1.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 “Keep Our Nature Green”.

2.Water Management

Water conservation management structure
In daily operations, the CEO is responsible for the strategy and performance of water management, and the Company's Senior Executive and the Sustainable Development Committee are responsible for the overall management and supervision of water management. Their responsibilities include the formulation of overall water conservation strategy, target setting, development of tasks and performance assessment mechanisms, and direct management of water conservation performance, review of progress of goals and daily monitoring. The Company has formulated the Water Conservation Management System as a reference and basis for water conservation work, and requires production personnel to operate in strict accordance with the system standards. Master Kong's supply chain centers have implemented water conservation projects at each production site in accordance with the planning arrangements made by the Sustainable Development Committee and its working groups at the beginning of the year, and have set up full-time management personnel at each production site. Master Kong's water conservation program has covered 100% of its production plants, contributing significantly to the Company's overall water efficiency.

Multi-dimensional water conservation strategy
We have included water conservation and reduction in the key performance appraisal indicators for each plant manager to implement effective water use and conservation. Master Kong factories regularly conduct “water balance tests” to understand the status of water consumption in the water supply network and each unit, and based on the measured water quantity data, determine the extent of reasonable water consumption and take appropriate measures. For production processes and equipment with high water consumption, we strengthened detailed control and actively promoted key water conservation projects, such as the use of water after wastewater treatment, and promoted them nationwide. 2023, Master Kong recycled a total of 1,220,781.29 tonnes of alternative water resources, of which 419,600.49 tonnes of water was reused, a water reuse rate of 2.65%. At the same time, we actively promote awareness and methods of water conservation, continue to carry out exchanges and experience sharing among factories nationwide, and endeavor to incorporate the concept of “cherishing, conserving, and protecting water” into all aspects of our daily production work to promote the common improvement of internal management levels.

3.Carbon Emissions Management

Energy conservation and carbon reduction management structure
The Sustainable Development Committee of Master Kong oversees the Company’s energy saving and carbon reduction strategies and performance. The Resource Working Group, headed by the senior management of each business, focuses on energy-saving and carbon reduction management while promoting energy-saving and carbon reduction projects. The Supply Chain Centers of each business units implement energy-saving and carbon reduction projects at their production sites and set up full-time management staff in accordance with the planning arrangements made by the Sustainability Committee and the working groups at the beginning of the year.

Carbon inventory and product carbon footprint accounting
The Company has been conducting carbon inventory covering the upstream and downstream of the value chain for three consecutive years, calculating Scope 1 and Scope 2 carbon emissions data, and measuring major Scope 3 carbon emissions upstream and downstream of the value chain. Based on the value chain carbon emission data of the past three years, the Company is in the process of discussing and planning a carbon neutral pathway in the short, medium, and long term, which will be disclosed to the public in due course.

In addition, while we continue reducing carbon emissions in the operation phase, we have completed the “cradle-to-gate” carbon footprint accounting of our core products, such as Master Kong's Ice Tea and Roasted Beef Noodle, and will gradually extend the carbon footprint to include the downstream value chain, with a view to ultimately achieving carbon emissions reduction across the entire value chain. Our current carbon emission reduction program involves sustainable procurement, energy-saving production, green logistics and transportation, sustainable packaging, and green refrigeration for distributors, etc. In the future, we will design more carbon emission reduction projects and cover more parts of the value chain, to drive the low-carbon development and transformation and upgrading of the industrial chain and supply chain.

Carbon reduction in the phase of raw materials production
We work with agricultural suppliers to improve energy efficiency and carbon reduction through nature-based solutions (NBS). We have introduced intelligent agriculture technology with our suppliers, adopting the “AI Automated Agriculture” mode of operation to improve energy and resource efficiency in vegetable planting, harvesting, and processing, so that vegetables do not fall to the ground in the whole process. The project also managed to use the biodegradable film technology innovatively. After being buried in the ground for several months, the discarded disposable mulch can be naturally degraded into organic matter, causing zero pollution to the environment and ensuring the safety and quality of the products from the source. We offset the carbon emissions of our products through the carbon sinks of our own ecological tea gardens in order to realize carbon neutrality of our products, which are also the first carbon neutral tea beverages in China to be certified. With reference to leading sustainable sourcing projects, we take our core products Ice Tea and Roasted Beef Noodle as sustainable sourcing flagships. We managed to reduce their carbon footprints by improving ingredients sourced from our raw material suppliers in cooperation and quantified the impacts of carbon emissions reduction. The programs mentioned above cover major raw material suppliers for all core products.

Carbon reduction in the phase of production and operation
Each of Master Kong’s business units and production bases have set up performance management indicators for energy consumption management to better assess the implementation of energy conservation, and have included the effect of energy saving and consumption reduction in the performance assessment indicators of the relevant positions and combined them with incentives to raise the importance of energy saving for employees in the relevant positions. We track the production energy consumption every day, find out the reasons for abnormal indicators and make improvements, and check and analyze the production energy indicators against the same period and the budget indicators every month to optimize and adjust them in a timely manner. We organize and carry out relevant training, and through the exchange and sharing of energy-saving experience, we achieve continuous improvement of the Company’s energy-saving management level. All of Master Kong’s core product manufacturing plants have implemented energy-saving and carbon reduction management, implementing initiatives including optimization of air compression and steam systems, implementation of waste heat recovery/reuse technologies, and installation of on-site distributed photovoltaic projects, which have resulted in significant energy-saving and carbon reduction.
At the same time, we actively share our experiences with suppliers about energy saving and carbon reduction. In 2023, we supported our aluminum can supplier in the Pepsi Beverages Business in installing photovoltaic power generation facilities, with an annual power generation capacity of 52,454kWh, which reduced carbon emissions from its operations by approximately 29.91 tonnes.
Carbon reduction in the phase of logistics transportation
Master Kong upgraded its intelligent Transportation Management System (TMS), docking it with systems such as Beidou and Master Pass, and cooperated with a third-party logistics organization to introduce an intelligent scheduling system and new energy trucks, establishing an informatization, automation, and intelligent logistics management and control system that can realize a variety of functions to realize the development of urban areas, intelligent scheduling of distribution and green sustainability of logistics and distribution. Intelligent scheduling of distribution and green sustainability of logistics and distribution have been established to effectively improve the management level in freight, efficiency, cost and service of logistics and transportation and promote the development of green transportation. At present, the intelligent logistics and transportation management system has been applied to all the Company’s businesses and all factories.

Carbon reduction in the phase of distribution and sales
Master Kong actively promotes the equipment replacement with smart and energy-efficient refrigerators in distribution centers and stores to promote green and efficient refrigeration. Compared with traditional refrigerators, smart refrigerators can reduce energy consumption and energy-related carbon emissions by more than 40%. By the end of 2023, the coverage of AIOT smart refrigerators in Master Kong’s beverage business was increased to 80% of all refrigerators at distributors, and we plan to reach 100% full coverage by 2030. Meanwhile, in 2024, we upgraded all the new series of AIOT smart refrigerators to Energy Efficiency Index Grade 1, with power consumption reduced by 38% on top of the existing smart refrigerators. Pepsi Beverages Business will gradually replace traditional dispensers with those filled by environment-friendly refrigerants, and promote equipment manufacturers to develop and upgrade more energy-saving and low-carbon models, with energy saved by 30-50% compared to the previous levels, and is planned to hit the market in 2025.

4． Packaging Materials and Waste Management

Packaging management strategy
In recent years, with the improvement of production technology and the enhancement of consumer awareness of environmental protection, Master Kong has developed a green packaging strategy based on the 3Rs of the circular economy, namely “Reduce, Reuse, and Recycle”, to minimize the environmental impact of product packaging.  The Company has taken the lightweight packaging as its key research content, and has reduced or optimized the use of packaging materials for some products on the premise of ensuring that the products look pleasant and practical, packaged tightly and in accordance with relevant national standards. Besides, we place packaging reuse and recycling as the key topic of our next-phase research. On the one hand, we will expand the use of recyclable, biodegradable, or reusable packaging, so that our products contain sustainable packaging materials; on the other hand, we encourage consumers to recycle packaging waste, and actively explore partnerships with relevant suppliers to cooperate in the collection, processing, or reproduction of packaging waste, to minimize the environmental impact of packaging waste.

Packaging management plan and targets
We have set plans and targets for plastic reduction and packaging management as following:

Plastic reduction for forks: In 2023, we were the first in the industry to achieve a 7% reduction in the plastic consumption of folding forks by adopting structural optimization for folding forks of some of our products, reducing the annual plastic consumption by 100 tonnes and achieving the industry’s lowest plastic consumption for a single folding fork. In the future, we plan to modify all fork molds, with an expected annual plastic reduction of 1,000 tonnes, and gradually transition to “recyclable and biodegradable” materials.

Lightweighting of bottle caps: Reduce the weight of bottle caps from 2.0g to 1.85g by 2024, covering products under the “Drink Natural” brand.

Packaging carton weight reduction: Reduce paper consumption by about 10g per carton by 2024 through the design of corner-cutting cartons, covering products under the “Tropicana” and “Gatorade” brands.

Switching to rPP and rPETG label: Complete the validation and mass production of rPP and rPETG for labeling in 2024.

Lightweighting of packaging for instant noodle products: Through scheme design and mechanical analysis, we adjusted the snap structure of the folding fork without affecting the strength, appearance and usability of the folding fork, and the grammage decreased by 7.7 per cent; we rationalized the packaging specifications on the design side to reduce packaging voidage and material usage. By 2025, the Company plans to reduce plastic consumption by 800 tonnes and paper consumption by 1,955 tonnes per year.

Packaging recycling of instant noodle products: eliminating the non-recyclable PS materials in the replacement plastic containers and using recyclable PP materials for the whole product; giving priority to the use of a single material for the wrapping film to enhance recyclability. By 2025, the company plans to reach the target of achieving a recyclability rate of over 90 per cent for all product packaging.

Environment-friendly aspects for packaging of instant noodles: Adoption of environmentally friendly plant-based inks instead of solvent-based inks to reduce VOC emissions. By 2025, the company plans to reach the target of reducing VOC emissions by 160 tonnes per year.

Highlights and effects of packaging management

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

Instant Noodles Business

Recycled and reused vinegar buckets to reduce plastic use

Used superheated closures instead of snap-top solutions for Sudatong products to reduce the use of packaging materials, saving 14.3 tonnes of plastic per year

Reduced the void ratio of storage and transportation cartons and reduced the area of corrugated paper used, which is expected to save 1,393 tonnes of paper annually

Master Kong Beverage Business

Carried out bottle weight reduction on 380 ml Drink Boiled Water products, reducing the use of PET particles by about 420 tonnes in 2023

Reduced the weight of caps for some products, reducing the use of PET particles by about 252 tonnes in 2023.

Added new aseptic injection-molded bottle caps, through the design optimization of cap shape, the weight of a single cap is reduced by 0.25g, which has been fully applied to Drink Boiled Water products, saving about 300 tonnes of HDPE particles

Replaced the ink for label printing from solvent ink, which uses esters and alcohols as solvents, to water-based ink, which uses water and ethanol as solvents, with an estimated reduction of about 2,000 tonnes of VOCs emissions.

Pepsi Beverage Business

Reduced the weight of 500 ml PET bottles from 22g to 21g in some factories, successfully tested in September 2023, with a reduction of about 16 tonnes of plastic use in 2023

Reduced the weight of 900 ml PET bottles from 35g to 33g in some factories, reducing plastic use by about 8 tonnes in 2023.

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