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:
AHB has developed corporate-level ESG policies and established the corporate ESG management organization. However, a corporate-level EHS management system (EHSMS) is yet to be established. Hence as part of the ESAP #1, AHB will establish corporate EHSMS per national laws, requirements of IFC Performance Standards, WBG General EHS Guidelines and WBG EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing. With these improvements implemented, AHB’s E&S management system will meet IFC PS1 requirements.
Currently, AHB has four operating facilities in China, including the QHB facility where the project will be located. QHB has established its own EHSMS commensurate with its operational EHS risks and obtained ISO 14001 (Environmental management) and ISO 45001 (Occupational Health and Safety Management) certificates. Documented EHS policy, rules and regulations, Standard Operating Procedures (SOP) and Manuals, and monitoring and performance review procedures aligned with national law are in place. These documents outline the company’s overall EHS goals and objectives, set EHS- related Key Performance Indicators (KPIs), define EHS roles and responsibilities of individual departments and staff, and describe the requirements for EHSMS implementation. Three-level (company, department/workshop, and employment position) EHS training will be provided to new hires to ensure the company EHS policies, rules, and regulations are well communicated to all employees.
Identification of Risks and Impacts:
The project consists of two sub-projects: the malic acid production facility and the tryptophan production line. The Company has contracted qualified third-party consultants to undertake the EIA per national law and standards and obtained the relevant approvals for construction. The EIA reports described the baseline E&S conditions, identified sensitive social and environmental receptors, analyzed key environmental risks and potential impacts, and proposed mitigation measures. Stack and fugitive emission modelings were included in the EIAs. The EIA reports also included environmental management and monitoring plans in line with national law and standards. A public consultation process, including engagement with local communities, has been carried out during the EIA process. In addition, given that the Project site is located in an expanding industrial park, the project EIA has evaluated the compliance of the project development with the regional planning framework of the industrial park for the cumulative impacts.
Corporate Environmental and Social Management and Organization:
Each subsidiary facility of AHB has its own EHS management team headed by the EHS manager. The EHS manager reports to the facility General Manager, who reports to the corporate VP of Production. In QHB there is an EHS department consisting of five designated staff, supported by a few part-time EHS coordinators in each workshop/process unit. Currently, AHB still needs to establish a corporate-level EHS management organization to make EHS policies, oversee EHS management system implementation, monitor and review corporate EHS performance. However, as observed during the IFC appraisal site visit, AHB has started improving its EHS organizational capacity and competency. A corporate Environmental Director with a strong background in the manufacturing industry has been appointed for a few months, and another position of Safety Director is now open for application. AHB has also established an internal ESG committee headed by a corporate VP to define company ESG strategic goals, develop ESG policies, initiate ESG performance improvement programs, and coordinate the compilation and disclosure of annual ESG reports.
Emergency Preparedness and Response (EPR):
QHB has developed site -specific EPR plans, aligned with national law, for both work safety and environmental incidents based on a comprehensive identification, analysis, and evaluation of potential hazards and risks in the QHB facility. Likely emergency scenarios that may arise at the facility (e.g., accidental leakage of hazardous materials, fire, and explosion, injuries to employees in the case of operation accidents, etc.) are listed, and the personnel roles and responsibilities, including EPR chains of command to respond to each potential emergency scenario are clearly defined. QHB has established a facility-level EPR organization commanded by the General Manager, supported by the EHS Department. The other four teams were assigned different roles and responsibilities, including on-site rescuing and evacuation, communication, medical assistance, logistics, and incident investigation and follow-up. A joint-response mechanism with local government authorities, fire brigades, hospitals, neighboring companies/plants, and communities has been established in the EPR plan.
EPR drills are conducted routinely with full participation from QHB staff and in coordination with third parties such as local fire brigades. Emergency scenarios include fire, leakage of hazardous chemicals, accidents in confined spaces, and environmental pollution incidents.
PS 2 – Labor and Working Conditions
Corporate Human Resources Policy and Management:
At present, AHB has a headcount of 1,691 employees in China, all directly full-time. AHB has established functional human resources (HR) policies and procedures in alignment with national labor law and IFC PS2, which are cascaded down to subsidiary companies/facilities to follow. The HR policies and procedures mainly specify the following aspects: 1) recruitment procedure; 2) terms of employment and working conditions, as well as employee code of conduct; 3) employees’ benefits including salary and compensation, incentive and bonus, insurance and paid leaves; 4) training and employees’ development, performance review and promotion; 5) internal communication mechanisms and grievance mechanisms; 6) occupational health and safety. Major points of these policies and procedures are documented in AHB Employee Handbook and communicated to all employees. In addition to the Handbook, the company will provide HR inductions to new employees.
AHB has established a Professional Development Center to provide training courses and organize team building activities to promote professional development of employees.
Working Conditions:
AHB provides competitive salaries and benefits to employees and promotion and development opportunities based on the performance review results. Three types of working hour systems are adopted in the company, which are: 1) standard working hour system for most office workers; 2) comprehensive working hour system for staff in departments of production, EHS and quality; 3) flexible working hour system for the senior management team and staff in the department of marketing, sales and procurement. Staff will receive time-off or cash compensation instead of any overtime work at rates regulated by the national labor authority. Overtime work during holidays will be compensated as per national labor law. All employees have access to insurance and pension funds as national law requires. The company provides an additional 60 days of maternity leave for female employees besides the mandatory days required by the national labor law, and a total of 30 days of paternity leave to male employees, which is also more than the average national standard days.
Workers’ Organization and Grievance Mechanisms:
A labor union is organized in AHB and a collective bargaining agreement is in place. AHB has established specific procedures for the election of labor union Chairman and members, collective bargaining, and internal consultation and communication. Employees’ joining the labor union is completely voluntary. The labor union is one of several important worker GRM channels, others of which include phone calls, email, company WeChat internal channel, physical drop box and direct report to line supervisor or HR. Relevant contact information, as well as the addresses of the physical box, are provided in the Employee Handbook. AHB has also established a mutual communication mechanism between the corporate senior management and employees. Before any major decision making which may impact employees, the company will consult with all employees for comments. The company encourages employees to firstly communicate with line supervisor if there are any suggestions or complaints. The labor union is mainly responsible for dealing with critical issues raised by large groups of employees or cannot be solved at the department or subsidiary levels. According to the interviews with AHB and QHB HR management teams there have been very few complaints/grievances by employees in the past years. Several cases received are mainly related to employee complaints about supervisors’ management ways.
Protecting the Workforce:
forced labor, and any form of discrimination are strictly forbidden in AHB. The company has established specific rules and regulations for child labor and forced labor management, protection of female employees, and anti-discrimination against gender, race, age, and region. The company promotes a culture of equality, diversity, and inclusion.
Since AHB and QHB have been expanding in recent years, there is no plan for any major workforce retrenchment.
Occupational Health and Safety (OHS):
QHB has established an OHS management system certified per ISO 45001. The company provides routine OHS training to employees, including new employee training and annual refreshers. Specific training programs will be provided to employees working at hazardous positions, which include job hazard analysis (JHA) for critical positions, exposure to hazardous chemicals, personal protective equipment (PPE) use requirements and etc. Any OHS accidents/incidents on site will be recorded and followed up for correction. No fatalities or significant accidents/incidents have been reported in the past two years in QHB.
Every three years, QHB will appoint a certified third party to conduct workplace monitoring of OHS indicators (e.g., noise level, temperature, indoor air quality such as the concentration of dust, ammonia, and other toxic chemicals). The latest monitoring data showed that the quality of working conditions complies with Chinese regulatory requirements, WBG General EHS Guidelines, and EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing. Occupational health check is provided to new employees and employees who are changing operation positions or leaving the company.
Supply Chain:
The main raw materials used in the project facility include starch, glucose, diluted ammonia solution and other miscellaneous materials. AHB has established a supply chain management system that includes SOPs for supplier selection and management in compliance with IFC PS2 requirements. ESG performance of the suppliers is among the supplier selection criteria. In the supplier agreement, there is a specific clause defining the requirements for the supplier’s social responsibility performance. In 2023 the company updated its Supplier Evaluation Checklist for existing suppliers. As per the new Checklist, in the future, AHB will carry out routine audits or reviews of major suppliers’ ESG performance, especially focusing on labor and human rights, environmental management, and business ethics. Action plans and mitigation measures will be taken if any non-compliances or risks are identified.
PS 3 – Resource Efficiency and Pollution Prevention
Energy and Water Consumption and Efficiencies and Greenhouse Gas (GHG) Emissions:
At the corporate level, AHB has established its energy and resource management system and obtained ISO 50001 (Energy Management) certificate. Saving energy, water, and other resource consumption is among AHB’s corporate ESG strategic objectives. The water consumption rate in 2023 is about 800 m3 per million revenue. The percentage of recycling water used in AHB reached 23% in 2023. In QHB, condensed water from the steam is treated with RO (Reverse Osmosis) and then reused in the production process. Part of the treated wastewater (~1000m3 per day) from the on-site process wastewater treatment station is further treated and reused for the cooling system. Currently, the electricity is purchased from local renewable energy sources (wind and solar) with certificates. A program planning to install photovoltaic panels on workshop roofs has been started in 2024, which is estimated to generate ~2 million kWh of electricity per annum once put into full operation.
In addition, AHB works with third parties to use recyclable packages to the maximum extent possible to reduce package material consumption. According to the ESG report disclosed by AHB to the public in 2023, around 97.5% of the total packages consumed can be recycled.
GHG Emissions: AHB has developed a corporate strategy to address climate change and integrated GHG emissions deduction into its long-term missions. For the IFC investment in QHB facility, the electricity is purchased from renewable energy sources with certificates. The fermentation production processes consist of both aerobic and anaerobic processes. The only GHG emission is from the on-site aerobic process, which is estimated to generate 3,707 tonnes of CO2-equivalent per annum.
Pollution Prevention and Compliances:
Wastewater generated from the production process, equipment cleaning, and gas treatment scrubbers are collected and sent to the on-site wastewater treatment station for treatment. The two core components of the wastewater treatment process are the IC (Internal Circulation) anaerobic reactor and AMOXP (Ammonia Oxidation Process). The other processes mainly include sedimentation and flocculation. The designed treatment capacity of this station has been expanded to 5100 m3 per day to meet the demand of the malic acid and tryptophan projects. After on-site treatment, the effluent is discharged into the municipal sewage system and further to the centralized municipal wastewater treatment plant (WWTP) for treatment. The Company has installed a continuous online monitoring system to monitor the quality of discharged wastewater into the municipal system (parameters include pH, COD, NH4-N, TN, and TP). The monitoring data indicate compliance with national effluent standards for discharge into municipal sewage system. Sewage from sanitary sources in the QHB facility is collected by a separate system and treated in septic tanks before being discharged into the municipal WWTP for further treatment.
The fermentation process will generate odorous air emissions, containing ammonia and other chemicals. In the QHB facility, the fermentation waste gas is collected through collection hoods installed on top of the fermentation tanks and sent to a three-level scrubber treatment system for treatment before being released into the air. The first two scrubbers use an alkaline solution and the third one uses acids. The small amounts of waste gas containing similar pollutants to the fermentation process will arise from the product purification (evaporation and condensation) process. This gas stream is collected and sent to separate alkaline and acidic solution scrubbers for treatment. A cyclone dust collector collects particulate matters (PM) generated from the product drying process to separate them from the outlet gas stream before the treatment by scrubbers. According to the recent monitoring data of process stack air emissions provided by a certified third-party, values of the main parameters including ammonia, H2SO4 and odor concentration comply with applicable Chinese air emission standards and WBG EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing (2007).
A 50t/h biomass-fired boiler is installed in QHB facility to provide heating. The biomass boiler is equipped with a SNCR (selective non-catalytic reduction) reactor to reduce NOx emission. One cyclone and another baghouse dust collector are also equipped to remove dust in the boiler flue gas. An online air emission monitoring system is in place to continuously monitor the quality of the released flue gas, which is connected to the local environmental authority’s monitoring system. Monitoring parameters include PM, SO2, and Nox. Real-time data observed during the site visit showed that all the values were under the limits of both local regulatory standards and WBG General EHS Guidelines (2007) for small combustion facilities.
The tanks are covered in QHB’s on-site wastewater treatment station to reduce fugitive emissions from the wastewater treatment process. Waste gas is collected and sent to two scrubbers for treatment. After that, the gas is sent to a biological treatment system (some specific kinds of microorganisms are used) for further treatment before being released into the air. According to the recent monitoring data of air emissions from the wastewater treatment station provided by a certified third party, values of the main parameters including ammonia, hydrogen sulfide and odor concentration comply with applicable Chinese standards and WBG EHS Guidelines for Pharmaceuticals and Biotechnology Manufacturing (2007). Fugitive emissions are now well controlled, and no obvious smell of odor was identified inside or near the wastewater treatment station during the site visit. The recent monitoring data of ambient air quality in the nearby communities showed that the air quality complies with local regulatory requirements. Currently, methane generated from the anaerobic process is collected and sent to a flare for burning. According to the interview with QHB management team the Company is planning to utilize the methane for power generation in future after the malic acid and tryptophan projects are put into full operation.
The sanitary solid wastes are collected by municipal contractors for disposal. Non-hazardous industrial wastes, including waste packages, wastewater treatment sludge, and other scraps, are temporarily stored on-site and will be sold to other local industries for recycling. The hazardous wastes, including waste oil sludge, waste chemicals, and contaminated containers, are temporarily stored in a separate access-controlled room in accordance with national regulatory requirements. A designated staff is responsible for daily inspection of the hazardous waste storage place to check whether hazardous wastes are properly stored and containers as well as secondary containment are in good condition. The hazardous wastes are periodically transported out by local third parties with relevant licenses for treatment and disposal, records of which are documented.
Hazardous Materials: A few hazardous materials, including hydrochloric acid, sulfuric acid, phosphoric acid, sodium hydroxide solution, and ammonia solution, are used in the QHB facility. These raw materials are stored in different tanks on concrete floors with secondary containment. Material safety data sheet (MSDS) with handling SOP for each material and warning signs are also in place. No large volume of organic solvents is stored in the facility. Considering the risk of liquid ammonia, diluted ammonia solution is stored and used for operation instead of liquid ammonia directly stored on site. Liquid ammonia is transported by a local supplier with tank trucks, diluted with water, and made into ammonia solution in a facility adjacent to the Project site. During the site visit to this supplier’s facility IFC observed that mitigation measures should be implemented to control the potential risks and ensure full compliance with local regulatory requirements and IFC requirements, e.g., no adequate emergency response plans and PPE are in place. It is QHB’s responsibility to manage this supplier properly. Hence as part of the ESAP #4, QHB will work with the supplier to provide adequate training to the operators and make sure appropriate PPE and ERP are in place.
PS 4 – Community Health, Safety and Security
The site is within the boundary of a local industrial park, however there are some residential areas with the nearest distance of 60 meters from the facility. During the past years of project development and expansion in the QHB facility, the company has carried out multiple programs/measures to minimize the eventual negative impacts on local communities. The original on-site wastewater treatment station has been modified and upgraded to reduce odor emissions. Routine monitoring of ambient air quality and noise levels in the nearby communities, as well as the local soil and groundwater quality, has been carried out. No contamination of the local soil and groundwater has been identified, according to the recent monitoring data. Ambient air quality and noise levels in the nearby communities comply with applicable national regulatory requirements.
The company has established the SOP - Rules and Procedures for Fire Safety Management. Each facility/building is 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. No large volume of organic solvents is stored on site. The volume of biomass stored on site is relatively small (only for 2~3 days’ consumption) and smoke detectors and two automatic water cannons are installed in the biomass warehouse. An EPR plan developed by QHB is in place and the joint-response mechanism has been established. The nearest fire brigade is about 3km away from QHB facility.
Security personnel: The Company employs unarmed security guards to secure its premises at its operating facilities. The EHS Department is responsible for the security management of the company facilities. There have been no known security or fire incidents since the start of operations at the QHB facility.
