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

Identification of E&S Risks and Impacts

The Project is subject to local regulatory assessments under Malaysian laws.  These have included an Environmental Impact Assessment (EIA) conducted for the broader Kulim Hi-Tech Industrial Park in 2012 and permits and approvals issued by the Kedah State Environment Department for air and water emissions and hazardous waste management.  The Kulim Hi-Tech Industrial Park Local Authority (Kulim Local Authority) has also issued permits for the construction of the Project. The Project has also completed Phase 1 and 2 land contamination assessments prior to construction and Hazard Risk Assessments for the site operations. The E&S assessments completed are generally consistent with the requirements of IFC PS1 to PS4 in relation to construction and operational impacts. As outlined below, there are some gaps in mitigation that require rectification to fully comply with IFC PS.

Environmental and Social Policies and Management Systems:

AT&S at a corporate level has uniform policies and procedures that apply to their global facilities.  These include certifications for ISO 9001:2015 (Quality Management System), ISO 14001:2015 (Environmental Management System) and ISO 45001:2018 (Occupational Health and Safety (OHS) Management System) and ISO 50001:2018 (Energy Management System).  These certifications are accompanied by specific Environmental and Social Governance (ESG) policies on sustainability and environment, product stewardship, occupational health and safety, people and human rights and supply chain.  These policies and procedures generally comply with IFC requirements; however, gaps have been identified related to labor and working conditions and are outlined below.

For the AT&S Malaysia facility, the Company is currently preparing an ISO 14001:2015 Environmental Management System (ESMS) that is proposed to be finalised by early 2025. The draft ESMS contains relevant procedures and policies for key risks pertinent for the facility, including OHS and hazard identification, risk management, pollution control and monitoring, fire, and emergency responses. AT&S also require these policies and procedures to be applied by all sub-contractors.  Based on IFC’s review, there are gaps identified related to labor and working conditions, community risks and pollution prevention, for the AT&S Malaysia facility and contractors, which are further elaborated below.  The Company will be required to ensure that the draft ESMS and associated policies is compliant with IFC PS, World Bank Group (WBG) Guidelines and Good Practice Notes prior to certification (ESAP #1).

E&S Organization Capacity:

At a corporate level AT&S maintains core ESG and Health Safety and Environment (HSE) staff at their headquarters in Austria that oversee the development and implementation of environment and social (E&S) policies and procedures. Corporate capacity is supported by an ESG Steering Committee, that reports to the company’s Board, and various networks to improve collaboration across the company’s assets.  For the Kulim facility, there are thirty-four (34) site level ESG and HSE staff flagged to support E&S implementation and monitoring. Not all positions are currently filled but are planned to be filled by early 2025. The Company’s Human Resources (HR) department supports the ESG and HSE teams at a site level by providing training on key E&S risks during induction as well as refresher training. Contractors have their own induction and training systems, however this is not currently monitored or reviewed for consistency with the AT&S Malaysia’s policies and procedures.  The Company is to improve oversight of sub-contractor’s training on E&S policies and procedures, including undertaking proactive audits (ESAP #2).

Emergency Preparedness and Response:

AT&S Malaysia has in place a well-developed Emergency Preparedness and Response Management Manual
(EPRMM) and associated awareness manual. The document includes evacuation plans; hazardous material handling plans, contact lists and business continuity plans.  A separate but related Guideline for Fire Protection has also been prepared.  Specific emergency management procedures for toxic substances that pose OH&S risks have also been prepared for the laboratory, workplaces, and materials storage areas. 

Management of community emergency risks is conducted by the Kulim Local Authority, however there are no specific measures to manage community related risks outlined within AT&S procedures.  Given the proximity of communities to the facility and to comply with IFC PS, the Company will be required to engage with community stakeholders, neighbouring industries, emergency response authorities and the Kulim Local Authority to update the EPRMM.  Once updated. The document is to be implemented and communicated with community stakeholders (ESAP #3).

Monitoring and Review:

AT&S Malaysia conduct internal audits of the Project’s operations that cover E&S aspects on a regular basis. Performance of sub-contractors on E&S compliance occurs with self-reporting on key indicators such as OH&S performance and environmental compliance.  AT&S also has annual safety audits conducted by an independent third party as part of the ISO 45001:2018 Occupational Health and safety management system. To ensure compliance with PS1 and PS2, AT&S will need to implement an independent annual operational audit of hazardous chemical handling (ESAP #4).  Monitoring of air, water, hazardous wastes, and noise emissions occurs on a regular basis and is reported internally and to the Kedah State Environment Department.

AT&S collects performance data on key performance indicators (KPI), including energy and resource consumption, waste generating and waste recycling rate, greenhouse gases emissions, health, and safety conditions from the Project, aggregating them in dedicated platform and in internal/external reports. AT&S reports E&S performance to the Board of Directors.

PS2: Labor and Working Conditions

Human Resource Policies & Procedures:

The regular employees of AT&S Malaysia are currently (as of September 2024) 1119 people.  The gender ratio is 28% female and 72% male.  There are currently 578 sub-contractors on site who are all male, with 563 of these personnel being migrant workers.  As trial production transitions into full production, the facility will be fully staffed with around 3000 employees. AT&S Malaysia maintains an Employee Handbook and associated policies and procedures.  The Handbook includes measures to manage terms of employment, hours of work, wages, overtime, compensation, performance assessment, promotion, collective bargaining agreements and worker rights under Malaysian law. The Company has a whistleblowing policy and grievance mechanisms, with employees encouraged to share their concerns, suggestions, or complaints with senior staff.  Compliant channels are monitored, and each report is documented and submitted to management. There are various channels for the submission of anonymous grievances, including through the AT&S – Speak Up platform. No unions represent employees at the Project; however, the Handbook will require updating to state that unions can be formed to comply with IFC PS. The Company does not have a retrenchment policy which will be required to be prepared (ESAP #5).

Gender Based Violence:

AT&S Malaysia’s Employee Handbook outlines policies for employees on personal conduct and anti-harassment.  The Handbook has specific requirements to reduce risks related to sexual harassment and discrimination. The Company maintains a whistleblower mechanism and a complaint handling mechanism to manage risks, including with sub-contractors and suppliers. Specific reference to gender-based violence risks and management within the Employee Handbook will be required to be included to be consistent with IFC PS (ESAP #6).

Human Rights, Child Labor and/or Forced Labor:

AT&S Malaysia uses AT&S’ Code of Ethics and Conduct and People and Human Rights Policy to maintain human rights and manage risks of child and forced labor. Both policies are consistent with IFC PS.  These policies also apply to tier 1 suppliers’ sub-contractors and the supply chain. Monitoring of the supply chain of AT&S Malaysia relies on an initial appraisal which is then followed up with self-reporting on compliance with corporate policies. To ensure compliance with IFC PS, regular auditing of tier 1 suppliers’ sub-contractors and suppliers in relation to compliance with the AT&S Code of Ethics and Human Rights policies will be required to be implemented (ESAP #7).

Grievance Mechanism:

AT&S Malaysia’s Employee Handbook includes a grievance mechanism for employees that applies to relationships in the workplace, employment conditions and the termination of employment.  Grievances can be submitted through supervisors and management, or staff can use the AT&S – Speak Up platform for anonymous submission.  The Handbook does make specific reference to reporting to supervisors and management on discriminatory practices and harassment, however this is not linked to the grievance mechanism. To ensure that discrimination and harassment are appropriately managed by the grievance mechanism, the Employee Handbook is to be updated (ESAP #8).

Occupational Health and Safety and Third-Party Employees:

AT&S Malaysia has a stand-alone Occupational Health & Safety Policy (OHS Policy) that requires management of material risks to human safety in the workplace through risk assessments, training and competencies, operational safety control mechanisms to manage risks and specific standard operating procedures and work statements for high-risk work environments and tasks.  Occupational noise is monitored within the facility and is reported to reduce risks to employees.  Indoor air quality monitoring is planned to commence in early 2025 to monitor OHS risks, however this is to commence as soon as possible given that the Project has commenced trials (ESAP #9).   Personal protective equipment (PPE) is provided to staff across the site, including in high-risk environments such as the laboratory. It was noted during the appraisal that PPE use by employees requires reinforcement.  AT&S requires that contractors comply with their policies and procedures and manages OHS risks of contractors through a self-reporting mechanism that tracks statistics on the risk level of incidents.  No serious incidents have occurred in the previous 12 months during construction and commencement of manufacturing trials. 

Contractors manage their own training requirements related to OHS and community health risks.  The Project enables only appropriately qualified personnel to attend work sites using electronic access systems.  The AT&S Malaysia site is preparing an ISO 45001:2018OHS Management System which is due to be completed by early 2025.  AT&S Malaysia are to review and update the OHS Management System currently being prepared to ensure consistency with IFC PS (ESAP #9). Requirements to use PPE are also required to be reinforced to employees, especially in high-risk environments (ESAP #10).

Migrant workers employed by contractors who work on the Project site have current Malaysian work permits based on evidence provided by AT&S Malaysia. Approximately 580 of these workers and other Malaysian nationals are housed within dormitories and in the community.  To ensure compliance with IFC PS, AT&S Malaysia and sub-contractors are to undertake an accommodation audit to ensure compliance with the IFC Guidance Note on Workers’ Accommodation: Processes and Standards (ESAP#10).

Supply Chain:

AT&S Malaysia uses the AT&S global supplier accreditation system that requires suppliers to undertake pre-qualification assessments, including assessments of commitments to human rights, labor and OHS risks consistent with the AT&S Supplier Code of Conduct (CoC).  The CoC references the Responsible Business Alliance (RBA) Responsible Business Alliance Code of Conduct Version 8 (2024) (RBA Code).  The RBA Code has commitments consistent with IFC PS requirements for supply chain management related to labor, health and safety, and the environment.  A review of the AT&S General Terms of Condition of Purchase identified that all suppliers are required to comply with the RBA Code and the AT&S Code of Ethics and Conduct.  In 2023/24, approximately 140 suppliers or 80% of the supply chain were considered essential, with all signing the CoC. Of the remaining 20% of suppliers, most of these suppliers had committed to the CoC with around 5% complying with an equivalent standard. A global supplier audit occurred in 2023/24 based on a supplier risk profile.  However, it was noted during appraisal that the E&S risks are not re-assessed during the audit and the supplier’s performance is based on the original pre-qualification appraisal.  AT&S are to review their pre-qualification and audit system to ensure that E&S risks are re-assessed during the audit process (ESAP #11).

PS3: Resource Efficiency and Pollution Prevention

Resource Efficiency:

AT&S are committed to resource efficiency and has a Sustainability Strategy 2025 that includes commitments for energy efficiency, life cycle assessments, water recycling and use of raw materials.  AT&S are developing copper recycling, wastewater recycling and energy efficiency projects for their global operations which will also be used at the AT&S Malaysia site.

Water and Wastewater:

AT&S Malaysia has conducted a water balance assessment and water risk assessment for their operations.  Approximately 27,000 cubic metres of raw water is supplied each day by the State of Kedah municipal services, which is treated to meet production standards. All stormwater on-site is collected and discharged to the Kulim Local Authority stormwater system. The Kulim Authority operates a detention basin for water from the industrial estate prior to its discharge to the environment and is currently investigating a water recycling system for the entire industrial park, which is likely to be operational within 3 years.

A wastewater treatment plant (WTP) is operated at the AT&S Malaysia site that treats industrial effluents from the production process.  The WTP discharges treated water to the Kulim Local Authority stormwater system according to discharge limits stipulated by permits issued by the Kedah State Environment Department. A review of monitoring data indicates that the wastewater discharge during manufacturing trials currently meets the World Bank Environmental, Health, and Safety Guidelines for Semiconductors & Other Electronics Manufacturing (WBG Guidelines) discharge limits.  However, some of the WBG Guideline discharge limits are more stringent and the monitoring parameters are different than those stipulated by the Kulim government.  AT&S Malaysia are therefore required to assess the ability of the WTP to meet the WBG Guidelines during full production and alter monitoring parameters to comply with IFC requirements.  If required, the WTP will be upgraded to meet WBG Guidelines (ESAP #12).

Water monitoring is currently undertaken at the point of discharge of the water treatment plant daily, with monthly monitoring undertaken at the discharge point into the Kulim Local Authority stormwater system.  Currently there is no groundwater monitoring at the Project.  To fully monitor risks of groundwater contamination and discharges to the stormwater system, AT&S Malaysia are to include groundwater and surface water monitoring points within the water quality monitoring program (ESAP #13).

Solid waste and hazardous material management:

AT&S Malaysia has a detailed Hazardous Substance Assessment that stipulate the requirements for the transport, storage and handling of all products entering the Project.  All hazardous materials are stored in a secure building and are sorted and stored to reduce risks of chemical interactions.  Hazardous materials storage tanks and other storage areas are appropriately bunded and have spill management and emergency response measures in place to reduce risks to OHS and the environment. Procedures for the safe transport of hazardous materials within the facility are included in OHS requirements. Workplace monitoring of hazardous material risks occurs in real time.

AT&S Malaysia has an Industrial Waste Disposal Plan.  Wastes generated at the site include solid wastes, industrial solid wastes (including hazardous waste) and domestic wastes.  All wastes are managed on site prior to being disposed using licensed waste contractors.  All waste management is licensed and regulated by the Kedah State Environment Department.  Industrial solid wastes are monitored to determine compliance with local regulatory requirements. Compliance with the World Bank Environmental, Health, and Safety Guidelines General EHS Guidelines: Environmental -Waste Management (WBG General Guidelines) will be required (ESAP #14).  Additionally, during appraisal it was observed that the solid hazardous waste storage area required improved measures to reduce spills during sampling of waste awaiting disposal (ESAP #15).

Air emissions:

Air emissions at the AT&S Malaysia facility occur during the production process and are emitted via thirty-seven (37) stacks.  These stacks are monitored for air emissions according to requirements outlined by the Kedah State Environment Department.  A review of air emissions data during manufacturing trials is compliant with the State requirements and WBG Guidelines.  However, the WBG methods for sampling and the emission standards are more stringent.  To ensure compliance with IFC PS, the Project will assess compliance with WBG emission standards.  If required, emissions equipment will be upgraded to meet WBG standards. Additionally, ambient air quality monitoring within the local community subject to similar parameters as defined from the indoor air quality monitoring will be completed on a regular basis (ESAP #16).

GHG Emissions:

The Project has overall low carbon footprint. The facility was built according to the highest quality and sustainability standards and equipped with state-of-the-art machinery and recycling systems, leading to high energy efficiency.  All processes of the facility were already optimized during the planning phase to avoid the use of fossil fuels. By 2026, the facility will ensure no natural gas is used and only diesel used for emergency generators, leading to near-to-zero fossil fuel usage. The Kulim facility aims to achieve 100% renewable energy goal by 2026 through either on-site solar energy or sourcing renewable energy attributes. Thus, considering all information above, the Project is considered as low carbon lock-in risk.

PS4: Community Health, Safety and Security

Infrastructure and Equipment Design, Life and Fire Safety:

The AT&S Malaysia facility has been designed to comply with international standards using and is a state-of-the-art facility. All production methods used comply with ISO 9001:2015 (Quality Management) system. The Project maintains a Crisis Management and Communication System to manage risks associated with Project malfunction, natural disasters, cyber events, and political unrest.

Life and fire safety is managed through AT&S Malaysia’s Guideline for Fire Protection.  Required permits from Kulim emergency authorities and coordination with the Kulim Local Authority are embedded into the system.  The system used to manage fire risk includes a fire alarm system, a hydrant and sprinkler system as well as fire extinguishers placed throughout the facility.  Fire extinguishers installed include both dry and wet types to match the risks at the relevant location.  Regular fire drills and monthly inspections are undertaken of all fire control devices and systems. Work procedures and training on the use of the fire system is included in both induction training and regular updates for all staff.  The fire protection guideline also is cross referenced to the EPRMM, as discussed above.  There are gaps however on how the life and fire system is applied to the local community.  As required by ESAP #3, relevant life and fire safety requirements pertinent to the local community will be included in the update of the EPRMM and included in the Guideline for Fire Protection.

Traffic Impacts and Transportation Safety:

Traffic risks associated with the AT&S Malaysia facility are low.  Traffic entering the site pass through two main gates after transiting through the Kulim Hi-tech industrial park.  Transportation safety risks are associated with the transport of hazardous materials to and from the facility.  AT&S Malaysia uses licensed contractors for this purpose. 

Community Health and Safety:

AT&S Malaysia undertakes informal community engagement and CSR activities with the local community.  The Sungai Seluang village is located adjacent to the Project and have highlighted several grievances related to stormwater management and pests, which have been resolved by the Project.  Community liaison is generally managed through the Kulim Local Authority, however. To formalise community engagement and CSR activities and to enable community grievances to be appropriately managed through a transparent system, AT&S Malaysia will prepare a Stakeholder Engagement Plan, cross referenced to the emergency and safety measures as updated into the EPRMM (ESAP #17).

Security Personnel:

The Company maintains security personnel outsourced to a security company for the Kulim facility.  The requirements are outlined within the Security Post Orders.  Eight (8) guard houses are manned across the site that maintain access restrictions, including an electronic pass system.  All security staff are trained on the access requirements of the site, including respecting those entering the site as well as measures for managing risks associated with escalation.

As part of its sustainability framework, AT&S regularly engages with its stakeholders, including government authorities, other industries, employees, workers, business suppliers and vendors to understand their concerns and issues. Annually, the Project discloses stakeholders' concerns and issues in its annual reporting. Common issues and concerns identified and raised by employees and workers include occupational health, welfare and safety, training and career development, compensation and rewards and labour practices.