistent with national and WBG EHS Guideline values. After primary on-site treatment, wastewater enters the Dongguan Da Lang Song Shan Hu municipal WWTP for secondary treatment, before being discharged to the local Mei Tang river.
Key potential air pollutants at Dongguan Phase 1 facility arising from Project facility WWTPs and production processes and which are being monitoring include: (1) [Energy and boiler related] SO2, NOx, and Particulate Matter (PM10); (2) [Production process related] Ammonia, H2S, isopropyl alcohol, n-Hexane, and volatile organic compounds (VOC) from production process (e.g. ethyl acetate, toluene, xylene, etc.); and (3) Odors and H2S arising at on-site WWTP. These pollutants are treated using two-stage spraying towers, dry active carbon adsorption filter, and microorganism-based odor removal technologies. After treatment to meet applicable national and industry standards (GB3095-2012, HJ2.2-2018, and GB14554-93), treated pollutants are discharged via boiler and rooftop stacks. Limits specified in these standards are consistent with applicable WBG EHS Guidelines for Pharmaceutical and Biotechnology Manufacturing (2007), and point source air emission monitoring results from the December 2023 monitoring report submitted by third party technical institute (as commissioned by Dongguan Phase 1 facility) were consistent with national and WBG EHS Guideline values. The Company is planning for similar air emissions and wastewater treatment setups to be adopted at the two greenfield facilities funded under the Project. Production building HVAC systems have been designed to meet the national GB50457-2008 Pharmaceutical Industry Clean Production Building Design Standard and GB50243-2002 Ventilation and Air Conditioning Construction Quality Requirement Standard.
At the Dongguan Phase 1 facility, non-hazardous wastes, hazardous wastes, and hazardous materials are stored in separate access-controlled buildings, 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 updated version 2013). On-site storage locations for hazardous wastes visited by IFC are designed with anti-explosion and anti-static features, are temperature-controlled, and are 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 which can be stored on site, as well as 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 Company facilities is 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. Wastes classified as medical wastes are segregated, stored, transported, and disposed in color coded sealed containers, by licensed third party handlers. Hazardous material management is subject to similar permitting requirements and procedures as that applied to hazardous wastes, in relation to 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.
There are small quantities of solvents stored and utilized on site at Company facilities. For the two greenfield facilities, if required by the local authorities and applicable national chemicals management regulations and where the facilities utilize and store significant quantities of solvents and chemicals on site, the Company will prepare a solvent management plan and conduct quantitative risk assessments (QRA) to mitigate potential process safety risks Refer to ESAP #3-PS3.
PS 4 – Community Health, Safety and Security
The two greenfield Projects will be sited with a setback of at least 750m from the nearest local communities within established industrial zones. Dust, noise, and odors from the Project facilities during construction phase are not expected to create a disturbance to local residents. Transport of hazardous and medical raw materials and finished products to and from Dongguan Phase 1 facility during construction and operational phases are subject to stringent 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 to ensure proper functionality. The same requirements will be observed by greenfield facilities.
Security personnel: At its operating facilities, the Company employs unarmed security guards to secure its premises, and there have been no known security or fire incidents since the start of operations at Dongguan Phase 1, Shanghai, and other Company facilities.
Life & Fire Safety (L&FS): All major buildings, areas, and sub-areas within buildings at the Dongguan Phase 1 facility have temperature and smoke detectors installed at ceilings, which are connected to the facility’s central fire control panel room, which is staffed 24/7 to monitor all parts of the facility, with assigned fire wardens regularly patrolling all areas of facility according to a pre-defined inspection routine. Any potential fire or smoke event can be immediately traced to a sub-area and will trigger a series of control and mitigation actions defined in the Company’s EPR and fire safety SOPs. The fire control room is equipped with a team of fire fighters trained by the local fire brigade. Dedicated fire-fighting water is available from the on-site fire-fighting water tanks, as well as from the municipal fire-fighting water supply connected to the premises by underground water pipes. All production buildings are designed with smoke ventilation ducts at rooftops which are 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. As described under PS1, EPR drills are carried out on a semi-annual basis with full staff participation to prepare for potential emergency scenarios including fire and smoke events. The two Project greenfield facilities are expected to have a fire safety setup similar to what is implemented at Dongguan Phase 1. Each greenfield facility will be required by national laws 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.
