| Considerations |
Response Measures |
Response Measures |
| Governance |
Production, Marketing,and Operational Risks |
In response to the supply-demand imbalance caused by China's overcapacity and sluggish demand, as well as geopolitical conflicts, US-China trade confrontations triggering global tariff measures, and energy price volatility resulting from climate change, the Company continues to adjust its business strategies to mitigate operational risks and maintain business stability. Key responsive measures include:
Flexible Raw Material Procurement Strategy：
Dynamically managing production, sales, and inventory
levels to stabilize product spreads and minimize the risks of inventory write-downs and supply chain
disruptions.
Optimization of Production Allocation and Process Efficiency：
Continuously upgrading equipment,
improving energy efficiency, and implementing smart technologies to ensure process safety, consistent
quality, and cost competitiveness.
Diversification of Markets and Sales Channels：
Maintaining strong customer relationships while actively
advancing the development of non-PVC materials and circular economy products.
High-Value and Diversified Product Strategy：
Enhancing overall market competitiveness in response to
climate change and emerging market demands.
Note 1：
For details on economic performance, please refer to CH 3.2 Operational Performance of the 2025 ESG Report.
Note 2：
For details on R&D initiatives, please refer to CH 3.5 Technology R&D of the 2025 ESG Report.
Note 3：
For details on smart technologies, please refer to CH 3.6 Intelligent Management of the 2025 ESG Report.
|
Finance Risk |
The Company faces the following financial risks and implements corresponding control measures：
Interest Rate Volatility：
Borrowing maturities and proportions are dynamically adjusted based on
short-, medium-, and long-term capital requirements. The Company actively manages total credit line
levels and maintains a drawdown rate of no more than 50% to mitigate the impact of interest rate
fluctuations.
Foreign Exchange Volatility：
In principle, the Company hedges 100% of its net exposure, with hedging
ratios flexibly adjusted within controllable risk limits.
Property Loss Risk：
Based on operating scale and asset volume, comprehensive property insurance
policies are underwritten based on replacement cost to appropriately transfer potential property loss
risks.
Endorsements and Guarantees：
Endorsements and guarantees are strictly restricted to 100%-owned
subsidiaries to lower their financing costs and enhance liquidity flexibility. All associated risks remain
well within tolerable levels.
Accounts Receivable (A/R) Controls：Differentiated risk management controls are enforced based on
customer profiles：
1.
Domestic Customers：
Strengthen collateral and guarantee requirements.
2.
Export Customers：
Mitigate credit risks through credit insurance or structured payment terms.
3.
Overdue & Daily Management：
For overdue accounts, shipments are immediately suspended while
root causes are investigated and financial status analyzed. Necessary legal asset protection
measures are enforced as circumstances require.
|
| Disaster Risk
|
To strengthen emergency and disaster risk management, the Company has implemented the following measures：
Hazardous Materials Inventory and Reporting：
Conducted comprehensive inventories of hazardous
materials within the plants and completed regulatory filings within prescribed deadlines in accordance
with applicable laws.
Fire Safety Equipment Inspection and Improvement：
Routinely inspected fire safety equipment, promptly
rectified any identified defects, and submitted legal disclosures upon verifying proper functionality.
Hydrant Testing and Routine Inspections：
Performed quarterly inspections of fire pipelines, hydrants, and
catch-basin valves to ensure normal system operation.
Level A Protective Suit Annual Inspection：
Sent Level A chemical protective equipment for third-party
inspections annually to verify operational integrity.
H-CARD Maintenance：
Continuously created and updated Hazmat Information Cards (H-CARDs) for
public hazardous materials to provide critical information required for emergency response.
Firefighting Water Storage Management：
Maintained water levels in fire water storage tanks in
compliance with statutory and design capacities according to replenishment plans, enhancing
emergency water supply capabilities.
Refinement of Fire Safety Protocols and Standard Operating Procedures (SOPs)：
Revised SOPs and
established clear guidelines in accordance with fire safety management policies to reinforce consistency
across fire safety practices.
|
Technology and Information Security Risks |
To strengthen information and technology security risk management, the Company has implemented the following key measures：
Cybersecurity Governance and Framework：
Maintained the ISO 27001 Management System (including the 2022 version transition),
established a dedicated cybersecurity unit and personnel, and conducted annual internal and external audits.
Personnel and Endpoint Protection：
Conducted cybersecurity awareness training and social engineering drills bi-annually; deployed
endpoint protection and heterogeneous detection mechanisms across company computers and critical IT assets.
System and Network Defense：
Enforced operational technology (OT) equipment inspections and USB access controls, executed
vulnerability scans and remediations twice a year, and mitigated external attack risks through firewalls, Access Control Lists (ACLs),
and DDoS protection.
Operational Resilience and Access Control：
Conducted annual disaster recovery drills for critical systems, and enforced SSL VPN,
email Multi-Factor Authentication (MFA), and the principle of least privilege to ensure business continuity.
|
| Others |
R&D Risk Management：
1.
To implement our Intellectual Property (IP) management policy, elevate industry standing, and safeguard existing technological achievements, the Company submitted a patent application in 2025: "Light-Transmitting Layer Structure and Application thereof to Light-Emitting Ornament" (Utility Model Patent No. M657916), with the patent rights term valid from July 11, 2024, to April 8, 2034.
2.
Product formulations are controlled through the ERP system and documents are managed by the Document Control Center (DCC), eliminating leakage risks.
3.
The R&D unit executed and monitored the 2025 R&D plans while formulating the 2026 R&D strategy. Carbon emission considerations have been integrated into product development, focusing on the circular economy, clean manufacturing processes, and green energy, with regular reviews on product competitiveness. Operations functioned normally during the year.
Legal Risk Management：
In 2025, the Legal Affairs Department provided legal consultation and assistance regarding administrative litigation matters-
including the clawback/reassessment of air pollution control fees and alleged violations of the Air Pollution Control Act at the
Toufen Main Plant-as well as issues related to idle land at the Zhongshan Plant. In other areas, including legal compliance risks,
transaction risks, and compliance awareness and behavior, operations functioned normally during the year.
|
| Environmental |
Climate change and environmental risks |
To address climate change and environmental risks, the Company has implemented the following measures：
Carbon Reduction Targets and Energy Initiatives：
Established a 2030 carbon reduction target (a 27% reduction compared to
2017) and a long-term goal of achieving carbon neutrality by 2050. We promote energy conservation and carbon reduction
programs, implement the ISO 50001 Energy Management System, and introduce internal carbon pricing mechanisms to
integrate carbon costs into business decision-making.
Climate Risk Assessment and Energy Transition：
Utilized the TCFD framework to evaluate physical and transition climate
risks and opportunities along with their financial impacts. Simultaneously, we are expanding our renewable energy
footprint by installing solar power capacity at the Toufen Main Plant while evaluating additional renewable energy
opportunities.
Regulatory Compliance and Environmental Management：
Continuously monitored developments in energy, greenhouse
gas (GHG), and environmental regulations, actively participating in policy discussions. Through environmental inspections,
Volatile Organic Compound (VOC) management, and annual Safety and Environmental (EHS) audits, we ensure regulatory
compliance and elevate environmental performance.
Pollution Prevention and Resource Efficiency：
Advanced pollution control equipment upgrades, process improvements,
waste reduction, and recycling initiatives. We also execute water recycling and verification to optimize resource efficiency.
GHG Inventory, Product Carbon Footprint, and Disclosures：
Commissioned independent third-party verification of GHG
emissions and completed official reporting. We advanced product carbon footprint assessments for 11 product lines,
maintained operations under the ISO 46001 Water Efficiency Management System, and participated in the CDP Climate
Change and Water Security disclosures.
|
| Social
|
Human resource risks |
The Group continuously monitors and manages human resource risks, dynamically adjusting its control mechanisms in response to risk variations.
Human Resource Shortage Risk：
∘
Diversified Recruitment and Industry-Academia Cooperation：
Recruited through campus recruitment, job banks, ESG websites, and the official company
website. Promoted industry-academia collaboration and pre-hiring internship programs with domestic and overseas universities to broaden talent
pipelines and enhance employer brand visibility.
Talent Retention & Turnover Risk:
∘
Talent Development and AI Empowerment：
Established a diversified training system and introduced generative AI applications to elevate employee skills
and operational efficiency.
∘
Promotion and Succession Framework：
Enforced annual promotion mechanisms, talent pipelines, and succession planning to strengthen key competency
cultivation and organizational sustainability.
∘
Labor Relations and Compensation Structure：
Promoted employee retention and mutual growth through labor-management communication channels and
market-competitive compensation frameworks.
∘
Employee Care and Support：
Implemented Employee Assistance Programs (EAP) to reinforce mental health and holistic care mechanisms.
Note 1：
For detailed human resources information, please refer to
CH 6.1 to CH 6.3
of the 2025 Sustainability Report.
|
Occupational safety risks
|
To reduce the risk of occupational hazards, our company has taken the following specific measures：
Strengthening Safety Culture：
The Group held the 2024 Group Site Technical Case Presentation on November 14, 2024, to encourage the sharing of experiences in industrial safety and environmental protection, equipment maintenance, and energy conservation and carbon reduction. The event also publicly recognized sites that achieved 1,000 cumulative safe days.
Implement safety monitoring：
Monthly statistics are compiled for each factory regarding the number of major occupational accidents and the cumulative number of safe days. Government safety inspection results and fines are regularly analyzed for vigilance and learning. The Main Plant has received zero safety fines in 2024.
Compliance and Promotion：
Regular safety and environmental audits are conducted to ensure compliance with regulatory requirements. Penalty benchmarks for contractors violating workplace safety regulations are established. On August 1, 2024, a contractor safety management practice and lockout/tagout training course was held at the CGPC Main Plant to enhance professional safety and environmental protection skills across all plants. The US petrochemical industry's Golden Rules for Workplace Safety were also introduced to strengthen promotion.
Strengthening process safety：
The Group holds a resource integration meeting for its northern plant every six months to promote process safety knowledge. It also produces promotional posters based on news reports of major occupational hazards to strengthen accident learning and prevention.
Promote communication and exchange：
Hold resource integration meetings at the northern plant every six months to communicate and convey the progress of various safety and environmental protection work.
Improving PSM Management：
Continuously conducting cross-site and internal PSM audits, developing a PSM platform, implementing e-management, and utilizing CMMS to calculate equipment reliability indicators, reduce the risk of equipment failure, and ensure that plant implementation and procedure documentation meet requirements.
Improving the work environment：
We are conducting improvements to high-noise areas within the factory (where PVC sheets are shredded). We are also introducing an AOI intelligent sensing safety system for forklifts (50 forklifts have been installed, and a forklift management platform has been set up for monitoring), to improves operational safety.
Promoting employee health：
Physician visits are provided once a month to provide health consultations, weight loss activities, health lectures, and health checkups to reduce the incidence of employee illness.
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