Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Reduction in intensity of energy and water consumption

Social Achievements

• Continued improvement in local hiring initiative
• Well-managed workplace health and safety practices throughout the pandemic

Governance Achievements

• Adoption of a zero-tolerance approach to bribery and corruption
• Preparation of the sustainability statement in accordance with the Global Reporting Initiative Sustainability Reporting Standards (“GRI Standards”) Core Option
• Mapping of sustainability approach with the 17 Sustainable Development Goals (“SDGs”)

Climate Goals & Targets

Environmental Challenges

• Business supply chain interruptions and risk arising from Covid-19 pandemic
• Higher operating expense environment
• Global container shortages
• Lower production output in December 2020 due to EMCO
• Disruption in delivery schedule and rising freight and transportation costs
• Acute labour shortage
• Difficulty in employing local workforce
• Changes to policies regarding employment of foreign workers
• Covid-19 pandemic and Movement Control Order

Mitigation Strategies

• Developing resilience in supply chains
• Protecting revenues and managing margins and profitability
• Diversifying product range to lessen the risk of customer concentration
• Set-up of one-stop solutions center specializing in sheet metal and structure fabrication
• Efforts to hire more Malaysians
• Exploration of automated equipment and machinery
• Competitive remuneration and benefits packages, training and career development opportunities
• Adhering to Ministry of Health’s guidelines, wearing face masks, physical distancing and practicing good personal hygiene
• Paying full salaries and allowances to all staff during MCO
• Providing meals to staff during MCO
• Providing household essentials to quarantined workers during EMCO

Supply Chain Management

Supplier Audits: Quality and labour ethics and safety audits at key suppliers

Responsible Procurement

• Supplier Ethical and Environmental Code of Conduct
• Responsible Business Alliance (RBA) Policy and Code of Conduct
• RoHS and REACH compliance

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards Core Option

Certifications: ISO 9001:2015, ISO 14001, ISO 45001:2018

UN Sustainable Development Goals

• Goal 8: Decent Work and Economic Growth
• Goal 16: Peace, Justice and Strong Institutions
• Goal 3: Good Health and Well-being
• Goal 13: Climate Action
• Goal 17: Partnerships for the Goals

Alignment of sustainability pillars with relevant SDGs

Awards & Recognition

• The Edge Billion Ringgit Club for highest returns to shareholders over three years
• RHB Investment Bank’s Top 20 Jewels for the second year running

Environmental Metrics

ESG Focus Areas

• Corporate Social Responsibility
• Sustainability
• Corporate Governance
• Labour Practices
• Community Engagement

Environmental Achievements

• Installation of rooftop solar panels in one manufacturing site, estimated 10% electricity savings in 2022.
• Replacement of fluorescent lights with LEDs in Bukit Minyak plant.
• Ongoing initiatives to reduce energy consumption and greenhouse gas emissions.

Social Achievements

• RM500,000 contribution to Penang Covid-19 Fund.
• RM65,220 investment in "Pledge a Library" initiative, distributing 1,672 books to 12 schools.
• RM10,000 sponsorship for Virtual Robomania 2021.
• RM5,000 donation to Be Home, a non-profit organization.

Governance Achievements

• Formalized Sustainability Management Committee (SMC) in May 2018.
• Merged SMC and Risk Management Committee into Risk Management and Sustainability Committee in February 2022.
• Updated Code of Conduct and Ethics and Whistleblowing policies in February 2022.
• Implemented Anti-Corruption and Bribery Policy and Charitable and Sponsorship Policy.

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions exacerbated by rising freight costs and raw material prices.
• Workforce shortages due to Covid-19 pandemic and restrictions on migrant workers.
• Global shortage of electronic components, particularly semiconductors.
• Uncertainty in supply chain due to Russia-Ukraine war and lockdowns in China.

Mitigation Strategies

• Developing resilience in supply chains, protecting revenues, and managing margins.
• Investing in manufacturing facility in China (completion expected September 2023).
• Workers retention program, competitive remuneration and benefits, skill training.
• Exploring automation to reduce labor dependency.
• Maintaining adequate raw materials inventory.
• Monitoring employee health and safety, encouraging booster shots.

Supply Chain Management

Supplier Audits: Quality and labor ethics and safety audits conducted on key suppliers.

Responsible Procurement

• Supplier Ethical and Environmental Code of Conduct aligned with RBA policy.
• Assessment of suppliers on sustainability aspects.
• RoHS and REACH compliance for raw materials.
• Conflict-free minerals policy.

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: GRI Standards Core Option

Certifications: ISO 9001:2015, ISO 14001, ISO 45001:2018, IATF 16949:2016

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Goal 8: Decent Work and Economic Growth
• Goal 16: Peace, Justice and Strong Institutions
• Goal 3: Good Health and Well-being
• Goal 13: Climate Action
• Goal 17: Partnerships for the Goals

Dufu's sustainability initiatives contribute to these goals through financial performance, corporate governance, employee welfare, environmental protection, and community engagement.

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Forbes Asia 2021 Best Under A Billion list.
• The Edge Billion Ringgit Club (BRC) award for highest returns to shareholders.

Environmental Metrics

ESG Focus Areas

• Economic Contribution
• Corporate Governance
• Labour Practices
• Environment
• Communities

Environmental Achievements

• Generated 1,084 MWh of energy by green energy, reducing 1,081 tonnes of CO2 emissions

Social Achievements

• Overall customer satisfaction score of 93.3%
• Employee satisfaction score of 90%
• Implemented various employee wellbeing initiatives (bi-weekly indoor interactive classes, yearly in-house sports tournaments, health screenings, wellness programs, etc.)
• Zero fatality cases recorded in 3 years leading to FY2022
• No occupational illness recorded from FY2020 to FY2022
• Invested RM71,078 in various charitable activities

Governance Achievements

• Inclusion in the FTSE4Good Bursa Malaysia Index and FTSE4Good Bursa Malaysia Shariah Index
• Introduction of various policies such as Directors Fit and Proper Policy, Senior Management’s Remuneration Policy, Board and Senior Management Policy, and Policy on Independence Directors
• Updated Anti-Corruption and Bribery Policy

Climate Goals & Targets

Environmental Challenges

• Slowing global demand in the enterprise and cloud data center impacting HDD segment
• Broad-based customer inventory rebalancing worsening in the final quarter of 2022
• Dissipating wave of demand generated earlier from the effects of the Covid-19 pandemic
• Uncertainty in the global economic outlook coupled with China’s zero-Covid policy
• High inflation slowing consumer spending
• Elevated materials prices, especially titanium
• Tight supply of critical components
• Slowing consumer spending and persistent inflationary pressures leading to CAPEX reduction by enterprise and cloud providers
• Acute labour shortage in Penang

Mitigation Strategies

• Risk mitigation strategy with alternate site for HDD components
• Acquisition of 2 units of Single Storey Detached Factory to address space constraints in sheet metal fabrication
• Fine-tuning and refurbishment of existing machines
• Sufficient stockpiles of raw materials and finished goods
• Reallocation of workers from HDD to other non-HDD business segments
• Improved on-time delivery of products, improved channel inventory, well-planned and efficient production operations
• Prudent measures in terms of operational, CAPEX and financial requirements
• Workers retention program and competitive remuneration and benefits packages
• Feasibility study to reduce labour dependency by developing and installing automated equipment

Supply Chain Management

Supplier Audits: 4 suppliers audited in FY2022

Responsible Procurement

• Supplier Code of Conduct aligned with UN Global Compact principles, Responsible Business Alliance Code (RBA)

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: GRI Standards Core Option, United Nations Sustainable Development Goals (SDGs), Responsible Business Alliance Framework (RBA), Bursa Malaysia FTSE Russel ESG Model Framework

Certifications: ISO 9001:2015, ISO 14001, ISO 45001:2018, IATF 16949:2016

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Goal 8: Decent Work and Economic Growth
• Goal 16: Peace, Justice and Strong Institutions
• Goal 3: Good Health and Well-being
• Goal 13: Climate Action
• Goal 17: Partnerships for the Goals

Alignment of sustainability pillars with relevant SDGs

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• THE EDGE’s Centurion Club Corporate Award 2019
• THE EDGE’s Billion Ringgit Club (BRC) Award 2020
• Forbes’ list of Asia’s Best Under A Billion 2021
• THE EDGE’s BRC Award 2021

Environmental Metrics

ESG Focus Areas

• Climate Change
• Corporate Governance
• People
• Community

Environmental Achievements

• Reduced CO2 emissions by 1,073 tonnes through green energy production of 1,076 MWh from solar energy.
• Estimated 7% energy savings from installing inverter air compressors with Progressive Adaptive Control.

Social Achievements

• Organized public and media awareness efforts and cash contribution of RM150,000 towards Kuang Yu Chinese Primary School’s relocation project.
• Maintained an overall customer satisfaction score of 93.3%.

Governance Achievements

• Maintained inclusion in FTSE4Good Bursa Malaysia Index and FTSE4Good Bursa Malaysia Shariah Index for the second consecutive year.
• Received an ‘AA’ rating by MSCI ESG Ratings for the third consecutive year.

Climate Goals & Targets

Environmental Challenges

• Lower demand in the HDD related business due to inventory corrections by HDD consumers, US-China conflict, Russia-Ukraine war, rising interest rates, and China's economic slowdown.
• Soaring energy bills, inflationary pressures, and manpower challenges in Malaysia.
• High business concentration risk (72% of revenue from HDD segment).

Mitigation Strategies

• Business diversification strategy focusing on semiconductor, automotive, and medical industries.
• Production efficiency improvement.
• R&D investment in innovation and process automation.
• Worker retention program with competitive remuneration, benefits, and training.
• Feasibility studies for automation to reduce reliance on labor.

Supply Chain Management

Supplier Audits: 13 out of 16 key suppliers audited in the past two years; aiming for 100% coverage every three years.

Responsible Procurement

• Supplier Code of Conduct aligned with RBA, UN Declaration of Human Rights, ILO Conventions, and UNGC principles.
• ESG related audit on major suppliers every 3 years.

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Chronic heat waves
• Shortage of natural resources
• Rise of sea levels

Transition Risks

• Shift to low-carbon technology
• Increased carbon pricing
• Tightened climate-related regulations
• Tightened emission reporting obligations
• Exposure to litigation
• Increased procurement cost
• Changing customer behaviour
• Changing investor preference
• Stigmatization of sector
• Workforce Management

Opportunities

• Development of energy-efficient products and services
• Improved resource efficiency
• Reduced material usage
• Decreased electricity consumption
• Lower manufacturing costs
• Streamlined distribution processes
• Transition towards lower-emission or renewable energy sources

Reporting Standards

Frameworks Used: GRI Standards 2021, TCFD Recommendations, FTSE4Good Bursa Malaysia Index, UN SDGs, RBA Framework

Certifications: ISO 9001:2015, ISO 14001, ISO 45001:2018, IATF 16949:2016

Third-party Assurance: Eco Asia Advisory Sdn Bhd (limited independent verification)

UN Sustainable Development Goals

• Goal 8: Decent Work and Economic Growth
• Goal 13: Climate Action
• Goal 16: Peace, Justice and Strong Institutions
• Goal 17: Partnerships for the Goals
• Goal 3: Good Health and Well-being

Alignment explained within the Materiality Mapping section of the report.