Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• PRC regulations on the administration of local governments restrict the Group’s financing model.
• The Group’s business operations require substantial capital outlay and failure to obtain sufficient capital resources on acceptable terms or in a timely manner may adversely affect its business and prospects.
• The Group faces risks associated with contracting with public bodies.
• The Zhenjiang Municipal Government and Zhenjiang SASAC can exert significant influence on the Group, and as a result, the Group may not be able to always make decisions, take actions or invest or operate in businesses or projects that are in its best interests.
• The Group has historically experienced volatile and negative net investing cash flows.
• Significant indebtedness may restrict the Group’s business activities and increase the Group’s exposure to various operational risks.
• Restrictive covenants contained in the bank loans and credit facilities of the Group may limit the Group’s ability to incur additional indebtedness and restrict its future operations, and failure to comply with these restrictive covenants may adversely affect its liquidity, financial condition and results of operations.
• Significant inventories and accounts receivables may affect the Group’s liquidity and restrict the Group’s business activities.
• The Group operates in multiple businesses through a number of subsidiaries and associated companies, and this business structure exposes the Group to challenges not faced by companies with a single or small number of businesses.
• The Group’s business operations are subject to extensive regulation at various levels of government, and any failure to comply with applicable laws, rules and regulations, including obtaining any necessary qualifications, permits or approvals for its operations may adversely affect the Group.
• The Group may cease to enjoy government subsidies and grants, the loss of which, or a reduction in which, could substantially reduce the Group’s profits.
• The Group’s results of operations may be susceptible to the material fluctuations of interest rates.
• The Group may not successfully implement its growth strategy.
• Any failure to maintain an effective quality control system could have an adverse effect on the Group’s business and operations.
• The insurance coverage of the Group may not adequately protect it against all operational risks.
• The Group is subject to various environmental, safety and health regulations in the PRC and any failure to comply with such regulations may result in penalties, fines, governmental sanctions, proceedings or suspension or revocation of its licences or permits.
• The Group faces risks related to force majeure events, natural disasters, health epidemics, pandemics and other outbreaks, such as the outbreak of COVID-19, which could significantly disrupt its business operations.
• The Group may not be able to fully detect money laundering and other illegal or improper activities in its business operations on a timely basis.
• The Group’s businesses may be adversely affected if it is unable to retain and hire qualified employees.
• The Group may not be able to detect and prevent fraud or other misconducts committed by its former or current employees, representatives, agents, customers or other third parties.
• The Group is exposed to litigation risks.
• The Group relies heavily on information technology systems for its business and any information technology system limitations or failures could adversely affect its business, financial condition and results of operations.
• The Group engages in related party transactions from time to time, which may create potential conflicts of interest.
• The Group is subject to joint venture risks.
• There are risks associated with any material acquisitions by the Group in the future.

Mitigation Strategies

• The Group should rely on the cash flow generated from its operations and external borrowings for financing its operating activities and to satisfy its cash needs for servicing its outstanding indebtedness.
• The Group will continue to require additional capital resources to carry out its municipal construction projects.
• The Group believes that its capital requirements and its reliance on external financing will continue to increase considering its existing cash needs to finance business operations and refinancing of existing indebtedness.
• As at 31 December 2020, the Group had credit facilities in a total amount of approximately RMB38,048.2 million, of which approximately RMB12,038.4 million had not been utilised, which accounted for 31.6 per cent. of the total amount of credit facilities.
• As at 31 December 2020, the Group had obtained all the outstanding consents and waivers from the lenders under relevant financing contracts, which are required in connection with the issue of the Bonds and the performance of its obligations in relation thereto.
• The Group maintains insurance policies that provide different types of risk coverage, which the Group believes to be consistent with the relevant law and industry and business practice in the PRC or elsewhere.
• The Group has adopted policies and procedures aimed at detecting and preventing the use of its business platforms to facilitate money laundering activities and terrorist acts.
• The Group has established a sound and effective corporate governance structure which is in line with modern corporate governance practice.
• The Guarantor has set up five departments (namely the general management department, strategic development and operation department, internal compliance and supervisory department, accounting management department and finance and operation department) to oversee different aspects of the Group’s daily operations.
• The Group has established comprehensive risk management and internal control systems.
• The Group conducts daily and periodic safety inspections.
• The Guarantor conducts comprehensive examinations at least twice for every quarter and its subsidiaries conduct comprehensive examination at least once a month.
• The risk management committee ensures that the Group’s daily operation complies with applicable laws and internal risk control mechanisms.
• The Group has established a comprehensive internal control system, including financial management, state-owned asset management, budget management, project fund management, external guarantee management, remuneration management, safety management, investment and financing management and related party transaction management and set up certain internal procedures relating to information disclosure and emergency.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Economic Performance
• Anti-corruption
• Energy
• Training and Education
• Occupational Health and Safety
• Local Communities

Environmental Achievements

• Implemented energy-efficient measures such as LED lamps and controlled use of air conditioners and heaters; Initiated recycling of waste batteries and digitalization efforts to go paperless.

Social Achievements

• Participated in over thirty community initiatives providing free dental consultations and treatments; Offered internship programs for 30 students; Provided an average of 12.36 hours of training per employee; Maintained zero workplace injury or fatalities.

Governance Achievements

• Implemented a Conflict of Interest policy and a whistleblowing mechanism; Conducted annual compliance training for all employees; Zero whistleblowing reports and reported incidents of corruption in FY2022.

Climate Goals & Targets

Environmental Challenges

• Significant operational losses due to the closure of hospitals and dental polyclinics for a total of 844 business days because of China's zero-COVID policy; Decrease in demand for products and services; Revenue decreased by 12.8%.

Mitigation Strategies

• Maintaining cost discipline and maximizing operational efficiency; Resumed operations as usual since January 8, 2023; Positive outlook on China's economic recovery.

Supply Chain Management

Responsible Procurement

• Group’s Procurement Policy; Regular assessment of key suppliers against sustainability criteria; Stringent quality requirements; Ensuring suppliers are registered with appropriate regulatory bodies.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Universal Standards 2021

Awards & Recognition

• Honorary banner from the Shuangxing Community Committee (Panjin Aoxin Stomatological Hospital); President’s Certification of Commendation (COVID-19) (Acumen)

Environmental Metrics

ESG Focus Areas

• Good Health and Wellbeing
• Climate Action
• Gender Equality
• Industry, Innovation and Infrastructure
• Responsible Consumption and Production
• Clean Water and Sanitation
• Quality Education

Environmental Achievements

• Reduced energy intensity by 35% compared to 2018
• Reduced GHG intensity by 44% compared to 2018
• Reduced waste intensity by 40% compared to 2018
• 38% of electricity consumed was from renewable sources
• Signed a ten-year VPPA for solar power matching electricity needs across Switzerland and the European Union
• Secured a renewable power purchase agreement in China

Social Achievements

• Established a central platform of training opportunities for employees
• Devised a multi-year roadmap to increase women in management roles to 35% by 2035
• Reduced employee turnover from 12.8% in 2022 to 10.5% in 2023
• Employees gave over 26,300 hours of volunteering to local communities

Governance Achievements

• Integrated ESG targets into executive compensation and global performance-based rewards since 2022
• Adopted Human Rights Principles
• Initiated a formalized human rights impact assessment process

Climate Goals & Targets

Environmental Challenges

• Climate change related physical risks (extreme weather, water scarcity)
• Climate change related transition risks (regulatory changes, carbon pricing)
• Supply chain risks (ESG risks from suppliers, disruptions)
• Water scarcity in certain regions
• Managing waste from single-use technology (SUT)

Mitigation Strategies

• Comprehensive climate plan to reduce Scope 1 and 2 emissions by more than 40% by 2030
• Supplier decarbonization program to reduce Scope 3 emissions
• Supplier Code of Conduct with ESG requirements
• Water reduction program focusing on reducing demand and preventing scarcity
• Waste reduction and circularity principles (avoid, reduce, recycle)
• Business continuity plans to address extreme weather events
• Corrective action plans with suppliers to address ESG gaps

Supply Chain Management

Supplier Audits: 72% of suppliers assessed for environmental impacts (2023); 3,469 suppliers assessed for social impacts (2023)

Responsible Procurement

• Supplier Code of Conduct with ESG requirements
• Responsible Sourcing Standard Operating Procedure
• Supplier Sustainability Risk Evaluation Framework
• Supplier Decarbonization Maturity Evaluation Framework
• EcoVadis online questionnaires
• TfS or PSCI on-site audits
• Integrity Next self-assessments

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Water scarcity
• Heat stress
• Flooding

Transition Risks

• Carbon pricing
• Regulatory changes
• Energy price increases

Opportunities

• Renewable energy sourcing
• Energy efficiency improvements
• Resource efficiency

Reporting Standards

Frameworks Used: GRI, SASB, TCFD, UNGC

Certifications: ISO 14001, ISO 45001

Third-party Assurance: KPMG AG

UN Sustainable Development Goals

• SDG 3
• SDG 5
• SDG 6
• SDG 9
• SDG 12
• SDG 13

Lonza's initiatives are aligned with these SDGs to create a meaningful sustainability strategy and program relevant to its business, society, and planet.

Sustainable Products & Innovation

• Recycled solvents
• Automated cleaning in place (CIP) with inline dilution

Awards & Recognition

• EcoVadis silver medal