Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental Protection
• Product Safety
• Responsible Manufacturing
• Employee Well-being

Environmental Achievements

• Recycling and use of eco-friendly stationery, plus a series of measures to save paper and energy, resulted in more efficient use of resources, as well as reduction of waste.
• Energy saving measures are enforced in the Group’s office and factory premises resulting in reduction of electricity consumption and greenhouse gas emissions.

Social Achievements

• Lung Cheong is also an active participant of the global toy industry’s initiative to continuously improve factory working conditions, commonly referred to as the ICTI CARE process (ICP).
• Employees responsible for overseeing and implementing ethical sourcing practices have received training and our factory-based human resource professionals have received specific instruction regarding the prevention of forced and child labor.

Governance Achievements

• The Company is committed to maintain a high standard of corporate governance practices as set out in the Corporate Governance Code (the “CG Code”) in Appendix 14 of the Listing Rules and the Company has complied with the code provisions set out in the CG Code save for the deviation from code provision A.2.1 which is explained in the relevant paragraphs in this report.
• The Board has established three committees, namely, the Audit Committee, Remuneration Committee and Nomination Committee, to oversee particular aspects of the Company’s affairs.

Climate Goals & Targets

Environmental Challenges

• A challenging market environment, competition to preserve OEM customers without a PRC manufacturing base, relying on Indonesian production facilities.
• Economic uncertainties affecting consumers worldwide, leading to fewer sales of premium-priced items.
• Market fluctuations and economic uncertainties (European sovereign debt crisis) affecting product demand and customer orders.
• Increased competition from electronic and mobile tablets, volatility of raw materials prices, ever-increasing energy costs, weakness of consumer spending, imminent increase in minimum salaries in PRC and Indonesia, fluctuation of Indonesian Rupiah and US dollar leading to increasing production costs.

Mitigation Strategies

• Shifting strategy to strengthen competitive advantages, securing sales with improved average selling prices and margins.
• Developing relationships with customers with strong electronic and plastic toy lines targeted at the lower-priced segment.
• Enriching product mix with new product lines.
• Expanding distribution channels in America and Europe.
• Streamlining production efficiency of the Indonesian plant to lower manufacturing overhead, sourcing, and administrative costs.
• Enhancing productivity by replacing inefficient machines, streamlining workflow, revising work practices, and exploring opportunities for utilizing idle seasonal capacity.
• Investing in business development, allocating financial resources to developing business with leading OEM brands and expanding OBM sales and distribution network.
• Focusing on growing with strategic OEM customers and expanding the base of strategic OBM customers.
• Focusing on research and development of more OBM products and expansion of marketing tactics for Kid Galaxy products.
• Actively looking into possibilities of selective mergers, acquisitions, and investments to expand the Group’s income base.

Supply Chain Management

Responsible Procurement

• Lung Cheong has committed to manufacture our products and comply with the ICP process.
• The Group’s Indonesian factory is registered with ICTI CARE are audited at least annually for compliance to the ICP Code of Conduct.

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Environmental protection
• Product safety
• Responsible manufacturing
• Employee well-being

Environmental Achievements

• Energy saving measures enforced in office and factory premises resulting in reduction of electricity consumption and greenhouse gas emissions.
• Recycling and use of eco-friendly stationery, plus a series of measures to save paper and energy, resulted in more efficient use of resources, as well as reduction of waste.

Social Achievements

• Active participant in the global toy industry’s initiative to continuously improve factory working conditions (ICTI CARE process).
• Indonesian factory registered with ICTI CARE and audited annually for compliance.

Governance Achievements

• Established a working group to spearhead ESG activities, chaired by an Executive Director.

Climate Goals & Targets

Environmental Challenges

• Lower Kid Galaxy sales due to continued weakness in the specialty toys market in North America and international markets.
• Increase in overall labour and staff costs in Indonesia due to annual increment of the Indonesian minimum salary.
• Expected reduction in gross margin in the toy manufacturing segment due to increased depreciation and labour costs.

Mitigation Strategies

• Business reengineering to transform the Group from a pure toy manufacturer into a multiple revenue streams group.
• Expansion of production facilities in Indonesia to increase capacity and meet orders.
• Review of OEM business segment to assess whether further capital investments are justifiable.

Supply Chain Management

Climate-Related Risks & Opportunities

Awards & Recognition

• iF Design Award 2015 (Haier branded Infant formula preparation kit and steam electric sterilizer)

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced GHG Scope 2 emission in 2019 mainly due to decreased revenue and effective electricity saving strategies.
• Decreased non-hazardous waste in 2019 mainly due to decreased revenue and effective waste reduction strategies.
• Decreased energy consumption in 2019 mainly due to decreased revenue and effective electricity saving strategies.
• Decreased water consumption in 2019 mainly due to effective water saving policies.

Social Achievements

• Established employment and labour practices in compliance with relevant laws and regulations.
• No material violation on laws and regulations related to employment, occupational health and safety, and product responsibility.
• Zero work-related injuries and fatalities.
• Implemented a comprehensive safety control system.
• Provided employees with competitive remuneration packages, including annual discretionary bonuses and a share option scheme.
• Organized various development and training programs for employees.

Governance Achievements

• Established an anti-corruption control system in compliance with relevant laws and regulations.
• No concluded legal cases regarding corrupt practices.
• Established an anonymous whistle-blowing mechanism.
• Formed an audit committee and hired external lawyers and auditors.

Climate Goals & Targets

Environmental Challenges

• Climate change posing a risk to business.
• Maintaining a healthy and safe working environment for employees.
• Ensuring suppliers fulfill their responsibilities and meet standards.
• Protecting intellectual property rights.
• Upholding high standards of ethics and integrity in all business operations.

Mitigation Strategies

• Managing carbon footprint by minimizing energy consumption.
• Implementing policies and measures on energy saving to reduce GHG emission.
• Implementing a comprehensive safety control system and providing safety training.
• Undertaking regular supplier performance reviews.
• Formulating internal policies and guidelines on supply chain management.
• Establishing an anti-corruption control system and whistle-blowing procedures.

Supply Chain Management

Responsible Procurement

• Fair and unbiased selection process based on product quality, costs, capability, social and environmental responsibility.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Appendix 27 to the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited, Global Reporting Initiative (GRI)

Awards & Recognition

• Quality Tourism Services Scheme (QTS) Accredited Shops
• Hong Kong Top Brand
• Caring Company

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced non-hazardous waste generation by 61% (0.26 tonnes in 2021 vs 0.67 tonnes in 2020)
• Implemented paper usage monitoring system and adapted smaller size printed labels instead of A4 paper for HKTV Mall sales packaging.

Social Achievements

• Zero work-related injuries and fatalities in 2021.
• Organized training programs on industrial development trends, market knowledge, and corporate governance.

Governance Achievements

• Established an ESG Working Group reporting directly to the Board.
• Conducted materiality assessment to understand stakeholder expectations on ESG issues.
• Provided 9 hours of anti-corruption training to 9 directors and staff.

Climate Goals & Targets

Environmental Challenges

• Increased GHG emissions in 2021 due to increased operating activities.
• Potential damage to office equipment from extreme weather events.
• Changes in precipitation patterns and extreme weather variability disrupting business productivity.
• Increased costs from carbon-pricing mechanisms and stricter environmental regulations.
• Potential litigation risk due to climate change regulations.
• Need to invest in low-carbon, energy-saving technologies to maintain competitiveness.

Mitigation Strategies

• Developed a natural disasters emergency plan.
• Developed an action plan to reduce GHG emissions and energy consumption.
• Planned improvements, retrofits, relocations to increase climate resilience.
• Conducted a carbon footprint survey to prioritize energy reductions.
• Engaged with local/national governments and stakeholders on local resilience.
• Monitored updates of environmental laws and regulations.
• Implemented GHG emissions calculations in advance.
• Invested in innovations of energy-saving products.
• Examined the feasibility of applying low-carbon technologies.
• Prioritized climate change in market decisions.
• Organized public relations activities to address climate change concerns.

Supply Chain Management

Responsible Procurement

• Fair and unbiased selection process based on product quality, costs, capability, social and environmental responsibility.

Climate-Related Risks & Opportunities

Physical Risks

• Increased severity and frequency of extreme weather events.
• Changes in precipitation patterns and extreme weather variability.

Transition Risks

• Increased fossil fuel prices due to carbon pricing.
• Increased compliance costs due to tightened environmental regulations.
• Litigation risk.
• Need for low-carbon technologies.

Opportunities

• Resource efficiency gains.
• Use of lower-emission energy sources.
• Development of climate adaptation and insurance risk solutions.
• Access to new markets.
• Participation in renewable energy programs.

Reporting Standards

Frameworks Used: Appendix 27 to the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited, GRI

Third-party Assurance: APAC Compliance Consultancy and Internal Control Services Limited

Awards & Recognition

• Quality Tourism Services Scheme (QTS) Accredited Shops (Nam Pei Hong)
• Hong Kong Top Brand (Nam Pei Hong)
• Caring Company (Nam Pei Hong)

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced GHG Scope 2 emissions from 137 tonnes of CO2-e in 2021 to 143 tonnes of CO2-e in 2022.
• Maintained stable non-hazardous waste generation.
• Maintained stable energy consumption.
• Maintained stable water consumption.

Social Achievements

• Zero work-related injuries and fatalities.
• No material violation on employment laws and regulations.
• No material violation on occupational health and safety laws and regulations.
• No complaints related to services and products received.

Governance Achievements

• Established an ESG Working Group reporting to the Board.
• Established an anonymous whistle-blowing mechanism.
• Conducted anti-corruption training for 9 directors (9 hours total).

Climate Goals & Targets

Environmental Challenges

• Climate change posing risks to operations (extreme weather, regulatory changes, market shifts).
• Potential supply chain disruptions due to climate events.
• Increased costs due to carbon pricing and stricter regulations.

Mitigation Strategies

• Developing a natural disaster emergency plan.
• Developing an action plan to reduce GHG emissions and energy consumption.
• Investing in energy-saving product innovations.
• Implementing GHG emissions calculations and monitoring ESG reporting standards.
• Engaging with local/national governments and stakeholders on local resilience.

Supply Chain Management

Supplier Audits: Regular supplier assessments.

Responsible Procurement

• Fair and unbiased selection process based on product quality, costs, capability, social and environmental responsibility.

Climate-Related Risks & Opportunities

Physical Risks

• Increased severity and frequency of extreme weather events.
• Changes in precipitation patterns and extreme variability in weather patterns.

Transition Risks

• Carbon pricing mechanisms.
• Government regulations on products and services.
• Litigation risk.
• Low-carbon technology advancements.
• Changes in customer preferences.

Opportunities

• Resource efficiency gains.
• Use of lower-emission energy sources.
• Development of climate adaptation and insurance risk solutions.
• Access to new markets.
• Increased resilience through renewable energy programs and energy-efficiency measures.

Reporting Standards

Frameworks Used: Appendix 27 to the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited, GRI

Certifications: Null

Third-party Assurance: APAC Compliance Consultancy and Internal Control Services Limited

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Quality Tourism Services Scheme (QTS) Accredited Shops (Nam Pei Hong)
• Hong Kong Top Brand (Nam Pei Hong)
• Caring Company (Nam Pei Hong)

Environmental Metrics

ESG Focus Areas

• Environmental Protection
• Social Responsibility
• Corporate Governance

Environmental Achievements

• Reduced GHG Scope 2 emissions from 143 tonnes of CO2-e in 2022 to 122 tonnes of CO2-e in 2023.
• Reduced electricity consumption.
• Reduced water consumption mainly due to office relocation.

Social Achievements

• No material violation of employment and labor laws.
• Zero work-related injuries, fatalities, and lost days due to work injury.
• Organized various development and training programs for employees.

Governance Achievements

• Established an ESG Working Group reporting to the Board.
• Conducted annual materiality assessment.
• Organized anti-corruption training for directors.

Climate Goals & Targets

Environmental Challenges

• Climate change posing risks to operations (extreme weather, regulatory changes, market shifts).
• Potential increase in MSW charging expenses.
• Gaps in understanding climate risks' impact on operations.

Mitigation Strategies

• Established a natural disaster emergency plan.
• Developed an action plan for GHG emission and energy consumption reduction.
• Engaged with local/national governments and stakeholders on local resilience.
• Conducted carbon footprint survey.
• Monitored updates of environmental laws and regulations.
• Invested in innovations of energy-saving products.
• Examined feasibility of applying low-carbon technologies.

Supply Chain Management

Supplier Audits: Regular basis

Responsible Procurement

• Fair and unbiased selection process based on product quality, costs, capability, and social and environmental responsibility.

Climate-Related Risks & Opportunities

Physical Risks

• Increased severity and frequency of extreme weather events.
• Changes in precipitation patterns and extreme variability in weather patterns.

Transition Risks

• Carbon-pricing mechanisms.
• Mandates on and regulation of existing products and services.
• Exposure to litigation risk.
• Low-carbon technologies.

Opportunities

• Resource efficiency
• Energy source
• Products and services
• Markets
• Resilience

Reporting Standards

Frameworks Used: Appendix C2 to the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited, GRI

Certifications: Null

Third-party Assurance: APAC Compliance Consultancy and Internal Control Services Limited

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Quality Tourism Services Scheme (QTS) Accredited Shops
• Hong Kong Top Brand
• Caring Company