* For identication purpose only
Evergreen Life,
Bright Future & Wisdom
www.livzon.com.cn
2024Environmental,Social andGovernanceReport
Stock Code : 1513(A joint stock company incorporated in the People’sRepublic of China with limited liability)
Livzon Pharmaceutical Group Inc.
Environmental, Social and Governance Report 2024
CONTENTS
1 ABOUT THIS REPORT2 CHAIRMAN’S MESSAGE
3 ABOUT THE COMPANY
3.1 THE COMPANY’S BUSINESS
3.2 CORPORATE GOVERNANCE
3.3 PERFORMANCE HIGHLIGHTS IN 2023
3.4 THE COMPANY'S HONORS
4 ESG GOVERNANCE
4.1 BOARD STATEMENT
4.2 ESG GOVERNANCE STRUCTURE
4.3 STAKEHOLDER COMMUNICATION
4.4 MATERIAL ISSUES
4.5 RISK MANAGEMENT
5 OPERATION COMPLIANCE
5.1 BUSINESS ETHICS
5.1.1 Anti-corruption
5.1.2 Whistleblowing protection
5.1.3 Clinical ethics
5.1.4 Ethical marketing
5.2 DATA SAFETY AND CLIENT PRIVACY PROTECTION
5.3 SAFEGUARING OF INTELLECTUAL PROPERTY RIGHTS
5.4 PARTY BUILDING ACTIVITIES
6 ACCESS TO HEALTH CARE
6.1 RESEARCH AND DEVELOPMENT INNOVATION
6.2 PRODUCT ACCESSIBILITY
6.3 AFFORDABILITY AND FAIR PRICING
6.4 ENHANCEMENT OF HEALTH CARE
6.5 SUPPORT FOR POST-MARKET PHARMACOVIGILANCE
6.6 INVESTMENT IN RARE DISEASES
6.7 RATIONAL USE OF DRUGS
CONTENTS
7 PRODUCT RESPONSIBILITY
7.1 QUALITY MANAGEMENT SYSTEM
7.2 QUALITY RISK MANAGEMENT
7.3 R&D QUALITY MANAGEMENT
7.3.1 Quality management of pharmaceutical R&D
7.3.2 Quality management of clinical trial
7.3.3 External regulation
7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
7.4.1 Registration and certification
7.4.2 External regulatory inspections
7.4.3 Quality control on production process
7.4.4 Quality audit
7.5 QUALITY MANAGEMENT OF PRODUCT DISTRIBUTION
7.5.1 Management of product package inserts and labels
7.5.2 Product tracing
7.5.3 Product recall and safety emergency management
7.5.4 Protection of customer rights and interests
7.6 PHARMACOVIGILANCE
7.6.1 Pharmacovigilance management
7.6.2 Report of adverse drug reaction
7.7 ESTABLISHMENT OF QUALITY CULTURE
8 RESPONSIBLE SUPPLY CHAIN
8.1 SUPPLY CHAIN MANAGEMENT
8.1.1 Entry management
8.1.2 Classification of suppliers
8.1.3 Supplier audit
8.1.4 Annual comprehensive supplier evaluation
8.2 IMPROVEMENT OF SUPPLY CHAIN QUALITY
8.3 ESTABLISHMENT OF CLEAN SUPPLY CHAIN
8.4 ENHANCEMENT OF SUPPLY CHAIN STABILITY
8.5 GREEN AND SUSTAINABLE SUPPLY CHAIN
8.5.1 Supplier EHS audit
8.5.2 Sustainable procurement
8.6 DRIVING INDUSTRY DEVELOPMENT
9 TAKE HUMAN AS THE FOREMOST
9.1 EMPLOYMENT
9.1.1 Compliant employment
9.1.2 Diversity and inclusion
9.1.3 Preservation of talent
9.2 TALENT MANAGEMENT
9.2.1 Employee training
9.2.2 Talent development
9.2.3 Remuneration and welfare
9.3 EMPLOYEE COMMUNICATION
CONTENTS
10 GREEN OPERATION
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
10.1.1 Management structure
10.1.2 Certification
10.1.3 Regular audit
10.1.4 Compensation linked to ESG performance
10.1.5 Environmental risk management
10.2 ENVIRONMENTAL MANAGEMENT TARGETS
10.3 POLLUTANTS CONTROL
10.3.1 Treatment of air emissions
10.3.2 Wastewater management
10.3.3 Waste management
10.3.4 Noise management
10.3.5 Reducing environmental impact
10.4 RESOURCE USE MANAGEMENT
10.4.1 Water resource management
10.4.2 Energy management
10.4.3 Material management
10.5 ADDRESSING CLIMATE CHANGE
10.5.1 Governance
10.5.2 Strategy
10.5.3 Risk management
10.5.4 Metrics and targets
10.6 BIODIVERSITY PROTECTION
11 SOCIAL CONTRIBUTIONS
11.1 RURAL REVITALIZATION
11.2 SOCIAL AND PUBLIC WELFARE
12 APPENDIX
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
13 CONTENT INDEX
9.3.1 Complaint reporting procedures
9.3.2 Communication of labor union
9.3.3 Employee engagement survey
9.4 OCCUPATIONAL HEALTH AND SAFETY
9.4.1 Occupational health
9.4.2 Work safety
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage1 Aboutthis report
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ABOUTTHISREPORT
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
OVERVIEWThis report is the ninth environmental, social and governance (“ESG”) report(the “Report”) issued by the Company that serves as an annual ESG report,which covers the period from 1 January 2024 to 31 December 2024 (“ReportingPeriod”, “the Reporting Period”, “the Year”, or “this Year”) to disclose theESG performance of the Company and its subsidiaries for 2024. To enhance thecomparability and completeness of the contents of the Report, some contentsare traced back to previous years or extended to the first quarter of 2025, asappropriate.BASIS OF THE REPORTThe Report has been prepared in accordance with the requirements ofAppendix C2 Environmental, Social and Governance Reporting Code to theRules Governing the Listing of Securities on The Stock Exchange of Hong KongLimited, and the Self-Disciplinary Regulatory Guidelines No. 17 for CompaniesListed on Shenzhen Stock Exchange – Sustainability Reporting (Trial), and hastaken into account the results of the Company’s analysis of material issues.SCOPE AND BOUNDARY OF THE REPORTThe coverage of the Report is in line with the scope of consolidated financialstatements as set out in the 2024 annual report of the Company.DATA SOURCE AND RELIABILITY STATEMENTThe data and case studies in the Report are mainly derived from the formaldocuments, statistical reports, relevant public documents and internal reportingdocuments of the Group. The Company undertakes that the Report containsno false representations or misleading statements and is responsible for thetruthfulness, accuracy and completeness of its contents. Unless otherwisespecified, all monetary amounts are denominated in Renminbi (RMB).CONFIRMATION AND APPROVALThe Report was confirmed by the Company’s management and approved by theboard of directors (the “Board”) on 23 April 2025.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
AVAILABILITY OF THE REPORT AND FEEDBACKThe Report is available and can be downloaded from the website of Hong Kong Exchanges and Clearing Limited (“HKEx”)(www.hkexnews.hk), the website of the Company (www.livzon.com.cn) and Cninfo (www.cninfo.com.cn).For any comments or suggestions regarding the Report, please contact the Company by email at LIVZON_GROUP@livzon.com.cn.The Report is prepared in both Chinese and English. In case of any discrepancies, the Chinese version shall prevail.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
EXPLANATION FOR ABBREVIATIONS
In order to facilitate presentation and reading, unless otherwise specified, the following abbreviations have the meaningsbelow:
Abbreviated company nameFull company nameThe Company, CompanyLivzon Pharmaceutical Group Inc.*The GroupThe Company and its subsidiariesSichuan Guangda
Sichuan Guangda Pharmaceutical Manufacturing Co., Ltd.*Shanghai Livzon
Shanghai Livzon Pharmaceutical Manufacturing Co., Ltd.*Shanghai Livzon Biotech
Shanghai Livzon Biotechnology Co., Ltd., Jiaozuo Branch*Pharmaceutical FactoryLivzon Group Livzon Pharmaceutical Factory*Limin Factory
Livzon Group Limin Pharmaceutical Manufacturing Factory*Livzon DiagnosticsZhuhai Livzon Diagnostics Inc.*Livzon MABLivzon MABPharm Inc.*LivzonBioLivzonBio, Inc.*Xinbeijiang Pharma
Livzon Group Xinbeijiang Pharmaceutical Manufacturing Inc.*Gutian FuxingGutian Fuxing Pharmaceutical Co., Ltd.*Jiaozuo Hecheng
Jiaozuo Livzon Hecheng Pharmaceutical Manufacturing Co., Ltd.*Ningxia Pharma
Livzon Group (Ningxia) Pharmaceutical Manufacturing Co., Ltd.*Livzon Hecheng
Zhuhai FTZ Livzon Hecheng Pharmaceutical Manufacturing Co., Ltd.*Fuzhou Fuxing
Livzon Group Fuzhou Fuxing Pharmaceutical Co., Ltd.*Livzon Microsphere
Zhuhai Livzon Microsphere Technology Co., Ltd.*Maohaizi
Maohaizi Animal Health (Guangdong) Co., Ltd.*
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message
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Mr. Zhu BaoguoChairman of the Board
CHAIRMAN’SMESSAGE
Dear stakeholders and all friends who care about Livzon,In 2024, under the dual drive of technological innovation and policy adjustment in the pharmaceutical industry, LivzonGroup has always been committed to the mission of “prioritizing the quality of life of patients”. With the vision of“becoming a leader in the pharmaceutical industry”, the Group focuses on planning the robust operation and developmentin its main innovative pharmaceutical business. Faced with the support of national policies and opportunities arising fromindustry transformation, we always uphold compliance as the baseline while embracing change with an open mindset. Bypushing forward with R&D innovation, integrating AI technology into drug R&D process, improving talent developmentsystems, accelerating global product deployment, and shifting pharmaceutical R&D from being “experience-driven” to“technology-driven”, we have laid a robust foundation for long-term sustainable growth.
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
In 2024, Livzon Group resolutely implemented the strategy of “independent R&D + BD dual-wheel drive”, focusing onthe dual pathways of “innovative drugs + high-barrier complex preparations”. With innovation serving as the engineand globalization as the vision, the Group deployed resources around its advantageous fields such as gastroenterology,assisted reproduction, and psychoneurosis, and progressively expanded into the fields of chronic diseases such asmetabolic disorders, anti-infectives, cardiovascular/cerebrovascular diseases to supplement the R&D pipeline, consolidatethe core product portfolio, and open up new areas of accessibility. In the field of assisted reproduction, TriptorelinAcetate Microspheres for Injection (1M) was granted the launch approval for the new indication of endometriosis, andthe marketing application for Recombinant Human Follitropin Alfa Solution for Injection was submitted and acceptedat the end of January 2025; in the field of psychoneurosis, following the license application submission for AripiprazoleMicrospheres for Injection in 2023, supplementary materials were successfully submitted during the Reporting Period, withlaunch approval expected in the first half of 2025; in the field of auto-immunity, the phase III clinical enrollment for thepsoriasis indication of Recombinant anti-human IL-17A/F Humanized Monoclonal Antibody Injection was completed, whilethe phase III clinical enrollment for the ankylosing spondylitis indication was completed; in the field of metabolism, themarketing authorization application for Semaglutide Injection for type 2 diabetes was accepted, and the phase III clinicalenrollment for its weight loss indication was completed. The continuous output of R&D results has paved the way forinternational expansion. In the field of assisted reproduction, Cetrorelix Acetate for Injection was approved by the US FDAfor marketing in 2024. These fruitful results have consolidated the Group’s position in various formulation fields, broughtmore high-quality treatment options to patients, and fully embodied the corporate mission of “prioritizing the quality oflife of patients”.The Group continues to make efforts in access to medicines. In active response to the national call, the Group effectivelyimproves the accessibility and affordability of pharmaceutical products through multiple measures to promote the balanceddistribution and accessibility of medical resources. During the year, a total of 191 products of the Group were included inthe Medical Insurance Catalogue, of which 92 were in the class A list and 99 were in the class B list, further expandingthe choices of medicines available to patients. In terms of pricing, the Company adheres to the principle of “high qualityat affordable prices”, optimizing processes to reduce production costs and providing cost-effective products for clinicaluse. In terms of international expansion, Livzon Group has further expanded the overseas reach of its products. In 2024,in the chemical drug preparation segment, a registration application was submitted for Cetrorelix Acetate for Injection inthe United States; in the API and intermediate segment, high-end pet drugs Fluralaner and Afoxolaner as well as antibioticproduct Dalbavancin Hydrochloride are undergoing registration in the United States; in the biological products segment,the Company is actively distributing Recombinant Human Choriogonadotropin alfa for Injection in the Asia, Africa andLatin America regions; in the traditional Chinese medicine segment, Jingfu Antipruritic Granules were granted the launchapproval in Russia. The Company has also established a joint venture with Kalbe’s subsidiary in Indonesia to strengthenits local production distribution and inject new momentum into its international development. Through a global two-waylicensing cooperation model, the Company introduces advanced technologies and products while also promoting itscompetitive products to international markets, bringing more well-beings to patients around the world.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
The Group continues to focus on its talent strategy, keeps optimizing mechanisms, and enhances corporate vitality inan all-round manner. The Company continuously optimizes and improves its systematic talent development mechanism.While nurturing and identifying talents internally, the Company actively expands its global talent acquisition strategyto adapt to the needs of its rapid development and industry transformation trends. The Group uses the Livzon BusinessSchool as its core platform to build a diversified employee training system, empowers employees on demand through alearning model that combines online and offline forms and integration of resources, and stimulates organizational vitality.The company strictly standardizes training management, improves supporting resources, promotes the systematizationand institutionalization of employee training, and continuously delivers high-quality talents for business development.The Company values employee well-being, practices the values of “happy life, happy work”, and creates a harmoniouscorporate culture. By improving working and living facilities, optimizing the industrial park environment, and organizinga variety of team activities, we create a comfortable and convenient working and living space for employees, enhancingteam cohesion and collaboration spirit, and injecting strong impetus for the sustainable development of the enterprise.The Group actively responds to the national carbon peak and carbon neutrality policies, deeply implements the conceptof sustainable development, and further improves the management of pollutant discharge and resource utilization. Inaddressing climate change, the Company has incorporated climate risks into the Group’s ESG risk management system,detailing the impact of related risks and opportunities on the financial level. In 2024, for the first time, we conducteda scope 3 greenhouse gas inventory to thoroughly assess carbon emissions in the upstream and downstream valuechains of the Company and actively implement the concept of low-carbon operations. The Group has established asound environmental management system, and continuously improves environmental management effectiveness throughcontinuous optimization of treatment processes and regular monitoring and evaluation. The Company attaches greatimportance to the potential impact of pollutant discharge on employees and local communities. We conduct in-depthanalyses and develop risk assessment and control plans to ensure compliant discharge. Meanwhile, we actively conductenvironmental awareness and professional technical training to strengthen the relevant employees’ environmentalexpertise in areas such as “three waste” treatment, water resource management, and energy management.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Bearing in mind its public welfare mission, Livzon is actively engaged in rural revitalization and educational public welfare,and contributes to a healthy China and common prosperity through industrial assistance and resource coordination.During the Year, the charitable donation of Livzon amounted to RMB12.98 million. The Group continues to promote thePublic Welfare Program for Prevention and Treatment of Chronic Diseases, focusing on remote areas with high incidenceof chronic diseases such as hypertension and hyperlipidemia. Through drug donations, we reduce the financial burden onpatients. As at the end of the Reporting Period, the Company had entered into a total of 31 agreements in relation to thePublic Welfare Program for Prevention and Treatment of Chronic Diseases, covering 9 provinces and 4 autonomous regionsacross the country, and had benefited more than 30,000 people with chronic diseases. The Company has also establishedlong-term scholarship programs with well-known colleges and universities, and made charitable donations to educationalcharities to support scientific research and teaching efforts and the growth of outstanding students, and promote thebalanced distribution of educational resources.Long as the journey is, we will reach our destination if we stay the course; high as the mountains stand and vast asthe waters span, we will prevail if we press on. On the road to the future, Livzon Group will remain true to its foundingprinciple of “prioritizing the quality of life of patients”, stay focused on innovation and R&D, practice social responsibility,promote green transformation, optimize product portfolios, and provide more high-quality treatment options for patients.We are willing to align with the grand blueprint of healthy China, enable the balanced development of medical resourceswith innovation, protect the health and well-being of all people with the heart of universal benefits, and contribute to therealization of the “Healthy China 2030” goal.
Mr. Zhu BaoguoChairman of the Board
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ABOUTTHECOMPANY
11 Socialcontributions10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
MissionPrioritizingthe quality of life
of patients
Vision
Becoming a leaderin the pharmaceutical
industry
Value
People-oriented,
Craftsmanship Spirit,Trustworthy, Truth-seekingand Pragmatism-oriented,Happy Life, Happy Work
3.1 THE COMPANY’S BUSINESS
Founded in January 1985 and headquartered in Zhuhai City, GuangdongProvince, the People’s Republic of China (the “PRC” or “China”), the Companyis a comprehensive group company that is principally engaged in pharmaceuticalR&D, production and sales. We are among the top 100 enterprises in Chinesepharmaceutical industry. The Company was listedon the main board of the Shenzhen Stock Exchange (stock code: 000513.SZ)on 28 October 1993, and listed on the main board of the Hong Kong StockExchange (stock code: 01513.HK) on 16 January 2014.Regarding R&D and innovation as the cornerstone of sustainability, theCompany continued to pay attention to new molecules and cutting-edgetechnologies in the field of global new drug R&D, and planned distributionof innovative drugs and high-barrier complex preparations based on clinicalvalue and differentiated prospect. With a focus on gastroenterology, assistedreproduction, psychoneurosis, and other fields, the Company formed a completeproduct portfolio and a differentiated product pipeline covering the entire R&Dlifecycle, which includes preparation products, APIs and intermediates, anddiagnostic reagents and equipment.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
3.2 CORPORATE GOVERNANCE
The Company has set up a corporate governance structure, which is composed of the general meeting of the Company(the “General Meeting”), the Board and its special committees, the supervisory committee (the “Supervisory Committee”)and the senior management of the Company. The decision-making and regulatory bodies of the Company, includingthe General Meeting, the Board and the Supervisory Committee, strictly followed the requirements of the regulatoryoperating rules and internal system in performing management decision-making and operation supervision. The operatingstandards were proven to be effective. The special committees of the Board all performed their respective duties. For moreinformation on corporate governance, please refer to Livzon 2024 Annual Report.
Board ofDirectors
StrategyCommittee
Remunerationand AppraisalCommittee
NominationCommittee
AuditCommittee
ESGCommitteeDiversity of the Board
The Company highly recognizes the contribution of a diverse Board in its corporate development. According to therequirements of the Board Diversity Policy, the Company takes into account diversity related factors such as gender, age,cultural and educational background, professional experiences, skills and knowledge, race and ethnicity when appointingBoard members. The Company makes decisions based on objective conditions such as comprehensive values a candidatecan deliver to the business and development of the Company, contributions a candidate can make to the Board whileensuring the diversity of the Board, and makes sure that the Board includes at least one female member to achieve genderdiversity in the Board. The nomination committee under the Board of the Company is responsible for monitoring andreviewing the Board diversity policy to ensure that it is working effectively.As at the end of the Reporting Period, the Board of the Company comprised 11 directors, including 2 executive directors,4 non-executive directors, and 5 independent non-executive directors, of which 1 was a female director.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Economic performanceSocial performanceEconomic performance
3.3 PERFORMANCE HIGHLIGHTS IN 2024
Net profit attributable to theshareholders of the CompanyRMB2,061 million,
a year-on-year increaseof 5.50%
Tax revenue created for thecountry
RMB
1,531 millionWages, bonuses, allowances,compensation, welfare, housingfunds and social insurance paidto the employeesRMB1,656 million
Social contribution per shareRMB
5.87 per share
R&D innovation
Number of R&D employeesand its percentage to the totalnumber of employees
908,
10.01%
R&D investment and itsproportion in operating incomeRMB1,044 million,
8.84%
Inclusive health
Products included in theNational Medical InsuranceCatalogue
Fair pricing policy that matcheslocal income levels in SouthAsia, Southeast Asia, SouthAmerica, and Africa for28 products
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Health and safety
Investment in work safety andoccupational health
RMB34 millionCertification rate of GB/T45001-2020/ISO 45001:2018Occupational Health and SafetyManagement System
100%
Number of work-relatedfatalities in all employees andcontractors
Diversity and training
Percentage of femaleemployees to the workforce47%Number of minorities
Average length of training forstaff102 hours
Public welfare and charity
Expenditure on charitabledonationRMB
12.98 million
By the end of the ReportingPeriod, agreements signed inrelation to the Public WelfareProject for Prevention andTreatment of Chronic Diseases
As at the end of the ReportingPeriod, the number of low-income people with chronicdiseases receiving ourassistance
30,000
Social performanceSocial performanceSocial performance
3.3 PERFORMANCE HIGHLIGHTS IN 2024
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Environmental performanceEnvironmental performanceESG rating performanceGreenhouse gas emissionTotal CO
emissions andpercent reduction compared to2020525,420
tCO
e, 8.5%Increase of total CO
emissionscompared to previous year11,087 tCO
eReduction of CO
emissionintensity compared to 202014%(2024 target: 22%)
Target year of achieving carbonneutrality2055
Environmental investment
Environmental protectioninvestment
RMB74 millionOf which:
Investment in maintenanceof environmental protectionoperation
RMB63 million
Investment in renovation ofenvironmental protectionequipmentRMB11 million
System and certification
Certification rate of GB/T24001-2016/ISO 14001:2015Environmental ManagementSystem100%
MSCI ESG scoredAAAS&P Global CSA score:
Included in the "SustainabilityYearbook 2025” by S&P Global
CDP (Climate Change Response)scoredB
3.3 PERFORMANCE HIGHLIGHTS IN 2024
(continued)
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
3.4 THE COMPANY’S HONORS
Name of AwardIssued by25th in the 2023 Top 100 Enterprises in Chinese Pharmaceutical IndustryThe 41st China Pharmaceutical Industry
Information Annual Conference 2024Information disclosure rating: AShenzhen Stock ExchangeBest Practice Case of the Board of Directors of Listed Companies in 2024China Association for Public CompaniesThe 2024 ESG Golden Dawn Award, The Golden Dawn EnvironmentalResponsibility Award, The Golden Dawn Leadership Award
WEEKLY ON STOCKS
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Name of AwardIssued byTop 100 Value of Main Board Listed Companies in Chinaegsea.comBest Board of Directors of Listed CompaniesNational Business DailyListed Companies with Excellent High-Quality Development,
Best Investment Value for Listed Companies
Hong Kong Ta Kung Wen Wei Media GroupCorporate Governance Special Contribution AwardDirectors & BoardsThe Top 20 Chinese Pharmaceutical Listed Companies in ESGCompetitiveness in 2024
Healthcare Executive
3.4 THE COMPANY’S HONORS
(continued)
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESGGOVERNANCE
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
A robust ESG governance system is the internal foundation on which companiescan efficiently fulfill their environmental and social responsibilities. To achievethe Company’s ESG management goals and improve the Company’s ESGgovernance, Livzon continuously strengthens ESG risk management, regularlyinspects the progress of ESG tasks, and rationally adjusts ESG governancepolicies and strategies. Meanwhile, we maintain active communication withstakeholders, fully integrate the ESG philosophy into corporate operationdecisions, and promote the coordinated development of the upstream anddownstream players of the industrial value chain.
4.1 BOARD STATEMENT
The Board of the Company places great importance on the deep integration ofESG management philosophy and corporate development strategy, and continuesto improve the ESG management mechanism to lay a solid foundation andprovide a strong guarantee for the sustainable and high-quality development ofthe Group.
ESG management approach and strategy:
The Board continuously pays attention to global ESG development trends andchanges in the macroeconomic situations at home and abroad, comprehensivelyfinds out ESG-related risks and opportunities on a regular basis in the contextof the Company’s development strategy planning, production and operationconditions, and the results of stakeholder communication, and provides timelyguidance on the optimization and adjustment of the ESG management approachand strategy to ensure that the Group’s ESG philosophy is up-to-date.
Goal setting and progress review:
The ESG Working Team of the Company sets ESG goals and relatedimplementation plans; the ESG Committee regularly reviews the progress ofachieving the ESG goals, provides requirements and recommendations for actionon items that require improvement, and reports to the Board. In addition, toeffectively promote Livzon’s ESG management work, the Company has tied theremuneration of members of the ESG Working Team under the ESG Committeeto ESG performance, and established a mechanism of tying managementremuneration to ESG performance. For details of the Company’s ESG goals andthe progress made in achieving them during the Report, please refer to Chapters5 to 11 of the Report.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
4.2 ESG GOVERNANCE STRUCTURE
The Board is the highest decision-making body for Livzon’s ESG governance and is ultimately responsible for the ESGwork of the Group. The ESG Committee is responsible for formulating the vision, goals, and strategies of the Group’sESG, inspect the ESG management structure, regularly reviewing the results and performance of ESG-related work, and isaccountable to the Board.The ESG Committee has the ESG Working Team as its executive body, which is mainly responsible for the dailymanagement of ESG, collaborating with the functional department, business unit and subsidiary of the Company to fullyimplement the ESG management strategy, regularly sorting out and summarizing the progress and results of the Group’sESG work, and reporting to the ESG Committee. In addition, the Company also has ESG full-time staff who are responsiblefor the implementation of specific ESG tasks in accordance with the ESG Working Team’s management plan.
ESG governance levelMembersDuties
ESG CommitteeIt is chaired by the Chairman and consists of
an executive director and three independentnon-executive directors
Develop and review the ESG vision, goals,strategies, and management guidelines,inspect the ESG management structure andperformance, and be accountable to theBoard.Team leader anddeputy leader of theESG Working Team
Team leader: president of the CompanyDeputy leaders: all vice presidents, chiefmedical officer, secretary to the Board, deanof the research institute, general manager ofAPI business department, and all assistantsto the president
Responsible for the daily management ofESG, regularly review the progress of theGroup’s ESG work and key ESG data, andreport to the ESG committee.
Members of theESG Working Team
Heads of the Company’s functionaldepartments, business units and subsidiaries
Implement specific ESG tasks as directed bythe ESG Working Team leader and deputyleaders.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
4.3 STAKEHOLDER COMMUNICATION
We highly emphasize maintaining communication with internal and external stakeholders, establishing a normalizedcommunication mechanism for timely knowledge of stakeholders’ requirements, and continuously optimizing andadjusting communication channels to actively respond to stakeholders’ concerns, thereby steadily promoting the orderlyimplementation of the Group’s sustainable development work.StakeholderIssues of focusCommunication channels
Government and regulatorsProduct quality and safety
Pollution controlEmission managementEthical marketingClimate change mitigation and adaptation
Supervision and inspection, work reports,on-site visits, meetings between thegovernment and the corporate sector,information disclosureShareholders and investorsProduct quality and safety
Risk managementCorporate governance and complianceResource consumption managementBusiness ethics and anti-corruptionProduct R&D and technological innovationEnergy efficiency and management
General meetings, daily informationdisclosure, investor communicationconferences and on-site visits, hotlines ande-mails
Directors and seniormanagement
Product quality and safetyIntellectual property rights protectionCorporate governance and complianceTalent attraction, retention and developmentProduct R&D and technological innovation
Board meetings, daily operation andmanagement meetings
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
StakeholderIssues of focusCommunication channelsStaffOccupational health and safety
Employee compensation and benefitsProtection of labor rights and interestsDiversity, equality and inclusionTalent attraction, retention and development
Workers’ representatives conference andtrade union, employee engagement survey,opinion feedback platform
Consumers and clientsProduct quality and safety
Customer privacy and data securityBiodiversityResponsible marketingWater resource managementProduct R&D and technological innovation
Product labels, client visits, consumersatisfaction survey, handling of consumercomplaints and opinions
Partners and suppliersProduct quality and safety
Sustainable supply chain managementIndustry development and cooperationProduct R&D and technological innovation
Regular communication, training andadvocacy, supplier audit
Local communityPollution control
Emission managementInclusive health and accessibilityCommunity social welfare and charity
Participation in social welfare events,provision of regular assistance to the localcommunity, volunteer service
4.4 MATERIAL ISSUES
During the Year, the Company formulated its ESG material issues matrix in accordance with the requirements of AppendixC2 Environmental, Social and Governance Reporting Guidelines to the Rules Governing the Listing of Securities on TheStock Exchange of Hong Kong Limited, and the Self-Disciplinary Regulatory Guidelines No. 17 for Companies Listed onShenzhen Stock Exchange – Sustainability Reporting (Trial) and in compliance with the double materiality principle byinviting internal and external interested parties to give feedback on the ESG issues from financial materiality and impactmateriality.
4.3 STAKEHOLDER COMMUNICATION
(Continued)
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4.4 MATERIAL ISSUES
(continued)
Material evaluation process– Review and update the pool of ESG issues: updated the pool of ESG issues for the Year after comprehensive
evaluation by following the requirements of securities regulatory rules and taking into account the overall businessdevelopment of the Group in 2024 and the advanced ESG management practices of peer companies;
– Formulate and implement the stakeholder engagement program: communicated and investigated with
important stakeholders to understand and collect relevant opinions and suggestions;– Quantify and evaluate ESG key issues: asked internal and external interested parties such as the Company’sdirectors, employees, investors, suppliers, distributors, government regulators, and local communities to evaluateeach issue in terms of both financial materiality and impact materiality, and drew a matrix of material issues;– Review and approve the matrix of material issues: submitted the evaluation report on material issues to, andpublished the results after review and approval by, the management.
Impact materiality
Livzon Matrix of Material ESG Issues for 2024High
Financial materiality
HighLow
Product R&D andtechnological innovation
Climate change mitigation and adaptation
Biodiversity
Water resource management
Energy efciencyand management
Resource management and circular economy
Emission management
Pollution control
Corporate governance and compliance operation
Risk managementProtection oflabor rightsand interests
Employee remuneration and benets
Supply chain sustainable managementIntellectual property rights protection
Ethical marketing
Product qualityand safety
Community charity
Business ethicsand anti-corruptionClient privacy anddata securityInclusive healthand accessibility
Occupational healthand safetyTalent attraction,retentionand development
Industry developmentand cooperation
Diversity, equality and inclusion
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4.5 RISK MANAGEMENT
A robust risk management system is the guarantee of a company’s long-term stable operations. Livzon continuouslyimproves its risk management level and perfects its risk management system, and builds solid risk defenses for theGroup’s stable development through comprehensive and effective risk management and internal control.Risk management structure
The Company has established a model of three defensive lines, a risk management structure, to effectively controlcorporate risks, strengthen systematic risk management, and fulfill risk management goal. The top regulatory authoritywithin the structure is the audit committee under the Board. For more information on the Company’s risk managementand internal control, please refer to the Company’s 2024 Annual Report.
Diagram of Livzon’s Risk Management Structure
Audit Committee
Board Level
First Line of Defense
Business departments
Second Line of Defense
Risk management head ofce
Third Line of Defense
Audit and integrity department
The Company has incorporated the principle of risk control into the daily production management, and has established anincentive and constraint mechanism for the implementation of risk management and internal control. It has included theeffectiveness of risk management and the implementation of internal control by each responsible unit into the performanceevaluation system to promote the effective implementation of internal control.
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4.5 RISK MANAGEMENT
(continued)Risk management cultureThe Company integrates a risk management culture into its corporate culture development, advocates the concept of“everyone participates in risk management”, and encourages employees to actively offer suggestions and opinions forimproving risk management practices, creating a positive risk management environment. The Company regularly providesrisk management training for the Board and conducts risk management knowledge training for staff to increase theirrisk awareness and risk management capabilities, and improve their ability to detect potential risks and take appropriatepreventive measures in their daily work.
Example: detected risks? Risk of trade secrets disclosure
Risk characterization: Disclosure of the Company’s core technologies, intellectual property,strategies, and other trade secrets to competitors may lead to the Company’s decreased revenueand weakened competitiveness. Possibility of risk emerging: Likely Degree of the potential influence on business: Medium-highResponse measure: Improve confidentiality measures, including but not limited to, implementing
classification management of trade secrets, finding new positions that involve secrets, refiningjob responsibilities, signing confidentiality agreements, and raising employee awareness ofconfidentiality and legal risks about trade secrets.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
4.5 RISK MANAGEMENT
(continued)Risk management culture(continued)Example: detected risks(continued)? Risk of single-supplier procurement
Risk characterization: Over-reliance on a single supplier may lead to the Company’s lack of flexibilityin technology, pricing, and supply, resulting in price monopolies, increased procurement costs, orrisks such as production stoppages. Possibility of risk emerging: Likely Degree of the potential influence on business: MediumResponse measure: Eliminate single-source procurement as a routine procurement practice by, forexample, developing double-purchasing plans, establishing reasonable inventories, and signingsupply assurance agreements; conduct regular supply chain risk evaluation and maintain supplierrelationships.
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4.5 RISK MANAGEMENT
(continued)Emerging riskWe detect and evaluate emerging risks to the long-term development of the Group and social progress in the social andenvironmental fields every year, and take appropriate measures to prevent and alleviate them in the course of operations.Name of emerging riskRisk description and influenceResponse measurePolitical Environment RiskChanges in international relations
may lead to the implementation oftrade restrictions and the erection oftariff barriers between countries, thusdisrupting the import & export andtransportation of products, resultingin shortages of raw materials andproduction interruptions, which affect thestability of the supply chain. It may alsolead to technological blockades, furtheraffecting technological exchange andcooperation within the industry.
In response to changes in theinternational political environment,we will anticipate potential risks witha proactive mindset. Our responsemeasures include, but are not limited to:
? Strengthen R&D of critical products
and research on the domesticationof production raw materials tofurther reduce dependence onimported bottleneck products;? Rationally plan product R&D andmanufacturing, and initiate thestorage of relevant raw materialsin advance to improve supply chainstability;? Establish good relations withgovernments, industry associationsand other stakeholders, keepabreast of industry trends, so asto further reduce risks posed bychanges in international relations.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
OPERATIONCOMPLIANCE
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Always upholding the principles of compliance and integrity and strictly abidedby national laws and regulations, Livzon has established a comprehensivecorporate governance system. Operation compliance is not only the cornerstoneof ensuring the long-term and stable development of the Group, but also thekey to enhancing corporate reputation and brand value. By establishing asound internal control mechanism and conformance management system, wecan effectively prevent corruption and fraud, reduce operational risks, promotethe rational allocation and efficient use of resources, and thereby enhance theCompany’s competitiveness and sustainable development ability.
5.1 BUSINESS ETHICS
Regarding management of business ethics as a priority of corporate governance,the Group continuously strengthens system construction. Several business ethicsmanagement systems have been developed and published on the Company’sofficial website, including the Anti-Corruption and Anti-Commercial BriberyRegulations, the Interim Provisions on Anti-Fraud, and the AdministrativeMeasures for Reporting and Complaint.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
5.1 BUSINESS ETHICS
(continued)
5.1.1 Anti-corruption
Consistently upholding the philosophy of operating with honesty and integrity, Livzon adopts a zero-tolerance attitudetoward any form of commercial subornation and corruption and constantly improves anti-commercial subornation andanti-graft system construction. During the Year, we did not identify nor were aware of any concluded legal cases regardingcorrupt practices, laundering illicit money, inside dealing brought against the Group or its employees.? Building an anti-corruption system
The Group strictly adheres to internal management norms and requires all relevant parties (including suppliers,service providers, contractors, clients, etc.) that have business transactions with the Group to strictly abide bythe Anti-Corruption and Anti-Commercial Bribery Regulations and sign the Supplier Commitment for Operatingwith Integrity. In addition, we have defined integrity commitment clauses in commercial contract templates ofthe Group, requiring the counterparties of the Group to operating with integrity and take active part in integritytraining organized by the Group. If there is any violation, the Group has the right to terminate the contract.At the same time, we regularly conduct audit of anti-corruption on suppliers to check whether they adhere to theCompany’s business ethics related systems. In daily operations, the risk management and control departments ofthe Group’s enterprises continuously inspect the procurement process and provide suppliers with business ethicsrelated training. During the Year, we undertook anti-graft inspection on 187 suppliers.For any corruption and commercial subornation committed by the employees of the Group that is proved to betrue, the Group shall, depending on the seriousness of the circumstances, impose a penalty in accordance with theLabor Employment Management System of the Company. If the circumstances are serious, the labor relationshipshall be terminated, and the loss caused to the Group shall be recovered in accordance with the law. Anysuspected criminal offense shall be transferred to judicial organs.
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5.1 BUSINESS ETHICS
(continued)
5.1.1 Anti-corruption
(continued)
? Fostering an anti-corruption culture
Livzon firmly regards honesty and integrity as the cornerstone of its conformance culture. We make continuousefforts on internal and external promotion of anti-graft and integrity and integrate the concepts of integrity,honesty and anti-graft into daily management and business operations. Through continuous training andpromotion activities, we enhance the integrity awareness of employees and business partners and cultivate apositive conformance culture.The Company has formulated the Administrative Regulations on Staff Integrity to specify the business ethicsguidelines to be followed by employees. The Company requires leaders at all levels to be the primary personsresponsible for anti-fraud issues and all employees to sign the Staff Commitment for Anti-Corruption and Anti-Commercial Bribery as a commitment to not seeking improper benefits in the performance of duties.To build a solid defense for integrity in all respects, we regularly undertake promotion and training on anti– graftawareness and the philosophy of operating with integrity through various means, such as the promotion andimplementation of staff handbooks and company regulations, staff training, etc., so as to improve the integrityawareness of all employees and internalize the concept of integrity as a conscious work requirement for employees.During the Year, we offered one business ethics training covering permanent employees of the Group, reachinga training coverage of 98%. In addition, the Company offers anti-graft trainings and risk management trainingsfor directors at least once a year to increase their awareness and capabilities of risk management, observancerisk prevention, and anti-commercial subornation and anti-graft, so as to effectively perform their supervisory anddecision-making functions.Case: Business ethics training
In February 2024, the Group provided business ethics training for 98% of its permanent employees. The trainingincluded case studies of corruption by enterprises and individuals from both within and outside the pharmaceuticalindustry, helping employees understand the concept of corrupt and subornation practices and related legalregulations, thereby increasing their awareness of conformance to laws and regulations and adherence to businessethics.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
5.1 BUSINESS ETHICS
(continued)
5.1.2 Whistleblowing protection
To effectively promote the development of integrity within the Group, we have established the Administrative Measuresfor Reporting and Complaint and built a regular reporting and complaint management mechanism to encourage allemployees, suppliers, clients, contractors, business partners, and any other parties who have business relationship withthe Group to actively participate in the Company’s actions for a culture of integrity and honesty. We accept anonymousreports and real-name reports, and provide secure and confidential channels for whistleblowers to report any misconduct,ensuring that all complaints are handled in an effective manner, and contributing to the Group’s compliant andhigh-quality development.In protecting the legitimate rights and interests of whistleblowers, we have taken strict confidentiality approach. Thedepartments that accept reports must keep the information of whistleblowers strictly confidential and ensure thattheir personal information and report content are not leaked in any part of the process. We promise to complete theinvestigation within 30 working days and issue a written investigation report, while continuously following up subsequenthandling. For violation of the regulation by disclosing information of whistleblowers or taking revenge on them, theCompany shall impose penalties such as position transfer, salary deduction and demotion, until transfer to judicialauthorities in accordance with the seriousness of the circumstances.
5.1.3 Clinical ethics
In the clinical R&D process, Livzon strictly abides by relevant laws, regulations, and moral norms, including the DrugAdministration Law of the PRC, the Good Clinical Practice, the Measures for Ethical Review of Life Science and MedicalResearch Involving Humans, the World Medical Association Declaration of Helsinki, the Personal Information ProtectionLaw of the PRC, and the Good Pharmacovigilance Practices for Pharmaceutical Products to ensure that the clinicalR&D process meets scientific and ethical requirements. The Company has established a comprehensive clinical researchmanagement system that covers trial protocol design and review, trial preparation, trial execution, trial data management,and statistical analysis. Standard operating procedures and work manuals are regularly updated and improved inaccordance with regulatory systems, industry guidelines, and adjustments to the Company’s structure. During theReporting Period, the Company did not act in violation of clinical ethics norms.
? Ensuring the safety of subject’s information and confidentiality
We attach great importance to the subjects’ right to know and confidentiality and protect their rights and intereststhrough ethical review and informed consent. The Company accepts reviews and oversight by the clinical trialethics committees throughout the trial process, including: during the clinical trial preparation phase, submitessential ethical materials such as clinical trial protocol, informed consent form, drug test report, and clinical trialinsurance to the ethics committees for approval before a trial can commence; during the clinical research period,ensure that changes to the trial protocol and other related materials are only implemented after receiving approvalfrom ethics committees, and regularly submit follow-up review reports to the ethics committees.We have implemented strict data encryption and secure storage approach to ensure no unauthorized accessand misuse of subject’s information and carefully prevent harms and risks from disclosure of subject’s privateinformation. During the acquisition of subject’s information, we follow the following principles: firstly, strictlylimit the scope of information acquisition and explicitly prohibit the acquisition of information irrelevant to clinicalresearch; secondly, apply the principle of minimization for the acquisition of personal information that must beobtained; thirdly, clearly define subject’s information that must be obtained but cannot be partially obtained andobtain the subject’s written consent. After the preliminary acquisition of information, the Company uses a GCP-verified clinical trial electronic data capture system for information management. Additionally, the Company carriesout strict training and certification for clinical researchers who have access to information of subjects to guaranteethe security of information and confidentiality from the two dimensions of technology and personnel qualification.
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5.1 BUSINESS ETHICS
(continued)
5.1.3 Clinical ethics
(continued)
? Implementing moral norms for animal testing
The Company strictly implements the ethical guidelines and legal provisions related to animal testing and hasdeveloped the Procedures for Laboratory Animal Ethics Management to regulate laboratory animal operationsand effectively protect the welfare of laboratory animals. Before carrying out animal experiments, we have ethicalapproval for the animal experiment protocols and strictly conduct experiments within the scope of the protocols.In the process of experiments, we give full consideration to ethical responsibility and animal welfare, providingappropriate living environments and careful care to reduce stress, pain, and harm of animals. We strive to achievethe best balance between scientific progress and moral responsibility.Case: Clinical ethics trainingIn March 2024, the clinical operations head office of the Company provided GCP regulation training for all staff,emphasizing the ethical review requirements in clinical trials and the importance of protecting the rights andinterests of trial subjects. The training covered clinical ethics-related regulations, such as the Measures for theEthical Review of Biomedical Research Involving Humans, the Measures for Ethical Review of Life Science andMedical Research Involving Humans, and the Guidelines for the Establishment of Ethical Review Committees forClinical Research Involving Humans.
5.1.4 Responsible marketing
The Group always upholds the bottom line of compliance and follows a rigorous and prudent approach in all sales andmarketing activities by adhering to all applicable laws, regulations, and industry guidelines in places where it operates,contributing to the maintenance of a healthy and orderly market environment, thereby establishing a solid foundationfor the Company’s long-term development. At the same time, the Group has developed several accountable marketingsystems to manage and regulate the marketing behavior of all employees of the Group to ensure that marketing activitiesare legal and compliant. During the Year, the Group received no complaints or legal proceedings on misleading ordeceptive promotion information.? Improving the responsible marketing system
The Company strictly complies with the requirements of the Basic Norm for Enterprise Internal Control. The riskmanagement head office carries out daily and special supervision of the Group’s risk management and internalcontrol. Each year, a third-party organization inspects the effectiveness of the Company’s internal control overfinancial reporting, covering all enterprises within the scope of the Group’s operation control. In addition, weregularly provide ethical marketing training for employees of the Group. We have established wide-ranging andthorough training courses on ethical marketing, which cover relevant laws and regulations on ethical marketing,rules and regulations of the Company, product knowledge, promotional norms, compliant promotion, notificationsof non-conformance cases, etc. During the Year, the Group’s trainings on ethical marketing covered 98% of theGroup’s employees.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
5.1 BUSINESS ETHICS
(continued)
5.1.4 Ethical marketing
(continued)? Preventing unfair competition
To effectively prevent unfair competition and ensure the legal conformance of the Group’s operations, we havetaken comprehensive and rigorous approach to actively promote the creation of a healthy and fair businessenvironment and provide strong support for the sustainable development of the industry. First of all, the Companyhas established a sound internal control mechanism to ensure that all business practices strictly adhere tolaws and regulations and ensure the transparency and normalization of business processes through continuoussupervision and evaluation, so as to effectively avoid potential risks. We also attach importance to the trainingand development of employees and the shaping of their awareness of conformance. We regularly organize trainingcourses on legal knowledge and compliant operations to improve employees’ legal awareness and professionalethics. Employees are encouraged to take the initiative to practice high standards of professional conduct in allaspects of their daily work.In terms of cooperation with business partners, we sign detailed competition rules and conformance agreements,which clearly stipulate the principle of fair competition that both parties shall follow, prevent any form of unjustenrichment, and maintain fairness and integrity in the partnership. During the Year, the Group was not involved inany legal proceedings or major administrative penalties resulting from unfair competition practices.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
5.2 DATA SECURITY AND CLIENT PRIVACY PROTECTION
In today’s era when digitalization is deeply embedded in corporate operations, Livzon regards safeguard of data safetyand privacy as an important responsibility for corporate operations, as we are keenly aware of the critical importanceof it for a company’s stable development and the maintenance of client trust. The ESG Committee under the Board isresponsible for supervising the Group’s information safety and privacy preservation matters. The information head officeregularly prepares an information risk evaluation report based on the performance on information safety management inthe current year and submits it to the ESG Committee for consideration and approval.The Company has established several information safety and data preservation systems, such as the Information SystemManagement System, the Information System Operation and Maintenance Management System, the Emergency ResponseManagement System, and the Incident Response Plan of Data Breach, which cover information safety management acrossall operations of the Group. During the Reporting Period, the Group had no information safety incidents or data leakage,nor was it involved in any lawsuits on information and information safety against the Group or its employees.Through a combination of proactive and reactive approach, the Company continuously and actively carries out informationsafety maintenance and improvement work, striving to minimize the occurrence of information safety incidents.Proactive approach
Safety systems and procedures: Develop and implement effective information safety systems, standards, and
guidelines to ensure that all employees understand and follow relevant regulations.Risk assessment and management: Actively conduct vulnerability detection for the business system on a regular
basis to ensure the implementation of active protection strategies against every new hazard incident identified;engage third-party companies to perform vulnerability detection and implement appropriate treatment based on thediscovered risks.
Technical protection approach: Provide unified deployment of enterprise-level anti-virus software, terminal
safety management system, network access management system and automatic update service (WSUS) patch server,and have safety devices. Establish power supply and environmental supervision system to detect in real time thestatus of physical environment.Information safety training: Regularly conduct special trainings on information safety management forinformation safety management personnel; the Company also includes information safety trainings in theonboarding training system of new employees and pushes messages from time to time on high risks of informationsafety and protection approach to all employees through the internal website, to improve employees’ informationsafety awareness.
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5.2 DATA SECURITY AND CLIENT PRIVACY PROTECTION
(continued)
Reactive approach
Background supervision: Deploy the bastion host management system to supervise the operation permissionsand code approval processes of administrators in the background.Emergency response plan: The Company has established an incident response plan of data breach. In the eventof a suspected data breach, our emergency response team will immediately confirm the incident, judge the scopeof the data breach and the affected systems, report the situation to the emergency response leadership team andsuspend related data access, notify the affected user groups, and make announcements as required by relevantlaws and regulations.Backup and recovery: Back up important data on a regular basis; deploy encryption management system on data
terminals, implement safety approach such as storage snapshots and remote disaster recovery for data centers, andconduct regular system recovery tests to guarantee the availability, reliability and recoverability of data.
Post-incident analysis and improvement: For identified data safety risks, the emergency response team will
evaluate the affected systems, data, and devices, investigate logs for root cause analysis, and preserve relevantevidence; inform affected users of the results of handling, restore the affected systems and devices; and reinforceand upgrade based on identified vulnerabilities to prevent similar attacks to the systems from recurring.To effectively ensure the stable operation of information systems and manageability of data safety, we entrust a third-partyindependent institution to conduct an annual inspection of the Group’s information systems and data safety managementevery year to comprehensively identify and evaluate the relevant risks; we actively take positive adjustment and makeimprovements based on the inspection results, and continue to improve the Group’s ability to prevent information anddata safety risks. During the Year, the Company issued the privacy policy which clarifies the principles of client privacypreservation.During the Year, we provided training on information safety and client privacy preservation for employees of the Group,reaching a training coverage of 98%. We also regularly promoted and disseminated information safety knowledgethroughout the Group to continuously improve the information safety and client privacy preservation awareness of staff.
Case: Information security and client privacy protection training
? In May 2024, the Group organized an information safety awareness training for staff. The training started
from case studies of large foreign companies being hacked and introduced common network fraudtechniques used in hacking. It also promoted the Company’s information safety systems and regulationsto help staff increase their awareness of information safety responsibility and standardize daily data safetymanagement.? In July 2024, the Group organized a training session for all the fresh graduates of 2024 on Information
Safety, BPM System Usage, and Introduction to the Use of Feishu. The training covered the Company’sinformation safety norms, the BPM system, precautions for using Feishu, precautions for sending andreceiving emails, identification and disposal of spam and phishing emails, means for securing personalinformation, etc., to help foster a sense of information safety protection among new recruits.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
5.3 SAFEGUARING OF INTELLECTUAL PROPERTY RIGHTS
Livzon regards safeguarding of intellectual property as a priority. According to the relevant notices from China NationalIntellectual Property Administration, the Company conscientiously maintains the patents it has applied for to ensure thestability and validity of its patent rights and interests. The Company also extensively explores the innovative technologiesfor various key products and is committed to building a comprehensive patent network, while always safeguarding againstpotential patent infringement risks.The Company has established and follows the requirements of the Patent Workflow and Trademark ManagementSystem, which strictly regulates key processes, including patent risk assessment before product project establishment,patent transformation of R&D achievements, patent risk response for marketed products, and review of articles beforepublication, and provides in detail a series of workflows of new patent application, maintenance, transfer, purchase,technology financing, technology patent retrieval, infringement litigation, invalidity response, etc., to allow patentacquisition, maintenance, application and preservation to be managed in a more scientific, standardized, and orderlymanner.In addition, the Company’s legal compliance head office maintains close communication and cooperation with the R&Dteam, and is committed to improving the efficiency of intellectual property management in an all-round way. On one hand,we actively promote patent mining by accurately extracting patentable innovations from research results and efficientlycomplete the drafting, application, and submission of patents to ensure that research results are promptly converted intointellectual property and build a strong legal protection shield for the Company’s technological innovations. On the otherhand, we actively follow up the development of projects under R&D to conduct patent risk assessments, provide referencefor assessment of patent infringement risk, take appropriate approach such as patent evasion or invalidation according tothe assessment results, and effectively resolve risks related to patent infringements, thereby ensuring the smooth progressof the Company’s R&D projects.We regularly organize intellectual property training and exchange activities in diversified formats, including legaland regulatory interpretations, case studies and sharing, risk assessments, and management. We aim to improve theawareness of intellectual property rights and patent preservation among R&D and conformance personnel, and enhancethe Group’s overall comprehensive capability in intellectual property rights and patent preservation.
Case: Intellectual property rights related award
Livzon’s trademark was ranked among the top 100 in the 2nd Guangdong-Hong Kong-Macao
Greater Bay Area High-value Trademark Cultivation Competition.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
5.4 PARTY BUILDING ACTIVITIES
As at the end of the Reporting Period, Livzon had a total of 662 Party members, including 420 Party members in Zhuhaiheadquarters, 242 Party members in the Company’s subsidiaries outside Zhuhai City, 11 Party branches directly under theZhuhai Party Committee, and 7 Party organizations of the Company’s subsidiaries outside Zhuhai City.During the Reporting Period, with the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a NewEra, the Company’s Party committee organized in-depth study of the spirits of the Report to the 20th National Congressof the Communist Party of China, the Third Plenary Session of the 20th Central Committee of the Communist Party ofChina, the Regulations on Disciplinary Actions of the Communist Party of China, and other important documents. Throughintensive study sessions, special lectures, and other forms of study, Party members and cadres were guided to deeplyunderstand the essence of these documents and effectively transform theoretical knowledge into work motivation andideological guidance. Party building activities ensure that private enterprises implement the Party’s line, principles andsystems during their development, guide them to abide by national laws and regulations, align their development withnational strategies, and prevent them from losing their direction in a complex market environment.By carrying out Party-building activities, we arm the Company’s employees, especially Party members, with the Party’stheories and thoughts to create a common ideal and value pursuit and enhance internal unity and cohesion. We encourageParty members to play a pioneering and exemplary role, actively participating in the Company’s technological innovation,management innovation, and other activities, injecting impetus into the Company’s development. We organize variouscultural activities, such as Party themed days and joint Party-building, to enrich employees’ cultural lives, strengthen theCompany’s cultural heritage and vitality, create a harmonious corporate culture, and stimulate the innovation awarenessand creativity of all employees.Additionally, the Party committee organized Party members to visit Xibaipo for the learning and education activity forParty members themed “Drawing Strength from the Revolutionary Heritages to Support High-Quality Development ofthe Company”. By visiting historical revolutionary sites and listening to the stories of predecessors, Party members wereable to truly feel the great power of revolutionary spirit, draw strength from the revolutionary heritages, and integratethe Party’s fine conduct into the corporate culture to form a positive work atmosphere and value orientation within theCompany and encourage all employees to progress together, thus injecting continuous spiritual energy into the Company’shigh-quality development.
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5.4 PARTY BUILDING ACTIVITIES
(continued)In 2024, the Company was honored with the title of “Strong Party Building and Development in Non-Public Enterprises inZhuhai”.
Case: Party building related activity
A group photo of the Company’s Party member representatives who participated in the learning and educationactivity for Party members themed “Drawing Strength from the Revolutionary Heritages to Support High-Quality
Development of the Company” in Xibaipo in May 2024
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ACCESS TOHEALTH CARE
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Always true to the corporate vision of “becoming a leader in the pharmaceuticalindustry”, Livzon focuses on unmet clinical needs and regards research anddevelopment innovation as the foundation for sustainable development. Upontaking full account of medical needs in Chinese and overseas pharmaceuticalmarkets, Livzon establishes clear and abundant product research anddevelopment pipelines and develops differentiated global deployment strategy,striving to protect lives and health.The Board of the Company represents the highest authority for issues of accessto healthcare, and overseas the implementation of access to healthcare relatedwork through the ESG committee, including strategies, policies and performance,committed to providing more equitable and accessible products and services forpatients around the world.Regarding promotion of inclusive healthcare and public health interests as animportant operation mission, Livzon supports provisions in The Doha Declarationon the Trade-Related Aspects of Intellectual Property Rights Agreement andPublic Health and the Patent Law of the PRC in relation to granting compulsorylicensing of relevant pharmaceutical patents for purposes of public interest or inemergencies.We support reasonable generics competition. Meanwhile, regarding to leastdeveloped countries and low-income countries with actual needs, we willconsider entering into voluntary licensing agreements with appropriate thirdparties, on appropriate terms and conditions, to manufacture and importmedicines to these regions for the benefit of the local people. In view of thecurrent operating environment, lobbying for compulsory licensing and tradeimports is not applicable to Livzon for now.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
6.1 RESEARCH AND DEVELOPMENT INNOVATION
Regarding research and development and innovation as the cornerstone of sustainability, Livzon continued to pay attentionto new chemical entities and cutting-edge technologies in the field of global pharmaceutical research and development,made layout of innovative drugs and high-barrier complex preparations based on clinical value and differentiated prospect,and focused on gastroenterology, psychiatry, assisted reproduction, anti-tumor and other fields, and continuouslydeveloped and formed a differentiated product pipeline covering the entire research and development lifecycle.In 2024, Livzon had 908 R&D employees, accounting for 10.01% of the total number of employees, indicating a basicallystable R&D team size.
2024202120222023
11.00%
9.50%
8.50%
9.00%
10.00%
10.50%
8.00%
1,000
10.01%
10.91%
10.81%
10.14%
Number and Percentage of Livzon’s R&D Employees from 2021 to 2024
Number of R&D employeesPercentage of R&D employees
During the Year, Livzon’s total expenditure relating to research and development amounted to RMB1,044.33 million,among which capitalized research and development investment accounted for 3.51% of total research and developmentinvestment, and research and development investment accounted for 8.84% of the Group’s total operating income for theYear.
2024
14.00%
12.00%
10.00%
8.00%
6.00%
1,600
1,2001,400
1,000
1,044.331,235.111,523.26
1,401.27
202120222023
12.63%
8.84%
11.10%
9.94%
Livzon’s R&D Investment and Percentage to Total Operating Income from 2021 to 2024
R&D investment (RMB million)Percentage of R&D investment to total operating income
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
6.1 RESEARCH AND DEVELOPMENT INNOVATION
(continued)Clinical needs oriented
The Company regards research and development and innovation as the foundation of sustainability. We take a “clinicalvalue-oriented” approach to the layout of innovative medicines, with a focus on optimizing the current clinical drugresistance and existing therapeutic regimens. We aim to discover potential new chemical entities and are committed tosolving unmet clinical needs of patients and improving existing diagnostic and treatment regimens to meet the diversemedicine needs of patients. Relying on our strong independent research and development and innovation strength, whilecontinuously incubating advantageous projects internally, we also seek complementary opportunities externally, focusingon new products already under clinical research and near commercialization, to further enrich the new medicine productmatrix. We have established a professional new pharmaceutical technology research and development platform.
Modified new drug – Aripiprazole Microspheres for Injection
Aripiprazole is a new atypical anti-schizophrenia medicine for treatment of adult schizophrenia and bipolar disorder.The main form of aripiprazole available for sale in Chinese market is the oral preparation which needs to be takenevery day. Livzon Microsphere develops aripiprazole as sustained-release microspheres for injection to realizeprolonged-action and stable release of medicines.The product’s marketing authorization application was accepted by CDE in September 2023, and it passed the on-site inspection of pharmaceutical registration in January 2024. As at the end of March 2024, this product hadpassed the clinical registration inspection by 4 centers, and supplementary materials were successfully submitted inOctober 2024. Manufacturing license is expected to be obtained in April 2025, and the GMP compliance inspectionof the production workshop will be completed in April 2025.
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6.1 RESEARCH AND DEVELOPMENT INNOVATION
(continued)Clinical needs oriented(continued)Modified new drug – Triptorelin Acetate Microspheres for Injection(1-month sustained release)Triptorelin is an analogue of natural gonadotropin-releasing hormone (GnRH) for treatment of prostate cancer,precocious puberty in children, endometriosis (phase I to IV), etc.Triptorelin Acetate Microspheres for Injection (1-month sustained release) developed by Livzon Microsphere isa chemical medicine of Class 2.2 and is the first domestically produced triptorelin prolonged-action preparationapproved for production. It has been included in the National Medical Insurance Catalogue 2023.The product’s indication for prostate cancer was approved on 6 May 2023. The marketing authorization applicationfor endometriosis was accepted in August 2023 and approved in September 2024. Clinical trials for the indicationof precocious puberty in children began in 2024, and by the end of 2024, 70% of the planned clinical enrollmenthad been completed.
Market-demanded generic medicine – Lurasidone Hydrochloride Tablets
In November 2024, the Company’s Lurasidone Hydrochloride Tablets were granted the launch approval. Researchersconducted comprehensive pharmaceutical comparison and bioequivalence studies between the self-producedproduct and the reference preparations through scientific research breakthroughs and repeated trials to ensure theproduct’s safety and efficacy for clinical use.Lurasidone is a novel atypical antipsychotic medicine that acts as an antagonist with high affinity for dopamine D2receptors and 5-hydroxytryptamine (5-HT) receptors 5-HT2A and 5-HT7. It is approved in China for the treatment ofschizophrenia. Lurasidone has weak extrapyramidal symptoms and is less likely to cause adverse reactions such asweight gain, hyperlipidemia, and hyperprolactinemia, making it well-tolerated.
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6.1 RESEARCH AND DEVELOPMENT INNOVATION
(continued)Clinical needs oriented(continued)
In the field of biologics, LivzonBio, a subsidiary of the Company, specializes in the independent research and developmentand industrialization of the world’s leading innovative macromolecular medicines. It has developed novel biologics inthe fields of autoimmune diseases, oncology, reproduction, the prevention of severe infectious diseases, etc., and has avariety of product pipelines for research and development, including novel vaccines, monoclonal antibodies, recombinantprotein medicines, etc., to meet various unmet clinical needs and continuously improve patients’ quality of life. In 2024,project B-01 in the assisted reproduction field completed phase III clinical trials, and the LZM012 in the auto-immunityfield completed phase III clinical enrollment, with expected market launch within the next 2-3 years. Livzon has made aleapfrog breakthrough in the field of biologics, and its product research and development and industrialization have beenhighly recognized by the country and the industry.LivzonBio will continue its efforts in accelerating new product development through multiple channels such as independentresearch and development, external introduction and strategic alliances, focus on promoting projects on which it hasadvantages based on the existing varieties in the pipeline, continue new medicine development across the globe, expandcutting-edge product mix of differentiated treatment and combination therapy, improve the technology platforms ofantibodies and protein medicines, and enhance its capability of product commercialization.
Product under research and development – Recombinant Anti-human IL-17A/FHumanized Monoclonal Antibody Injection (“LZM012”)
LZM012 is a humanized monoclonal antibody with a unique molecular design targeting IL-17A/F, offering a dualmechanism of action. It is capable of potently and selectively neutralizing two key cytokines, IL-17A and IL-17F,thereby inhibiting inflammation more effectively than blocking interleukin-17A alone. Developed indications includemoderate to severe psoriasis and ankylosing spondylitis.Currently, only one imported IL-17A/F targeting medicine has been approved for market launch in China and theworld, and LZM012 is the first IL-17A/F candidate medicine in China.In August 2023, LZM012 officially initiated phase III clinical trials for the psoriasis indication, becoming the firstmedicine in China to commence head-to-head clinical studies against secukinumab (“Cosentyx”). As at the endof the Year, all subjects had been enrolled. Additionally, the ankylosing spondylitis indication, developed by thepartner Beijing Xinkanghe Biomedical Technology Co., Ltd., officially started phase III clinical trials in September2023, and the first analysis was announced in December 2024 to reach the primary efficacy endpoint of the trial.
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6.1 RESEARCH AND DEVELOPMENT INNOVATION
(continued)Clinical needs oriented(continued)Biosimilar under research – Recombinant Human Follitropin Alfa Solution forInjection (“B-01”)B-01 is a biosimilar developed with Gonal-f
?(original product manufacturer: Merck Serono) as the referencemedicine. Its active ingredient is consistent with that of Gonal-f, both being recombinant human follicle-stimulating hormone (r-hFSH) expressed in CHO cells, primarily indicated for infertility. The project has completedpharmaceutical, non-clinical, and clinical similarity studies. The study results show that its pharmaceutical propertiesare highly similar, with consistent non-clinical pharmacokinetics (PK) and safety profiles. Clinical PK and efficacyboth demonstrate good equivalence.LivzonBio’s B-01 shares identical active ingredients, specifications, and excipients with the original productGonal-f’s pen injector. B-01 also uses a novel pre-filled pen injector for easier administration, allowing for accuratemedication dosage and adjustable dosage. Compared to traditional syringes, pen injector products typically havefiner needles, resulting in significantly less pain during injection, which can enhance patient compliance.In the field of diagnostic reagents and equipment, Livzon Diagnostics, a subsidiary of the Company, has transitioned toindependent innovation, developing raw materials, reagents and equipment in a completely independent manner. Basedon several powerful independent research and development technology platforms, it strategically focuses on autoimmunediseases, respiratory diseases, and severe infectious diseases.The principle of Livzon Diagnostics’ product layout is to solve unmet clinical needs, to solve the pain points in the processof disease diagnosis and treatment. For example, Livzon Diagnostics chooses to develop for diseases with relatively limitedglobal supply and significant impact on people’s quality of life (e.g. autoimmune diseases), and is committed to efficient,comprehensive and accurate diagnosis and treatment of autoimmune diseases, as well as early and effective treatment.? There is a rapid growth in the diagnosis and treatment of autoimmune diseases every year, but the diagnosis
system in the domestic market is characterized by a low degree of automation and inconsistent standards. To solvethis problem in the market, we created a global pioneering technology platform – the fully-automatic multipleimmune analyzer method – by transforming a technology platform from manual to automatic through technologicalbreakthrough, independently achieving the ground-breaking industrialization of diagnostic reagents.This pioneering technology platform has greatly improved the efficiency of diagnosis and the medical experienceof patients: Reports are issued more quickly from weekly to daily, reducing the time that patients have to wait forthe prescription. In 2024, Livzon Diagnostics deeply integrated the fully-automatic multiple immune analyzer withchemiluminescence immunoassays to complete most autoimmune antibody tests on a single device. There is alsopotential to further integrate indirect immunofluorescence technology, significantly improving the efficiency of laboratoryautoimmune diagnostics and allowing technological breakthrough to benefit patients more widely and promptly.? Alzheimer’s Disease (AD), a class of neurodegenerative diseases that inflict significant social burden and family
impact, predominantly affects the elderly population, and there is a lack of effective diagnostic and identificationtools. Biomarker testing can better help physicians diagnose AD and tailor medication, but previously, biomarkerswere largely based on cerebrospinal fluid samples, which are difficult to collect and invasive, greatly reducingaccessibility. Livzon Diagnostics is committed to developing blood (plasma)-based AD biomarker testing. Itsbreakthroughs in raw materials and signal technologies are expected to realize efficient detection and evenscreening of early-stage patients, thereby widening the beneficiary group.
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(continued)Clinical needs oriented(continued)
Product under research and development – Diagnostic Kit for Anti-MDA5 Antibodies
The anti-MDA5 antibody, a recently discovered MSA antibody, is considered indicative of the heterogeneityof dermatomyositis (DM). Approximately 10% to 30% of DM patients are anti-MDA5 positive, with a higherprevalence among Asian patients. Those with DM and positive for anti-MDA5 antibodies often show worsening ILDin radiographic imaging within one month of respiratory symptoms onset, accompanied by progressive dyspnea andhypoxemia, and they often require intensive care treatment for respiratory failure.Therefore, timely detection of MDA5 antibodies is crucial for patients. Given the insidious onset of connectivetissue disease-associated interstitial lung disease (CTD-ILD) and the potential for rapid disease progression and life-threatening implications after the onset, there is an urgent clinical need for the detection of anti-MDA5 antibodiesin CTD patients.Currently, the clinical trials for Livzon Diagnostics’ Diagnostic Kit for Anti-MDA5 Antibodies have been completedand the kit is expected to be approved in 2025.
Product under research and development – Diagnostic Kit forAutoimmune Encephalitis-Related Autoantibodies
Autoimmune encephalitis, a disease of great concern in neurology, is characterized by brain inflammation mediatedby autoantibodies. Effective symptomatic treatment requires differentiation from other causes of inflammation.Currently, diagnostic methods for autoimmune encephalitis are very limited, with a global lack of standardized,highly efficacious immunodiagnostic approaches. Existing cell or tissue experiments are difficult to establish inhospitals and have low standardization and generally moderate reliability.Based on this significant clinical need, Livzon Diagnostics strives to make technological breakthrough throughthe development of a neuronal transmembrane protein target antigen expression platform. It aims to detectautoimmune encephalitis-related autoantibodies based on a high-performance immunodiagnostic platform,achieving technological breakthroughs in high efficiency, standardization, and minimal batch-to-batch variation,thereby improving the diagnostic efficiency and accuracy of autoimmune encephalitis.
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6.1 RESEARCH AND DEVELOPMENT INNOVATION
(continued)
Clinical needs oriented(continued)
AI-enabled research and development and intelligence-driven innovationLivzon has deeply integrated artificial intelligence (AI) technology into clinical operations management, successfullyovercoming a series of critical challenges. To cope with the problem of impurity growth, AI technology also played akey role. During the research and development process of a particular project, the problem of impurity growth onceplaced great pressure on the research and development team. Through in-depth analysis using AI technology, theteam swiftly identified the root cause and proposed a solution of changing the packaging form, thereby significantlyshortening the experimental cycle and effectively controlling costs.Furthermore, in excipient substitution, AI technology demonstrated its unique advantages. During the researchand development process of a particular project, the problem of impurity growth similarly posed a challenge tothe research and development team. Through in-depth analysis using AI technology, the team swiftly identifiedthe root cause and proposed replacing capsule polymer with copper-based excipients, resulting in effective controlof stability impurities and markedly improved product quality. Also, in the process of patient enrollment review,AI greatly improved review accuracy by developing patient profiles and conducting interactive training, savingsubstantial human resources and further boosting the efficiency of clinical research.These results fully demonstrate Livzon’s remarkable achievements in AI technology application, laying a solidfoundation for the Company’s future sustained breakthrough and development.
Opportunities brought by AI to pharmaceutical research and development
Livzon actively adopts AI technology to enhance research and development efficiency and quality andcomprehensively broaden its diversified application scenarios across the entire pharmaceutical research anddevelopment process, covering critical stages including disease target identification, medicine discovery and newmedicine design, synthesis planning, and formulation design.Leveraging its professional AI medicine development platform, the Company made phased achievements duringthe Reporting Period: In the early stages of pharmaceutical research and development, the Company utilized theAI platform’s precise process to efficiently predict physicochemical properties and stability correlations of inputmolecules and predict storage shelf life based on short-term stability data. Meanwhile, AI-based novel molecularroute design provided fresh ideas for exploring chemical synthesis pathways and process development, empoweringthe researcher team to identify more promising and potential synthetic routes with greater precision from so manypossibilities. The application of AI has effectively improved research and development efficiency and quality, injectedrobust momentum into research and development endeavors, and promoted pioneering research and developmentwith greater quality and efficiency.
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(continued)External collaboration
In addition to independent research and development, Livzon actively collaborates with various partners and constantlyexplores various forms of partnership so as to realize mutual benefit and win-win situation by virtue of resourceintegration and complementary advantages.Focusing on key research and development projects in the fields of gastroenterology, psychiatry, assisted reproduction,anti-tumor, anti-infection, etc., the Group has established close cooperation with renowned universities, researchinstitutes, and medical institutions in China on aspects of academic research and communication, technology exchangeand pharmaceutical research and development. The Group has also entered into strategic collaborations with top-notch enterprises at home and abroad. These collaborations jointly promote scientific research innovation and thecommercialization of technological accomplishment, elevate and enrich our research and development technology andresearch and development fields, and provide more possibilities for Livzon’s commercialization in the future.
External collaboration project – NS-041In July 2024, the Company entered into a Patent Licensing and Technology Transfer Agreement (the “Agreement”)with NeuShen Therapeutics (Shanghai) Co., Ltd. (“NeuShen Therapeutics”). Under the Agreement, Livzon exclusivelyobtains all rights and interests in NS-041 within the Greater China region (including China’s mainland, HongKong, Macao, and Taiwan). At the same time, NeuShen Therapeutics will retain leadership in the development andcommercialization of NS-041 in other global regions. The Company is required to pay NeuShen Therapeutics thecorresponding patent and technology transfer fees (including upfront payment, development milestone payments)and sales royalties.NS-041 is a highly selective KCNQ2/3 activator developed by NeuShen Therapeutics. As a new chemical medicineof class 1, it targets neuropsychiatric disorders such as epilepsy and depression. Approved by the National MedicalProducts Administration (NMPA) in March 2024 to initiate clinical trials, its first clinical trial indication is intendedfor focal epilepsy, and it is currently in the clinical trial phase.Livzon, with many years of expertise in the field of psychoneurosis, remains committed to the development ofnovel psychiatric and neurological medicines. Leveraging its advantages in research and development and clinicaladvancement in this field, Livzon will actively promote the commercialization of this product. The introduction ofthe NS-041 project will strengthen the Company’s advantages in the field of psychoneurosis, aligning with theCompany’s strategic plan of medium to long-term pioneering development.
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(continued)
External collaboration(continued)
External collaboration project – Development of generic medicine for MagnesiumSulfate, Sodium Sulfate and Potassium Sulfate Concentrate Oral Solution
In 2024, Pharmaceutical Factory, a subsidiary of the Company, was granted approval for the project of MagnesiumSulfate, Sodium Sulfate and Potassium Sulfate Concentrate Oral Solution. This project was co-developed byPharmaceutical Factory and the external enterprise Beijing Minkang Baicao Pharmaceutical Technology Co., Ltd.Pharmaceutical Factory conducted scale-up studies and process validation, prepared regulatory submissions, andcoordinated supplementary studies during the approval process until obtaining the manufacturing license.The implementation of this project offers a scientific and reasonable technological route for the developmentand production of similar formulations in the same field. The project has effectively bolstered the enterprises’capabilities in research, production, clinical trials, and market evolution. Moreover, this collaboration has furtherenhanced the enterprise-institute collaboration system, providing a valuable foundation for future technologicaladvancements and product development.
6.2 PRODUCT ACCESSIBILITY
Livzon’s products include drug preparations, APIs and intermediates, as well as diagnostic reagents and equipment,covering various treatment fields such as gastroenterology, assisted reproduction, psychiatry, anti-tumor, etc., and hasformed a relatively complete and diverse product profile. We pursue registration and sales of our proprietary drug andgenerics in emerging markets and developing countries.We have developed markets outside China through license cooperation, equity investment, etc. We now do businessin China and other regions, including Europe and North America, Latin America, Australia, the Commonwealth ofIndependent States, Southeast Asia, East Asia, Central Asia, West Asia, South Asia, the Middle East, and Africa.During the Year, the Group continued to provide high-quality pharmaceutical products and services to many countries andregions, and our income from overseas principal businesses amounted to RMB1,723.61 million, accounting for 14.73% ofincome from principal businesses, with a compound growth rate of nearly 6.92% in the past five years.
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6.2 PRODUCT ACCESSIBILITY
(continued)API businessAs a major global supplier of APIs, the Group deepens and maintains business in Asian markets such as India, Pakistanand Vietnam, South American markets such as Argentina and Brazil and Middle East markets while continuouslydeveloping and operating in regulated markets such as the United States and Europe. The Group has newly developedbusiness in Eurasian Economic Union (EAEU) member states and African markets.The Group’s API enterprises are increasingly becoming the preferred strategic partners of leading enterprises in theglobal pharmaceutical industry. During the year, we continued to intensify our development efforts in both domesticand international markets. For our high-end antibiotic and intermediate product lines, strategic collaborations had beenestablished with the relevant leading preparation and API enterprises. We focused on anthelmintic APIs for veterinarydrugs and maintained close cooperation with major international animal health companies, leading to sustained growth inthe sales of our API business segment.In terms of market access, we always adhere to the principle of prioritizing registration. Our extensive registrationexperience in European and North American markets has laid the foundation for the reputation of Livzon’s APIs in theinternational market for high quality. Meanwhile, we continue to widen registration markets, strive for completeness ofregistration documents, respond swiftly and accurately to official requirements, and work hand in hand with preparationcustomers to accelerate registration progress. In 2024, the Company successfully passed the GMP on-site inspection byBrazil’s ANVISA with zero defects, accelerating the registration of its human-use APIs in Brazil.In order to explore international markets, we have set up overseas offices in Europe, South America, the Middle East, andSoutheast Asia to develop markets, maintain customers, enhance the communication and negotiation of new projects,strengthen promotion of new products, and enhance the Company’s brand awareness and product market share. In2024, our sales team actively participated in the CPhI Worldwide, while actively visiting customers to gain in-depthunderstanding of their needs; overseas colleagues also increased the frequency of visiting local customers and attendingregional exhibitions to continuously develop new customers.As at the end of the Reporting Period, a total of 34 APIs and intermediate products of the Group had completed202 international registrations in 94 overseas countries/regions; the Group obtained 32 certificates for internationalcertification for its API and intermediate varieties, including: 6 certificates for FDA on-site inspections, 16 CEP certificates,1 EU GMP certificate, 4 Japanese GMP certificates, 1 Mexican GMP certificate, and 4 Brazilian GMP certificates. Moreover,as at the end of the Reporting Period, the Group completed registrations in China for a total of 52 API products.
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(continued)API business(continued)
Livzon made contributions to charitable projects on treating river blindness andother diseases
Onchocerciasis (“river blindness”) is a parasitic infection caused by the bite of the black fly, which is most prevalentin Africa and a few Latin American countries. Once infected by parasites in the river, patients will suffer frominflammation of the cornea, which can lead to vision loss or unrecoverable blindness if not treated promptly.Currently, there are 200 million people globally exposed to the risk of getting river blindness.Medicines Development for Global Health (“MDGH”), a not-for-profit public company and registered charity. Theoral moxidectin was approved by the US FDA in June 2018 for the treatment of onchocerciasis in patients aged 12years and older. The Group signed a long-term strategic cooperation agreement with MDGH in 2022. We plan toprovide moxidectin APIs for the charitable project “Moxidectin for human project” under the Bill Gates Foundationfor consecutive years in the future, at a favorable price far lower than the market price. The Moxidectin product ismainly used for treatment of patients with river blindness in Africa and certain Latin American countries, with themedication covering the whole population (including healthy people).In December 2024, MDGH obtained marketing authorization for river blindness (for adults and children over 4 yearsof age) from Ghana’s FDA, with phased administration in Ghana to follow. Meanwhile, MDGH continues phase IIclinical studies for additional indications including scabies, soil-transmitted helminthiasis, and strongyloidiasis.Drug preparation businessFor the drug preparation business, Livzon continues to deeply explore markets outside China’s mainland, includingthe countries and regions in South Asia, Southeast Asia, Central Asia, Latin America, and Africa, such as Pakistan,the Philippines, Thailand, Indonesia, Malaysia, Vietnam, Brazil, Chile, Russia, Uzbekistan, Kenya, and Hong Kong andMacao of China. Meanwhile, we evaluate and select products with higher market potential overseas and strengthen theirregistration to continuously cater for the needs of international markets.To align with diverse market characteristics, Livzon has developed differentiated development strategies. We rely on theexisting products of the Group that meet the requirements of local registration regulations and meet local medication needin growing markets which mainly include Southeast Asia, South Asia, Latin America, and other regions, so as to initiateGMP inspection work and submission of regulatory dossiers in CTD format and obtain market approval. In view of thestrict regulatory requirements and the high cost of early development in regulated markets which mainly include Europeand the United States and South Korea, we promote the existing featured high-barrier complex preparations to acquirehigh-end preparation certification in Europe and the United States, based on international multi-center clinical trial anddeclaration, so as to seize the opportunity to enter into the regulated markets.
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6.2 PRODUCT ACCESSIBILITY
(continued)Drug preparation business(continued)In 2024, Livzon’s drug preparation business secured approvals for 6 products and submitted new applications forregistration of 8 products in overseas markets, completed 1 GMP on-site inspection in PIC members, filed 3 GMPapplications in other countries, and signed 15 new overseas registration or business cooperation agreements forpreparations. It is planned that over the next five years, 79 new overseas registration or business cooperation agreementsare signed for preparations in 22 more countries/regions, 90 overseas registrations are submitted, and 60 are approved;we plan to select 4 products from generic research and development products to list as international goal and reserveproducts, and, in alignment with the Company’s research and development direction and enlarging product pipeline, tofurther explore more products for internationalization.Livzon hopes to help patients around the world gain access to sustainable and high-quality medical services in the future,is committed to eliminating health disparities in underserved regions, and contribute to balanced development in globalhealthcare.
Preparation entry into the U.S. market – Cetrorelix Acetate for Injectionapproved and marketed in the U.S.In April 2024, the Company received an ANDA approval notice from the U.S. Food and Drug Administration for itsself-developed Cetrorelix Acetate for Injection, authorizing its market launch in the U.S. The approval of Livzon’sCetrorelix Acetate for Injection for market launch in the U.S. certifies the Company’s qualification to market theproduct as a pharmaceutical product in the U.S. and will have a positive impact on the Company’s expansion intooverseas markets.U.S. market launch demonstrates the medicine’s compliance with rigorous regulatory scrutiny and validates itsauthority in terms of safety and efficacy, which provides an important reference for other countries and regions tointroduce the medicine. In addition, with the enhancement of production capability and the growth of the marketscale, the cost of the medicine is expected to gradually decrease, making the medicine affordable to more resource-constrained countries and regions and enabling broader patient access to effective treatment, thereby furtherimproving the level of global public health.
Broaden the layout of biologics – Tocilizumab Injection promotes overseascollaboration in Brazil, the largest market in Latin America
As one of the world’s major emerging pharmaceutical markets, Brazil has a broad market space. Brazil accountsfor more than half of the entire Latin American pharmaceutical market. Brazil’s drug regulatory environment leadsLatin America, with ANVISA (the Brazilian Health Regulatory Agency) leading the region in terms of drug reviewand approval and regulatory criteria. The Company has successfully partnered with a global leader in preparationinternationalization to register Tocilizumab Injection in Brazil, and has laid a solid foundation for the promotionand widespread use of the Company’s biologics across Latin America.
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(continued)Drug preparation business(continued)
Exploring local production overseasThe South Asian pharmaceutical market stands out as one of the fastest-growing regions, with Bangladeshemerging as a leader and a perceived up-and-coming hub for generics in the region.Following the signing of a Memorandum of Understanding for strategic partnership and local productioncollaborations on biologics with a leading reproductive product company in Bangladesh in 2023, Livzon enteredinto a formal cooperation agreement in 2024, under which Recombinant Human Choriogonadotropin alfa forInjection will be introduced into the country through local production, which has already started, and strategiccollaborations on local production will be initiated. If things continue favorably in the future, the RecombinantHuman Choriogonadotropin alfa for Injection will fill a void in this product category in Bangladesh and offer anenhanced treatment option for local patients in need of reproductive assistance.Diagnostic reagents and equipment business
The demand for autoantibody testing is growing worldwide, and the number of people susceptible to specific autoimmunediseases has exceeded tens of millions. With increasing public health awareness and surging clinical demand, accurate,high-throughput and convenient testing methods have become the key to improving the accessibility of autoantibodytesting. In this context, Livzon Diagnostics launched an automatic immunoassay analyzer with supporting test reagents.The device offers high throughput, fast speed and ease of use for testing, providing medical institutions with a solutionfor autoimmune disease testing and contributing to tackling the challenge of autoimmune diseases.For respiratory disease testing, Livzon Diagnostics continued to distribute and improve other testing products in thefield of respiratory testing. During the Reporting Period, it improved 4 rapid antibody testing products for Mycoplasmapneumoniae and Chlamydia pneumoniae, and launched a high-throughput chemiluminescence testing product forpneumoniae and Chlamydia pneumoniae, as well as a rapid influenza antigen screening product.For autoimmune disease testing, Livzon Diagnostics launched an integrated, intelligent automatic immunoassay analyzerwith one-stop operation which enhances ease of use in laboratory testing of products. With the launch of these products,medical institutions have broader supplier options and more streamlined laboratory operation solutions.
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6.3 AFFORDABILITY AND FAIR PRICING
Livzon has always maintained a highly responsible attitude toward patients and focused on delivering high-quality andaffordable medications to patients. Livzon takes full account of the differences in regional economic development whensetting the price of its products, and is committed to making the medicines needed affordable for more patients.Domestic marketIn late 2024, the National Healthcare Security Administration and the Ministry of Human Resources and Social Securitypublished the Catalogue of Drugs for National Basic Medical Insurance, Work-related Injury Insurance and MaternityInsurance (2024) (the “Medical Insurance Catalogue”). A total of 191 products of the Group are included in the MedicalInsurance Catalogue, with 92 products in the Class A list and 99 products in the Class B list.In active response to the national polices of the reform of the medical and health system, we further reduced medicineprices in the process of medicine bidding, procurement and access, to alleviate the financial pressure of patients andthe pressure on the payment of medical insurance funds and contribute to the development of a more fair, efficient, andsustainable medical security system.All products marketed by the Group are tendered according to provincial bidding policies, mainly classified into two forms:
Sunshine Online Procurement and Volume-based Procurement. In Sunshine Online Procurement, the declared accessprices are based on the attributes of the product, referring to the original product price, median price, and lowest priceof products with the same generic name. These prices are reviewed and publicly announced by the National HealthcareSecurity Administration before they take effect, while Volume-based Procurement involves competitive bidding based onproduct selection rules. Livzon actively participates in centralized volume-based procurement projects conducted at variouslevels in China’s mainland, and has a total of 8 specifications selected in 2024.
Use of domestic instead of imported product – Aripiprazole Microspheres forInjection
Aripiprazole is an antipsychotic medicine mainly used for the treatment of schizophrenia. The overseas sellingprice of Aripiprazole prolonged-action preparation from Otsuka, Japan, is about RMB4,000-26,000 per dose,corresponding to an annual treatment cost of about RMB50,000-RMB300,000, which is expensive for patients. Itwas marketed for sale in China’s mainland in May 2023.The Aripiprazole Microspheres for Injection developed by Livzon Microsphere is a modified new medicine and is notsubject to the patent restrictions of the original product. Scheduled for launch approval in April 2025, this productwill provide patients with a domestic dosage form for long-acting treatment.
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(continued)
Overseas market
In the development and layout of overseas markets, Livzon sets reasonable and favorable prices for its products by fullyconsidering local economic development, GDP, local medicine production and supply, per capita income, product pricing ofpeers, medical system condition, and other socioeconomic factors. The Company actively participates in local governmentbiddings, striving to reduce the burden of medication for local patients.As at the end of the Reporting Period, the Group had adopted equitable pricing policy for a total of 28 APIs andpreparations based on local income levels in the sales process in South Asia, Southeast Asia, Eastern Europe, Central Asia,South America, and Africa.Livzon adheres to a relatively transparent and consistent pricing policy. Preparations comply with the local government’smedical pricing policies in developing countries. The overall market prices of APIs are relatively transparent, and customersare familiar with and understand the price level, and market sales mainly focused on end preparation factories to reduceintermediate channels and lower the cost of local medicine supplies.Business segmentEquitable pricing policiesProgress
API? Livzon continues to reduce the
production costs of APIs and sellsAPIs and intermediates in emergingmarkets/developing countries atprices lower than those in developedcountries to reduce the cost ofmedicines in target market countries;? Livzon’s sales pricing in domestic
markets follows the principle offairness. For domestic strategiccooperation partners, we offer certainprice discounts according to thepurchase volume by signing annualsupply agreements.
? Livzon has commercial cooperation
with about more than 50 customersin India, offering 20 kinds of APIsand intermediates. Among them, theprices of intermediates are about5%-10% lower than those of thedeveloped countries, while the pricesof APIs are about 20%-30% lowerthan those of the developed countries;? Certain high-end antibiotic products
are in a relatively large demand inoverseas markets, and the averageselling price of Livzon in SouthAmerica, Southeast Asia, and Africathat is about 15%-30% lower thanthe price of developed countries.
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Business segmentEquitable pricing policiesProgressDrug preparation? Livzon provides the Asian, Africa
and Latin America markets withpreparations that are cheaper thanthe proprietary preparations andobtain similar therapeutic effects;? Livzon formulates reasonable pricesin line with local development levels.Livzon waives the market licensing feeof its products in underdeveloped andimpoverished countries due to socialresponsibility.
? For South Asia, Southeast Asia,Eastern Europe, Central Asia, SouthAmerica, and Africa, Livzon hasprovided or formulated pricing policiesfor preparations that are cheaperthan the proprietary preparations andobtain similar therapeutic effects;? For the biological product RecombinantHuman Choriogonadotropin alfa forInjection, Livzon waived the marketlicensing fee for its cooperativecustomers in 4 countries in WestAfrica, South Asia and Southeast Asia;? For the biological product Tocilizumab
Injection, Livzon waived the marketlicensing fee in 3 countries inSoutheast Asia, Eastern Europe, andCentral Asia;? For proprietary new drug Ilaprazole
Sodium for Injection, Livzon waivedthe market licensing fee for itscustomers in 2 Southeast Asiancountries and 1 African country.Reagents? Livzon conducts thorough research
on the terminal selling prices of itsproducts, ensuring that the salesprices are not only fair but alsocompetitive;? Livzon formulates more preferentialprices in underdeveloped andimpoverished countries.
? Actively inquire several transportation
companies to seek the freightservice with the best quotations, soas to provide customers with thetransportation mode that featuresthe lowest cost and the highest cost-effectiveness for their selection.
6.3 AFFORDABILITY AND FAIR PRICING
(continued)
Overseas market(continued)
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6.3 AFFORDABILITY AND FAIR PRICING
(continued)Overseas market(continued)Some high-end antibiotic sterile APIs verified for production andcommercialization to improve the affordability of APIsAccording to market research, in some growing markets and developing countries, high-end antibiotic preparationsare directly bottled and produced into finished drugs from purchased sterile APIs. However, sterile APIs are mainlyproduced and supplied under the control of European suppliers, leading to high prices due to tight supply.To change this market situation, Livzon built a lyophilized production line for high-end antibiotic sterile APIs in2024. Currently, it has successfully initiated validation production of sterile Teicoplanin and realized commercialsales of sterile Colistimethate Sodium in South American markets.
6.4 ENHANCEMENT OF HEALTH CARE
Amid the prosperity of the global medical and health industry, Livzon accelerates its international layout with a forward-looking strategy. Through innovation and cooperation, Livzon has built a breakthrough global partnership network, joinedhands with domestic and overseas pharmaceutical peers, and engaged in deep cooperation with international partners tocontribute to the enhancement of medical quality.
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6.4 ENHANCEMENT OF HEALTH CARE
(continued)Training of medical staffAs more products enter overseas markets, the Group, in collaboration with local partners, actively provides training formedical staff to help promote the medical services quality in developing countries and fulfil its social responsibilities.
Case? In March 2024, Livzon Diagnostics communicated with a well-known Grade A tertiary hospital in China
on the basic knowledge, latest diagnostic technology, product technical principle, operation process, andclinical application cases of autoimmune diseases in the laboratory in response to the experiments andinterpretation questions of the hospital in the detection of autoimmune diseases, and obtained a positiveevaluation.? After Livzon’s biological product Recombinant Human Choriogonadotropin alfa for Injection was launched
in Indonesia in 2023, we conducted 4 academic seminaring and exchange events in collaboration with localpartners in Indonesia during the Year. In August 2024, Livzon and its partners attended the 9th IndonesianFertility and Endocrinology Association Biennial Scientific Meeting in Semarang. The meeting was attendedby around 500 Indonesian fertility specialists. At the meeting, Livzon and its partners jointly invited famousChinese fertility specialists to present on Recombinant Human Choriogonadotropin alfa and share theirexperience in clinical use, which received positive feedback from Indonesian fertility specialists.
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6.4 ENHANCEMENT OF HEALTH CARE
(continued)Enhancing the manufacturing capability of preparation customers
As an API supplier, Livzon has actively shared research results and transferred technologies to overseas underdevelopedcountries and regions and helped preparation customers enhance their manufacturing capability so as to facilitate thesuccessful launch of their products in the regulated markets such as Europe and North America and enhance theircompetitiveness.
CaseDue to concerns regarding genotoxicity, the FDA first introduced guidelines for nitrosamine impurities in 2023,followed by similar regulatory requirements from authorities in Europe, Brazil, and other regions. In response,Fuzhou Fuxing has actively cooperated with these regulations by conducting risk assessment reports for severalvarieties of high-end antibiotics. For varieties identified with risks, Fuzhou Fuxing has further developed analyticalmethods to comprehensively examine potential points of nitrosamine impurity formation during production. It hasimplemented strict control during production and actively collaborated with preparation customers to study andcontrol impurity levels in preparations. It strives to obtain exemption from inspection, thereby further ensuring thesafety of medication use for patients.
Drug supply chain managementAs a dedicated player in the pharmaceutical industry, we continuously optimize supply chain management, strictlyadhere to regulations, and build an efficient supply chain system. This helps enhance our partners’ capabilities inproduct transportation and storage, thereby providing high-quality medicines to patients worldwide while safeguardingpharmaceutical quality and safety.Abroad, we collaborate with local partners to disseminate knowledge on how to use, transport and store products inadvance, imparting professional pharmaceutical knowledge to local distributors, thus strengthening the management andoptimization of the local supply chain.For the packaging and temperature monitoring of temperature-controlled products, we adapt to the local climaticconditions by employing regulatory-compliant specialized packaging materials. We upgraded our sea containers fromgeneral containers to temperature-controlled containers. Meanwhile, we added GPS thermometers to monitor thetransportation temperature throughout the process, which advanced the temperature control conditions for medicinesupply. We carefully differentiate between the varying transportation requirements for raw materials. Meanwhile,through a comprehensive study of our transportation plans, we provided customers with the optimal plans to avoid poorfreight transport caused by international instability, ensure stable and secure supply, and effectively help customers savetransportation costs.
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6.5 SUPPORT FOR POST-MARKET PHARMACOVIGILANCE
In developing countries as late starters in pharmacovigilance (“PV”) work, PV progress has been much slow, with manypressing issues yet to be resolved. Therefore, the support of Livzon as a pharmaceutical enterprise for the establishment ofa complete post-market pharmacovigilance system in developing countries is an important part of its responsibility.Regarding Livzon’s Recombinant Human Choriogonadotropin alfa for Injection marketed in Indonesia, we have activelycollaborated with local companies and the government to enhance the local level of post-market pharmacovigilance. Afterthe product was marketed, we conducted research and activities to discover, evaluate, understand and prevent adversereactions or any other possible drug-related problems. We aimed to ensure the scientific and reasonable clinical use ofthe product after its launch and guarantee the safety of clinical medication. Consequently, we have aided Indonesia’spost-market pharmacovigilance enhancement, protected the local public from substandard or non-compliant drugs, andpromoted the sustainable development of local medical system.
6.6 INVESTMENT IN RARE DISEASES
Under the guidance of relevant policies such as the “Healthy China 2030” Planning Outline and the Guidelines forDiagnosis and Treatment of Rare Diseases, Livzon has leveraged on its scientific research system and capabilities andactively cooperated with the state to establish a two-way mechanism for research and development of medicines for rarediseases, in an effort to help promote the clinical status of rare diseases in China and strive to make high-quality, newmedicines available and affordable to patients with rare diseases.Malignant hyperthermia
Malignant hyperthermia, a rare disease, is an inheritable myopathy, with extremely high mortality rates once developed,while dantrolene sodium is the only specialized medicine for treatment. Due to its research and development difficulty,small patient population, and thin profit margins, there has been no enterprise in China for the development andproduction of dantrolene sodium in the past 40 years.Undertaking the corporate mission of “prioritizing the quality of life of patients”, Livzon spent so many years on self-development of Dantrolene Sodium for Injection, which is indicated for the prevention and treatment of malignanthyperthermia. As our exclusive product, Dantrolene Sodium for Injection
was granted the launch approval in October2020, saving Chinese patients with malignant hyperthermia from a condition of no medicine available for use and solvingthe problem of clinical medicine shortages in China. Over the years, our project “Establishment, Promotion and Applicationof Malignant Hyperthermia Diagnosis, Treatment and Rescue System” won the first prize of the 2021 (7th) Beijing MedicalScience and Technology Award and the first prize of the 2022 Huaxia Medical Science and Technology Award.
Dantrolene Sodium for Injection is the first generic drug in China’s mainland, whose patent medicine is Dantrium
?byPar Sterile Products LLC, an American Company.
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6.6 INVESTMENT IN RARE DISEASES
(continued)Systemic Juvenile Idiopathic Arthritis (sJIA)Systemic Juvenile Idiopathic Arthritis (sJIA) is a rare chronic generalized disorder that typically manifests before the ageof 16. It is primarily characterized by persistent joint pain and swelling lasting for 6 weeks or more, accompanied bydamage to other tissues and organs. sJIA represents the most severe subtype of Juvenile Idiopathic Arthritis (JIA), with anincidence rate in China of approximately one in ten thousand.In January 2023, the Tocilizumab Injection (“Atvtia”), developed by LivzonBio, was approved for market launch in China’smainland, with the approved indication for rheumatoid arthritis (with a prevalence rate of 0.42% in China). In May 2023,following a supplemental application for new indications, Atvtia was granted approval by the NMPA to include twoadditional indications: Systemic Juvenile Idiopathic Arthritis (sJIA) and Cytokine Release Syndrome (CRS). Consequently,Atvtia has received approval for all three indications for the original product in China (the original product, Actemra
?,is the first humanized monoclonal antibody targeting IL-6 receptor to launch on the global markets, and was officiallyincluded in China’s National Medical Insurance Catalogue in August 2019).
6.7 RATIONAL USE OF DRUGS
Livzon has recognized resistance to antibiotics as one of the major public health risks worldwide. Bacterial and fungalresistance has become a major challenge for current global public health. Drug-resistant bacteria and fungi pose a growingthreat to human health. Various factors have led to a decrease in the sensitivity of the patient population to antibacterialmedicines, especially hospital-acquired infections caused by certain multi-drug resistant and pan-drug resistant bacteriaand fungi, making clinical treatment even more difficult.In order to solve the problem of resistance to antibiotics and other antimicrobials, Livzon has actively taken measuresfrom four aspects: pharmaceutical research and development, clinical use of antibiotics, pharmacovigilance and industrycommunication, and was committed to preventing the spread of global antibiotic tolerance.
Research and development in response to fungal resistance
During the past few years, as the number of people with immunodeficiency and tumor chemotherapy increased,the cases of invasive fungal infection also increased gradually. Currently, there are mainly 3 types of antifungalmedicines on the market, namely polyenes, azoles and echinocandins. After years of clinical application, antifungaltolerance has become more and more serious, leading to a very limited number of clinical applicable medicines.In 2024, Livzon introduced SG1001, a new class 1 antifungal medicine, and secured exclusive rights to develop,produce and commercialize SG1001 for all developable dosage forms and indications for antifungal andother therapeutic fields in Greater China. SG1001 is an inhibitor that selectively targets fungal dihydroorotatedehydrogenase (DHODH) and has demonstrated significant antibacterial activity against Aspergillus (includingAspergillus fumigatus), Scedosporium, penicillium, trichoderma, and Talaromyces marneffei. The project has nowentered the clinical phase.
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6.7 RATIONAL USE OF DRUGS
(continued)Marketed product – Treatment for acute bacterial skin infectionsIn October 2024, the Company’s Tedizolid Phosphate for Injection received market approval for the treatment ofacute bacterial skin and skin soft tissue infections caused by susceptible strains of Gram-positive bacteria.While a variety of antibacterial medicines are available domestically for the treatment of skin and soft tissueinfections, the number of antibacterial medicines for the treatment of skin and soft tissue infections caused byMRSA (Methicillin-resistant Staphylococcus aureus) remains highly limited.Tedizolid phosphate, a new oxazolidinone prodrug antibiotic, provides a new therapeutic option for clinicaltreatment. Oxazolidinones represent a new class of fully synthetic antimicrobial agents marketed followingsulfonamides and quinolones. They have a very wide antibacterial spectrum against gram-positive bacteria and haveantibacterial activity against a variety of multi-drug resistant strains. They can be used to treat inflammation, skinsoft tissue infections, etc. caused by gram-positive bacteria.
Industry exchange – National academic conferences in the area of anti-infectionLivzon proactively promotes industry communication and contributes to improving the development of anti-infectiondisciplines. During the Year, we participated in over 10 national-level academic conferences in the field of anti-infection, covering areas such as respiratory infection, deep mycosis infection, and bacterial infection. We invitedexperts to report on new developments in product research and development and had in-depth communications andexchanges with clinical experts and scholars engaged in microbiological basic research, so as to jointly promote thedevelopment of medical technology.In addition, we organized more than 20 online seminars for sales and marketing personnel on topics such as“Common interpretation of Chinese experts on the clinical application dose of Vancomycin” and “Guideline onpersonalized use of Voriconazole”. These seminars were aimed at bolstering the product knowledge of internalemployees and enhancing their understanding of the reasonable use of antimicrobial products of Livzon.
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PRODUCTRESPONSIBILITY
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Product quality not only directly affects customer satisfaction and brand
reputation, but also relates to the overall performance and social responsibility
of an enterprise. Livzon stays committed to the mission of “prioritizing the
quality of life of patients”, continuously strengthens awareness of legal
and compliant operations, and consistently builds and improves its quality
management system. The Company takes active quality management actions,
fosters a quality culture awareness among all employees, and is committed
to delivering the quality values of “being scientific and compliant, improving
continuously, pursuing excellence, striving to provide patients with high-quality
products” to every customer.
In the context of the accelerating restructuring in the global pharmaceutical
industry, the Group’s quality management has evolved from basic compliance
requirements to the core of the Company’s strategic competitive advantage. The
Group’s deep focus on quality and safety has not only created a competitive
moat for its development, but also presents systematic challenges in areas such
as cost control, public opinion management, and environmental compliance.
I. ECONOMIC IMPACT
Positive impact:
Enhanced market competitiveness: Product quality and safety constitute
the fundamental cornerstone of corporate existence. The Group places great
emphasis on product quality and safety, which allows it to gain the trust and
recognition of consumers, thereby standing out in fierce market competition and
expanding its market share.
Reduced operating costs: With strict quality control and safety management,
the Group effectively mitigates quality-related losses including product
returns and recalls, thus reducing operating risks and costs for the Company.
Meanwhile, good product quality standards enhance manufacturing efficiency,
further optimizing the cost structure of the Company.
Improved brand value: High-quality products and strict safety management
help shape the Company’s brand image and improve its brand awareness and
reputation. An improvement in brand value not only attracts more customers
and market share for the Company but also, to a certain extent, boosts its
bargaining power and increases the added value of its products.
Attracting investment and partnerships: In the current market environment
focused on sustainable development, investors and partners are increasingly
concerned with an enterprise’s quality and safety management levels. The
Group’s excellent performance in product quality and safety enhances the
confidence of investors and partners and attracts more capital and resources,
thereby providing strong support for the Company’s growth.
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I. ECONOMIC IMPACT(continued)Negative impact:
Increased costs: To ensure product quality and safety, the Company needs to invest substantial funds in R&D,equipment upgrades, quality testing, safety facilities, etc. For example, the Group has consistently increased its investmentin environmental protection to meet increasingly stringent environmental requirements, which has, to some extent, raisedits operating costs.Market risks: Despite the Group’s high product quality, the complex and ever-changing market environment still posesunforeseen risks. For example, fluctuations in raw material prices and changes in policies and regulations may affect theCompany’s financial performance and operational stability.
II. SOCIAL IMPACTPositive impact:
Protecting public health: The quality and safety of pharmaceutical products are directly related to public health andsafety. Through strict quality control and safety management, the Group ensures that the pharmaceutical products,medical devices, and other products it provides meet national standards and industry regulations, effectively safeguardingpublic drug safety and making a positive contribution to the social well-being and stability of health.Improving social trust: The Company’s emphasis on product quality and safety reflects its sense of social responsibility,which strengthens public trust in both the enterprise and its products. This trust not only fosters long-term, stablecollaborative relationships between the Company and its consumers, but also contributes to the harmonious developmentof society as a whole.Promoting employment and talent development: To ensure product quality and safety, the Group needs to recruitand cultivate a large number of professionals. This not only provides employment opportunities for society, but also helpsimprove the overall professional level and talent quality within the industry.Promoting industry standard development: As a well-known enterprise in the industry, the Group can serve asa role model for its good practices in product quality and safety. Its advanced management experience and qualitycontrol systems can provide reference points for other enterprises, promoting the standardized development of the entirepharmaceutical industry and raising the overall quality and safety standards of the industry.
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II. SOCIAL IMPACT(continued)
Negative impact:
Public opinion pressure: The pharmaceutical industry is under close public scrutiny, where even isolated incidentsrelated to product quality or safety may trigger widespread societal concern and scrutiny. Such events can put significantpublic opinion pressure on the Company and impact its public image and reputation.Public panic: Inadequate management of product quality and safety incidents may precipitate public health concernsand erode consumer confidence. A single pharmaceutical safety event could trigger broader skepticism toward relatedtherapeutic products and potentially undermine trust in the industry ecosystem. Such scenarios risk precipitating marketdisruptions that could extend to societal implications.III. ENVIRONMENTAL IMPACTPositive impact:
Promoting green production: While pursuing product quality and safety, the Group actively practices the concept ofgreen development. By adopting advanced production technologies and equipment and optimizing production processes,the Group reduces energy consumption and pollutant emissions and discharge during production. For example, the Grouphas invested in the development of energy-saving projects, such as efficient energy-saving equipment upgrade and wasteheat recycling systems, effectively reducing energy consumption during production.Resource recycling: The Company places great emphasis on the recycling of resources by implementing wasteclassification and recycling and resource recycling systems. This not only reduces waste generation and lowersenvironmental pollution, but also improves resource utilization efficiency, achieving a win-win situation in both economicand environmental benefits.Raising industry environmental awareness: The Group’s positive actions and good performance in environmentalprotection can inspire the entire pharmaceutical industry to pay more attention to environmental protection. Its advancedenvironmental protection philosophy and practical achievements can provide reference and inspiration for otherenterprises, driving the entire industry towards green and sustainable development.Negative impact:
Increased environmental protection costs: To fulfill the requirements for product quality and safety while alsomeeting environmental protection standards, the Company needs to invest significant funds in building and operatingenvironmental protection facilities. This has increased the Company’s operating costs and financial burden.Environmental risks: Despite the implementation of various environmental protection measures by the Company,potential environmental risks may still exist during production. For example, improper handling of wastewater, waste gas,and solid waste generated during the production of APIs could lead to pollution of the surrounding environment.The Group’s quality management is based on the principles of “risk anticipation and value transformation”. Tooperationalize these principles, we have established a “dual-drive” response system–leveraging technological innovationto alleviate rigid cost pressures and ecosystem collaboration to reconstruct the risk defense network.
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7.1 QUALITY MANAGEMENT SYSTEM
Livzon always regards the establishment, improvement, and continuous effective operation of its quality managementsystem as the cornerstone of the Company’s development, and ensures the high quality and safety of products throughscientific and rigorous management. The Group strictly adheres to relevant laws and regulations such as the DrugAdministration Law of the PRC, and continues to implement the main responsibility as an enterprise for quality and safety.The Group’s quality management system complies with industry standards for quality management systems (GLP, GCP,GMP, GSP, and GVP), as well as the latest regulatory requirements of the National Medical Products Administrationand other regulatory agencies. It covers all stages of R&D, manufacturing, sales, use, etc. A quality monitoring systemcovering the entire product life cycle has been established, and advanced testing technologies and equipment have beenused to conduct full batch testing of raw materials and finished products to ensure that products meet established qualitystandards. In 2024, we continued to improve our quality management system and pharmacovigilance system, clarify thequality management responsibilities of each department, and continuously optimize the quality management system andimprove the quality management level through regular internal audits and management reviews; during the Year, weestablished the pharmacovigilance head office at the Group level to strengthen pharmacovigilance work and continuouslyrefine our full-lifecycle quality management model.
? Governance
The Company has established a unified Group-wide quality management system in accordance with relevantlaws and regulations, such as the Drug Administration Law of the PRC, the Provisions for the Supervision andAdministration of Drug Manufacturing, the Provisions for Drug Registration, the Good Clinical Practice, the GoodManufacturing Practice, the Good Supply Practice, the Good Pharmacovigilance Practice, and the Regulations onthe Supervision and Administration of Marketing Authorization Holder Implementing Main Responsibility of DrugQuality and Safety. The Group has established a quality management head office responsible for overseeing thequality supervision of all subsidiaries. Through dedicated and specialized auditing and special quality work withinthe Group, we ensure that all subsidiaries within the Group implement the requirements of a unified qualitymanagement system. The Group’s quality management system covers both domestic and international certificationstandards, and the Group has established a complete quality exception response mechanism, forming a closed-loopof “strategy-process-execution” quality framework. We have developed clear product quality strategies, identifiedand assessed potential impacts, risks, and opportunities, set quantifiable metrics and targets, and continuouslyimproved product quality to meet customer expectations, thereby supporting the Company’s sustainable growthinitiatives.
? Metrics and targets
Livzon always prioritizes quality and safety and sets clear targets: official inspections, including license inspections,GMP compliance inspections, and drug registration inspections, are passed on the first attempt, and the passrate of government sampling inspections reaches 100%. To achieve these targets, we regularly conduct internalproduction supervision and inspections, while performing compliance inspections based on the progress of R&Dprojects; for key R&D or technological improvement projects, we establish specialized teams to conduct multiplespecial inspections based on project progress and assist subsidiaries in resolving quality management and technicaldifficulties. In 2024, all our targets were successfully met: official inspections such as license inspections, GMPcompliance inspections, and drug registration inspections were passed on the first attempt. The governmentsampling inspection pass rate remained at 100%.
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7.2 QUALITY RISK MANAGEMENT
To adapt to changing market demands and consumer expectations, Livzon always regards product quality as an importantpart of its corporate sustainability strategy. Adhering to the quality concept of “scientific risk assessment and control asthe basis of quality management”, the Company has developed a series of management plans and strategies focusedon the impacts, risks and opportunities related to product quality. According to external quality management standardsand internal management systems such as Administrative Procedures for Quality Risks, the Company conducts qualityrisk management (QRM) throughout the entire product life cycle such as product R&D, technology transfer, commercialproduction, product circulation and termination. Risks are reviewed at a minimum frequency of once per year to ensurethe safety and compliance of products. This approach, guided by high quality and standards, promotes the steady progressof products towards sustainable development goals.
QRM Policy of Livzon
Quality RiskManagement(QRM)Confirmationand verification
Materialmanagement
Product design
and transfer
Complaint
handling
Deviation and
OOS/OOT
Change control
Design andconstruction of
facilities and
equipment
Process control
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7.2 QUALITY RISK MANAGEMENT
(continued)From the perspective of patient safety, we, based on scientific knowledge, strive to properly identify and control the risksof factors involved in the product life cycle, implement dynamic risk management, and rationally allocate resources toachieve continuous risk control and continual improvement.Quality risk management of the Group is divided into risk assessment, risk control, risk communication and risk audit andreview and other processes. Among them, risk communication runs through the entire risk management process.We identify quality risks in an all-round way from multiple sources, such as gap analysis of product technology transfer,annual quality assessments of material suppliers, deviation reports, change control, quality complaints, adverse reactioninformation, trend analysis for product quality review, and inspections on continuous product stability. Secondly, weanalyze and estimate the identified risks and their problems, confirm the possible consequences of the problems and thepossibility of the occurrence, and issue a quality risk assessment report based on the system risk assessment form. Wethen determine the control measures to reduce the quality risk according to the risk level, and take corrective actions andpreventive actions (CAPA) when necessary; after implementation of the risk mitigation measures and reassessment, thequality risk management team makes a decision on whether to accept the residual risk. Please see the process chart asbelow:
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7.2 QUALITY RISK MANAGEMENT
(continued)Quality Risk Management Process of Livzon
Risk assessmentRisk identication
Risk analysisRisk appraisal
Risk control
Risk mitigation
Risk acceptance
Risk audit and reviewEvent audit and review
Results/output of qualityrisk management proceduresRisk communication
Risk management tools
Not accept
Start risk management
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7.2 QUALITY RISK MANAGEMENT
(continued)Through significant impact assessment and risk management process, Livzon identified and assessed the following qualityrelated risks and opportunities in 2024:
Quality related risks
Expected Time ofRisk Occurrence
Probability ofRisk Occurrence
Non-compliance risk of sampling inspection: If the product market samplinginspection and government sampling inspection fail to pass, production maybe ordered to stop and brand quality image may be damaged.
Long-termImprobableDrug safety risk: Major mass safety incidents related to drug use may triggerrecalls, substantial compensation, and public opinion issues, which severelyaffect brand image.
Long-termImprobable
Quality related opportunities
Expected Time
of Opportunity
Occurrence
Probability ofOpportunityOccurrenceImprovement in drug outer packaging quality: By conducting improvement indrug outer packaging quality, the quality of drug outer packaging is graduallyenhanced, and the appearance and material are aligned with the quality ofouter packaging of drugs imported from Europe and the United States, so asto boost brand influence, attract a wider customer base, and increase productcompetitiveness.
Medium-termAlmost certain
Due to the substantial uncertainty in quantifying the above quality related risks and opportunities, the value of relatedquantitative information is limited. To ensure the accuracy and reliability of the information, the Company did not disclosespecific financial data in the Report. The Company plans to further improve the collection and analysis of related data inthe next year and will disclose quantitative information accordingly.? Risk response measures
In response to potential emergencies that may arise during the production process, we have established relevantmanagement systems. We organize emergency drills quarterly to ensure the continuity of production and the safety ofour employees in the event of an emergency. To reduce the risk of production stoppages due to safety and environmentalfactors, we have implemented several improvement measures. These include the introduction of efficient and energy-saving regenerative thermal oxidizer (RTO) equipment, the upgrading of transformers to meet higher electricity demand,and the installation of lightning protection facilities, so as to improve the overall level of production safety and ensure thenormal production process. In addition, we mandate daily inspections of safety and environmental protection equipmentby all departments and organize comprehensive safety and environmental protection assessments on a monthly basis byprofessionals. We establish a hazard management record and keep track of corrective actions to ensure that hazards areeffectively resolved.
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7.2 QUALITY RISK MANAGEMENT
(continued)? Risk response measures(continued)
To address the risk of supply disruption of upstream raw materials and auxiliary materials due to factors such as marketcompetition, monopolies, safety, and environmental protection, and to ensure production continuity, we have adopted adual sourcing strategy. By increasing the number of critical raw material suppliers in different regions, we try our best tomake sure that each material has at least 2-3 suppliers to secure stable material supply. In addition, to address the riskof supply disruption of critical raw materials, we have engaged in the research and development (“R&D”) of processes forsome critical raw materials and reserved in-house production technology to promptly respond to this risk.Meanwhile, considering safety and environmental concerns in API product manufacturing, the locations of our currentmanufacturing sites may not be suitable for long-term production due to surrounding developments. In response tothis risk, we have taken the measure of adding back-up manufacturing sites. For example, Livzon Hecheng in Zhuhai,Guangdong Province, has established a new manufacturing site in Henan Province. This enables the simultaneousproduction and supply of key varieties at two locations, effectively reducing production and supply risks.
7.3 R&D QUALITY MANAGEMENT
Livzon keeps deepening its quality management by extending the scope of quality management from post-market to theR&D stage to realize quality control throughout the entire product life cycle.
7.3.1 Quality management of pharmaceutical R&D
The pharmaceutical R&D centers of the Group have established and operated a quality management system forpharmaceutical R&D in accordance with the GXP
, ICH
guidelines and relevant registration regulations. The Company’squality management head office conducts simulated on-site registration verification (simulated on-site inspection ofpharmacological R&D and production) at key points of drug preparation projects under R&D to assist marketingauthorization holders (“MAHs”) in fully identifying the risks before product approval, and takes prompt risk controlmeasures. By establishing an effective quality assurance system and continuous risk assessment, we ensure the smoothapplication of projects on schedule.Each of the Group’s R&D centers conducts process reviews and compliance self-inspections at key points in pharmaceuticaldevelopment of R&D projects (such as process project establishment, process research, process pilot production,verification and registration batches, and IND/NDA submissions) to make pharmaceutical R&D work more scientific,rational, and compliant. The quality head office of the Group conducts special audits or key stage audits based on theimportance level of R&D projects. During the Year, the quality management head office of the Company conducted 16audits on drug preparation projects under R&D. Based on the requirements of API R&D management and technologytransfer documents, the Group’s API enterprises conducted 2 self-inspections on the R&D sites for the variety ofSemaglutide. The new variety JP-1366 of API enterprises underwent 1 internal audit by the quality management headoffice of the Company. The API enterprises conducted 1 on-site audit on the entrusted research units within the Group.
GXP represents Good X (Agriculture, Laboratory, Clinical, Manufacturing, Supply) Practices, collective name for the GoodAgricultural Practice for Chinese Crude Drugs, the Good Laboratory Practice, the Good Clinical Practice, the Good ManufacturingPractice, and the Good Supply Practice.
ICH refers to the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use.
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7.3 R&D QUALITY MANAGEMENT
(continued)
7.3.1 Quality management of pharmaceutical R&D
(continued)The Company also implements systematic quality control for the design and development of medical devices. We ensureproduct safety and quality stability by establishing a sound design control process, including clear product projectestablishment, design planning, design input, design output, design conversion, design verification, design validation, anda medical device risk management system based on ISO 14971 applied to the whole process of product R&D.During the Year, the Company conducted audits on the compliance requirements of the R&D process of medical deviceproducts by stages according to the project progress, and conducted a total of 14 audits in 2024.
Case: Registration on-site simulation inspections of new products
To ensure that the three new products of Xinbeijiang Pharma, R&D center of traditional Chinese medicine businessdepartment, Livzon Pharmaceutical Factory, and Livzon MAB passed registration reviews successfully, the Companyorganized key business employees from the quality module of each manufacturing subsidiary to form a professionalsteering group to conduct comprehensive registration on-site simulation inspections. During the inspection process,the steering group focused on the latest developments in new drug R&D, took a data-centric approach, andemployed interactive inspections, item-by-item checks, and other inspection methods. The work strictly followed therequirements for drug registration R&D on-site inspections and drug registration manufacturing on-site inspections.The inspection work was based on clear goals and well-defined responsibilities, and strictly complied with therelevant requirements for drug registration R&D and manufacturing on-site inspections to ensure successfulregistration inspections.
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7.3 R&D QUALITY MANAGEMENT
(continued)
7.3.2 Quality management of clinical trial
The establishment of a sound clinical trial quality management system is an important cornerstone for the Company toensure scientific research quality. During the Reporting Period, all R&D units of the Group, in strict compliance with thedocuments of the clinical trial quality management system, enhanced the quality control of clinical trials, improved theability to manage potential risks, conducted clinical trials properly, and ensured that the Group’s clinical trials compliedwith the requirements of relevant laws and regulations to guarantee the safety of subjects and the reliability of test data.The Group applies the ICH Q10 pharmaceutical quality system to the management of clinical research, with reference tothe Quality Management System–Requirements (GB/T 19001-2016), and, combining clinical quality management practices,creates a cQMS
in line with the Company’s management process, which provides a comprehensive quality managementsystem for clinical R&D and ensures that the cQMS of the clinical departments is aligned with the strategic goals of theCompany. At the same time, we keep improving the cQMS system documents according to the latest regulatoryrequirements related to clinical trials.To improve the quality control and process management of clinical trial projects, the clinical research quality managementteam coordinates the development of quality risk management plans for each R&D project. By implementing inspectionand audit management measures, we can determine the times and frequency of performing audits according to thecharacteristics of projects, promptly identify potential risks, and complete correction within the specified time, so as toensure that projects remain compliant and meet industry standards.For drug clinical trials, the quality management head office of the Company formulates scientific and detailed audit plansbased on the type and complexity of clinical trials and the level of risks that affect subjects. According to the progress ofthe clinical trial projects, it organizes audits at different stages and strengthens supervision throughout the entire processof drug clinical trials to ensure compliance with relevant laws and regulations, proactively identify potential projectproblems and prevent recurrence of problems, protect the rights and interests and safety of subjects, and ensure thetruthfulness, accuracy, and completeness of clinical data. The production of the Group’s API enterprises strictly complieswith related regulatory requirements. They guarantee the truthfulness, accuracy, completeness, and traceability ofinformation throughout the clinical trial process.The Company conducts at least one quality audit for each clinical research project undertaken by all the R&D centers ofthe Group.As at the end of the Reporting Period, in accordance with the existing annual audit plan, the quality management headoffice of the Company conducted 37 audits on 8 clinical trial projects of the Group, which involved 33 clinical trialinstitutions and 3 biological sample analysis units. As a sponsor, the Group achieved quality supervision and managementthroughout the process of clinical trials by audits, thereby further ensuring the quality of clinical trials and continuouslypreventing and controlling compliance risks.
cQMS is Clinical Quality Management System.
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7.3 R&D QUALITY MANAGEMENT
(continued)
7.3.3 External regulation
Livzon has 2 API R&D centers, 7 drug preparation R&D centers, 1 in vitro diagnostic reagent R&D center and 1 veterinarydrug R&D center. During the Year, the R&D centers of the Group accepted 32 inspections from external regulatoryagencies, and there were no major or serious defects.Type of product
Inspections by external regulatory agencies accepted by the R&Dcenters of the Group in 2024Drug preparation
? 2 varieties passed the registration inspection (pharmaceutical R&D and
manufacturing site)? 2 varieties passed the registration inspection (clinical trials)? 2 varieties confirmed exemption from registration inspection (pharmaceuticaldevelopment and manufacturing site)In vitro diagnostic reagent? 3 on-site inspections of registration of medical devicesAPI
? The variety of Semaglutide Injection (affiliated with the API business
department) passed the registration on-site inspection initiated by the
Center for Food and Drug Inspection of NMPA, with participation from the
provincial and city-level administrations in Guangdong Province.
7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
For quality management of product manufacturing after market launch, Livzon has established a quality managementsystem for the Group’s manufacturing in strict accordance with the standards of the Chinese GMP and internationalrequirements to ensure that all manufacturing enterprises strictly implement the system and meet quality controlstandards. All of the Group’s manufacturing enterprises are 100% committed to promoting the full implementation of thequality management system to strictly control product quality. In addition, the Group’s API manufacturing enterprises havealso implemented the quality management system in accordance with the requirements of ICH Q7, US cGMP and EU-GMP.
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7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
(continued)
7.4.1 Registration and certification
As at 31 December 2024, the product registration, national certification and GMP compliance status of the Group are asfollows:
Product Registration, National Certification and GMP Compliance Status of LivzonItemWork of drug preparations in 2024
International registration
31 registration projects were completed in 11 countries/regions for 17specifications of productsDomestic registration162 products were registered domesticallyInternationalcertification
Internationallycertified varieties
3 varieties obtained international certificationInternationallyrecognizedcertificates
3 internationally recognized certificates within the validity period were obtainedGMP compliance status ofproduction lines
A total of 58 production lines were GMP compliantItemWork of APIs in 2024
International registration202 registration projects were completed in 94 countries/regions for 34 productsDomestic registration60 products were registered domesticallyInternationalcertification
Internationallycertified varieties
15 varieties obtained international certification for on-site inspectionsInternationallyrecognizedcertificates
32 internationally recognized certificates were obtained (including:6 certificates
for FDA on-site inspections, 16 CEP certificates, 1 EU GMP certificate, 4 Japanese
GMP certificates, 1 Mexican GMP certificate, and 4 Brazilian GMP certificates)GMP compliance status ofproduction lines
A total of 71 production lines were GMP compliantISO quality management systemcertification
? 2 enterprises were certified to GB/T 19001-2016/ISO 9001:2015 Quality
Management System
? 1 enterprise was certified to ISO 22000:2018 Food Safety Management
System
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7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
(continued)
7.4.1 Registration and certification
(continued)Product Registration, National Certification and GMP Compliance Status of Livzon(continued)ItemWork of in vitro diagnostic reagents in 2024
International registration27 registration projects were completed in 40 countries/regions for 27 productsDomestic registration
169 products were registered domestically (7 drugs with 9 certificates, 162medical devices)Internationalcertification
Internationallycertified varieties
10 varieties obtained international certificationInternationallyrecognizedcertificates
8 internationally recognized certificates within the validity period were obtainedGMP compliance status ofproduction lines
A total of 2 production lines were GMP compliantISO quality management systemcertification
1 enterprise was certified to ISO 13485:2016 Quality Management System for
Medical Devices
7.4.2 External regulatory inspections
Livzon has 7 drug preparation enterprises, 5 API enterprises and 1 in vitro diagnostic reagent enterprise. In 2024, Livzonaccepted a total of 57 inspections from external regulatory agencies and there were no serious defects.
Inspections by External Regulatory Agencies Accepted by LivzonType of enterprise
Inspections by external regulatory agencies accepted by the Group in2024Drug preparation manufacturingenterprises
Drug preparation enterprises accepted a total of 28 inspections from drugregulatory agencies. All inspections were passed smoothly:
? 7 license inspections? 12 routine inspections? 7 other inspections? 2 unannounced inspections
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Type of enterprise
Inspections by external regulatory agencies accepted by the Group in2024
API manufacturing enterprises
API enterprises accepted a total of 24 inspections from drug regulatory agencies.All inspections were passed smoothly:
? License for veterinary drugs manufacturing & GMP acceptance (for exportonly): 1? Pre-market GMP compliance of drugs & Changes to scope of manufacturinglicense & On-site inspection of GMP compliance of drugs exported to EU: 1? U.S. FDA cGMP inspection and pre-approval inspection: 2? Brazilian ANVISA GMP certification inspection: 1? Post-market GMP compliance inspection: 1? Daily supervision inspection of veterinary drugs: 6? Daily supervision inspection of pharmaceuticals for human use: 4? Pre-market GMP compliance inspection: 1? Daily supervision inspection of food additives: 1? Clinical on-site inspection: 4? Combined registration on-site inspection and GMP compliance inspection: 1? Inspection of changes to scope of manufacturing license for pharmaceuticals
for human use: 1
In vitro diagnostic reagent enterprise
In vitro diagnostic reagents (drugs) accepted 1 inspection from drug regulatoryagencies. The inspection was passed smoothly:
? 1 daily inspection of drugsIn vitro diagnostic reagents (medical devices) accepted a total of 4 inspectionsfrom medical device regulatory agencies. All inspections were passed smoothly:
? 1 annual audit of ISO 13485:2016 Quality Management System for MedicalDevices? 1 MDSAP (Medical Device Single Audit Program) initial certification audit formedical device quality management systems (U.S. and Japan)? 1 daily supervision audit of medical devices? 1 on-site assessment of risk monitoring
7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
(continued)
7.4.2 External regulatory inspections
(continued)
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7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
(continued)
7.4.3 Quality control on production process
According to national laws and regulations and industry standards, we have developed detailed plans for equipmentcertification, intermediate process control, etc. and implemented comprehensive quality management and control ofvarious production facilities, with a full-spectrum approach to quality control in the production process. We conductregular certification on key production facilities. The main principles we abide by are as follows:
For facilities with clear regulations, such as sterilization cabinets and air-conditioning systems, the recertificationcycle strictly follows the regulations;For facilities without clear regulations, such as labelling machines and packaging machines, recertification
assessments are conducted annually to determine whether recertification is necessary for the current year;If changes to the facilities occur, the results of the change risk assessment are used to determine whether toconduct recertification. Facilities recertification is included in the annual certification master plan for management.The quality management officer is responsible for the final approval of the certification master plan, certificationplan and reports.During the Year, all (100%) of the Group’s key production facilities were certified to an in-house testing standard.
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7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
(continued)
7.4.3 Quality control on production process
(continued)At the same time, the Company pays continuous attention to announcements and reports from the NMPA, media, andinternational organizations to ensure timely access to industry trends and quality and safety information. For any new risksidentified, we will immediately take relevant measures to ensure product safety, as detailed below:
? If relevant information about emerging quality/safety concerns that may involve a certain type of products
or materials is found, after verifying the authenticity of the information, we will immediately engage thequality, technology, production and other relevant departments in a preliminary assessment of the products ormaterials to determine the degree and scope of the influence.
? Once the scope of influence is determined, we will send a letter to the supplier involved for investigation;
if the supplier has conducted relevant research and assessment, we will collect relevant data as a basis forfurther assessment.
? According to the results of the relevance assessment, we conduct entrusted inspections of influencing
factors, quality research tests, etc.
? According to the relevant information obtained from the extended investigation of the supplier, together
with the data from the quality research conducted, we will proceed with a quality risk assessment todetermine whether risks are introduced into the relevant modules and the acceptability of the risks.
Relevance assessment:
Extended investigation:
Quality research:
Quality risk assessment:
? If, after the quality risk assessment, it is confirmed that emerging quality/safety concerns may posea relatively large influence on the products or materials with a relatively high-risk level, we will takeappropriate corrective and precautionary actions, such as raising quality standards, improving processes, andoptimizing formulations; we will recall the products if necessary.
Corrective and precautionary actions:
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7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
(continued)
7.4.3 Quality control on production process
(continued)The Group remains mindful of the risk of product quality. We actively conduct precautionary testing for emerging productquality and safety concerns. We organize quarterly quality analysis meetings for product review analyses to preemptivelyidentify potential quality and safety risks of products, and formulate corresponding quality control plans.
Case: Conducting precautionary testing for regular risk analysisTo enhance the internal quality management level and ensure continuous compliance, 7 drug preparationmanufacturing enterprises established a quarterly product and quality risk analysis and reporting system, whichwas used to study and judge product and system risks, develop corrective and preventive actions, and continuouslyimprove the quality management system. Quality risk control opinions and suggestions were reported quarterlyto the heads of these enterprises, who fully considered these opinions and provided resources for continuousimprovement.
Case: Precautionary testing for regulations
During the Year, the Guangdong Provincial Medical Products Administration issued the Administrative Measuresfor Pharmaceutical Qualified Persons of Guangdong Provincial Medical Products Administration, and the NationalMedical Products Administration issued the Notice on Strengthening the Supervision and Administration ofEntrusted Drug Manufacturing (Draft for Comments). These regulations impose higher requirements on keypersonnel, especially those in entrusted manufacturing enterprises. The Company’s quality management headoffice required all relevant subsidiaries to conduct a gap analysis with a comprehensive reference to the above-mentioned regulations, and formulate and implement targeted improvement measures. In response to theincreasing qualification requirements for key quality management personnel, the Company’s quality managementhead office organized key personnel (persons in charge of quality, persons in charge of production, qualifiedpersons, and delegated qualified persons) from the Group’s 9 manufacturing enterprises to study regulatoryknowledge, and held a legal knowledge competition for core personnel to encourage enterprises within the Groupto actively expand their pool of delegated qualified persons. At the same time, the quality head office organizedfurther training for quality management personnel of the enterprises. During the Year, a total of 80 people fromsubsidiaries participated in audit work organized by the quality head office for 275 person-days, from which theirbusiness management skills were improved. They were involved in drug preparation and API audits, clinical trialproject audits or self-inspections, internal and external training, irregular summary exchange sessions, and relatedmanagement work of the quality management head office. These efforts helped accelerate the development of keyquality management personnel for the future and ensure a reserve of qualified quality management personnel.
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7.4 QUALITY MANAGEMENT OF PRODUCT MANUFACTURING
(continued)
7.4.4 Quality audit
Based on the six systems of GMP
and internal production quality management system standards, the Company hasdeveloped detailed inspection rules and defect evaluation standards. According to these standards, the Company conductsa comprehensive quality audit at least once a year for each of the Group’s manufacturing enterprises, so as to assist eachof them in conducting a comprehensive management of the quality system throughout the entire life cycle ofpharmaceuticals, identify blind spots in quality management, and avoid regional and systemic risks, thereby furtherpromoting the steady operation of the quality management system of each manufacturing enterprise.The Company conducts a comprehensive quality audit at least once a year, covering all (100%) of the Group’smanufacturing enterprises and MAHs. During the Reporting Period, the Company conducted 18 quality audits on theGroup’s drug preparation enterprises (including animal drug preparation enterprises), 2 quality audits on the Group’s invitro diagnostic reagent enterprise, 10 quality audits on the Group’s API enterprises, and 2 quality audits on the Group’sdistributors.During the Year, the Group’s drug preparation enterprises and in vitro diagnostic reagent enterprise accepted a total of49 audits from drug regulatory agencies and other external auditors, all of which revealed no serious defects. The Group’sAPI enterprises accepted a total of 176 external audits, all of which were successfully passed.For problems and defects revealed in the quality audits, the quality management head office of the Company emphasizesholistic risk identification, requires MAHs to actively identify relevant product or system risks on the basis of reviewingdefects, and ensures that effective corrective and precautionary actions are implemented under the guidance of the “Plan-Do-Check-Act” (PDCA) model. The PDCA model not only emphasizes the process of teamwork and brainstorming, butalso encourages the use of various quality risk management tools to help enterprises identify potential problems moreeffectively. The Company strictly requires all MAHs to use the PDCA mode to ensure comprehensive and systematicinvestigation of product and system risks. In this process, it is necessary to develop a complete risk list and correspondingcontrol measures list covering the six major factors of man, machine, material, method, environment, and measurement.Each MAH must implement corrective actions carefully against these lists and make continuous improvements to fulfill theGroup’s basic requirements of “daily settlement and precise GMP” for production quality work.
The six systems of GMP are quality system, facilities and equipment system, material system, production system, packaging andlabelling system and laboratory system.
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7.5 QUALITY MANAGEMENT OF PRODUCT DISTRIBUTION
Livzon is committed to establishing a compliant and efficient drug distribution system, while closely following regulatoryrequirements and the latest regulatory trends of drug regulatory agencies. The Company regularly conducts compliancetraining on drug distribution to improve the professional quality of employees. In addition, the Company conducts routineaudits on all pharmaceutical distributors of the Group at least once a year in order to implement quality control over thewhole process of drug distribution and to enhance the quality assurance of pharmaceuticals in circulation.In 2024, based on the annual audit plan, the quality management head office of the Company conducted quality auditson all pharmaceutical distributors of the Group in accordance with the GSP system; 2 pharmaceutical distributors of theGroup accepted a total of 4 GSP special and daily supervision inspections by drug regulatory agencies, and no materialdefects were found, hence the quality management risk of our drug distribution is controllable.
7.5.1 Management of product package inserts and labels
Product labels and package inserts are important guides for consumers in correct selection and use of drugs, and are ofgreat significance to ensure the health and life safety of the public. Livzon strictly complies with laws and regulations suchas the Drug Administration Law of the PRC and the Provisions for Drug Package Inserts and Labels. Each manufacturingenterprise has established a management system of labels and package inserts, and has formulated relevant managementsystems. Livzon always pays close attention to updates on the regulatory documents of the National Medical ProductsAdministration (NMPA) on package inserts, labels and packaging, and continuously conducts internal checks, so as toensure that our product labels and package inserts fully comply with regulatory requirements, safeguarding the safety ofconsumer medication.The Group conducts standardized management of package inserts and labels for design, audit, purchasing, printing,acceptance, storage, distribution and use, and sets clear requirements on audit of relevant packaging material suppliers.The Group conducts internal audits of the package inserts and labels on a regular basis each year or when regulationschange, and revises and improves the product package inserts and labels in a timely manner.
7.5.2 Product tracing
Livzon has established a complete product information traceability system and formulated the Drug TraceabilityManagement System. Through traceability platforms such as “Ma Shang Fang Xin” and the “NationalVeterinary Drug Tracing System”, Livzon has successfully enabled the smallest sales packaging unit of drugs, class IIImedical devices and veterinary drugs to be traceable (giving unique traceability ID to the smallest sales packaging unit).With a comprehensive information traceability mechanism, we enable the efficient circulation of traceability informationacross different processes, thereby promoting the overall governance of product quality and safety and improving ourability to guarantee product quality and safety.Our API export enterprises have formulated the Procedures for Management of QR Codes for Active PharmaceuticalIngredients (APIs) to ensure that each level of packaging labels for exported APIs bears a QR code (Quick Response Code).This enables regulatory agencies and consumers to trace product unique identifiers, batch numbers, dates of manufacture,and other product information by scanning the QR code through tracking systems such as the “China Product InformationService Platform” and “ANCC app”.
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7.5 QUALITY MANAGEMENT OF PRODUCT DISTRIBUTION
(continued)
7.5.3 Product recall and safety emergency management
In order to regulate the management of unqualified products and prevent risks such as confusion or errors, the Companyhas formulated the Operating Procedures for Product Recalls, the Unqualified Product Management System, the ReturnedProduct Management System, the Contingency Plans for Material Product Safety Incidents, and other managementsystems. The disposal of unqualified materials, intermediate products, products to be packaged, and finished productsshall be approved by MAH persons in charge of quality, and relevant records shall be kept. We establish and keepcomplete purchase and sale records to ensure the traceability of products sold, and regularly conduct simulated productrecalls and emergency drills for product safety emergencies.During the Year, the Group had no recalls of products sold or shipped for safety and health reasons and thus did not incurany medical expenses resulting from product quality issues.
Product Recall Procedures of Livzon
If any unqualified product is identified or assessed by the entrusted party during the process, it shallimmediately be marked and isolated. The entrusted party shall give timely feedback on the relevantinformation substantiating the nonconformity assessment, such as product/material name, batch number,supplier, validity involved, and any abnormal conditions, to the entrusting party. For products to be recalled,the quality management department organizes members of the risk assessment team to classify the productrecall into three levels based on the severity of potential product safety hazards.After the recall is approved, the quality management department will issue a recall notice to all relevantdepartments, and the sales department will formulate a recall plan and specific measures and submit a copyof the recall plan to the drug regulatory agencies.In the course of the recall, the sales department has to report the recall progress as required by the documents,conduct statistics and acceptance of the products to be recalled, and complete the destruction of the recalledproducts that must be destroyed under the supervision of the regulatory department. An Unqualified ProductDestruction Record must be completed and submitted to the regulatory department. In addition, the relevantperson in charge will register the destruction and handling information in the Unqualified Product HandlingRecord for timely update and maintenance.During the Year, some MAHs and all API enterprises of the Group conducted simulated product recalls and emergencydrills for product safety emergencies. The results of these drills met the expected targets, fully verifying the feasibility andeffectiveness of the recall processes. The drill results demonstrated that the effectiveness of the recall process had beenfully verified, and the establishment of relevant policies ensured that enterprises could quickly and effectively conductcontingency handling in the event of product safety emergencies.
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7.5 QUALITY MANAGEMENT OF PRODUCT DISTRIBUTION
(continued)
7.5.4 Protection of customer rights and interests
Enhancement of customer satisfactionIn order to effectively protect the rights and interests of customers and improve their satisfaction, Livzon always takes theannual satisfaction survey of the quality of products and services as one of its key priorities. To fully protect the rights andinterests of customers and improve customer satisfaction, we regularly distribute questionnaires to customers in variousregions to deeply understand the views and suggestions of customers on the Group’s products and services in a multi-dimensional way. Guided by customer feedback, we optimize service processes and continuously improve service qualityand standards to ensure that customer expectations are fully met.
Performance
CustomerSatisfaction
SurveyDimensions
Packaging
Product efcacy
Service attitudeProduct quality
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7.5 QUALITY MANAGEMENT OF PRODUCT DISTRIBUTION
(continued)
7.5.4 Protection of customer rights and interests
(continued)Enhancement of customer satisfaction(continued)
In 2024, the Company received 293 feedbacks in written forms from customers. The results showed that customerswere highly satisfied with the quality, packaging, and efficacy of Livzon’s products. The questionnaires were sent to thecorresponding business departments. Relevant departments analyzed the problems and suggestions from customers’feedbacks and solved existing problems in a timely manner, to provide customers with better products and better services.
100%
90%80%70%60%50%
202220232024
100%100%
99.6%
100%100%100%100%100%
99.7%
Product qualityProduct efcacyPackaging
Customer Satisfaction Survey Results from 2022 to 2024
Meanwhile, to gain comprehensive insights into end-user needs, the Group conducts customer satisfaction surveysregularly every year in forms of service feedback letters, satisfaction survey questionnaires, phone calls, etc., allowingcustomers to comprehensively rate the quality, efficacy, packaging, transportation, delivery timeliness and service ofproducts, etc. The customer satisfaction ratings maintained at above 95% in recent years. In addition, the Group entrustscommercial customers to survey doctors and patients via phone calls from time to time, and through regular summary ofsurvey results, the Group accurately assesses the safety and efficacy of products to ensure continuous improvement andoptimization.
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7.5 QUALITY MANAGEMENT OF PRODUCT DISTRIBUTION
(continued)
7.5.4 Protection of customer rights and interests
(continued)
Protection of customer privacyAs its principal businesses are manufacture and distribution of drugs, APIs and intermediates, diagnostic reagents andequipment and veterinary drugs, Livzon has little direct contact with end customers and access to their private information.For limited risks of privacy and security management, Livzon also fully complies with the relevant legal provisions onpersonal data protection under the Civil Code of the PRC and the Personal Information Protection Law of the PRC tostrictly protect customer privacy.We collect necessary information from customers and other individuals under the premise of legal compliance. For thehandling of confidential information, we enter into confidentiality agreements with relevant parties, and customers canrevise their personal data by telephone, email and other methods.During the Year, Livzon had no incidents of infringement of customer privacy or loss of customer data.Customer feedbacks and complaintsThe Company has established a sound customer complaint handling system, and has formulated relevant managementsystems to manage the Group’s product quality complaint affairs by coordinated guidance and supervision.We undertake to promptly and properly handle the quality complaints about the products of our subsidiaries, and requireeach subsidiary to establish or improve its own quality complaint management system in accordance with relevant lawsand regulations and the requirements of the Company’s management systems, so as to fully protect customers’ rights andinterests and ensure product quality.During the Year, Livzon received 108 product-related feedbacks, including 21 medication queries and 87 product-relatedcomplaints. In accordance with relevant processes and systems, the Group promptly followed up and dealt with therelevant product queries and complaints received, reaching a response rate of 100%.
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7.6 PHARMACOVIGILANCE
Livzon actively responds to and supports the establishment of a comprehensive pharmacovigilance system, including pre-market clinical trials and post-market monitoring, to ensure the effective identification and reduction of possible safetyrisks throughout the entire life cycle of pharmaceutical products, thereby ensuring patients’ drug safety.
7.6.1 Pharmacovigilance management
Livzon has been constantly enhancing its pharmacovigilance (“PV”) management requirements. All MAHs of the Grouphave established the system and policies that cover the current PV-related regulatory requirements, and gradually reviseand improve the system and policies according to the latest regulatory requirements during the implementation process.Meanwhile, all MAHs of the Group have established an independent PV department and set up a drug safety committeeto ensure the safe and healthy use of drugs by the public.The Group has set up standardized and uninterrupted channels for collecting information on adverse drug event andachieved monitoring and control of drug safety. We purchased a PV system and a MedDRA dictionary for auxiliarydata alignment to ensure timely and accurate submission of various reports, document retrieval, and risk warning.Moreover, the system is seamlessly integrated with the CDE (Center for Drug Evaluation of the National Medical ProductsAdministration), improving work efficiency and providing a safeguard for public drug safety.In 2024, the pre-market PV department of the Company was committed to the continuous optimization of the PVmanagement system, comprehensively monitoring and analyzing the risks of clinical research drugs and developingeffective risk control measures to protect the safety of clinical research subjects. This ensured the scientific and compliantnature of the PV system and provided strong support for the pre-market clinical research of drugs for the Company and itssubsidiaries.Meanwhile, in the annual quality audits of the Company’s subsidiaries conducted by the Company’s quality managementhead office, a special appraisal of the construction and operation of the pharmacovigilance (PV) system was included. ThePV audits across all operations of the Group not only promoted communication among subsidiaries, learning from eachother’s strengths, but also prevented individual enterprises from working in isolation on PV system development. Throughdiscussions on solutions to common issues during the audits, the subsidiaries collectively enhanced the operationalefficiency and regulatory compliance of their PV system, and reduced errors, thereby continuously advancing thecontinuous improvement of the PV system in the Group’s entire life cycle quality management.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
7.6 PHARMACOVIGILANCE
(continued)
7.6.2 Report of adverse drug reaction
Based on the PV system and its related activities, the Group has established the Administrative Procedures for Drug SafetyInformation, the Operating Procedures for Reporting Post-Approval Individual Case Safety of Drugs, Operating Proceduresfor Handling Drug Safety Incidents, and other relevant systems. The Group collects product safety information (includingadverse reactions/events of products) in multiple ways throughout the entire product life cycle, and analyzes, evaluates,and supervises it.Livzon has established standardized and uninterrupted channels for autonomously collecting information on suspectedadverse reactions/events of products, and makes three feedback channels available to patients and medical institutions,including an Adverse Drug Event (“ADE”) reporting platform, to achieve effective monitoring and control of productsafety.
Adverse Reaction Feedback Channelsfor Patients / Medical Institutions
Channel 1: Feedback through
the ADE reporting platform
set up on the ofcial
website
Channel 2: Report by faxor email
Channel 3: Report bycontact number on theproduct package inserts
Note: To safeguard drug safety for the public, Livzon established an ADE reporting platform on its official website, and provided
contact number and email as feedback channels for patients or clinical trial subjects with adverse conditions that occur afterdrug administration, to understand and evaluate adverse events and product characteristics in a timely manner, and safeguardpublic drug safety.
The Group has established a systematic product quality complaint process. When information on adverse drug reactionsis received, the relevant functional departments and subsidiaries of the Company will take timely response measures inaccordance with the Administrative Procedures for Quality Complaints.
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7.6 PHARMACOVIGILANCE
(continued)
7.6.2 Report of adverse drug reaction
(continued)Flowchart of Handling Product Quality Complaints of Livzon
Staff or customerQuality management
department
Manufacturers
Recorded by qualitymanagement departmentPV department
End
Quality conrmation
Quality issuesIssue resolution
Not requiredRequired
YesNoMaterial issues
AdversereactionEnd
For medical device-related adverse events, the Group has allocated full-time staff for monitoring adverse events ofmedical devices according to the requirements of internal systems. The Group actively fulfilled its primary responsibilitiesfor monitoring by proactively collecting information on adverse events of medical devices, and conducting a series ofmeasures such as prompt investigation, analysis, and evaluation to improve the ability to prevent and control risks ofadverse events. The Group is committed to creating a safer and more reliable environment for the use of medical devicesby the public.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
7.7 ESTABLISHMENT OF QUALITY CULTURE
To enhance the quality risk awareness and quality management capabilities of all employees, Livzon continuouslystrengthens the establishment of advanced quality culture, actively conducts quality-themed cultural activities inaccordance with relevant quality management regulations and standards, based on the requirements of product regulatoryagencies, and spreads quality awareness in every process to achieve continuous improvement in overall quality levels.We formulate annual training programs for quality, and accordingly conduct product quality and safety trainings ona regular basis for all employees of the Group every year. Through forms of annual quality meetings, weekly qualitymeetings, regular reports on pharmaceutical policies and regulations, etc., we disseminate and strictly supervise theimplementation of the Company’s quality culture and quality control requirements from top to bottom.During the Year, the Group’s quality-related trainings covered all (100%) employees of the Group.Livzon’s main channels for disseminating and implementing quality culture:
? Annual quality meeting: Every year, an annual quality meeting is held to conduct special report on quality.Participants include the senior management of the Company, the general manager of the quality managementhead office of the Company, heads of all manufacturing enterprises of the Group, heads of productionmanagement and quality management of each manufacturing enterprise of the Group, etc.? Weekly quality meeting: Every week, the person in charge of quality management of each manufacturingenterprise of the Group reports work to the senior management of the Company through weekly qualitymeeting.? Regular report on pharmaceutical regulations: The quality management head office of the Companysorts out the newly promulgated pharmaceutical policies and regulations every week, month and year,extracting the highlights of the regulations and summarizing into weekly, monthly and annual reports onregulations. With these reports, employees in quality and production related positions of each manufacturingenterprise of the Group are able to gain a timely and comprehensive understanding of the updates and trendsof pharmaceutical policies and regulations.? Quality Month event: During the Year, the Quality Month event was organized and held by the Company’squality management head office and widely attended by all manufacturing enterprises and R&D units of theGroup. The event had an effect of large-scale promotion of the Company’s quality culture.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
7.7 ESTABLISHMENT OF QUALITY CULTURE
(continued)Case: Quality Month event – Shared facilities assessment and cleaning validation
training, technology transfer trainingIn September 2024, the quality management head office of the Company conducted a special training in two parts:
“shared facilities assessment and cleaning validation” and “technology transfer”. Two persons in charge of qualitywith extensive quality management experience within the Group were invited to provide explanations and answerquestions. The training attracted online participation from 10 enterprises within the Group and offline participationfrom more than 200 quality related staff in the industrial park, which further strengthened the quality awareness ofemployees and improved quality management levels.
Case: Quality Month event – Legal knowledge competition for MAH key personnel
In September 2024, the quality management head office of the Company engaged persons in charge of quality,persons in charge of production, qualified persons, delegated qualified persons, and newcomers to the qualityteam from all enterprises in a legal knowledge competition for MAH key personnel. A total of 21 teams from 9enterprises within the Group participated in the competition, which consisted three intense and competitive rounds,with engaging audience Q&A sections. This competition responded to the requirements of the AdministrativeMeasures for Pharmaceutical Qualified Persons of Guangdong Provincial Medical Products Administration. Bypromoting learning through examination, enterprises within the Group are encouraged to actively expand the poolof delegated qualified persons, strengthen employees’ learning and understanding of quality laws and regulations,and cultivate future quality talents for enterprises.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
RESPONSIBLESUPPLY CHAIN
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Adhering to the concept of sustainable development, the Group is committedto creating a responsible, efficient and green supply chain ecosystem. With aprocurement mechanism that combines market-based pricing and comprehensiveassessment, we join hands with supply chain partners to fulfill socialresponsibilities, achieve win-win results for all parties, establish a resilient andsustainable supply chain system, and lay a solid foundation for supply chainmanagement.As at the end of the Reporting Period, the Group had a total of 2,059 supplierswith the following regional distribution:
Number of Suppliers by Geographical Region
2.1%
Southwestern China,
36.1%
Southern China,
37.8%
Eastern China,
9.4%
Northern China,
7.7%
Central China,
1.1%
Northeastern China,
0.3%
Overseas,
5.3%
Northwestern China,
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.1 SUPPLY CHAIN MANAGEMENT
Livzon strictly complies with relevant national and local laws and regulations. In accordance with GMP requirements andits actual situation, Livzon continuously establishes and improves internal supplier management systems to standardizesupply chain management, and conducts supplier entry, audit, assessment, and classification management. We keepimproving our supplier management system, consistently enhance the comprehensive and multidimensional managementlevel of the Group’s supply chain, and effectively fulfill our social responsibilities for suppliers, customers, and consumers.We have established a comprehensive performance evaluation system that covers each stage of supplier managementthrough comprehensive appraisal measures such as qualification confirmation, risk assessment, audit supervision, andevaluation. We improve our procurement management system based on the principles of openness, transparency, andstandardized management. In terms of audit and supervision, we have established a dedicated team to oversee supplierconduct through audits and annual comprehensive appraisal; furthermore, we have established a supplier complaintmechanism to encourage employees or other stakeholders to report any violations of the code of conduct by suppliers. Inaddition, we proactively cooperate with suppliers on resolving issues related to product quality and safety and ESG; weactively conduct supplier trainings, promote energy conservation and emission reduction in the supply chain, and providesupport for suppliers to improve themselves and obtain certification. In doing so, we are committed to building a healthy,green and sustainable supply chain.To further improve the overall management level of the supply chain, enhance procurement efficiency, and reduceprocurement costs, the Company formulated the Material Centralized Procurement System to regulate the managementprocess of centralized procurement activities during the Year. We actively conducted joint procurement of commonuse items and services. For example, the Company’s API business department strengthened strategic and centralizedprocurement of bulk materials to continuously enhance the stability and sustainability of the supply chain.The Code of Conduct for Suppliers (the “Code”) established by the Company sets forth standards of conduct for suppliersin different areas. It designates the Board as the highest responsible authority for overseeing the implementation ofthe Code, with the ESG Committee under the Board responsible for the day-to-day implementation, supervision, andperiodic review. To ensure the effective implementation of the Code, we continuously communicate its requirements tosuppliers at each stage of the procurement process. We conduct relevant training for cooperating suppliers, integrate therequirements of the Code into supplier audits, and build a multi-level supervision system to ensure that suppliers complywith the Group’s ethics and compliance standards. For suppliers who do not meet the requirements of the Code, we willurge them to propose correction plans and make corrections within a specified timeframe; if a supplier still fails to meetthe standards after correction, we will terminate the cooperative relationship with it. In addition, Livzon incorporatescompliance with the Code and ESG requirements as contractual terms, and specify in contracts that Livzon will conductannual comprehensive appraisal of suppliers, and implement the concept of sustainable development in the whole processof procurement management.The Company attaches great importance to collaborative development with suppliers. During the Year, we conductedtrainings on the Code for 327 suppliers. For suppliers who did not meet the provisions of the Code, we made promptcorrections and adjustments to ensure the stability and sustainability of our supply chain.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.1 SUPPLY CHAIN MANAGEMENT
(continued)
8.1.1 Entry management
Livzon strictly controls supplier entry standards. We select qualified suppliers in terms of product quality standards, testingand verification, process testing, stability, etc., and strictly control over the basic threshold of supplier entry. In additionto the necessary qualifications, we focus on the performance of suppliers in terms of system certification, operationcompliance, production qualification, etc. We also take suppliers’ ESG system development, social responsibility, andenvironmental protection into the scope of investigation. Under the same conditions, we give priority to suppliers certifiedto ISO management systems and EcoVadis and continuously increase the proportion of procurement from high-qualitysuppliers.According to different types of suppliers, we classify suppliers into suppliers of pharmaceutical raw materials and auxiliarymaterials, suppliers of immediate pharmaceutical packaging materials, and suppliers of pharmaceutical printing andpackaging materials, and we have defined the specific qualification requirements and certification documents by type ofsuppliers.
8.1.2 Classification of suppliers
To improve the quality delivery level of suppliers, the Group classifies suppliers into two categories: direct suppliers (tier 1suppliers) and indirect suppliers (tier 2 suppliers), with subclassification based on factors of procurement amount, materialcategory, risk level, irreplaceability, etc. of suppliers, and updates the list of supplier annual classification in the firstquarter of each year.
Diagram of Supplier Classification
All suppliers
Indirect suppliers(Tier 2 suppliers)
Critical indirect suppliersGeneral indirect suppliers
Direct suppliers(Tier 1 suppliers)
Critical suppliers
Key suppliersGeneral suppliers
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.1 SUPPLY CHAIN MANAGEMENT
(continued)
8.1.3 Supplier audit
To build a solid defense line for compliant procurement and product quality at source, Livzon has formulated andstrictly implements the internal supplier audit management system, and conducts audits from the dimensions of supplierqualification, staff composition, equipment and facilities, material management, production management, qualitycontrol and quality assurance, business ethics, human rights and labor, environmental protection, etc. The Companyincludes supplier EHS performance in the scope of audits to ensure that suppliers’ ESG performance meets the Group’srequirements. We specify the corresponding requirements of audit frequency and method according to the classification ofsuppliers, as shown in the following table:
Supplier classificationFrequency and method of audit
Tier 1 suppliersCritical suppliersNot less than 1 on-site audit every two years
Key suppliersNot less than 1 on-site audit every three yearsGeneral suppliersNot less than 1 written audit every three yearsTier 2 suppliersCritical indirect
suppliers
The enterprises shall require direct suppliers to conduct on-site audits oncritical indirect suppliers and confirm the completion of these auditsDuring the year, Livzon audited 639 tier 1 suppliers and 28 tier 2 suppliers. Specifically, 170 tier 1 suppliers and 9 tier 2suppliers were on-site audited, and 469 tier 1 suppliers and 19 tier 2 suppliers were desk audited. For issues identifiedduring audits, we have overseen suppliers’ remedies in a timely manner. The correction process includes analyzing auditdeficiencies, developing corrective plans, implementing corrective actions, inspecting and assessing correction results, andsummarizing and sharing correction experience. In the follow-up work, we also pay continuous attention to suppliers andpromote their ongoing improvement in comprehensive management level.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.1 SUPPLY CHAIN MANAGEMENT
(continued)
8.1.4 Annual comprehensive supplier evaluation
Strict periodic evaluation and review is fundamental to supplier management. The Company has established a soundannual comprehensive evaluation system for suppliers, with the supply chain, production, quality, risk control, EHS, andother departments conducting assessments from their respective professional perspectives. The evaluation is based onmulti-dimensional information such as audit reports and questionnaire surveys, which forms systematic appraisal results tobe submitted to the Company’s management for presentation and review.During the Year, to further build a green and sustainable supply chain, we strengthened our audit requirements in ares ofsupplier safety, environmental protection, occupational health, etc., thus reducing supply chain risks.According to the standards for annual comprehensive supplier evaluation, the Company classifies suppliers into four levels:
excellent, good, qualified and unqualified. For suppliers rated as excellent, we may consider increasing an appropriateprocurement volume as an incentive; for suppliers rated as unqualified, we will suspend procurement operations andrequest correction within a specified time limit. According to the monitoring and correction results, suppliers that meet therequirements will have their qualifications re-verified; conversely, if the correction is not timely or fails to meet standards,the suppliers will be disqualified and removed from the qualified supplier database after a process approval.The results of the annual comprehensive supplier appraisal will be an important basis for allocation of procurementshare in the following year. Each enterprise of the Group will make reasonable adjustments to the procurement share forthe current year according to business operation and the results of the annual comprehensive supplier appraisal for theprevious year.During the Year, we conducted an annual comprehensive appraisal for a total of 1,928 suppliers. The pass rate of theannual appraisal of suppliers was 99.7%.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.2 IMPROVEMENT OF SUPPLY CHAIN QUALITY
Livzon places high importance on supply chain quality management and makes every effort to ensure safe and reliableproduct sources. To improve supply chain quality, we are taking active measures, including seminars, trainings, on-siteguidance, and conclusion of strategic agreements, to work together with suppliers and achieve win-win cooperation.
Optimization of supply chain quality
The Company has a sound supplier audit system in place and clearly communicate our requirements to suppliers throughstandardized audit procedures. For any non-compliance identified during audits, the supplier is required to make timelycorrections. The results of these corrections are factored into the annual supplier assessment, which, in turn, influencesthe allocation of procurement shares for the following year.In addition, we regularly organize special seminars to share cutting-edge quality management concepts and practicalexperience with suppliers, seek their feedback, and discuss with them measures and strategies to improve product quality.We also conduct supplier quality training to communicate the Company’s quality standards, help suppliers optimize theirquality control systems, and actively assist suppliers in passing ISO and other certification standards.Before the release of new industry regulations and standards, we take the initiative to investigate suppliers’ understandingand implementation of relevant provisions, and timely conduct interpretation training when necessary; in case of materialsupply or quality abnormalities, the Company provides specific guidance and, when required, sends a technical team tooffer on-site support to ensure that problems can be corrected quickly.To achieve full-process information exchange and collaboration, we establish a multi-level cooperation mechanismwith suppliers, enter into strategic and long-term partnership agreements that clearly specify quality requirements andresponsibilities, and undertake to help suppliers improve their overall performance for a long time and consolidate mutualcooperation trust. Moreover, in managing the supply chain of traditional Chinese medicinal materials, we have beencommitted to the quality research for genuine medicinal materials, and has strengthened the construction of medicinalmaterial bases to ensure the quality stability of traditional Chinese medicinal materials from the very source.Ensuring the supply chain quality of traditional Chinese medicinal materialsThe Group has been committed to the quality research and base construction for genuine medicinal materials, andhas constructed traditional Chinese medicinal material bases through three models: self-construction, co-construction,and joint construction. During the Year, the Group worked together with medicinal material suppliers to construct 23key jointly built bases, involving 12 medicinal materials (including Isatis indigotica, Acorus tatarinowii, Pogostemoncablin, Curcuma aromatica, Forsythia suspensa, Rehmannia glutinosa, Anemarrhena asphodeloides, Lonicera japonica,Saposhnikovia divaricata, Panax notoginseng, Astragalus membranaceus, and Codonopsis pilosula), covering a total areaof over 27,000 mu, providing raw medicinal materials with uniform and stable quality for the production of key varieties.During the Year, the Group purchased over 3,329 tonnes of dried medicinal materials.We have 5,165-mu self-built and 1,320-mu jointly built medicinal material bases in Hunyuan County, 8,786-mu jointlybuilt standardized GAP (Good Agricultural Practice for Chinese Crude Drugs) bases in Tianzhen County and YanggaoCounty of Datong City in Shanxi Province – the genuine producing areas of Astragalus membranaceus; and 5,132-mujointly built Astragalus membranaceus GAP bases in Yulin City in Shaanxi Province. The area of our bases totaled 20,403mu. Without watering, fertilizing, or using pesticides, it is ensured at the source that high-quality and genuine Astragalusmembranaceus is produced.
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8.2 IMPROVEMENT OF SUPPLY CHAIN QUALITY
(continued)
Ensuring the supply chain quality of traditional Chinese medicinal materials(continued)In response to the significant decline in the resources of wild Acorus tatarinowii over the past few years, the Group has,in cooperation with a local pharmaceutical enterprise and under the technical guidance of the expert team of SichuanAcademy of Traditional Chinese Medicine, successfully built bases for Acorus tatarinowii cultivated in simulated wildconditions. The base area is planned to reach more than 4,000 mu in the next three years. In 2024, a 50-mu standardizedcultivation demonstration base of Acorus tatarinowii was jointly built in Wangcang County, Guangyuan City, SichuanProvince, and cleaning processing workshops were built simultaneously in the producing areas to enable standardizedprocessing. Furthermore, we will guide local farmers to expand the planting area in the future to ensure the uniform andstable quality of medicinal materials.At present, initial results have been achieved with these traditional Chinese medicinal material bases. While meeting theGroup’s needs, they can also be sold to stabilize the huge price fluctuations caused by supply and demand imbalances,etc., and supply the Group with raw materials of stable quality.As at the end of the Reporting Period, Livzon had completed the construction of a full-process traceability system and theQR code traceability management for the cultivation bases of 11 key medicinal materials. It is possible to check the entireprocess of medicinal material cultivation through a software platform and traceable QR codes, which ensures that thesources of traditional Chinese medicinal materials and their whereabouts can be traced and verified, and parties concernedcan be held accountable. As such, we have further improved the quality and safety of our TCM products and increased oursupply chain transparency.
Supplier training on quality
To control the quality risk of the supply chain, we conduct annual training on quality for all high risk suppliers of theGroup. The Group develops an annual supplier training plan every year and conducts trainings for suppliers in both onlineand offline forms by providing relevant materials to suppliers or by other means.We determine the training content according to the problems found in the process of the supplier appraisal and supplieraudit, so as to improve the training efficiency and effectiveness. The training content includes guiding suppliers to improvethe establishment of quality management systems, raise the level of process quality, and other ESG-related content, inorder to first raise awareness, strengthen internal quality, and jointly drive win-win cooperation within upstream anddownstream supply chains to achieve collaborative development.During the Year, the Group’s supplier trainings on quality covered all high risk suppliers of the Group.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.2 IMPROVEMENT OF SUPPLY CHAIN QUALITY
(continued)Supplier training on quality(continued)Case: Supplier training on quality? In July 2024, Pharmaceutical Factory organized trainings on quality, with participation from 3 critical
suppliers and 4 key suppliers, which further strengthened the suppliers’ understanding of Livzon’s qualityrequirements and helped improve the quality level of the supply chain.
? In April 2024, Livzon Diagnostics organized a special training for key suppliers. The training covered
interpretation of the latest industry laws and regulations, quality standard requirements, quality controlprocesses, etc., which further improved the suppliers’ understanding and implementation ability of qualitymanagement and ensured the overall quality level of the supply chain.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.3 ESTABLISHMENT OF CLEAN SUPPLY CHAIN
The Company has established various internal supplier management systems to promote the establishment of a cleansupply chain. All senior management of the Company, all management personnel at the deputy manager level or above ofeach subsidiary, and staff in key positions such as procurement, engineering, and EHS, have signed the Staff Commitmentfor Anti-Corruption and Anti-Commercial Bribery. During the Year, all (100%) of the Group’s employees signed the StaffCommitment for Anti-Corruption and Anti-Commercial Bribery.
External constraints and supervisionWe require all interested parties (including suppliers, service providers, contractors, clients, etc.) that have businessrelationship with the Group to comply with the Anti-Corruption and Anti-Commercial Bribery Regulations of the Companyand sign the Supplier Commitment for Operating with Integrity. As at the end of the Reporting Period, the signing rate ofthe integrity commitment by all the suppliers that have business relationship with the Group reached 100%.The Company’s Code of Conduct for Suppliers (the “Code”) requires all suppliers of the Group to comply with theCompany’s Anti-Corruption and Anti-Commercial Bribery Regulations, adhere to business ethics, and agree that theCompany has the right to conduct compliance reviews on them. In addition, to strengthen supplier integrity management,the Company has included integrity clauses in its contract templates, which require the counterparties to commit tooperating with integrity, comply with the Company’s relevant systems and ESG requirements, and cooperate with integritytrainings. If there is any violation, the Group has the right to terminate the contract. When signing a contract, suppliersmust sign the Supplier Commitment for Operating with Integrity. If there is any breach of commitment, the Group willdisqualify such suppliers and terminate the contracts, and will transfer those suspected of crime to the judicial organs. Theabove measures are effectively binding on counterparties in the legal form.We regularly evaluate suppliers performance of business ethics on an annual basis: There are no less than 4 evaluationsper year for critical suppliers, no less than 2 evaluations per year for key suppliers and no less than 1 evaluation peryear for critical indirect suppliers. The Group regularly conducts anti-corruption audits on critical suppliers, key suppliersand general suppliers, and subsidiaries report to the risk management head office. During the year, 187 suppliers wereaudited to ensure compliance. In addition, the Company conducts follow-up inspections of major construction projects ona quarterly basis, and also conducts random checks on bidding and procurement files, so as to ensure business complianceand avoid corruption.In daily operations, the risk control departments of each enterprise of the Group continuously monitor the procurementprocess and annually conduct trainings on business ethics such as anti-corruption for suppliers. During the Year, weconducted trainings on business ethics including anti-corruption for 504 tier 1 suppliers. At the same time, we requiredtier 1 suppliers to conduct trainings on business ethics such as anti-corruption for critical indirect suppliers.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.3 ESTABLISHMENT OF CLEAN SUPPLY CHAIN
(continued)External constraints and supervision(continued)Case: Provision of anti-corruption trainings for suppliers
? In 2024, Livzon MAB conducted a special training on the theme of anti-corruption and integrity for its
suppliers to clearly inform suppliers of integrity requirements, regulate the conduct of suppliers, andeffectively prevent the occurrence of commercial bribery and other corruption incidents. The training coveredsuppliers of productive materials, raw materials, auxiliary materials, and packaging materials. Suppliers wereassessed and required to sign a commitment to ensure that they understood and complied with relevantintegrity norms, so as to further improve the compliance awareness of suppliers and promote a healthybusiness environment.? During the Year, Livzon Diagnostics conducted anti-corruption trainings for 97 suppliers. In the anti-
corruption trainings for suppliers, Livzon Diagnostics introduced relevant anti-corruption laws andregulations to suppliers, explained the Company’s code of conduct of integrity and related systems, andhelped suppliers understand the integrity risks that may exist in various processes of cooperation with theCompany, such as rebates in the procurement process, risks of bid-rigging and collusion during bidding,risks of improper benefit transfer during the performance of contracts. Suppliers were also taught how toidentify these risks and establish effective internal control and supervision mechanisms to prevent them,thus enhancing their integrity awareness and response ability in practical operations.Internal regulation and management
While regulating the conduct of suppliers, we also strictly regulate internal management and processes. We haveestablished a full-process management system of “ex ante involvement, ad interim control and ex post supervision”, andhave fully launched a digital supplier management platform – the Supplier Relationship Management system to track,manage and trace the whole process of procurement business. These internal management measures can effectivelyprevent the risk of malpractice in the supplier management process, ensure fair and equitable procurement, and solidlypromote the Group’s establishment of a clean supply chain.
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8.4 ENHANCEMENT OF SUPPLY CHAIN STABILITY
Supply chain risk assessment is an essential component of Livzon’s supply chain management. We conduct comprehensiveassessment and control of supply chain risks to minimize supply chain risks, classify suppliers according to their risk levels,and develop targeted precaution mechanisms, preventive measures and risk treatment plans, so as to ensure the stabilityand security of the supply chain and effectively resist systemic risks in the supply chain.According to the requirements of the Company’s internal systems, the Group regularly conducts supply chain riskassessment of its direct suppliers and critical indirect suppliers every year. The assessment includes at least the following14 indicators:
Impactof climate
changeInternational
tradeenvironmentand impactImpact ofinternationalfinance andexchange rate
Impact ofmajor unexpected
events
Impact ofsocial events
Impact offestivals
Impact ofbusiness ethics
Impact ofworkers’human rights
EnterprisequalificationEnterprisefinancial
status
Enterprisebusinessenvironment
Enterpriseproduct qualityand service
Indicators ofSupply Chain Risk
AssessmentImpact ofenvironmental,occupationalhealth, and safety(EHS)Impactof nationalenvironmentalprotectionregulations andpolicies
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
8.4 ENHANCEMENT OF SUPPLY CHAIN STABILITY
(continued)According to the supply chain risk assessment results, we categorize suppliers into three levels of high risk, mediumrisk and low risk. For high-, medium-, and low-risk suppliers, the Group formulates corresponding contingency plansfor emergencies and principles of response measures. During the Year, we conducted a supply chain risk assessmentcombining both qualitative and quantitative analysis across the above 14 assessment dimensions. Overall, our suppliersperformed well, with only 1 rated as high risk.In addition, we have specified the responsibilities of each department of the enterprises for the management of supplychain risks, and developed feasible supply chain risk assessment principles, control procedures, and response measuresfor each type of risks. Meanwhile, we require each enterprise to prepare an Annual Supplier Risk Assessment Report eachyear to build a full-process, systematic, and effective risk control system, thereby ensuring the stability and security of thesupply chain.
Supply Chain Risk Control Process of Livzon
Selecting key materials
Creating templates
Making judgment
Case closed
Conducting regular supply chain risk
assessment as required
Adjusting the supply plan based
on risk assessment results
Following up and feeding back on delivery
Formulating a risk handling plan
Organizing a special team and
developing handling strategies
Regularly following up on completionof the risk handling plan
Emergencies/Market abnormalities
No
Yes
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8.4 ENHANCEMENT OF SUPPLY CHAIN STABILITY
(continued)For general supply chain risks and special supply chain risks, we have established appropriate response measures,respectively, as described below:
? General response measures:
Establish and improve dual sourcing plans, and build back-up manufacturing sites;Strengthen communication and sign long-term agreements with suppliers, and ensure priority in thedelivery of materials; urge suppliers’ performance of procurement agreements, and, when necessary, assignpersonnel to their plants for this purpose;Actively develop new suppliers to avoid exclusive supply, optimize supply chain distribution, and reasonablyallocate the proportion of imported and domestic materials; Regularly investigate the price trend of bulk key materials; Carry out regular visits to suppliers to understand the production and operation of suppliers;Develop and deploy suppliers for key varieties in advance, and promote the quality improvement ofalternative suppliers;Try the best to ensure the availability of at least 2-3 qualified suppliers in different regions for each type ofmaterial.Strengthen the technical support for suppliers’ EHS management and reduce the risk of environmentalregulations.? Specific response measures:
For key materials involved in key products, formulate supplier supplementation plans, and develop anddeploy suppliers in advance;For materials supplied by high-risk suppliers, adopt a safe inventory strategy by establishing a reasonableinventory (to meet the production needs of six months or up to one year) and carrying out dynamicmanagement;For exclusively supplied materials that cannot be replaced temporarily, increase the frequency of on-siteaudits or jointly build bases to urge the supply and ensure product quality, so as to reduce supply risks;For suppliers of materials with a long order cycle (such as imported materials), sign annual long-term
agreements with them to ensure annual supply;Develop futures hedging business to hedge the risk of price fluctuations of bulk materials such as cornstarch and glucose, and to stabilize procurement costs.
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8.4 ENHANCEMENT OF SUPPLY CHAIN STABILITY
(continued)We continue to increase the number of suppliers of key materials and expand our supplier poor by actively seeking newsources. In 2024, we added 127 new suppliers of key materials, further improving the stability of the Group’s materialsupply.During the Year, the Group conducted risk assessments for 1,746 suppliers and identified 1 high-risk supplier. To preventstock-outs, the Company added new supply channels. There was no production delay caused by supply chain interruptionsthroughout the Year, which provided strong assurance for the Company’s stable development and improved marketcompetitiveness.
8.5 GREEN AND SUSTAINABLE SUPPLY CHAIN
Livzon highly emphasizes green development in its supply chain, taking active social responsibility and integrating ESGmanagement concept into the supplier management system. We continuously improve the ability of the supply chain tocreate environmental and social value through systematic assessment and control.For the process of supplier selection and appraisal, the Group has established an ESG evaluation mechanism, whichintegrates environmental performance, social responsibility, and other indicators into the comprehensive assessmentsystem of suppliers, with the results of comprehensive assessment linked to procurement decisions. We also conduct EHSaudits on suppliers, enter into green management agreements with suppliers, and set out green development requirementssuch as energy conservation and emission reduction. As at the end of the Reporting Period, we had conducted ESGassessments of all suppliers to ensure that their production and operations comply with Livzon’s green managementstandards.
8.5.1 Supplier EHS audit
To better practice ESG concept in supply chain management, the Company has formulated a supplier EHS audit system.The audit results may influence the allocation of procurement shares in the following year, creating an effective incentiveand constraint mechanism that encourages suppliers to continuously improve their ESG management levels.The specific requirements for managing and conducting supplier EHS audits are as follows:
? Basic principle: EHS audit must be included in the annual supplier audit plan;? Audit scope and frequency: consistent with the requirements of supplier audit. For details, please refer to the
relevant content of “8.1.3 Supplier audit” in this chapter;
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8.5 GREEN AND SUSTAINABLE SUPPLY CHAIN
(continued)
8.5.1 Supplier EHS audit
(continued)
? Audit content: It mainly includes the implementation of the “three simultaneous” system, energy conservation
and emission reduction, compliance with discharge requirements of pollutants, the ISO system certification, etc. Inparticular, the audit targets of energy conservation and emission reduction are as follows:
o 1.5% decrease in water consumption per RMB10,000 of output value for the next fiscal year, compared
with this fiscal year;o 1.5% decrease in electricity consumption per RMB10,000 of output value for the next fiscal year, compared
with this fiscal year;o 1% decrease in COD emissions per RMB10,000 of output value for the next fiscal year, compared with this
fiscal year;o 1% decrease in sulfur dioxide emissions per RMB10,000 of output value for the next fiscal year, compared
with this fiscal year;o Amount of hazardous waste to be treated in the next fiscal year not exceeding that in the current fiscal
year, and meeting national standards and regulatory requirements.? Audit methods and process: written or on-site audit; upon completion of the audit, prepare an annual audit report
of the supplier, and submit it to the Company’s production technology head office for reporting and review.
8.5.2 Sustainable procurement
Livzon has been active in the promotion of sustainable procurement to facilitate the establishment of a green supplychain. All manufacturing enterprises of the Group have established the Administrative Procedures for Energy Conservationand Emission Reduction for Suppliers, which impose appraisal requirements related to energy conservation and emissionreduction on all critical suppliers of the Group. Please see the following for details:
? Evaluation targets: Set specific plans and appraisal targets for suppliers according to their actual situation. Please
see the following for details:
o 1.5% decrease in water consumption per RMB10,000 of output value for the next fiscal year, compared
with this fiscal year;o 1.5% decrease in electricity consumption per RMB10,000 of output value for the next fiscal year, compared
with this fiscal year;o 1% decrease in COD emissions per RMB10,000 of output value for the next fiscal year, compared with this
fiscal year;o 1% decrease in sulfur dioxide emissions per RMB10,000 of output value for the next fiscal year, compared
with this fiscal year;o Amount of hazardous waste to be treated in the next fiscal year not exceeding that in the current fiscal
year, and meeting national standards and regulatory requirements.
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8.5 GREEN AND SUSTAINABLE SUPPLY CHAIN
(continued)
8.5.2 Sustainable procurement
(continued)? Appraisal cycle: Suppliers shall submit a report on the results of energy conservation and emission reduction to
the Group every six months, and the Group shall conduct annual appraisal of suppliers and continuously track theimprovement of suppliers.? Appraisal results: The results of the annual appraisal will be included in the annual comprehensive supplier
appraisal and used as an important basis for the allocation of procurement shares in the following year.We pay continuous attention to suppliers’ performance in energy efficiency and utilization of renewable energysources. We actively provide professional guidance, technical assistance, and ESG related trainings to help improve ESGmanagement performance, assist in obtaining relevant certifications and achieving energy conservation and emissionreduction targets, so as to jointly promote green development. Meanwhile, in specific practice, we urge suppliers to adoptadvanced process equipment, promote the application of clean energy, strengthen the recycling of water resources, andregularly track and assess their energy conservation and emission reduction effects. Moreover, by optimizing supply chaindistribution, we reduce energy consumption in logistics processes, continuously improving the operation efficiency of thesupply chain.During the Reporting Period, the Group made collaborative innovation with suppliers on emission reduction projects,jointly created a green and sustainable industrial ecosystem, and pushed suppliers to make progress in energy conservationand emission reduction, thus laying a solid foundation for achieving a low-carbon transformation of the supply chain.ESG empowerment for suppliers
We are actively engaged in ESG empowerment for our suppliers and improve suppliers’ ESG management levels byproviding systematic trainings and technical guidance. Meanwhile, we conduct special training courses for personnel inprocurement, EHS, ESG, and other related positions within the Group to ensure that they master and effectively implementsupplier ESG management requirements and promote the implementation of the supply chain sustainability strategy.
8.6 DRIVING INDUSTRY DEVELOPMENT
Livzon actively participates in the activities of industry associations, and now becomes formal members and holdspositions such as vice-chairman, executive director and board member of several associations. By providing assistance inthe development of industry standards, delivering academic presentations, preparing teaching materials, and participatingin seminars, industry conferences and forums, we share practical experience in the industry and contribute professionallyto the high-quality development of the pharmaceutical industry.
Case: Participation in intelligent manufacturing seminars
In August 2024, China Pharmaceutical Enterprises Association organized a seminar on “Digital Empowermentin Pharmaceutical Supply Chain Management” in Zhuhai, aiming to improve the level of digital supply chainmanagement of pharmaceutical enterprises. The Company actively participated in the event of the association andinvited representatives from more than 50 participating enterprises to visit our factory. We engaged in discussionsand sharing with these representatives on the Company’s supply chain informationization and management andreceived unanimous praise from the enterprise representatives, which was inspiring and exemplary for improvingthe digital development of the industry supply chain.
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8.6 DRIVING INDUSTRY DEVELOPMENT
(continued)Livzon’s Formal Membership in Industry-Wide Associations (Partial)
? Pharmaceutical Supply Chain Quality Branch of ChinaQuality Association for Pharmaceuticals? World Federation of Chinese Medicine Societies? Specialty Committee of Multidimensional Evaluation onGenuine Medicinal Materials of the World Federation ofChinese Medicine Societies? China Pharmaceutical Enterprises Association? China Chamber of Commerce for Import and Export ofMedicines and Health Products? China Association of Traditional Chinese Medicine? Price Association of China? China Pharmaceutical Industry Association? China Association for Public Companies? Specialty Committee of R&D and Manufacturing ofTraditional Chinese Medicine Classical Prescriptions ofthe China Association of Traditional Chinese Medicine? Specialty Committee of Child Health and Drug Researchof the China Association of Traditional ChineseMedicine? China Ethnic Medical Association – Inheritance andRational Drug Use Working Committee? China Food and Drug Corporation Quality and SafetyPromotion Association? Professional Committee of Traditional ChineseMedicinal Materials Cultivation of the China Associationof Traditional Chinese Medicine
? Guangdong Association for Quality? Specialty Committee of Qualified Persons in
Pharmaceutical Manufacturing of the GuangdongPharmaceutical Association? Pharmacovigilance Alliance of the Guangdong
Pharmacological Society? Guangdong Pharmacological Society? Sichuan Pharmaceutical Industry Association? Sichuan Traditional Chinese Medicine Development
Promotion Association? Specialty Committee of Dose-Effect Study of
Prescriptions, Sichuan Provincial Association of Chinese
Medicine? Sichuan Medical and Health Products Cosmetics Quality
Management Association? Pengzhou Medical and Health Industry Development
Promotion Association? Pengzhou Enterprise Federation? Guangdong Bio-pharmaceutical Innovation Technology
Association? Guangdong Food & Drug Technology Association for
Evaluation & Certification? Guangdong Province Pharmaceutical Industry
Association? Guangdong Association of Traditional Chinese Medicine? Guangdong Medical Price Association? Guangdong Medical Association? Guangdong Preventive Medicine Association? Guangdong Association of Circular Economy and
Resources Comprehensive Utilization? Alliance for R&D and Technological Innovation in
Vaccines for Emerging Infectious Diseases? Zhuhai Preventive Medicine Association? Zhuhai Management Association of Precursor Chemicals? Guangdong Drug Compliance Insurance Organization? Shanghai Pharmaceutical Profession Association? Fuzhou Pharmaceutical Association? Zhuhai Management Association of Precursor Chemicals
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TAKE HUMAN ASTHE FOREMOST
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Livzon values talents, upholds the talent philosophy that “Employees arethe most valuable resource, and high-caliber talents are the most importantassets”, and actively expands the channels for talent introduction. Regardingthe building of talent team as the foundation of development, we haveestablished a scientific and systematic talent training system to provide eachemployee with tailor-made career development channels and help them reachtheir full potential. Furthermore, we prioritize employee health and safetyby continuously improving occupational health and safety management andprotecting the growth of employees throughout their stay with us. Togetherwith our employees, we go on a new journey of sustainable development of theCompany.
9.1 EMPLOYMENT
Livzon always considers high-quality talents as the core competitiveness forcorporate development. We are committed to protecting the legitimate rightsand interests of employees, standardizing employee recruitment and employmentprocesses, improving the employment management system, and eliminatingany form of discrimination or harassment, so as to create a diverse, equal, andliberal working environment for staff.As at the end of the Reporting Period, the Group had a total of 9,067employees (31 December 2023: 8,933 employees).
Livzon’s Number of Employees in 2024
By Gender4,764Maleemployees
Livzon’s number of employees by gender in 2024
Livzon’s number of employees by function in 2024
Livzon’s number of employees by age in 2024
Livzon’s number of employees by educational attainment in 2024
4,303
Femaleemployees
By Age
3,183
30 and below
5,306
31 - 49
50 and above
By Educational
Attainment
2,837
2,7772,927
Less than acollege diploma
CollegediplomaUndergraduate
MasterDoctorBy Function1,8341,130
5,376
Sales staffTechnical staff
Productionstaff
Financial staffAdministrativestaff
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9.1 EMPLOYMENT
(continued)
9.1.1 Compliant employment
The Group strictly comply with the Labor Law of the PRC, the Labor Contract Law of the PRC, and other relevantnational and local laws and regulations. It also follows the ten principles of the United Nations Global Compact (the“Ten Principles”) and the core conventions of the International Labor Organization (the “Core Conventions”), andother external human rights related demand, and the Company formulated relevant compliant employment system andguideline. In particular, the Company’s Code of Labor Employment and Ethical Conduct covers the Ten Principles, theCore Conventions, and other external human rights related demand, so as to regulate the management of the Group’semployment practices and ensure compliance, fairness and transparency of recruitment and employment procedures.The Group ensures that the recruitment and employment procedures comply with the requirements of laws and regulationsand are implemented in a fair and transparent environment, so as to protect the legitimate rights and interests ofcandidates while selecting talents. The Group forbids the recruitment and employment of minors under the age of sixteenand is against compulsory labor. No unit shall force employees to labor by means of violence, threats or illegal restrictionson personal freedom.For procedural compliance, the Group strictly follows a sequential process during recruitment, which includes publicationof recruitment information, collection of resumes, resume screening, written tests, interviews, background checks, andoffer of employment to ensure that there are clear operating norms and standards for each step. Once an individual isselected for employment, the Group enters into a labor contract with the employee within the stipulated time frame,clearly defining the rights and obligations of both parties.For fairness and transparency, the Group’s recruitment information is comprehensive, open, and transparent. Jobadvertisements, whether published on the Company’s official website, recruitment platform, or other collaborativechannels, describe information such as job responsibilities and qualifications. For resume screening, written tests,interviews, and other steps, unified and clear selection criteria have been established.In 2024, Livzon did not experience any incidents of using child labor or compulsory labor; there were no incidents ofwalkout, shutdown or factory closures aimed at compelling workers to accept new compensation or working conditions;the Company’s human resource head office inquired about the labor employment management and complaints ofsubsidiaries. Over the past three years, there have been no major layoff, nor have there been major merger or acquisitionaffecting the majority of the Group’s employees. During the Year, the Group was involved in six labor dispute cases, ofwhich two were ruled in favor of the Company, three were settled through mediation, and one was concluded with aneffective and enforced judgment. The Group terminated its labor contracts through amicable negotiations and mutualagreement whenever dismissing employees.
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9.1 EMPLOYMENT
(continued)
9.1.1 Compliant employment
(continued)Flexible employmentFor the management and care of workers in flexible employment, the Company adheres to a people-oriented approachand fully implements protection to build harmonious cooperative relationships. Through the following measures, theCompany provides reliable protection and development opportunities for workers in flexible employment to achieve amutually beneficial result for both parties.For standardized employment, the Company enters into a written agreement with each worker in flexible employment toreasonably define the rights and obligations of both parties. This guarantees the rights and interests of workers in flexibleemployment, such as fair treatment, and clarifies their responsibilities such as completing tasks on time, thus establishinga solid legal foundation for the cooperation.For remuneration, the Company scientifically determines the workload and labor intensity of workers in flexibleemployment and ensures that labor remuneration is paid on time and in full.For safety assurance, the Company prioritizes the safety and health of workers, improves work safety conditions, andequips them with protective equipment and labor protection supplies. The Company strengthens training on safetyawareness, protection knowledge, etc. to improve the safety awareness and emergency skills of workers in flexibleemployment.Human resource (“HR”) related honors and issuing authorities over the past three years
Name of AwardIssuing AuthorityChina Preferred Employer of the Year 2023
Center for Social Investigation and Research, PekingUniversity & Zhaopin.comFirst Harmonious Labor Relations Enterprises in JinwanDistrict, Zhuhai in 2023
Human Resources and Social Security Bureau of JinwanDistrict, Zhuhai; Federation of Industry and Commerceof Jinwan District, Zhuhai; Federation of Labor unions ofJinwan District, ZhuhaiThe 5th Cloud Atlas Award for 2023 – Digital EnterpriseLearning and Development Talent – Excellence Award
Jiangsu Yunxuetang Network Technology Co., Ltd., Instituteof Organization and Talent Development, CEIBS BusinessReview2023 Model Worker’s Home of FuzhouFuzhou Federation of Labor unionsHarmonious Labor Relations Enterprise of Fuzhou
Human Resources and Social Security Bureau of Fuzhou,Fuzhou Federation of Enterprises and Entrepreneurs, FuzhouFederation of Labor unions, Fuzhou Federation of Industryand Commerce2023 Worker Pioneer AwardGuangdong Provincial Federation of Labor unions2022 Top 10 Doctoral and Postdoctoral InnovationDemonstration Platforms in Zhuhai
Human Resources and Social Security Bureau of Zhuhai
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9.1 EMPLOYMENT
(continued)
9.1.2 Diversity and inclusion
Livzon understands that the diversity and differences of its employees are the most valuable assets of the Company andalways treats every employee with respect and appreciation. We are committed to creating a warm and caring workenvironment where every employee feels accepted and respected. At the same time, we build a broad and promisingcareer development platform for employees, providing equal opportunities for them to fully showcase their talents,maximize their personal value, and progress hand-in-hand with the Company.The Company’s ESG committee is responsible for reviewing the diversity system, surpervising the Group’s overall diversityperformance, and discussing future plans. The human resource head office of the Company regularly reviews theimplementation of the Group’s diversity work, and counts and collects relevant quantitative data. It also prepares diversityreports and submits them for review to the ESG committee to ensure the proper progress of diversity related work.
2021202220232024
50.00%
45.00%
47.50%
42.50%
40.00%
4,5004,2504,0003,7503,500
4,3034,088
4,277
4,230
47.46%
47.70%47.50%
47.35%
Total number of female employeesPercentage of female employees (%)
Livzon’s Employee Distribution by Gender from 2021 to 2024
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9.1 EMPLOYMENT
(continued)
9.1.2 Diversity and inclusion
(continued)Diversity measures
We actively promote diversity and inclusion in our hiring and day-to-day operations, and implement diverse incentives:
Hiring and employmentWe carry our hiring activities in the principle of fairness, impartiality and openness. We recruit and assign talent based onjob qualifications and candidate’s ability, regardless of gender, age, ethnicity, race, nationality, religious belief, and otherbackground.The Company strengthens the management of hiring information. Our job postings include various diversified welfareand describe only the job qualifications and skill requirements. At the stages of screening of resumes by human resourcedepartment, decision making by employing department, etc., we minimize barriers to diversity and avoid imposing higherand more employment requirements on women than men.Day-to-day managementWe believe the degree to which diversity is valued by management is a key driver of diversity.We ask management officers to lead by example, be proactive in creating a diverse and liberal work environment, and payreal attention to the needs of staff, so that every employee can truly feel the humanistic care of the Company. We providetargeted training for management officers of diversity to provide guidance on practical actions which managers can takein actual management and enhance their leadership skills.Training and activitiesIn our day-to-day operations, we strive to create a diverse work environment where all types of staff feel accepted andrecognized. We cultivate awareness of diversity and pluralism and build a corresponding cultural philosophy. To this end,we carry out activities and training for our staff of diversity to enhance their understanding of diversity and create a liberalworkplace atmosphere.During the Year, we provided diversity training for 98% of our employees. Employee satisfaction with the training reached
89.4%. The training covered the essence and mechanisms of diversity, the importance of diversity, personal exploration
and action on diversity, etc., so as to achieve the effective dissemination of the concept of diversity.
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9.1 EMPLOYMENT
(continued)
9.1.2 Diversity and inclusion
(continued)Diversity measures(continued)
Welfare and holidaysWe strictly observe the Special Regulations on Labor Protection of Female Staff and specify in the employment system thatfemale staff are entitled to special leaves such as paid marriage leave, maternity leave, and breastfeeding leave. Also,we have set up well-equipped mother-and-baby rooms to support female staff returning to work after giving birth, andprovide paternity leave for male staff. We have added special items such as breast cancer screening and cervical cancerscreening to the medical check-up of female staff over 35 years to better protect their health and give them full care.We respect the customs and culture of our foreign staff and minority staff. In addition to the Company’s holidays, weensure that they enjoy their respective ethnic cultural festivals.Anti-discrimination and anti-harassmentThe Group has zero tolerance for discrimination, rejects all acts of discrimination and prejudice, and strictly forbids anyform of harassment in the workplace. We do our best to identify discrimination and harassment and have a clear processfor reporting complaints and remedial or punitive measures for discrimination and harassment. To this end, we encouragerelevant personnel to report instances of discrimination and harassment to their supervisors or the human resourcedepartment as soon as possible so that we can investigate and tackle them to reduce future instances.Where discrimination and harassment do exist after investigation, we will communicate with the involved staff andactively take measures to remedy their violations. For all kinds of violations, we will judge according to the severity ofthe misconduct and implement measures such as warnings, demerits, and termination of labor contracts according toregulations. Suspected offenders, in particular, will be transferred to the relevant judicial organs for serious treatment.
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9.1 EMPLOYMENT
(continued)
9.1.2 Diversity and inclusion
(continued)Diversity measures(continued)
Case: Diversity training for the managementIn October 2024, the Company carried out a special training on “Diversity of the Management” for the managementthrough an online format, which involved all managers of the Group. The training covered DEI concepts, the impactof diverse cultures, diversity management in corporate governance, etc. This training effectively helped managersdeeply recognize the importance of diversity to the enterprise, better understand and respond to the challenges ofdiversity, and implement the philosophy of diversity in their work.
Data: Training participation rate of female staff
? Fresh graduate training: 68% for female staff? Intern training: 56% for female staff? Employee growth training: 48% for female staff? Career enhancement training: 48% for female staff
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9.1 EMPLOYMENT
(continued)
9.1.2 Diversity and inclusion
(continued)
Diversity measures(continued)
Case: Diversity events? Embroidery workshop – “Stitching feminine grace, weaving a better life”
To reflect the Company’s deep care and respect for female compatriots, enrich their leisure cultural life,and enhance team cohesion, Shanghai Livzon specially planned the embroidery workshop of “Stitchingfeminine grace, weaving a better life” in 2024. This unique embroidery event not only allowed participantsto appreciate the profound cultural heritage of traditional Chinese embroidery, but also showcased thewisdom and elegance of women in the new era through the interweaving of needles and threads. Thisevent aimed to let female staff experience the charm of traditional culture through learning and practicingtraditional handicrafts amid their busy work schedules, demonstrate their delicacy and talent, and promotethe communication and understanding among colleagues, thus collaboratively creating a harmonious andwarm corporate culture atmosphere.? Greetings on the International Women’s Day
As the 2024 International Women’s Day approached, Pharmaceutical Factory extended holiday greetings toall female staff and presented each of them with a small gift and a greeting card. This event aimed to allowstaff with different cultural backgrounds to feel the warmth and care of the company, create a positiveorganizational atmosphere, and demonstrate the company’s diversity and pluralism and its corporate cultureof “happy life, happy work”.? Women’s Day themed event
In March 2024, Ningxia Pharma held the Women’s Day themed event of “Spring blossoms, March and you”,where female staff showcased their charm through the craft of making round fans. Additionally, female staffplayed games such as life-size Monopoly to enhance the festive atmosphere and strengthen interpersonalrelationships. At the end of the event, their received flowers and exclusive Women’s Day walfare. This eventembodied the concept of gender equality, promoted understanding, respect, and cooperation betweengenders, and contributed to building more harmonious social relationships.
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9.1 EMPLOYMENT
(continued)
9.1.2 Diversity and inclusion
(continued)Diversity measures(continued)
Case: Anti-discrimination trainingIn October 2024, the Company provided online and offline training for all staff of the headerquarters on anti-discrimination, harassment, and gender equality. The training not only elaborated on the definitions and types ofdiscrimination and harassment but also listed manifestations of discriminatory and harassing behaviors in personallife and work. It aimed to regulate individual workplace behavior and collectively create a fair and harmoniousatmosphere.With a satisfaction rate of 88%, staff offered many suggestions on related work. We will take improvement actionsbased on these suggestions, trying best to create an equal and liberal working environment for staff.Diversity of the Board
The Company deeply recognizes and values the critical role of a diverse Board in its corporate development and regardsBoard diversity as one of the core elements in maintaining competitive advantages and driving long-term development.According to the requirements of the Board Diversity Policy, the Company takes into account diversity related factors suchas gender, age, cultural and educational background, professional experiences, skills and knowledge, race and ethnicitywhen appointing Board members. On this basis, the Company shall make decisions based on objective conditions such ascomprehensive values a candidate can deliver to the business and development of the Company, contributions a candidatecan make to the Board while ensuring the diversity of the Board, and make sure that the Board includes at least onefemale member to achieve gender diversity in the Board. The nomination committee is responsible for reviewing the Boarddiversity policy on an annual basis to ensure that it is working effectively.The Company’s Board has a balanced and diverse composition, composed of 11 members aged between 42 and 69years, including one female director. The Board members have diverse professional backgrounds and extensive industryexperience, including accounting professionals, domestic and international lawyers and individuals experienced inenterprise management. Their knowledge structure and areas of expertise are both professional and complementary to theBoard, providing forward-looking, scientific and feasible opinions on the Group’s regulatory governance and major policydecisions.
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9.1 EMPLOYMENT
(continued)
9.1.3 Retention of talent
Livzon actively implements talent retention of projects and tries its best to reduce employee turnover from various aspectssuch as remuneration and welfare, education and training, and employee communication. During the year, the employeeturnover of the Group was 10.38% (2023: 13.45%).
Talent retention measures? Establish an employment mechanism in which competition is fair, the competent are elevated and the
mediocre are demoted, and create a positive working atmosphere;? Establish an early warning mechanism for employee turnover;? Provide staff with competitive remuneration and welfare, and give incentive bonuses in line with job
characteristics;? Strengthen onboarding training for new staff to help them better understand their duties and fit into the
workplace;? Identify high potential and key talents, and provide appropriate support in processes such as promotion;? Analyze staff’s needs and try to meet them, and assist staff in solving difficult problems;? Actively improve the working environment, address their concerns about the working environment, and
create an activity center that staff enjoy, providing a foundation for happy work and happy life.
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9.2 TALENT MANAGEMENT
Focused on talent development, Livzon has made continuous efforts to strengthen talent development scheme andoptimize the talent management model, and has improved the efficiency of human resource management by utilizingscientific and technological means such as human resources information-based systems. For talent groups in differentfields, we develop targeted training plans and strive to build a professional and innovative workforce as a core competitiveedge for Livzon’s development.
9.2.1 Employee training
Livzon believes that adequate training resources are a solid foundation for staff to achieve personal development. TheGroup uses the Livzon Business School as its core platform to build an all-round and diversified employee training system,empowers staff on demand through a learning model that combines online and offline forms and full integration ofinternal and external resources, and continuously stimulates organizational vitality. In accordance with the internal system,we standardize training management and complete internal and external training supporting resources in order to ensurethe full-process and routine operation of training projects, systematize and institutionalize employee training, and keepbuilding a workforce that matches business development needs.During the Year, we provided employees with all-round and multi-dimensional training, including general training andprofessional skills training. The training projects were rich and diverse. During the Reporting Period, each employee of theGroup had an average of 102.3 training hours.Onboarding training
The Group meticulously planned the training project for new staff and implemented a “180-day tracking project”.The project was built on 70-20-10 (721) rule, namely, 70% of learning comes from on-the-job practice, 20% fromcommunication, sharing and interaction with others, and 10% from in-class training. We carried out 8-levels of trainingcourses for staff to help them equip with a thorough knowledge of the Company’s core values, adapt to job requirementsand master job skills as soon as possible.When the new staff’s assessment expired, we carried out one-on-one and face-to-face communication and guidance onthe training situation, job responsibilities and performance assessment for them during the assessment period, so as totimely understand their feedback and provide incentives such as early transfer, promotion and salary adjustment to thosewith good performance.
Case: Graduate training
In 2024, the Company designed a year-long training project in three stages under the theme of “Welcoming NewTalents at Livzon: Creating a Bright Future Together for the Pharmaceutical Industry” for graduates, following theconcept of “1-2-6 graduate growth Ladder”. Centered around aspects such as cultural systems, role transitions,and competence enhancement, the project comprised offline intensive training, outdoor development, onlinefragmented learning sessions, offline one-on-one mentorship, and debriefing and mentor evaluation to help staffdeeply understand the Company’s values and business strategies.
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9.2 TALENT MANAGEMENT
(continued)
9.2.1 Employee training
(continued)Training for business positionsThe Group formulates annual training plans for each business department based on the Company’s development objectivesfor the Year and the previous year’s performance assessment results. Business departments (such as production, sales, andR&D) provide business position-specific professional knowledge training for staff based on the annual training plans andthe evolving needs of business development, so as to deeply align the growth of staff with the development needs of theCompany.? Research and development positions: carry out technical guidelines, experimental skills, pharmaceutical regulations
and other skill upgrading courses;? Production positions: carry out hands-on training on safe production, process regulations, machine operation and
other knowledge;? Sales positions: carry out product knowledge, compliance promotion, communication skills and other skill
upgrading courses.In addition, each department has a specific training fund in its annual budget so that staff can attend external professionalskills training according to business needs.
Case: Training for research and development positions
In 2024, the Company’s research institute carried out training for staff in the R&D system on SOP, laboratorymanagement procedures, equipment and instrument operation skills, etc. to improve their experimental and dataanalysis skills. Training methods included hands-on practice, course training, corporate mentoring and coaching,practical drills, written assessments, skills competitions, etc. The number of participants was 106, and the trainingduration was 1,796.5 hours.
11 Socialcontributions10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.1 Employee training
(continued)Management and leadership training
To drive the steady development of the Company, Livzon always attaches importance to the improvement of managementability and strives to build a high-caliber management team to inject strong impetus into the development of theenterprise. We continued to empower managers, improve the capability model of key positions, and carried out variousforms of management training to help staff acquire a wealth of management knowledge and thus improve the corporatemanagement level.During the Year, the Company continued to maintain and update the talent advancement system, including Young LeadersProject, learners’ growth tracking, and other key tasks. In the meantime, the Group promoted and increased the salariesof top-performing staff in terms of overall ability and professional skills, and regularly assessed their performance andprogress and provided responses and suggestions to aid their continuous growth and skill enhancement.We provided diverse management training for junior staff, executives, junior management, middle management and seniormanagement to enhance management effectiveness. During the Year, the total duration of management and leadershiptraining of the Group amounted to approximately 107,555 hours, involving 4,683 staff, of whom 47.03% were femalestaff.
Cases of management and leadership training? During the Year, to discover and cultivate a group of talented young managers with potential to support
the strategic and business growth of the enterprise, the Company continued its second Young LeadersProject, and a total of 35 persons successfully completed their studies. Courses included next-generationmanagement, scientific decision making and leadership, time management and productivity improvement,lean and fine management introduction, etc.To effectively measure the learning outcomes of staff, we provided case discussions, after-class assignments,and examination and evaluation during the training, achieving a 100% participation rate in case discussionsand assignment completion. The Young Leaders Project improved the leadership awareness of the studentsand effectively developed their abilities to efficiently complete tasks, delve into research, and innovateboldly, laying a solid foundation for Livzon to reserve versatile and compound talents.? In 2024, Sichuan Guangda carried out training for executives on topics such as “Self-Management and
Time Efficiency Management for Managers”, “How to Analyze and Solve Problems”, “How to ManageCommunication and Cross-departmental Collaboration”, and “How to Use ChatGPT for EfficiencyManagement”.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.1 Employee training
(continued)Management and leadership training(continued)Case: Employee development projectLimin Factory
(1) Project name & description: “Lean Operations Management System LPS-II” project
(2) Target/Commercial value of the project: To clarify and refine the responsibilities of workshop managers;
optimize and integrate workshop management process forms for standardized daily operations; establishprocess standards for the selection of team leaders; create ability accreditation standards for team leaders.
(3) Quantitative effect of business value: Clarified responsibilities of production managers, optimized
management process, developed seven task objectives/indicators and five guidelines for business segments,and improved management ability of 40 frontline managers, laying an important foundation for theestablishment of a lean workshop standardized management system.
(4) Proportion of staff covered by the project: Production department managers and all team members.
9.2.2 Talent development
Talent introductionThe Group focused on the construction of talent team, the establishment of a clear formal talent development strategy,and the scientific prediction of talent demand. On the one hand, we deepened university-enterprise cooperationrelationship to broaden channels of talent introduction and enlarged the talent reserve; on the other hand, we fostered afree and equal development atmosphere to consolidate the Company’s core competitiveness.Aligning with its strategic positioning, business expansion trends, and the current state of its talent team, Livzonoptimized the structure of its workforce through talent reviews, and role assignment. At the same time, we innovatedour talent selection methods and continuously intensify efforts to introduce talents. By leveraging diverse channels, weattracted professionals from various fields, so as to provide solid strategic support for the Group’s future talent needs,gained a sustained competitive advantage, and fostered a healthy internal ecosystem where talents are effectively utilizedand reach their full potential.
11 Socialcontributions10 Greenoperation
9 Take human as
the foremost
8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.2 Talent development
(continued)Talent introduction(continued)
To enable complementary advantages and mutual welfare in talent training, Livzon established cooperation in terms oftalent cultivation, skills training, employment referral, etc., with domestic first-class research institutes and universities,such as the Chinese Academy of Sciences, Jinan University, Sun Yat-sen University, Fudan University, and Shanghai JiaoTong University, and became the social practice base of many professional colleges and universities, smoothing thechannel for talent transfer from schools to enterprises.The Group actively established several social practice and practice bases, which received student interns from cooperativeuniversities, and actively promoted campus recruitment. During the Year, the Company established cooperative relationshipwith Chengdu University of TCM, Fujian Normal University, Zhuhai City Polytechnic, among others.We maintained long-term cooperative relationship with Peking University, Shenyang Pharmaceutical University, andMacau University of Science and Technology and other universities to focus on cultivating staff’s professional quality andpractical ability through collaborative training projects. Through intensive professional courses, they continuously refinedtheir medical knowledge structure and advanced their professional skills. In addition, the Group actively worked withgovernment departments and schools to build learning platforms and integrate resources to cultivate professional talentssuited to the regions where the subsidiaries operate.Promotion and transfer mechanism
We highly value the talents of each employee, fully recognize the value that they create for the Company in differentpositions, create free growth space and offer equal opportunities for promotion and transfer for staff. In case of internalvacancies, the Company gives priority to internal staff for their promotion or transfer.The Company established a multi-directional growth channel covering functional, technical, research and development,promotion, production/operation, and other sequences, fully respecting and supporting staff to choose suitable careergrowth paths independently. We broadened the career paths of staff, expanded their advancement space, and provided alevel-by-level promotion channel for staff in all sequences according to their performance contribution and work ability inthe mode of “ladder promotion”.The Company regularly reviewed the construction and reserve of talent team every month, timely collated and publicizedinternal job information, and encouraged staff to achieve internal promotion through open competition.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.2 Talent development
(continued)
Academic qualifications and credentials supportLivzon supported all full-time employees, part-time employees and contract employees of the Group in obtaining job-related qualifications and credentials in their spare time, and helped employees apply for relevant specific qualifications ornationally accredited professional titles, including professional title promotion projects, vocational qualification promotionprojects, and business module training projects.The Company issued the Administrative Regulations on Employee Learning and Growth to assist all staff of the Group inapplying for suitable learning projects according to their own promotion needs. The Company actively collaborated withcolleges and universities to conduct school-enterprise cooperation and collaboratively run classes, and actively encouragedstaff to pursue self-study examinations, full-time or part-time study, distance education, on-the-job postgraduate projects,professional title assessment, professional credentials, etc. At the same time, the Company took the qualifications andcredentials obtained by staff into consideration for promotion and salary adjustment considerations, in order to fullymotivate staff to participate in training and study.At the same time, in accordance with the local government’s talent system, the Company actively helped staff apply forlocal qualification authentication projects for high-level talents, craftsmen, young top-notch talents, industrial innovationand development talents, innovation teams, etc.
Case? The Company provided all staff of the Group and their families with education promotion platforms from 18
universities as well as an exclusive mechanism for obtaining credentials in 8 skill projects.? During the Year, to the best knowledge of the Group, a total of 25 employees obtained academic
qualification improvement, and 407 employees obtained skills/professional title credentials.
9.2.3 Remuneration and welfare
Remuneration composition
In accordance with the relevant laws and regulations, Livzon formulated systems such as the Remuneration ManagementSystem and the Administrative Measures for Remuneration Adjustment, and established a salary system composed of fixedand fluctuating income for all staff, including non-management positions and non-sales positions, with fluctuating incomelinked to personal accomplishment and the business results of the Company, so as to stimulate the enthusiasm andsubjective initiative of staff, maximize the personal value of staff, and effectively give play to the effective incentive role ofthe salary system for talents.
11 Socialcontributions10 Greenoperation
9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.3 Remuneration and welfare
(continued)Performance assessment
In accordance with the relevant provisions of the Administrative Measures for the Performance of Functional Head Offices,the Group carrys out quarterly, semi-annual and annual KPI performance assessments on staff. The assessment contentincludes the staff’s business performance, behavioral performance, etc., which serve as the objective basis for the staff’sperformance bonus distribution, salary adjustment, promotion or demotion, annual advanced selection, and positionadjustment.The Group follows the principles of “objective, fair, and timely feedback” to evaluate the performance of each team andperson in a comprehensive and objective manner.In personal performance management, we use KPIs as a performance assessment method. The basic dimensions ofassessment include the completion of key performance indicators, execution capability, teamwork, personal learning anddevelopment, etc. Meanwhile, we integrate the assessment system, remuneration system, and employee developmentsystem to ensure that employees’ efforts and value contributions are appropriately rewarded.Moreover, the Company also factors performance within a team in personal performance assessment in order to moreobjectively assess the contribution and value of a person in teamwork. Firstly, we set the team performance goals foreach department based on the annual operation goals. Then, we break down the team goals into personal work goals forteam members. Finally, following a results-oriented principle, we assess an employee’s team performance during his/herpersonal performance assessment, providing performance summaries and guidance to form an effective performance cycle.In terms of team performance, we tailor personalized assessment methods for different types of teams. For example, forR&D teams, we set an assessment method with key milestones such as “obtaining clinical trial approvals” and “obtainingmanufacturing approvals” as performance goals.Moreover, we incorporate performance indicators related to risk management into the performance assessment ofcertain staff. For example, we include performance indicators such as avoidance of risks of production or environmentalliability accidents in the performance assessment of the general managers. By including risk management in the scope ofassessment, we have effectively strengthened risk prevention capability of the Company.Finally, we attach importance to providing timely and comprehensive feedback and guidance for staff in the performancemanagement process. The performance assessment process is divided into four stages: performance plan, performanceimplementation and guidance, performance assessment and interview, assessment appeal and result feedback. At eachstage, managers can provide responses and improvement suggestions for staff through various methods. After assessment,the human resource department reviews and summarizes the performance assessment results, gives replies to eachdepartment, and requires each department to improve the relevant issues identified during the assessment period.Equity incentiveIn order to continue to improve the long-term incentive mechanism, attract and retain outstanding staff, and fully motivatestaff, Livzon has put forward various forms of equity incentive schemes for the Group’s key staff, middle management,senior management, directors and staff who have made outstanding contributions to the Company’s performance.For details of equity incentive schemes, please refer to Section III of the 2024 Annual Report of the Company.
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6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.3 Remuneration and welfare
(continued)Benefits and welfareWe are mindful of the well-being of our staff and continue to improve the benefit and welfare packages of staff. In termsof mandatory benefits, during the Reporting Period, the total wages, bonuses, allowances, compensation, welfare, housingfunds and social insurance paid to the employees by the Group amounted to RMB1,656.49 million (31 December 2023:
RMB1,582.87 million).In terms of non-statutory benefits, we provide extensive non-compensation benefits for all employees of the Group, asdetailed in the table below. At the same time, we have special benefits for staff who meet special conditions, such asflexible working practice, working from home, mother and baby room, special health check-up for women, and consolationallowances for staff in desperate need. In terms of statutory benefits, in accordance with national or local regulations,we provide staff with statutory holidays, rest days, sick leave, work-related injury leave, marriage and bereavement leave,prenatal check-up leave, maternity leave, paternity leave, breastfeeding leave, and annual leave.
? Welfare dormitory? Rent allowance? Talent settlement
? Summer welfare, heat
allowance? Gym? Various sports courses? Book corner, English corner? Employee activity center? Employee association activities? Cafe? Team-building activities? Fellowship activities
? Welfare canteens? Meal allowance? Commuter shuttle? Transport allowance
? Occupational health check-up? Employee welfare for medical
check-up
? Holiday allowances or gifts for traditional festivals? Birthday allowances or gifts for staff? Lucky draw at annual meetings, back-to-work red packet following
Spring Festival
? Travel allowance? Communication allowance? Shift allowance? Office computer allowance? External training with pay? Afternoon tea, fruit, night
snack for night-shift staff
? Admission assistance for staff’s
children? Employee assistance project? Maternity/illness/work injury
visitation
Housing
Life
Convenient living
Health
Holidays
Work support
Assistance
Non-statutory benefits for all employees of the Group
11 Socialcontributions10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.3 Remuneration and welfare
(continued)Work-life balance and employee careLivzon pays high attention to staff’s well-being and sense of belonging and actively creates a balanced work-lifeatmosphere. The Company has set up an employee activity center, a gym, a book corner, and other facilities to help staffrelax and recharge.In terms of enriching the leisure time of staff, the Company regularly holds badminton, basketball, table tennis, and othersports events, and also carrys out various team-building activities, such as fun games, garden parties, and answeringlantern riddles at the Mid-Autumn Festival. In addition, the Company encourages staff to develop personal interests. Staffhave self-organized clubs, such as dance (yoga) club, badminton club, e-sports club, basketball club, and mountaineeringclub. The Company strongly supports club activities and provides staff with a variety of choices.In terms of employee care, Livzon shows equal attention. The Company visits staff who are badly off or sick in hospitaland gives Spring Festival relief funds for staff in severe difficulty; on holidays, the Company distributes thoughtful gifts tostaff, allowing them to really feel the warmth and care from Livzon.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.3 Remuneration and welfare
(continued)Work-life balance and employee care(continued)Case: A wide variety of diversified cultural and sports activities
During the Year, in order to put into practice the corporate culture value of “happy life, happy work”, the Groupheld a series of wonderful activities. In the field of sports competition, these included the 27th Staff BasketballGame of Livzon Group, the 2024 Jinwan District FTU Cup Staff Basketball Game, the 1st Fun Games of LivzonGroup, the 21st Badminton Mixed Team Competition, the 2024 Jinwan District FTU Cup Staff Badminton Game,the 2024 Sanzao FA Cup 8-a-side Football Game, the 20th Staff Mountaineering Team Competition, etc. In termsof cultural and sports activities, these included the 1st Fun Games of Livzon Group, “Livzon Carnival” garden partyevent, etc. These activities demonstrated the colorful and diverse leisure time of Livzon people in an all-round way.
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.2 TALENT MANAGEMENT
(continued)
9.2.3 Remuneration and welfare
(continued)Work-life balance and employee care(continued)Case: Carnival eventAs the Company approached its 40th anniversary, the 2024 “Livzon Carnival” garden party event led by the Party,labor union and Communist Youth League organizations of the Company and organized by the labor union grandlyopened in October 2024 at the plaza outside the headquarters building of the Livzon Industrial Park.This annual cultural celebration meticulously planned a variety of fun games, including “blindfold and paste facialfeatures”, three-legged race, and treasure ring toss. Participants actively competed, and the atmosphere at theevent was lively. The event also featured a wide range of local delicacies and a children’s playground. Startingpromptly at 6:00 PM, the event lasted nearly 3 hours, allowing staff and their family members to leave with greatmemories.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.3 EMPLOYEE COMMUNICATION
Livzon always places great importance on communication and exchange among staff and highly respects the opinionsand suggestions of every employee. We have actively established an equal, harmonious, efficient, and transparentcommunication bridge, as we are committed to creating a high-quality communication environment where staff canexpress themselves freely and without any concerns.
9.3.1 Complaint reporting procedures
Livzon valued the protection of employees’ rights and interests and established a smooth and confidential complaintreporting mechanism, and kept complainants and relevant information strictly confidential. The Company has formulatedthe Employee Complaint Management System, which allows all parties concerned to file complaints against violations ofhuman rights, labor rights and other human resources-related matters. The Company implemented necessary measures toprotect the personal safety and legitimate rights and interests of complainants.According to the system, complainants can be appealed through telephone, WeChat, email, on-site visits, and suggestionboxes. The human resource departments of the Company and its subsidiaries are the complaint acceptance center, whichare responsible for recording, acceptance, investigation, processing and follow-up of complaints. The human resourcehead office of the Company is responsible for supervising the Group’s complaint handling work, regularly carrying outstatistical analysis and summary of the complaint handling situation, and reporting to the ESG committee.The complaint handlers shall do a good job of confidentiality when handling complaints by keeping complaint materialsand records as confidential documents. In case of disclosure, the Company will deal with it seriously.
9.3.2 Communication of labor union
At Livzon, the labor union is a key bridge between management and ordinary staff. In order to promote mutualunderstanding between the enterprise and our staff and enhance their sense of corporate identity, the Company’slabor union gives full play to its bridging role. It holds workers’ representatives conference every year to maintain closecommunication with staff. It always adheres to the purpose of serving the staff wholeheartedly, striving to enhancewelfare for staff and deliver results for their well-being.During the Year, 100% of the Group’s staff participated in labor unions and signed collective contracts.
CaseIn March 2024, the Company’s labor union organized the 2nd member representatives conference of the 7th Laborunion Committee of the Group, which deliberated and voted by secret ballot on the Fund Use System of the Laborunion Committee of Livzon Group, the Regulations on Employees’ Love and Mutual Assistance Fund of LivzonGroup, and the proposal submitted by the marketing head office for the Implementation of an Irregular WorkingHour System.
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.3 EMPLOYEE COMMUNICATION
(continued)
9.3.3 Employee engagement survey
In 2024, in order to investigate employee satisfaction, the Company invited an external third-party professionalorganization to carry out a survey on employee engagement with reference to Gallup’s influence model based on 16driving factors, such as organizational support, work-life balance, career development opportunities, diversity andpluralism, performance management, and employer brand.In 2024, the content of the employee engagement survey included job satisfaction, purpose of work, happiness, stress,etc. The overall engagement score was 80%, a 5% increase from the previous year, surpassing the national average by 7percentage points and the pharmaceutical industry level by 3 percentage points.? The scores across 16 engagement dimensions showed improvement, with high levels of employee satisfaction
observed in dimensions such as collaboration, employer brand, diversity and pluralism, and decision-making.? There was a general increase in the scores of all engagement drivers: Scores increased by 11% for employer brand,
9% for customer orientation, 6% for job content, 6% for organizational support, 6% for personnel and allocation,
and 6% for performance management.? Engagement scores for 14 subsidiaries exceeded the pharmaceutical industry level.
Covering allpermanent employees
Overall engagement score
80%Employee response rate
100%
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message
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.3 EMPLOYEE COMMUNICATION
(continued)
9.3.3 Employee engagement survey
(continued)
To enhance employee engagement, we carried out improvement activities in the order of priority optimization, secondaryoptimization, and continuous improvement, and attained positive results, as detailed in the table below:
PriorityKey dimensionsImprovement outcomesPriorityoptimization
Career developmentopportunities
? A certain proportion of participants in the backup talent training project were
promoted, figured out the direction of their vocational skills improvement, andenhanced their management capabilities.? Improved staff’s self-awareness and professional skills, and encouraged staff toexplore their careers aligned with career promotion channels and achieve careerdevelopment breakthroughs.Rewards andrecognition
? Enriched welfare and stimulated employee motivation for self-improvement.? Increased staff’s confidence and self-efficacy, set examples for teams anddepartments, and motivated staff to pursue higher goals.Secondaryoptimization
Work-life balance? Carried out a series of activities to provide staff with opportunities to release
stress and create chances for interaction with relatives.? Through AI and office system assistance, optimized the work flow of staff to
improve their productivity.Employer brand? Through social welfare activities and internal publicity, made staff aware
of Livzon’s social responsibility, values, and the ways of practicing them to
strengthen their sense of belonging.Personnel andallocation
? Developed versatile skills of frontline staff to adapt to changes, promoted
outstanding frontline staff through internal competition, optimized the talent
team, and injected new vitality into frontline team management.Continuousimprovement
Customerorientation
? Ensured that customer opinions were regularly solicited and maintained smooth
channels for soliciting opinions.? Improved the service and responsibility awareness of sales personnel, and
ensured stable service quality regardless of deadlines.
11 Socialcontributions10 Greenoperation9 Take human as
the foremost
8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.4 OCCUPATIONAL HEALTH AND SAFETY
The Group adheres to the EHS (Environment, Health and Safety) values of “Put life first, prioritize safety, followregulations and laws, protect the environment”, instituted an EHS policy, and established quantitative targets of “zeroaccidents and zero injuries”. The Group is focused on continually improving the performance of the occupational healthand safety (“OHS”) management system.We strictly abide by relevant domestic laws and regulations and the OHS management system issued by the InternationalOrganization for Standardization (ISO). We have set a series of OHS systems and the Environmental, Occupational Health,and Safety Management Policy (including the OHS policy), which, along with the related systems, cover all enterprises,employees, and contractors of the Group.When we formulate the OHS policy and related systems, we will first release the drafts for consultation, and only formallypublish them after we have consulted with workers and/or workers’ representatives and made improvements andoptimizations. At the same time, we integrate OHS standards into procurement and contract terms to ensure that third-party partners strictly comply with our OHS policy.The Group actively implements the requirements of various provisions of the OHS management system, clarifies prioritytasks, develops and executes detailed action plans, continuously improves the risk assessment and prevention and controlmechanism, and strengthens emergency response capabilities. As at the end of the Reporting Period, all manufacturingenterprises of the Group had been certified to GB/T 45001-2020/ISO 45001:2018 Occupational Health and SafetyManagement System certification, with a certification rate of 100%. In particular, 7 manufacturing enterprises obtainedthe work safety standardization certificates.The ESG Committee (the “ESG Committee”) under the Company’s Board is responsible for formulating the OHS policyand other EHS related policies and systems, setting annual safety targets, developing work plans, and supervising andreviewing the implementation of various measures. To ensure effective policy implementation, the Company and itssubsidiaries are equipped with dedicated OHS management teams to provide a solid guarantee for creating a safe andhealthy working environment for all employees. During the Year, with the continuous development of the Company’sbusiness, new challenges and higher requirements emerged in areas such as work safety, environmental protection, andemployee occupational health protection. To further strengthen the internal management of the enterprise, we developedthe Regulation on the Administration of Safety, Environmental Protection and Occupational Health Appraisal during theYear. This regulation, centered around multi-dimensional assessment criteria, covers specific areas such as investigationand treatment of safety hazards, environmental pollution prevention and control measures, and employee occupationalhealth protection, which further improves the Company’s safety, environmental protection, and occupational healthmanagement levels, lays a solid foundation for the Company’s sustainable development, and creates a safe, stable, greenand healthy working environment.The Company always adheres to the safety philosophy of “zero accidents and zero injuries”, and annually evaluatesand reviews the achievement of OHS targets on a regular basis. During the Reporting Period, the Group completed thequantitative targets of zero major safety accidents and a low rate of minor injury accidents. The annual work targetsand plans for safety and environmental protection of all manufacturing enterprises of the Group have been implementedeffectively. We have also emphasized to all employees through regular safety training the potential safety hazards andpreventive actions to prevent re-occurrence of similar accidents.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.4 OCCUPATIONAL HEALTH AND SAFETY
(continued)
During the Year, to further strengthen the Company’s occupational safety management system, improve ability to preventand control risks, and effectively safeguard employees’ life safety and the Company’s stable operations, the Companyconducted the identification and assessment of occupational safety risks in an all-round manner and though multiplemeasures.? Conducting EHS audits: The Company conducts as least 1 comprehensive EHS audit every year on all
manufacturing enterprises of the Group, and continues to follow up on the improvement of each enterprise. Duringthe Reporting Period, the Company conducted internal OHS audits on all manufacturing enterprises of the Groupin accordance with EHS standards and norms. The scope of the audits covered production process, operation ofequipment and facilities, implementation of safety management systems, etc.
? External expert inspections: The Company specially engages senior safety experts from the industry to conduct
inspections inside the enterprise. These experts, with substantial experience and professional knowledge inoccupational safety management, conduct in-depth field investigations at production frontlines. After meticulousexamination of all parts of production and work zones, they propose targeted improvement suggestions to furtherimprove the company’s safety management level.? Cross-checks of subsidiaries: Each subsidiary selects experienced and professionally competent personnel to
form an inspection team, which then visits other subsidiaries to conduct inspections, so as to promote exchangeof experience and mutual supervision between subsidiaries. This approach not only allows subsidiaries to acquireexcellent management experience of other sister companies, but also enables them to identify their own problemsfrom different perspectives, effectively avoiding the limitations in the process of self-inspection.During inspections, we focused on key tasks such as identification of hazard sources within the enterprises. We alsothoroughly reviewed the risk identification records of the Company’s subsidiaries, verified the rationality of risk levelclassification, and checked whether the hazard investigation and management had formed an effective closed-loopmanagement: from the discovery, reporting, correction to review of hazards, every stage was under strict control. Foridentified problems, we issued correction notices in a timely manner, specifying correction requirements, correctiondeadlines and responsible persons to ensure timely and effective resolution of problems. This series of practical andeffective actions has given us a clearer and more comprehensive understanding of the Company’s occupational safetyrisks, and provided a strong basis for the subsequent development of targeted risk prevention and control measures andcontinuous improvement of safety management.During the Reporting Period, Livzon invested an aggregate of approximately RMB34.25 million in OHS, the cost inputclassification is as follows:
Investment in technology improvement for work safetyRMB15.39 millionInvestment in operation and maintenance for work safetyRMB13.56 millionInvestment in occupational healthRMB5.31 million
11 Socialcontributions10 Greenoperation
9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.4 OCCUPATIONAL HEALTH AND SAFETY
(continued)
9.4.1 Occupational health
Livzon has formulated the Administrative Procedures for Occupational Health, and upholding the principles of “prevention-oriented, comprehensive planning, adapting to local conditions and comprehensive management”, continuously optimizesproduction equipment and occupational disease protection facilities, striving to provide a healthy and safe workingenvironment for all employees.During the Reporting Period, the Group recorded no new occupational diseases, suspected occupational diseases oroccupational contraindications.? Occupational hazard investigation
Each manufacturing enterprise of the Group classifies occupational hazards based on their magnitude of impactand commissions a qualified unit to inspect, investigate and evaluate the occupational disease hazard factorsat the production site on a regular basis. At the same time, we organize regular occupational health check-upsfor employees every year to implement our principal responsibilities for preventing and controlling occupationalhazards.? Occupational health notification
For job positions with occupational health hazards, we inform new employees of the risks of occupational healthhazards and the measures to be taken to prevent and control occupational diseases in their positions throughemployment contract before they report for duty. We set up warning signs at prominent locations in workplaceswhere occupational health hazards exist to provide necessary information on occupational health hazards andprotective measures.? Labor protection equipment
We equip employees who are exposed to occupational hazards with standardized, appropriate and effectivepersonal labor protective equipment, regularly purchase and distribute such equipment for employees’ use, andsupervise the use of personal protective equipment to prevent occupational diseases. We set up flushing facilitiesin places with corrosive substances such as acid and alkali or potential risk of chemical burns, and maintain,upgrade and improve the occupational disease protection facilities.? Occupational health check-up
We arrange pre-job, on-job and off-job occupational health check-ups for workers are exposed to occupationalhazards, and establish occupational health files for tracking and management.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.4 OCCUPATIONAL HEALTH AND SAFETY
(continued)
9.4.1 Occupational health
(continued)
? OHS training
The Group attaches great importance to training and publicity on OHS, and regularly provides targeted OHStraining for employees and relevant parties: personnel who are newly recruited, change positions and returnto positions need to attend pre-job training and pass the assessment before officially taking up their jobs, andspecial operation personnel must take up their jobs with certificates. Employees on duty receive training onoccupational health hazard prevention and control, and experts provide mental health lectures and psychologicalrescue knowledge. For contractors and relevant parties, the Group conducts OHS training in accordance with theContractor Safety Management System to fully protect employees’ physical and mental health and work safety.Case: Combustible gas centralized alarm system upgradeLimin Factory upgraded its monitoring system to transmit alarm signals from combustible gas detector controlpanels installed in workshops and departments to the factory duty room’s fire monitoring center. These signalswere connected to the monitoring host of the combustible gas alarm system, enabling centralized monitoring ofalarm information with 24-hour manned surveillance. Following project completion, combustible gas detectors inthe TCM extraction workshop and hazardous material storage of Limin Factory are networked to the duty room firemonitoring center, achieving centralized monitoring and timely alarm response.Livzon always cares about the health and safety of its employees by continuously optimizing the occupational healthprotection for employees, eliminating potential safety hazards for employees, and implementing the protection ofemployees’ occupational health interests. During the Reporting Period, the number of Livzon’s work-related fatalities andthe number of lost time injuries occurring per 1 million hours worked (lost time injury frequency rate, “LTIFR”) are asfollows:
Number of work-related fatalities of employees in 2024 (person)0Number of work-related fatalities of contractors in 2024 (person)0LTIFR of employees in 2024 (LTIs/million hours worked)0.26LTIFR of contractors in 2024 (LTIs/million hours worked)0.00
11 Socialcontributions10 Greenoperation
9 Take human as
the foremost
8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.4 OCCUPATIONAL HEALTH AND SAFETY
(continued)
9.4.2 Work safety
Livzon adheres to the work safety policy of “safety first, prevention foremost, comprehensive governance, totalinvolvement, risk control and continuous improvement”, and has developed a series of work safety systems. Duringthe Year, to improve the overall safety management level of the Group, the Company organized cross-checks amongsubsidiaries, and developed detailed plans defining the scope, content, and procedures of these cross-checks. Meanwhile,the Company engaged senior work safety experts to analyze and evaluate identified risk points, provided correctionsuggestions, and conducted safety training for management officers and employees to improved the overall safetymanagement level.Throughout this process, we strictly controlled hazard sources, established detailed hazard source inventories, designatedresponsible persons and control measures, and conducted regular inspections and assessments. We implemented a “zerotolerance” approach to work safety hazards identified by investigation, created hazard correction records specifyingcorrection requirements, deadlines, and responsible persons to ensure timely and thorough elimination of hazards andprovide a solid safety guarantee for the stable production and sustainable development of each subsidiary.Moreover, we regularly review the work safety status of each enterprise of the Group and relevant stakeholders,implement work safety management requirements, and rectify any problems identified in a timely manner. In addition,the Company requires each manufacturing enterprise to implement a safety responsibility system and strictly controlproduction processes. We identify and control danger points by upgrading equipment and introducing automation systemsto prevent work safety accidents caused by human errors and ensure the establishment of work safety. In particular,Ningxia Pharma’s work safety liability insurance covers all its employees.As at the end of the Reporting Period, 6 manufacturing enterprises of the Group had conducted HAZOP (Hazard andOperability) analysis.Laboratory safety managementWe have established a biosafety committee, implemented strict supervision of biological laboratory safety, and developedcomprehensive biosafety management systems. We conduct quarterly self-inspections. Meanwhile, the Company developscontingency plans for biosafety accidents and organizes drills annually to ensure that relevant personnel are familiarwith handling procedures. In terms of biological laboratory management, we strictly regulate personal protection, signwarning, facility configuration, and waste management. We require laboratory personnel to have regular check-ups andmaintain health records, and equip the laboratory with sufficient emergency supplies and special equipment to fully ensureexperimental safety.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.4 OCCUPATIONAL HEALTH AND SAFETY
(continued)
9.4.2 Work safety
(continued)Laboratory safety management(continued)
Additionally, we have established documents such as the Training Management System. We conduct biosafety trainingfor personnel involved in experiments, who are allowed to take up their jobs only after passing the appraisal. We alsoconduct monthly training on job-specific operation knowledge to continuously improve the safety awareness and operationskills of personnel and ensure effective implementation of laboratory safety management.During the Year, Pharmaceutical Factory successfully passed the biosafety inspection of pathogenic microorganismlaboratories in Zhuhai in 2024 by the Health Bureau of Zhuhai.
Case: Automatic foam fire suppression system projectIn 2024, to further improve the safety assurance level of its tank farm, Livzon Hecheng invested RMB1.25 millionto upgrade the fire safety of the tank farm by adding an automatic foam fire suppression system. This upgradeincluded automatic fire alarm field devices that accurately detect fire hazard and promptly alert; automatic foamsprinkler systems that rapidly activate during emergencies and provide cooling, oxygen deprivation, and chemicalsuppression to the tank farm to effectively extinguish tank farm fires and incipient ground liquid fires; outdoor fixedmanual fire foam cannon monitors with long-range firefighting capabilities to safeguard against large-scale fires.Following project completion, Livzon Hecheng’s fire alarm equipment can respond quickly to gain critical time foremergency handling; the collaborative operation between sprinkler systems and fixed foam cannon monitors greatlyimproves fire suppression efficiency. This upgrade effectively reduces the fire risks of Livzon Hecheng, improves thefire safety performance of the solvent tank farm, provides reliable protection for solvent storage and handling, andsupports stable production and operations of the company.Management and control of safety risks
We regularly identify and analyze hazard sources in production and R&D activities, and products and services, grade thelevel of risks, and formulate corresponding plans and measures for management and control based on the grading results.Safety emergency managementWe prepare comprehensive contingency plans, special contingency plans, and on-site disposal plans covering allemployees, conduct regular training and emergency drills for relevant personnel, and further improve contingency plansand disposal plans based on the drill results.
Hazard investigation and management
We conduct regular hazard investigation for all factories of the Group. If a hazard is identified, we require factories tocomplete the correction within a limited period of time, and to conduct regular review and appraisal of the factories.
11 Socialcontributions10 Greenoperation
9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
9.4 OCCUPATIONAL HEALTH AND SAFETY
(continued)
9.4.2 Work safety
(continued)Safety training and education
We prepare practical safety training materials according to job characteristics and needs, conduct targeted safetyeducation, and organize safety education and publicity for employees at multiple levels. Specifically, we require personnelwho are newly recruited, change positions and return to positions to attend pre-job training, and they can only bearranged to work after passing the assessment; we conduct qualification training for special operational personnel toensure that they work with certificates. At the same time, we provide work safety training for all relevant personnelinvolved in construction from external parties, so as to ensure operation is in compliance with regulations.Safety culture promotionIn order to raise awareness of work safety awareness among all employees, we regularly organize various theme activitiesaround work safety. We designate the 4th, 14th and 24th days of each month as the safety reflection days of the Groupand conduct safety reflection activities. By identifying and addressing gaps in work safety activities, along with summaryand reflection, we actively mobilize the enthusiasm of employees to participate, increase the safety awareness of allemployees, and collectively promote the building of a safety culture.
Case: Watching safety awareness videos and safety knowledge competitionIn 2024, to strengthen employees’ understanding of the serious consequences of hazardous chemical accidents,Ningxia Pharma organized all its employees to watch “Safe Passage” and “Safety Awareness Video on MajorHazardous Chemical Accidents”. Based on real cases, these educational videos visually demonstrated accidentprocesses and the resulting huge losses through archival footage. Ningxia Pharma arranged discussion sessionsguiding employees to deeply analyze the causes of accidents and summarize experiences and lessons based on theirwork realities. Through this case-based approach, Ningxia Pharma effectively strengthened employees’ safety redline awareness and bottom-line awareness, so that they would integrate safety concepts into every part of theirwork.Additionally, Ningxia Pharma held a work safety knowledge competition covering hazardous chemical storage,transportation, usage standards, work safety laws and regulations, emergency rescue knowledge, etc., furtherstimulating employees’ proactive safety knowledge learning.Contractor safety management
Livzon is acutely aware of the importance of contractor safety management. During the Year, we referenced more relevantlaws and standards issued by the State to update the Contractor Safety Management System, thereby further improvingthe applicability and completeness of the system.We implement safety management requirements with contractors. We provide safety training for all personnel involvedin construction from external parties, supervise their construction, establish safety files, and conduct regular safetyperformance appraisals to improve the safety management level of contractors.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
GREENOPERATION
11 Socialcontributions10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Livzon has taken environmental protection as its own responsibility, adhering
to green and low-carbon development while actively fulfilling its corporate
social responsibility. Livzon strictly abides by the Environmental Protection Law
of the PRC and other related environmental laws and regulations. We have
revised the Environmental, Occupational Health, and Safety Management Policy
with reference to the standard requirements of the ISO 14001 Environmental
Management System, and kept optimizing our environmental management
system and improving our environmental management levels and ability to
perform responsibilities. We have implemented low-carbon concepts in each
stage of production and operation in response to the national dual carbon goals,
contributing to the sustainable development of society and the environment.
At the same time, we have established an EHS management system, specifying
the responsibilities of EHS management at multiple levels, and continuously
increased investment in environmental management. In addition, we have
conducted practical activities such as energy conservation, emission reduction
and environmental protection training to promote and implement environmental
protection awareness, practice the concept of low-carbon development, and
drive low-carbon, green and high-quality development.
We have a well-established environmental management system and conduct
coordinated management of wastewater, waste gas, waste and noise through
the EHS department. We continuously improve environmental management
effectiveness through continuous optimization of treatment processes and
regular monitoring and evaluation. To ensure that our management system
remains up-to-date, we track the latest environmental regulations on a monthly
basis. Based on the actual operations of the Group, we promptly adjust
and improve relevant systems and ensure that environmental management
requirements are fully implemented.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Moreover, the Company has established a series of comprehensive internal management systems for each key area ofenvironmental management (such as air emissions, water discharges, waste, noise and energy), including the Proceduresfor Air Emission Management, the Procedures for Wastewater Management, the Procedures for Solid Waste Management,the Procedures for Noise Emission Management, the Procedures for Energy Management, etc., and requires eachenterprise of the Group to strictly abide by and implement them. At the same time, by signing environmental protectiontarget and responsibility statements, manufacturing enterprises are aware of annual key environmental targets and specificimplementation plans, and review and evaluate the achievement of their targets on a regular basis.During the Reporting Period, there were no environmental pollution incidents or environmental administrative penalties,waste gas and wastewater were all discharged or reused after being treated to meet the discharge standards, noenvironmental monitoring items exceeded the standards, and wastes were all disposed of or recycled in compliance withregulations.During the Year, Livzon’s investments in environmental protection are as follows:
Investment in maintenance of environmental protection operationRMB63.45 millionInvestment in upgrade of environmental protection facilitiesRMB11.01 million
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
Livzon always adheres to the EHS management policy of “compliance with laws and regulations, prevention of risks,continuous refinements and timely communication”, keeps improving the environmental management system, andpromotes the standardized and systematic development of the Group’s EHS work. By establishing and improving theenvironmental management system, we strictly control the discharge of pollutants and increase the efficiency of resourceutilization. At the same time, we have established a comprehensive supervision and assessment mechanism to regularlyreview the operation status of the environmental management system of each production base and assess the achievementof environmental management indicators to ensure the continuous and effective operation of the environmentalmanagement system.As at the end of the Reporting Period, all manufacturing enterprises of the Group had established the internalenvironmental management system (EMS). All manufacturing enterprises of the Group had been certified to the GB/T24001/ISO 14001 Environmental Management System (EMS) (100% certification rate).
11 Socialcontributions10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
(continued)
10.1.1 Management structure
To ensure the efficient operation of environmental management system and continuous improvement of EHS managementperformance, we have established a hierarchical management structure, clearly dividing EHS management responsibilitiesto ensure that the primary responsibility is effectively implemented, thereby providing a strong foundation for the furtherpromotion of EHS management of the Group.? Strategy level: The ESG Committee of the Board is responsible for establishing policies and systems related to
EHS such as environmental management and use of resources, reviewing the performance on a regular basis andreporting to the Board on the progress.? Management level: The production technology head office of the Company is responsible for the planning and
implementation of the overall EHS work and supervising and guiding EHS-related work of the subsidiaries.? Implementation level: The subsidiaries have EHS departments responsible for the implementation of energy
conservation and emission reduction, three-waste (wastewater, waste gas and solid waste) discharge management,
climate risks management, carbon emission management and control, environmental protection technology
upgrade and investment assurance, occupational health and work safety, etc.
10.1.2 Certification
The Company has made active efforts to facilitate its subsidiaries to obtain ISO environmental management systemcertifications, implement cleaner production, apply for accreditation of green factory, etc., in order to strengthensenvironmental management in a standardized and systematic manner and comprehensively improve the environmentalmanagement level of its subsidiaries.As at the end of the Reporting Period, all manufacturing enterprises of the Group had been certified to GB/T 24001-2016/ISO 14001:2015 Environmental Management System (EMS) (100% certification rate).Among all manufacturing enterprises of the Group, 10 had completed the cleaner production audit, 3 had obtained thecertification for “National Green Factory”, and 1 had obtained the certification for “Provincial Green Factory”.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
(continued)
10.1.3 Regular audit
According to the requirements of ISO 14001 environmental management system, each manufacturing enterprise ofthe Group operates and maintains the effectiveness of the system in a method of “Plan – Do – Check – Act” (PDCA).Meanwhile, we have established a sound supervision mechanism, regularly conduct internal and external audits to assessthe operation status and effectiveness of the EHS management system of each subsidiary and accordingly develop targetedimprovement measures to further improve the EHS management level of the Group.Internal AuditLivzon has established the EHS internal audit system, and conducts regular environmental management audits on allmanufacturing enterprises of the Group. Audits mainly include contents such as EHS compliance, implementation of the“three-simultaneous” system, operation of pollution treatment facilities, etc.The frequency of internal audit is as follows:
? The production technology head office of the Company conducts as least 1 comprehensive EHS audit every year on
all manufacturing enterprises of the Group, and continues to follow up on the improvement of each enterprise;? The API business department of the Company conducts 3 to 4 EHS cross-checks every year for the API
manufacturing enterprises of the Group, and continues to follow up on the improvement of each enterprise;? All manufacturing enterprises of the Group conduct at least 1 EHS meeting and inspection at the corporate level
every month, and rectify findings in a timely manner;? All enterprises of the Group that have obtained the ISO management system certification conduct at least 1
EHS comprehensive internal audit every year, and carry out management reviews according to the audit results.
Accordingly, the management of the Company evaluate and make improvement suggestions on the applicability,
adequacy and effectiveness of the operation of the management system.
External Audit
All of our manufacturing enterprises that have been certified to ISO 14001 have established a regular audit mechanism:
Independent third-party certification institutions conduct supervisory audits once a year and audits of recertification(certificate renewal) once every three years, so as to ensure the standardized and regulated operation of the environmentalmanagement system.
11 Socialcontributions
10 Greenoperation
9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
(continued)
10.1.4 Compensation linked to ESG performance
We have established a mechanism that links ESG performance to compensation. We have included ESG indicators, witha 10% weighting, into the management’s performance appraisal. Failure to meet ESG appraisal targets directly impactsthe annual performance bonuses of the management. In addition, we extend ESG indicators to the operation performanceappraisal of our subsidiaries to ensure the effective implementation of the Group’s environmental managementrequirements, carbon neutrality goal, and green and low-carbon commitments. The details of implementation are asfollows:
Appraisal mechanism forESG Working Team
? Set an ESG indicator (weighted at 10%), covering the
achievement of environmental targets and carbon emissionreduction goals, and ESG governance effectiveness, in thepersonal performance appraisal of the members of the ESGWorking Team.? Failure to meet ESG appraisal indicators will result in proportional
deductions from the annual performance bonuses.Appraisal mechanism forEHS management and subsidiaries
? Set ESG and EHS related appraisal indicators respectively in
the operation performance of the head of the Company’s EHS
department, the EHS management of each subsidiary, and each
subsidiary, which include environmental targets and carbon
emission reduction goals, ESG governance, and EHS performance.? The ESG appraisal of the head of the Company’s EHS department
carries a weight of 10%, and the amount of EHS bonuses is
determined for subsidiaries based on the appraisal score.Special incentive mechanism forAPI enterprises
? Due to the relatively high amount of energy consumption and
emissions of the API enterprises, the Company has set up special
bonuses for API enterprises. Those that achieve the emission
reduction targets will receive rewards based on the set criteria, so
as to encourage the API enterprises to actively engage in energy
conservation and emission reduction.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
(continued)
10.1.5 Environmental risk management
In order to further strengthen the management and control of environmental risk, the Company has formulated systemsincluding the Identification and Assessment Requirements of Environmental Factors, the Guidelines for Management ofEHS Changes, etc. Taking into account the requirements of ISO 14001 Environmental Management System, we regularlyidentify and review the environmental risk factors, and optimize and improve risk control measures. By practicingenvironmental management, upgrading standards for environmental protection facilities and equipment, and enhancingemergency response capabilities for environmental emergencies, we continuously strengthen our risk prevention andcontrol levels and comprehensively improve our environmental risk control capabilities.? Identification of major environmental factors: By conducting a comprehensive review of the environmental
factors that may be involved in production and operation activities and evaluating the risk levels with ratingmethods, we have formed a list of major environmental factors, and developed corresponding managementstrategies and control measures to minimize environmental risks and prevent the occurrence of environmentalaccidents.
Energy consumptionWater consumption
Chemical consumptionRaw materials consumption
Common consumablesconsumption
ProductsUse of landSocial interaction
Air emissions
Waste water dischargeSolid waste production
Production and operationactivities of the Company
11 Socialcontributions
10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
(continued)
10.1.5 Environmental risk management
(continued)
During the Year, the Company deeply assessed and actively addressed potential environmental risks in production andoperations. To effectively prevent and respond to environmental risks, the Company conducted a thorough environmentalrisk assessment, and taking into account production processes, equipment, facilities, and management models, theCompany accurately identified risks from both internal and external dimensions.? External environmental risks include damage to facilities and environmental protection equipment due to natural
disasters (e.g., rainstorms, floods, and earthquakes), and the impact of accidental emissions from surroundingenterprises on the air quality and water bodies of the Company; internal environmental risks are predominantlyassociated with production processes, with a focus on the identification and evaluation of the storage,transportation, and use of hazardous chemicals, and the treatment of wastewater, waste gas, and solid waste.We have identified that environmental risks primarily stem from chemical leaks and abnormal waste discharge. Forexample, hazardous chemicals such as acetone, methanol, ethanol, and ethyl acetate used in production, if exposed tofire sources, high heat, or static electricity, may cause fires and produce accident wastewater and secondary pollutantgases. If the accident wastewater is not properly treated, it can severely pollute surrounding water bodies. A failure oroperation error in air emissions treatment facilities may lead to excessive emissions of volatile organic compounds (VOCs),generating unpleasant odors that may affect the lives of surrounding residents.To address these possible environmental risks, the Company takes a multi-pronged approach to ensure rule-based andorderly environmental risk management. Specific measures on risk management and control:
? Conducting regular environment monitoring: Each of the Company’s manufacturing enterprises strictly
abides by relevant domestic laws and regulations and conducts regular environmental monitoring work based onits actual conditions to have timely knowledge of the discharge status of pollutants. The monitoring results arequickly disclosed to the public to ensure oversight by regulatory agencies and society.
? Sufficient equipment and resource assurance: The Company is equipped with sufficient and applicable
emergency supplies. We have stocked materials for handling chemical leaks, such as oil-absorbing mats, sealingmaterials, and neutralizers, as well as various protective equipment to ensure the safety of emergency responders.Additionally, emergency supplies are regularly inspected, maintained, and updated to ensure they remain in goodstandby condition. During the Year, the Group’s total investment in environmental protection was approximatelyRMB74.46 million.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.1 ENVIRONMENTAL MANAGEMENT SYSTEM
(continued)
10.1.5 Environmental risk management
(continued)? Strengthening emergency response capabilities: Each manufacturing enterprise of Livzon has set up
an emergency response leading team and working team, formulated the Contingency Plan for EnvironmentalEmergency, which covers various potential environmental emergency scenarios, and developed detailed emergencyresponse procedures, such as emergency reporting, command, disposal, personnel evacuation, and environmentalmonitoring. Furthermore, we have established different response measures and resource allocation plans forenvironmental emergencies of varying severity, ensuring rapid and effective disposal in the event of an emergencyto minimize environmental damage. We conduct regular professional training and emergency drills to improve ouremergency response capabilities for crisis events.As at the end of the Reporting Period, each manufacturing enterprise of the Group had prepared contingency plansfor environmental emergencies tailored to their specific circumstances, established their own environmental emergencyresponse organizations, developed environmental emergency response procedures, equipped themselves withcomprehensive emergency disposal supplies, and formulated effective emergency protective measures. The Company’scontingency plans for environmental emergencies had been reviewed by experts and filed accordingly. Similarly, theCompany’s environmental monitoring plans had been reviewed and approved by experts before being filed with regulatoryauthorities, with no major deficiencies identified.During the Year, the Group did not experience any major environmental incidents, nor did it receive any significantadministrative penalties or criminal liability from ecological and environmental departments or other relevant departmentsdue to environmental incidents.
10.2 ENVIRONMENTAL MANAGEMENT TARGETS
Livzon established and published the Environmental Management Targets of Livzon Group for 2021-2025 according tothe Reporting Guidance on Environmental KPIs of the ESG report issued by Hong Kong Stock Exchange, with reference tothe management practices of domestic and overseas peers and combining its own operation characteristics, in order toachieve the Group’s refined management on pollutants discharge and use of resources. This document clearly regulatesthe quantitative targets of each indicator and action plans which the Group will take to achieve the targets, and specifiesthe people in charge of each step.The production technology head office of the Company follows up the achievement of indicators of the Group and itssubsidiaries on a quarterly basis, and the ESG Committee regularly reviews the environmental management strategy andperformance, provides improvement suggestions, and reports to the Board on a regular basis. Moreover, the Company,based on set environmental management targets, promotes and regularly checks pollutant emissions and discharge andresource utilization.
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.2 ENVIRONMENTAL MANAGEMENT TARGETS
(continued)
Livzon’s Environmental Management Targets for 2024-2025 and Achievements in 2024ItemIndicatorTargets for 2024-2025Change in 2024 compared
with the base year
Note
Sulphur dioxide (SO
)Amount of emission perRMB10,000 of output value
To decrease by 2.2% comparedwith the previous year
Up 57.12%Chemical OxygenDemand (COD
cr)
Amount of emission perRMB10,000 of output value
To decrease by 2.2% comparedwith the previous year
Down 31.59%Hazardous wasteAmount of disposal per
RMB10,000 of output value
To decrease by 0.5% comparedwith the previous year
Down 13.05%Non-hazardous wasteAmount of disposal per
RMB10,000 of output value
To decrease by 0.5% comparedwith the previous year
Down 12.89%WaterAmount of consumption per
RMB10,000 of output value
To decrease by 3% comparedwith the previous year
Down 14.02%ElectricityAmount of consumption per
RMB10,000 of output value
To decrease by 3% comparedwith the previous year
Down 2.67%Ammonia nitrogenAmount of emission per
RMB10,000 of output value
To decrease by 2.0% comparedwith the previous year
Down 39.63%VOCsAmount of emission per
RMB10,000 of output value
To decrease by 2.0% comparedwith the previous year
Down 7.35%Nitrogen oxides (NOX)Amount of emission per
RMB10,000 of output value
To decrease by 2.0% comparedwith the previous year
Up 5.64%Particulate matterAmount of emission per
RMB10,000 of output value
To decrease by 2.0% comparedwith the previous year
Down 45.91%
Note: The base year for water, electricity, chemical oxygen demand (COD), sulfur dioxide, and hazardous waste is 2020, while the
base year for the remaining five environmental management targets is 2021.To actively respond to the national dual-carbon goals of “achieving carbon peaking by 2030 and carbon neutrality by2060”, Livzon established the targets for carbon dioxide emission reduction and carbon neutrality (scope 1 & scope 2)in 2021. In 2024, for the first time, the Company conducted a scope 3 greenhouse gas inventory to thoroughly assesscarbon emissions in the upstream and downstream value chains of the Company and actively implement the concept oflow-carbon operations. During the Year, Livzon Group’s total greenhouse gas emissions amounted to 2,246,725.29 tCO
e,with scope 1 and scope 2 emissions totaling 537,229.11 tonnes, and scope 3 emissions totaling 1,709,496.18 tonnes.(Discrepancies between this inventorying result and Appendix 12.2 arise primarily from improved scope 1 emission sourcecoverage in this carbon inventory process, including scope 1 emission sources such as fire extinguishers, refrigerationequipment, and process-related sources that were previously excluded from the calculation).
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.2 ENVIRONMENTAL MANAGEMENT TARGETS
(continued)
The Company’s carbon dioxide emission reduction targets and their achievement in the Year and carbon neutrality targetsare shown in the table below:
IndicatorTargetsCarbon dioxideemissions(Scope 1 &
scope 2)
? 2024: To decrease amount of emission per RMB10,000 of output value by 22% as compared with 2020
(The target for 2024 was not met, representing an actual decrease of 14% from 2020)? 2025: To decrease amount of emission per RMB10,000 of output value by 26% as compared with 2020
To achieve carbon neutrality by 2055
10.3 POLLUTANTS CONTROL
The Group strictly abides by environmental protection laws and regulations, comprehensively controls the discharge andemissions of pollutants, strictly supervises waste gas, wastewater, solid waste, etc., and takes measures such as reducingand limiting production for heavy pollution weather. In addition, for new construction, modification and expansionprojects, we strictly implement the environmental protection “Three-Simultaneous” system. We regularly engage third-party institutions for environmental monitoring, and proactively accept social supervision to make sure that pollutants aretreated in compliance with regulations and discharged after meeting the standards.According to the requirements of environmental information disclosure, the Group reports on the discharge and emissionsof pollutants:
? Major pollutants: Regarding water pollutants, we focus on monitoring key indicators such as chemical oxygen
demand, five-day biochemical oxygen demand, ammonia nitrogen, suspended solids, total nitrogen, totalphosphorus, and pH; the Group’s air pollutants include volatile organic compounds, non-methane totalhydrocarbons, nitrogen oxides, particulate matter, and sulfur dioxide.? Characteristic pollutants: Pollutants involved by the Group include dichloromethane, hydrogen chloride,
acetonitrile, and volatile phenols.? Regarding the management of controlled substances under international environmental conventions, based on
the Catalogue of Controlled Ozone Depleting Substances in China, currently the Group mainly uses refrigerants
R22 (chlorodifluoromethane) and R123 (1, 1-dichloro-2,2,2-trifluoroethane). During the Year, 2.24 tonnes and
1.3 tonnes of these substances were replenished, respectively, both of which were consumed. The Group did not
directly discharge any controlled substances in the Catalogue.
11 Socialcontributions10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.3 POLLUTANTS CONTROL
(continued)The Group attaches great importance to the potential impact of pollutant discharge on employees and local communities.We conduct in-depth analyses and develop comprehensive risk assessment and control plans. Through continuoustechnological innovation, strict environmental management, and active risk prevention and control, we have minimizedthe potential adverse impacts of pollutant emissions and discharge on employees, communities and the ecologicalenvironment.? Regarding employees’ occupational health, the waste gas generated during the pharmaceutical manufacturing
of the Group contains volatile organic compounds (VOCs), which may pose potential risks to employees’ health.Long-term exposure to these pollutants may lead to respiratory irritation, lung diseases, and other occupationalhealth issues. Therefore, the Group has implemented strict occupational health protection measures, includingadvanced ventilation systems, personal protective equipment, and regular occupational health checks to minimizethe risk of occupational exposure for employees.? For the surrounding communities, the Group’s production activities may impact the quality of air and water bodies.
Therefore, we have established a comprehensive environmental monitoring and treatment system to ensure thatpollutant emissions and discharge strictly comply with national environmental standards, and regularly conductenvironmental impact assessments.? Regarding ecosystems, pollutant emissions and discharge of the Group may lead to ecological risks, such
as changes in soil pH and heavy metal contamination. The Company adopts advanced pollution treatmenttechnologies to ensure that waste gas, wastewater, and solid waste are effectively treated and minimize theimpact on surrounding ecosystems.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.3 POLLUTANTS CONTROL
(continued)
10.3.1 Treatment of air emissions
Livzon strictly abides by relevant domestic laws and regulations. The Company has formulated the Procedures for AirEmission Management as the guideline of air emission management for the whole Group. In addition, in combination withtheir own actual conditions, each manufacturing enterprise of the Group has established and implemented specializedmanagement systems for air emission, and continuously promotes air emission reduction on the foundation of ensuringemission after reaching standards, ensuring that the environmental management targets will be achieved successfully.At present, the Company’s primary waste gas treatment methods include RTO incineration, sodium hypochlorite spraying,water spraying, biphasic hydrogen peroxide spraying, micro-nano bubble spraying, microbial treatment, and otherprocesses or their combination. Each manufacturing enterprise of the Group has established air emission monitoring andmanagement systems, enabling the monitoring and management of various air emissions.During the Year, the manufacturing enterprises of the Group updated their waste gas treatment devices, eliminated olderequipment with long operation life, low treatment efficiency, and high maintenance costs, and introduced new equipment.On the basis of updating the main equipment, the manufacturing enterprises tackled technological challenges associatedwith difficult-to-treat components in waste gas. For organic waste gas treatment, the Company adopted advancedtechnologies such as condensation treatment. In addition, we were equipped with efficient condensation equipment toensure the full condensation and recovery of organic waste gases, and, in combination with adsorption, combustion, andother subsequent treatment processes, we effectively reduced the content of organic pollutants in tail gas to meet thenational emissions standards. Additionally, we conducted training on environmental awareness and professional skillsfor relevant personnel to improve their air emission management concepts and professional capabilities. Through theseupdates and specialized treatment measures, the manufacturing enterprises made remarkable progress in air emissionstreatment.The Group’s air emissions treatment facilities are regularly inspected and maintained by professional teams. We engagequalified third-party testing agencies to sample and test each air emission point monthly. After professional testing, thepollutant indicators of the Group’s air emissions are better than the national and local emission standard limits. Livzon’smajor air pollutants (i.e. VOCs, nitrogen oxides, sulphur dioxide, and particulate matter) emission data for the Year aredetailed in Section 12.2 of the Report.
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10.3 POLLUTANTS CONTROL
(continued)
10.3.1 Treatment of air emissions
(continued)
Major Air Emissions Treatment Improvement Cases
Companyname
Type of airemissionstreatmentimprovementprogram
Program description
Fuzhou FuxingEquipment
replacement andtechnologicalupgrade
During the Year, Fuzhou Fuxing constructed a low-temperature refrigeration systemfor organic solvent tail gas from the low-temperature water recycling workshop toreduce the volume of organic solvent tail gas entering the RTO. Through technicalmeans such as low-temperature cooling and increased heat exchange surfacearea, the project reduces the volume of tail gas while also reducing solvent usage,resulting in annual solvent cost savings of approximately RMB350 million.Gutian FuxingEquipment
replacement
During the Year, Gutian Fuxing improved its air emissions treatment processes byadding air emissions treatment procedures, replacing facilities and equipment, andother means, further improving air emissions treatment efficiency.
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10.3 POLLUTANTS CONTROL
(continued)
10.3.2 Wastewater management
Livzon strictly abides by domestic laws and regulations concerning water pollution prevention and control. The Companyhas formulated the Procedures for Wastewater Management as the guideline of wastewater management for the wholeGroup. Taking into account their actual conditions, each manufacturing enterprise has formulated and implementedspecialized management systems to continuously strengthen wastewater management and ensure compliant discharge,and continuously improving the proportion of reuse. Each manufacturing enterprise of the Group has designated aspecific responsible department for wastewater management. These responsible departments analyze the types, dischargeconcentrations, discharge limits and other information of wastewater pollutants produced by each manufacturingenterprise and lead the formulation of effective wastewater management measures, taking into account the Company’swastewater management policies.We operate the wastewater treatment systems in strict accordance with their technological procedures. We conductdaily inspections of each treatment step at the wastewater stations. All of our key pollutant discharge subsidiaries haveinstalled on-line wastewater monitoring instruments at the discharge outlets of wastewater, connecting the on-linesystems with government supervising authorities to realize real-time monitoring and share the discharge data of processedwastewater, so as to monitor on a dynamic basis that wastewater is discharged after reaching the standards. Additionally,each manufacturing enterprise of the Group actively cooperates with local bureaus of ecology and environment in theinvestigation of the implementation of pollutant discharge permits, and regularly monitors discharged wastewateraccording to the monitoring frequencies required by these permits. We also engage third-party testing agencies to test thewastewater treatment performance to verify the effectiveness of our wastewater management. Through the combinationof perfect wastewater treatment facilities and professional operation teams, the Group has achieved effective treatmentand control of wastewater during production.In wastewater treatment, the Company strictly controls wastewater discharge at the source, while continuously optimizingwastewater treatment processes to improve wastewater treatment efficiency and effectively reduce wastewater discharge.Furthermore, in response to the problem of high-concentration wastewater treatment, the Company has introducedpretreatment devices. The high-concentration wastewater first undergoes pretreatment to improve water quality througha complex treatment process, before entering subsequent treatment processes. This relieves the load pressure on latertreatment units and avoids system instability due to the impact of water quality, thus improving the overall wastewatertreatment efficiency. The upgraded treatment system ensures stable treated water quality, with pollutant indicators wellbelow national discharge standards. The Company also makes great efforts on technological breakthrough projects ofwastewater reuse to effectively reduce total wastewater discharge. Livzon’s wastewater and major water pollutants (i.e.COD and ammonia nitrogen) discharge data for the Year are detailed in Section 12.2 of the Report.
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10.3 POLLUTANTS CONTROL
(continued)
10.3.2 Wastewater management
(continued)
Major Wastewater Treatment Improvement CasesCompanyname
Type ofwastewatertreatmentimprovementprogram
Program description
XinbeijiangPharma
Technologicalupgrade
During the Year, Tobramycin production involved a large amount of ammoniawater, resulting in an average increase of 70 mg/L in ammonia nitrogenconcentration in the influent at the wastewater station. Xinbeijiang Pharmaconstructed two new nitrogen and phosphorus removal tanks to reinforce thedenitrification process, improve the efficiency of ammonia nitrogen treatment,and ensure the discharge of ammonia nitrogen after reaching the standards at thewastewater station.
Jiaozuo Hecheng
Technologicalupgrade
During the Year, Jiaozuo Hecheng reduced the discharge of fluoride ions inwastewater by making breakthroughs in wastewater treatment processes. Thismeasure not only reduced the fluoride ion content in the workshop wastewater,but also resulted in a monthly consumption reduction of 16.5 tonnes of quicklimeand 60 tonnes of polyaluminum chloride, generating an economic benefit ofapproximately RMB30,000 per month.
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10.3 POLLUTANTS CONTROL
(continued)
10.3.3 Waste management
The Group strictly complies with the requirements of relevant domestic laws and regulations. The Company has formulatedthe Procedures for Solid Waste Management and the “Three-Waste” and Noise Management System as the guideline ofwaste management for the whole Group. In addition, in combination with their own actual conditions, each manufacturingenterprise of the Group has formulated and implemented specialized management systems for waste. Meanwhile, eachmanufacturing enterprise of the Group has established a responsible department for the prevention of environmentalpollution from solid waste. These departments are responsible for overseeing waste generation, disposal, transfer, andother processes to make sure all waste is appropriately disposed of.The Company attaches great importance to the standardized management of waste. In strict accordance with the nationallaws and regulations, the Company builds special temporary storages of waste and classifies and segregates waste fortemporary storage based on its nature, hazard level, etc. After temporary storage, waste is transferred to qualified thirdparties for treatment. The third parties utilize high-temperature incineration methods and develop advanced treatmenttechnologies to eliminate harmful substances in the waste.To reduce the waste discharge during the operation, we conduct waste management improvement programs across alloperations of the Group every year. During the Year, we increased investment in the application of relevant technologies,conducted in-depth research on waste resource utilization technologies, and tried to reduce waste generation at thesource. Through enterprise-university-research institution cooperation, the Company has established close partnershipswith university research teams to jointly explore treatment technologies for the harmlessness and reduction of myceliumresidue. At present, some technological achievements have entered the small-scale test phase and are expected toimprove the efficiency of waste treatment and environmental protection in an innovative way. Meanwhile, the Groupheadquarters has conducted internal waste audits at each manufacturing enterprise, assessing waste generation, includingthe types, quantities, treatment and disposal methods of waste generated by each department. The audits also check theimplementation of relevant management systems and the compliance of the relevant processes and operations with theestablished management procedures, especially the management and disposal of hazardous waste.In addition, the Company has been working with qualified third parties to explore ways of resource utilization for coalash, pharmaceutical residues, and other wastes. Through the conversion of renewable resources, we reduce emissions,alleviate environmental pressure, achieve resource recycling, and generate economic benefits. Livzon’s waste (includingnon-hazardous waste and hazardous waste) disposal data for the Year are detailed in Section 12.2 of the Report.
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10.3 POLLUTANTS CONTROL
(continued)
10.3.3 Waste management
(continued)Case: Alumina recycling
During the Year, Fuzhou Fuxing conducted an alumina recycling project through experimental cooperation withthird parties. In the project, waste alumina was processed into aluminum sulfate, which will be used as a floctantfor water treatment. The project is in progress, and once completed, it will reduce the amount of hazardous wastedisposal in Fuzhou Fuxing, while saving disposal costs.
10.3.4 Noise management
The Company has formulated the Procedures for Noise Emission Management and the “Three-waste” and NoiseManagement System as the guideline of noise management for the whole Group. In addition, in combination with theirown actual conditions, each manufacturing enterprise has formulated and implemented noise management systems.All manufacturing enterprises of the Group conduct regular monitoring of noise inside the factory and continuously carryout noise management work to reduce the noise pollution from the Group’s production and operation process and improvethe environmental quality.During the Year, we phased out older equipment that generated excessive noise during operation and introduced a seriesof new equipment using advanced noise reduction technology. In terms of noise source management, the Company builtsoundproof facilities in key areas. For example, multi-layer composite soundproof walls were installed in specific areasof the factory, offering excellent sound absorption and insulation properties, effectively preventing noise transmission.For some large equipment, soundproof enclosures were specially built to greatly reduce the diffusion of noise into thesurrounding environment.Moreover, the Company widely used sound-absorbing cotton, damping soundproof panels and other efficient acousticmaterials in the soundproofing processes of buildings and equipment. These materials were applied to workshop walls,ceilings, and key parts of equipment, effectively absorbing sound energy and reducing noise intensity. These efforts notonly provided a quieter and more comfortable working environment for employees, but also minimized the noise impacton the surrounding communities.
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10.3 POLLUTANTS CONTROL
(continued)
10.3.4 Noise management
(continued)Case: Noise management improvement measures
The fermentation projects I and II of Fuzhou Fuxing faced serious noise problems, primarily caused by sterilizationsteam discharge, air discharge, and airflow noise within the pipelines. To improve the working environment andprotect employees’ hearing health, Fuzhou Fuxing implemented three-phase noise management:
In the first phase, the small discharge gas collection system of the tank replenishment system was optimized anddirected into a sealed funnel, and quick-connect clamps were used to reduce the noise of gas discharge; in thesecond phase, a pipeline network was laid on the second floor to connect the small discharge system of the airfilter, and tail gas was centrally directed into a treatment system to avoid noise diffusion; in the third stage, thefermenter air pipes were soundproofed by wrapping them with heat and sound insulation cotton and covering themwith aluminum sheets.Through these measures, the noise in Fuzhou Fuxing workshops was reduced by 11.5dB and 7.2dB, respectively,which significantly improved the quality of the working environment.
10.3.5 Reducing environmental impact
When heavy pollution weather warnings occur, Livzon proactively cooperates with requirements of local governments toreduce production volume, so as to reduce discharge of pollutants such as VOCs, nitrogen oxides, particulate matter andsulphur dioxide, and to minimize the impact of corporate operations on the environment as much as possible.Due to the excellent environmental management performances of the Group, Xinbeijiang Pharma is rated as a VOC keyregulatory Class-A corporate, which can carry out autonomous emission reduction in heavy pollution weathers. JiaozuoHecheng is rated as a Class-B corporate in key industry performance rating under heavy pollution weather in HenanProvince, which is not required to reduce production volume in yellow warning and is only required to conduct appropriateemission reduction in orange or above warnings of heavy pollution weather according to the requirement of heavypollution weather control.
10.4 RESOURCE USE MANAGEMENT
Livzon integrates the concept of sustainable development into the entire production and operation process, strictlycomplies with laws and regulations related to energy conservation, water resources, and circular economy, and hasestablished an energy management system. The Company has formulated the Procedures for Energy Management andother management documents as the general guideline of resource use for the Group, and requires each enterpriseto strictly implement them. The Company has set forth the Environmental Management Targets for 2021-2025 tocontinuously optimize how to use resources through management improvement and technological upgrading. Taking intoaccount their actual conditions, each manufacturing enterprise formulates resource management systems, implementssystematic management, regularly reviews the achievement of targets, and comprehensively improves the efficiency ofresource use.
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10.4 RESOURCE USE MANAGEMENT
(continued)
10.4.1 Water resource management
Livzon remains focused on effectively promoting water management and proactively addressing water risks throughoutits operations. We implement a stringent management system, keep strengthening the awareness of preventing waterresource risks internally, and conduct water resources management improvement programs across all operations of theGroup to reduce water consumption and to continuously improve the Group-wide capability to address water resourcerisks.During the Reporting Period, Livzon did not encounter any issue in sourcing water that is fit for purpose. Livzon’s waterconsumption data for the Year are detailed in Section 12.2 of the Report.Water risk assessmentIn order to identify the potential risks associated with access to water resource at all operations of the Group, allmanufacturing enterprises of the Group conduct water risk assessment at least once a year. Using the WRI Aqueduct
tool,we analyzed risks from 17 dimensions to identify potential risks and develop response plans. Based on the assessmentresults, we set water-saving targets and implemented supervisory measures to ensure the sustainable management ofwater resources. We regularly report the assessment results and the implementation of improvement measures to the ESGCommittee, ensuring the safety and sustainability of water resource management.In 2024, our specific assessment dimensions are as follows:
Overall water riskWater stress
Livzon’s Water Risk Assessment Dimensions
Water depletionSeasonal variabilityGroundwater table declineCoastal flood riskDrought riskUntreated connected wastewaterCoastal eutrophication potentialUnimproved/no drinking waterUnimproved/no sanitation
Physical risks-quantityInterannual variabilityRiverine flood riskPhysical risks-qualityRegulatory and reputational riskPeak country ESG risk index
Aqueduct, a water risk atlas tool developed primarily by the World Resources Institute, aids enterprises, investors, and
government departments in understanding current and future water risks in various regions through the use of open-sourcedata.
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10.4 RESOURCE USE MANAGEMENT
(continued)
10.4.1 Water resource management
(continued)
Water risk assessment(continued)Based on the overall water risk scores for each operation from the WRI’s water stress analysis tool, we classified the waterrisks of each operation into five levels: low, medium-low, medium-high, high, and very high. The water risk assessmentresults for the operations of the Group’s manufacturing enterprises in 2024 are as follows:
Water risk levelLowMedium-lowMedium-highHighVery highNumber of operations03624
Water Resource Management MeasuresTo address potential risks and impacts related to water resources, the Group has developed a series of managementmeasures focusing on five dimensions: water security, water quality control, emergency plan, internal and externalmonitoring, and training and promotion. In water security, we optimize production processes and upgrade water-savingequipment to ensure efficient use of water resources. In water quality control, we establish a water quality monitoringsystem, and we regularly test and ensure water safety. We have developed detailed contingency plans for natural disasterssuch as floods, droughts, and high temperatures or emergencies such as extreme weather to ensure rapid response andeffective handling. At the same time, we strengthen the transparency and compliance of water resource managementthrough a combination of internal supervision and external audits. In addition, the Group regularly conducts waterresource management training to enhance employees’ awareness of water conservation, and promotes the concept ofgreen water use through publicity activities.
? Water resource recyclingEach manufacturing enterprise of the Group actively conducts projects of reclaimed water and cooling water recycling toimprove the utilization efficiency of water resources. Highlight cases are as follows:
Fuzhou Fuxing: environmental heavy water reuse programDuring the Year, Fuzhou Fuxing recycled the heavy water produced from the water production process. The heavywater was used for the preparation of chemical agents for wastewater treatment in the wastewater station.After the implementation of the program, 100 tonnes of heavy water can be recycled per day while reducing theconsumption of water resources.
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10.4 RESOURCE USE MANAGEMENT
(continued)
10.4.1 Water resource management
(continued)Water Resource Management Measures(continued)
? Water consumption reductionEach manufacturing enterprise continuously develops and optimizes water-efficient processes and equips themselveswith water-efficient facilities to reduce the water consumption in daily production and operations. Highlight cases are asfollows:
Fuzhou Fuxing: chromatography reclaimed water recycling programDuring the Year, Fuzhou Fuxing used ammonia wash water regenerated from chromatography for the acid washingof some demineralization columns and adsorption columns. Upon completion, the program can save an average of80 tonnes of water per day.
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10.4 RESOURCE USE MANAGEMENT
(continued)
10.4.2 Energy management
Paying great attention to the conservation and consumption reduction of energy, Livzon has formulated and strictlyimplemented management systems such as the Procedures for Energy Management and the Procedures for ResourcesManagement. We keep improving our internal energy management system, and implement programs to reduce energyconsumption and carbon emissions, such as reduction of greenhouse gas emissions, energy efficiency improvements, anduse of renewable sources, across all operations of the Group, continuously strengthening energy management and controllevels.During the Year, the Company actively promoted the transition to clean energy, collaborating with wind power suppliersto purchase renewable energy. These wind power sources are connected to the Company’s power grid through stabletransmission lines, providing green power for production and operations, which can effectively reduce carbon emissionsand promote green development.In terms of energy utilization, the Company achieves efficient recycling of resources from multiple perspectives. Forexample, for the waste heat from air compressors, high-efficiency heat exchangers and circulating pipelines are installedto use the heat energy generated during the operation of air compressors to preheat production water and provide heatingfor office areas; the heavy water produced by the water production system is recycled and used to prepare wastewatertreatment agents, thus reducing the use of fresh water resources and lowering wastewater discharge. The Company alsoinstalls differential pressure power generation equipment on steam transmission pipelines to generate electricity by usingthe differential pressure of steam to achieve cascade utilization of energy.In addition, for high power-consuming manufacturing enterprises that cannot yet fully transition to new energy sources,we employ advanced monitoring systems to assess energy conservation potential, and perform measurement analysis andappraisal of electricity use. In accordance with the national Catalogue of Obsolete Mechanical and Electrical EquipmentEliminated due to High Energy Consumption, we conduct comprehensive inspections to eliminate obsolete equipment anduse energy-efficient equipment to reduce energy consumption.Through innovative practices such as renewable energy utilization, waste heat recovery, and water resource recycling, theCompany has achieved results in the field of circular economy, laying a solid foundation for sustainable development ofthe enterprise and setting a good example for the industry.As at the end of the Reporting Period, the Company’s subsidiary Fuzhou Fuxing had been certified to ISO 50001:2018/RB/T 114-2014 Energy Management System, and Livzon Hecheng had been certified to GB/T 23331-2020/RB/T 114-2014Energy Management System.Livzon’s energy consumption and major greenhouse gas emissions data for the Year are detailed in Section 12.2 of theReport.
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10.4 RESOURCE USE MANAGEMENT
(continued)
10.4.2 Energy management
(continued)Livzon’s Implemented or Planned Key Clean Energy Programs as at the end of 2024
Companyname
Programname
Programinput(RMB’0,000)
Program descriptionDescription of effects
LivzonHecheng
Photovoltaicpowergeneration
180The program uses monocrystalline silicon
solar cells as photovoltaic conversiondevices. Photovoltaic power generationsystems are installed atop the carport andwarehouse roofs, while the correspondingaccess system is configured according to theconstruction site plan. The program will befunded and constructed by Livzon Hechengitself, and all electricity will be generatedfor its own use.
To be implemented, theprogram will generate500,000 kWh of electricityper year upon completion.
SichuanGuangda
Photovoltaicpowergeneration
600In the program, photovoltaic power
generation systems are installed atop thecarport and plant roofs. The program wasfunded and constructed by a third partywho gave Sichuan Guangda electricityconcessions with a fixed unit price ofRMB0.49/kWh.
Implementation commenced,the program will generate2,170,000 kWh of electricityper year upon completion.
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10.4 RESOURCE USE MANAGEMENT
(continued)
10.4.3 Material management
True to the principle of minimizing resource consumption and pollutant discharge at source, Livzon continuouslyoptimizes the use of materials. In the process of product manufacturing, we promote the recycling of industrial materialsthrough technological transformation to effectively improve the utilization of production resources. At the same time, wecontinuously improve our product packaging design, make active efforts such as recycling of green packaging boxes, andsimplify packaging materials provided that market demand and production requirements are met, achieving a win-winresult of improving economic benefits and conserving resources.Livzon’s data of packaging material use for the Year are detailed in Section 12.2 of the Report.
Case: Program to improve ethanol recovery rate
During the Year, Sichuan Guangda improved the ethanol recovery rate by implementing technological upgradeof ethanol distillation columns, single-effect concentrators, and distillation residue. After the completion of theprogram, the ethanol recovery rate increased from 80% to 92%. Sichuan Guangda can save approximatelyRMB430,000 in ethanol costs annually, significantly reducing ethanol consumption.
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
Globally, climate change has become one of the major risks. A constant threat to human health, it also poses a challengeto business operations. As a pharmaceutical company, Livzon keeps in mind the mission of “prioritizing the quality of lifeof patients” and actively fulfills its social responsibilities. We help mitigate global climate change by reducing greenhousegas emissions, and are also focused on addressing the health problems caused by climate change, in order to minimizethe negative impact of climate change on the environment and human health.During the Year, we managed and disclosed climate change impacts in accordance with the recommendations of the TaskForce on Climate-related Financial Disclosures (“TCFD”), and completed the 2024 CDP Climate Change Questionnaire.
10.5.1 Governance
Attaching great importance to climate-related risks and opportunities, Livzon has established a governance structure anda working mechanism for climate-related matters, where managing climate-related risks is integrated into the Group’soverall risk management.The ESG Committee is responsible for leading climate change management, reporting to the Board at least once a year,overseeing the identification, assessment, and management of climate-related risks and opportunities, developing andoverseeing the implementation of climate targets and response plans, and integrating them into the Company’s long-termdevelopment strategy.As the executive body of the ESG Committee, the ESG Working Team is responsible for collaborating with eachdepartment, unit and subsidiary of the Company to fully implement the management of climate change issues, regularlysorting out and summarizing the progress and results of the Group’s related work, and reporting to the ESG Committee.The production technology head office and the general managers of subsidiaries of the Company are responsiblefor managing and monitoring the implementation of climate-related work. The general managers of each subsidiaryadvance and supervise the joint implementation of climate-related work by the functional departments of their respectiveenterprises, and ensure effective communication and action at the implementation level.
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.1 Governance
(continued)
Board of DirectorsESG CommitteeESG Working TeamProduction technology head ofce of the CompanyGeneral managers of each subsidiary of the CompanyFunctional departments:
production departments, quality departments,supply chain departments, nance departments,market development departments, EHS departments,and other relevant departments
Livzon’sClimateGovernanceFramework
10.5.2 Strategy
Livzon strives to fully integrate climate risks into the Group’s ESG risk management system, while seizing the developmentopportunities presented by climate change. We conduct a detailed analysis of the financial impact of related risks andopportunities, and ensure that climate change issues are thoroughly considered in the Company’s strategic decisions.
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Introduction to climate strategy and scenario analysisDuring the Reporting Period, the Group conducted a comprehensive assessment of the climate change risks (includingphysical risks and transition risks) and opportunities facing its business with full reference to the recommendations of theTCFD. Meanwhile, the Group conducted climate scenario analysis to assess the adaptability of various parts of its valuechain to climate scenarios, the materiality of climate-related risks, and the possible impact on the Group of potentialopportunities in the process of transitioning to a lower emissions future.
Low-emission scenarios: SSP 1-2.6 and IEA NZE 2050In assessing physical risks, we have selected the climate scenario of SSP 1-2.6. This scenario envisions a sustainablesociety dominated by clean energy, where countries recognize the severity of climate change, intensify climate actions,and enact strict climate policies, striving to reduce carbon emissions and keep global warming well below 2?C.With technological progress and increased public awareness, the world transitions to lower carbons and low energyconsumption, greatly reducing carbon dioxide emissions. Despite the slow pace of emissions reduction, net-zero emissionscould be achieved after 2050, and the temperature increase of within 1.8? C is expected to be achieved by 2055, a timespan that aligns with the Company’s goal of achieving operational carbon neutrality by 2055.In assessing transition risks, we have selected the scenario of IEA NZE 2050, where the global community strives toachieve the net-zero emissions target by 2050. Governments and industries take proactive climate actions, developingand implementing a series of new climate policies that promote the widespread application of clean energy and theimprovement of energy efficiency. Technological innovation and increased public awareness facilitate the transitionof enterprises to a low-carbon economy, leading to a significant reduction in global CO
emissions. Despite potentialchallenges in the emissions reduction process, net-zero emissions will eventually be achieved by 2050. By 2100, there isat least a 50% probability that the global average temperature increase will be limited to 1.5?C.High-emission scenarios: SSP 5-8.5 and IEA STEPS
In assessing physical risks, we have selected the scenario of SSP 5-8.5, which follows a “business as usual” emissionpathway, focuses on the climate impacts of physical risk factors, and involves no strict climate policies issued by countries.Under this scenario, global temperatures are expected to rise by more than 2.5?C by 2055, potentially leading to sea levelrise, changes in weather patterns, and more intense and frequent extreme weather events.In assessing transition risks, we have selected the scenario of IEA STEPS, which reflects the global energy and climatedevelopment pathways based on current policies. In this scenario, governments promote the optimization of energystructures and the development of clean energy technologies according to existing policy frameworks and plans. The STEPSscenario, which can be used to assess the potential and limitations of current policies in achieving the net-zero emissionstarget by 2050, represents a more gradual pace of emissions reduction than the scenario of NZE 2050. Global CO
emissions are reduced in this scenario, but more time and effort will be needed to achieve the same emissions reductionas in the scenario of NZE 2050. By 2100, there is a 50% probability that the global average temperature increase will belimited to 2.4?C.
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)
Major uncertainty factorsLow-emission scenarios
1. Policy continuity doubts: Although countries establish active emission reduction policies in the short term,
changes in political landscapes may lead new governments to be influenced by economic interest groups, causingthem to adjust or abandon existing policies. For example, some countries, influenced by lobbying from traditionalenergy industries, reduce renewable energy subsidies, hindering project progress.
2. Risk of technological breakthrough delays: The research and development of renewable energy technologies
is full of uncertainties. Key technologies, such as efficient solar cell materials and long-life energy storage batteries,may fail to overcome challenges on time, delaying energy transition. Even with technological breakthroughs,funding shortages and market entry restrictions could impede their commercial promotion.
3. Obstacles to global cooperation: Addressing climate change requires close cooperation between countries.
However, there are big differences between developed and developing countries in distribution of carbon emissionreduction responsibility, technology sharing, and financial assistance. The game of interests can easily hindercooperation, threatening the achievement of global emission reduction targets.High-emission scenarios
1. Geopolitical shocks: Geopolitical conflicts can cause fluctuations in the global energy market. Wars in major oil-
producing countries can cut off oil supply and drive up oil prices. In the short term, countries, due to difficulties inenergy transition, may have to increase the extraction of fossil energy sources such as coal, exacerbating carbonemissions.
2. Unexpected technological breakthroughs: Even though overall technological development may be slow,
unexpected breakthroughs may still occur in certain key areas. For example, if low-cost, high-efficiency carboncapture and storage technologies are rapidly applied on a large scale, they could change the high-emission energyproduction model and reverse the emissions trend.
3. Public awareness shift: As the impacts of climate change intensify, public awareness of environmental
protection may rapidly awaken, creating strong public opinion pressure. This will push governments to increaseenvironmental protection investment and carbon emission regulation, while businesses will adjust strategies toreduce emissions due to changes in consumer preferences.
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Major uncertainty factors(continued)
High-emission scenarios(continued)
At the same time, with respect to the assumptions regarding carbon emissions pricing in each scenario, we are notcurrently impacted by carbon emissions pricing, but a significant increase in the prices of carbon emissions under thesescenarios may influence our expenditures through value chain transmission. Therefore, we still consider carbon emissionspricing in our scenario analysis and incorporate these considerations into our climate strategy. While improving our energyefficiency comprehensively, we will continue to increase the proportion of renewable energy usage, thereby reducingcarbon emissions.In addition, based on the above scenario analysis, we also summarize the significant economic, social, and environmentalimpacts of climate change factors:
Economic impactsEconomic impacts mainly manifest in policy uncertainty, technological breakthrough delays,
and obstacles to global cooperation. Policy uncertainty may lead to instability in renewableenergy project investments, increasing operating costs for enterprises. Technologicalbreakthrough delays could delay the energy transition, leading to increased reliance ontraditional energy and higher operating costs for enterprises. Obstacles to global cooperationmay affect international supply chains and market expansion for enterprises. Moreover,the carbon emissions pricing could significantly rise in the future, impacting corporateexpenditures through value chain transmission and increasing operational pressure.
Social impacts
In terms of social impacts, climate change may lead to shifts in public awareness andpolicy adjustments, impacting social structures. Policy adjustments may cause shifts in theemployment structure of the traditional energy industry, with employees needing to transitionto the renewable energy sector. The rapid awakening of public awareness of environmentalprotection may create public opinion pressure, pushing enterprises to adjust productionmethods to suit consumer preferences. In addition, climate change may trigger extremeweather events, increasing social instability and affecting the stability of corporate supplychains.Environmental impacts
In terms of environmental impacts, climate change is directly related to the sustainabledevelopment of enterprises. In low-emission scenarios, technological breakthrough delaysmay result in slow development of renewable energy, causing enterprises to still rely on fossilenergy, increasing carbon emissions, and raising environmental pressure. In high-emissionscenarios, geopolitical conflicts may lead to increased fossil energy extraction, furtherexacerbating carbon emissions and environmental destruction.
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities
In 2024, we rated the climate risks and opportunities in different scenarios from the dimensions of “impact level”and “expected time of occurrence”. Based on the climate score, the impact levels of climate risks and opportunitieswere classified into five levels: high, medium-high, medium, medium-low, and low. For the climate-related risks andopportunities that significantly impact the Group, we developed and implemented specific action plans.
1. Physical Risk Impact Analysis and Response Measures
Risk TypeRisk NameClimate Score in
Different Scenarios
ExpectedTime of RiskOccurrenceLow-emission
Scenarios
High-emissionScenariosPhysical risksAcuteTyphoons
LowMediumShort-termFloodsRainstormsHeatwaves/Cold wavesLowMedium-lowShort-termDroughtLowLowMedium-termChronicRising mean temperaturesLowMedium-lowLong-term
Air pollutionLowMedium-lowMedium-termLack of waterLowLowShort-termHumid airLowLowMedium-term
Note: Time dimension (expected time of risk occurrence): short-term (0-3 years), medium-term (3-10 years), long-term (10-30 years)
11 Socialcontributions
10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
1. Physical Risk Impact Analysis and Response Measures
(continued)Acute-Extreme weather (typhoons, floods, rainstorms)
Risk description:
The Group’s production bases are widely distributed in the regions of northwestern, southwestern, southern, eastern, andcentral China. Extreme weather events caused by climate change include, but are not limited to, typhoons, rainstorms,droughts, and floods. Under the 1.5?C global warming scenario, the frequency of 1-in-20-year heavy precipitation eventsincreases by 10% and the frequency of 1-in-100-year heavy precipitation events increases by 20%; under the 2?C globalwarming scenario, the frequency of 1-in-20-year heavy precipitation events increases by 22% and the frequency of 1-in-100-year heavy precipitation events increases by more than 45%.Risk impacts:
Natural disasters such as rainstorms, floods, and strong typhoons may have lasting impacts on the Group. During extremeweather events, transportation of raw materials and products will be impeded, employee commutes will be inconvenient,and risks of power and water outages, and suspended steam supply could also arise. For example, some of the Group’sproduction bases, located in coastal cities, are affected by tropical air currents in the northern hemisphere. From May toOctober, several typhoons may potentially make landfall nearby, leading to production stoppages and property losses. Inaddition, during the rainy season, there may be several instances of rainfall at the red alert level for rainstorms, causingimpediments to the transportation of production materials, inconvenience to employee commutes, and damage tocorporate assets, thereby affecting production schedules and increasing facility maintenance costs.
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)
Climate risks and opportunities(continued)
1. Physical Risk Impact Analysis and Response Measures
(continued)
Acute-Extreme weather (typhoons, floods, rainstorms) (continued)Response measures:
? Emergency system development: Develop systems such as the Contingency Plans for Extreme Weather, establish
a contingency command system, and set up an emergency office with defined responsibilities of personnel whocoordinate with production departments for safety inspections and logistics departments for material support.? Response to extreme weather
? Before extreme weather events: monitor the weather, implement safety inspection corrections, provide
protective and emergency equipment, and make arrangements for personnel attendance, materialtransportation, and production and delivery.? During extreme weather events: reduce production, stop outdoor operations, shut down as needed,
arrange for shift duty, and ensure personnel safety and sufficient supplies.? After extreme weather events: assess the loss in time, summarize the experience, and speed up the
resumption of production.
? Fixed asset protection: regularly inspect and maintain equipment and facilities, insure assets in high-risk locations,
and take additional protective measures to reduce force majeure losses.? Water quality safety management: Use water purification system to ensure the safety of production water, and
regularly test the quality of domestic and drinking water.
11 Socialcontributions10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
1. Physical Risk Impact Analysis and Response Measures
(continued)Acute-Extreme weather (heatwaves, cold waves)
Risk description:
Due to human activities, the probability of cold wave occurrences has decreased to a certain extent, but there is anincreasing trend in intensity. Cold waves can bring drastic temperature drops, strong winds, rain and snow, frost, andother disasters, impeding the Group’s raw material production, logistics transportation, power operation, etc. Meanwhile,heatwaves and heavy precipitation-heatwave combined extreme events are becoming more frequent and intense in thecontext of global warming. This leads to an increase in residential electricity loads, which could cause industrial electricityrestrictions for our enterprises during certain periods.Risk impacts:
Under extreme heat, the Group may need to enhance ventilation and cooling in production plants and offices, resulting inhigher energy consumption and operating costs; meanwhile, the normal production may be impacted by power outagesdue to possible peak demand on the power grid. In extreme cold weather, the Group may increase demand for heating inproduction plants and offices, resulting in higher energy consumption and operating costs; road icing due to cold weathermay lead to insufficient supply of raw materials, directly resulting in production delays or stagnation; dry weather easilycauses fires, explosions, spills, poisonings, and other accidents; extremely low temperature may cause property lossessuch as equipment failure and increase maintenance costs for various facilities. Moreover, cold waves or heatwaves mayincrease the severity and scope of diseases such as cardiovascular disease, malaria, or heat stroke, threatening employees’health.
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘s
message
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
1. Physical Risk Impact Analysis and Response Measures
(continued)Acute-Extreme weather (heatwaves, cold waves)(continued)Response measures:
? Energy management: make arrangements for off-peak power use before peak demand, and prepare backup energy
and contingency plans.? Hazardous material management: in summer, schedule deliveries for hazardous materials to avoid the high
temperature period and reduce the risk of fire.
? Supply chain management: analyze supplier risks, develop inventory strategies for key raw materials, and
strengthen cooperation.
? Safety protection and inspection: implement preventive measures, provide protective equipment, and set up
warning signs; conduct regular inspections of equipment such as boilers and slippery areas, and require all plants
to maintain winter insulation to prevent freezing damage to equipment.? Accident prevention: Develop contingency plans for accidents such as fires and explosions.
11 Socialcontributions10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
1. Physical Risk Impact Analysis and Response Measures
(continued)
Chronic-Lack of waterRisk description:
The Group’s production process requires a significant amount of water resources for multiple steps such as raw materialprocessing, product synthesis, and equipment cleaning. As the issue of global water scarcity becomes increasingly severe,especially in certain arid and water-stressed regions, the impact of water scarcity risks on production stability and costcontrol for pharmaceutical enterprises is becoming more pronounced.Risk impacts:
The Group’s water sources include surface water and groundwater. Water scarcity may force us to scale down or haltproduction, or take additional water resource management measures, such as recycling water resources and applyingwater efficiency technologies, which may result in increased production costs or reduced operating income. At the sametime, the Group’s supply chain may be dependent on water resources in certain regions, and water scarcity risks may leadto instable supply of critical raw materials, affecting the stability of the entire supply chain.Response measures:
? Risk assessment and response: continually conduct water risk assessments for the Group’s manufacturing
enterprises, set reasonable water conservation targets and countermeasures, and take and implement improvementmeasures (for details, please refer to Section “10.4.1 Water resource management” in this chapter).? Dynamic monitoring and emergency response: monitor geographic and climatic information and initiate
contingency plans when the water levels reach the risk line.
? Water usage control: set water conservation targets, reduce fresh water consumption, and increase wastewater
reuse.
? System development: Establish and improve the water resources management system and appraisal system,
develop contingency plans, and prepare buffer production water tanks.
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘s
message
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
1. Physical Risk Impact Analysis and Response Measures
(continued)Chronic-Rising mean temperatures
Risk description:
Analysis of the China Meteorological Administration’s global surface temperature dataset shows that global warming hascontinued since 2015, with records for the “hottest year on record” continually being broken. Rising mean temperaturescaused by global warming may pose a series of challenges to the production activities, raw material supply, productquality control, and employee health and safety of pharmaceutical enterprises. Temperature changes may impact theproduction processes, storage conditions, transportation chain, and stability of drug efficacy, especially for temperature-sensitive drugs and biological products.Risk impacts:
Temperature changes may impact the synthesis and production processes of certain drugs, which requires adjustments toproduction parameters or addition of temperature control measures, thereby increasing production costs. In some regionsexperiencing high temperatures, continuous temperature rise requires the Group to enhance ventilation and coolingmeasures in production plants and offices, resulting in higher energy consumption and operating costs. It also reducesproduction efficiency due to increased likelihood of heat stroke and other sudden heat-related illnesses among employees.Response measures:
? Energy-saving improvement: improve air-conditioning and ventilation systems in production plants and offices for
energy conservation to increase energy efficiency.? Employee care: provide employees with adequate supplies for heatstroke prevention in summer, and arrange
annual health check-ups.? Safety training: include heat response knowledge in employee training and conduct emergency drills for heat
stroke and other heat-related illnesses.? Work safety: avoid working outdoors at midday in hot weather to ensure work safety.? Power management: Plan for off-peak power use in advance.
11 Socialcontributions
10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
Risk TypeRisk NameClimate Score in
Different Scenarios
ExpectedTime of RiskOccurrenceLow-emissionScenarios
High-emission
ScenariosTransition risksPolicy and LegalEnhanced mandates on
and regulation of existingproducts and services
LowLowMedium-termRisk of litigationLowLowMedium-termTechnologySubstitution of existing
products and services withlower emissions options
LowLowMedium-termUnsuccessful investment innew technologies
LowLowMedium-termCosts to transitionto lower emissionstechnology
LowLowMedium-termMarketsChanging customer
behavior
LowLowShort-termUncertainty in marketsignals
LowLowLong-term
Increased cost of rawmaterials
LowMedium-lowShort-term
ReputationStakeholder concern or
negative stakeholderfeedback
LowLowShort-term
Stigmatization of sectorLowLowMedium-term
Note: Time dimension (expected time of risk occurrence): short-term (0-3 years), medium-term (3-10 years), long-term (10-30 years)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
(continued)Policy and Legal-Increased pricing of GHG emissions
Risk description:
The Group has not yet been included in the industries covered by the national emissions trading system and has setemission reduction targets to achieve carbon neutrality by 2055. In a future low-emission scenario, if the countrycontinues to promote stricter emission reduction policies, for which the Group is likely to be included into the carbonquota trading market, the Group may be affected by carbon quotas and need to take more aggressive emission reductionmeasures or utilize carbon emission rights trading to ensure greenhouse gas emission compliance.Risk impacts:
As the pricing of greenhouse gas emission rights increases, the Group’s expenditures in carbon trading may continue torise, impacting the Group’s financial performance. Also, the increased pricing of carbon emissions will have a significantimpact on the power and chemical industries, resulting in rising energy prices or short supply of raw materials, which willindirectly increase the Group’s operating costs.Response measures:
? Strategic planning and management: establish a greenhouse gas emission management framework, and define
energy conservation and consumption reduction targets and carbon emission reduction targets.
? Production technology innovation: improve production efficiency and the yield of products through technological
upgrading, thus reducing the raw material input and energy consumption per unit of product.
? Operational energy efficiency control: conduct a comprehensive review of energy-consuming equipment and
energy usage in production and operations, replace or upgrade high-energy-consuming equipment for energyconservation, and strengthen energy control.
? Resource recycling: promote resource recycling, install facilities for reclaimed water reuse, alcohol waste liquid
recycling, etc., and carry out acid-base recovery projects to achieve efficient resource circulation.? Energy structure optimization: promote projects such as photovoltaic power generation, and increase the share of
clean and renewable energy, such as purchasing wind power and obtaining green electricity certificates.
11 Socialcontributions10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
(continued)Policy and Legal–Environmental mandates on and regulation of existing products
Risk description:
Currently, China has introduced policies and regulations such as the Action Plan for Carbon Dioxide Peaking Before 2030and the 14th Five-Year Plan for Development of Pharmaceutical Industry. In the future, as domestic and internationalcarbon emission trading becomes interconnected and related efforts continue to deepen, more detailed implementationrules for coordinated emission reduction of greenhouse gases and other pollutants may be introduced in environmentalpollution prevention and control.Risk impacts:
Stricter environmental policies in the future may lead to write-offs, asset impairment, and early retirement of existingassets, and may also increase related insurance costs. Meanwhile, to meet policy requirements, the Group may need toinvest in R&D of new technologies and new processes of low energy consumption, thus increasing R&D expenditures;alternatively, due to policy requirements, the Group may need to purchase new equipment, thus increasing capital costs.Moreover, environmental compliance costs may also rise.Response measures:
? Business product optimization: replace high-energy-consuming, high-polluting, low-value-added products with
low-energy-consuming, low-polluting, high-value products to reduce regulatory impact.
? Carbon reduction in transportation: increase loading rates, use more new energy for transportation, and control
cost increases caused by increased carbon emission pricing.? Energy efficiency improvement: assess energy conservation status, such as performance rating for heavy pollution
weather, conduct on-site surveys, develop correction plans, and work with third-parties to prepare rating plans, so
as to reduce energy costs and avoid policy risks.
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
(continued)Technology-Unsuccessful investment in new technologies
Risk description:
In the process of responding to climate change and reducing environmental impacts, the Group may need to invest innew technologies and production processes, such as more environmentally friendly raw materials, more energy-efficientproduction equipment, or lower emissions logistics solutions. These investments are aimed at reducing the carbonfootprint of the enterprise and complying with increasingly stringent environmental regulations. However, the R&Dand implementation of these new technologies carry uncertainties, and the investments may fail due to failure of thesetechnologies to achieve expected outcomes, low market acceptance, cost overruns, or extended implementation timelines.Risk impacts:
The capital investments associated with technology development, new procedures, and new processes may result inhigher product costs and the risk of losing some market share due to price disadvantages. Meanwhile, investing in newtechnologies requires substantial R&D capital input with uncertainties as to their effective conversion into productivity,and, given the long technology replacement cycles, may affect the production capacity of existing products; theintroduction of new technologies may also require the elimination of old equipment, leading to write-offs and earlyretirement of existing assets. Additionally, if customers do not recognize new processes after technology reform, it maylead to reduced revenue from possible reduced demand for products.Response measures:
? R&D innovation: Accelerate the R&D of new technologies and intensify marketing efforts for new products that
apply new technologies to develop new growth points of profit.
? Upgrading: Modify and refine old products, continuously optimize material processes, develop green and lower
emissions production techniques, reduce production costs, and increase profit margins.
? Parallel processing: Operate new technology and old processes at the same time to avoid the slow sales of
products caused by technology update.? Risk prevention and control: when investing in new technologies or transition, fully evaluate input-output and
feasibility, select mature technologies, conduct pilot applications, and control risks through small, pilot and batch
tests.? Employee training: Provide training on new technology/process operation to help employees become familiar with
the new process.
11 Socialcontributions
10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)
Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
(continued)
Market-Changes in raw material costsRisk description:
The Group’s raw materials involve a variety of types including chemical raw materials, biomaterials, APIs, and traditionalChinese medicinal materials. During periods of heat in summer and cold in winter, or under extreme weather conditions,the production of some suppliers of raw materials and auxiliary materials may be restricted, resulting in productionreductions or shutdowns, which could potentially lead to shortages and price increases for some materials supplied tothe Group. Meanwhile, under the influence of climate change, global energy transition, etc., the prices of energy sources,water and raw materials may fluctuate, and some biological raw materials are hardly available, and some raw materialsuppliers are closing down; climate change may also turn essential resources for production into scarce resources.Risk impacts:
With climate change and energy transition undertaken by countries in response to climate change, the yield and quality ofraw materials for the Group’s products may be affected by factors such as extreme weather, pests, and energy shortages,resulting in insufficient raw material supplies and higher prices, thereby raising the Group’s production costs.
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6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
(continued)
Market-Changes in raw material costs (continued)
Response measures:
? Technological and resource innovation: actively carry out technological innovation, and identify alternative raw
materials and energy sources; improve production technology to promote product yield, reduce consumption ofraw materials and energy sources, and control costs.? Innovative cooperation models: explore new cooperation models, invest in the joint construction of cultivation
bases to ensure raw material quality and supply, and stabilize prices.? Supplier management: regularly assess supplier risks and increase the inventory from key suppliers. Sign long-term
contracts to stabilize bulk raw material prices, develop multiple alternative suppliers, and reduce dependence on a
single supplier.? Raw material reserves: reserve raw materials in advance according to market trends. For materials with large
consumption and long shelf life, monitor their prices, stockpile in advance, or sign annual agreements to prevent
supply disruptions.? Energy structure adjustment: increase electricity generated from renewable energy to address possible rising
electricity costs due to increased coal prices.? Packaging optimization: stay informed about new eco-friendly materials, select those with a cost advantage,
optimize packaging forms, and improve packaging efficiency using automated equipment.
11 Socialcontributions
10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
(continued)
Market-Uncertainty in market signalsRisk description:
Given climate change and its broad socioeconomic impacts, uncertainties related to market demand, regulatoryenvironments, competitive landscapes, and technological advancements may increase. For example, evolving policiesand regulations aimed at addressing climate change could affect the manufacture, packaging, and distribution ofpharmaceutical products.Risk impacts:
Under the influence of climate change or national carbon peaking and carbon neutrality policy, sudden power and waterrationing and outages and higher electricity prices could occur, potentially reducing product output and thereby disruptingnormal production and timely supply to customers. Moreover, raw material prices may rise, or supplies become delayeddue to power and water rationing and outages and sudden increases in electricity prices, leading to increased productioncosts.Response measures:
? Information monitoring: keep a close eye on market trends and energy policies to ensure timely access to
information.? Emergency preparedness: develop contingency plans and make arrangements to reduce the impact of sudden
power/water rationing.? Collaborative response: Establish a communication mechanism with various departments of power supply and
distribution, and establish systems for emergency response to power outages. Allocate emergency generators and
emergency pools, and adopt off-peak power use when electricity prices rise, to cope with the change of policies
such as staggered power outages and emission restrictions.
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message
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
2. Transition Risk Impact Analysis and Response Measures
(continued)Market and reputation-Changing customer behavior/stakeholder concern or negative stakeholderfeedbackRisk description:
As public awareness of climate change and environmental protection increases, customer requirements and preferences forpharmaceuticals and services may also evolve in the future. In a low-emission scenario in the future, an increasing numberof customers are likely to gradually prefer pharmaceutical enterprises and their products that have a lower environmentalimpact and use sustainable production methods. At the same time, in a low-emission scenario, future stakeholders otherthan customers may have higher expectations of the Group’s environmental performance.Risk impacts:
In a low-emission scenario in the future, as regulations and requirements on carbon emissions tighten gradually,customers’ requirement for lower emissions products or the consideration of ESG performance as a review point forcooperation may lead to decreased demand for existing products and retirement of inventories. As the Group’s ESGperformance has attracted great attention from the capital markets, any ESG downgrade and reputational damage mayresult in reduced capital availability. The Group’s production sites are exposed to reputational damage in the event ofcomplaints from residents. In terms of partnerships, negative impacts on workforce management and planning may leadto reduced revenue or increased costs. Failure to promptly address ESG concerns during customer audits could havean impact on sales. As government environmental regulations become more stringent, expansions of energy-intensivefactories may not be approved by the government in the future, which could affect the Group’s production.Response measures:
? Market and product strategy: flexibly adapt market strategies and product portfolios, pay attention to consumer
preferences, and focus on the development of green and lower emissions products.? Target setting and implementation: set and strive to achieve carbon emission and energy management targets.? Stakeholder engagement: proactively respond to inquiries from capital market stakeholders such as investors and
rating agencies.? Internal management improvement: improve ESG governance levels and conduct ESG training for employees.? Environmental management and compliance: disclose climate-related risks, opportunities, and response
measures in ESG reports, and implement energy conservation and carbon emission reduction measures to reduce
environmental impact and ensure EHS compliance.
? Brand and employee management: Build green factories, improve climate risk protection, and enhance brand value
and employee satisfaction.
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
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Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
3. Opportunity Impact Analysis and Response Measures
OpportunityFactor
Climate Score inDifferent Scenarios
Opportunity ImpactsLow-emission
Scenarios
High-emissionScenariosResourceEfficiency
LowLow? Reduced operating costs
? Increased production capacity, resulting in increased
revenues
? Increased value of fixed assets
? Benefits to workforce management and planning,
resulting in lower costsResource SourceLowLow? Reduced operating costs
? Reduced exposure to future fossil fuel price increases? Reduced exposure to greenhouse gas emissions and
therefore less sensitivity to changes in trading price of
carbon? Improved reputation and increased demand for productsProducts andServices
LowLow? Increased revenue through new solutions to climate
adaptation needs? Better competitive position to reflect shifting consumer
preferences, resulting in increased revenuesMarketsLowLow? Increased revenues through access to new and
emerging markets? Increased diversification of financial assets (e.g. green
deposits) to spread risksResilienceLowLow? Increased market valuation of infrastructure, land and
buildings through resilience planning? Increased business operation resilience through resource
substitutes and other means
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6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
3. Opportunity Impact Analysis and Response Measures
(continued)Resource Efficiency
Considering the potential future risks of rising raw material costs, increasing labor costs, logistics disruptions, etc.,the Group can improve its overall resource efficiency by increasing the level of automation in production and storageequipment, moving to more energy efficient buildings, and using more efficient modes of transport to provide more,higher value-added and more sustainable products and services with less resource consumption. Moreover, by usingmore efficient production and distribution processes, recycling resources, and reducing water usage, the Group can notonly reduce energy and material consumption, but also increase production capacity and meet increasingly stringentenvironmental requirements.Response measures:
? Production technology optimization: improve the yield of products through technological refinement, thus reducing
the raw material and energy consumption; optimize high-risk and energy-intensive inspection methods to ensureemployee safety and efficiency.? Product structure adjustment: replace high-energy-consuming, high-polluting, low-value-added products with
low-energy-consuming, low-polluting, high-value products, such as the construction of afoxolanerproduction lines and the elimination of colistinproduction.? Supply chain upgrading: improve supply chain management capabilities, strengthen communication with
the market and centralize production scheduling, and reduce the risk of inventory by shortening the cycle ofprocurement and production.
? Carbon reduction and efficiency improvement in transportation: increase the loading rate of containers and trains,
use new energy vehicles and low-carbon technologies for transportation, and use electric forklifts for in-planttransportation.
11 Socialcontributions
10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
3. Opportunity Impact Analysis and Response Measures
(continued)
Resource SourceAt present, the energy used by the Group remains the primary source of carbon emissions. As the price of fossil fuelsmay fluctuate along a lower emissions development pathway, initiatives such as the development of photovoltaics andthe promotion of clean production plans can better facilitate the Group’s achievement of its emission reduction targets.On another front, against the backdrop of China’s active promotion of energy transition, coupled with the increasinglycompetitive operating costs of renewable energy, the Group can secure stable, long-term returns from energy transitionand participation in the carbon trading market.Response measures:
? Energy transition: promote the construction of photovoltaic power generation projects in various manufacturing
enterprises, and explore other applicable clean energy sources.? Audit mechanism: regularly conduct cleaner production audits and continuously apply the comprehensive
environmental protection strategy to the production and product processes.? Incentive assurance: establish an incentive mechanism for cleaner production to promote emission reduction and
increase the profit potential of carbon trading.
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6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)
Climate risks and opportunities(continued)
3. Opportunity Impact Analysis and Response Measures
(continued)
Products and ServicesBy developing new products and introducing lower emissions goods and services, the Group can not only meet thegrowing environmental demands of consumers and enhance its competitiveness in the market, but also create newrevenue streams and improve its brand image. This environmentally friendly innovation not only helps the Group build animage as a sustainable and responsible enterprise and attract greater attention from consumers and investors, but alsoreduces operating costs and improves efficiency and profitability through optimized energy and resource use.Response measures:
? Drug R&D: give subsequent consideration to the R&D of drugs to treat tropical infectious diseases (e.g.
antiparasitic drugs).? Product upgrading: actively pay attention to consumer preference trends in the market, focus on the development
of green and low-carbon products, and build a green manufacturing system.MarketsClimate change may lead to changes in disease patterns and epidemiology, affecting the demand for specific medicines.For example, temperature changes may expand the range of transmission of certain infectious diseases, increasing thedemand for related drugs and presenting new market opportunities. Meanwhile, the impact of climate change on publichealth may prompt governments and international organizations to take further actions. The Group can improve itsbrand image and explore new markets and business opportunities by participating in these public health projects andcollaborations. In the future, the development of green finance may also bring about new financing opportunities.
11 Socialcontributions10 Greenoperation
9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
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index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
3. Opportunity Impact Analysis and Response Measures
(continued)
Markets (continued)Response measures:
? Market expansion: pay continuous attention to new markets, and actively prepare for new markets and businesses
brought about by emerging diseases caused by climate change.? Green finance: proactively pay attention to the green finance market, and explore green deposits and other
financial products.? Government subsidies: increase efforts to track environment-related policies, such as applying for subsidies in a
timely manner through measures such as building green factories and conducting energy efficiency certification.ResilienceAs the risks of climate change escalate leading to more frequent extreme weather events, whose intensity becomesincreasingly unpredictable, strengthening climate resilience is particularly important to avoid the loss of life and propertycaused by climate risks. The Group can increase the future market valuation of assets by strengthening the climateresilience of infrastructure, optimize the supply chain and diversify sourcing to mitigate the risk of unstable raw materialsupply, and invest in green and efficient production technologies to reduce negative environmental impacts. Thesemeasures help our enterprises maintain operational flexibility and efficiency in the face of challenges posed by climatechange, while also enhancing our environmental sustainability and market competitiveness.
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Climate risks and opportunities(continued)
3. Opportunity Impact Analysis and Response Measures
(continued)
Resilience (continued)Response measures:
? Green production and asset appreciation: select environmentally friendly materials and processes, and build green
factories and office buildings to increase the market valuation of fixed assets.? Energy structure optimization: vigorously promote photovoltaic power generation and explore other clean energy
sources to enhance the reliability of energy supply.? Supplier management upgrading: improve the supplier management process for pharmaceutical plants, assess
and classify their ability to respond to climate risks, and plan ahead accordingly to reduce the risk of supply
disruptions.? Exploration of energy efficiency projects: investigate the feasibility of energy efficiency projects, such as
photovoltaic cell energy storage, to secure power supply for production and improve business operation resilience.Financial impacts of climate risks and opportunitiesDuring the Reporting Period, we conducted a financial impact assessment of three climate risks and opportunities: physicalrisk–typhoons, transition risk–changes in raw material costs, and opportunity–use of energy-efficient technologies, underthe premise that information is reasonably accessible and costs are affordable.Physical risk-Typhoons
1. Potential financial impacts: approximately RMB28 million, including:
? Asset loss: typhoons may cause damage to the buildings, equipment, inventories, and other assets of
subsidiaries located in typhoon-prone areas, resulting in asset impairment or payment of repair costs.
? Production interruptions: typhoons may lead to production line shutdowns, affecting product production
and delivery, which in turn causes a decline in sales revenue and customer loss.
? Additional expenditure: to resume production, the Company may need to pay for additional overtime,
rental of replacement equipment, or temporary production sites.
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(continued)
10.5.2 Strategy
(continued)Financial impacts of climate risks and opportunities(continued)
Physical risk-Typhoons (continued)
2. Risk response costs: approximately RMB1.6 million, including:
? Insurance costs: insure the premises of the Company against all risks of property and casualty to obtain
insurance compensation in the event of asset damage. Insurance costs are determined based on theinsured amount and premium rate.? Emergency supplies reserve: purchase and stock typhoon emergency supplies in advance, such as sandbags,
tarps, and generators. The cost of these suppliers is calculated based on the quantity purchased and theunit price.? Emergency drill costs: organize employees for typhoon emergency drills to improve preparedness for
typhoon events. Drill costs include site rental fees, equipment usage fees, personnel training fees, etc.Transition risk-Changes in raw material costs
1. Potential financial impacts: approximately RMB8.6 million, including:
? Rising direct material costs: rising raw material prices leads to increased product costs, which in turn
impacts the Company’s profits.? Rising energy costs: rising energy prices lead to increased production costs, which in turn impacts the
Company’s profits.
2. Risk response costs: approximately RMB0.32 million, including:
? Alternative material costs: finding and purchasing alternative materials may require additional R&D costs,
testing costs, and procurement costs.? Costs of energy-saving improvement projects: conduct energy-saving improvement projects, with costs
including equipment purchase fees, installation and debugging fees, personnel training fees, etc.? Supply chain management costs: strengthen cooperation with suppliers to ensure stable supply of raw
materials. This may require the payment of additional supply chain management costs.
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.2 Strategy
(continued)Financial impacts of climate risks and opportunities(continued)Opportunity–Use of energy efficient technologies
1. Potential financial impacts: approximately RMB5.9 million, including:
? Energy cost savings: substantial energy cost savings are expected through the implementation of energy-
saving improvement projects.? Government subsidies and tax incentives: using energy-efficient technologies may qualify the Company for
government subsidies and tax incentives, further increasing the Company’s profits.
2. Costs of achieving the opportunity: approximately RMB8.3 million, including:
? Costs of energy-saving improvement projects: including equipment purchase fees, installation and
debugging fees, personnel training fees, etc.? Production delay costs: energy-saving improvement projects may lead to temporary shutdowns of
production lines, resulting in certain production delay costs. Delay costs include employee wages,
equipment depreciation fees, etc., during downtime.? Technology introduction and R&D costs: if the Company needs to introduce or research and develop new
energy-efficient technologies, it may be required to pay additional technology introduction fees or R&D
costs.
10.5.3 Risk management
To address potential risks and opportunities arising from climate change, Livzon, under the leadership and supervision ofits Board and the ESG Committee, has established a process and framework of climate-related risk management, and hasintegrated climate-related risks into the Group’s overall risk management.We annually conduct identification of climate-related risks and opportunities on a regular basis, assess the climate-relatedrisks and opportunities with the help of external experts to develop and implement response plans, and regularly report onwork results to the ESG Committee every year.Our specific climate risk management steps are as follows:
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.3 Risk management
(continued)
Step I:
Prepare a list of potential climate risks
? Prepare a preliminary list of the Group’s potential climate risks based on industry research reports,
relevant policies issued by regulatory agencies, peer benchmarking, stakeholder surveys, interviews withbusiness departments, interviews with executives, external information search, etc.? Interview the heads of all relevant business departments (“executives”) to collect a list of potential
climate risks that executives consider exist, to obtain a comprehensive and unbiased list of risks.
Step IV:
Oversee and report? All relevant business departments report to the general manager of each operation on the
implementation of response measures on a semi-annual basis, and adjust actions in a timely manneraccording to the actual situation.
? The Group prepares an Annual Report on Climate Risk Management every year, which is submitted to
the ESG Committee for review after approval by the general manager of each enterprise and the ESGWorking Team.
Step II:
Assess climate risksConduct climate-related scenario analysis and assessment for each climate risk and opportunity across thefollowing two dimensions, and rate each comprehensively to understand the potential impact of various risk andopportunity factors on the Group’s operations.? Time dimension (expected time of risk occurrence)
Short-term (0-3 years), medium-term (3-10 years), long-term (10-30 years)
? Impact dimension (degree of impact of a risk on business performance) High, medium-high, medium, medium-low, low
Step III:
Develop response measuresAccording to the results of the climate risk assessment, relevant business departments jointly discuss and developresponse measures to form the Climate Risk Response Action Plan. After approval by the general manager ofeach operation, the relevant business departments are responsible for implementation.
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10.5 ADDRESSING CLIMATE CHANGE
(continued)
10.5.4 Metrics and targets
Based on a well-developed framework of governance, strategy, and risk management, we have set the metrics and targetsfor climate-related risks and opportunities management, and conduct routine oversight and appraisal. For details, pleaserefer to Section “10.2 ENVIRONMENTAL MANAGEMENT TARGETS” in this chapter.
10.6 BIODIVERSITY PROTECTION
Livzon is deeply aware of the importance of biodiversity protection, strictly complies with relevant domestic laws andregulations, and international conventions, and clearly defines biodiversity protection requirements in the Environmental,Occupational Health, and Safety Management Policy. “Zero deforestation” has been incorporated as a special clauseinto the environmental management system to contribute the Company’s efforts to ecological environment protection.In addition, we continuously reduce our negative impact on ecosystems through sustainable management of naturalresources and raw materials in our supply chain, so as to fulfill our commitment to biodiversity conservation.To conserve biodiversity, we assess the dependencies and scope of impacts of our business operations on naturalresources, continuously reduce the adverse impacts of our business operations on biodiversity, actively promote thesustainable use of natural resources, and maintain the balance and stability of ecosystems. Additionally, we apply a“mitigation hierarchy” approach, namely “avoidance, reduction, restoration, offsets”, to work towards “No Net Loss” ofbiodiversity. Specifically:
? Avoidance? Reduction? Restoration? Offset
at the project planningstage, give priority toavoiding ecologicallysensitive areas and chooseconstruction programswith minimal impact onbiodiversity;
during operations, adopteco-friendly technologies tominimize adverse impacts onecosystems;
for ecological damagecaused, initiate therestoration mechanism in atimely manner;
for unavoidable ecologicalimpacts, achieve ecosystembalance through professionalecological compensationprograms.
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10.6 BIODIVERSITY PROTECTION
(continued)In the resource acquisition process, we use no species listed in the Convention on International Trade in EndangeredSpecies of Wild Fauna and Flora (CITES). Meanwhile, through continuous internal training and ecological awarenesseducation, we cultivate an ecological protection mindset among all employees and promote the joint performanceof biodiversity protection responsibility within the enterprise and with supply chain partners. In addition, based onthe characteristics of the TCM industry, we develop biological resources in a scientific and reasonable manner on thebasis of protecting ecosystem integrity, so as to achieve a dynamic balance between ecological benefits and industrialdevelopment.? Guaranteeing the source of raw materials for genuineness and quality: We implement a strict
procurement quality management system. Through order-based procurement from producing areas of genuinemedicinal materials, strict raw material quality audit, self-construction + joint construction of medicinal materialbases and other measures, we guarantee from the source that all medicinal raw materials are sourced in a legaland compliant way and in good quality. We also prevent from the source any flow of traditional Chinese medicinalmaterials from unknown sources into the production link. To a certain extent, we have suppressed excessive andexploitative farming and cultivation in the production of traditional Chinese medicinal materials.
? Constructing medicinal material plantation bases: We thoroughly assess the supply chain’s impact on
biodiversity, adhere to sustainable supply of raw materials, and continuously reduce the negative impact onbiodiversity. Through the development of methods and standards for medicinal material plantation and processingin producing areas, and introduction of a model of joint construction of bases, among other methods, we constructdemonstration bases for the cultivation of traditional Chinese medicinal materials by integrating traditionalcultivation experience with modern agricultural technologies in Shanxi, Shaanxi, Gansu and other genuineproducing areas to promote the sustainable development of traditional Chinese medicinal materials.? Protecting germplasm and germplasm resources: Site locations for constructing the Group’s medicinal
material plantation bases are selected rationally in strict accordance with the suitable environment for medicinalmaterial plantation, the historical plantation experience and other factors. By enterprise-university-researchinstitution cooperation, self-construction of seedling experimental areas and strict control over the germplasmresource and seedling quality of medicinal materials, we are preventing, from the technical source, problems suchas the weakening of species’ germplasm resources and varieties and the invasion of alien species.
? Insisting on green and scientific planting: In the process of planting medicinal materials, we insist on green
and scientific planting. Datong Livzon Qiyuan Medicine Co., Ltd.(“DatongLivzon”), the Company’s subsidiary, cultivates its Astragalus membranaceus in simulated wild conditions withoutthe use of fertilizers or pesticides to protect the land and water resources. Datong Livzon has obtained theorganic product certification, the certification of the cultivation base of genuine high-quality medicinal materials(Astragalus membranaceus), and 5A-grade Astragalus membranaceus cultivation base (artificially sown andnaturally grown) certification for its products. Longxi Livzon Shenyuan Medicine Co., Ltd.
(“Longxi Livzon”), the Company’s subsidiary, has obtained the certification of organic conversion and thedemonstration base of genuine high-quality medicinal materials (Codonopsis pilosula) certification. As at the endof the Reporting Period, all the varieties involved in the traditional Chinese medicine business department of theCompany complied with the relevant international convention (Convention on International Trade in EndangeredSpecies of Wild Fauna and Flora (CITES)).
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10.6 BIODIVERSITY PROTECTION
(continued)? Exit mechanism within the red line of ecological protection: The Company’s construction of medicinal
material bases, including self-built bases and jointly built bases with suppliers, does not involve areas withimportant ecological functions or ecologically sensitive and fragile areas. Land selection is required to complywith requirements of national and local laws and regulations, ensuring that medicinal materials are not plantedin environmentally sensitive areas or within the red line of ecological protection. Generally, barren mountains,forested land, wasteland, and land used for common economic crops are chosen. If any ecological protection redline areas are found during inspections, the Company will immediately exit the cultivation bases of medicinalmaterials, restore the land to its original use, and maintain ecosystem integrity.? Promoting sustainable use of raw materials: With the technical support from the R&D platforms of medicinal
material plantation enterprises under the traditional Chinese medicine business department of the Company andthe center for medicinal material resources of our traditional Chinese medicine research institute, we are activelyconducting research on the germplasm resources and cultivation technology of medicinal materials, methods andstandards for processing in producing areas, full-process information tracing, and comprehensive utilization anddevelopment of medicinal material resources, to ensure the quality of medicinal materials and make the mostof medicinal material resources, maintain the ecological balance of medicinal materials, and prevent the loss,degradation and overexploitation of ecological resources, thereby ensuring the sustainable use of traditionalChinese medicinal resources and protecting the genetic diversity of medicinal materials and the biodiversity ofcultivation bases.In addition, facing the issue of wild resource depletion due to the continuous growth of market demand, we activelyexplore sustainable development solutions. With the technical support of the expert team from Sichuan Academy ofTraditional Chinese Medicine, we have conducted in-depth cooperation with local pharmaceutical enterprises andsuccessfully established a base for Acorus tatarinowii cultivated in simulated wild conditions, of which 1,500 mu has beencompleted. It is planned to expand to more than 4,000 mu in 3 years.To ensure the quality of medicinal materials, we have collaborated with local enterprises to construct standardizedcleaning processing workshops in the producing areas. Through unified processing technology, we effectively guaranteethe stable and uniform quality of Acorus tatarinowii. This not only alleviates the pressure on wild medicinal resources,but also provides useful references for the protection and development of other medicinal materials, achieving a win-winsituation for both ecological protection and industrial development.
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10.6 BIODIVERSITY PROTECTION
(continued)Case: Biodiversity indicator monitoring
The medicinal material plantation bases of the Company always pay attention to plant community diversity,surrounding animal diversity, and soil biodiversity. The Astragalus membranaceus base in Datong Livzon, forexample, is located in a remote mountainous area, which is itself a natural habitat for wild animals, providing anear-pristine growth environment for Astragalus membranaceus. We track and record the number and distributionof species around the base, assess the impact of field management measures on the ecosystem, and adopt an eco-friendly field management model. Only manual weeding is carried out in the field management in the principleof “removing large and leaving small”. We use no pesticides and fertilizers and are committed to building anecosystem in which animals, plants, and humans coexist in harmony.
Case: Protecting biological genetic resources
Datong Livzon has established an Astragalus membranaceus germplasm resource nursery in Hunyuan County,focusing on the protection of biological genetic resources. Through careful observation and classification of themorphological characteristics of Astragalus membranaceus plants, Datong Livzon has successfully collected over 20varieties of wild Astragalus membranaceus germplasm resources within the genuine producing area. To ensure thescientific management and protection of germplasm resources, Datong Livzon has maintained detailed record of theorigin location information of all germplasm, including collection sites, times, altitude, longitude and latitude, andgrowth method (cultivated or wild), supplemented by photography and specimen making. This preserves originaldata for these resources, providing valuable basic data for research on biological genetic diversity.
Case: Protecting the ecological system of the Codonopsis pilosula cultivation base
To ensure the sustainability of the ecological environment of the Codonopsis pilosula cultivation base, Longxi Livzonhas conducted an in-depth analysis of the current ecological environment of the Codonopsis pilosula cultivationbase and its causes, and has formulated the Environmental Biodiversity Conservation Plan for the CodonopsisPilosula GAP Cultivation Base. In 2024, Longxi Livzon’s Codonopsis pilosula base successfully passed the inspectionof compliance with the Good Agricultural Practice for Chinese Crude Drugs. Longxi Livzon pays particular attentionto the use of pesticides, fertilizers, and plant growth regulators throughout the medicinal material plantationprocess, strictly implements GAP standards, continuously strengthens biodiversity protection measures, and strivesto build a more sustainable and eco-friendly planting model.
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10.6 BIODIVERSITY PROTECTION
(continued)
We promote the concept of biodiversity protection to all enterprises of the Group, and actively implement variousecological conservation measures while ensuring normal production and operations. By optimizing greening layout of thefactory area and other means, we minimize the potential impact of operations on biodiversity and promote harmoniouscoexistence between our enterprises and the natural environment.EnterpriseBiodiversity Conservation Initiatives
Ningxia PharmaIntensified greening of
factory area
In April 2024, Ningxia Pharma launched a volunteer activity of “Revive& Thrive: Clean Up for Civilized Progress”. Ningxia Pharma leadersand volunteers fertilized the factory’s green plants and cleaned up theenvironmental garbage in the factory. Everyone brought their own cleaningtools and protective gear to pick up garbage, reducing environmentalpollutants and improving the cleanliness of the working environment.This activity effectively enhanced the company’s environmental protectionimage and raised employees’ awareness of ecological protection.
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EnterpriseBiodiversity Conservation InitiativesLimin FactoryTree planting and
greening
In March 2024, the CYL committee of Limin Factory actively respondedto the call of the municipal CYL committee and convened more than 20CYL members in the factory to participate in the “Planting Fresh Greenery,Cultivating Dreams for Tomorrow: Youth Pioneers Lead the ‘Green &Beautiful Guangdong’ 10,000-Youth Forest Event”. The tree-plantingevent not only enhanced the appeal, cohesion, and unity of grassroots CYLorganizations, but also improved the development concept of protectingthe ecological environment and practicing ecological civilization amongCYL members. A strong atmosphere of “universal engagement in greeninginitiatives: collaborative efforts to build a land of lucid waters and lushmountains”.
10.6 BIODIVERSITY PROTECTION
(continued)
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SOCIALCONTRIBUTIONS
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Bearing in mind its public welfare mission, Livzon, in strict accordance withexternal laws and regulations and the internal Management System forCharitable Donation, assumes its social obligations to serve the society byutilizing its own resources and strengths. Proactively engaging in public welfareprojects, we empower rural revitalization by assisting the industries, help solvethe problem of imbalance in educational resources by donating to teachers andstudents in need, and take initiative to coordinate resources for disaster reliefand disaster reduction, thereby making more contributions to promoting theconstruction of a healthy China and realizing common prosperity.The Group takes the initiative to assume social responsibility and continues toincrease investment in public welfare activities. During the Year, the expenditureof charitable donation of the Group amounted to RMB12.98 million, includingcash donation of RMB10.90 million and in-kind donation worth RMB2.08million.
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11.1 RURAL REVITALIZATION
To facilitate the sustainability of the rural economy, the Company has formulated and implemented the plan of “AstragalusMembranaceusIndustry Revitalization”. Adopting the model of “Company + Base” and “Company + SpecialtyCooperative” to build Astragalus membranaceus self-built bases and jointly built bases, the Company aims to drivelocal cultivation and processing of Astragalus membranaceus, build a genuine medicinal material industry for Astragalusmembranaceus adapted to local conditions, and accelerate the construction of the “Chinese Medicine Ecological Base”.In this way, a long-lasting and pillar industry for wealth generation will be created, and a new path to prosperity throughthe development of the distinctive Astragalus membranaceus industry will be forged.The “Astragalus Membranaceus Industry Revitalization” plan has continued since 2017. Datong Livzon Qiyuan MedicineCo., Ltd.(“Datong Livzon”), a subsidiary of the Company, has built and jointlybuilt Astragalus membranaceus cultivation bases of over 20,000 mu. Datong Livzon regularly provides on-site technicalguidance and GAP training for managers and leading farmers of the bases every year, and conducts practical trainingon the traceability of traditional Chinese medicinal materials. At present, all bases have been included in the Company’sGood Agricultural Practice for Chinese Crude Drugs production management traceability system, sharing advancedtechnical resources with the Company.During the Reporting Period, Datong Livzon’s co-built and jointly built Astragalus membranaceus cultivation bases plantedabout 1,000 mu of Astragalus membranaceus, excavated about 3,500 mu of Astragalus membranaceus, and harvestedabout 709 tons of fresh Astragalus membranaceus. In cooperation with the village committee of Mazhuang Village inGuan’er Township, Hongyuan County of Datong City in Shanxi Province, Datong Livzon also carried out the project of“Joint Construction by Village and Enterprise” to build a local Astragalus membranaceus processing workshop, which wasput into use in 2023. By 2024, the workshop has solved the employment of about 120 local farmers.
In July 2024, Datong Livzon’s self-built and jointly built Astragalus membranaceus bases passed the extended inspectionof pharmaceutical work safety in Guangdong Province (inspection of compliance with the Good Agricultural Practice forChinese Crude Drugs).
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11.2 SOCIAL AND PUBLIC WELFARE
? Public Welfare Project for Prevention and Treatment of Chronic Diseases
Since 2018, Livzon and its controlling shareholder, Joincare Pharmaceutical Industry Group Co., Ltd, haveworked together to continuously implement, deep in rural areas, the “Public Welfare Project for Prevention andTreatment of Chronic Diseases”. The project aims to provide assistance to needy people suffering from commonchronic diseases such as high blood pressure, hyperlipidemia, cardiovascular and cerebrovascular diseases, andstomach diseases in remote areas, and to relieve the medical burden of patients’ families in financial difficulties bycontributing necessary therapeutic medicines.As at the end of the Reporting Period, the Company had entered into a total of 31 agreements in relation to thePublic Welfare Project for Prevention and Treatment of Chronic Diseases, covering 9 provinces and 4 autonomousregions across the country, and had benefited more than 30,000 low-income people with chronic diseases.Chaotian District of Guangyuan City, Jinkouhe District of Leshan City, Songpan County of Ngawa Tibetanand Qiang Autonomous Prefecture, Jiange County, and Pingwu County in Sichuan Province; Hunyuan County,Guangling County, and Lingqiu County of Datong City in Shanxi Province; Dongxiang County, Tianzhu County,Linze County, Shandan County, and Huining County in Gansu Province; Xianghai National Nature Reserve inJilin Province; Machun District of Jiaozuo City in Henan Province; Huangshan District of Huangshan City in AnhuiProvince; Suining County in Hunan Province; Fenyin County in Jiangxi Province; Ziyuan County in the GuangxiZhuang Autonomous Region; Kashgar City in Xinjiang Uyghur Autonomous Region; Chayu County in TibetAutonomous Region; Bairin Left Banner and Togtoh County in Inner Mongolia; Jiangshan City (County-level) ofQuzhou City in Zhejiang Province; Gaize County of the Ngari Prefecture in Tibet Autonomous Region; ShandanCounty of Zhangye City in Gansu Province; Sunnan Yugur Autonomous County of Zhangye City in Gansu Province;and Bomi County of Nyingchi City in Tibet Autonomous Region.
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11.2 SOCIAL AND PUBLIC WELFARE
(continued)
? Education Support
Livzon actively responds to the national call for supporting high-quality education development of the countrythrough a series of public welfare activities such as endowment to schools. The Company has established long-term education scholarship projects with well-known colleges and universities such as China PharmaceuticalUniversity, Shenyang Pharmaceutical University, and Sichuan University to support scientific research and teachingefforts and the growth of outstanding students. During the Year, the Group also made charitable endowment tothe Education Development Charity Association of Jinwan District, Zhuhai City, Ningxia Women and Children’sDevelopment Foundation, etc., to promote the balanced distribution of educational resources with practicalactions.
In September 2024, the Company donated RMB100,000 to the Education Development Charity Association ofJinwan District, Zhuhai City (as part of an agreement to donate a total of RMB300,000, with annual payment ofRMB100,000), intended for education scholarships and other activities.
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11.2 SOCIAL AND PUBLIC WELFARE
(continued)
? Disaster Relief
Livzon always cares about the welfare of society and actively fulfills its social responsibilities. In the face of suddennatural disasters, the Group acted quickly and efficiently mobilized internal and external resources. We providedemergency supplies including medicines to the affected areas as soon as possible and fully engaged in disasterrelief efforts. Through a professional and prompt response mechanism, Livzon has demonstrated its responsibilityin times of crisis.In June 2024, when heavy rain in Meizhou City, Guangdong Province severely affected Meixian District, PingyuanCounty, and Jiaoling County, Livzon immediately donated medicines worth approximately RMB510,000 to theaffected areas.? Volunteer Activities
To further promote the volunteer spirit, the Company established the Livzon Volunteer Association in 2022. As atthe end of the Reporting Period, the total number of registered volunteers of the association reached 79, and thetotal volunteer service hours exceeded 800.
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APPENDIX
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12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyA1. EmissionsEnvironmental Protection Law of the PRC
Law on the Prevention and Control of Environmental Pollution by Solid
Waste of the PRCWater Pollution Prevention and Control Law of the PRCAtmospheric Pollution Prevention and Control Law of the PRCEnvironmental Protection Tax Law of the PRCSoil Pollution Prevention and Control Law of the PRCRegulations on the Prevention and Control of Environmental Pollution bySolid Waste of Guangdong ProvinceNational Catalogue of Hazardous Wastes (2021)Administrative Regulations for Urban Construction WasteEnvironmental Impact Assessment Law of the PRCAdministrative Rules of Environmental Protection for Construction ProjectsStandard for Pollution Control on Hazardous Waste Storage (GB 18597-2023)Technical Guideline for Deriving Hazardous Waste Management Plans andRecords (HJ1259-2022)Administrative Measures for Hazardous Waste TransferSelf-monitoring Technology Guidelines for Pollution Sources–General Rule
Identification and Assessment Requirements of Environmental
FactorsProcedures for Air Emission ManagementProcedures for Noise Emission ManagementProcedures for Solid Waste ManagementProcedures for Hazardous Chemicals ManagementProcedures for Wastewater ManagementSoil Pollution Hazard Investigation SystemGuidelines for Management of EHS Changes“Three-Waste” and Noise Management SystemHazardous Waste Management SystemEnvironmental, Occupational Health, and Safety ManagementPolicy
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ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyA1. EmissionsSelf-monitoring Technology Guidelines for Pollution Sources–
Pharmaceutical Industry Chemical Synthesis Products CategoryStandard for Pollution Control on the Non-Hazardous Industrial SolidWaste Storage and Landfill (GB18599-2020)Guideline for Deriving General Industrial Solid Waste ManagementRecords (Interim)Measures for the Administration of Pollutant Discharge PermitsGuidelines for the Identification of Potential Soil Pollution Hazards in KeyRegulatory Units (Interim)Administrative Measures for the Legal Disclosure of EnterpriseEnvironmental InformationAdministrative Measures for the List of Key Units Subject to EnvironmentalSupervisionGuideline on Available Techniques of Pollution Prevention and Controlfor Pharmaceutical Industry–Active Pharmaceutical Ingredients(Fermentation, Chemical Synthesis, Extraction) and PreparationCategories (HJ1305-2023)Discharge Standard of Water Pollutants for Pharmaceutical IndustryFermentation Products Category (GB 21903-2008)Emission Standards for Odor Pollutants (GB14554-2018)Technical Specifications for Collection, Storage, Transportation of
Hazardous WasteEmission Standard for Industrial Enterprises Noise at Boundary
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
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ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyA2. Use of ResourcesEnergy Conservation Law of the PRC
Circular Economy Promotion Law of the PRC
Procedures for Resources ManagementProcedures for Energy ManagementEnergy Management SystemEnvironmental, Occupational Health, and Safety Management
PolicyA3. The Environment andNatural Resources
Environmental Protection Law of the PRCEnergy Conservation Law of the PRCForestry Law of the PRCRegulations on the Implementation of the Forestry Law of the PRCRegulations on Restoring Farmland to ForestMeasures for the Administration of Regenerative Felling of ForestsWater Law of the PRCRegulations of the PRC on the Protection of Wild PlantsRegulations on Protection of Wild Medicinal ResourcesLaw of the People’s Republic of China on the Protection of Wildlife
General Requirements of EHS Management SystemEnvironmental Hygiene Management System for Factory AreaSoil Pollution Hazard Investigation SystemContingency Plan for Environmental EmergencyEHS “Three Simultaneous” Management System for
Construction ProjectsEnvironmental Protection Responsibility SystemEnvironmental Performance Appraisal and Reward and
Punishment SystemEnvironmental, Occupational Health, and Safety Management
Policy
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyA4. Climate ChangeOpinions of the Central Committee of the Communist Party of China and
the State Council on Completely, Accurately, and ComprehensivelyImplementing the New Development Concept and Doing a Good Job inCarbon Peaking and Carbon NeutralityAction Plan for Carbon Peaking Before 203014th Five-Year Plan for Development of Pharmaceutical Industry
Contingency Plans for Extreme WeatherAbnormal Weather Management RegulationsContingency Command Plans for Typhoon PreventionContingency Plans for Production Safety AccidentsClimate Change Management SystemAdministrative Measures for Contingency Plans forEmergencyB1. EmploymentLabor Law of the PRC
Labor Contract Law of the PRCSocial Insurance Law of the PRCProvisions on the Prohibition of Using Child LaborIndividual Income Tax Law of the PRC
Labor Employment Management SystemRecruitment Management SystemEmployee Retirement Reward SchemeBoard Diversity PolicyRemuneration Management SystemAdministrative Measures for Remuneration AdjustmentProvisions on the Base Salary of Fresh GraduatesAdministrative Measures for Job GradesCode of Labor Employment and Ethical ConductAdministrative Measures for Technical Sequence PositionsAdministrative Measures for the Performance of Functional
Head OfficesEmployee Grievance Management System
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB2. Health and SafetyLabor Law of the PRC
Labor Contract Law of the PRCSocial Insurance Law of the PRCWork Safety Law of the PRCLaw of the PRC on the Prevention and Control of Occupational DiseasesFire Prevention Law of the PRCConstruction Law of the PRCBiosecurity Law of the PRCSpecial Equipment Safety Law of the PRCRegulations on the Supervision and Administration of the Implementationof Safety Responsibility by Special Equipment Users
General Requirements of EHS Management SystemAdministrative Measures for EHS AccidentsEHS Meeting and Inspection Management SystemAdministrative Measures for EHS Information and
CommunicationManagement System for Identifying Hazard Sources and
Grading and Controlling Safety RisksRegulations on Work Safety PenaltiesWork Safety Training Management SystemWork Safety Responsibility Management SystemAdministrative Measures for Contingency Plans for
EmergencyAdministrative Procedures for Occupational Health
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the Company
B2. Health and SafetyRegulations on Reporting, Investigation, and Handling of Special
Equipment AccidentsStandards for Determining Major Accident Hazards in Industrial and TradeEnterprisesGeneral Rules for the Storage of Hazardous Chemicals in WarehousesRegulations on the Safety Management of Hazardous ChemicalsCode for Fire Protection Design of Buildings (GB50016-2014) 2018EditionFire Protection Standards for Engineering Design of Fine Chemical
Enterprise (GB51283-2020)Standard for Fire Prevention Design of Petrochemical Enterprises
(GB50160-2008) 2018 EditionGeneral Code for Fire Protection of Buildings and Constructions
(GB55037-2022)Standard of Construction Safety Inspection
Contingency Plans for Production Safety AccidentsContingency Command Plans for Typhoon PreventionEHS Culture of Livzon GroupManagement System for Investigating and ManagingAccidental HazardsContractor Safety Management SystemEHS “Three Simultaneous” Management System forConstruction ProjectsAdministrative Procedures for EHS Targets and IndicatorsTen Prohibitions for Work SafetyEnvironmental, Occupational Health, and Safety Management
PolicyRegulations on the Administration of Safety, Environmental
Protection and Occupational Health Appraisal
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB3. Development and TrainingLabor Law of the PRC
Labor Contract Law of the PRCSocial Insurance Law of the PRC
Work Safety Training Management SystemAdministrative Measures for Administrative and Technical
SequencesQuarterly Assessment and Incentive Plan for R&D Units
(Interim)Administrative Regulations on Employee Learning and
GrowthTraining Management SystemAdministrative Procedures for Training Appraisal and
EvaluationAdministrative Procedures for Quality Control Laboratory
TrainingAdministrative Procedures for Personnel Qualification
ConfirmationB4. Labor StandardsLabor Law of the PRC
Labor Contract Law of the PRCSocial Insurance Law of the PRCSpecial Regulations on Labor Protection of Female EmployeesProvisions on Medical Treatment Period for Enterprise Employees withIllness or Non-Work-Related Injuries
Labor Employment Management SystemRecruitment Management SystemCode of Labor Employment and Ethical ConductEmployee Grievance Management System
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB5. Supply Chain ManagementCompany Law of the PRC
E-commerce Law of the PRCTendering and Bidding Law of the PRCImplementation Guide for Traditional Chinese Medicine Traceability SystemTraditional Chinese Medicine Traceability Information Requirements –Cultivation of Traditional Chinese Medicinal MaterialsTraditional Chinese Medicine Traceability Information Requirements –Production of Traditional Chinese Medicine TabletsGood Agricultural Practice for Chinese Crude DrugsGuideline for Cold Chain (Transportation, Storage) Management ofMedical Devices
Administrative Procedures for Supplier StandardAdministrative Procedures for Supplier AuditAdministrative Measures for Material ProcurementMaterial Management SystemRules on Integrity in Bid EvaluationAdministrative Measures for Joint Audit of SuppliersAdministrative Measures for Supplier EntryAdministrative Measures for Supplier Classification,
Maintenance, Risk Assessment and Annual AppraisalAdministrative Measures for Electronic ProcurementSupplier Risk Management SystemAdministrative Procedures for Energy Conservation andEmission Reduction for SuppliersAdministrative Procedures for Supplier EHS AuditCode of Conduct for SuppliersAdministrative Measures for Construction Project SuppliersAnti-Corruption and Anti-Commercial Bribery RegulationsAdministrative Measures for Whistleblowing and ComplaintStaff Commitment for Anti-Corruption and Anti-CommercialBriberyAdministrative Measures for Cooperative Service Providers
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB6. Product ResponsibilityPatent Law of the PRC
Trademark Law of the PRCCopyright Law of the PRCDrug Administration Law of the PRCGood Manufacturing Practice (GMP)EU GMP Annex 1: Manufacture of Sterile Products (13th Edition)Good Laboratory Practice (GLP)Good Clinical Practice (GCP)Good Supply Practice (GSP)Pharmacopoeia of the PRCProvisions for Drug RegistrationProvisions for the Supervision and Administration of Drug ManufacturingAdministrative Measures for Drug RecallsRegulations on Protection of Traditional Chinese MedicinesAdvertising Law of the PRCImplementation Rules on the Drug Administration Law of the PRCProvisions for Drug Package Inserts and LabelsProvisions for the Change Management of Post-approval Drugs (Interim)Good Pharmacovigilance Practice (GVP)Administrative Measures for Drug Inspection (Interim)Vaccine Administration Law of the PRCPersonal Information Protection Law of the PRC
Procedures for Establishment of Independent Research and
Development ProjectsQuality Management SystemProcedures for Drug Inspection and AcceptanceUnqualified Product Management SystemAdverse Drug Reaction Reporting and Monitoring
Management SystemReturned Product Management SystemDrug Traceability Management SystemTen Prohibitions on QC Laboratory ManagementAdministrative Measures for Quality IncidentsContingency Handling Procedures for Sampling InspectionMeasures for Cross-examinations among R&D EnterprisesMeasures for Cross-examinations among Drug Preparations
Manufacturing EnterprisesManagement System for Marketing Authorization HolderAdministrative Procedures for Quality Internal AuditAdministrative Procedures for Quality ComplaintsAdministrative Procedures for Quality InformationManagement Rules for Qualified PersonsAdministrative Procedures for TCM Pre-treatment and
Extraction Workshop Shared among Enterprises within
Livzon GroupAdministrative Measures for Clinical Audit and ProcedureAdministrative Procedures for Quality RisksOperating Procedures for Product RecallsContingency Plans for Material Product Safety Incidents
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB6. Product ResponsibilityLaw of the PRC on Traditional Chinese Medicine
Technical Guideline for the Revision of Safety Information Items inPackage Inserts of Marketed Traditional Chinese Medicines (Interim)Technical Guidelines for the Compilation of Information Related toChildren’s Drug Use in the Instructions of Chemical Drugs andTherapeutic Biological Products (Interim)Regulations on the Supervision and Administration of Medical DevicesRegulations on the Administration of Veterinary DrugsGood Manufacturing Practice for Veterinary DrugsGood Clinical Practice for Medical DevicesAdministrative Regulations on the Package Inserts and Labels of MedicalDevicesAdministrative Measures for Veterinary Drug Package Inserts and LabelsChinese Veterinary PharmacopoeiaMeasures for the Registration of Veterinary DrugsAdministrative Measures for Medical Advertisements
Administrative Measures for Joint Audit on CommissionedResearch InstitutionAdministrative Measures for Joint Audit of Material SupplierManagement Procedures for Design, Audit, Purchasing and
Use of Package Inserts and LabelsManagement Procedures for Design, Review and Printing of
Product PackagingAdministrative System of Quality EnquiryAdministrative System of After-sale Quality ComplaintsProcedures for Adverse Event Monitoring and ControlCode of Conduct for Interaction with Healthcare ProfessionalsAdministrative Regulations on Meetings Related to
Healthcare ProfessionalsAnti-Corruption Code of Conduct in the Marketing SystemResponsible Marketing Policy of the Sales Center of API
Business Department
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB6. Product ResponsibilityMeasures for Drug Advertisement Review
Implementation Measures for Early Settlement Mechanism of Drug PatentDisputes (Interim)Provisions on Several Issues Concerning the Application of Law in the Trial
of Civil Cases Involving Patent Disputes Related to Drugs of WhichApplications for Registration are FiledGeneral Data Protection Regulations (GDPR)Work Procedures for Drug Registration Inspection (Trial)Key Points and Determination Principles of Drug Registration Inspection(Pharmacological and Toxicological Study) (Trial)Key Points and Determination Principles of Drug Registration Inspection(Drug Clinical Trials) (Trial)Key Points and Determination Principles of Drug Registration Inspection(Pharmaceutical Development and Manufacturing Site) (Trial)Quality Management System–Requirements (GB/T 19001-2016)Regulations for the Administration of Affairs Concerning LaboratoryAnimalsGuidance Suggestions for the Care and Use of Laboratory Animals
Packaging Design and Verification Workflow for Overseas
Sales of Drug PreparationsWorkflow for Protection of Drug Clinical Trial DataAdministrative Procedures for Printing and Packaging
MaterialsPatent Workflow and Trademark Management SystemAdministrative Procedures for Contamination Control Strategy
(CCS) of Pharmaceutical ProductsManagement Procedures for the Handling of Individual Case
Safety Reports of Pre-approved DrugsStandards of Vulnerability ManagementStandards of Password ManagementStandards of Special Account ManagementStandards of Internet Security ManagementAdministrative Regulations on Network AccessProvisions of Document Encryption
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB6. Product ResponsibilityBiosecurity Law of the PRC
Civil Code of the PRCMeasures for the Quality Supervision and Administration of theDistribution and Use of Medicinal ProductsNational Medical Products Administration Announcement onStrengthening Supervision and Management of Contract Manufacturingby Marketing Authorization HolderRegulations on the Supervision and Administration of MarketingAuthorization Holder Implementing Main Responsibility of Drug Qualityand SafetyNotice on the Standard Use of Drug Names in Drug AdvertisementsAdministrative Measures for the Clinical Application of Anti-bacterial
DrugsGuidelines for the Clinical Application of Anti-bacterial DrugsDirectories for the Classification Management of Clinical Application ofAnti-bacterial DrugsNotice on Further Strengthening the Management of Anti-Microbial Drugsto Suppress Drug ResistanceDetailed Rules for Drug Packaging and Labeling StandardsProvisions for Supervision and Administration of Online Medical Device
Sales
Standards of E-mail System Intrusion Analysis and Emergency
ResponseAdministrative Procedures for Quality RisksProcedures for Laboratory Animal Ethics ManagementResponsible Marketing Policy of Livzon GroupInformation System Operation and Maintenance Management
SystemInformation System Management SystemEmergency Response Management SystemIncident Response Plan of Data BreachProcedures for Management of QR Codes for Active
Pharmaceutical Ingredients (APIs)
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB6. Product ResponsibilityProvisions for Supervision and Administration of Medical Device
ManufacturingGood Manufacturing Practice for Medical DevicesProvisions for Supervision and Administration of Medical DeviceDistributionGood Agricultural Practice for Chinese Crude DrugsAdministrative Measures for Pharmaceutical Qualified Persons of
Guangdong Provincial Medical Products AdministrationNotice on Matters Related to Further Strengthening Supervision and
Administration of Contract Drug Manufacturing in Guangdong ProvinceTechnical Guidelines for Research on Overfilling of Chemical Generic Drug
InjectionsSpecial Regulations on the Management of Traditional Chinese Medicine
StandardsTechnical Guidelines for Quality Control Research of Oral Traditional
Chinese Medicine Preparations During Manufacturing (Trial)Technical Guidelines for Pharmaceutical Research on Compatibility and
Stability of Chemical Drug Injections (Trial)Technical Guidelines for Pharmaceutical Research on Compatibility and
Stability of Chemical Drug Injections (Trial)Technical Guidelines for Pharmaceutical Changes of Innovative Drugs
(Chemical Drugs) During Clinical Trials (Trial)Technical Guidelines for Pharmaceutical Research and Changes of
Biological Products During Clinical Trials (Trial)Technical Guidelines for Pharmaceutical Change Research of Marketed
Vaccines (Trial)
Standard Operating Procedures for the Collection and Uploadof QR Codes for Veterinary DrugsStandard Operating Procedures for the Use and Maintenanceof QR CodesManagement System for Hazard InvestigationContingency Plans for Work SafetyAdministrative Procedures for Pharmacovigilance SystemAdministrative Procedures for Drug Safety InformationOperating Procedures for Reporting Post-Approval IndividualCase Safety of DrugsOperating Procedures for Handling Drug Safety IncidentsAdministrative Procedures for Pharmaceutical Changes of
Innovative Drugs During Clinical TrialsAdministrative Procedures for Contract ManufacturingAdministrative Procedures for Change ControlAdministrative Procedures for Qualified Persons
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB7. Anti-corruptionCriminal Law of the PRC
Anti-Unfair Competition Law of the PRCInterim Provisions on Banning Commercial BriberyNotice on Serious Investigation and Punishment and Proactive Preventionof Duty Crime in Food and Drug SupervisionAudit Law of the PRCRegulations of the Audit Office on Internal Audit WorkLabor Law of the PRCLabor Contract Law of the PRCCompany Law of the PRCBasic Standard for Enterprise Internal ControlApplication Guidelines for the Accounting Standards for BusinessEnterprises
Interim Provisions on Anti-FraudAnti-Corruption and Anti-Commercial Bribery RegulationsCode of Conduct for Sales Personnel of Livzon GroupManagement System for Construction ProjectsAdministrative Measures for Major Construction ProjectImplementationMaterial Management SystemAdministrative Measures for Material ProcurementAdministrative Measures for Approval of Allocation andWrite-off of Idle Materials (Interim)Management System for Centralized Procurement ofMaterialsCode of Professional Ethics for EmployeesInternal Audit Work System
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG areasMajor laws and regulations, policies and standards observedSome internal policies of the CompanyB7. Anti-corruptionAdministrative Measures for Whistleblowing and Complaint
Corporate Internal Control GuidelinesCode of Professional Ethics for Internal AuditorsStaff Commitment for Anti-Corruption and Anti-Commercial
BriberySupplier Commitment for Operating with IntegrityLabor Employment Management SystemCode of Labor Employment and Ethical ConductAdministrative Measures for Supplier Classification,
Maintenance, Risk Assessment and Annual AppraisalEmployee Grievance Management SystemAdministrative Regulations on Staff IntegrityB8. Community InvestmentCharity Law of the PRCManagement System for Charitable Donation
12.1 LIST OF LAWS AND REGULATIONS AND POLICIES
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘s
message
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
ESG IndicatorUnit202220232024A Environmental
A1 Emissions
A1.1 Types of emissions and respective emission dataIndustrial wastewatertonne4,530,994.94,921,781.54,853,012.5Chemical Oxygen Demand (COD
cr)tonne259.0246.3247.2Ammonia nitrogentonne9.310.68.7Volatile organic compounds (VOC
s)tonne26.435.544.2Nitrogen oxides (NO
X)tonne101.281.6142.7Sulphur dioxide (SO
)tonne29.434.184.3Particulate mattertonne16.512.412.8
A1.2 Direct (Scope 1) and energy indirect (Scope 2) greenhouse gas emissions and intensity
Direct greenhouse gas emissions (Scope 1)
CO
equivalent (in tonnes)196,398.1155,807.28194,440.58Indirect greenhouse gas emissions (Scope 2)
CO
equivalent (in tonnes)369,261.9358,525.65326,718.79Total greenhouse gas emissionsCO
equivalent (in tonnes)565,660.0514,332.93521,159.37Intensity of greenhouse gas emissions
CO
equivalent (in tonnes)/
RMB10,000
0.3950.3650.422
Environmental data disclosure covers all production companies of Livzon.
Disclosure of major pollutants/emissions by type and respective emission data according to the production characteristics of
enterprises.
Scope 1 greenhouse gas (“GHG”) emissions are mainly derived from direct GHG emissions from the consumption of fossil fuels
in the company’s operations/production processes (e.g. gasoline, diesel, natural gas, etc.). Emission factors and calculationmethods refer to the Guidelines for Accounting and Reporting of Greenhouse Gas Emissions from Industrial Enterprises in OtherIndustries (Trial). The formula used is: CO
emissions from fossil fuel = fuel consumption × low level heat generation × carboncontent per unit of calorific value × fuel carbon oxidation rate × 44/12.
Scope 2 GHG emissions are mainly derived from indirect GHG emissions from purchased electricity and steam consumed bythe company’s operations/production processes, calculated with reference to the document “Appendix 2: Reporting Guidanceon Environmental KPIs” of the Hong Kong Stock Exchange. Specifically, the power emission factor for 2022 adopts the gridemission factor 0.5810 tCO
/MWh in the “Corporate Greenhouse Gas Emission Accounting Methodology and Reporting Guidefor Power Generation Facilities” (Huan Ban Qi Hou [2021] No. 9), and the power emission factor for 2023 adopts the gridemission factor 0.5703 tCO
/MWh in the Notice on Carrying out Greenhouse Gas Emission Reporting and Verification forSelected Key Industries for the Years 2023-2025.
The intensity in 2022-2024 was calculated based on RMB10,000 of output value.
11 Socialcontributions10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG IndicatorUnit202220232024A Environmental
A1 Emissions
A1.3 Total hazardous waste produced and intensityTotal hazardous waste
tonne3,532.32,708.22,791.0Hazardous waste intensity
kg/RMB10,000
2.51.922.3Of which: medical waste (HW02) and waste
medicines (HW03)
tonne1,954.01,676.11,728.8Other hazardous waste
tonne1,578.31,032.01,062.2Disposal method:
Total hazardous waste recycled/reusedtonne
844.3423.0546.2Total hazardous waste disposedtonne2,688.02,285.22,791.0
A1.4 Total non-hazardous waste produced and intensity
Total non-hazardous waste
tonne114,580.9103,491.2100,364.7Non-hazardous waste intensity
kg/RMB10,000
80.073.4081.16Disposal method:
Total non-hazardous waste recycled/reused
tonne10,830.547,261.924,139.9Total non-hazardous waste disposedtonne103,750.456,229.399,544.2
Total hazardous waste = Total hazardous waste recycled/reused + total hazardous waste disposed
During 2022 to 2024, no highly radioactivity waste was released.
Total non-hazardous waste = Total non-hazardous waste recycled/reused + total non-hazardous waste disposed
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG IndicatorUnit202220232024A Environmental
A2 Use of ResourcesA2.1 Direct and indirect energy consumption by type in total and intensityI. Non-renewable energy
1. Direct energy
Gasolineliter219,086.4266,040.5217,607.7Dieselliter165,774.7206,607.4209,661.6Coaltonne88,244.266,894.583,607.5Natural gas10,000 cubic meters584.5689.8737.4Liquefied petroleum gastonne6.83.70.55
2. Indirect energy
Purchased electricitykWh423,624,184.5416,608,822.9413,542,489.2Of which: Intensity of purchased
electricity
kWh/RMB10,000295.9295.48334.43Purchased steamtonne416,061.3411,261.6357,611.3Total non-renewable energy consumptionMWh1,324,392.21,199,298.21,256,136.2
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG IndicatorUnit202220232024A Environmental
A2 Use of ResourcesA2.1 Direct and indirect energy consumption by type in total and intensityII. Renewable energy
1. Direct energy
Alcohol based liquid fueltonne0.00.00.0Biomass fueltonne9.91,004.03,668.25Solar power (self-use)kWh1,044,773.0431,250.025,388.0
2. Indirect energy
Solar power (purchased)kWh235,701.01,192,325.81,496,252.0Total renewable energy consumptionMWh1,320.85,708.216,445.4III. Total energy consumption
1. Direct energy consumption
MWh580,898.6472,417.4584,692.15
2. Indirect energy consumption
MWh744,814.4732,589.0687,889.36Total energy consumption
MWh1,325,713.01,205,006.41,272,581.51Intensity of total energy consumption
MWh/RMB10,0000.90.851.03
Total energy consumption = total non-renewable energy consumption + total renewable energy consumption
Direct energy consumption (unit: MWh) is derived from gasoline, diesel, coal, natural gas and other relevant direct energy
consumption.
Indirect energy consumption (unit: MWh) is derived from purchased electricity, purchased steam and solar power (purchased),which were calculated by referring to the “General Rules for Calculation of The Comprehensive Energy Consumption” (GB2589-2020).
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG IndicatorUnit202220232024A Environmental
A2 Use of ResourcesA2.2 Water consumption in total and intensityConsumption of municipal water supplies(or from other water utilities) (A)
tonne5,189,580.34,452,079.54,119,908.25Fresh surface water consumption (B)tonne243,835.0179,227.0207,101.0Fresh groundwater consumption (C)tonne215,184.01,573,530.01,597,948.0Fresh water consumption = A+B+Ctonne5,648,599.36,204,836.55,924,957.25Alternative water consumption
tonne000Total water consumption
tonne5,648,599.36,204,836.55,924,957.25Intensity of water consumption(fresh water)
tonne/RMB10,0004.04.404.8Reclaimed water consumptiontonne64,83691,952.066,257.0Water recycling rate%4.793.213.7
A2.5 Total packaging material used for finished products and with reference to per unit produced
Paper packaging materialtonne4,829.836,128.755,050.76Other packaging materialtonne8,288.087,988.447,704.12Total packaging material usedtonne13,117.9114,117.2012,754.89Intensity of packaging material used
kg/RMB10,0009.1610.0110.31
Alternative water sources include seawater, brackish water, rainwater and gray water.
Total water consumption = fresh water consumption + alternative water consumption
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
11 Socialcontributions10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024B SocialB1 EmploymentB1.1 Total workforce by gender, employment type, age group and area
Total number of employeesperson9,0058,9339,067Gender
Maleperson4,7284,7034,764Femaleperson4,2774,2304,303Employeecategory
General manager and aboveperson808194Director person168183184Manager person908897904Other employeesperson7,8497,7727,885Age
30 and belowperson3,4243,2263,18331-49person5,0665,1565,30650 and aboveperson515551578Area
China’s mainlandperson8,9918,9219,060Hong Kong, Macao and Taiwanperson320Overseas areasperson11107
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘s
message
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024DiversityNumber of minority staff
person540547559Ratio of minority staff%6.06.16.1Ratio of minority staff in management%3.43.13.0Number of women in managementperson397415438Ratio of women in management%34.335.837.0Number of senior officersperson878Number of female senior officersperson222Ratio of female senior officers%25.028.625.0Average ratio of female senior officers over the pastthree years
%25.026.226.2Ratio of women at general manager and above%27.532.129.8Ratio of women at director%31.029.533.7Ratio of women at manager%35.637.438.4Ratio of women holding managerial roles inrevenue-generating functions
%24.925.928.7Ratio of women in STEM-related positions%60.258.058.1
The top three minorities of Group are Hui (2.7%), Zhuang (1.2%) and Miao (0.5%). The ratio of Hui, Zhuang and Miao in the
Group’s management is 0.42%, 0.84% and 0.08%, respectively.
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024Years of employment
Average years of service for female staffyear/person
7.77.78.0Average years of service for male staffyear/person
9.79.510.1
New recruitsTotal number of new recruitsperson2,4432,2382,021Gender
Maleperson1,2981,2101,101Femaleperson1,1451,028920Employeecategory
General manager and aboveperson334Director person12819Manager person186167181Other employeesperson2,2422,060 1,817Age
30 and belowperson1,5781,4571,28531-49person85276573050 and aboveperson13166Area
China’s mainlandperson2,4392,236 2,019Hong Kong, Macao and Taiwanperson211Overseas areasperson211Employment absorption
Number of newly recruited staff through recruitmentabsorption
personNot disclosedNot disclosed
Number of newly recruited staff through flexiblerecruitment
personNot disclosedNot disclosed
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024Internal recruitmentPercentage of internal recruits
%19.0826.9831.7Gender
Male%57.2953.9356.70Female%42.7146.0743.30Employeecategory
General manager and above%0.171.812.87Director %5.214.963.62Manager %23.7824.5522.23Other employees%70.8368.6871.28Age
30 and below%37.5034.7038.3031-49%59.5561.7956.4950 and above%2.953.515.21Area
China’s mainland%99.83100.0099.79Hong Kong, Macao and Taiwan%0.000.000.00Overseas areas%0.170.000.21
The internal recruitment ratio is calculated as: total number of vacancies taken by the Group’s own staff during the year/thetotal number of vacancies of the Group during the year.
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024B SocialB1 EmploymentB1.2 Employee turnover rate by gender, age group and area
Total employee turnover rate%10.8213.4510.38Gender
Male%10.0912.269.99Female%11.6414.7810.82Age
30 and below%12.9817.6614.2831-49%9.6010.797.9350 and above%4.033.954.67Area
China’s mainland%10.8113.4510.37Hong Kong, Macao and Taiwan%25.0025.0033.33Overseas areas%18.188.339.09Employeecategory
General manager and above%1.152.4110.59Director %9.792.276.44Manager %13.9013.4914.84Other employees%10.6013.739.96
The employee turnover rate is calculated as: the number of resignations (in the specified category) / total number of staff at thebeginning of the period (in the specified category) + new recruits (in the specified category).
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024B SocialB2 Health and SafetyB2.1 Number and rate of work-related fatalities that occurred in each of the past three years (2022-2024)Number of work-related fatalitiesperson000Rate of work-related fatalities%000
B2.2 Lost days due to work injury
Lost days due to work injuryday14321498
Investment in work injury insurance and safety liability insuranceAmount invested in staff injury insuranceRMB10,000Not disclosedNot disclosed520.74Amount invested in work safety liability insuranceRMB10,000Not disclosedNot disclosed24.55Coverage of injury insurance for workers%Not disclosedNot disclosed99.91
B3 Development and Training
B3.1 Percentage of trained staff by gender and staff category
Percentage of trained staff in total staff%10010098.40Gender
Male%52.5052.6552.49Female%47.5047.3547.51Employeecategory
General manager and above%0.890.911.03Director %1.872.052.08Manager %10.0810.0410.14Other employees%87.1687.0086.75
The calculation of training related data of B3 refers to the Hong Kong Stock Exchange’s Appendix III: Guidelines for Reportingon Social Key Performance Indicators.
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024B3.2 Average number of training hours per employee by gender and employee categoryAverage number of training hours per employee hour/person80.174.3102.3Gender
Malehour/person80.169.2100.2Femalehour/person80.180.1104.6Employeecategory
General manager and abovehour/person51.612.017.0Director hour/person71.028.845.6Manager hour/person68.031.843.6Other employeeshour/person82.081.0111.5
Average number of training hours per staff by age, area and type of training
Age
30 and belowhour/person77.5106.6145.431-49hour/person82.055.177.150 and abovehour/person79.465.492.8Area
China’s mainlandhour/person80.174.4102.4Hong Kong, Macao and Taiwanhour/person82.330.794.0Overseas areashour/person77.926.411.4Average length of training per staff involved inmanagement training
hour/person3.621.320.3Average length of training per staff involved inleadership training
hour/person4.636.747.3Staff training expenditurePer capita expenditure on staff training anddevelopment
RMB/person478.45598.88501.79Employee engagement surveyProportion of staff who expressed "very satisfied" and"satisfied" in the employee engagement survey amongtotal staff
%72.397580Target of the year set for the proportion of staff whoexpressed "very satisfied" and "satisfied" in theemployee engagement survey among total staff
%7576/
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘s
message
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024B SocialB5 Supply Chain ManagementB5.1 Number of suppliers by region
Total number of suppliersnos1,8772,0862,059
Region
Number in Southern Chinanos667709744Number in Eastern Chinanos724797779Number in Northern Chinanos188194193Number in Central Chinanos131187159Number in Northeastern Chinanos313023Number in Northwestern Chinanos92111110Number in Southwestern Chinanos364744Number in foreign countriesnos8117B6 Product ResponsibilityB6.1 Percentage of total products sold or shipped subject to recalls for safety and health reasons
Percentage of such products to total products soldand/or shipped
%000B6.2 Number of products and service related complaints receivedProduct-related complaintsnos778087Medication queriesnos201721Major liability incidents related to safety and qualityof products and servicesMajor safety and quality liability accidents relatedto products and services
caseNot disclosedNot disclosed0Amount involved in administrative penalties causedby major liability incidents related to safety andquality of products and services
RMBNot disclosedNot disclosed0Amount involved in damages caused by majorliability incidents related to safety and quality ofproducts and services
RMBNot disclosedNot disclosed0
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
11 Socialcontributions10 Greenoperation9 Take human as
the foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
ESG Indicator Unit202220232024B SocialB7 Anti-corruptionB7.1 Number of concluded legal cases regarding corrupt practices brought against the Company or its employees during the reportingperiod and the outcomes of the casesNumber of brought and concluded legal casesregarding corrupt practices
case000B7.3 Anti-corruption training provided to directors and staffNumber of directors who participated in anti-corruption training
person11119Total length of anti-corruption training provided todirectors
hour222222.5Number of staff who participated in anti-grafttraining
person9,0058,9338,922Total length of anti-graft training provided to staff hour22,422.5 17,020.71,8190.0B8 Community InvestmentB8.2 Resources contributed to the focus areasCash donationRMB10,000
373.11,349.81,089.7In-kind donationRMB10,000
624.7348.3208.0Total investment in charitable donations RMB10,000
997.81,698.11,297.7Of which: Investments in healthRMB10,000
330.8261.2457.8Investments in educationRMB10,000
61.5560.2561.0Investments in disaster reliefRMB10,000
322.1625.147.2Investments in rural revitalization and
industrial assistance
RMB10,000
254.7196.1222.3Other investmentsRMB10,000
28.755.59.4
12.2 DATA LIST OF KEY PERFORMANCE INDICATORS
(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
CONTENT INDEX
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
13.1 CONTENT INDEX OF “ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING CODE”
OF THE HONG KONG STOCK EXCHANGESubject Areas, Aspects, General Disclosures and KeyPerformance Indicators (“KPI”)
Corresponding Section(s)A. EnvironmentalAspect A1:
Emissions
General disclosure10.3, 12.1KPI A1.112.2KPI A1.212.2KPI A1.312.2KPI A1.412.2KPI A1.510.2, 10.3, 10.4KPI A1.610.2, 10.3Aspect A2:
Use of Resources
General disclosure10.4, 12.1KPI A2.112.2KPI A2.212.2KPI A2.310.2, 10.4KPI A2.410.2, 10.4KPI A2.512.2Aspect A3:
The Environment andNatural Resources
General disclosure10.6, 12.1KPI A3.1
Aspect A4:
Climate Change
General disclosure10.5, 12.1KPI A4.110.5
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Subject Areas, Aspects, General Disclosures and KeyPerformance Indicators (“KPI”)
Corresponding Section(s)B. SocialEmployment and Labor Practices
Aspect B1:
Employment
General disclosure9, 12.1KPI B1.19.1, 12.2KPI B1.29.1, 12.2Aspect B2:
Health and Safety
General disclosure9, 12.1KPI B2.19.4, 12.2KPI B2.212.2KPI B2.39.4Aspect B3:
Development and Training
General disclosure9, 12.1KPI B3.112.2KPI B3.212.2Aspect B4:
Labor Standards
General disclosure9, 12.1KPI B4.19.1KPI B4.29.1
13.1 CONTENT INDEX OF “ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING CODE”
OF THE HONG KONG STOCK EXCHANGE(continued)
11 Socialcontributions10 Greenoperation9 Take human asthe foremost8 Responsiblesupply chain7 Productresponsibility
12 Appendix13 Content
index
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
Subject Areas, Aspects, General Disclosures and KeyPerformance Indicators (“KPI”)
Corresponding Section(s)B. SocialOperating PracticesAspect B5:
Supply Chain Management
General disclosure8, 12.1KPI B5.18, 12.2KPI B5.28.1, 8.3KPI B5.38.1, 8.3, 8.4, 8.5KPI B5.48.5Aspect B6:
Product Responsibility
General disclosure5, 7, 12.1KPI B6.17.5, 12.2KPI B6.27.5, 12.2KPI B6.35.3KPI B6.47.3, 7.4, 7.5KPI B6.55.1, 5.2, 7.5Aspect B7:
Anti-corruption
General disclosure5, 8, 12.1KPI B7.15.1, 12.2KPI B7.25.1, 8.3KPI B7.35.1, 12.2
Community
Aspect B8:
Community Investment
General disclosure11, 12.1KPI B8.16, 11, 12.2KPI B8.212.2
13.1 CONTENT INDEX OF “ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING CODE”
OF THE HONG KONG STOCK EXCHANGE(continued)
5 Operationcompliance4 ESGgovernance3 Aboutthe company2 Chairman‘smessage
6 Access tohealthcare
Livzon Pharmaceutical Group Inc. 2024 Environmental, Social and Governance Report
13.2 CONTENT INDEX OF SELF-REGULATORY GUIDELINES NO. 17 FOR COMPANIES LISTED
ON SHENZHEN STOCK EXCHANGE - SUSTAINABILITY REPORTING (TRIAL)No.TopicCorresponding Article(s)Corresponding Section(s)Environmental
1Climate responseArticles 21 to 2810.52Pollutant dischargeArticle 3010.2, 10.33Waste disposalArticle 3110.34Ecosystem and biodiversity protectionArticle 3210.65Environmental compliance managementArticle 3310.1, 10.26Energy utilizationArticle 3510.4.27Water resources utilizationArticle 3610.4.18Circular economyArticle 3710.4.2
Social9Rural revitalizationArticle 3910.6, 11.210Social contributionsArticle 401111Innovation drivenArticle 42612Ethics of science and technologyArticle 435.113Supply chain securityArticle 45814Equal treatment of SMEsArticle 46815Product and service safety and qualityArticle 47716Data security and customer privacy protectionArticle 485.217EmployeesArticle 509.4Sustainability-related Governance
18Due diligenceArticle 52419Stakeholder engagementArticle 534.320Anti-commercial bribery and anti-corruptionArticle 555.1, 8.321Anti-unfair competitionArticle 565.1, 8.3
* For identication purpose only
Evergreen Life,
Bright Future & Wisdom
www.livzon.com.cn
2024
Environmental,Social andGovernanceReport
Stock Code : 1513(A joint stock company incorporated in the People’sRepublic of China with limited liability)
Livzon Pharmaceutical Group Inc.
Environmental, Social and Governance Report 2024