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All documentation, records and primary information collected by the December visitconfirmed that there is no outstanding land acquisition and compensation related legacyissues as a result of land acquisition; all received information confirmed that there is nooutstanding compensation disbursement to villagers or related legacy issues. No issues related to gender were identified. It was known that the EIP location do nothave existing gender issue or concern, and audit didn’t reveal issues that related togender in the process of land acquisition, compensation and disbursement. SUS TaiyuanCompany have 64 full-time staffs, among them, 12 female staffs (19%) occupyingtechnical position. Meanwhile, among the 438 workers employed by the contractors atthe site during construction, 30 site workers (6.8%) are female; there are 10% (42 workers)of all workers undertake managerial work, 82% (360 workers) undertake technical work,while the rest 8% (36 workers) undertake non-technical work. Public consultation and information disclosure prior to land acquisition were regarded assufficient by villagers; all interviewed villagers reported their knowledge about the landacquisition, process, compensation rate and disbursement. The EIP is not located in an ethnic minority area, Dongnanshe village is not identified asan ethnic minority village nor there was any villager individual identified belonging to anyethnic minority group.Social impacts from construction nuisances The project is located in the EIP, within Dongnanshe village area, the closest villageresidential area is about 360 meters from the project site. Key measures to minimizeconstruction impacts have been developed by the project; measures include dustsuspension such as sprinkling the road and covering dirt grounds. Other constructionnuisances (such as noise, vibration) are not expected to impact the local communitybased on longer distance to the village. Grievance mechanism for this project follows the existing social structure. Any grievancefrom villagers either goes to the village office or grievances can reach the project companyfirst and will then be escalated to government agencies following the ladder of village,town and city. Interviewed SUS Company and TSAB representatives all expressed thatthere are no known grievances related to the land acquisition, compensation nor to theconstruction that is significant. As a good practice, SUS WTE prioritized job opportunities to villagers for positions suchas security and operation workers. SUS Taiyuan Company have 64 full-time staffs,among them, 3 technicians come from affected Dongnanshe village. SUS Taiyuan WTECompany hired two service companies, 61% of onsite staffs (13 workers) come fromaffected Dongnanshe village. Meanwhile, about 7% of the entire workforce in theconstruction team comes from Dongnanshe village.Public health and safety (at construction and operation stage) - Stakeholder engagement There has been growing concerns from the general public regarding WTE projects, suchas pollution and its control, public consultations were conducted during the preparation ofdomestic EIA. However, there are no specific requirements by the government for theWTE project during construction stage and engagements are therefore mainly with localaffected community regarding the land acquisition and compensation. Periodicstakeholder engagement and information disclosure (including both social andenvironmental impacts, mitigation measures) is therefore recommended to be developedto address key concerns from the general public and provide material and meaningful4

information to local community. Key social impacts associated with operation are transportation corridor (traffic and odorcontrol), and air emission (in particular, odor control and hazard air emission). Thoseissues have been identified in the EIA with specific management measures to minimizethe impacts. SUS Taiyuan WTE Company should work with local government, such asTSAB, and village committee to present relevant information to the communities duringstakeholder engagement activities with local communities’ understandable manners. Transportation – modern closed transportation truck will be used to transport municipalwaste to minimize the odor. Transportation will not use any village road nor run throughvillages.5

1.INTRODUCTION1.1 BackgroundShanghai SUS Environment Co., Ltd. (SUS), majority owned by CITIC Private Equity, is anintegrated environmental protection solution provider. Its operations are mainly focused on fivesectors: Eco-Industrial Park-investment, operation and maintenance of municipal solid waste-toenergy (WTE) plant, the facilities for sludge, medical waste, kitchen waste and constructionand electronic waste, etc.Waste-to-Energy EPC-SUS started with introduction of grate type incineration technologyfrom Hitachi Zosen Corporation. SUS supplies waste incinerator equipment and EPCservices to Waste-to-Energy developers;Soil Remediation-environmental services for land remediation and re-development; andBiomass utilization of agricultural and forestry waste.SUS has signed a concession agreement on MSW treatment with Taiyuan Municipal SanitationAdministration Bureau in January 2017. During the concession period, Taiyuan MunicipalSanitation Administration Bureau (TSAB) guarantees no less than 1,000,000 t/a (equals to 3,000t/d) municipal solid waste. SUS Taiyuan Waste to Energy Co., Ltd, the project company, isdeveloping the 80-megawatt (MW) Taiyuan Waste-to-Energy Power Project (the subproject),located inside the Taiyuan Circular Economy and Sanitation Industry Demonstration Park (theEIP), Dongnanshe Village, Qingxu County, Taiyuan City, Shanxi Province of People’s Republicof China (PRC). During the concession period SUS Taiyuan WTE power plant will provide powerto the grid and steam to the sludge and kitchen waste treatment facilities in the EIP.SUS has requested corporate financing from Asian Development Bank (ADB) and is planning toinclude the Taiyuan WTE power plant in the portfolio of WTE plants to be financed by ADB. Theproject is categorized as B for environment and C for involuntary resettlement and IndigenousPeoples based on SUS’ ESMS (Appendix 1). SUS enhanced its ESMS to comply with therequirements of ADB’s Safeguard Policy Statement (2009) (SPS).In order to meet the requirements of SUS’ enhanced ESMS, a stand-alone audit of environmentaland social compliance was conducted to identify past or present concerns related to risks andimpacts on the environment, involuntary resettlement and Indigenous Peoples.1.2 ObjectivesThe objectives of this environmental and social compliance due diligence are to: Determine whether actions and activities during the pre-construction, construction andoperation phases were and are in compliance with the requirements of SPS, and SUS’senhanced ESMS, applicable national laws and regulations and good international industrypractices; andPropose a corrective action plan (CAP) that sets out the actions that the subproject needs toimplement and/or supplemental studies to be conducted in order to achieve compliance withthe requirements of SPS, SUS’s enhanced ESMS, applicable national laws and regulationsand good international industry practices.6

1.3 MethodologyThe methodologies adopted for the environmental and social due diligence included the followingactivities: (i) desk review and discussion with SUS manager on SUS existing EnvironmentalHealth and Safety System (EHSS); (ii) a review of relevant national laws, regulations andguidelines related to environmental, social impact assessment, land acquisition andcompensation, ethnic minorities, public consultation and participation; (iii) interviews with the SUSWTE management and construction managers, EHS staff from contractor, constructionsupervision company, environmental supervision company, solid waste transfer station, TaiyuanMunicipal Environmental Protection Bureau (EPB), representatives from villages nearby andMunicipal Sanitation Administration Bureau (TSAB); and (iv) site inspection. The documentaryreview and interviews were carried out during the course of the site visit with an aim of assessingthe on-site environmental management, labor and working conditions, land acquisition adcompensation, indigenous peoples, as well as gender and development aspect of SUS TaiyuanWTE. A site visit to the subproject area was conducted in 10 to 12 December 2018. The deskbased review of project documentation included the following key documents: Project Environmental Impact Assessment (EIA) report, July 2017;Project Feasibility Study Report (FSR), July 2017;Project Preliminary Design (text part); April 2018;Soil and Water Conservation Plan, August 2017;Cultural Relics Investigation Survey, December 2016;Flood Risk Assessment, October 2016;Earthquake Risk Assessment, October 2016;Opinions on Connection to Grid, July 2016;Modification of Taiyuan EIP Detailed Plan, June 2018;Draft PPP Concession Agreement (table of content and environmental and social relatedpages), January 2017;Wastewater treatment agreement, March 2017;Tentative fly ash disposal agreement, January 2017;SUS Taiyuan EHS Procedures for Construction, January 2018;Safety Pre-Assessment, February 2017;Occupational health risk assessment, April 2017;Land acquisition contract with Dongnanshe village;Land free use contract with the TSAB.A list of personnel interviewed is provided Appendix 2.2.COMPLIANCE FRAMEWORKADB’s SPS requires an environmental and/or social compliance audit, including on-siteassessment, for projects or subprojects involving facilities that already exist or are underconstruction to identify past or present concerns related to impacts on the environment,involuntary resettlement, and Indigenous Peoples. The audit includes an evaluation of thesubproject’s compliance with the following applicable environmental and social requirements:7

2.1 ADB Safeguard Requirements ADB’s Safeguard Policy Statement, 20093. The ADB’s SPS sets out the policy objectivesscope and trigger, and principles for following three key safeguard areas: (i) environmentalsafeguard; (ii) involuntary resettlement safeguard; and (iii) indigenous peoples safeguard.The objective and scope of above these key areas are briefly described below. Safeguards Requirement 1 (SR1) on Environment. SR1 ensures the environmentalsoundness and sustainability of subprojects and supports the integration ofenvironmental considerations into the subproject decision-making process.Environmental safeguards are triggered if a subproject is likely to have potentialenvironmental risks and impacts. During the design, construction, and operation of asubproject, SUS will apply technologies and practices consistent with international goodpractice, as reflected in internationally recognized standards such as the WB’s EHSGuidelines and IED 2010/75/EU. Safeguards Requirement 2 (SR2) on Involuntary Resettlement. SR2 requiresavoidance or minimization of involuntary resettlement by exploring subproject designalternatives; to enhance, or at least restore, the livelihoods of all displaced person(s) inreal terms relative to pre-project levels; and to improve the standards of living of thedisplaced poor and other vulnerable groups. The involuntary resettlement safeguardscover physical displacement (relocation loss of residential land or loss of shelter) andeconomic displacement (loss of land assets, access to assets, income sources, or meansof livelihoods) because of involuntary restrictions on land use or on access to legallydesignated parks and protected areas. It covers them whether such losses andinvoluntary restrictions are full or partial, permanent or temporary.Safeguards Requirement 3 (SR3) on Indigenous Peoples. SR3 requires the designand implementation of subprojects in a way that fosters full respect for indigenouspeoples’ identity, dignity, human rights, livelihood systems, and cultural uniqueness asdefined by the indigenous peoples themselves so that they: (i) receive culturallyappropriate social and economic benefits, (ii) do not suffer adverse impacts because ofsubprojects, and (iii) can participate actively in subprojects that affect them. SR3 istriggered if a subproject directly or indirectly affects the dignity, human rights, livelihoodsystems or culture of indigenous peoples or affects the territories or natural or culturalresources that indigenous peoples own, use, occupy, or claim as an ancestral domain orasset.ADB’s Policy on Gender and Development (GAD) (1998)4. ADB’s policy on GAD includedmainstreaming as a key strategy in promoting gender equity. With respect to subprojects, theGAD policy requires: gender analysis: to assess systematically the impact of a subproject on men and women,and on the economic and social relationship between themgender planning: to formulate specific strategies that aim to bring about equalopportunities for men and cy-statement4 velopment8

mainstreaming: to consider gender issues in all aspects of corporate’s operations,accompanied by efforts to encourage women’s participation in the decision-makingprocess in development activities ADB’s Social Protection Strategy (2001) 5 . ADB’s Social Protection Strategy (2001)requires the company, its contractors and subcontractors to comply with applicable labor lawsin relation to the subproject and take measures to comply with the core labor standards. Corelabor standards include a set of four internationally recognized basic rights and principles atwork: (i) freedom of association and the effective recognition of the right to collectivebargaining; (ii) elimination of all forms of forced or compulsory labor; (iii) effective abolition ofchild labor; and (iv) elimination of discrimination in respect of employment and occupation.SUS, its contractors and subcontractors will also endeavor to employ local labor wheneverpossible and take measures to comply with ADB’s Social Protection Requirements. ADB’s Access to Information Policy (2019)6. The objective of the Access to InformationPolicy is to promote stakeholder trust in ADB and to increase the development impact of ADBactivities. It requires transparency, accountability, an

Environmental and Social Compliance Audit Report Project Number: 51399-001 April 2019 PRC: Eco-Industrial Park Waste-to-Energy Project Prepared by Guangzhou GreenWorld Company Limited for the Asian Development Bank. This environmental and social compliance audit report is a document of the borrower. The views