Governance Structure and Actions

The Sustainable Development Committee of Master Kong is chaired by the Chairman and CEO of the Company, with members of the Operating Committee as members, and comprises four working groups: Beverage Resources, Instant Noodle Resources, Product Research and Development, and Communication. The Committee guides work implementation and performance evaluation on the basis of a clear corporate ESG strategy and development direction, regularly deliberates and makes decisions on work objectives, report disclosure and related material matters, and reports on work progress to the Board of Directors. Each working group continues to promote the implementation of relevant projects in accordance with its annual work plan and reports regularly to the Sustainable Development Committee and the Company’s senior management on the progress of its work.

● Beverage Resources Working Group: Focusing on water conservation, energy saving and emission reduction management, plastic reduction and packaging management, the Working Group actively promotes special projects for beverage PET bottle weight reduction, light weight bottle caps and paper straw replacement.

● Instant Noodle Resource Working Group: Focusing on water conservation, energy saving and emission reduction management, the Working Group focuses on promoting special projects such as oil boiler waste gas recovery, boiler emission reduction and water recycling to improve the Company’s energy management.

● Product Research and Development Working Group: Focusing on the development and expansion of healthy and nutritious products, the Working Group actively promotes special research projects on salt reduction, sugar reduction, fat reduction and nutritional fortification to meet consumers’ needs for nutrition and health.

● Communication Working Group: Focusing on enhancing the Company’s sustainable development impact, the Working Group works with various working groups to introduce external resources and to organize activities such as healthy diet promotion and healthy research cooperation from the perspective of food safety, healthy China and sustainable development, and continues to promote the Comprehensive Carbon Inventory Project. Additionally, the Working Group promotes domestic and international cross-industry communication and cooperation in order to deepen its efforts and make a greater impact in the field of sustainable development.

At the same time, Master Kong is further leveraging the strengths of each business industry, enhancing the relevance and practicability of ESG management, and making continuous efforts to implement the sustainable development concept of “Keep Our Nature Green”.

Energy and Water Conservation Management

According to the planning arrangements made by the Sustainable Development Committee and its working groups at the beginning of the year, the Supply Chain Centre of each business of Master Kong implemented energy and water conservation projects at each production base, and set up full-time management personnel at each production base.

Master Kong has formulated the Energy Management Code, the Energy Unit Consumption Assessment and Evaluation Method, the Energy Management Team System and the Energy Management Performance Penalty System as the basis for the management process, the reference for work implementation and the guidance for energy saving performance assessment of energy saving work. We also clarify the responsibilities of relevant units, improve unreasonable processes and control measures, promote key energy-saving projects, and reduce energy consumption. Performance management indicators for energy consumption management have been set up in each business and production base to better assess the implementation of energy conservation, and the effect of energy saving and consumption reduction has been incorporated into the performance appraisal indicators of relevant posts and combined with incentives to enhance the importance of energy saving work by staff in relevant posts. We track daily production energy consumption and investigate the causes of any abnormalities in the indicators, and make improvements accordingly. We review and analyze the production energy consumption indicators against the corresponding period and budget indicators every month, so as to optimize and adjust them in time. We organize relevant training and share energy saving experiences to achieve continuous improvement of the Company’s energy saving management level.

20 plants of Master Kong’s beverage business and 13 plants of Pepsi’s beverage business were honoured as “Excellent Energy-saving Enterprise“ by the China Beverage Industry Association for their respective outstanding energy saving management achievements.

In terms of water conservation management, the Company has formulated the Water Conservation Management System as a reference and basis for carrying out water conservation work and requires production staff to operate in strict compliance with the system. We put water saving and consumption reduction into the performance evaluation index of key supervisors of factory directors in order to implement effective water saving. During this year, Master Kong’s factories regularly carried out a “water balance tests” to understand the current situation of water consumption in the water supply network and each unit, and based on the measured water quantity data, we judge the reasonable level of water consumption and take corresponding measures. We identified production processes and equipment with high water consumption, strengthened detailed control, actively promoted key water conservation projects, such as the utilization of reclaimed water after sewage treatment, and promoted them nationwide. During the year, the total amount of water that can be reused by the Beverage Business and Instant Noodle Business after water treatment was 2,019,124 tonnes. At the same time, we actively promote awareness and ways to conserve water resources, continue to carry out exchanges and experience sharing among factories across the country, and strive to integrate the concept of “Cherishing, Conserving and Protecting Water” into all aspects of our daily production work, so as to promote the common improvement of internal management level.

The 17 plants of the Master Kong Beverages Business and 13 plants of the Pepsi Beverages Business were once again awarded the title of “Excellent Water-saving Enterprise” by the China Beverage Industry Association for their excellent management practices.

Emission and Carbon Reduction Management

For the management of exhaust gas, greenhouse gas, wastewater and waste emissions, we comply with the relevant laws and regulations of the country and the place of operation, including the Law of the People’s Republic of China on Environmental Protection, the Law of the People’s Republic of China on the Prevention and Control of Air Pollution, the Law of the People’s Republic of China on the Prevention and Control of Water Pollution, the Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste, the Comprehensive Emission Standards for Air Pollutants, the Technical Guidelines for Self-Monitoring of Emission Units, the Emission Standards for Boiler Air Pollutants, the Emission Standards for Odour Pollutants, the Emission Control Standards for Volatile Organic Compounds from Industrial Enterprises, etc. The internal management system for exhaust gas, greenhouse gas, waste water and waste emissions of Master Kong has been formulated as the basis for management and control. We clearly defined the management responsibilities of relevant positions, continuously used advanced management tools, optimized production processes, introduced advanced environmental protection facilities and technologies, and carried out various specialized environmental protection projects to mitigate the impact of production and operation on the environment. We commission qualified units to conduct regular environmental monitoring to ensure that all pollutants are discharged in accordance with standards. For hazardous waste generated, we have commissioned qualified professional units to conduct disposal in compliance. For non-hazardous waste, we strived to reduce waste generation at the source and promote the recycling and utilization of resources. At the same time, we upgrade the skills of relevant personnel and implement maintenance work for treatment equipment to achieve stable operation of the wastewater and waste gas treatment systems.

Master Kong applies intelligent logistics Transportation Management System (TMS) to centrally dispatch and manage factories, carriers, and drivers in the logistics process, and establishes an information-based, automatic and intelligent logistics management and control system with functions such as automatic order acceptance, vehicle appointment, pre-stocking in the warehouse, intelligent on-route monitoring, transport route optimization and performance management, which effectively improves the management level in logistics transportation costs, efficiency, cost and service, and promotes the development of green transportation.

We apply image recognition technology in our warehouse system, using cameras to recognize the EAN (European Article Number) codes and spray codes of product boxes, and matching them with production order numbers to achieve automatic warehousing, which effectively improves the accuracy of warehousing. In 2022, we will upgrade TMS to monitor the on-route trajectory and key logistics nodes of distribution vehicles in real time and with precision. We will also connect TMS with the existing system, arrange

● oading and unloading work reasonably, and allow distributors to query the logistics nodes of their orders in real-time, while ensuring service quality and greatly enhancing the user experience.

Product Packaging Management

In recent years, with the improvement of production technology and the enhancement of consumer awareness of environmental protection, Master Kang has taken the lightweight packaging as a key research content, and has reduced or optimized the use of packaging materials for some product items under the premise of fully ensuring that the product appearance is beautiful and practical, the packaging is tight and secure, and meets the relevant national standards.

During this year, we have set plans and targets for plastic reduction and packaging management:

● In terms of PET bottle weight reduction, in 2023 to achieve the 330ml mini bottle hot filling line 23g weight reduction to 18g, aseptic line 20g weight reduction to 17g plan, covering "Ice Tea" "Green Tea" "Jasmine Series" "Oolong Tea" "Juice Daren" "Rock Candy Pear" "Sweet-Sour Plum Juice" "Drink Boiled Water" and other brands of small size products

● In terms of aluminum can thinning, the plan to reduce the wall thickness of 310ml aluminum cans from 0.27mm to 0.26mm in 2023, covering canned products of brands such as "Iced Tea", "Juice Daren", "Rock Candy Pear" and "Sweet-Sour Plum Juice"

● In terms of PE cap lightweighting, the promotion plan of reducing the weight of aseptic caps from 2.15g to 2.00g and 1.90g in 2023, covering the aseptic line of "Juice Daren", "Rock Candy Pear", "Sweet-Sour Plum Juice", "Milk Tea" and "Drink Boiled Water" brands

● In terms of packaging carton weight reduction, the plan to achieve weight reduction of 5L beverage carton dividers in 2023, covering 5L "Drink Boiled Water" "Master Kong Mineral Water" "Aquafina" and other products

● In terms of PETG label switching, PVC labels will be gradually replaced with more easily degradable PETG labels in 2023, covering products of brands such as "Ice Tea" "Green Tea" "Jasmine Series" "Oolong Tea" "Juice Daren" "Rock Candy Pear" "Sweet-Sour Plum Juice" "Xiao Lao Duo Duo" "Pure Sugar-free" and "Milk Tea" that use shrink labels

Highlights of our work on plastic reduction and packaging management during the year include:

Instant Noodles Business

● Change from bagging to tanker transport of raw materials , reducing the consumption of packaging materials

● Reduce packaging materials waste by recycling cartons

● Reducing the use of packaging bags by switching to tonne bags for raw materials packaging

● Optimize the container design of some noodle products and no longer use plastic snap-on lids, effectively reducing the use of plastic, which is expected to save 756 tons of plastic during the reporting period.

● Increase research on large diameter paper containers and develop new environmentally friendly paper noodle mixing containers instead of traditional plastic containers, which is expected to save 600 tons of plastic per year. We will continue to promote this design in the future.

● By reducing the amount of wrapping film used and lowering the printing area, we reduced plastic usage by 53 tons and ink/solvent usage by 42 tons during the reporting period.

● By optimizing the area and thickness of cartons, we saved 1,000 tons of corrugated paper usage during the reporting period.

Master Kong Beverage Business

● Optimization of bottle labels from PVC to easily degradable PETG material, reducing environmental impact and reducing the use of PVC bottle labels by approximately 3,126 tonnes per year

● Reducing the weight of 330ml and 500ml beverage bottles is expected to reduce the use of PET material by approximately 3,400 tonnes per year

● Reducing cap weight of some products by 0.2g per cap, reducing raw material PE consumption by approximately 340 tonnes per year

Pepsi Beverage Business

● Reducing PET cap weight from2.5g to 2.3g in some factories, reducing PET material use by approximately 413 tonnes per year

● Reducing PET 500ml Pepsi sugarfree empty bottles from 23.2g to 21g, reducing the use of PET material by approximately 219 tonnes per year

● Complete testing of PET 1L empty bottles from 35g to 33g, to be replaced step by step in 2022

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