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
Environmental and Social Management System:
EF currently maintains two E&S policies addressing health, safety, and quality. While these policies establish measures for workplace safety and compliance with applicable health standards, they do not fully meet IFC PS1 requirements and do not comprehensively address broader environmental and social dimensions, including labor and working conditions, community health and safety, and biodiversity management. In line with ESAP #1, EF will update the its E&S policy framework to incorporate explicit provisions on social aspects (e.g., non-discrimination and equal opportunity, prohibition of forced and child labor, prevention of gender-based violence and harassment, and measures for the protection of community health and safety).
EF holds ISO 9001 certification for its Quality Management System. EF’s current ESMS, adopted from Antara, has a strong focus on OHS procedures. For the project, EF has contracted the EPC contractor to develop the Environmental, Health, and Safety Management System (EHSMS) for the new plant. In line with ESAP #2, EF will use this EHSMS—together with other required documents and management plans/permits—to update and implement its ESMS to align with IFC Performance Standards (IFC PSs), the World Bank Group Environmental Health and Safety (WBG EHS) Guidelines for Integrated Steel Mills (2007), and the WBG EHS General Guidelines (2007).
Identification of Risks and Impacts:
EF holds an EIA approval originally issued in 1991 to Antara by the Department of Environment (DOE). This approval was recently amended by DOE to transfer responsibility to EF and to introduce an additional requirement for an Environmental Monitoring Plan (EMP) covering dismantling, construction, and operation stages to ensure continued regulatory compliance. EF has engaged a qualified consultant to prepare the EMP for submission to DOE prior to the start of project construction. The EMP will address conditions in the original EIA approval, new DOE requirements, and other applicable regulations, following the Guidance Document for Preparation and Submission of EMP. Upon DOE approval, EF will implement the EMP and provide regular compliance reports to DOE. In line with ESAP #3, EF will develop and implement a construction stage Environmental and Social Management Plan (ESMP) including a construction stage ESMS to supplement the EMP and will incorporate mitigation, management, and monitoring requirements aligned with IFC PSs and applicable WBG EHS Guidelines.
Organizational Capacity and Competency:
EF has established a governance framework to manage environmental and OHS matters. This framework includes a Safety, Health, and Environment (SHE) Committee chaired by the Plant Director and supported by the Safety Manager. EF implements an E&S training program that prioritizes OHS. The program covers safety induction, hazard identification, risk assessment, permit-to-work procedures, and safe work practices for shop floor personnel. In line with ESAP #4, EF will strengthen the capacity/competency of its E&S function with the recruitment of an E&S manager/officer who will report to senior management and will have the responsibility of overseeing the development and implementation of the ESMS, addressing PS-related gaps as identified through ESAP monitoring, regularly monitoring the E&S performance and reporting to senior management, developing and implementing PS-compliance E&S policies and programs, and establishing internal monitoring and auditing processes as defined in the ESMS. EF will provide the E&S management function with annual budgetary allocations (E&S CAPEX/OPEX) to implement the E&S actions, including those in this ESAP, and to support continuous improvement of E&S performance.
Monitoring and Review
EF will implement an EMP and associated procedures to ensure compliance with local EIA requirements and the amended EIA approval issued by the DOE. The EMP will cover internal and third-party monitoring across all relevant SHE aspects, including air emissions and Continuous Emissions Monitoring Systems (CEMS) verified by DOE, scheduled waste management, industrial effluent treatment, ambient air quality, and boundary noise levels. Monitoring results will be reported to the Plant Director and periodically submitted to DOE. Further, where required, additional measures will be implemented as part of the operation stage ESMS (ESAP #2) and construction stage ESMP (ESAP #3) to align with IFC Performance Standards.
Emergency Preparedness and Response
EF has adopted an Emergency Response Plan (ERP) (November 2022), originally developed by Antara, which covers a range of scenarios and sets out emergency preparedness and response procedures Currently, no onsite medical personnel are available; emergencies are referred to nearby clinics or hospitals that are around 5 km from the plant facility. In line with ESAP #5, EF will update the ERP to incorporate emergency scenarios that reflect the new facility layout and revised production arrangements and address national regulatory requirements.
PS 2 – Labor and Working Conditions
Human Resource Policy and Management:
As of October 2025, EF employs 52 staff (37 men and 15 women) and engages contracted workers. The workforce includes migrant workers (2 from China and 12 from Nepal) and around 60 third-party workers employed by local contractor from Bangladesh, Pakistan and Nepal engaged in the dismantling work. Female staff primarily occupy office and administrative positions. The workforce is expected to increase to approximately 900 employees once the plant is fully operational.
EF provides off-site accommodation free of charge for employees and at nominal rent for third-party workers. As per IFC’s onsite observation, the employer-provided accommodation is partially aligned with the IFC/EBRD Worker Accommodation Guidelines try Practice (GIIP). In line with ESAP #6, EF will upgrade its employer-provided worker accommodation to comply with IFC/EBRD Worker Accommodation Guidelines by installing fire detection systems and fire extinguishers, establishing clear evacuation routes and emergency signage, improving waste disposal systems to meet hygiene standards, and verifying compliance through inspection and documentation.
EF has established Human Resources (HR) policies that address employee benefits, recruitment, training and development, labor relations, working conditions, prevention of sexual harassment, complaint management, equal opportunity, and non-discrimination. All new employees receive an HR policy briefing during onboarding and sign acknowledgment forms. Contracted workers are governed by the terms of their respective contracts or purchase orders. EF does not currently have a collective bargaining agreement in place. The HR department is responsible for managing internal grievances, including those related to sexual harassment and gender-based violence. EF currently relies on informal channels such as daily meetings, shift meetings, and verbal communication. In line with ESAP #7, EF will update its HR Management System in line with Malaysian regulations and IFC PS 2, which include: i) grievance mechanism with discreet and confidential reporting channels, time-bound steps, escalation and appeals mechanisms, confidentiality and non-retaliation commitments, procedures for monitoring, analysis, and internal reporting to senior management and also cover contract workers; ii) provision for collective bargaining/freedom of association; iii) extension of similar protections to third party workers; iv) data privacy stipulation and clear statement of migrant workers’ rights; v) requirements for the prevention and management of gender-based violence.; and (vi) alignment of leave, working hour and notice period policies with applicable labor laws.
Workers Engaged by Third Parties
The number of contractor employees engaged in dismantling, construction, and operational activities varies according to the scope of outsourced work, such as equipment demolition, machinery maintenance, and catering services. Third-party workers are recruited from local Malaysian provinces and other countries, including Bangladesh, Nepal, Pakistan and China. EF applies E&S criteria during contractor pre-qualification and incorporates HR, E&S, and OHS clauses into contractual agreements. In line with ESAP #8, EF will establish a mechanism under the updated HR policies to ensure fair payment including overtime wages and acceptable working conditions for third-party workers, measures to address language barriers for migrant workers, and implement ad-hoc and scheduled audits to monitor contractor compliance with HR, E&S, and OHS requirements, report non-compliance, and enforce corrective actions through a documented follow-up process.
Occupational Health and Safety:
For dismantling activities, EF applies HSE controls, including safety briefings, permit-to-work procedures, hazard identification, risk assessment and control (HIRAC), onsite monitoring, and daily shop-floor meetings. The HIRAC procedure covers structured safety induction with documented acknowledgment, covering PPE requirements, permit-to-work protocols for high-risk activities (working at height, confined space, excavation, high voltage, hot work, ionizing radiation), and safe work procedures under the OHS program. On-site oversight includes daily toolbox talks led by the Safety Officer to reinforce OHS compliance, daily supervision by Eden Flame’s Safety Manager, and additional Safety Supervisors from CISDI/MCC. Use of personal protective equipment (PPE) needs to be improved and unsafe conditions, including exposed live cables, excessive noise, and dust need to be addressed. As part of ESAP #9, EF will establish a comprehensive OHS management system tailored to both construction and operation and maintenance (O&M) phases. At a minimum, this system will include an OHS policy and legal compliance register, hazard identification and risk assessment, an accident and incident registry, procedures for daily and periodic supervision and control (including process safety management, permit-to-work, lockout/tagout, machine guarding, chemical and hazardous materials management, PPE provision, and occupational health programs with medical surveillance for noise, dust, and chemical exposure), as well as task-specific procedures, training programs, and monitoring protocols.
Supply chain
EF sources scrap metal from Malaysian collectors and regional suppliers (Singapore, Japan) based on market conditions, supplemented by Esteel subsidiaries and on-site demolition scrap. Malaysian import standards require licenses and government monitoring. In line with ESAP #10, EF will develop a supply chain management system in line with IFC PSs. This will include screening and mapping suppliers to identify risks such as child labor, forced labor, and poor OHS practices. EF will only source from suppliers that follow its Supplier Code of Conduct. All scrap metal contracts will include minimum requirements: compliance with laws and IFC standards, prohibition of child and forced labor, adherence to OHS and environmental rules, cooperation with monitoring and audits, and acceptance of penalties for non-compliance, including suspension or termination.
PS 3 – Resource Efficiency and Pollution Prevention
Resource Efficiency and Greenhouse Gas Emissions:
The plant utilizes electricity, water, diesel, coke and natural gas. Once the plant is operational, energy consumption is expected to decrease by approximately [30] Kilowatt-hours (kWh) per ton of product compared to previous operation. Electricity will be sourced from the national power grid. The combined power consumption for the EAF and rolling processes is estimated at approximately [470 kWh] per ton of processed product, which is consistent with the WBG EHS Guidelines for Integrated Steel Mills (2007).
Natural gas will be used for billet reheating, scrap preheating, and ladle/tundish preheating, with anticipated reductions in consumption of 10 Sm³/ton for natural gas and 7 Nm³/ton for oxygen compared to previous operations.
The plant will primarily use water for cooling critical components of the EAF (furnace and shell roof), slag quenching, descaling steel products, and cooling the rolling mills. Daily make-up water consumption is expected to be 2,000 m³, with approximately 8,000 m³ of water recycled each day. EF utilizes the industrial centralized municipal water systems for potable and process water. Water use per ton of processed product is estimated at 8 m³/ton which is aligned with the WBG EHS Guidelines for Integrated Steel Mills (2007). For water conservation, EF will construct a closed-loop Recycled Water Treatment Plant (RWTP), to treat, recycle, and reuse process water in both the steel making plant and hot rolling mills.
The project is expected to generate GHG emissions (Scope 1 and 2) of about 247,000 tons of CO2eq/annum and 0.45 tCO2e/ton of product. In line with ESAP #11, EF will develop procedure to quantify GHG (Scope 1 and Scope 2) emissions annually in accordance with internationally recognized methodologies and good practices and report to IFC.
Pollution prevention:
During plant operation, the primary sources of air emissions will include fugitive dust from scrap processing, process emissions from the EAF, fumes generated during molten metal reheating in the LF, and combustion emissions from natural gas used in reheating furnaces for rolling mills. To manage these emissions, the project will install a dedusting plant designed to ensure particulate matter emissions do not exceed 30 mg/Nm³. In line with ESAP #12, EF will put in place an air emissions and ambient air quality monitoring program that complies with the WBG EHS Guidelines for Integrated Steel Mills (2007), and the WBG EHS General Guidelines (2007). If monitoring results indicate adverse impacts on the ambient air quality, additional air assessment will be required.
There is potential risk of soil contamination in unconcreted areas. In line with ESAP #13, EF will engage a specialized and licensed third party contractor to conduct soil investigations to assess potential risk of legacy soil pollution. Should monitoring results indicate historical soil pollution, EF will implement worker health and safety measures to mitigate direct contact with potentially contaminated soil during construction and operational activities.
Noise during plant operations is expected from various sources, including machinery, metal cutting, rolling operations, and material handling equipment. The operational noise level will be maintained below 65 dB at plant boundary, in alignment with both Malaysian DOE and WBG General EHS Guidelines requirements for industrial areas. The nearest residential community is approximately 300 meters from the plant’s north boundary wall. EF will put in place several measures to reduce noise at source and also install noise barriers above the north boundary wall.
Effluents from EAF and rolling mills are primarily generated from water used in cooling, cleaning, dust suppression, and descaling processes. EF will implement a closed loop water recycling and reuse system, designed to minimize discharge into external drains. Storm water discharge flows through designated manholes into internal drainage before discharge to municipal systems. Sewage will be treated through a sewage treatment plant. Treated sewage will be discharged to the nearest approved discharge point connected to the local authority’s drainage system, in compliance with DOE requirements.
Wastes
Non-scheduled wastes/non-hazardous waste such as EAF slag (approximately 70,000 tpa) and LF slag (approximately 18,000 tpa) will be sold to licensed companies for zinc and iron recovery. Remaining calcium-rich slag will be directed for landfilling or road construction, with periodic quality checks conducted by local universities. Mill scale (approximately 3,000 tpa) generated from hot rolling mills will be managed for resale or recycling of iron oxide.
Scheduled/Hazardous waste includes sludge (approximately 300 tpa) generated from the industrial effluent treatment plant, which will be treated by contracted recyclers. EAF dust (approximately 6,000 tpa) from the dedusting unit, will be collected in silos and sold to authorized recovery companies for zinc extraction or reuse in EAF operations. Domestic waste generated by an estimated 900–1,000 workers will be disposed through municipal systems.
Decommissioned equipment, including old EAF units, rolling mills, LF, CCM, reheating furnaces, and related components, will be resold or disposed of as scrap, depending on condition and market value.
Hazardous Materials Management:
EF maintains designated on-site storage areas for both non-hazardous and hazardous wastes/materials, equipped with secondary containment to prevent soil or water contamination prior to disposal through authorized waste management contractors. All scheduled/hazardous waste generated at the plant will be recorded in the electronic Scheduled Waste Information System (eSWIS), which is accessible to the DOE for monitoring and compliance purposes. In line with ESAP #14, EF will assess the risk of employee exposure to hazardous chemicals and implement risk control measures consistent with the WBG General EHS Guidelines.
PS 4 – Community Health, Safety and Security
Community Health and Safety:
EF’s facilities are located within the Pasir Gudang Industrial Estate, an established industrial zone. Densely populated residential areas, worker accommodations, and the ILP Training College are located approximately 300 meters from the plant boundaries.
The EPC contract establishes QA/QC measures for structural design and construction, including compliance with Malaysian standards, material certification, supervision and inspection protocols, defect remediation, and warranty obligations for the reasonable service life specified in design documents. To align with IFC PSs 1, 2, and 4, in line with ESAP #15, EF will conduct independent Life and Safety reviews prior to design finalization by qualified professionals referencing NFPA standards, with documented corrective action closure before start of construction and sign off by owners engineer post-construction stage prior to commissioning.
The EF security team consists of nine unarmed personnel. In line with ESAP #16, EF will develop a Security Management Plan to define conduct requirements for security personnel, establish procedures for background checks, and implement a grievance mechanism for addressing complaints related to security staff behavior.
No significant labor influx is anticipated during dismantling of obsolete equipment and installation of new plant components. During operations, the workforce is expected to increase from 52 employees to approximately 900, with workers either accommodated in company-provided housing to minimize pressure on local infrastructure or workers commuting from their own residences.
Historically, nearby communities reported dust accumulation in the past during the previous plant operations to the city council. In response, EF installed a barrier along site boundaries towards the communities to reduce dust dispersion to adjacent residential areas. The proposed project’s emission levels at 30 mg/Nm3 is well below the original plant’s emission levels of 50 mg/Nm3. Also, sources of fugitive dust and noise like scrap storage and processing will be undertaken in closed buildings.
Stakeholder Engagement:
EF currently engages with stakeholders through CSR activities and ad-hoc interactions with the Pasir Gudang City Council in response to community complaints or inquiries. In line with ESAP #17, EF will develop a Stakeholder Engagement Plan that includes community mapping, stakeholder identification and analysis, engagement strategies, disclosure of environmental and social information, community notification procedures (including during emergencies), an external grievance mechanism, and clear roles and responsibilities within EF and in coordination with local authorities.
Grievance Mechanism:
In line with ESAP #17, EF will develop a formal grievance redress mechanism and associated procedures in line with IFC Performance Standards. This mechanism will be designed to receive, address, and resolve complaints related to environmental and social issues from internal and external parties.
