| Considerations |
Response Measures |
Response Measures |
| Governance |
Production, Marketing,and Operational Risks |
Faced with a global economic slowdown caused by unfavorable factors such as overcapacity in China, weak domestic demand, supply chain restructuring, geopolitical risks, and climate change, the Company is actively adjusting its business strategy:
PVC products：
In response to the above factors, Vinyl Chain has reduced the proportion of long-term contract raw material purchases, flexibly adjusted spot purchases, and conducted daily rolling inventory reviews to stabilize product spreads and avoid losses from large-scale price drops of finished products.
Production Operations：
Considering the relatively low profit margin between raw materials and products for export, we are prioritizing CGPCP, which has lower production costs, for export production and export. We are also increasing the surcharge on CGPC's special-specification raw materials to widen the price gap. At the same time, we are continuously upgrading equipment to reduce workplace safety risks and improve production efficiency. We are also introducing air pollution treatment equipment and green power generation systems to improve energy efficiency and reduce costs. We are also accelerating the implementation of intelligent to ensure precise processes, safe production, and product quality.
Sales Strategy：
Diversify product markets, expand distribution channels, and maintain strong customer relationships to increase market share and revenue. Develop and promote non-PVC plastic materials and product recycling system certification. Collaborate with external technology development centers to develop environmentally friendly circular economy materials and products, meet environmental requirements, and lay the foundation for sustainable development.
Product Research and Development：
We will continue to research, develop and transform traditional products to make them more effective in adapting to climate change, develop product color diversification, and create new experiences through different channels.
We will continue to focus on the impact of interest rate cuts in major countries and China's economic stimulus plan on the housing market and the PVC industry.
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Finance Risk |
As global inflation slows and central banks around the world continue to cut interest rates, the Company faces the following financial risks：
Interest rate fluctuation risk：
Pay attention to changes in market interest rates and adjust the loan term and proportion in a timely manner to reduce the risk of interest rate fluctuations.
Exchange rate risk：
The US Federal Reserve has initiated a cycle of interest rate cuts, potentially increasing volatility in the international foreign exchange market. In principle, we maintain a 100% net position hedge. If exchange rate trends clearly favor the company, we will adjust the hedge ratio within a manageable range.
Property loss risk：
We have purchased various property insurance policies based on the replacement cost according to the scale of business and assets to appropriately transfer the risk.
Endorsement and guarantee risk：
Endorsement and guarantee of a single subsidiary in which the company holds 100% of the shares is in line with the company's strategy and the risks are controllable.
Accounts receivable risk：
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Domestic customers：
Provide additional collateral and joint guarantors.
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Export customers：
Increase credit insurance limits or purchase letters of credit, and issue bills of lading upon receipt of payment.
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All customers：
Regularly review operations and financial reports, suspend shipments to problematic customers, and implement necessary preservation measures.
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| Disaster Risk
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To strengthen disaster and accident risk management, the Company has implemented the following measures：
Regulatory Compliance：
In 2024, the Factory Management Guidance Act and the Factory Hazardous Goods Declaration Method will be revised to complete the inventory and declaration of hazardous goods within the factory, comprehensively increase insurance amounts, revise fine limits, and implement dynamic declaration.
Fire Safety Regulations：
In accordance with the effective Fire Safety Equipment Inspection and Reporting Regulations (Article 9), strengthen on-site fire safety equipment inspections and conduct maintenance in advance. Any deficiencies must be promptly corrected and reported as complete to ensure proper equipment function.
Strengthening firefighting capabilities：
In 2024, we plan to purchase large-flow mobile fire water monitors to enhance firefighting capabilities.
Maintenance of protective equipment：
Class A protection equipment should be sent out for inspection regularly every year to ensure normal function.
Provide disaster relief information：
Continue to establish and update the public hazardous materials H-CARD to facilitate the provision of disaster relief information.
Chemical System Management：
We will continue to promote the operation of our on-site chemical cloud system in 2024. This systematizes chemical information, providing a comprehensive map of chemical types, quantities, and locations within the plant, as well as essential emergency response information. This will facilitate immediate access to essential information and enable precise formulation of sustainable development strategies.
Fire Incident Response：A fire broke out at the Toufen plant on October 19, 2024. No casualties were reported. The Fire Department determined the cause to be spontaneous combustion caused by oxidation of the thermal oil. The company is reviewing its shutdown and startup SOPs and thermal oil operation safety procedures, and strengthening early warning and monitoring safety measures. (See CH6.4 for details.)
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Technology and Information Security Risks |
To strengthen information security, the Company has implemented the following measures：
Strengthen account and threat management：
Regularly review SSLVPN accounts, monitor various security issues, and conduct group information environment audits and vulnerability corrections.
Establish a defense-in-depth system：
Conduct information security management based on the three-stage defense system (before, during, and after) established in operational practices.
Enhance cybersecurity awareness：
Appoint professional cybersecurity consultants to conduct social engineering drills, cybersecurity education training and testing every six months.
Implement OT information security protection：
regularly inspect OT equipment, inventory assets, and lock USB ports.
Implement weakness and vulnerability management：
1-2 times per year, commission professional information security consultants to conduct information security audits, vulnerability scanning and patching, as well as information environment security checks and packet flow analysis.
ISO 27001 Certified：
We have been ISO 27001 certified for 10 consecutive years and undergo two internal audits each year.
Ensure the security of the official website and systems：
Migrate the official website to the cloud and establish a backup mechanism, strengthen firewalls, and conduct disaster recovery drills regularly. Conduct disaster recovery drills for critical systems and follow the 3-2-1 backup principle.
Strengthen endpoint and USB device control：
Deploy two sets of heterogeneous endpoint detection and response software for critical information assets, and perform recycling, inventory, and virus scanning of USB external storage devices.
Establish a dedicated information security unit：
Establish a dedicated information security unit and assign dedicated supervisors and personnel to be responsible for planning, monitoring, and executing information security management operations and supervision.
Developing Smart Factories：
We are incorporating intelligent into our efforts to develop intelligent factories. Currently underway are projects including process optimization, safety monitoring, equipment identification, AOI thermal imaging for electrical panels, intelligent sensor safety systems for forklifts, warehousing systems, and pipe production line automation.
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| Others |
R&D risks：
1.
To implement intellectual property management policies, enhance industry status, and safeguard existing
technological achievements, the Company filed two patent applications in 2024:：
(1) Patent for light-transmitting layer structure: Obtained (New Model No. M657916), with a patent expiration date of April 8, 2034.
(2) Patent for heat reflective layer structure: Obtained (New Model No. M664325), patent term expires on August 15, 2034.
2.
Product formulas are controlled by the ERP system and documents are managed by the document management center, eliminating the risk of leakage.
3.
The R&D department is executing and tracking the 2024 R&D plan and developing the 2025 R&D plan. Carbon emissions are being integrated into product development, focusing on aspects such as the circular economy, clean processes, and green energy. The company also regularly reviews product development competitiveness and maintains normal management.
Legal risks：
In 2024, the Group Legal Affairs Department provided legal advice and assistance regarding the recovery of air pollution control fees at the Main Plant, administrative litigation involving violations of the Air Pollution Control Act, and the idle land issues at the Zhongshan Plant. Other areas of responsibility, including compliance risks, transaction risks, and compliance awareness and behavior, all remained normal this year.
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| Environmental |
Climate change and environmental risks |
In response to climate change and environmental risks, the Company has taken the following measures：
Setting carbon reduction targets and implementing energy-saving plans：
The Group has set a 27% reduction in carbon emissions by 2030 compared to 2017, with a long-term goal of achieving carbon neutrality by 2050.
Energy-saving plan implementation and technical exchange：Group-wide technical case studies are held annually to encourage all plants to share energy-saving and carbon-reduction technologies and experiences. The Department of Design and Environmental Protection will conduct a meeting at the CGPC Main Plant from June 19-20, 2024, to promote energy-saving and carbon-reduction policy and regulatory trends. Discussions will include analysis of key carbon-emitting and energy-consuming equipment, improvement tracking of diagnostic results, and recommendations for improvement. The meeting will also include regular follow-up on implementation progress. (See CH5.2.8 Energy-Saving and Carbon-Reduction Plans and Performance.)
Implementing an Energy Management System and Internal Carbon Pricing：
The Group's nine core domestic production plants have implemented an ISO 50001 energy management system to effectively manage energy performance. In response to the government's carbon fee policy, the Group has implemented an internal carbon pricing system, which will reference the domestic carbon fee pricing framework. The Group plans to integrate this system into its decision-making and investment evaluation processes, assessing the impact of carbon emissions on business operations and accelerating the implementation of carbon reduction measures. On September 19th, the Group held an educational training session to raise employee awareness of carbon reduction.
Pay attention to policies and regulations and participate in public hearings：
We continue to monitor changes in domestic and international environmental regulations, energy, greenhouse gases, and other issues, actively participate in public hearings, assess the impact of regulations, and formulate corresponding measures.
Assessing the impact of climate change and deploying new energy resources：
Analyzing the potential impacts of climate change through the TCFD and international research reports, assessing risks and opportunities, and actively deploying new energy project development. A 2.12MW solar installation has been installed on the rooftop of the CGPC Main Plant, initially focusing on solar photovoltaics. The company is also evaluating new energy opportunities in wind and geothermal energy.
Strengthening environmental management and audits：
Monthly statistics on environmental audits and fines issued to each plant are compiled, requiring each plant to conduct self-reviews and make immediate improvements. Quarterly statistics on VOC leaks are compiled and monitoring and repairs are strengthened. Annual safety and environmental audit plans are implemented to ensure compliance with regulations.
Strengthening safety and environmental protection training and accident prevention：
We hold professional safety and environmental protection training courses annually to enhance employee skills. We also create awareness files on major environmental incidents and provide them to all plants to prevent similar accidents.
Implementing carbon emission management and pollution prevention：
Carbon Emission Management：We commissioned a third-party organization to verify greenhouse gas emissions
and upload them to the National Greenhouse Gas Registry of the Ministry of Environment, Executive Yuan. We
participated in the CDP 2024 questionnaire and received a Double B management rating for both climate change
and water security. In 2024, we implemented carbon footprinting for water pipes, hydrochloric acid, caustic soda,
and bleaching water, and maintained an ISO 46001 water resources management system.
Waste Management：
We conduct monthly waste inspections, issue improvement notices for environmental
deficiencies and track improvements. We regularly inspect waste disposal vendors to ensure proper handling
capabilities, promote the reuse of recyclable resources, and reduce waste generation.
Air pollution prevention and control：
The rubber factory installed VOC waste gas treatment equipment to
effectively reduce air pollutant emissions; it stopped using coal-fired boilers and switched to natural gas boilers to
reduce greenhouse gas emissions.
Safety Protection：
High-pressure tank shifting equipment is installed to handle emergencies during vinyl chloride tanker transport.
Enhance Sustainability：
Participate in events such as the Green Chemistry Application and Innovation Awards and
the Net Zero Transformation and Air Pollution Prevention Forum to enhance the company's positive image for
sustainable operations and environmental protection.
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| Social
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Human resource risks |
The Group continues to monitor and control human resource-related risks and flexibly adjusts its management and control mechanisms based on changes in risks.
Manpower shortage risk：
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Talent Recruitment：
We recruit talent through diverse channels and collaborate with renowned domestic and international universities to train interns.
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Talent Development：
We establish a training map and comprehensive training system, offer diverse courses, and promote employee skills retraining.
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Optimization：
We establish a promotion system and talent review committee, optimize the supervisor reserve mechanism, strengthen talent development, and implement succession planning.
Talent drain risk：
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Harmonious Labor-Management Relations：
Maintain good communication with the labor union to foster a labor-management relationship based on mutual trust and support.
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Generous Compensation and Benefits：
Provide a competitive compensation system and implement an employee compensation contribution ratio, ensuring that all employees share in the company's operating results.
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Overseas Compensation Strategy：
Compensation for overseas subsidiaries is based on local market standards and operational performance, encouraging long-term employee contribution.
Legal compliance risks：
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Integrity Management：
Establish relevant rules and regulations and conduct regular education and training to strengthen employee integrity awareness.
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Professional Consultation：
External legal counsel provides consultation and regularly reviews personnel regulations to ensure compliance with regulations.
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Open Reporting Channels：
Establish a comprehensive reporting system and set up an Audit Committee mailbox to encourage employees to report illegal activities. No related violations or illegal incidents were reported in 2024.
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Occupational safety risks
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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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