Contents
About the ReportStatement of the Chairman
ESG Data and NotesIndexes
About Sanhua IntelligentControlsCompany OverviewBusiness LayoutCorporate Culture
ESG ManagementESG Governance MechanismDouble Materiality AssessmentContribution to the United NationsSustainable Development Goals (SDGs)
Feature: Innovating for the Future,Leading the Technological FrontierR&D InnovationIntellectual Property Protection
Feature:Low-Carbon Transitionand Climate Change Response
Responding to Climate Change
Environmental Protection: Clean,Circular, and Natural
Environmental Policies and ManagementResource ManagementEmissions and Waste
Corporate Governance: Transparency,Responsibility, and ValueCorporate GovernanceRisk and Compliance ManagementBusiness Ethics
Foundation of Trust: Quality,Safety, and Security
Product and Service Safety and QualityCyber and Information SecuritySustainable Procurement
Social Value: Respect,Development, and Contribution
Labour Rights and Talent RetentionHuman Capital DevelopmentOccupational Health and SafetyCorporate Citizens and Public Welfare
Sanhua Intelligent Controls2024 Highlights Overview11
Contents
0102
2024 Environmental, Social and Governance ReportAbout the Report
About the Report
This report is the secondEnvironmental, Social, and Governance (ESG) Reportpublished by Zhejiang Sanhua IntelligentControls Co., Ltd., disclosing the Company’s philosophy held, the regulations established, the measures implemented, andthe results achieved on ESG topics in its operations to all stakeholders.Reporting ScopeThe reporting scope covers Zhejiang Sanhua Intelligent Controls Co., Ltd. (hereinafter referred to as“Sanhua IntelligentControls”or“the Company”) and its subsidiaries . Unless otherwise stated, the reporting scope is consistent with the scopeof the consolidated financial statements of Sanhua Intelligent Controls (stock code: 002050) for the same period.
Reporting PeriodThe reporting period for this report is from 1 January 2024 to 31 December 2024. The data in this report, unless otherwisespecified, pertains to this period.Reporting ApproachThis report has been compiled in accordance with theSelf-Regulatory Guidelines No. 17 for Companies Listed on ShenzhenStock Exchange—Sustainability Report (For Trial Implementation) (April 2024),theSelf-regulatory Guidelines No. 1 forCompanies Listed on Shenzhen Stock Exchange — Standardised Operations of Companies Listed on the Main Board(December 2023),theSelf-regulatory Guidelines No. 3 for Companies Listed on Shenzhen Stock Exchange — SustainabilityReport Compilation (January 2025),with reference to Global Sustainability Standards Board (GSSB)GRI SustainabilityReporting Standards (2021)and the United Nations Sustainable Development Goals (SDGs).Data CollectionThe financial data in this report is sourced from the 2024 financial report, while other data is sourced from internaldocuments and real records of actual operations.The financial data in this report is presented in RMB. In case of discrepancies between the financial data in this report andthe Company’s annual financial report, the figures in the annual financial report shall prevail.Reporting AccessThis report is available in both Simplified Chinese and English. In case of any discrepancies between the two versions, theSimplified Chinese version shall prevail. The electronic version of the report can be obtained from the Company’s officialwebsite, the Shenzhen Stock Exchange (http://www.szse.cn), and the CNINFO website (http://www.cninfo.com.cn).
Contact UsIf you have any suggestions regarding this report, you can contact us through the following methods:
Address: No. 219, Woxi Avenue, Chengtan Street, Xinchang, Shaoxing, Zhejiang, China.Email: shc@zjshc.com
Reporting principlesMaterialityThe Company identifies the material topics related to its operations that are of concern to stakeholders and focuses onthem in this report. While disclosing material topics, the Company also considers the characteristics of the industry andbusiness operations. The process and results of materiality assessment are detailed in the“Double Materiality Assessment”
section of this report.AccuracyThis report ensures the accuracy of information to the best of the Company’s ability. For quantitative information, the datascope, calculation basis, and assumptions are clearly explained to ensure that the calculation error range does not misleadinformation users. The quantitative information and notes are provided in the“ESG Data and Notes” section of this report.BalanceThe content of this report reflects objective and truthful facts, with both positive and negative information about theCompany disclosed impartially. No negative events that should have been disclosed were omitted during the reportingperiod.ClarityThis report is published in both Simplified Chinese and English. It includes tables, models, and other supporting informationto aid in the understanding of the textual content. To help stakeholders access the information more quickly, this reportincludes content indexes.
QuantificationThis report discloses key quantitative information and, where possible, provides historical data.ComparabilityFor the same quantitative indicators, the statistical methods and disclosure approach remain consistent across differentreporting periods. If there are changes in data collection, measurement, or calculation methods, the relevant data will beretrospectively adjusted, and the adjustments and reasons will be explained in the notes. This ensures that stakeholderscan conduct meaningful analysis and evaluate the trends in the Company’s ESG data.CompletenessThe scope of disclosure in this report aligns with the scope of the Company’s consolidated financial statements.TimelinessThis report is an annual report, covering the period from 1 January 2024 to 31 December 2024.Verifiability
The cases and data in this report are sourced from the Company’s actual operational records or financial reports. The datasources and calculation processes disclosed in the report are traceable and can support external verification checks.
0304
2024 Environmental, Social and Governance ReportStatement of the Chairman
Statement of the Chairman
As a global leader in the manufacturing of automotive thermal management system components and refrigerationand air-conditioning control components, we consistently stand at the forefront of industry. We drive industryupgrade through technological innovation and expand our growth boundaries with a global strategic layout. In 2024,we are resolutely advancing, accelerating the upgrade of low-carbon technologies, deeply engaging in the globalenergy transition, and continuously expanding our influence within the global industry value chain.Industry Upgrade: Shaping the Future through TechnologyTechnological advancements are reshaping the global industrial landscape, with the electric vehicle and refrigerationindustries undergoing profound transformation. We continue to break new ground in our core business areas, offeringmore efficient and intelligent thermal management solutions to our global clients.In the Automotive Components sector, we have maintained our leadership edge, with products such as electronicexpansion valves, electronic water pumps, and electric oil pumps covering three critical scenarios: cabinet thermalmanagement, battery thermal management, and electrical/control system thermal management. These products havemade us a key partner to leading global automotive companies. Through precise temperature control management,we help optimize energy efficiency in new energy vehicles (“NEVs”), enhance driving range, and contribute to a moreefficient, safer, and sustainable future.In the
Refrigeration and Air-conditioning Product Components sector, we drive industry advancementthrough technological innovation, actively promoting the use of new eco-friendly refrigerants and heat pumptechnologies to reduce energy consumption in cooling equipment. Our products, including electronic expansionvalves, four-way reversing valves, and micro-channel heat exchangers, are widely used in air conditioners,refrigerators, washing machines, industrial refrigeration, cold-chain transport, heat pump heating, and data centres,empowering energy-efficient buildings, heating, ventilation and air-conditioning (“HVAC”) systems and householdappliances thermal management systems.ESG Strategy Upgrade: from Social Responsibility to Long-Term Value Creation
Sustainability for enterprises is not only about economic growth but also about enhancing environmentalresponsibility, social responsibility, and governance capabilities. We recognize that exceptional ESG managementis the foundation for long-term corporate success. In 2024, we have fully upgraded our ESG management system,integrating sustainability principles into business decision-making processes.
InEnvironmental Management, we have fully implemented carbon reduction initiatives, continually optimizingenergy usage efficiency and reducing greenhouse gas (“GHG”) emissions. We are also advancing the developmentof low-carbon products, leveraging innovative technologies to contribute to global climate action.InEmployee Management, we persist in advancing talent development strategies, optimizing our global talentdistribution, and ensuring diversity and inclusion. We are committed to promoting vocational education anddeveloping the next generation of green technology talent.In Intelligent Manufacturing, we continue to optimize energy efficiency in factories, driving the upgrade ofintelligent and digital production processes. In multiple global production bases, we are accelerating the adoption ofautomation equipment and data analysis platforms, optimizing production workflows and improving efficiency.InSupply Chain Management, we emphasize global collaboration, ensuring the stability and sustainability of oursupply chain. By optimizing procurement strategies, we continuously enhance manufacturing efficiency and productquality, leveraging our global layout to strengthen supply chain resilience.InCorporate Governance, we adhere to principles of transparency, compliance, and responsibility. We areconstantly refining our ESG governance structure, strengthening data security, and ensuring compliance and riskmanagement to ensure the stable development of the Company.Thanks to our exceptional ESG management practices, we have received multiple global ESG recognitions in 2024.Our ratings with EcoVadis and CDP for climate change have significantly improved, reflecting our global leadershipin sustainability.Our growth journey is a history of transformation driven by technological innovation and a continuous explorationof sustainability. We understand that the global industry is undergoing profound changes, and we are committedto being a practitioner, leader, and promoter of this transformation. Looking to the future, we will continue todrive technological innovation, leverage our global strategic layout, and uphold sustainability as our core value,collaborating with global partners to create a smarter, more efficient, and sustainable future.
Chairman Zhang Yabo
0304
0506
2024 Environmental, Social and Governance ReportAbout Sanhua Intelligent Controls
About Sanhua
Intelligent Controls
0708
2024 Environmental, Social and Governance ReportAbout Sanhua Intelligent Controls
Company OverviewZhejiang Sanhua Intelligent Controls Co., Ltd. was established in 1994. The Company primarily engages in the researchand development (“R&D”), manufacturing, and sales of refrigeration and air-conditioning product components, aswell as automotive components. With a core focus on the R&D and application of heat pump technology and thermalmanagement systems, the Company is dedicated to developing efficient heat exchange and temperature controlsolutions for environmental thermal management.Over the years, the Company has expanded from offering a single valve product to providing a broader range ofrefrigeration and air-conditioning product components and automotive components. In 2005, the Company was listed onShenzhen Stock Exchange and was further included in major indices such as the CSI 300 Index, SZSE 100 Index, MSCI,FTSE Russell, etc.
Company ProfileCompany Chinese Name浙江三花智能控制股份有限公司Company English NameZHEJIANG SANHUA INTELLIGENT CONTROLS CO.,LTD.Headquarter AddressXinchang County, Shaoxing City, Zhejiang Province
Listed Date2005Stock Code002050.SZ
Business LayoutSanhua Intelligent Controls is the world’s largest manufacturer of refrigeration and air-conditioning control componentsand a global leader in automotive thermal management system components. In line with the mission to develop anintelligent, low-carbon economy and create a sustainable, quality living environment, the Company has been dedicated tothe R&D, promotion and adoption of thermal management technology, providing customers across the globe with energy-efficient solutions through the Company’s industry-leading products of the finest quality. Embracing globalization, theCompany has established a business that spans two major sectors: refrigeration and air-conditioning product componentsand automotive components.In 2024, the Company achieved signicant success in multiple business sectors, as follows:
World’s Largestrefrigeration and air-condition-ing control component manu-
facturer
Global Leadingautomotive thermal manage-ment system component manu-
facturer
World’s Largest
market sharefor
majorproducts categories
%coverage of the World’s top 10refrigeration and air-conditioningmanufacturers & automobile man-
ufacturers
0708
Global Presenceacross
Continents
4,252Valid PatentsRMB
27.947
bn2024 Revenue
0910
2024 Environmental, Social and Governance ReportAbout Sanhua Intelligent ControlsUnder the refrigeration and air-conditioning product component business, the Company mainly engages in the development andapplication of control components, subsystems and technology solutions which empower energy-e?cient buildings, heating,ventilation and air-conditioning systems and household appliances thermal management systems. The Company is a key suppli-er of automatic control components and system technology solutions, serving the global market for residential and commercialair-conditioning, commercial and industrial refrigeration and small household appliances, among others.Under the automotive components business, the Company is committed to offering essential and comprehensive thermal man-agement and control solutions for NEVs and providing high-performance products that enhance energy e?ciency and reduceemissions for traditional fuel vehicles. The Company spearheads the R&D of values, pumps, heat exchanges and integratedmodules, especially under cabinet thermal management, battery thermal management and electrical/control system thermalmanagement, designed to achieve effective thermal management in automotive operations.As a pioneer that leads the development of thermal management technologies, the Company has accumulated abundant expe-riences and expertise in developing and manufacturing a considerable number of electric motors. By leveraging the Company’smotor manufacturing expertise, scalability and cost-control capabilities, the Company has successfully ventured into the produc-tion of bionic robot electromechanical actuators. The Company strives to provide lighter, smaller and more precise electrome-chanical actuators through independent R&D.The Company has built 8 production bases globally, which serve as production centres comprising factory clusters, warehousesand logistics hubs, designed to support key nearby markets. Factories across the globe are deployed with R&D resources. TheCompany’s R&D system consists of one R&D Center and six R&D bases, with three located in China, two in the United States,and one in Germany.
Corporate CultureThe Company adheres to the development strategy of“focusing on excellence and innovating for success”, committedto reinforcing the leadership in existing product offerings while actively cultivating new drivers for sustained growth. TheCompany has established itself as a trailblazer in creating a global network.The“Sanhua”brand symbolises the“Flower of Management”,“Flower of Technology”, and“Flower of Talent”representingthe Company’s high regard for advanced management practices, cutting-edge technology, and the acquisition,development, and retention of talent. By summarising practical experience and refining cultural connotations, the Companyhas developed a corporate culture system centred around the concept of the“Evergreen Tree”, which fully guides theCompany’s development process.
Sanhua Evergreen Tree
As of December 31, 2024, our products had reached the America, Europe, Asia, Oceania, and Africa, covering over 80 countries and regions worldwide.The Company has production bases / manufacturing plants / R&D bases in these regions.
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2024 Environmental, Social and Governance ReportSanhua Intelligent Controls 2024 Highlights Overview
Sanhua Intelligent Controls 2024Highlights Overview
EcoVadis Sustainability RatingCDP Climate Change QuestionnaireScore improved from 46 to 57, and awarded theCommitted Medal
Upgraded from C to B
CNINDEX ESG RatingCSINDEX ESG Rating
Upgraded from A to AAAImproved from A toAA
MSCI ESG RatingWind ESG Rating
Maintained at BMaintained atBB
Domestic and International ESG RatingsAwards and Recognitions
Manufacturing Industry Single Champion
Product — Four-way Reversing ValueAwarded by the Ministry of Industry andInformation Technology, China
2024 Zhejiang Top 100 High-tech Enterpriseswith the Strongest Innovation CapabilityAwarded by Zhejiang High-tech Enterprise
Association
Global Top 100Automotive Parts SuppliersAwarded by Automotive News
China’s Top 500Most Valued Listed Manufacturing CompaniesAwarded by Economic Management ResearchInstitute of Machinery Industry, China Associationof Plant Engineering, China Heavy Machinery
Industry Association
United Nations Global Compact Member
Recognized by UN Global Compact
National Enterprise Technology Centre
CertificationIssued by the National Development and Reform
Commission, China
National Postdoctoral Research WorkStationApproved by the Ministry of Human Resources
and Social Security, China
Zhejiang Provincial Science & Technology
Leader EnterpriseCertified by the Department of Science andTechnology of Zhejiang Province
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2024 Environmental, Social and Governance ReportESG Management
ESG Management
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2024 Environmental, Social and Governance ReportESG Management
ESG Governance Mechanism
The Company attaches great importance to ESG management, based on its operational situation and industrycharacteristics, it refers to domestic and international ESG standards, policies, industry trends, and key focus areas ofglobal ESG ratings. With a clear ESG governance structure, the Company continuously improves its ESG managementperformance.
In 2024, the Strategy Management and ESG Committee (hereinafter referred to as“the Committee”) actively improved theESG strategy and development plan. It formulated the Company’s strategies and goals for key topics such as corporategovernance, sustainable procurement, responding to climate change, business ethics, human capital development, etc.The Committee also issued and published Sanhua Intelligent Controls’
Labour and Human Rights Statement, EnvironmentalManagement Statement, and Business Ethics Statement, making ESG management commitments and goals todemonstrate the Company’s responsibility and determination in ESG governance.In 2024, the ESG Working Group coordinated and organised multiple ESG training sessions and interviews. It held 6ESG working meetings, collaborating with each functional department and business unit to formulate ESG goals andstrategies for improvement, along with a detailed work plan. The ESG Working Group actively participated in domestic andinternational ESG rating responses and information disclosure, collecting the Company’s practices and progress of goalsfrom functional departments and business units, and regularly reporting work progress to the Strategy Management andESG Committee.Furthermore, the Company emphasises the formulation of ESG promotion and capacity. It invited external experts toconduct specialised seminars such as“LCA and Ecodesign”,“Science-based Targets for Corporate Climate Risk Responsesand Opportunity Analysis”, and“Anti-bribery and Anti-corruption Training”, to enhance comprehensive awareness of ESGacross all organizational levels, from executives to frontline employees.
Sanhua Intelligent ControlsESG Governance Structure
The Board of DirectorsThe Strategy Management and ESG Committee
The ESG Working Group
Responsibilities and Duties of ESG Governance
The Board of
Directors
Developing, supervising, and reviewing the Company’s ESG strategy, including strategic direction, goalsetting, and key policies.Evaluating and monitoring ESG-related risks and opportunities, assessing their impacts on theCompany’s long-term development.
The highest governance body for the Company’s ESG management and is responsible for:
The StrategyManagement andESG Committee
Specialising in ESG-related matters and providing decision-making and research recommendations to theBoard.Irregularly reviewing the implementation of ESG strategies and goals, regularly reporting progress to theBoard.Guiding the ESG Working Group and various business units to effectively implement ESG efforts.
The specialised working body under the Board of Directors, responsible for:
The ESG Working
Group
Planning the overall strategy and key actions for ESG-related topics, assisting departments in breakingdown goals and clarifying responsibilities.Holding ESG working meetings to ensure the effective implementation of related measures and reportingwork progress to the Strategy Management and ESG Committee.Leading the planning of ESG information disclosure and preparing the annual ESG report in accordancewith regulations.
Composed of the Company’s senior managers, with the Company’s Human Resources Director andProcurement Director as the leaders, and delegates from each functional department and each businessunit as members, and is responsible for:
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2024 Environmental, Social and Governance ReportESG Management
Double Materiality Assessment
Double Materiality Assessment Process
In 2024, the Company conducted an assessment of ESG topics from a double-materiality perspective, in accordance withtheSelf-Regulatory
Guidelines No. 17 for Companies Listed on Shenzhen Stock Exchange—Sustainability Report (For TrialImplementation)(hereinafter referred to as the“Guidelines”) for determining the materiality of topics. The assessment alsoreferenced international sustainability information disclosure standards, such as theGRI Sustainability Reporting Standards(2021 edition) (hereinafter referred to as the“GRI Standards”). The analysis and assessment focused on both impactmateriality and financial materiality to identify the topics that are of high materiality to the Company.
Stakeholder Communication and Due DiligenceBased on the Company’s business and operational characteristics and in line with industry practices, the Company hasidentified its primary stakeholders as investors, the Management, customers, employees, government and regulationauthorities, suppliers, industry associations, and the media. A communication mechanism has been established witheach stakeholder group, and regular interactions are maintained through channels such as the Company’s website,media, meetings, reports, events, interviews, surveys, visits, etc. This ensures timely and continuous communication withstakeholders.Double Materiality Assessment Process in 2024Key Stakeholder-Concerned Topics and Communication Methods
Investors
The Management
Customers
StakeholderTopics of ConcernCommunication Methods and Frequency
Responding to Climate ChangeOpportunities in Clean TechInnovation and Intellectual PropertyRightsRisk and Compliance Management
Corporate GovernanceBusiness EthicsRisk and Compliance ManagementEnvironmental Policies and Man-agementResponding to Climate Change
Product Lifecycle ManagementResponding to Climate ChangeOpportunities in Clean TechInnovation and Intellectual PropertyRightsProduct and Service Safety andQualityCyber and Information SecurityChemicals and Hazardous Sub-stancesSustainable Procurement
Product carbon footprint verification report (irregularly)Pre-sale, in-sale, and after-sale customer service (real-time)Customer factory audits, CSR audits (annually)Customer satisfaction surveys (annually)
Company website, WeChat official account news updates (real-time)Shenzhen Stock Exchange Interaction Platform (real-time)Investor research activities (irregularly)Shareholders' Meetings and earnings briefings (annually)Investors' meetings and roadshow events (annually)
Meetings of Board of Directors, Committees and Board ofSupervisors (irregularly)Daily work reporting meetings (irregularly)
Understand Sanhua Intelligent Controls’strategic planning, business model, external marketenvironment and industry trends.Identify and understand the key stakeholders of the Company.
Step 1
Understand theCompany’s Activities andBusiness Relationships
Communicate with stakeholders and identify, screen and determine ESG topics relevant to theCompany in conjunction with disclosure standards and industry practices.Conduct due diligence for senior management, employees, suppliers, customers, etc., analysethe significant impact of the topics on the economy, environment, and society, as well asthe significant impact on the Company's business model, operations, development strategy,financial position, etc., and identify the impact, risks, and opportunities of the topics on theCompany.
Step 2
StakeholderCommunication, TopicIdentification and Due
Diligence
A total of 160 quantitative survey questionnaires were distributed and collected. Reasonableand applicable evaluation methods (impact materiality: impact scale, scope, and irremediability;financial materiality: likelihood of occurrence and extent of financial impact) and materialitythresholds were set.Based on the due diligence results, evaluate the materiality and priority of the topics.
Step 3
Topic Materiality
Assessment
After review and approval of assessment results by the Company’s Strategy Managementand ESG Committee, form a matrix of topics of materiality, disclose the topics of highmateriality for 2024 in the ESG report.
Step 4
Topic Approval and
Disclosure
1920
2024 Environmental, Social and Governance ReportESG Management
Employees
Community and thePublic
Industry Associations
Occupational Health and SafetyLabour Rights and Talent Reten-tionHuman Capital DevelopmentBusiness Ethics
Environmental Policies andManagementResponding to Climate ChangeCorporate Citizens and PublicWelfare
Environmental Policies andManagementEmissions and WasteChemicals and HazardousSubstancesWater resources managementCorporate GovernanceBusiness EthicsRisk and ComplianceManagementProduct Lifecycle ManagementCircular EconomyResponding to Climate ChangeChemicals and HazardousSubstancesProduct and Service Safety andQualitySustainable ProcurementBusiness Ethics
Innovation and IntellectualProperty RightsOpportunities in Clean Tech
Employee Representative Congress (annually)Employee training and sports/cultural activities (irregularly)“Department Head’s Mailbox”,“Employee Complaint Forms”,and Sanhua Employee Service Platform (real-time)Employee performance feedback mechanism (annually)
Media reports (irregularly)Company website, WeChat official account news updates (real-time)Public welfare and volunteer activities (irregularly)
Government-enterprise communication meetings (irregularly)Government pollution discharge permit management, wastemanagement systems (annually)Regular government department filings (irregularly)
Supplier information security self-assessment actions(irregularly)Supplier performance evaluation actions, supplier conferences(annually)Social responsibility surveys, on-site audits (irregularly)Daily communication and visits (real-time)
External exhibitions, industry exchange meetings (irregularly)Internal technical exchange meetings (irregularly)
Based on the ESG governance structure, the ESG Working Group coordinates all departments to carry out due diligence toall stakeholders through daily communication, research, interviews, etc., to identify, analyse, and evaluate the ESG topicsbased on their potential impacts over the short term (0-1 year), medium term (2-5 years), and long term (6+ years) on theeconomy, environment, and society, as well as significant impacts on the Company’s business model, business operations,development strategy, and financial position. The assessment also identifies the risks and opportunities that these topicspose to the Company, allowing the Company to implement targeted management practices.
2024 Materiality Topics and Their Impact, Risks, and OpportunitiesNo.TopicsImpact ScopeStakeholders AffectedMain Risks/Opportunities
Environmentalpolicies andmanagement
Short-term,medium-term,
long-term
Government andregulation authorities
The Management
Community and the public
If environmental compliance management is inadequate, suchas exceeding pollutant discharge limits or improper wastedisposal, the Company may face substantial fines or risks ofproduction suspension and rectification, and may even facelegal lawsuits and public resistance, leading to financial lossesand reputational damage.
Energymanagement
Medium-term,long-term
Purchasing green electricity and self-generated photovoltaicpower will bring cost pressure to the Company in the shortterm, but optimising energy usage structure can create cost-saving opportunities for the Company.
Waterresourcesmanagement
Medium-term,long-term
The installation and maintenance of water recovery andrecycling systems require significant initial investment andmay affect financial performance in the short term. At thesame time, by saving water and recycling water, the Companycan reduce its dependence on water resources.
Productlifecyclemanagement
Medium-term,long-term
Suppliers
Customers
As environmental protection policies and customerrequirements gradually tighten, binding standards on productcarbon footprints may emerge in the future.
Emissions and
waste
Short-term,medium-term,long-term
Government andregulation authorities
Community and the public
If pollutant emission management is inadequate, the Companymay face fines, lawsuits, and regulatory sanctions, and mayalso encounter public criticism, damaging the Company’sreputation and even affecting production permits and businessdevelopment.
Circulareconomy
Medium-term,
long-term
Suppliers
Implementing circular economy provides the Company withopportunities to reduce resource costs, enhance supplychain resilience, and explore new business areas. Throughinnovative recycling and reuse models, the Company can notonly improve competitiveness but also attract consumers andinvestors who are focused on sustainability.
Responding toclimate change
Short-term,medium-term,
long-term
Investors
Customers
The Management
Suppliers
Community and the public
Building new factories in areas vulnerable to extreme weather(floods, high temperatures, typhoons) may pose a risk ofproduction stoppages and work delays due to the damage tothe Company infrastructure caused by severe weather.
Opportunities inClean Tech
Medium-term,
long-term
Investors
Customers
Industry associations
Seizing opportunities in clean tech not only promotes theCompany’s green transformation but also helps it maintaina competitive advantage amid increasingly stringentenvironmental regulations and market demand shifts.
Government andRegulation Authorities
Suppliers
StakeholderTopics of ConcernCommunication Channels and Frequency
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2024 Environmental, Social and Governance ReportESG Management
No.TopicsImpact ScopeStakeholders AffectedMain Risks/Opportunities
Chemicalsand hazardous
substances
Medium-term,
long-term
Suppliers
Customers
Government andregulation authorities
If chemical management is improper, it could cause safetyincidents, harm employee health, and result in direct financial lossesand reputational damage. If products contain harmful substancesexceeding the standard limit, it will affect business orders.
Labour rights
and talent
retention
Medium-term,long-term
Employees
If employee recruitment management is poor, there are risks offorced labour, child labour, etc. The Company will face penaltiesfrom local governments, damaging its public image and reputation.
Occupational
health and
safety
Short-term,medium-term,long-term
Employees
The Company’s occupational health and safety facilities andequipment are widely distributed. If supervision is inadequate,safety hazards may not be detected in time, and employeesmay fail to wear protective equipment properly. If governmentand regulation authorities discover these problems and issueadministrative penalties, the Company will face negative impactsand fines.
Human capitaldevelopment
Medium-term,
long-term
Employees
Increasing employee development and training helps the Companycultivate high-quality core talent, improve teamwork, and enhanceproductivity.
Innovation and
intellectualproperty rights
Short-term,medium-term,
long-term
Investors
Customers
Industry associations
Through technological innovation and business modelinnovation, the Company can improve operational efficiency,reduce costs, and attract more investors and customers.
Product andservice safety
and quality
Short-term,medium-term,
long-term
Suppliers
Customers
If the Company neglects product and service safety andquality management, it may lead to product defects or safetyincidents. Recalls and compensation losses will result in directfinancial costs and affect market share and customer loyalty.
Cyber andinformationsecurity
Medium-term,
long-term
Suppliers
Customers
If the Company fails to effectively protect customer data andprivacy, it may lead to data breaches, privacy violations, andcyberattacks, resulting in legal lawsuits, regulatory penalties,and reputational damage.
Sustainableprocurement
Short-term,medium-term,
long-term
Suppliers
Customers
If environmental and social risks in the supply chain are noteffectively managed, it may result in environmental pollution,labour rights violations, and other issues, which will affect theCompany’s reputation and disrupt the stability and long-termsustainability of the supply chain.
Corporatecitizens andpublic welfare
Short-term,medium-term,long-term
Community and the public
By supporting social development, the Company can not onlycreate positive impacts but also enhance employee cohesionand social recognition.
Corporategovernance
Medium-term,
long-term
Government andregulation authorities
The Management
Good corporate governance helps the Company improvegovernance performance, promoting business sustainabilityand market adaptability.19Business ethics
Medium-term,
long-term
Government andregulation authorities
Employees
The Management
Suppliers
If anti-commercial bribery and anti-corruption measuresare ineffective, the Company will face increased risks oflegal actions and regulatory penalties, potentially leading tosignificant financial losses and reputational damage.
Risk andcompliancemanagement
Short-term,medium-term,long-term
Government andregulation authorities
Investors
The Management
If the Company fails to conduct timely compliance and riskmanagement, the likelihood of violations increases, and theCompany will face legal lawsuits and public pressure.
2024 Materiality Matrix
Conclusion of Materiality Assessment
Materiality to the Company's financeLowest
Materiality of economic, social, and environmental impacts
Corporate Citizens and Public WelfareRisk and Compliance Management
Human CapitalDevelopmentLabour Rights andTalent Retention
Product and Service Safety and Quality
Innovation and Intellectual Property Rights
Responding to Climate Change
Circular EconomyBusiness Ethics
Environmental Policies and Management
Cyber and Information SecurityCorporate Governance
Occupational Health and SafetyWater ResourcesManagement
Chemicals andHazardous Substances
Energy Management
Sustainable ProcurementEmissions and Waste
Opportunities in Clean Tech
Product Lifecycle Management
Only Impact MaterialityNeither Financial Materiality nor ImpactMateriality
Both Financial Materiality and Impact MaterialityOnly Financial Materiality
Highest
Highest
Note: Among the 21 topics set in theGuidelines,the Company does not involve“Ecosystem and Biodiversity Protection”or“Ethicsof Science and Technology”;“Stakeholder Engagement”and“Due Diligence”are necessary processes for the Company to identifyand analyse ESG topics, which are addressed in the“Double Materiality Assessment" section and are not included as ESG topicsin the“Materiality Matrix”; the remaining topics are addressed in the main body of the report or in the indexes. The Company hasindependently identified topics such as“Corporate Governance”,“Risk and Compliance Management”,“Opportunities in Clean Tech”,“Chemicals and Hazardous Substances”, and“Product Lifecycle Management”, all of which are addressed in the correspondingchapters of the report.
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2024 Environmental, Social and Governance ReportESG Management
Contribution to the United Nations Sustainable Development Goals (SDGs)
SDGs
MetricsGreenhouse gas emission intensity
The proportion of electricity generatedfrom renewable sources
The proportion of recycled packagingmaterials for finished products
Workplace injury rateAverage training hours per employee
The coverage of anti-discrimination andanti-harassment training
Targets
Reduce greenhouse gas emission intensityby over 30% from 2020 levels by 2030Achieve carbon neutrality by 2050 and strivefor full product lifecycle carbon neutrality by2060
The proportion of electricity generated fromrenewable sources remains ≥15% annually
The proportion of recycled packagingmaterials for finished products reaches 25%by 2030
Reduce workplace injury rate by 5% from2024 to 2026 compared to the previous year
Increase average training hours peremployee by 30% from 2022 levels by 2030
Achieve over 95% coverage in anti-discrimination and anti-harassment trainingby 2030
2024 Progress
Greenhouse gas emissions per unit revenueare 0.127 tCO
e/RMB10,000
The proportion of electricity generated fromrenewable sources was 16.00%
The proportion of recycled packagingmaterials for finished products was 22.07%
Workplace injury rate was 0.30%
Average training hours per employee was
39.66 hours, an increase of 29% compared
to 2022 levels
The coverage rate of anti-discrimination andanti-harassment training was 86%
Annual Key Actions
Gradually phased out high energyconsuming production equipmentsuch as transformers, air conditioners,air compressors, and motors, andcontinuously applied smart energysystems.Invested heavily in R&D for new energyvehicle thermal management technologyand eco-friendly refrigerants.
Installed distributed photovoltaic powergeneration, energy storage facilities, andsmart microgrid systems.Purchased green electricity from renewablesources such as solar and wind.
Explored the application of greenpackaging, including foldable reusablepackaging, leased recyclable packaging,and reducing packaging air transportvolume.
Strengthened employee health and safetyprotection mechanisms, ensured adequaterest time, and reduced repetitive straininjuries.
Developed targeted training programs fordifferent levels and job categories, coveringjob skills, professional knowledge, andmanagement capabilities.
Conducted anti-discrimination andanti-harassment training, ensuring nodiscrimination in hiring, compensation,training, promotion opportunities, etc.,based on race, religion, gender, nationality,age, marital status, or disability.
2526
SDGs
R&D innovation achievements
Annual patentapplications1,341
Authorisedpatents granted
Feature
Innovating for the
Future, Leading the
Technological Frontier
Topics
Innovation and Intellectual PropertyRights, Opportunities in Clean Tech
R&D investmentRMB1,351,798,800
Revenue proportion
4.84%
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2024 Environmental, Social and Governance ReportFeature: Innovating for the Future, Leading the Technological Frontier
Sanhua Intelligent Controls ad-heres to the development strategyof “focusing on excellence and in-novating for success” and strictlycomplies with the Law of the Peo-ple’s Republic of China on Scienticand Technological Progress, thePatent Law of the People’s Republicof China, and other relevant laws,regulations, and requirements.The Company has establishedan innovation and intellectualproperty management system tostandardise the R&D process anddrive technological advancements,transitioning from a “cost leading”model to a “technology leading”model.
Innovation and Intellectual Property Management System
Governance
Establish an R&D and innovation management structure based on a“Marketing Department – Technical Management Departments of Busi-ness Units” framework and formulate management regulations for tech-nology development and design review.Business unit technical departments collaborate with development man-agement departments to carry out intellectual property management.
Impacts, Risks, and Opportunities Management
Improve R&D innovation management processes, continuously optimis-ing full-value chain management in the refrigeration and air-conditioningproduct components and automotive components sectors.Enhance internal management and external collaboration mechanismsby engaging in industry-academia-research projects with universities andconducting R&D innovation training programs to strengthen employees’
innovation capabilities.Metrics and Targets
Cover key metrics such as R&D investment, valid patent applications, and
authorised patents.
Strategy
Develop and adjust product R&D strategies and plans in response to
identi?ed market risks, policy and regulatory risks, and product and ser-
vice opportunities.
Position clean technology as a key strategy, leveraging market opportu-
nities in the low-carbon economy to develop more stable, safer, precise,
and eco-friendly solutions.
R&D and InnovationR&D and Innovation Management Structure
The Company continuously improves its R&D and innovation management structure. TheMarketing Department is responsible for market research and product strategy, while the technicalmanagement departments of business units oversee the large-scale production and optimisationof R&D outcomes, actively promoting the transformation of innovative achievements.
R&D and Innovation StrategyThe Company adheres to the strategy approach of “reserve one generation, develop onegeneration, and apply one generation”, establishing a comprehensive talent acquisition andinternal training system to build a highly skilled workforce. By leveraging cutting-edge technology,the Company continues to expand into international markets, increasing R&D investment to drivebreakthroughs and applications of key technologies.Through market research and policy tracking, the Company identifies risks and opportunities,converting external changes into internal R&D directions. It regularly evaluates the financialimpact of R&D innovation risks and adjusts its R&D strategies, accordingly, ensuring that researchoutcomes serve as a driving force for business growth.
The Company has established internal regulatory frameworks such as the Regulations ofTechnology Development Project,theRegulations of Scientific and Technological ProjectManagement and Awards,theRegulations of Design Review Management,theRegulations ofTechnical Review Management,and
theControl Procedures for New Product Development. Bymaintaining a structured R&D process and continuous investment in research, the Companyaccumulates technological expertise and expands market opportunities.
Conducts regular market research, monitors markettrends, and builds an information resource database.Participates in formulating product strategies, con-ducts in-depth evaluations of technical targets andproducts, provides R&D recommendations, and over-sees the setting and execution of product line goals.
Responsible for the large-scale production and man-ufacturing of R&D outcomes. Implements more en-ergy-e?cient technological solutions based on localpolicies, market demand, and operational costs.
R&D and Innovation Management Structure
Marketing DepartmentTechnical Management Departments of Business Units
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2024 Environmental, Social and Governance ReportFeature: Innovating for the Future, Leading the Technological Frontier
R&D and Innovation Risks and Opportunities
R&D and Innovation Management Process
Risk/Opportunity TypeDescriptionFinancial Impact
Market Risk
Failure to continuously launch competitive new products or technologiesmay lead to pressure from domestic and international competitors, posinga risk of market share decline.If the market trend changes, such as the negative growth of heat pumpsdue to the unsatisfactory effect of switching from gas to heat pumps inEurope, the Company's products will be delayed, or inventory will be caused.
R&D costs increaseRevenue decreases
Policy and Regulatory Risk
Governments worldwide are introducing stricter environmental regulations,such as the European Union’s F-Gas Regulation and the relevant regulationson low-GWP refrigerant alternatives in the United States, which have ledto increasing demands for the reduction of fluorinated greenhouse gases.Failure to promptly adjust production and sales strategies could result incompliance risks, restricted market access, fines, or sanctions.
Operating costsincrease
Product and ServiceOpportunity
The transition to green, low-carbon technologies in NEVs industry presentsopportunities for technological innovation and market expansion. TheCompany proactively explores advancements in NEV thermal managementtechnology and collaborates with leading research institutions to gain acompetitive edge in industrial transformation.
R&D costs increaseRevenue increases
Market Opportunity
The development of new energy promotes the growth of thermalmanagement demand in fields such as photovoltaic inverters and energystorage. The development of AI accelerates the expansion of data centresand promotes the upgrading of cooling technology. The Company canexpand product applications by leveraging the advantages of thermalmanagement technology and seize the market opportunities brought by therapid development of new energy and data centres.
Revenue increases
Conduct regular research on customer demands, monitor market and industrydevelopment trends, establish a resource database, and identify current andanticipated risks and opportunities in R&D innovation.
Based on identified risks and opportunities, analyze the associated financial impact,comprehensively evaluate the feasibility and expected benefits of R&D projects, andformulate product R&D directions and strategies for the next 3–5 years.
Continuously increase R&D investement, emphasize industry-academia-research collaboration and international R&D deployment, and drive technologicalinnovation through comprehensive management and incentive mechanisms toenhance market competitiveness.
Business units formulate full-value chain planning for products, settingcomprehensive targets related to cost, integration, and other key product attributes.Through the process of "collecting customer needs – analyzing competingproducts – proposing product solutions – conducting review meetings," theCompany tracks the progress of R&D projects and evaluates the achievement ofobjectives.
Identification
Evaluation
Management
Monitoring
The Company has always been committed to providing customers across the globe with more efficient, smarterand cleaner thermal management solutions. Focusing on the core strategy of clean technology, throughcontinuous innovation and accumulation, and leveraging the transformative impact of a green future, significantprogress has been made in core business areas such as automotive components and refrigeration and air-conditioning product components, helping customers achieve sustainability commitments.Under the automotive components business, the Company continues to expand its business leading advantages,with products such as electronic expansion valves, electronic water pumps, and electric oil pumps covering threekey scenarios: cabinet thermal management, battery thermal management, and electrical/control system thermalmanagement. In 2024, the Company's revenue from the automotive components business was RMB11,386,559thousand, accounting for 40.74% of the total revenue.Under the refrigeration and air-conditioning product components business, the Company actively promotesthe application of new eco-friendly refrigerants and heat pump technology, committed to reducing the energyconsumption of refrigeration equipment. The Company's electronic expansion valves, four-way reversing valves,micro-channel heat exchangers and other products are widely used in air conditioners, refrigerators, washingmachines, industrial refrigeration, cold-chain transport, heat pump heating, and data centres, empoweringenergy-efficient buildings, heating, ventilation and air-conditioning systems and household appliances thermalmanagement systems. In 2024, the Company's revenue from the refrigeration and air-conditioning productcomponents business was RMB16,560,605 thousand, accounting for 59.26% of the total revenue.
R&D and Innovation Management MechanismThe Company promotes digital process of the product lifecycle management, improves R&Dmanagement efficiency, enables end-to-end digital operations, and continuously optimises the full-value chain management process for its products by identifying market demands, assessing risks andopportunities, developing management tools, and monitoring goals and implementation progress.
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2024 Environmental, Social and Governance ReportFeature: Innovating for the Future, Leading the Technological Frontier
R&D and Innovation Actions and Achievements
Key Actions and Achievements of R&D and Innovation in 2024
Actively explored refrigerant substitution pathways in the air-conditioning industry, expanding the application of cleanrefrigerant technologies such as CO? refrigerant and R134a refrigerant. The Company’s related products offer advantages inenergy conservation, environmental protection, high-pressure resistance, and low global warming potential (“GWP”).The brazed plate heat exchanger adopted R290 eco-friendly refrigerant (low GWP value). Compared to its previous generation,refrigerant charge was reduced by 37%, while heat exchange performance improved by more than 20% on average.
Eco-Friendly Refrigerant Substitution
Led and participated in the formulation of one national standard, five industry standards and four group standards, such asMaximum allowable values of energy efficiency and energy efficiency grades for cold store (box) and refrigerant compressorcondensing unit, Technical Specification for energy storage battery integrated cooling system, Liquid cooled heat sinks forenergy storage battery, etc.Actively engaged in industry symposiums and technical exchange meetings to stay informed on industry developments.
Industry Development Collaboration
The“Key Technologies and Industrial Applications of Intelligent Low-Carbon Thermal Management for NEVs”project achievedsubstantial innovation, reaching an internationally leading level.The Company’s thermal management valve island integration modules, electronic expansion valves, battery coolers, andelectric oil pumps held the largest global market share.The electronic expansion valve was awarded the“Manufacturing Industry Single Champion Product (2023–2025)”by theMinistry of Industry and Information Technology (MIIT), China.
Thermal Management Technology
The full-stack energy storage thermal management solution won the“2024 Best Liquid Cooling Technology Solution Award”
and the“2024 Best Thermal Management Technology Solution Award” in China’s energy storage industry.
Energy Storage Technology
Actively built an“Industry-Academia-Research”platform, collaborating with Tsinghua University, Shanghai Jiao TongUniversity, Xi’an Jiaotong University, South China University of Technology, National University of Singapore, University ofIllinois, and Beijing University of Chemical Technology, etc., to conduct joint research projects. Multiple research results werepublished in top-tier academic journals.
Industry-Academia-Research Collaboration
Key Honors and Awards of R&D and Innovation
National Enterprise Technology CentrePost-doctoral Research Workstation
National Development and Reform CommissionMinistry of Human Resources and Social Security,
National Postdoctoral Committee
Provincial High-Tech Enterprise
National Technology Innovation Demonstration
EnterpriseDepartment of Science and Technology of Zhejiang Province,Department of Finance of Zhejiang Province, State Taxation
Administration Zhejiang Provincial
Ministry of Industry and Information
Technology, China
Zhejiang Provincial Key Enterprise Research Institute forIntelligent Control for Refrigeration Household Appliances
Zhejiang Provincial Science and Technology Leading
Enterprise
Department of Science and Technology of
Zhejiang Province
Department of Science and Technology of
Zhejiang Province
Zhejiang Provincial Industrial Internet Platform
National Manufacturing Industry Single
Champion Enterprise
Department of Economy and Information of
Zhejiang Province
Ministry of Industry and Information Technology ,
China
“Aipulanke Core Technology Award”
“Most Influential Enterprise in Automotive
Thermal Management Industry”
Appliances & Electronics World Expo (“AWE”)World Vehicles Thermal Management System Tech
Innovation Conference (“WVTMS”)
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2024 Environmental, Social and Governance ReportFeature: Innovating for the Future, Leading the Technological Frontier
Recognised as a National Manufacturing Industry Single Champion EnterpriseCaseIn March 2024, Zhejiang Sanhua Automotive Components Co., Ltd. (referredto as“Sanhua Automotive”), a subsidiary of the Company, was awardedthe Manufacturing Industry Single Champion title by MIIT for its thermalmanagement integrated component products. These products integraterefrigerant-side modules, water-side modules, control modules, and dampingmodules into highly integrated structural components, reducing spaceoccupation and enabling vehicle lightweighting, which in turn lowers carbonemissions during end-use.The Company continuously enhances automation levels in production,assembly, logistics, and inspection processes, driving the upgrade of intelligentmanufacturing. Core components of Sanhua Automotive’s products haveachieved independent processing. Equipment such as turret machines, CNCmachines, and punching machines have been fully automated with roboticloading, processing, and unloading, establishing a technology-driven, new-quality productivity model.
Zhejiang Sanhua Automotive Components Co.,Ltd. was awarded“National ManufacturingIndustry Single Champion Enterprise” by MIIT
NEVs Smart Low-Carbon Thermal Management Technology Received Multiple PatentsCaseIn February 2024, Sanhua Automotive’s project on“Key Technologies and Industrial Applications of Intelligent Low-Carbon Thermal Management for NEVs”underwent a scientific evaluation organised by the Technology EvaluationCommittee of the Chinese Association of Refrigeration. To address the challenge of heat transfer enhancementin the confined spaces of NEVs with high heat flux densities, the Company proposed a new flow path dampingand fluid distribution configuration and invented novel fish-scale chevron wave and dot-wave heat exchangerstructures. These innovations enabled uniform flow distribution between plates, significantly improving heat fluxdensity in heat exchangers.This project has resulted in 16 core international patents and 52 national invention patents, as well as the revisionand formulation of 12 industry and group standards. It represents substantial innovation in high-efficiencyheat exchanger technology for NEVs, high-precision electronic expansion valve technology, compact thermalmanagement valve island integration technology, and intelligent manufacturing systems for thermal managementproducts, reaching an internationally leading level.
Patent Law Knowledge TrainingCase
In January 2024, following the enactment of theImplementation Regulations of the Patent Law of the People’sRepublic of Chinaand the Patent Examination Guidelines, the Company promptly organised a training sessionto interpret the revision to the Patent Law, implementation regulations and examination guidelines. Nearly 60key personnel responsible for intellectual property management and operations across various business unitsattended the training. The course covered revised provisions on patent applications, examinations, and rightsprotection, enhancing participants’ ability to apply patent regulations in practice.
Intellectual Property ProtectionSanhua Intelligent Controls has established internal regulations such as theRegulations of Intellectual Property, theRegulations of Patent Work, and theRegulations of Intellectual Property Rewards and Remunerationto define thereward mechanisms for the application and authorisation of intellectual property rights such as patents, technicalsecrets, and software copyrights.Technical personnel from each business unit are responsible for identifying intellectual property opportunities,compiling documents, submitting applications, and managing follow-up procedures. The development managementdepartment handles the registration, application, approval, and archiving of intellectual property rights.In 2024, the Company invited external experts multiple times to provide training on Theory of Inventive ProblemSolving (TRIZ) and conducted customised workshops on R&D project management and popularisation ofintellectual property laws. These initiatives expanded employees’ innovative thinking.
To ensure effective R&D management, the Company has established reasonable R&D targets and regular progressreview mechanisms. It adopts the Objectives and Key Results (OKR) method to track the progress and achievementof R&D objectives and conducts monthly, quarterly, and annual assessments of technical R&D personnel. TheCompany continues to increase its investment in R&D related to clean technology, including R&D expenses in thefields of NEVs thermal management technology and eco-friendly refrigerant technology. The Company's strategicgoal is to increase investment in R&D of clean technologies, and plans to increase R&D investment by more than10% year-on-year in 2025 compared to 2024.
Intellectual Property Performance in 2024Metrics2024 ProgressAnnual patent applications (units)1,341Annual patents granted (units)460Among them, invention patents (units)185Utility model patents (units)223Design patents (units)52
SDGs
Carbon Neutrality Declaration
Committed to reducing carbon emission intensity by more than 30% from 2020 levels by 2030,achieving carbon neutrality by 2050, and striving for full product lifecycle carbon neutrality by2060.
Topics
Responding to Climate Change,Energy Management
Feature
Low-Carbon
Transition and Climate
Change Response
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2024 Environmental, Social and Governance ReportFeature: Low-Carbon Transition and Climate Change Response
Responding to ClimateChangeFaced with the severe challenges of globalclimate change, Sanhua Intelligent Con-trols recognises the profound impact cli-mate change has on corporate operations,business expansion, and supply chain col-laboration. The Company actively respondsto China’s “2030 Carbon Peaking and 2060Carbon Neutrality” goals and strictly com-plies with local GHG emissions-relatedlaws, regulations, and requirements. TheCompany proactively identies climate-re-lated risks and opportunities relevant toits business, incorporating climate changeinto its strategic planning and operationalpractices to effectively manage associat-ed challenges and potential impacts.The Company’s current GHGs primarilystem from direct emissions from opera-tions (e.g., combustion of gasoline, diesel,and natural gas), indirect emissions frompurchased electricity and steam, and indi-rect emissions from value chain, includingupstream leased assets, downstreamtransportation and distribution, and down-stream leased assets.
Climate Change Management SystemGovernance
Establish a climate change governance structure composed of the Boardof Directors, the Strategy Management and ESG Committee and the ESGWorking Group ,formulate relevant management regulations.
Metrics and Targets
Track and analyse GHG emissions and other relevant metrics, andcontinue to track the progress of the Company’s carbon reduction andcarbon neutrality targets to evaluate the effectiveness of climate changemanagement.
Strategy
Conduct comprehensive identification and analysis of key climate-related risks and opportunities through department interviews andexpert assessments, evaluating their current and anticipated financialimpacts on strategic planning and business models.Impacts, Risks, and Opportunities Management
Utilise a systematic process to identify, assess, prioritize, and monitorclimate-related risks and opportunities, integrating them into the overallcorporate risk management framework. The Strategy Management andESG Committee reviews and approves all evaluations and analyses.Develop and implement systematic energy conservation and emissionreduction projects, increasing R&D investments to lower the carbonfootprint of products.
Climate Change Governance Structure
The Board of Directors, as the highest-level governing body, is fully responsible for formulating andoverseeing climate-related strategies, targets, and policies to ensure alignment with the Company’s long-termdevelopment goals. The Board conducts regular assessments of climate-related risks and opportunities,monitoring their potential impacts on the Company’s long-term development.The Strategy Management and ESG Committee conducts in-depth research on climate-related strategicissues and provides advisory recommendations to the Board. The Committee regularly reviews the executionof climate-related strategies and targets, promptly identifying and addressing implementation challengeswhile reporting progress to the Board.The ESG Working Group is responsible for formulating detailed climate change response plans and actionplans, coordinating departments to ensure effective execution of climate-related targets, and collaboratingwith business units to ensure company-wide implementation of climate initiatives while tracking andreporting progress across departments.Climate Change StrategyThe Company follows the International Financial Reporting Standards Sustainability Disclosure StandardNo.2 – Climate-related Disclosure (IFRS S2) framework for classifying and defining climate-related risksand opportunities, aligning with its business characteristics and market conditions. Based on likelihood ofoccurrence and extent of impact, the Company assesses and prioritizes the materiality of climate-relatedrisks and opportunities, ultimately identifying two major risks and two major opportunities.
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2024 Environmental, Social and Governance ReportFeature: Low-Carbon Transition and Climate Change Response
Dimensions of Climate-related Risk and Opportunity Assessment
Climate-related Risks and Opportunities
Time Horizon of Impact
Extent of Impact
Likelihood of Occurrence
Climate-related risks and opportunities are categorised into short-term (0–3 years), mid-term (4–10 years), and long-term (11–30 years) based on their expected impact period.
Assess based on financial impact, regulatory and compliance requirements, and time horizon dimensions.
Evaluate based on probability of occurrence, geographic factors, and industry relevance.
Short-term: Focus on current climate change factors and trends, ensuring the effectiveness of the climatemanagement system by improving the identification of compliance obligations, potential impacts, andimmediate risks and opportunities.Mid-term: Address potential future developments, including new technology advancements, changes inenvironmental legislation and standards, and emerging market trends.Long-term: Consider broader climate change effects, such as increasing resource scarcity and socialtransformations, and evaluate their impact on the Company’s long-term sustainability, business model,supply chain, and product lifecycle.
Risk/OpportunityType
DescriptionAffected Value ChainFinancial Impact
Physical - acutephysical risk
Frequent extreme weather events (e.g.,heatwaves, heavy rainfall, floods) maydisrupt production facilities and supplychains, leading to delays in production anddelivery, as well as additional repair costs.
Upstream value chain,self-owned operations,downstream valuechain
Operating Costs: facilitymaintenance expenses increase
Asset Depreciation: accelerateddepreciation of infrastructuremay lead to prematuredecommissioningTransition – policyand regulatory risk
Policy-driven requirements for cleanenergy adoption may result in higher initialprocurement costs for green electricitycompared to traditional power sources,increasing overall operational costs.
Self-owned operations
Operating Costs: electricityexpenses increase
Risks and Opportunities Management Mechanism
The Company has established a systematic process for identifying, assessing, prioritising, and managingclimate-related risks and opportunities, fully integrating them into the overall corporate risk managementframework. The Strategy Management and ESG Committee is responsible for reviewing and approving climate-related assessments and analyses to ensure the scientific accuracy and effectiveness of response measures.
Climate-related Risks and Opportunities Management Process
Using a systematic approach, the Company analyses operations, supply chains,and market trends to identify climate-related risks and opportunities, includingregulatory changes, shifts in market demand, and the impact of climate events.
Targeted response strategies are developed, including risk mitigation measuresand opportunity management plans, which are embedded into the Company’sbusiness decision-making and operational processes.
Analytical tools are employed to assess the identified risks and opportunities,evaluating their potential financial impact, likelihood of occurrence, and extent offinancial influence on business operations.Based on the assessment results, climate-related risks and opportunities areprioritized according to their relevance to the Company’s products and their levelof materiality. These are then integrated into the Company's risk managementsystem to clarify priority areas for action.
Identification
Management
Evaluation
Prioritization
Risk/Opportunity
Type
DescriptionAffected Value ChainFinancial ImpactPolicy andregulatoryopportunity
The Company proactively complies withhydrofluorocarbon (“HFC”) phase-outpolicies and collaborates with leadingtechnology institutions to advance thedevelopment and application of eco-friendly alternatives.
Self-owned operations
Production Costs: R&Dinvestment increases
Revenue: revenue fromrelated product salesincreases
Marketopportunity
The Company’s proactive efforts inadvancing NEVs thermal managementsystem technologies align with thegrowing demand for low-carbon, high-efficiency solutions, enhancing itsmarket competitiveness.
Self-owned operations
Production Costs: R&Dinvestment increases
Revenue: revenue fromrelated product salesincreases
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2024 Environmental, Social and Governance ReportFeature: Low-Carbon Transition and Climate Change Response
Climate Change Management ActionsThe Company actively responds to climate change by implementing various measures to enhance riskmanagement and climate resilience. In terms of risk response, the Company has developed detailedemergency response plans to ensure rapid action during extreme weather events, minimising productiondowntime and ensuring employee safety. For clean energy adoption, the Company has installed distributedphotovoltaic (“PV”) generation and energy storage facilities while purchasing green power certificates tosupport clean energy development and reduce carbon emissions. In the optimisation of energy management,the Company has introduced a smart energy system to monitor real-time energy consumption acrossbusiness units, workshops, and high-energy-consuming equipment. This system aggregates and analysestotal energy consumption and structure to improve overall energy efficiency.The Company’s eco-friendly refrigerant technology sector is susceptible to climate transition risks, whileits NEVs thermal management technology sector aligns with climate-related opportunities. As climaterisks intensify and demand for low-carbon technologies increases, the Company has adjusted its businessmodel by expanding investments in low-carbon and eco-friendly technologies, enhancing the environmentalsustainability of its products and services, and driving a transition toward greener and more sustainablebusiness operations.Climate Change-related Metrics and TargetsIn 2024, the Company strategically set a GHG emissions reduction target of reducing carbon emissionintensity by more than 30% from 2020 levels by 2030 and a long-term goal of achieving carbon neutrality by2050 and striving for full product lifecycle carbon neutrality by 2060.
GHG Emissions in 2024Metrics2024 ProgressTotal amount of GHG emissions (Scope 1 and Scope 2) (tCO
e)356,264.97GHG emissions (Scope 1) (tCO
e)64,880.18GHG emissions (Scope 2) (tCO
e)291,383.89GHG emissions (Scope 3) (tCO
e)77,049.86GHG emissions per unit of revenue (Scope 1 and Scope 2) (tCO
e/RMB10,000)0.127
GHG Emissions Distribution in 2024GHG Emissions by Business Sector
GHG Emissions by Source
63.64%
36.36%
76.21%
5.58%
18.21%
Refrigeration and air-conditioning product componentsAutomotive components
Combustion energyElectricitySteam
Corporate Governance:
Transparency,
Responsibility, and Value
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2024 Environmental, Social and Governance ReportCorporate Governance: Transparency, Responsibility, and Value
Corporate GovernanceSanhua Intelligent Controls strictly complies with theCompany Law of the People’s Republic of China,theSecurities Lawof the People’s Republic of China,theSelf-regulatory Guidelines No. 1 for Companies Listed on Shenzhen Stock Exchange —Standardised Operations of Companies Listed on the Main Boardissued by Shenzhen Stock Exchange, and other relevantlaws and regulations. The Company remains committed to corporate governance under the rule of law, laying a solidfoundation for its development with a high-standard governance system.
Corporate Governance Management SystemGovernance
Establish a corporate governance structure consisting of the Shareholders’Meeting, Board of Directors, Board of Supervisors, andSenior Management.The Board of Directors has four specialised committees: the Audit Committee, the Nomination Committee, the Remuneration andEvaluation Committee, and the Strategy Management and ESG Committee.
Strategy
Identify corporate governance-related risks and opportunities, such as related party transactions, board independence, and conflict ofinterest.Strengthen board independence and enhancing conflict of interest management help improve transparency, build shareholder trust,and mitigate regulatory risks, thereby enhancing decision-making efficiency and compliance.Impacts, Risks, and Opportunities Management
Regularly evaluate the impact of legal and regulatory changes, shareholder expectations, and market trends on the corporate governancesystem, monitor related risks and opportunities, and develop response plans.Ensure continuous optimisation of the governance structure through periodic performance monitoring and strategic adjustments.
Metrics and Targets
Review key governance metrics such as the number of information disclosure announcements and investor research activities toensure timely and accurate disclosure, strengthening communication transparency.
Corporate Governance StructureThe Company has established a corporate governance framework centred on the Shareholders’Meeting, with the Boardof Directors, Board of Supervisors, and Senior Management working together to ensure effective checks and balances.Internal governance policies such as theArticles of Association,theRules of Procedure of the Shareholders’ Meeting,the
Rules of Procedure of the Board of Directors,and the Regulations of Investor Relations Managementhave been formulatedto standardise corporate governance procedures, ensuring transparent and fair decision-making.
The Shareholders’Meeting serves as the highest authority within the Company, responsible for reviewing strategicdirections and major decisions to ensure operational transparency and maximise shareholder interests. The Boardof Directors consists of 9 members, including 3 independent directors and 1 female director. To ensure professionalspecialisation and operational efficiency, the Board has established the Strategy Management and ESG Committee, theAudit Committee, the Nomination Committee, and the Remuneration and Evaluation Committee. The Board of Supervisorsreports to the Shareholders’Meeting and supervises the performance of the Board of Directors and Senior Management,and actively monitors corporate operations, protects shareholder rights, and ensures that decision-making processescomply with legal and regulatory requirements.According to theArticles of Association, the Company clarifies that the Shareholders' Meeting has the authority to electand replace non-employee representative directors and supervisors in accordance with the law, and to decide on theirremuneration matters. The Board of Directors and the Board of Supervisors propose a compensation plan, which isreviewed and determined by the Shareholders' Meeting regarding the amount and payment method of the compensation.
Corporate Governance Structure
Shareholders’ Meeting
The Board of SupervisorsThe Board of Directors
The Strategy Managementand ESG Committee
The Audit Committee
The Nomination
Committee
The Remuneration andEvaluation Committee
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2024 Environmental, Social and Governance ReportCorporate Governance: Transparency, Responsibility, and Value
2024 Directors, Supervisors, and Senior Management Composition & Meeting Summary
Board of Directors, Board of Supervisors, and Senior ManagementBoard of Directors
membersBoard of Supervisors
members
Independent Directors
membersEmployee Supervisor
member
Female Director
member
Meetings of the Three Governing Bodies
Shareholders’Meetings
Resolutions Discussed atShareholders’ Meetings
Board of DirectorsMeetings
Resolutions Discussed atBoard of Directors Meetings
Board of SupervisorsMeetings
Resolutions Discussedat Board of SupervisorsMeetings
In terms of compensation management, the remuneration package for executive directors includes base salary, performance-based salary, and position-related allowances/subsidies. To ensure alignment between the personal interests of directorsand the Management with the Company’s long-term development goals, their compensation policies are closely linkedto the Company’s sustainability and ESG objectives. The Board incorporates the Company’s ESG performance into theManagement’s performance evaluations, including safety production (e.g., workplace injury rate) and compliance and internalcontrol performance (e.g., audit issue rectification rate), which serve as key factors in determining executive compensation.Information Disclosure and Investor Relations ManagementIn terms of information disclosure, the Company has designatedSecurities Times, Shanghai Securities News,and CNINFOwebsiteas its official disclosure channels to ensure authenticity, accuracy, timeliness, and accessibility of corporateinformation. Additionally, the Board Secretary is responsible for managing investor relations, organising and implementingdaily investor relations management, and responding to investor inquiries through phone, email, and the interactiveplatform. These efforts strengthen communication with investors and fully safeguard their right to information. In 2024, theCompany published 196 announcements and other disclosures via public channels and responded to 108 investor inquirieson the interactive platform.The Company has established a reasonable profit distribution policy to ensure that dividend payments align with its long-term development strategy. Based on business performance, capital needs, and shareholder returns, the Company willreasonably arrange cash dividends, continuously enhancing shareholder returns and corporate value.
The Nomination Committee is responsible for nominating and electing Board members, ensuring that they possessprofessional expertise and extensive experience to effectively drive the Company’s strategic initiatives. As of the end of thereporting period, the Nomination Committee comprised 3 members, including 2 independent directors, meeting corporategovernance requirements and best practices to maintain the Nomination Committee’s independence and impartiality.
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2024 Environmental, Social and Governance ReportCorporate Governance: Transparency, Responsibility, and Value
Risk and Compliance Management
Sanhua Intelligent Controls strictly adheres to theAudit Law of the People’s Republic of China,theBasic Internal ControlNorms for Enterprises,the Provisions of the National Audit Office on Internal Auditing, and other relevant laws andregulations. The Company has established internal policies, including theInternal Audit Systemand theRegulationsof Contract Management, to ensure that risk and compliance management is standardised, scientific, and efficient,safeguarding the Company’s compliant operations.
Risk and Compliance Management Mechanism
The Company has established a risk and compliance management structure comprising the Board of Directors, AuditCommittee and Internal Audit Office, with clearly defined responsibilities. The Audit Committee is responsible for supervisingand evaluating the Company’s risk compliance management and internal control procedures, including monitoring theinternal control system and reviewing key findings from risk compliance investigations. The Audit Committee reports tothe Board of Directors on progress, quality, and significant issues discovered in risk management and internal control work.The Internal Audit Office is responsible for implementing the directives of the Audit Committee, conducting internal controlassessments, identifying and evaluating potential risks, and ensuring the effectiveness and compliance of the internalcontrol system through periodic audits. It also provides timely recommendations for continuous improvement.The Company has implemented a“Three Lines of Defence”mechanism for risk and compliance management, ensuringcomprehensive and effective risk identification, assessment, and response.
Risk and Compliance Management ActionsThe Company identifies, monitors, and inspects compliance risks throughout its production and operations in a timelymanner through legal professional work such as contract review and dispute resolution, systematically reviewing potentialrisk issues and providing targeted improvement suggestions based on identified issues. At the beginning of the year, aplan is formulated to conduct overall research on risk issues and carry out specific compliance work, providing specialcompliance suggestions and improvement plans to promote the overall compliance of the Company.To further strengthen compliance awareness, the Company formulates a training plan at the beginning of the year, andregularly organises regulatory training sessions to communicate the latest legal and compliance requirements to allemployees, so as to enhance the employee’s ability to mitigate legal risks and maintain compliance, ensuring that allbusiness activities adhere to relevant laws, regulations, and industry standards. This approach minimises compliance risksand supports the Company’s sustained and healthy development.To foster a strong compliance culture, the Company conducts compliance awareness training for employees in key positionsand has established a legal compliance section on the“Sanhua E-Learning Platform”, where compliance training materialsand a business-related legal and regulatory database are available for employees. Additionally, the Company has launcheda Legal Compliance Knowledge Portal on its OA system, featuring regular or timely release of compliance news, guidelines,and management policies to guide compliance execution and promote compliance culture.
“Three Lines of Defence” Risk and Compliance Management System
The First Line
The Second Line
The Third Line
Business supervisionconsisting of business departments that are responsible for daily operations and management, and for designingand implementing relevant internal control measures to address risks.
Functional supervisionconsisting of functional departments, assisting the first line of defence in establishing and improving its controlprocedures, and performing supervisory duties to ensure that work is implemented.
Internal audit and supervisionconsisting of internal audit and supervision departments, regularly providing independent evaluations of theeffectiveness of control procedures, and conducting awareness publicity to employees.
In 2024, the Companyconducted
training sessions covering risk management, compliancemanagement, and legal education.
Approximately
3,000 employees were covered.
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Business Ethics
Sanhua Intelligent Controls places great emphasis on business ethics management and strictly complies with theCriminalLaw of the People’s Republic of China,theAnti-Unfair Competition Law of the People’s Republic of China,theAnti-monopolyLaw of the People’s Republic of China,the Anti-Money Laundering Law of the People’s Republic of China, and other relevantlaws and regulations. The Company maintains a zero-tolerance policy toward corruption and takes all necessary measuresto prevent and combat unethical practices. In 2024, the Company did not experience any violations related to anti-bribery,anti-corruption, or anti-unfair competition regulations.
Impacts, Risks, and Opportunities Management
Business Ethics Management SystemGovernance
Establish a business ethics management structure comprising the Board of Directors, the Audit Committee, the Legal, Audit, andCompliance Departments and formulate an integrity management system.
Metrics and Targets
Cover signing rates of employee and supplier integrity agreement and audit coverage of high-risk positions.
Strategy
Identify business ethics-related risks and opportunities, including corruption risks, unfair competition risks, and money laundering risks.Improving whistleblowing channels and conducting integrity training requires additional management costs and operationalcomplexity, but also enhances transparency, builds stakeholder trust, and reduces legal and compliance risks.
Use audits, employee feedback, and risk assessments to identify potential integrity risks in business operations, particularly in projectaudits, supply chain management, and sensitive positions.Regularly conduct unfair competition risk assessments to prevent behaviours related to unfair competition and monopoly.
Business Ethics GovernanceThe Company has established a business ethics governance structure based on the Board of Directors, the AuditCommittee, and the Compliance, Audit, and Legal Departments framework. The Board of Directors shall assume the ultimateresponsibility for the Management, implementation and supervision of business ethics. Based on the internal policies suchas theAgreement of Employees’ Integrity,theSystem of Integrity Return Visit,and
theCooperation Agreement of Integrity,
the roles and responsibilities of each department are clearly defined to ensure effective and systematic business ethicsgovernance.In 2024, the Company published theSanhua Intelligent Controls Business Ethics Statement, reaffirming its strongcommitment to ethical business practices. This statement not only reflects the Company’s dedication to responsibleoperations but also provides clear behavioural guidelines for employees, business partners, and customers.Business Ethics Management MechanismThe Company conducts business ethics audit at all operations and comprehensively identifies integrity risks throughaudits and supervision to ensure that risk assessments cover all business units. Anti-corruption measures are embeddedin annual project audits and exit audits, allowing the Company to identify potential issues in sensitive positions and keybusiness areas and implement targeted supervision plans. The Internal Audit Office regularly conducts anti-corruptionaudits, proactively identifying fraud risks and ensuring swift investigation and resolution of detected issues.The Company regularly reviews the business ethics policies and their implementation, launches accountability andpunishment procedures for employees who violate the regulations on business ethics, and imposes verbal criticism,disciplinary review, and termination of employment, depending on the severity of the violation.Employee Integrity ManagementThe Company conducts ongoing integrity training and awareness publicity for all employees to reinforce ethical andcompliance awareness, ensuring that employees fully understand and adhere to business ethics requirements. In 2024, theCompany conducted 8 business ethics training sessions. For high-risk areas such as infrastructure projects, the Companyimplemented special supervision programs to strengthen integrity and compliance management.To enhance transparency, the Company has established multiple reporting channels, enabling employees and externalpartners to report ethical concerns anonymously. The Company strictly protects whistleblower information at every stage,including reporting, registration, record-keeping, and investigation. In 2024, the Company received 12 internal and externalreports through its whistleblowing program.
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Supply Chain Anti-Corruption ManagementIn supply chain anti-corruption management, the Company requires all suppliers and subcontractors to sign theCooperationAgreement of Integrityto ensure that the cooperation of suppliers, partners, and other third parties always comply withthe Company’s anti-corruption requirements. At the same time, the Company visits suppliers, and timely understands andgrasps the staff dynamics of the procurement system. Anti-corruption policies and requirements are embedded in the third-party due diligence process. The Company conducts strict background checks and risk assessments before establishingpartnerships, particularly concerning anti-corruption compliance. Contract clauses explicitly require third parties to complywith the Company’s anti-corruption policies.
Anti-Unfair Competition ManagementPreventing and managing unfair competition is a key focus of the Company’s compliance management system. TheCompany has implemented a systematic risk assessment mechanism to analyse potential unfair competition risks in corebusiness operations, supply chain collaborations, and market competition, including risks related to price manipulation,market monopolies, and exclusionary agreements. The Company conducts continuous compliance oversight and regularreviews, ensuring that all business activities comply with fair competition requirements.To effectively manage unfair competition risks, the Company provides legal training to all employees, covering the cleardefinition and typical cases of the crime of infringing trade secrets in relevant laws and regulations to improve employees’
legal awareness. Employees are required to sign confidentiality agreements, explicitly prohibiting the disclosure, use, orillegal sharing of trade secrets, as well as stealing or transmitting trade secrets to competing entities.The Company conducts specialised training for key positions (e.g., sales, marketing, and procurement teams) to ensure fullunderstanding of legal obligations and compliance requirements. A dedicated compliance advisory channel is available foremployees to seek guidance on competitive business interactions.
Business Ethics Metrics and Targets in 2024Metrics2024 TargetEmployee signing rate of theEmployee Integrity and Self-Discipline Agreement (%)100100Proportion of procurement personnel receiving anti-corruption training (%)100100Supplier signing rate for theIntegrity and Self-Discipline Cooperation Agreement (%)10090Audit coverage of business conduct risks in high-risk positions (%)100100
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Foundation of Trust:
Quality, Safety, and
Security
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2024 Environmental, Social and Governance ReportFoundation of Trust: Quality, Safety, and Security
Product and Service Safety and QualitySanhua Intelligent Controls strictly complies with theProduct Quality Law of the People’s Republic of China,theMetrologyLaw of the People’s Republic of China,the Standardisation Law of the People’s Republic of China, and other relevant laws andregulations. The Company has established a comprehensive quality management system and implements comprehensivequality control to ensure that products meet national, industry, and customer requirements. In 2024, the Company did notexperience any product recalls due to safety or health concerns related to sold or shipped products.
Product and Service Safety and Quality Management SystemGovernance
Strategy
Metrics and Targets
Impacts, Risks, and Opportunities Management
Establish a product and service management structure comprising quality, production, process, and technical departments, eachresponsible for quality management at different stages, including development, design, raw materials, manufacturing, and finalproduct release.
Timely identify external market and regulatory requirements, assess internal operational risks related to product quality and theirpotential impacts and develop proactive response strategies.
Cover key metrics such as number of complaints against products and complaint handling rate.
Conducted strict process disciplineinspections.Required new employees to undergostandardised training and pass as-sessments before starting work.Upgraded software version, advancedsampling timing by 500ns duringopen-loop drive phase, and adjustedcurrent loop bandwidth.
Strengthen end-to-end quality control and customer complaint resolution and implement activities including enhancement of qualitymechanism, quality management training, etc.Strictly control hazardous substances in products in accordance withQC080000 Hazardous Substance Process ManagementStandard, GB/T 3051-014 Automotive Restricted Substances Requirements, EU RoHS and REACHregulations, etc.
Product and Service Management StructureThe Company has established a product quality and customer service management structure led by the quality, production,process, and technical departments. The Quality Management Department is responsible for formulating non-conformingproduct and hazardous substance management policies. The Production & Manufacturing Department manages identification,isolation, and review of non-conforming products during the production process. The Sales, Marketing, and Quality ManagementDepartments oversee pre-sales, in-sales, and after-sales service, ensuring high product quality and customer satisfaction.The Company has established internal regulations such as theProduct Customer Complaint Information Feedback and HandlingProcess and the After-Sales Service Control Procedures. It has also developed a four-level quality system framework consistingof Quality Manual, Regulations, Control Procedures, Standardised Forms. In 2024, the Company passed ISO 9001 QualityManagement Systems Certification and IATF 16949 Automotive Industry Quality Management System Certification.| Product Quality and SafetyProduct Quality StrategyBased on the internal operations, the Company proactively identifies external market and regulatory requirements, assessesquality risks and potential opportunities, and develops corresponding response strategies. Each identified risk/opportunity isassigned to a responsible department with a defined response timeline.
Product Quality and Safety Risks and Opportunities
2024 Product Quality and Safety Risk Rectification Plan (Example)
Risk/Opportunity TypeDescriptionFinancial ImpactMarket Risk
Poor product quality management—including design flaws, technical bottlenecks inmanufacturing processes, or unresolved human-caused quality issues—may lead toa decline in customer satisfaction and lost orders.
Operating costsincrease
Revenue decreases
Product Opportunity
According to EU regulations, traditional R32 refrigerants are being phased out, whileR290 refrigerants, with extremely low global warming potential (GWP), are emergingas the primary alternative. This shift presents an innovation opportunity for theCompany, helping it gain a first-mover advantage in new refrigerant technology,comply with stricter environmental regulations, and enhance market competitiveness.
Operating costsincrease
Revenue increases
StageRisk DescriptionResponse MeasuresCompletion Status
Human-CausedQuality Issues
After-SalesQuality Issues
Employees lack qualityawareness and do not fullyadhere to process discipline,leading to repeated human-caused defects.Abnormal low-temperaturestartup for 10P units.
Completed
Completed
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2024 Environmental, Social and Governance ReportFoundation of Trust: Quality, Safety, and Security
Product Quality and Safety Management ProcessThe Company has established a comprehensive product quality and safety management process, covering 19 key controlstages, including contract review, design and development, production process control, product delivery, product monitoringand measurement, and non-conforming product control.
In 2024, the Company continuously improved its product quality management standards and levels by strengthening policystandards, enhancing quality training, and facilitating supplier quality management.
Each year, the Company establishes quality improvement activity targets and plans, tracking project progress monthlythrough three key initiatives: Quality Control Circles (QCC), KICCHIRI Standardised Quality Management (Keep Improvementfor Customer’s Confidence, Harmony, Innovation, Reliability, and Integrity), Defect-Free Production Program. Theseinitiatives aim to enhance employees’ quality awareness and solidify quality improvement results.
Product Quality and Safety Management Process
Key Initiatives of Product Quality and Safety Management in 2024
Risk and opportunity identification analysis: Based on internal production conditions andexternal market demands, the Company develops theRisk and Opportunity IdentificationAnalysis Evaluation Formto detect potential quality risks and opportunities. Detailedresponse measures are formulated based on impact categories, assigning responsibilitiesand deadlines for resolution.
Identification & Analysis
Quality audits: Quality audits are conducted monthly in accordance with theComplianceEvaluation Control Procedure,including process audits and product audits. Quality risks aremitigated through Quick Response Quality Control (QRQC), corrective/preventive actions, etc.Internal audits: Internal audits are conducted annually by each business department basedon theInternal Audit Control Procedure. Identified issues result in corrective/preventive actionplans, with a 100% closure rate.
Evaluation & Audit
Quality inspections:
The Company strictly adheres to the “Three Inspections” (InitialInspection, In-Process Inspection, Final Inspection) policy, ensuring that there are noabnormalities in the transmission of the previous process. Material Testing: Raw materialsundergo sampling tests on the size and performance before entering production. ProcessControl: The Company ensures equipment, process parameters, dimensions, andperformance data meet specifications before processing begins. Before the product leavesthe factory, it is necessary to verify that the person, machine, material, method, process andtest meet the quality requirements and customer specific requirements.Traceability & recall:
Based on the Control Procedures for Product Identification andTraceability and Product Recall Management Measures, the Company tracks quality issues,recalls defective products, and minimises financial losses.
Monitoring &Improvement
Strengthening Policy StandardsUpdated theQuality Manualto align with external laws and regulations and improved the scope of application and businessscenarios of the quality management system.Revised theNon-Conforming Product Management Process, introducing Non-Conforming Product Identification Cards andPending Processing Product Identification Labels to improve control over incoming material inspections and defect notifications.Optimised daily management document templates, including theRework & Scrap Record Form, Non-Conforming ProductDisassembly Ledger, and Daily Production Defect Report, etc.
Enhancing Quality TrainingConducted continuous quality improvement training for all business units, covering internal auditor training, the Five Core Toolsof the Automotive Industry, quality problem solving tools and report (8D Report, 8 Disciplines Problem Solving Report) usageskills, product application, failure mode analysis, etc.
Supplier Quality Management
Conducted monthly supplier quality evaluations. Organised supplier conferences, quality review meetings, and quality supportprograms to ensure alignment with the Company’s quality standards.
Quality System Learning Map Co-Creation WorkshopQCC Quality Improvement Results Presentation
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4DI Virtual Soldering Defect Reduction
ACC Laser Welding Quality Enhancement
17WG2 Stator Injection Moulding Optimisation
Assembly Operations Optimisation
UV Coating Defect Reduction
PCB Screw Tightening Quality Improvement
2024 Quality Improvement Milestones
Training Program for Enhancing Quality Management System EffectivenessCase
In 2024, the Company organised a two-day training program titled“Enhancing Quality Management System Effectiveness – R&DQuality Management Training”. The training covered core R&D processes, including Product Planning & Technology Planning,Function Definition & Breakdown, Design Control (Review, Validation, and Verification), Product Safety & Special CharacteristicsClassification, Manufacturing Design & Validation, Supplier Development, Product & Process Changes, etc. This program helpedemployees gain a comprehensive understanding of full-process quality management in product design and development.
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Hazardous Substance ManagementSanhua Intelligent Controls complies with the QC080000Hazardous Substance Process Management Standard, GB/T 3051-
Automotive Restricted Substances Requirements,theEU RoHS Directive (Restriction of the Use of Certain HazardousSubstances in Electrical and Electronic Equipment), and theEU REACH Regulation (Registration, Evaluation, Authorisation,and Restriction of Chemicals), as well as other relevant laws and regulations.In 2024, at the request of external customers, the Company conducted Responsible Business Alliance (“RBA”) audits andResponsible Supply Chain Initiative (“RSCI”) audits to assess social responsibility compliance in the electronics industry.During production, the Company strives to use raw materials with minimal hazardous substance content, such as lead-free,no-clean solder paste, to reduce air pollutant emissions and mitigate occupational health risks in the workplace.
| Customer Service Management ProcessThe Company has established a comprehensive global after-sales service network, enabling customers to report productquality issues through official after-sales service channels. After-sales personnel can promptly dispatch professionaltechnical experts for on-site assessment, sample analysis, and failure investigation, assisting customers in conductingfailure analysis and issue resolution.
Customer Complaint Handling Process
Verify product details, quality data, and customer demands, then have the CustomerComplaint Engineer confirm whether the issue falls within the Company’s responsibility.
Verifying Compliant
Information
If it is confirmed as the Company’s responsibility, the Company assesses the quality statusof the product and provides interim measures and investigation progress to the customerwithin 24 hours.
Product Containment
The responsible department is required to confirm and review the causes of the qualityissue within 48 hours and provide a written analysis report.
Root Cause Analysis
In the event of a situation causing the production stoppage or product quarantine of thecustomer, the After-sales Quality Management Department sends personnel to the site fordisposal to minimise losses.The Company initiates aQuality Anomaly Risk Review Form, conduct testing or risk controlinvestigations as necessary, and promptly communicate with the customer to clarify timelines.
Rectification &
Validation
Customer Service Metrics and Targets in 2024
Metrics2024TargetComplaint handling rate (%)100100
Customer Relationship ManagementThe Marketing, Sales, and Quality Management Departments of Sanhua Intelligent Controls are responsible for pre-sales, in-sales, and after-sales customer management. In 2024, the Company revised theProduct Customer Complaint InformationFeedback and Handling Processand optimised the Problem Resolution and Escalation Management Processby refining theclassification criteria for issue severity levels. The process now includes escalation or de-escalation requirements at threekey stages: process initiation, root cause analysis, and responsibility determination. Customer complaints are categorised byseverity into Major, Important, A-Category, B-Category, and C-Category quality issues. Each complaint is logged into the OAsystem as a Customer Quality Information Feedback Form, which enables full-process online tracking until the issue is resolved.
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Cyber and Information SecuritySanhua Intelligent Controls strictly abides by theData Security Law of the People’s Republic of China,thePersonalInformation Protection Law of the People’s Republic of Chinaand other laws and regulations. The Company prioritisesconfidentiality and information security for customers, employees, and suppliers and continuously improves its informationsecurity management system. In 2024, the Company did not experience any information security breaches or customerprivacy leaks.
Cyber and Information Security Management System
Cyber and Information Security Management Policy
Cyber and Information Security Risks
Governance
Establish a management structure consisting of the Information Management Centre and IT Departments across all business units.Each business unit is assigned with ITBPs to coordinate between IT and business departments.
Employee or third-party negligence or system failures may result in data loss or damage, leading tobusiness disruptions.
Potential hacker attacks, phishing scams, or malware infections could compromise production data,R&D results, or other trade secrets.
Strategy
Identify operation risks, trade secret leakage risks, market opportunities, and product opportunities. Enhance information securitycapabilities and implement digital tools to mitigate risks and improve competitiveness.
Metrics and Targets
Cover key metrics such as information security audits, data and privacy breaches,information security training, etc.
Impacts, Risks, and Opportunities Management
Conduct regular system audits and special audits across business units to assess compliance with ISO 27001 and internalmanagement system requirements.Perform third-party information security due diligence and standardise data retention and time recording.
| Information Security Management StructureThe Company has established a management structure consisting of the Information Management Centre, and ITDepartments across all business units, and has implemented strict secure use and management of information networkssecurity, establishing a four-level system consisting of Management System, Regulations, Management Standards andEvaluation Forms. To safeguard information security, the Company employs data encryption, access control, securityauditing and monitoring, desktop management controls, and private cloud. In 2024, the Company passed ISO 27001Information Security Management System certification.
| Information Security StrategyThe Company closely monitors external cybersecurity threats and regulatory changes, continuously identifying informationsecurity risks and potential opportunities. To address risks such as operational disruptions and trade secret leaks, theCompany has developed response strategies, clearly defining responsibilities and deadlines for each department. Thisensures effective management of information security, reduces risk impacts, and enhances market competitiveness.
Information Security Management System Manual, Information Security Strategy, Statement of ISMSApplicabilityLevel 1
Third-Party Access Confirmation Form, Supplier Information Security Self-Assessment Form, Correctiveand Preventive Action Form, Information Security Risk Assessment ReportLevel 4
Regulations of Computer Application and Information Security, Information Security ComplianceManagement Procedure, Internal Information Security Audit Procedure, Information Asset SecurityManagement ProcedureLevel 2
Network Security Management Standards, IT Equipment Security Management Standards,Confidentiality and Information Security Management Standards, Third-Party Information SecurityManagement StandardsLevel 3
Operation
Risk
Trade SecretRisk
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2024 Environmental, Social and Governance ReportFoundation of Trust: Quality, Safety, and Security
| Information Security Risk Management MechanismThe Company follows theInformation Security Risk Management Proceduresand theInternal Information Security AuditProcedure, conducting regular system audits and special audits across business units, to evaluate whether the Company’sR&D, production, and other OA management systems, as well as the operational procedures of relevant personnel, complywith ISO 27001 and internal management systems requirements.
| Information Security Due DiligenceSanhua Intelligent Controls considers third-party information security due diligence as a critical component of supplychain and partner management. The Company has established and implemented a Third-Party Information Security DueDiligence Procedure under theSupplier Security Management Procedureto ensure that all collaborations with suppliers,partners, and service providers comply with applicable information security laws, regulations, and internal policies.Before establishing partnerships, the Company conducts information security risk assessments on all third parties,evaluating data protection capabilities, cybersecurity measures, and compliance status. During partnerships, the Companyperforms regular audits, questionnaire surveys, and on-site inspections to continuously monitor third-party informationsecurity management practices.
| Information Retention and Record Management
The Company has developed and implemented a comprehensive record retention plan, ensuring that business, financial,and compliance records are managed in accordance with legal requirements and industry standards.The plan clearly defines the retention periods, storage requirements, and disposal procedures for different types of records,including business contracts and agreements (all customer and supplier contracts are retained for 10 years after contracttermination), personnel records (employment contracts, salary records, and training archives are retained for 5 years afteremployee departure), and environmental and compliance records (emission data, energy usage, environmental impactassessments documents are retained for at least 5 years), ensuring data completeness, traceability, and security.
Cyber and Information Security Risk Management Process
Sort out the disposal records of assets in status alerts across business units, assess theseverity and priority of potential risks, based on threat intelligence analysis.
Evaluation
Conduct internal audits based on ISO 27001 Information Security Management Systemrequirements, covering 13 control domains, including information security policy, accesscontrol, asset security, and communication security, to identify potential risks.Perform quarterly information security audits across business units to identify accesscontrol risks in accordance with the Access Control Security Management Guidelines.Regularly conduct vulnerability scans on databases, servers, and computers, identifying andtracking the number of security vulnerabilities.
Identification
Prioritize identified risks based on theRisk List and Remediation Recommendationsandaudit reports, ensuring clear bases for corrective actions.Review whether the vulnerability remediation rates meet the established target and, ifnecessary, develop accelerated plans for high-priority unresolved vulnerabilities.
Prioritisation
Continuously monitor vulnerability remediation rates and improvement progress to ensuresecurity objectives are met.Conduct internal status detection assessments, enabling real-time monitoring of securityalerts and tracking remediation progress to enhance information security managementcapabilities.Require new employees and approved suppliers to sign aConfidentiality Agreement,strengthening data security controls and preventing information leaks.
Monitoring
2024 Risk List and Remediation (Example)Controlling PointAudit ResultsRisk AssessmentRemediation MeasuresCompletion Status
Passwords
UnattendedUser Devices
Employees were foundusing weak passwordsand enabling passwordauto-save.
Risk of unautho-rised access viabrute-force at-tacks.
Require strong pass-words and disablepassword auto-save.O?ce computers haveauto-lock enabled, butemployees fail to man-ually lock screens whenleaving their desks.
Risk of leakage ofproduction, R&D,and employeepersonal data.
Employees must en-sure their computersare password-pro-tected when unat-tended.
Completed
Completed
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2024 Environmental, Social and Governance ReportFoundation of Trust: Quality, Safety, and Security
| Employee Information Security Training & AwarenessIn 2024, the Company conducted information security training and campaigns for new employees and technical personnelthrough various formats, including monthly email updates featuring data breaches and privacy leak cases, securityreminders displayed on personal computer desktop calendars, periodic security-related wallpapers automatically pushed toemployee computers, and E-learning online courses.
In the process of using the office collaboration OA system, employees are required to input personal information (includingemployee birthdays, phone numbers, home addresses, ID card numbers, etc.). To fully respect and protect employees'personal information, the company sends an“OA System Employee Information Collection Notice”and“Visitor InternetAccess Authentication Disclaimer”to all employees, outlining the purpose, scope, usage, and corresponding protectivemeasures for collecting employee personal information, in order to obtain employees’consent before gathering anyinformation.
Security Reminder on the Desktop Wallpaper – Weak Password
Protection
Security Reminder on the Desktop Calendar – Third-Party Network Access
Security
Cyber and Information Security Metrics and Targets in 2024
Metrics2024TargetCustomer complaints related to information security and privacy breaches (cases)0≤2Critical information security incidents, major information security incidents (cases)0≤1Number of information security training attended by all technical personnel5≥1Core business system availability (%)100≥99.9
Sustainable ProcurementSanhua Intelligent Controls not only focuses on the stability and security of the supply chain but also considers suppliers’
ESG performance as one of the key evaluation criteria. The Company emphasises on reviewing suppliers’policies andpractices in reducing environmental impact and safeguarding labour rights to ensure compliance with the Company’srequirements and standards.
Sustainable Procurement Management SystemGovernance
The Strategy Procurement Centre is responsible for the construction and implementation of the Company’s procurement systemregulations and processes, promoting the informatisation of procurement processes, identifying and developing core procurementcompetencies, etc.The Procurement Departments in business units are responsible for the specific work of supplier management and procurement.
Impacts, Risks, and Opportunities Management
Ensure supplier compliance and risk control through stringent supplier management processes.Conduct annual audits and on-site audits of qualified suppliers to ensure their compliance in terms of environmental, labour, andbusiness ethics.Implement incentive mechanisms to prioritise outstanding suppliers for new projects, regularly evaluating supplier performance, andpromoting continuous optimisation and compliance management of the supply chain.
Strategy
Identify key risks, including operation risks, policy and regulatory risks, and analysing potential impacting factors based on externalmarket conditions and internal operations.
Metrics and Targets
Cover metrics and targets such as the proportion of key suppliers assessed for social responsibility and sustainable procurementtraining, etc.
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| Supply Chain Management StructureThe Company clearly stipulates that the Strategy Procurement Centre is responsible for promoting procurement activities,including constructing and implementing procurement system regulations and processes, promoting procurementinformatisation, and identifying and developing core procurement competencies, etc., to promote the efficient implementationof related work of the procurement system. The Procurement Departments set up by various business units are responsiblefor supplier management, material inspection, optimising procurement processes and informatisation, formulating andexecuting material procurement strategies, and ensuring that the Company’s production and development needs are met.The Company has formulated internal regulations such as theProcurement Execution Management Process,theRegulationsof Supplier Designation,theRegulations of Supplier Performance Evaluation,and Procurement Control Procedures. Theseregulations clearly define procurement processes, supplier selection, and evaluation standards to ensure long-termpartnerships with qualified suppliers while enhancing supply chain efficiency and quality.| Supply Chain Management StrategyThe Company improves procurement and logistics management efficiency through digital systems and proactively addressesrisks and opportunities in supply chain management. The Company’s Supplier Relationship Management (SRM) platform coverssupplier management, demand management, price management, execution coordination, and financial coordination, etc.,helping to reduce risks related to supply chain disruptions or non-compliance while enhancing collaboration efficiency within thesupply chain.For finished goods shipment operations, the Company has introduced the Order to Warehouse System (OTWB), which managesorders, transportation, and costs to optimise business processes and reduce risks in transportation and inventory management.
| Supply Chain ESG ManagementThe Company signs agreements with suppliers such as theSupplier Code of Conduct, Basic Supply Agreement, CooperationAgreement of Integrity, andEnvironmental and Safety Agreement, which include ESG-related provisions to ensure suppliersfulfil their environmental and social responsibilities. At the same time, the Company emphasises the diversification ofsuppliers and advocates prioritising cooperation with supplier enterprises owned by minority/disadvantaged groupsand women. The Company organises regular training for internal procurement personnel on hazardous substances andmanagement systems such as ISO 14001, ISO 45001, and SA8000 to strengthen their sustainability capabilities.The Company actively pays attention to the performance of suppliers in terms of ESG, and explicitly incorporates ESG-related factors into standards such as supplier admission evaluation, annual audit, etc. Among them, the Company activelypromotes the control of hazardous substances in the supply chain, the reduction of pollutants and hazardous waste, andexplicitly includes provisions related to hazardous substances in the supplier CSR audit checklist and performance ratingsystem, which include prohibiting illegal discharge of hazardous substances such as wastewater, exhaust gas or wasteresidue, etc., continuously monitoring and effectively treating hazardous wastewater and exhaust gas, properly handlinghazardous solid waste, striving to reduce toxic emissions in the supply chain, etc.The Company requires suppliers and subcontractors to sign theCooperation Agreement of Integrity, and the auditdepartment conducts special audits on fraud risks in business projects. The Company also signsRecycling Agreements
with suppliers dealing with hazardous chemical packaging andHazardous Substance Guarantee Agreementswith suppliershandling toxic and hazardous substances to ensure supply chain safety and environmental compliance.
Supply Chain RisksTypeDescriptionFinancial Impact
Operation Risk
If raw and auxiliary materials fail to arrive on time due to market fluctuations, natural disasters,transportation issues, or supplier-related problems, it will impact the Company’s productionschedule.
Revenuedecreases
Policy andRegulatory Risk
If labour rights violations (such as child labour, forced labour, or unfair compensation) existin the supply chain, the Company’s reputation may suffer, leading to customer loss, legaldisputes, and other issues.
Operational costsincrease
Supply Chain Risk Management Process
Background Investigation:
Before supplier admission, publicly available information is usedto assess supplier credit risk. According to the Regulations of Supplier Audit Management,new suppliers must complete system registration and audit.Analysis:
For suppliers who fail the initial audit, an Analysis of Potential Supplier AuditReport is conducted, assessing business conditions, production capacity, product quality,and industry certifications from multiple perspectives.
Identification and
Analysis
Performance Evaluation:
According to the Regulations of Supplier Performance Evaluation,suppliers are assessed on workplace safety, occupational health, working hours, wagescompliance, etc.Incentive Mechanism:
Suppliers with an A performance in quarterly evaluations are givenpriority for new projects, with a 10% supply proportion increase in the following quarter,capped at 80%. Suppliers rated A annually receive awards or certificates at the Company’sannual supplier conference.
Monitoring
CSR Compliance Review:
Key production suppliers undergo Corporate Social Responsibility (CSR)audits to ensure compliance in environmental protection, labour practices, business ethics, etc.Performance Rating:
Suppliers are rated quarterly based on quality, price, service, new productdevelopment, and delivery punctuality, etc. An annual excellence evaluation for suppliers isconducted.Annual Review:
Key suppliers undergo on-site audits or self-assessments based on the SupplierQuality System Review Checklist.
Inspection and
Evaluation
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| Conflict Minerals Management
Regarding conflict minerals management, the Company requires suppliers to sign theSupplier Code of Conduct, whichincludes relevant clauses on conflict mineral management to ensure all suppliers understand and comply with the conflictminerals policy. The Company requires suppliers to cooperate with their upstream supply chain to trace the sourcing of“gold, tungsten, tantalum, and tin”to the smelting level. For suppliers identified as having potential conflict mineral risks,corrective actions must be taken to ensure compliance. Suppliers who are unable to make corrections will have their supplyqualifications suspended or revoked.
Social Value:
Respect,
Development, and
Contribution
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Working Hours and CompensationFemale Employee Protection
Labour Rights and Talent Retention
Sanhua Intelligent Controls strictly adheres to theCivil Code of the People’s Republic of China, Labour Law of the People’sRepublic of China, Labour Contract Law of the People’s Republic of China, Law of the People’s Republic of China on theProtection of Rights and Interests of Women, Special Rules on the Labour Protection of Female Employees, and otherrelevant laws and regulations. It also follows international conventions related to labour rights, such as theUnited NationsGlobal
Compactand the 10 core conventions of the International Labour Organisation, including theEqual RemunerationConvention, Minimum Age Convention, Worst Forms of Child Labour Convention, Discrimination (Employment andOccupation) Convention, Forced Labour Convention, Abolition of Forced Labour Convention, Occupational Safety and HealthConvention, Freedom of Association and Protection of the Right to Organise Convention, Right to Organise and CollectiveBargaining Convention, Promotional Framework for Occupational Safety and Health Convention, covering working hours,salary and benefits, work safety, prohibition of child labour and forced labour, etc.In 2024, the Company did not experience any incidents of legal penalties related to labour standards, including employeerecruitment and dismissal, working hours and leave, promotion and equal opportunity, nor any violations regarding childlabour or forced labour.The Company has formulated internal regulations such as theEmployee Handbook and Quota-based EmployeesRegulations, which ensure strict compliance with national standards and regulations in employment, salary and workinghours, social security, health and safety, training, etc. These measures continuously improve employee protectionmechanisms and effectively safeguard the legal rights of employees.In 2024, the Company established and publicly disclosed theSanhua Intelligent Controls Labour and Human RightsStatement, which clearly outlines the Company’s commitments and measures regarding working hours, compensation,employee diversity, discrimination, equality, and development. The Company ensures equal treatment of all candidates,with no discrimination in employment, compensation, training, or promotion opportunities based on race, religion, gender,nationality, age, marital status, or disability, etc. The Company’s human resources management system also implementsthe function of ID card reading to verify the identity of new employees, ensuring that employees are over 18 years old beforebeing hired. In 2024, the Company set a diversity target for its workforce, which is the proportion of female employeesreaches 38% by 2030, up from 34% at the end of the reporting period.
Employee Employment and Rights Management System
The Company contributes to all employees’ social insur-ance and housing fund and provides fair compensation,adequate rest time, and a safe and comfortable workplace.Salaries are paid on time monthly, with clear communica-tion about the salary structure and calculation methods.Employees can view their salary details, including perfor-mance, allowances, bonuses, social insurance, housingfund, and taxes, etc., through the human resources man-agement system.
In compliance with legal requirements, the Companyhas set regulations for female employees duringpregnancy, maternity leave, and breastfeeding, ensuringno discrimination or unjust salary reduction during theseperiods.
| Employee Compensation and Performance
The Company has established a scientific and comprehensive performance evaluation system based on the principles ofgender equality, equal pay for equal work, and distribution according to labour. Performance evaluations for managementat all levels are linked to the Company’s business objectives, and the Company offers a reasonable salary structure withcompetitive compensation levels. The Company is committed to creating a community where employees and the Companyshare common interests, striving to inspire employees’ creativity and enthusiasm.Variable performance pay is included in the salary structure for all employees, including the Management, productionworkers, sales, and functional positions, etc. Variable performance compensation is dynamically adjusted based on individualperformance and the Company’s overall business performance, ensuring fair and just compensation distribution. Additionally,the Company actively promotes employee stock incentive plans. In 2024, the Company granted 24.91 million restricted stockunits to 1,933 participants through its restricted stock incentive plan, and 560,000 stock appreciation rights to 47 foreign oroverseas work recipients through a stock appreciation right incentive plan, accounting for approximately 10% of the totalnumber of employees at the end of the reporting period, promoting the joint development of the Company and its employees.| Employee Communication and EngagementThe Company encourages employees to actively voice their opinions and offers multiple communication and feedbackchannels, including the“Department Head’s Mailbox”,“Employee Complaint Form”, and the Sanhua Employee ServicePlatform, making it easy for employees to express their views or provide suggestions. The Company emphasisessafeguarding the independence and confidentiality of the grievance process, ensuring that feedback is handled properlyand protecting the safety of employees who make complaints, thus providing a transparent and secure communicationenvironment. The Company conducts regular employee engagement and satisfaction surveys every year, covering workenvironment, system and mechanism, workshop management, welfare subsidies and other aspects. In the 2024 survey,the satisfaction score was 94 out of 100.The Company encourages employees to voluntarily join the labour union and regularly holds the congress of workers andstaff to ensure that employees’voices are fully expressed. Employee representatives sign collective labour agreementswith the Company to protect employees’rights regarding labour compensation, working hours, rest and leave, occupationalhealth and safety, training, insurance and benefits, special protection for female employees and minors, etc.The Company values the welfare of its employees and the maintenance of their daily lives and is committed to providingemployees with a fair working schedule, aiming to promote a balance between work and personal life, ensuring that allemployees are guaranteed a living wage that meets their basic needs.
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Non-Statutory BenefitsEmployee Assistance for Financial HardshipsCare and Support
Provide meal subsidies, housingsubsidies, and transportation sub-sidies for all employees, along withholiday benefits for events suchas Chinese New Year, InternationalWomen’s Day, Summer Festival,Mid-Autumn Festival, quarterlylabour protection bene?ts, etc.Assist high-level talents and skilledworkers in applying for govern-ment talent evaluation and certi?-cation programs.Purchase commercial insurancebeyond the legal requirements forsome employees, including acci-dent medical insurance, transpor-tation accident insurance, etc.In 2024, a total of 172 female em-ployees took maternity leave fora total of 16,901 days; 199 maleemployees took paternity leave fora total of 2,609 days.
The Company has establishedthe“Sanhua Family”relief fundto support employees in need.The employee’s direct relativeswho suffer from major illnessesand are unable to afford their ex-penses due to family di?culties,or employees who suffer fromaccidents that cause temporaryliving di?culties will get a certainamount of relief fund.In 2024, the fund helped 17employees, with a total ofRMB124,900 in aid disbursed.
Invite renowned medical expertsto provide free medical consul-tations for employees and offerapartment accommodations.Provide summer camp servicesand assist employees’childrenwith school enrolment.Open a“Mommy Room”forbreastfeeding female employees,making it easier for them to nursewhile at work. Since the“MommyRoom” was opened, the Women’sCommittee of the Labour Unionhas provided breastfeeding educa-tion to female employees duringtheir breastfeeding period. By theend of 2024, approximately RMB20,000 had been invested in the“Mommy Room”, with about threeusers per day.The canteen has set up a halalfood counter to respect the dietarycustoms of ethnic minorities.
Employee Welfare Management System
Mommy Room
Various Employee Roundtable Meetings
Spanish Language Classes
Case
Case
The Company has established acommunication bridge betweenthe Management and employeesby organising roundtable meetingsfor frontline workers, new universitygraduates, and holidays. Thesemeetings provide the Company with anopportunity to understand employees’
living conditions and work-relatedissues, formulate action plans, andassign responsible parties to addressemployees’concerns and suggestions,ultimately enhancing team cohesion.
The Company hosted beginner-level Spanish language classes inHangzhou and Shaoxing. The courseswere developed and taught by theCompany’s senior Spanish languageinstructors. The aim of these classeswas to help employees gain a deeperappreciation for Mexican culture whileincreasing their interest in the Spanishlanguage and improving their Spanishlanguage skills.
Roundtable Meeting Scene
Event Scene
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2024 Environmental, Social and Governance ReportSocial Value: Respect, Development, and Contribution
Human Capital DevelopmentSanhua Intelligent Controls enhances employees’professional skills and managerial abilities through a multi-level trainingsystem. At the same time, the Company encourages employees to participate in degree programs and professionalcertifications, helping to closely align employees’ career development with the Company’s goals.The Company has built a comprehensive employee training system covering talent development programs for different levelsand sequences. This system aims to improve employees’professional knowledge, skills, and managerial abilities. For leadershipdevelopment, the Company has programs such as“Navigator”,“Voyager”,“Initiator”,“New Manager”, and“Management TraineeProgram”, targeting senior management, middle management, grassroots management, newly promoted managers, and high-potential grassroots employees. These programs provide training in strategic planning, team leadership, basic managementskills, etc.To strengthen employees’professional skills, the Company offers several elite classes and specialised training camps,including quality elite class, production planning elite class, procurement elite class, financial elite class, HR business partnertraining camps, IT project manager training camps, and marketing youth training camps. The Company also has programsfocused on future high-potential talents and senior-level talent development. These programs aim to foster employees’careergrowth and personal development through diverse training opportunities, ensuring they unleash their potential in various fields.The Company places great emphasis on supporting employees’educational advancement and actively encourages themto participate in degree courses and professional certifications. The Company offers comprehensive support for furthereducation for all employees and has established a scholarship program to reward employees with associate degrees pursuingundergraduate degrees. Additionally, the Company provides subsidies and rewards for employees seeking professionalcertifications, such as the intermediate engineer qualification.For career advancement, the Company has established dual career paths for management and professional roles. It hasdeveloped internal regulations such as theRegulations of Positionand theRegulations of the Qualificationto create qualificationstandards for technical positions and job series career development paths, providing clear direction for employees’skillenhancement and career growth, which aligns with the Company’s strategic goals.
Advanced TalentEvaluation
PersonalDevelopment Plan
R&D Personnel
Training
Talent Development Management System
Key Training Programs of Talent Development in 2024
The Company has formulated theRegulations of the Evaluation of Professional Talentsand establisheda Professional Talent Evaluation Committee responsible for capability certification and assessment.For promotion to level 4 and below, employees must submit an application and score sheet. Afterdepartment recommendations, HR review, and committee evaluation, it is submitted for approval bythe general manager. For promotion to level 5 and above, employees must meet the required score andpass a professional skills certification defence by the Professional Talent Evaluation Committee.
27 participants engaged in two days of in-depth learning, exploring the five key elements of coaching leadership and experiencingthe concept that“state precedes action”. This training sparked enthusiasm in participants, helping them embrace challenges in bothwork and life, laying the foundation for practicing positive leadership.
A total of 47 participants took part in a one-day training and system hands-on session, helping various business units familiarisethemselves with system specifications and related operations.
Senior lean employees conducted KPO lean improvement knowledge training for the participants, explaining the improvementlogic, methods, and practical applications of three major themes: in-line efficiency, non-decreasing increments, and off-lineefficiency. Participants, together with colleagues from production, quality, process, and maintenance departments, formed a cross-departmental team to jointly promote on-site improvement initiatives.
The Company customised an experiential training program for the leadership development coaching camp, focusing on coachingleadership and self-discovery.
In response to the Company’s overall digital transformation strategy, the material digitalisation project aimed to establishstandardised processes and improve the transparency and traceability of material information.
The KPO training camp, an essential part of the Company’s lean talent development system, aimed to refine participants’lean skillsthrough practical on-site training, improving overall operational efficiency.
The Company conductsIndividual Development Plan (IDP)sessions to understand employees’careerpreferences, desired promotion positions, and record their core strengths and areas for development.Customised action plans are created to address areas where employees need improvement.The Company has developed theRegulations of the Cultivation of R&D Talent Production Lineto supportthe development of innovation capabilities at every stage, from selection, training, appointment, toretention, promoting continuous innovation.
Leadership Training
KPO Training Camp
Digitalisation Project
Human Capital Development Metrics and Targets in 2024
Metrics2024 2030 Long-Term TargetsAverage training hours per employee (Hours)39.66
39.88
(Increase by 30% compared to 2022)Anti-discrimination and anti-harassment training coverage (%)86≥95
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2024 Environmental, Social and Governance ReportSocial Value: Respect, Development, and Contribution
Occupational Health and SafetySanhua Intelligent Controls’occupational disease hazard positions mainly include coating, reflow soldering, manualsoldering, red glue dispensing, wave soldering, etc. The Company complies with laws and regulations such as theWorkSafety Law of the People’s Republic of Chinaandthe Prevention and Control of Occupational Diseases Law of the People’sRepublic of China,ensuring a safe and healthy working environment for employees. In 2024, the Company did notexperience any major safety responsibility accidents.
Occupational Health and Safety Management SystemGovernance
Establish a governance structure consisting of the Board of Directors, the Smart Manufacturing and Quality Management Centre, andthe EHS Offices of various business units, and formulate systems related to work safety and hazard identification.
Impacts, Risks, and Opportunities Management
Improve the occupational health and safety risk management process by developing detailed management measures and operatingprocedures.Regularly conduct physical examinations for employees exposed to occupational disease hazards, upgrade safety facilities, distributeprotective equipment, and implement occupational health and safety management measures.
Strategy
Through regular safety hazard inspections, identify risks and opportunities related to occupational health and safety, and create a listof medium and high-risk hazards.
Metrics and Targets
Include metrics such as the number of production safety accidents, work-related injury rates, etc.
| Occupational Health and Safety Management Structure
The Company has established an occupational health and safety management structure consisting of the Board ofDirectors, the Smart Manufacturing and Quality Management Centre, and the EHS Offices of various business units. TheSmart Manufacturing and Quality Management Centre serves as the specific executive body for work safety management,responsible for formulating regulations of occupational health and safety, regularly monitoring and measuring EHS-relatedmetrics, and continuously optimising EHS performance. Each business unit of the Company has an EHS office, with full-time managers responsible for occupational health and work safety matters. They also establish relevant assessmentregulations to monitor and rectify safety hazards and violations within the factory.Each business unit of the Company has established internal regulations such as theSystem of Work Safety,theWorkSafety Responsibility System,theRegulations of Safety Hazard Identification,theSystem of Occupational Disease HazardMonitoring and Evaluation,etc., to ensure the establishment of a safe workplace and a sound occupational diseaseprevention and monitoring mechanism. In 2024, the Company passed the ISO 45001 Occupational Health and SafetyManagement System certification.| Work Safety and Occupational Health Management MechanismThe Company systematises the identification and monitoring of environmental factors and hazards, enhancing its riskidentification and management capabilities. The Company also regularly conducts occupational health check-ups to reducethe incidence of occupational diseases.
Occupational Health and Safety RisksTypeRisk DescriptionFinancial ImpactHealth and Safety
Protection Risk
The safety and occupational health protection facilities and equipment within the factoryare widely distributed. Inadequate supervision may result in failures not being detectedin a timely manner. Employees may also fail to wear protective equipment, leading topenalties if regulatory authorities detect violations.
Operational costsincreaseHazard SourceIdentification Risk
If environmental factors and hazard sources are not properly monitored, and occupationaldiseases are not effectively prevented and controlled, employees may need to bereassigned to lower-risk positions, or production may need to be halted, affecting theCompany’s stable operations.
8586
2024 Environmental, Social and Governance ReportSocial Value: Respect, Development, and ContributionIn 2024, the Company and its business units further optimised internal regulations such as theRegulations of OccupationalDisease Prevention,theSystem of Fire-related Work Operation,and theStandards of Key Position Personnel CertificationManagementto improve and standardise the work safety management process. At the same time, the Company and itsbusiness units established and improved safety hazard inspection and emergency response procedures, commissioningqualified third-party institutions to conduct a comprehensive evaluation of the safety status to ensure the scientific andeffective risk management process, continuously improving the Company’s overall safety management level.Work Safety and Occupational Health Risk Management Process
Identify safety hazards based on theRegulations of Safety HazardIdentification and create a company-level medium and high-risk hazard list.DevelopPost Operation Proceduresbased on the work safety risks of eachposition.
Conduct hazard source identification annually based on theSystem ofOccupational Disease Hazard Monitoring and Evaluationand theHazard SourceIdentification,Risk Assessment, andRisk Control Management Procedures.Update the list of occupational disease hazard positions and risk factors.
Conduct regular safety hazard inspections, identify frequently occurringproblems, compile a list of hazards, and issue warnings to business units.Include images of common problems and hazards in the hazardcompilation, along with corrected operation demonstration images.
Regularly conduct pre-employment, in-service, and post-employment healthchecks to ensure the continuous protection of employees’occupationalhealth and safety.Continuously monitor the updated occupational hazard positions andfactors, ensuring that protective measures are in place.
Hire a qualified third-party institution to compile theSafety Status EvaluationReport, assessing the current work safety situation.
Hire a qualified third-party institution to compile theOccupational HazardStatus Evaluation Report, identifying hazard sources and assessingoccupational hazard positions and related factors.
Prioritise the identified safety hazards by their risk level, creating acompany-level medium and high-risk list, focusing on high-risk items first.
Prioritise the updated list of occupational hazard positions based on theseverity of the hazards, focusing on high-risk positions and factors.
Identification
Identification
Monitoring
Monitoring
Assessment
Assessment
Prioritisation
Prioritisation
SafetyProduction
Occupational
Health
| Occupational Health and Safety Initiatives
In 2024, the Company strengthened the management of work safety and occupational health by conducting comprehensivetraining, hazard inspections, and emergency drills, optimising job environments, promoting automation upgrades, improvingemployee safety awareness, and enhancing health protection levels, reflecting its commitment as a responsible employer.
Key Initiatives of Occupational Health and SafetyWork Safety Management
Occupational Health Management
Emergency Management and Automation Improvement
Organised occupational health and safety training: Safety officer certification, lockout/tagout procedures, fire escape, accidentprevention and emergency response, pallet handling, hazardous chemicals management, etc.Implemented safety facility upgrades and distributed protective equipment based on theEHS Management Element ChecklistandEHS Typical Hazard Compilation.Regularly conducted emergency drills for scenarios such as mechanical injuries, heatstroke, chemical spills, electric shocks, andfires to enhance emergency response capabilities.Post job risk points and hazard factors in the workshop to remind employees to operate safely, wear protective gear, and provideemergency measures and rescue phone numbers.
Arranged pre-employment, in-service, and post-employment health checks for employees exposed to occupational diseasehazards, and standardised hazard notifications and the use of personal protective equipment.Regularly rotated employees in occupational disease hazard positions to safeguard their health rights.Regularly promoted thePrevention and Control of Occupational Diseases Law of the People’s Republic of China,conductedoccupational disease prevention training, and raised employees’ health awareness.
Developed a Work Safety Accident Emergency Response Planto activate emergency response in the event of an accident,minimising the scope of damage.Introduced automated machinery to reduce fatigue and repetitive movements that led to musculoskeletal injuries, optimisingtasks such as empty box handling, reaching, and height adjustments, to improve work efficiency and convenience.
Routine First Aid DemonstrationFire Extinguisher Practical Demonstration
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2024 Environmental, Social and Governance ReportSocial Value: Respect, Development, and Contribution
Safety Administrator Training
Job Risk Point Notification Cards
Promotion of thePrevention and Control of Occupational Diseases Law
Chemical Operation Safety Protection Warning Signs
° Semi-Automatic Rotating Material RackCase
Improvement in Finished Product Inspection AutomationCaseAt the Company’s relevant inspection positions, there was a problem with the long and frequent transportation distance of emptyboxes when changing finished product boxes, with the need to adjust the height of each box multiple times using a foot-operatedhydraulic cart. To address this, the Company introduced a custom-built stacking mechanism, which allows for automatic sliding offinished product boxes and automatic falling of empty boxes, increasing the box-changing efficiency by 76%.
In relevant testing positions, there were frequent hand-reaching and downward grabbing movements when placing semi-finishedproducts. By introducing a custom-built 180°rotating module, the Company improved the work path, reducing the placing andpicking time by 1 second per unit, with clear product batch placement at five units per batch. This innovation improved both workefficiency and convenience.
| Occupational Health and Safety Metrics and TargetsEach business unit of the Company has established aSystem of Work Safety Responsibility, achieved safety level two orthree standardised enterprise certifications, and required all employees to sign theWork Safety Responsibility Letter. TheCompany has also developed Environmental and Safety Goals, Metrics, and Management Plans, with regular reviews of goalachievement.
Occupational Health and Safety Metrics and Targets in 2024Metrics2024 TargetOccupational diseases, severe injuries, and majorwork safety incidents (cases)
1NoneWork injury incident rate (%)0.3
Reduce by 5% compared to the
previous year (2024-2026)
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2024 Environmental, Social and Governance ReportSocial Value: Respect, Development, and Contribution
Corporate Citizens and Public WelfareIn order to fully implement corporate social responsibility, Sanhua Intelligent Controls is committed to supportingcommunity development through public welfare and charity projects in areas such as volunteer service, promoting industrydevelopment, and helping students and the needy, promoting social harmony and sustainability.In 2024, the Company donated RMB100,000 to the Shangyu District Charity Federation in Shaoxing City to assist vulnerablegroups. In addition, the Company encourages employees to participate in voluntary blood donation. Employees whovolunteer for blood donations are provided with care packages and given time off. In 2024, there were nearly 80 blooddonors, with a blood donation volume exceeding 27,000 millilitres.
In the area of educational assistance, the parent company Sanhua Holding Group Co., Ltd. (hereinafter referred to as“Sanhua Holding”) has established the“Sanhua Scholarship and Education Fund”. In 2024, Sanhua Holding donated RMB20million to Xinchang Middle School and RMB1.7 million to Youth and Children's Psychological Growth and DevelopmentCentre in Xinchang County to implement the“Student Care and Development Digital Empowerment”project, providingtimely and professional psychological support for children and families in need. To promote the development of therefrigeration industry, Sanhua Holding established the Xia Anshi Scholarship to incentivise talent in the refrigeration sector.In 2024, Sanhua Holding donated RMB20,000 to the Qixing Subdistrict“Hanging Single to Help”Fund in Xinchang County,supporting low-income families and vulnerable groups affected by illness or disability.
Environmental
Protection: Clean,
Circular, and Natural
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2024 Environmental, Social and Governance ReportEnvironmental Protection: Clean, Circular, and Natural
Environmental Policies and ManagementSanhua Intelligent Controls is committed to reducing its environmental footprint in operations and promoting a green, low-carbontransformation. Through a strict environmental management system and efficient resource utilisation, the Company integratesenvironmental protection into daily operations and strategic planning, continuously optimising energy use, waste management,and pollution control measures to achieve the coordinated development of the economy, society, and the environment.The Company strictly complies with laws and regulations such as theEnvironmental Protection Law of the People’s Republic ofChina,theAtmospheric Pollution Prevention and Control Law of the People’s Republic of China,theWater Pollution Prevention andControl Law of the People’s Republic of China,theNoise Pollution Prevention and Control Law of the People’s Republic of China,the
Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste,andRegulationsof the Prevention and Control of Solid Waste Pollution in Zhejiang Province. An environmental management system has beenestablished, and environmental protection responsibilities are comprehensively implemented to ensure that all production andoperational activities comply with national and local environmental standards.In 2024, the Company has not been subjected to major administrative penalties or criminal liabilities related to environmentalincidents by ecological or environmental authorities.
The Company and its subsidiaries, includingZhejiang Sanhua Automotive Components Co., Ltd., Zhejiang SanhuaCommercial Refrigeration Co., Ltd.,and Hangzhou Sanhua Microchannel Heat Exchanger Co., Ltd., are key environmental riskcontrol units in Zhejiang Province.Given the alignment of“Environmental Policies and Management”with other environmental topics in Governance andImpacts, Risks, and Opportunities Management, relevant information is disclosed under the“Environmental Policies andManagement” topic, and is not repeatedly described in individual topics.| Environmental Governance StructureThe Company has established an environmental governance structure consisting of the Board of Directors, the SmartManufacturing and Quality Management Centre, and the EHS Offices of various business units. In collaboration with variousbusiness units, the Company has developed internal management systems, including theLegal and
Regulatory ComplianceObligations and Compliance Evaluation Procedure,theEnvironmental Factors Identification and Evaluation Control Procedure,theRiskand Opportunity Response Control Procedure,theEnergy Regulations,theManual of Energy Management System,theWastewaterand Air Pollutant Control Procedures,theSolid Waste Control Procedures,theRegulations of Hazardous Waste,theManagementRegulations of Safety and Environmental Assessment, etc.These systems clarify the environmental management processes andresponsibilities, and the Board of Directors assumes the responsibility for the management and supervision of environmentalmanagement strategies and performance targets, ensuring that environmental protection requirements are implemented acrossall business processes and continuously strengthening the system and execution of environmental management. In 2024, theCompany passed ISO 14001 Environmental Management System certification, with a coverage rate of 94%.To further strengthen environmental responsibility, the Company considers environmental performance as one of the evaluationfactors for executive compensation. Each year, the Company and its business units set environmental goals for departmentheads. If the goals are not achieved, the performance rewards of the respective department heads are reduced. In the eventof an environmental pollution incident, the relevant performance evaluations are conducted in accordance with the applicableassessment and management regulations.In 2024, the Company developed and published theSanhua Intelligent Controls Environmental Statement,which outlines coregoals related to energy and GHGs, water resource utilisation, pollution management, chemicals and waste management, and eco-design of products, to promote the active fulfilment of environmental protection responsibilities. The business scope includes theCompany and its wholly owned subsidiaries, and holding subsidiaries, and operational activities include the Company's productionand business operations, products and services, distribution and logistics, waste management, etc.
Environmental Management SystemGovernance
Establish an environmental management structure consisting of the Board of Directors, the Smart Manufacturing and QualityManagement Centre, and the EHS Offices of various business units, and develop internal management systems such as complianceevaluation procedures and environmental control procedures.
Impacts, Risks, and Opportunities Management
Through identification and evaluation of environmental factors by various departments, develop risk management plans andimplement the“Three Lines of Defence”mechanism to ensure that environmental impacts, risks, and opportunities are effectivelymanaged and addressed.
Strategy
Identify environmental risks and opportunities, including policy and regulatory changes, technological innovations, market demandshifts, changes in the natural environment, reputational risks, etc. Evaluate their potential impacts on business operations, supplychain management, and financial performance, and provide support for developing response strategies.
Metrics and Targets
Key metrics include no major environmental pollution incidents in the year, compliance with wastewater and waste gas emissionstandards, VOCs emission intensity, waste generation intensity, etc.
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2024 Environmental, Social and Governance ReportEnvironmental Protection: Clean, Circular, and Natural
| Environmental Management Mechanism
The Company fully recognises the materiality of environmental risks and opportunities to its sustainability. Throughsystematic identification, assessment, and management of environmental-related risks, the Company actively seizes theopportunities presented by green transformation and low-carbon development, promoting a win-win situation for bothenvironmental protection and economic benefits.
| Environmental Management InitiativesIn 2024, the Company focused on standardising emergency drills, strengthening evaluations and audits, and conductingcontinuous monitoring and inspections to ensure the effective implementation of environmental protection measures,further enhancing environmental management capabilities.
Key Initiatives of Environmental Management
Standardising Emergency Drills
Continuous Monitoring and Inspections
Regularly update theEmergency Response Plan for Environmental Incidentsto ensure the plan aligns with the latestenvironmental risks and legal/regulatory requirements.Regularly conduct different types of emergency drills within each business unit, including hazardous chemical leakage drills andevacuation drills, to ensure a quick response and minimise environmental damage during an incident.
Based on the risk identification results, high-priority environmental factors will be included in the List of Key Environmental Factors
and corresponding control measures will be implemented based on their severity.EHS departments in each business unit organise monthly environmental inspections to ensure the effective execution of dailyenvironmental management and to promptly address any issues found.Actively promote environmental technology transformation projects to improve resource utilisation efficiency and reducepollutant emissions through technological means.
Strengthening Evaluations and Audits
Based on EMS system audits and external requirements, annually conduct ISO 14001 EMS audits for all EMS-certified productionand operation sites.Irregularly conduct third-party environmental audits, covering all production and operation sites at least every three years, toensure environmental standards are strictly met.Conduct environmental assessments for all significant changes and new projects, evaluate potential environmental impacts, andimplement appropriate control measures.
Environmental Management Metrics and Targets in 2024Metrics2024 TargetMajor environmental pollution incidents0NoneVOCs emissions per unit revenue (kg / RMB 10,000)
0.005
0.0045
(Decrease by 10% from 2024 level by 2030)Amount of waste generated per unit revenue(tons / RMB 10,000)
0.0139
0.0126
(Decrease by 10% from 2024 level by 2030)
Major Environmental Risks and OpportunitiesEnvironmental RisksEnvironmental OpportunitiesFailure to timely identify and evaluate updates to envi-ronmental laws and regulations, and not updating inter-nal systems accordingly, which may lead to violations.Environmental management facilities and equipmentare widely distributed. Insufficient monitoring mayresult in failures that go unnoticed and unrepaired, in-creasing the likelihood of environmental damage.
Stricter environmental protection requirements andregular inspections by regulatory authorities promotethe Company’s environmental protection efforts,reduce the likelihood of environmental liability incidents,and enhance overall environmental performance.
Environmental Factors Identification and Management Process
Identify external factors that may impact the environment based on daily operational activities.
The identification dimensions include risk and opportunity categories, external factors,
stakeholders, etc.
Use theEnvironmental Factors Record and Determination Formto identify and document all
potential environmental risks, ensuring comprehensive coverage of all business areas.
Identification and
Determination
Perform a detailed assessment of identified environmental factors. The evaluation dimensions
include occurrence frequency (the likelihood of risk/opportunity events), severity (the extent of
impact after an event occurs), and risk coefficient (the specific impact of the risk on company
operations). Risk and opportunity levels are then prioritised.
The evaluation results help the Company identify environmental risks that need immediate
response and potential environmental opportunities that can be utilised.
Assessment and
Prioritisation
For high-priority risks and opportunities, develop corresponding management measures,
led by the responsible departments, specifying the content, implementation deadlines, and
supervision mechanisms.
Regularly review the effectiveness of the environmental management system to ensure
continuous optimisation and improvement of environmental risk management.
Management and
Improvement
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2024 Environmental, Social and Governance ReportEnvironmental Protection: Clean, Circular, and Natural
Resource Management| Energy ManagementThe types of energy used by Sanhua Intelligent Controls include gasoline, diesel, natural gas, purchased electricity, andpurchased steam.The Company strictly adheres to laws and regulations such as theEnergy Conservation Law of the People’s Republic ofChinaand the Energy Law of the People’s Republic of China, as well as internal management systems such as theEnergyRegulationsand the Manual of Energy Management Systemto ensure efficient and compliant energy use in production andoperations. In 2024, the Company passed ISO 50001 Energy Management System certification.
| Energy Management InitiativesIn 2024, the Company further strengthened energy-saving and emission reduction measures by promoting energyefficiency, reducing energy waste, and increasing renewable energy usage. The Company implemented a series ofinnovative projects and technological upgrades to drive green transformation and achieve sustainability goals.
Energy Management System
Impacts, Risks, and Opportunities Management
Conduct energy audits and risk assessments, build a smart energy IoT management platform, and develop carbon emission calculationsoftware to monitor energy consumption in real-time across business units, workshops, and high-energy-consuming equipment.Regularly generate monthly energy analysis reports and present them to senior management to adjust energy management strategiesin a timely manner.
Governance
Establish an energy management structure consisting of the Board of Directors, the Smart Manufacturing and Quality ManagementCentre, and the Equipment and Power Departments of various business units.The Smart Manufacturing and Quality Management Centre is responsible for the overall management of energy consumption.Strategy
Identify potential energy inefficiencies, waste, and environmental impacts, and strengthen response mechanisms to external factorssuch as energy price fluctuations and supply instability.
Metrics and Targets
Set a target of“the proportion of electricity generated from renewable sources remains ≥15%”.
Key Initiatives of Energy ManagementPromoting Energy Efficiency
Eliminating High-Energy Consumption Equipment: Replaced outdated high-energy-consuming transformers with efficientequipment, saving about 158.4 MWh annually.High-Energy Consumption Air Conditioner Renovation: Implemented a centralised air conditioning control software to monitorand optimise air conditioning performance in real-time. The standardised arrangement of drainage pipes helps improve systemefficiency, and regular cleaning further enhances energy performance.Upgrading Air Compressor Technology: Replaced inefficient air compressors with more efficient models, improving the overallefficiency of the air compression process.Replacing Old Water Pump Motors: Replaced outdated cooling tower water pump motors, improving system efficiency andreducing electricity consumption, saving approximately 57,000 kWh annually.
Increasing Renewable Energy Usage
Roof mounted photovoltaic: Installed distributed photovoltaic power generation, energy storage facilities, and smart microgridsystems. Utilised solar energy to provide electricity for production equipment.Outsourcing green electricity: Increased the proportion of electricity generated from renewable energy by directly purchasinggreen electricity and obtaining green electricity certificates.In 2024, the Company’s electricity generated from renewable energy accounted for 16.00%.
Reducing Energy WasteHeat Recovery: Utilised a heat pump to recover waste heat generated during production and converted it into hot water forproduction line cleaning, reducing the need for purchased hot water. A large single-stage screw compressor was used to recoverwaste heat, turning previously wasted thermal energy into usable energy.
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2024 Environmental, Social and Governance ReportEnvironmental Protection: Clean, Circular, and Natural| Water Resources Management
The water resources used by Sanhua Intelligent Controls mainly come from municipal water supplies, and are utilisedin the production process, equipment cleaning, as well as for employee daily life and office needs. The Company adoptsmultiple measures to ensure the rational use of water, promote water conservation, and implement water quality protectionmeasures to minimise environmental impact.
| Circular Economy
Sanhua Intelligent Controls follows laws and regulations such as theCircular Economy Promotion Law of the People’sRepublic of China, aiming to promote the efficient use of resources and minimise waste treatment. The Companyencourages the organic combination of production, consumption, disposal, and reuse, achieving a win-win situation foreconomic benefits and environmental protection.
2024 Water Resource Conservation Actions
2024 Circular Economy Promotion Actions
Reducing Waste and Consumption
Reducing Single-Use Packaging
Promoting Circular Use
Pollutants and Waste TypesProcesses InvolvedMain Pollutants and Waste Types
Air Pollutants
Water Pollutants
Waste
Promoting Packaging Recycling and Reuse
Adjusted production processes and optimisedwater usage to reduce pure water consump-tion.More than 90% of water used for product test-ing was recycled after sedimentation.Recycled water was used for toilets and land-scaping irrigation.
The Company changed the packaging method foran electronic expansion valve to circular packaging,using pallet boxes instead of traditional single-usepackaging. About 48,000 sets are reused annually,with the inner lining having a lifespan of 2 years,and the outer box lasting 3 years.The turnover boxes and boarding boxes used forshipping products can be recycled. After the prod-uct is delivered to the customer, the empty boxesused by the customer are transported back to theStorage and Transportation Department and canbe distributed to various factories for reuse. Eachbox can be reused approximately 14 times per year.
Promoted wastewater reuse management,treating various types of wastewaters, includ-ing steam condensate, welding wastewater,wash tank hot water, and rinsing water. Afterpuri?cation, the treated water is reused.The Company’s wastewater treatment stationprocesses approximately 1,200 tonnes of pro-duction wastewater per day, with about 45,000tonnes of wastewater reused in 2024.
Sulfuric acid mist, tin and its compounds, non-methanehydrocarbons, trichloroethylene, smoke, particulatematter, sulphur dioxide, nitrogen oxides, etc.Electroplating, pickling,welding, injectionmoulding, ultrasonic,polishing, gascombustion, brazing,hydrophilic coating
Machining, exhausttreatment, testing,cleaning
Chemical oxygen demand, suspended solids, petroleum,total phosphorus, biochemical oxygen demand,ammonia nitrogen, anionic surfactant solids, etc.Hazardous waste: Sludge, waste cutting fluid, wasteoil, waste cleaning agents, ethylene glycol, waste PCBboards, waste packaging barrels, waste electronicproducts, waste activated carbon, etc.General solid waste: Waste cardboard, waste mixedmaterials, scrapped stators, scrapped oil pumps, wasteiron, etc.Household waste
Encouraged suppliers to use recyclable packagingmaterials for components, such as plastic basketsand other eco-friendly materials.Returned raw material packaging to suppliers forreuse and sold auxiliary materials from injectionmoulded parts to third parties for recycling.Classified waste materials based on their com-position, such as waste solder dross, waste pins,and scrap metal, and sold these materials to thirdparties for recycling.
Emissions and Waste
Sanhua Intelligent Controls is committed to reducing pollutant emissions and improving the efficiency of waste treatmentand resource utilisation. The Company comprehensively identifies pollution sources in the production process, clarifies thetypes of air pollutants, water pollutants, and waste generated by each production process, and develops and implementsmeasures for reducing hazardous substance emissions and waste, in strict accordance with relevant regulations, coveringall production and operation sites, to ensure that pollutant emissions meet environmental protection standards.
Pollutants and Waste Types and Involved Processes
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2024 Environmental, Social and Governance ReportEnvironmental Protection: Clean, Circular, and Natural
Impacts, Risks, and Opportunities Management
While ensuring compliance with environmental protection regulations, strive to optimise production processes and waste disposalprocedures, not only reducing environmental pollution risks but also converting green technology and resource recovery into newmarket opportunities.
Pollution and Waste Management SystemGovernance
Establish a pollution and waste management structure consisting of the Board of Directors, the Smart Manufacturing and QualityManagement Centre, and the EHS Offices of various business units.Strategy
Identify and assess various risks and opportunities, such as legal liabilities and fines due to pollutant emissions exceeding limits,environmental pollution and reputational risks from improper waste disposal, and improving environmental protection technologiesto reduce emissions. Implement waste resource recovery and recycling to improve resource recovery efficiency.
Metrics and Targets
Set goals for achieving compliant emissions of waste gases, wastewater, and noise, as well as compliant waste disposal.
| Pollution and Waste Management InitiativesPollutant EmissionsIn 2024, the Company continued to advance pollutant reduction by optimising processes, upgrading equipment, andeffectively reducing the generation and emissions of waste gases, wastewater, and noise.
In line with regulatory and external requirements, the Company hires qualified third-party institutions to regularly testpollutants such as exhaust gases, wastewater, and noise, issuing third-party certified test reports. In the event of anaccident, the Company follows the“Four No Spares”principle (i.e., no spares until the cause of the accident has beeninvestigated, no spares until the person responsible for the accident has been dealt with, no spares until the public havebeen educated, and no spares until preventive measures have been taken), adhering to the principle of“No concealment, Nofalse reporting, No delayed reporting, and No procrastination in reporting”.
Key Pollution Emission MeasuresOil Mist, Smoke, and Exhaust Gas Treatment Improvements
Shot Blasting Equipment and Smelting Furnace Dust Removal Process Improvements
The machining workshop adopted a centralised oil mist collection system, discharging via external pipes to address unevendisposal efficiency at individual equipment.Welding smoke in the assembly workshop was switched from single-point bag collection to centralised water spray process.Injection moulding workshop adopted a combination of precise single-point collection and centralised piping to collect exhaustgases, adjusting damper angles to ensure that each collection point meets airflow standards. The honeycomb activated carbonwas replaced with granular activated carbon to enhance adsorption and increase collection efficiency.The manual acid washing process for product cleaning was replaced with automatic water-based cleaning to reduce acidicwastewater and exhaust gas emissions.
Shot blasting equipment used a multi-stage filtration process, including settling hoppers, cyclone dust collectors for preliminaryfiltration, and a Venturi wet scrubber for deep filtration. The discharged gases met national standards via high-altitude emission devices.For the smelting furnace, smoke was captured by a dust collection hood, pre-treated by pipes and fire prevention coolers, then purifiedthrough a cyclone dust collector and pulse bag dust collector. Dust collection efficiency exceeded 90%, and the dust removal efficiencyexceeded 97%, ensuring compliant emissions.
The“Commercial Refrigeration and Air-Conditioning Intelligent Control Component TechnologicalTransformation Project”Case
The Company enhanced its product industry chain and increased product added value by purchasing advanced domesticequipment such as fully automatic cleaning devices, tunnel furnace equipment, and laser welding machines. The project optimisedthe process by using low-pollution raw materials, improving process continuity, and other methods to reduce waste generation. Afterreaching full production capacity, the project is expected to generate an annual sales revenue of approximately RMB70 million andan annual total profit of approximately RMB20 million.
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2024 Environmental, Social and Governance ReportESG Data and Notes
Waste DisposalThe Company strictly categorises and manages waste according to theSolid Waste Control Procedures, ensuring proper,scientific, and safe disposal of waste to minimise environmental pollution.
In addition, the Company actively conducts training related to solid waste disposal, including but not limited to hazardouswaste disposal, the entire process management of hazardous chemicals, and on-site safety hazard management,continuously enhancing employee environmental awareness and operational standards. This ensures that all employeeshave a clear understanding of the relevant management requirements and can implement them in accordance withregulations.
Note 1: The Company began tracking and disclosing the average hours of anti-commercial bribery and anti-corruption training received by directors starting in2024.Note 2: [Calculation Formula] Average hours of anti-commercial bribery and anti-corruption training received by directors = Total hours of anti-commercialbribery and anti-corruption training received by directors / Total number of directors at the end of the reporting period.Note 3: [Calculation Formula] Percentage of operational points covered by business ethics audits = Number of operational points audited for business ethicsduring the reporting period / Total number of operational points * 100%.
Key Waste Disposal MeasuresWaste Classification and Disposal
Hazardous Waste Disposal
According to procedural requirements, the Company separates household waste and production waste, setting up three typesof waste bins in production areas for recyclable waste, non-recyclable waste, and hazardous waste. Each container is clearlylabelled for easy identification.Except for recyclable waste, all other waste is entrusted to qualified third-party disposal services. A Third-Party Waste DisposalList is maintained to ensure that the waste disposal plan can be promptly adjusted if the third-party changes.
At the beginning of each year, each production department identifies and counts the types and quantities of hazardous wastegenerated, summarising them into the Hazardous Waste Management Plan.Each production workshop sets up temporary storage points based on the types of hazardous waste. Each waste container isclearly marked, and mixing of waste types is prohibited.Hazardous waste storage areas are equipped with barriers and drainage pipes, with facilities to prevent wind, rain, and leakage.The storage period for hazardous waste does not exceed one year, and any extension requires approval from the environmentalprotection department.The Company has established a hazardous waste management ledger and submits online reports to the EnvironmentalProtection Bureau in accordance with the Regulations of Hazardous Waste Transfer.The Company promotes the digitalisation of hazardous waste warehouses, adding video surveillance and electronic weighingsystems to enable traceability (from generation to disposal) using QR codes.
ESG Data and Notes
MetricsUnit202220232024
Total assetsRMB10,0002,796,121.423,189,058.483,641,574.84RevenueRMB10,0002,134,754.972,455,780.212,794,716.45Net profit RMB10,000260,805.16293,371.47311,172.58Total taxes paidRMB10,00062,233.2771,797.96105,764.05
MetricsUnit202220232024
Coverage of directors receiving anti-commercialbribery and anti-corruption training
%//100Average hours of anti-commercial bribery andanti-corruption training received by directors
Hours//4.00Percentage of operational points covered bybusiness ethics audits
%100100100Number of corruption-related lawsuits filedagainst the Company or its employees andconcluded during the reporting period
/000Number of cases in which the Company wassanctioned by relevant authorities for unfaircompetition or violations of antitrust laws duringthe reporting period
/000Amount involved in lawsuits or significantadministrative penalties due to improper conductby the Company during the reporting period
RMB10,000000Number of illegal or non-compliant incidentsrelated to the protection of trade secrets(including intellectual property)
/000
Economic Data
Business Ethics Data
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2024 Environmental, Social and Governance ReportESG Data and Notes
MetricsUnit202220232024
Number of confirmed incidents of leakage, theft, orloss of customer data
/000Amount involved in customer privacy breach incidentsRMB10,000000Amount involved in data security incidentsRMB10,000000
Cyber and Information Security Data
MetricsUnit202220232024
R&D investment amountRMB10,00098,895.45109,683.42135,179.88R&D investment amount as a percentage of revenue
%4.634.474.84Number of R&D personnel/2,2433,2413,578Number of R&D personnel as a percentage of totalemployees
%15.0918.2818.08Number of patent applications during the reportingperiod
/893 1,2931,341Number of patents granted during the reporting period//211460Number of valid patents during the reporting period/3,5813,792 4,252
Innovation and Intellectual Property Data
Note 1: [Calculation Formula] R&D Investment amount as a percentage of revenue = R&D investment amount for the reporting year / Revenue for the reportingyear * 100%.Note 2: [Calculation Formula] Number of R&D personnel as a percentage of total employees = Number of R&D personnel / Total number of employees * 100%.
MetricsUnit202220232024Number of incidents of violations of laws andregulations related to products and services
/000Amount involved in major safety and quality incidentsrelated to products and services
RMB10,000000Total number of complaints received regardingproducts and services
/1175Complaint handling rate for products and services
%100100100Sales amount of products sold or delivered that wererecalled for safety and health reasons
RMB10,000000
Product and Service Safety and Quality Data
Note 1: [Calculation Formula] Complaint handling rate for products and services = Number of complaints handled regarding products and services / Totalnumber of complaints received regarding products and services * 100%.
MetricsUnit202220232024
Total number of suppliers
/6,221 7,291 7,564By region
Mainland China/3,760 3,870 3,950Hong Kong, Macau, Taiwan, andOverseas
/2,461 3,421 3,614Percentage of direct suppliers signing the suppliercode of conduct
%100100100Percentage of target suppliers providinginformation on conflict minerals
%100100100Percentage of direct suppliers signing contractscontaining ESG-related provisions
%100100100Percentage of procurement personnel receivingtraining on sustainable procurement
%100100100
MetricsUnit202220232024
Total number of employees/14,86017,73219,787By gender
Female employees/6,7766,5516,722Male employees/8,08411,18113,065By region
Employees working in MainlandChina
/10,92613,12014,429Employees working in Hong Kong,Macau, Taiwan, and overseas
/3,9344,6125,358By age
Employees aged over 50/1,4571,4211,651Employees aged 30 to 50/9,14710,09110,391Employees aged below 30/4,2566,2207,745
Sustainable Procurement Data
Labour Rights and Talent Retention Data
Note 1: [Calculation Formula] Total number of suppliers at the end of the reporting period = Number of suppliers in Mainland China at the end of the reportingperiod + Number of suppliers in Hong Kong, Macau, Taiwan, and Overseas at the end of the reporting period.Note 2: [Calculation Formula] Percentage of direct suppliers signing the supplier code of conduct = Number of direct suppliers signing the supplier codeof conduct at the end of the reporting period / Total number of direct suppliers * 100%. Direct suppliers refer to those who provide raw materials, parts, orcomponents required for the Bill of Materials (BOM) of the product.Note 3: [Calculation Formula] Percentage of target suppliers providing information on conflict minerals = Number of target suppliers providing information onconflict minerals / Total number of target suppliers * 100%. Target suppliers refer to suppliers in the categories of electronic components or bulk commoditiesrelated to conflict minerals. The Company signs theSupplier Code of Conductwith target suppliers, committing not to use any minerals from conflict regionsin the supply chain and ensuring all suppliers are fully aware of and comply with the Company's conflict minerals policy.Note 4: [Calculation Formula] Percentage of direct suppliers signing contracts containing ESG-related provisions = Number of direct suppliers signing contractscontaining ESG-related provisions / Total number of direct suppliers * 100%.Note 5: [Calculation Formula] Percentage of procurement personnel receiving training on sustainable procurement = Number of procurement personnelreceiving sustainable procurement training / Total number of procurement personnel * 100%.
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2024 Environmental, Social and Governance ReportESG Data and Notes
MetricsUnit202220232024
Number of senior management employees/428590Percentage of female employees in seniormanagement
%7.147.0615.56Employee turnover rate
%11.6517.3921.25By gender
Female employees%9.8117.5820.92Male employees%13.1417.2921.58By region
Employees in mainland China%6.2513.4414.48Employees in Hong Kong, Macau,Taiwan, and overseas
%23.8326.9014.70By age
Employees aged over 50%13.2719.9434.57Employees aged 30 to 50%6.3013.1417.82Employees aged below 30%20.8622.9624.68Percentage of employees covered by unions/collectiveagreements
%71.6091.5092.00Percentage of employees covered by employeerepresentative election
s4
%71.6091.5092.00Note 1: [Calculation Formula] Percentage of female employees in senior management = Number of female employees in senior management /Total number of senior management employees * 100%.Note 2: [Calculation Formula] Employee turnover rate for each category = Number of employees leaving in the category during the reportingperiod / (Number of employees in the category at the end of the reporting period + Number of employees leaving in the category during thereporting period) * 100%.Note 3: [Calculation Formula] Percentage of employees covered by unions/collective agreements = Number of employees who joined the union /Total number of employees * 100%. The contract is signed by employee representatives and covers employees who have joined the union.Note 4: [Calculation Formula] Percentage of employees covered by employee representative elections = Number of employees eligible toparticipate in employee representative elections / Total number of employees * 100%. All employees who have joined the union are eligible toparticipate in the employee representative election.
MetricsUnit202220232024
Labor contract signing rate%100100100Social insurance coverage rate%100100100Number of employee training sessions
///6,853Total expenditure on employee trainingRMB10,000/762.89829.74Employee training coverage rate
%63.0676.2981.65By gender
Female employees%60.0172.4580.77Male employees%65.6178.5482.13
Human Capital Development Data
Note 1: The Company began tracking and disclosing the number of employee training sessions starting in 2024.Note 2: [Calculation Formula] Training coverage rate for each category of employees = Number of employees in the category receiving training / Total numberof employees in the category * 100%.Note 3: [Calculation Formula] Average training hours per employee for each category = Total training hours for employees in the category / Number ofemployees in the category.Note 4: [Calculation Formula] Percentage of employees receiving diversity, anti-discrimination, and anti-harassment training = Number of employees receivingdiversity, anti-discrimination, and anti-harassment training / Total number of employees * 100%.
MetricsUnit202220232024
Percentage of employees participating in occupationalhealth examinations
%100100100Number of lost workday accidents
/2490104Number of workdays lost due to work injuries//3,1172,326Employee work injury insurance coverage rate
%100100100Employee work injury insurance investment amountRMB10,000//1,278.17Employee occupational safety liability insurancecoverage rate
%//32.80Employee occupational safety liability insuranceinvestment amount
RMB10,000//334.56Percentage of operations covered by health and safetyrisk assessments
%100100100
Occupational Health and Safety Data
Note 1: The Company began tracking and disclosing the employee work injury insurance coverage rate and investment amount, as well as the employeeoccupational safety liability insurance coverage rate and investment amount, starting in 2024.Note 2: [Calculation Formula] Percentage of employees participating in occupational health examinations = Number of employees participating in occupationalhealth examinations / Number of employees in occupational disease risk positions at the end of the reporting period * 100%.Note 3: The Company started tracking and disclosing the number of lost workday accidents, including those from overseas factories, in 2023, so the datashows a growth trend.Note 4: [Calculation Formula] Employee work injury insurance coverage rate = Number of employees covered by work injury insurance during the reportingperiod / Total number of employees * 100%.Note 5: [Calculation Formula] Employee occupational safety liability insurance coverage rate = Number of employees covered by occupational safety liabilityinsurance during the reporting period / Total number of production employees * 100%.Note 6: [Calculation Formula] Percentage of operations covered by health and safety risk assessments = Number of operational points assessed for healthand safety risks during the reporting period / Total number of operational points * 100%.
MetricsUnit202220232024
Total training hours for employeesHours455,860.50689,225.36753,686.63Average training hours per employee
Hours30.6838.8739.66By gender
Female employeesHours29.3047.3448.21Male employeesHours31.8333.9034.96Percentage of employees receiving diversity, anti-discrimination, and anti-harassment training
%78.0080.0086.00
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2024 Environmental, Social and Governance ReportESG Data and Notes
MetricsUnit2024Charitable donation amountRMB10,00012.48Times of employee volunteer services/439Total volunteer service hours by employeesHours895
Corporate Citizens and Public Welfare Data
Note 1: Starting in 2024, the Company began tracking and disclosing key metrics related to charitable donations and employee volunteer services within thescope of Sanhua Intelligent Controls and its subsidiaries.
MetricsUnit202220232024
Environmental ManagementEnvironmental protection investment amountRMB10,0002,721.103,370.963,432.76Proportion of employees receiving environmental-related training
?
%100100100Proportion of operational sites covered by environ-mental risk assessments
?
%100100100Pollutant DischargeWastewater and water pollutantsTotal wastewater dischargem
1,784,248.701,945,599.993,027,711.46Of which: Industrial wastewater dischargem
//2,153,879.86Of which: Domestic wastewater dischargem
//873,831.60
By type?Total nitrogen (TN) discharget//27.29Biochemical oxygen demand (BOD)discharge
t//40.72Chemical oxygen demand (COD)discharge
t190.71222.16231.10Ammonia nitrogen (NH
-N) discharget5.539.1911.03Air pollutants
By type?Volatile organic compounds (VOCs)emissions
t//14.04Nitrogen oxides (NOx) emissionst14.2916.6216.09Sulphur oxides (SOx) emissionst3.384.285.33Particulate matter (PM) emissionst31.3137.0433.05
Waste DisposalTotal waste generatedt14,499.7515,721.6338,984.44Waste generated per RMB10,000 of revenuet/RMB10,0000.00680.00640.0139
Emissions and Waste Data
Note 1: In 2024, the Company expanded the scope of data collection related to emissions and waste to include additional domestic and overseas factories.Where possible, data for 2022 and 2023 were retrospectively adjusted to improve comparability. However, for certain indicators, data for 2022 and 2023remain unavailable, resulting in higher figures for some indicators in 2024.Note 2: [Calculation formula] Proportion of employees receiving environmental-related training = Number of employees who received environmental-relatedtraining / Total number of employees * 100%.Note 3: [Calculation formula] Proportion of operational sites covered by environmental risk assessments = Number of operational sites assessed forenvironmental risks during the reporting period / Total number of operational sites * 100%.Note 4: In 2024, the Company continued monitoring water pollutant emissions to collect and disclose data on water pollutant discharges. The main types ofwater pollutants include total nitrogen (TN), biochemical oxygen demand (BOD), chemical oxygen demand (COD), and ammonia nitrogen (NH
-N).Note 5: In 2024, the Company continued monitoring air pollutant emissions to collect and disclose data on air pollutant discharges. The main types of airpollutants include volatile organic compounds (VOCs), nitrogen oxides (NOx), sulphur oxides (SOx), and particulate matter (PM).Note 6: Other non-hazardous waste includes metal scraps, kitchen waste, wood, foil paper, etc. Since 2024, the Company has further improved the statisticaland management mechanisms for non-hazardous waste and disclosed disaggregated data on different types of non-hazardous waste generated.Note 7: Other hazardous waste includes sludge, waste packaging materials, used batteries, etc. Since 2024, the Company has further improved the statisticaland management mechanisms for hazardous waste and disclosed disaggregated data on different types of hazardous waste generated.
MetricsUnit202220232024
Energy Management
Integrated energy consumption
?
tce58,351.3374,852.32121,388.73Integrated energy consumption per RMB10,000 ofrevenue
tce/RMB10,0000.0270.0300.043
Resources Management Data
MetricsUnit202220232024
Non-hazardous wasteTotal non-hazardous waste generatedt8,786.4910,145.8233,597.57Non-hazardous waste generated per RMB10,000 ofrevenue
t/RMB10,0000.0040.0040.012
By type
Waste papert//2,881.66Domestic wastet//16,302.41Industrial solid wastet//10,929.94Otherst//3,483.56Hazardous wasteTotal hazardous waste generatedt5,713.265,575.815,386.88Hazardous waste generated per RMB10,000 ofrevenue
t/RMB10,0000.0030.0020.002
By type
Waste solvents or chemicalst//906.38Waste oil/lubricants from propertymanagement
t//263.02Electronic productst//115.27Otherst//4,102.21
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2024 Environmental, Social and Governance ReportESG Data and Notes
MetricsUnit202220232024
By type
Natural gas consumptionm
11,893,953.7514,432,218.0628,692,650.45Diesel consumptionLiter190,875.78201,550.51834,285.59Gasoline consumptionLiter170,958.18224,397.11261,273.45Total electricity consumption
MWh316,443.75402,683.82 615,802.92Of which: Electricity from non-renew-able sources
MWh296,418.67351,541.74 517,264.11Of which: Electricity from renewablesources
MWh20,025.0851,142.0898,538.81Purchased steam consumptionGJ93,402.84165,035.36180,690.56Proportion of electricity generated from renewableenergy
%6.3312.7016.00
Water Resource ManagementTotal water consumptionm
3,643,299.454,002,069.094,496,122.51Water consumption per RMB10,000 of revenuem
/RMB10,0001.7071.6301.609By source
Municipal water supplym
//3,533,936.51Surface waterm
//962,186.00Circular EconomyTotal weight of recycled waterm
474,237.89642,244.001,501,076.90Proportion of recycled water in total water con-sumption
%13.0216.0533.39Total weight of finished product packaging materialsused
t12,590.7316,142.0514,565.52Total weight of recycled finished product packagingmaterials
t1,921.752,523.303,214.36Recycling rate of finished product packagingmaterials
%15.2615.6322.07Weight of recycled wastet//7,415.54Note 1: In 2024, the Company expanded the scope of data collection related to resources by including additional domestic and overseas factories. Wherepossible, data for 2022 and 2023 were retrospectively adjusted to improve comparability. However, for certain indicators, data for 2022 and 2023 remainunavailable, resulting in higher figures for some indicators in 2024.Note 2: Total integrated energy consumption includes consumption of natural gas, gasoline for official vehicles, diesel for forklifts and stationary sources,purchased municipal electricity and green electricity, rooftop photovoltaic power generation, and purchased steam.Note 3: [Calculation formula] Total electricity consumption = Consumption of electricity from non-renewable sources + consumption of electricity fromrenewable sources.Note 4: Electricity from renewable sources includes directly purchased green electricity, photovoltaic power generation within Company premises, and verifiedGreen Electricity Certificates.Note 5: [Calculation formula] Proportion of recycled water in total water consumption = Total volume of recycled water / Total water consumption× 100%.Note 6: [Calculation formula] Recycling rate of finished product packaging materials = Total weight of recycled finished product packaging materials / Totalweight of finished product packaging materials used * 100%.
Note 1: In 2024, the Company expanded the scope of its GHGs inventory by including additional domestic and overseas factories. Where possible, data for2022 and 2023 were retrospectively adjusted to enhance comparability. However, for certain indicators, data for 2022 and 2023 remain unavailable, resulting inhigher total GHG emissions and emissions intensity in 2024 compared with the previous two years.Note 2: Scope 1 GHG emissions include direct emissions from the combustion of natural gas, gasoline for official vehicles, diesel for forklifts, and diesel forstationary sources. The calculation methods and emission factors refer to the China Energy Statistical Yearbook (2022), among others.Note 3: Scope 2 GHG emissions include indirect emissions from the consumption of purchased electricity and purchased steam. The carbon emission factorfor purchased municipal electricity is the national average electricity CO
emission factor (excluding non-fossil energy under market-based transactions),published in theNotice on the Release of the 2022 Electricity Carbon Dioxide Emission Factors(December 2024) by the Ministry of Ecology and Environmentof China and the National Bureau of Statistics: 0.5856 tCO
/MWh. For other countries and regions, electricity emission factors refer to relevant documentspublished by local governments or regulatory authorities.Note 4: Scope 3 GHG emissions include indirect emissions arising from upstream leased assets, downstream transportation and distribution, downstreamleased assets, and other activities. The calculation methods and emission factors refer to theWorld Input-Output Database (WIOD), Lifecycle GHG EmissionFactors for Chinese Products, Beijing Low-carbon Travel Emission Reduction Methodology (Trial), UK DEFRA Conversion Factors, US EPA GHG Emission FactorsHub, and other relevant sources.
MetricsUnit202220232024
Total GHG emissions (Scope 1 + Scope 2)tCO
e209,647.27253,251.65356,264.97GHG emissions per RMB10,000 of revenue (Scope1 + Scope 2)
tCO
e/RMB10,0000.0980.1030.127By scope
Scope 1 GHG emissions
?
tCO
e26,623.0332,262.1764,880.18Scope 2 GHG emissions
?
tCO
e183,024.24220,989.48291,383.89Scope 3 GHG emissions
?
tCO
e36,750.9339,575.2477,049.86
Responding to Climate Change Data
113114
2024 Environmental, Social and Governance ReportIndexes
Indexes
Self-Regulatory Guidelines No. 17 for Companies Listed on Shenzhen StockExchange—Sustainability Report (For Trial Implementation) Content IndexDisclosureLocation
Climate response
Feature: Low-Carbon Transition and Climate Change ResponseESG Data and NotesPollutant discharge
Emissions and WasteESG Data and NotesWaste disposal
Emissions and WasteESG Data and NotesEcosystem and biodiversity protection
The Company’s production and operations are primarily located in industrial parks orurbanized areas, where the direct impact on ecosystems or biodiversity is minimal.Environmental compliance management
Environmental Policies and ManagementESG Data and NotesEnergy utilization
Energy ManagementESG Data and NotesWater resources utilization
Resources ManagementESG Data and NotesCircular economy
Resources ManagementESG Data and NotesRural revitalization
Corporate Citizens and Public WelfareESG Data and NotesSocial contributions
Corporate Citizens and Public WelfareESG Data and NotesInnovation
Feature: Innovating for the Future, Leading the Technological FrontierESG Data and NotesEthics of science and technology
The Company is currently in the R&D stage in the field of bionic robotelectromechanical actuators, primarily focusing on optimizing product prototypes. Ithas not yet entered large-scale commercial application and, therefore, has not beeninvolved in real-world scenarios that may give rise to ethical concerns in technology.
DisclosureLocation
Supply chain security
Sustainable ProcurementESG Data and NotesEqual treatment of SMEs
The balance of accounts payable (including notes payable) of the Company at theend of the reporting period does not exceed RMB30 bn or represent more than 50percent of the total assets. Therefore, it does not fall within the mandatory disclosurescope specified in theGuidelines. The Company ensures timely payments to smalland medium-sized enterprises.Product and service safety and quality
Product and Service Safety and QualityESG Data and NotesData security and customer privacy
Cyber and Information SecurityESG Data and Notes
Employees
Labour Rights and Talent RetentionHuman Capital DevelopmentOccupational Health and SafetyESG Data and NotesDue diligenceDouble Materiality AssessmentStakeholder engagementDouble Materiality AssessmentAnti-commercial bribery and anti-corruption
Business EthicsESG Data and NotesFair competition
Business EthicsESG Data and Notes
Self-disclosed Topics
Corporate GovernanceCorporate GovernanceRisk and ComplianceManagement
Risk and Compliance ManagementOpportunities in CleanTech
Innovating for the Future, Leading the Technological Frontier
Low-Carbon Transition and Climate Change Response
ESG Data and NotesChemicals andHazardous Substances
Product and Service Safety and QualityProduct LifecycleManagement
Emissions and Waste
Resources Management
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2024 Environmental, Social and Governance ReportIndexes
GRI Content IndexStatement of use
Zhejiang Sanhua Intelligent Controls Co., Ltd. has reported the information cited in this GRI content index for the periodfrom 1 January 2024 to 31 December 2024 with reference to the GRI Standards.GRI 1 usedGRI 1: Foundation 2021GRI STANDARDDISCLOSURELOCATION
GRI 2: GeneralDisclosures 2021
2-1Organizational detailsAbout Sanhua Intelligent Controls2-2Entities included in the organization’s sustainability reportingAbout the Report2-3Reporting period, frequency and contact pointAbout the Report2-4Restatements of informationESG Data and Notes2-5External assuranceNot Conducted2-6Activities, value chain and other business relationshipsAbout Sanhua Intelligent Controls2-7Employees
Social Value: Respect, Development, andContribution2-8Workers who are not employees
Social Value: Respect, Development, andContribution2-9Governance structure and composition
Corporate Governance2-10Nomination and selection of the highest governance body2-11Chair of the highest governance body2-12
Role of the highest governance body in overseeing themanagement of impacts2-13Delegation of responsibility for managing impacts2-14Role of the highest governance body in sustainability reportingESG Governance Mechanism2-15Conflicts of interestCorporate Governance2-16Communication of critical concernsDouble Materiality Assessment2-17Collective knowledge of the highest governance bodyESG Governance Mechanism2-18Evaluation of the performance of the highest governance bodyCorporate Governance2-19Remuneration policiesCorporate Governance2-20Process to determine remunerationCorporate Governance2-21Annual total compensation ratio
Due to confidentiality requirements, it is not
disclosed to the public at this time.2-22Statement on sustainable development strategyStatement of the Chairman
2-23Policy commitments
Feature: Low-Carbon Transition and Climate
Change Response
Corporate Governance: Transparency,
Responsibility, and Value
Social Value: Respect, Development, and
Contribution
Environmental Protection: Clean, Circular,
and Natural
GRI STANDARDDISCLOSURELOCATION
GRI 2: GeneralDisclosures 2021
2-24Embedding policy commitments
Feature: Low-Carbon Transition and ClimateChange ResponseCorporate Governance: Transparency,Responsibility, and ValueSocial Value: Respect, Development, andContributionEnvironmental Protection: Clean, Circular,and Natural2-25Processes to remediate negative impactsDouble Materiality Assessment2-26Mechanisms for seeking advice and raising concernsDouble Materiality Assessment2-27Compliance with laws and regulations
For details, please refer to the respectivesections of the report.2-28Membership associations
Feature: Innovating for the Future, Leadingthe Technological Frontier2-29Approach to stakeholder engagementDouble Materiality Assessment2-30Collective bargaining agreementsLabour Rights and Talent RetentionGRI 3: MaterialTopics 2021
3-1Process to determine material topicsDouble Materiality Assessment3-2List of material topicsDouble Materiality Assessment3-3Management of material topicsDouble Materiality AssessmentGRI 201:
EconomicPerformance2016
201-1Direct economic value generated and distributedAbout Sanhua Intelligent Controls201-2
Financial implications and other risks and opportunities due toclimate change
Feature: Low-Carbon Transition and ClimateChange Response201-3Defined benefit plan obligations and other retirement plansLabour Rights and Talent Retention201-4Financial assistance received from government
For details, please refer to the SanhuaIntelligent Controls 2024 Annual Report.GRI 204:
ProcurementPractices 2016
204-1Proportion of spending on local suppliers
Due to confidentiality requirements, it is notdisclosed to the public at this time.
GRI 205: Anti-corruption 2016
205-1Operations assessed for risks related to corruption
Business EthicsESG Data and Notes205-2
Communication and training about anti-corruption policies andprocedures
ESG Data and Notes205-3Confirmed incidents of corruption and actions taken
Business Ethics
ESG Data and NotesGRI 206: Anti-competitiveBehavior 2016
206-1
Legal actions for anti-competitive behavior, anti-trust, andmonopoly practices
Business Ethics
ESG Data and Notes
GRI 207: Tax2019
207-1Approach to tax
For details, please refer to the Sanhua
Intelligent Controls 2024 Annual Report.207-2Tax governance, control, and risk management207-3
Stakeholder engagement and management of concerns relatedto tax207-4Country-by-country reporting
117118
2024 Environmental, Social and Governance ReportIndexes
GRI STANDARDDISCLOSURELOCATION
GRI 301:
Materials 2016
301-1Materials used by weight or volumeESG Data and Notes301-2Recycled input materials usedESG Data and Notes301-3Reclaimed products and their packaging materialsESG Data and Notes
GRI 302: Energy2016
302-1Energy consumption within the organizationESG Data and Notes302-2Energy consumption outside of the organizationESG Data and Notes302-3Energy intensityESG Data and Notes302-4Reduction of energy consumptionEnergy Management302-5Reductions in energy requirements of products and servicesEnergy ManagementGRI 303: Waterand Effluents2018
303-1Interactions with water as a shared resourceResources Management303-2Management of water discharge-related impactsResources Management303-3Water withdrawalESG Data and Notes303-4Water dischargeESG Data and Notes303-5Water consumptionESG Data and Notes
GRI 304:
Biodiversity 2016
304-1
Operational sites owned, leased, managed in, or adjacent to,protected areas and areas of high biodiversity value outsideprotected areas
The Company’s production and operationsare primarily located in industrial parks orurbanized areas, where the direct impacton ecosystems or biodiversity is minimal.304-2
Significant impacts of activities, products and services onbiodiversity304-3Habitats protected or restored304-4
IUCN Red List species and national conservation list specieswith habitats in areas affected by operations
GRI 304:
Biodiversity 2016
305-1Direct (Scope 1) GHG emissions
Feature: Low-Carbon Transition andClimate Change ResponseESG Data and Notes305-2Energy indirect (Scope 2) GHG emissions
Feature: Low-Carbon Transition andClimate Change ResponseESG Data and Notes305-3Other indirect (Scope 3) GHG emissions
Feature: Low-Carbon Transition andClimate Change ResponseESG Data and Notes305-4GHG emissions intensity
Feature: Low-Carbon Transition andClimate Change ResponseESG Data and Notes305-5Reduction of GHG emissions
Feature: Low-Carbon Transition andClimate Change Response305-6Emissions of ozone-depleting substances (ODS ) Not ApplicableGRI 304:
Biodiversity 2016
305-7
Nitrogen oxides (NOx), sulfur oxides (SOx), and other significantair emissions
ESG Data and Notes
GRI STANDARDDISCLOSURELOCATION
GRI 306: Waste2020
306-1Waste generation and significant waste-related impactsEmissions and Waste306-2Management of significant waste-related impactsEmissions and Waste306-3Waste generatedESG Data and Notes306-4Waste diverted from disposal
Emissions and WasteESG Data and Notes306-5Waste directed to disposalEmissions and WasteGRI 308: SupplierEnvironmentalAssessment2016
308-1New suppliers that were screened using environmental criteriaSustainable Procurement308-2
Negative environmental impacts in the supply chain andactions taken
Sustainable Procurement
GRI 401:
Employment2016
401-1New employee hires and employee turnoverESG Data and Notes401-2
Benefits provided to full-time employees that are not providedto temporary or part-time employees
Labour Rights and Talent Retention401-3Parental leaveLabour Rights and Talent Retention
GRI 402: Labor/ManagementRelations 2016
402-1Minimum notice periods regarding operational changes
Due to confidentiality requirements, it is
not disclosed to the public at this time.
GRI 403:
OccupationalHealth and Safety2018
403-1Occupational health and safety management systemOccupational Health and Safety403-2
Hazard identification, risk assessment, and incidentinvestigation
Occupational Health and Safety403-3Occupational health servicesOccupational Health and Safety403-4
Worker participation, consultation, and communication onoccupational health and safety
Occupational Health and Safety403-5Worker training on occupational health and safetyOccupational Health and Safety403-6Promotion of worker healthOccupational Health and Safety403-7
Prevention and mitigation of occupational health and safetyimpacts directly linked by business relationships
Occupational Health and Safety403-8
Workers covered by an occupational health and safetymanagement system
Occupational Health and Safety403-9Work-related injuries
Occupational Health and Safety
ESG Data and Notes403-
Work-related ill health
Occupational Health and Safety
ESG Data and NotesGRI 404: Trainingand Education2016
404-1Average hours of training per year per employeeESG Data and Notes404-2
Programs for upgrading employee skills and transitionassistance programs
Human Capital Development404-3
Percentage of employees receiving regular performance andcareer development reviews
Human Capital Development
ESG Data and Notes
119120
2024 Environmental, Social and Governance ReportIndexes
GRI STANDARDDISCLOSURELOCATION
GRI 405: Diversityand EqualOpportunity 2016
405-1Diversity of governance bodies and employees
Labour Rights and Talent RetentionESG Data and Notes405-2Ratio of basic salary and remuneration of women to men
Due to confidentiality requirements, it isnot disclosed to the public at this time.GRI 406: Non-discrimination2016
406-1Incidents of discrimination and corrective actions takenLabour Rights and Talent RetentionGRI 407:
Freedom ofAssociationand CollectiveBargaining 2016
407-1
Operations and suppliers in which the right to freedom ofassociation and collective bargaining may be at risk
Labour Rights and Talent RetentionGRI 408: ChildLabor 2016
408-1
Operations and suppliers at significant risk for incidents of childlabor
Labour Rights and Talent RetentionGRI 409: Forcedor CompulsoryLabor 2016
409-1
Operations and suppliers at significant risk for incidents offorced or compulsory labor
Labour Rights and Talent Retention
GRI 413: LocalCommunities2016
413-1
Operations with local community engagement, impactassessments, and development programs
ESG Management
Social Value: Respect, Development, and
Contribution
Environmental Protection: Clean, Circular,
and Natural413-2
Operations with significant actual and potential negativeimpacts on local communities
ESG Management
Social Value: Respect, Development, and
Contribution
Environmental Protection: Clean, Circular,
and NaturalGRI 414:
Supplier SocialAssessment2016
414-1New suppliers that were screened using social criteriaSustainable Procurement414-2Negative social impacts in the supply chain and actions takenSustainable ProcurementGRI 416:
Customer Healthand Safety 2016
416-1
Assessment of the health and safety impacts of product andservice categories
Product and Service Safety and Quality416-2
Incidents of non-compliance concerning the health and safetyimpacts of products and services
ESG Data and Notes
GRI 417:
Marketing andLabeling 2016
417-1Requirements for product and service information and labelingProduct and Service Safety and Quality417-2
Incidents of non-compliance concerning product and serviceinformation and labeling
Product and Service Safety and Quality417-3
Incidents of non-compliance concerning marketingcommunications
Product and Service Safety and QualityGRI 418:
Customer Privacy2016
418-1
Substantiated complaints concerning breaches of customerprivacy and losses of customer data
Cyber and Information Security
ESG Data and Notes