China Mengniu Dairy Co Ltd

While the company previously indicated plans to act upon the release of new SBTi guidelines, no follow-up details have been disclosed in recent reports. The company has discussed strategies for reducing greenhouse gas emissions by optimising feed composition and using additives to lower methane emissions during feeding, but it has not specified a methane reduction target.

The company aims for carbon neutrality across the entire industrial chain by 2050, reaching peak carbon emissions by 2030. It has set targets for reducing Scope 1 and 2 greenhouse gas emission intensity to 165 kg CO2e per ton of dairy products by 2025 and 160 kg CO2e by 2030. By 2050, the company plans to increase the use of renewable energy and reduce its product carbon footprint annually. The company also aims for carbon neutrality in Scope 1, 2, and 3 emissions by 2050. Between 2023 and 2025, it will explore and implement Scope 3 GHG emissions reduction measures, and from 2025 to 2030, it will deepen these efforts. By 2050, it plans to achieve comprehensive GHG emission reductions in Scope 3 to reach complete carbon neutrality.

The company incorporates value chain carbon reduction into its dual-carbon strategy by collaborating with stakeholders in areas such as pasture for low-carbon development. It focuses on five aspects of pasture carbon reduction: energy utilisation, manure treatment, herd management, feed composition, and ecological carbon fixation. The company has implemented over 260 carbon reduction initiatives, achieving a reduction of approximately 185,000 tonnes in greenhouse gas emissions. Additionally, the company has joined the Supplier Ethical Data Exchange (Sedex) platform to build a responsible supply chain, drawing on international concepts and practices.

The company promotes using farm manure as organic fertiliser within an ecological cycle, guiding cooperative farms to apply manure as solid and liquid fertilisers. This approach reduces chemical fertiliser use and enhances soil health. In 2023, organic fertiliser was returned to 250,000 mu of farmland, decreasing chemical fertiliser usage by approximately 125,000 tonnes. Additionally, the "Planting and Breeding Cycle" model supports the use of biogas slurry as fertiliser for crops like corn and wheat. While it is assumed this improved fertiliser management applies to feed farming, the company is encouraged to confirm this in future reports.

The company has developed a carbon management plan for pastures that includes feed composition adjustments, optimisation of herd and manure management, ecological carbon fixation, and improved energy efficiency. It supports carbon reduction through methane-lowering additives, replacement of fossil fuel equipment with renewable sources, and the use of green electricity. The company is encouraged to disclose the scope of these initiatives.

The company discloses Scope 1 and 2 emissions of 270,400 tCO2 and 1,152,900 tCO2, respectively, for 2023, with total GHG emissions amounting to 142,330,000 tCO2.

The company discloses that its GHG emissions data includes carbon dioxide, methane, and hydrofluorocarbons. In 2023, it reports subsidiaries China Modern Dairy and China Shengmu achieved GHG emissions reductions to 0.89 kgCO2e and 0.85 kgCO2e per kilogram of fat- and protein-corrected milk, respectively, compared to 2022 figures. China Shengmu's 2023 ESG report details emissions from intestinal fermentation and manure management at 354,200 tCO2e and 140,000 tCO2e, respectively, and 85,800 tCO2e from feed processing. The company is encouraged to report both animal farming and feed production emissions across the entire Group. The company does not disclose its GHG emissions from land-use change.

The company has responded to the CDP Climate Change Questionnaire, but it is not publicly available. In April 2023, its subsidiary, Modern Dairy, received carbon emission reduction verification from the China Classification Society Certification (CCSC).

Between FY2022 and FY2023, the company reports a slight decrease of 0.17% in total GHG emissions, from 1,425,700 to 1,423,300 tCO2e, but an overall increase of 4.65% from FY2021 to FY2023. This corresponds to an average annual increase of 2.33%. In 2023, the company promoted biogas power generation to 120 million kWh from its pastures, reducing GHG emissions by approximately 66,800 tonnes. However, it does not disclose emissions data from manure management to confirm an overall decrease. Its subsidiary, Modern Dairy, reduced emissions from enteric fermentation by about 2% and manure management by about 4.3%, lowering CO2 emissions from the herd by approximately 40,000 tonnes. For FY2023, the company reports Scope 1 emissions of 270,400 tCO2 and Scope 2 emissions of 1,152,900 tCO2.

The company employs IPCC SSP1-2.6 and SSP5-8.5 scenario models to evaluate potential physical risks, while using IEA 2050 Net Zero Emissions (NZE) and Established Policy Scenarios (STEPS) for assessing transformation risks. It has identified and integrated 13 key ecological and environmental risks into a risk map for continuous monitoring and management.

The company provides mixed disclosure across the identified climate-related risks. It acknowledges that extreme weather events such as typhoons, heat waves, and floods pose risks to raw material supply and pricing, including soybeans and corn, with mitigation through a green procurement strategy, a "zero deforestation" supply chain programme, and supplier training initiatives. The company also recognises the impact of heat waves and droughts on dairy cows, using temperature control measures like sunshades, fans, and water-cooling systems. However, it does not provide explicit mitigation plans for the increased veterinary and medicine costs resulting from climate impacts. Regarding energy, the company partially addresses rising temperatures by optimising refrigeration systems in transport trucks to control maintenance costs. It also commits to reducing carbon emissions through photovoltaic projects, but does not explicitly address increased energy costs or demand. Potential carbon tax risks on methane and nitrogen oxide emissions are acknowledged, with plans to monitor regulatory changes and maintain green operations to mitigate compliance risks. Finally, the company acknowledges extreme weather as a risk to operations but reports no significant disruptions to date, committing instead to enhancing its disaster preparedness measures.

The company does not disclose its commitment to align capital expenditures with its GHG targets.

The company's upstream farms use soybean meal for cattle feed, accounting for approximately 7% of total feed purchases in 2023. It encourages cooperative farms to reduce soybean meal consumption, opting for alternatives like rapeseed, cottonseed, and sesame meal. The company is enhancing traceability to ensure soybeans are sourced from deforestation-free origins. The company requires its subsidiary, China Shengmu, to adhere to COFCO International's "zero deforestation" criteria and its own Forest Protection Policy for risky raw materials. COFCO International, a supplier to the company's Aiyangniu platform, aims to establish a "Zero Deforestation and Zero Vegetation Destruction" soybean supply chain in sensitive Latin American regions by 2030, including full traceability and monitoring. China Shengmu sources 100% deforestation-free soybeans from organic areas. Despite these efforts, the company does not fully disclose that all sourced soy comes from suppliers guaranteeing 100% deforestation-free feed. It maintains the Responsible Supply Chain ESG Risk List and the Procurement Risk Sorting and Identification Form to identify critical procurement risks. The company conducts risk assessments on forest-related risks associated with soybean sourcing, evaluating suppliers based on location, industry, material quality, and social responsibility. Non-compliant suppliers may face rectification or termination, while compliant ones receive support for improvement. However, it does not disclose the locations identified as high-risk for deforestation in its sourcing practices.

The company is collaborating with the World Economic Forum, the Forest Positive Coalition of the Consumer Goods Forum, and the Roundtable on Sustainable Palm Oil to eliminate deforestation in its commodity procurement process. It is committed to achieving zero deforestation by 2030, as stated in its Forest Protection Policy. Additionally, the company requires soy to be sourced only from areas where no deforestation has occurred since 31 December 2020.

The company's Forest Policy, which applies to raw and auxiliary commodities at risk of deforestation such as timber products, palm oil, and soybean meal, encompasses a commitment to zero deforestation across all its factories, ranches, and sourcing regions.

The company reports ordering 50,000 tonnes of zero deforestation soy, with its subsidiary, China Shengmu, ordering 12,000 tonnes. However, it does not disclose the total volume sourced, making it unclear what proportion meets its commitment. The company responded to the CDP Forests Questionnaire in 2023, achieving a score of B, but this information is not publicly available. Additionally, there is no disclosure on whether its progress data against the commitment has been verified or audited by a third party.

The company, in partnership with Modern Dairy and China Shengmu, developed the "Soybean - Zero Deforestation Joint Action Plan for the Dairy Industry Chain." Its Forest Protection Policy focuses on biodiversity conservation and mitigating deforestation risks through specialised management of timber products, palm oil, soybean meal, and other commodities. The company encourages suppliers to obtain third-party certifications, such as RTRS, and provides training to ensure compliance with its policy. However, it does not disclose if it offers financial incentives to promote deforestation-free production.

The company adheres to China's "Forest Law" for zero deforestation and promotes third-party certifications, such as Round Table on Responsible Soy (RTRS), for responsible soybean sourcing. It maintains a Responsible Supply Chain ESG Risk List and uses a Procurement Risk Sorting and Identification Form to identify critical procurement risks. The company uses the Sedex platform to manage environmental, social, governance, and economic risks impacting supply chain stability, categorising suppliers based on ESG risk levels and conducting thorough assessments, including on-site and remote evaluations for both domestic and foreign suppliers. Non-compliant suppliers are given the opportunity for rectification, but cooperation is terminated if standards are not met. Improvement plans are offered to enhance suppliers' sustainable development capabilities. In managing its operations, the company monitors commodities such as timber, palm oil, and soybean meal to eliminate deforestation risks throughout its value chain, aiming for "zero deforestation" by 2030. It reports achieving traceability of all soybeans directly sourced from Matopiba in Brazil to the farm level, although the proportion of soy this represents is unclear.

The company complies with environmental laws in China, including the Environmental Protection Law, the Environmental Impact Assessment Law, the Law on the Prevention and Control of Soil Pollution, and the Water and Soil Conservation Law. The company employs renewable agriculture practices, applying manure as organic fertilisers to improve soil health. It also sources local feed, such as corn products, and mandates cooperative farms to reduce soybean meal consumption by using alternatives like rapeseed, cottonseed, and sesame meals.

The company acknowledges the significant water requirements for dairy production, including processing, cooling, and cleaning. It systematically manages water resources via a Watershed Risk Map to assess stress levels around factories, continuously improving its water risk management. However, it does not specify information regarding facilities in low water stress areas. By 2022, the company expanded its water resource distribution map for water-scarce regions in China to include flood probability, ecological status, and biodiversity, creating a comprehensive five-dimensional risk map for factories. In 2023, it adopted the WWF Water Risk Filter, advancing to a Watershed Risk Map that evaluates 12 risk factors, including water shortage and stress levels. A water risk assessment on 63 factories in China found higher risks near high-risk river basins like the Yellow River and Yellow Sea. This assessment aids in setting priorities and enhancing water risk response, supporting sustainable development. In FY2023, the company reports withdrawing 35.20 million tonnes of water and discharging 31.70 million tonnes, suggesting an estimated consumption of 3.5 million tonnes, though specificity in reporting is encouraged. It has developed a 3U Water-Saving Strategy, incorporating Save Use, Recycle Use, and Common Use principles alongside the Total Productive Maintenance (TPM) approach. It has applied water conservation measures across its operations, saving 1.06 million tonnes of water and reusing approximately 2.04 million tonnes, with a reclaimed water rate of 6.44%.

The company aims to reduce freshwater consumption per ton of dairy product by 6% by 2025, compared to 2020 levels, and has already achieved a 3.8% reduction by 2023. However, it has not disclosed any specific time-bound targets for reducing total water withdrawals at its facilities for the reporting year.

The company reports a water withdrawal increase from 28.24 million tonnes in 2022 to 35.20 million tonnes in 2023, but does not disclose water consumption or the sources of withdrawal. Additionally, it does not categorise withdrawals or consumption by water stress levels, nor does it disclose water-related operating expenditure (OPEX). In 2023, the company invested RMB27.45 million in ecological environmental protection, but specific water-related capital expenditure (CAPEX) details were not provided. While the company promotes water footprint inspection and one of its products received the first Water Footprint Verification Statement for organic pure milk in China, it has not confirmed third-party audits on all water consumption or withdrawal data. Several facilities have attained AWS certification. The company responded to the CDP water questionnaire in 2023, receiving a score of C, though the reports are not publicly accessible.

The company's code of conduct for business partners requires suppliers to reduce water use through conservation, reuse, and recycling, as well as regularly quantify and analyse their water consumption, set conservation targets, and monitor progress. In its 2023 Sustainability Report, the company details training sessions and conferences for suppliers on water management and sustainable agriculture practices, though these are not explicitly linked to feed supply chains. The company has guided some cooperative pastures in water-scarce areas with severe soil erosion to reduce their dependence on wells. It has implemented 64 intelligent water management projects in pastures, covering 12% of cooperative areas and saving 2.8 million tonnes of water annually. Intelligent wastewater reuse systems have been introduced, saving over 450,000 tonnes of water annually through purification and recycling for cleaning and irrigation. The company has not disclosed any partnerships with third parties concerning its feed sourcing or farming strategy on water use.

The company has disclosed its efforts in regenerative agriculture, including strengthening the management of feed procurement and promoting local feed projects to reduce carbon emissions from transportation. However, it does not specify how these efforts address water scarcity in feed production. China Shengmu, a subsidiary, has installed 16 filtration devices in oxidation ponds on its pastures, enabling the treatment and reuse of 25,000 m3 of water over three months to irrigate nearby silage corn. It is anticipated that this initiative will ultimately save 500,000 m3 of groundwater for irrigation. The company has not provided data on feed water intensity or the proportion of feed sourced from water-stressed areas.

The company requires suppliers to sign a Supplier Code of Conduct ensuring compliance with environmental protection standards, which includes commitments to reduce water consumption through conservation, reuse, and recycling. Suppliers are advised to quantify water use, set conservation targets, and monitor progress, although it is unclear if water use reduction targets are mandatory. As part of its 3U Water-Saving Strategy, the company implemented 64 water-saving pasture projects in the reporting year, covering 12% of cooperative pastures and saving 2.8 million tonnes of water annually. Initiatives included promoting an intelligent heat stress control system, saving over 1.5 million tonnes of water annually, and intelligent wastewater reuse systems, saving over 450,000 tonnes of water annually. The company also guides cooperative pastures in water-scarce areas to reduce reliance on wells and coordinates with local governments for sustainable water provision to protect local ecology. The company has not disclosed the proportion of animal protein commodities produced or sourced from water-stressed areas.

The company does not disclose having established partnerships with third parties to input into sourcing/farming strategy, including water use.

By 2023, the company reports that all wastewater treatment plants comply with pollutant discharge standards, adhering to water quality permits, standards, and regulations without incurring any penalties. The company has completed water risk assessments for 63 domestic factories using a Watershed Risk Map, considering factors such as biodiversity, ecosystem services, water scarcity, flooding, and water quality. It identifies high-risk watersheds near some factories, including the Yellow River, Yellow Sea, East China Sea, and Liao River. While the company discloses the total volume of wastewater, it does not specify volume or quality targets.

In 2023, the company reported discharges of 1,106.82 tonnes of COD, 238.40 tonnes of BOD, and 335.81 tonnes of ammonia nitrogen. It also reported discharging 31.7 million tonnes of water, although a later mention in the report states a total of 29.66 million tonnes of wastewater. The cause of this discrepancy is not explained. The company participated in CDP Water Security 2023 and received a C score, but its reports are not publicly available. Additionally, the company has not disclosed if third-party auditors verify its wastewater-related data.

The company does not disclose having improved the wastewater quality at the aggregate level compared to the previous reporting period or reduced the volume of wastewater discharged.

The company mandates that cooperative farms comply with environmental protection laws and regulations, conducting annual monitoring of soil, water, and air quality in line with Farm Environmental Protection Management Regulations and Milk Supplier Access Review Rules. Feed suppliers must develop management plans for pollution, covering wastewater, waste gas, noise, and solid waste, though it is unclear if this includes nutrient management plans. The company also guides farms to return manure to fields harmlessly, reducing the reliance on synthetic fertilisers while enhancing soil health. It grows six types of forage, fruits, vegetables, and grains in fields surrounding these farms. Additionally, the company has partnered with the Institute of Grassland Research of CAAS for high-quality forage technology research projects, focusing on Alfalfa to achieve integrated water and fertiliser management.

The company integrates residue from biogas power generation and biogas slurry into its feed crop fields and employs regenerative agriculture practices. Since 2019, it has collaborated with the Institute of Grassland Research to enhance alfalfa production, achieving international standards for forage quality. Advanced irrigation methods have reduced water usage by 40% to 60% compared to traditional methods. The use of nitrogen-fixing rhizobia in alfalfa fields requires minimal soil disturbance over 5-6 years, improving soil health and reducing costs. At Helin Yimu Pasture, the widespread use of domestically grown alfalfa has replaced imported feed, saving approximately RMB 770 per dairy cow annually by December 2023. The company does not use pesticides in its organic feed production and has implemented a crop rotation system to reduce reliance on pesticides and chemical fertilisers.

The company reuses manure for biogas production and organic fertiliser, converting it into renewable energy for on-site use. A subsidiary, China Shengmu, responsibly applies manure to fields or rehabilitates degraded soil to improve soil health. Additionally, Modern Dairy of Mengniu enhances its manure management through a "Planting and Breeding Cycle," involving feed planting, dairy farming, manure treatment, and biogas-powered manure return to farmland. The company also discloses action plans for pastures at high risk of pollution and has conducted a risk assessment.

The company states it controls manure management on its cooperative pastures and guides farms to safely return manure to fields, thus reducing fertiliser use and improving soil health. However, it is unclear if this management is verified by a third party.

The company reports a reduction in emissions by feeding cattle with optimised feed compositions and additives to decrease methane production. However, it does not clarify whether reducing nutrient excretion is an objective. Additionally, the company discloses efforts to regenerate degraded land using organic fertilisers. The company conducts community impact assessments and communicates with local representatives before commencing operations in new areas. This process includes informing communities about the environmental risks associated with farm construction, such as potential pollution from biogas slurry and manure. It also provides channels for community concerns. The company does not incorporate nutrient management performance into farmers' incentive schemes.

The company recognises the significance of antimicrobial resistance (AMR) and is committed to reducing antibiotic usage. However, it does not have a formal antibiotics policy specifying conditions for their application, such as for growth promotion or prophylaxis, and there is no evidence of antibiotic-free brands. The company has implemented measures to reduce antibiotic use and disease incidence through biosecurity protocols, sanitation and vaccination programmes, routine health monitoring, veterinary training, and animal welfare programmes. It explores better breeding and diets using alternatives like probiotics, essential oils, and mineral salts, along with adjustments in stocking density. However, routine mutilation is not addressed.

The company discloses that 5% of cattle from its subsidiary China Modern Dairy, and 0% from China Shengmu, received antibiotics during the reporting period. However, it does not provide the overall percentage for its operations. Additionally, it does not disclose the reasons for antibiotic use, the quantities used by type or class, or any reduction compared to the previous period. There is also no third-party audit of its antibiotic usage data.

The company adheres to the "Five Freedoms" principles, ensuring dairy cattle are free from hunger, thirst, discomfort, pain, injury, disease, fear, and distress, while promoting natural behaviours and overall well-being. Its commitment to animal welfare includes training employees across all operations through annual sessions for employees, cooperative farms, and herdsmen, in partnership with China Agricultural University, benefiting over 107,000 participants in 2023. The company enforces a zero-tolerance policy for animal neglect, abuse, or mistreatment, though it does not disclose specific disciplinary measures. It demonstrates leadership in advancing animal welfare through research and development, collaborating with universities and institutions to improve feeding management and welfare measures. Initiatives include the "Cow Golden Key" and "Pastures Successors" programmes, standardised farm governance systems, and optimising breeding environments, all aligned with the "Five Freedoms" of animal welfare. Additionally, the company participates in developing group standards for dairy cow welfare in China.

The company commits to providing dairy cows with adequate space and facilities to express natural behaviours, specifying at least 8 square metres of lying space and 10 to 25 square metres of activity space per lactating cow. Outdoor exercise areas are designed to be at least 120% larger than the lying area to ensure a healthy environment, maintaining low stocking densities. While the company has specifications for animal health during transportation to minimise discomfort, it does not explicitly commit to avoiding long-distance transportation or limiting transport time to 8 hours or less. The company has implemented measures to enrich the environment for dairy cattle, such as comfortable bedding, sufficient lighting, good ventilation, moderate temperatures, and outdoor exercise areas. It maintains warm, clean cowsheds with eco-friendly materials and ensures cows receive at least 8 hours of light daily, with indoor lighting of at least 180 lux. Temperature, humidity, and air quality are regulated through mechanical ventilation and cooling devices in summer and heating in winter. However, the company does not commit to avoiding routine mutilation or to humane slaughter practices. Moreover, it does not exclude breeds with production traits that increase anatomical or metabolic disorders.

The company has 26 cooperative farms certified under the China Good Agricultural Practice (China GAP), which includes animal welfare standards, for its dairy operations as of 2023. However, without details on the total number of its farms, it is unclear if this certification covers the majority of its operations, indicating that only a portion of its operations are certified.

The company reports annually on its animal welfare progress with specific metrics. In 2023, it achieved a 5% reduction in heat stress impact on cows compared to 2022, with comfort improvement projects implemented on over 60% of its farms. Additionally, its subsidiary reported a decrease in the lameness rate from 0.53% in 2022 to 0.45% in 2023, and a decline in mastitis incidence from 1.62% to 1.35% over the same period.

The company has implemented measures to address welfare risks in its owned dairy operations, ensuring cows have access to comfortable shelters and rest areas with appropriate bedding. It conducts daily health checks, closely monitors lameness and mastitis rates, and prohibits tethering. In 2023, the lameness prevalence was 0.45%, and the mastitis incidence was 1.35%, both significantly below the respective thresholds. However, it is unclear what percentage of raw milk is supplied versus produced.

The company upholds human rights by adhering strictly to laws and regulations and follows international standards, including the United Nations Universal Declaration of Human Rights, the International Convention on Human Rights, and core conventions of the International Labour Organization. It is also a member of the UN Global Compact.

The company monitors its supply chain through an ESG risk assessment, including the evaluation of labour rights. Suppliers identified with significant ESG risks are offered a time-bound rectification process, and potentially capacity-building measures, such as training. If suppliers fail to meet the company's standards after this process, the relationship is terminated. However, the company does not disclose how it monitors human rights within its own operations or identifies subsequent actions. It also has not revealed how it assesses actual or potential human rights risks. Although its subsidiary, Modern Dairy, provided all employees with human rights protection training in December 2023, the company lacks detailed disclosure on managing identified risks in its operations and supply chain.

The company does not disclose whether it has identified any human rights risks in its operations through human rights due diligence.

The company prohibits child labour, forced labour, discrimination, and harassment, but does not state whether it promotes fair wages, only that it offers a competitive salary. The company discloses having commercial insurance but does not specify if it provides sick pay to employees. A subsidiary, Modern Dairy, reports conducting human rights audits aligned with its human rights policy, which prohibits harassment and discrimination. However, it is unclear if audits for child labour or forced labour are conducted, or whether the same audits are conducted by the company. The company's Supplier Code of Conduct mandates all suppliers to prohibit discrimination, harassment, child and teenage labour, and to promote freely chosen employment.

The company has joined Sedex's responsible business platform, with 29 strategic suppliers of raw and auxiliary materials completing the SMETA third-party audit, covering labour rights protection and business ethics compliance. However, this represents a small geographic scope, as only 29 out of 1,214 suppliers have undergone the audit. Although all suppliers completed a self-assessment questionnaire, this is not equivalent to an audit. The company has a grievance mechanism with publicly accessible whistleblowing channels, accepting anonymous reports and is also accessible to its suppliers. It reported receiving and resolving seven complaints during the reporting year, though it is unclear if they were made through these channels. The company should clarify this in future disclosures. It is also uncertain whether the grievance mechanism was designed in consultation with stakeholders.

The company complies with occupational health and safety laws and operates under an ISO 45001-certified management system. In 2023, it achieved ISO 45001 certification for all self-operated factories, with six factories passing safety production standardisation evaluations. It has also implemented a three-year EHS plan to enhance safety and environmental risk controls and established a Safety Production Committee comprised of upper management. However, the company does not disclose whether any of its facilities have health and safety committees with worker representatives. Additionally, it has not disclosed any assessment or measures addressing the risk of antimicrobial resistance for its workforce.

The company reported an increase in lost hours due to work-related injuries, from 5,399 hours in FY2022 to 15,920 hours in 2023. It recorded no fatalities from accidents over the past three years. Additionally, the company reports a turnover rate of 16.23% in 2023, with breakdowns by gender, age, and region, but not by seniority.

The company operates primarily in China, where freedom of association is legally restricted, and does not disclose policies or statistics regarding this for its overseas operations. It employs communication channels such as the Employee Representative Congress system and engages with its labour union to discuss wages and collective contracts. However, no measures to support worker representation outside China are reported. While the company's Code of Conduct for Business Partners encourages suppliers to uphold employees' rights to join unions and engage in collective bargaining, it does not mandate this as a requirement.

The company discloses that all employees are covered by collective bargaining agreements. In 2023, it reported a workforce of 46,051 full-time and 13 part-time employees. However, the company does not disclose the number of temporary versus permanent employees or the extent of subcontracted labour. All employees of its subsidiary, Modern Dairy, are regular full-time direct employees, with no subcontracted or part-time workers.

The company's operations are fully certified under multiple food safety standards, achieving a 100% certification pass rate for 63 factories in 2023. Certifications include HACCP, FSSC 22000, BRCGS, IFS, and SQF. All factories have ISO 9001 certification, all dairy factories have HACCP certification, with 5 fresh milk factories certified under BRCGS and IFS, and 3 milk formula factories certified under SQF. The company requires its suppliers to maintain quality management system certifications, including GFSI-recognised schemes. New suppliers must have ISO 9001 and ISO 22000 certifications. Most major suppliers hold certifications such as FSSC 22000, HACCP, BRCGS, and IFS, with nearly 100% of suppliers for raw materials and food-contact auxiliary materials having dual system certifications. However, absolute full certification disclosure is not provided.

The company does not disclose the number or frequency of food safety audits conducted across its operations. It has developed an internal traceability system for its products to track the origin of raw materials and product manufacturing stages. However, this system does not extend traceability to the end customer. Furthermore, the company does not provide information on corrective action rates for non-conformances at its facilities.

The company maintains a comprehensive product recall system that encompasses protocols, roles, responsibilities, documentation, and disposal procedures. The system includes guidelines for recall decisions, communication plans, and logistics, divided into three severity levels with specific response times: first-tier recalls within 24 hours, second-tier within 48 hours, and third-tier within 72 hours, all with detailed reporting requirements. In 2023, the company successfully recalled 100% of identified unsafe products on time and reported zero product recalls.

The company does not disclose information on the number and locations of market bans for the reporting year, and no such bans were identified through media screening.

The board of directors evaluates ESG risks and opportunities and oversees the company’s ESG risk management and internal control systems. A Sustainability Committee, chaired by a non-executive Director and including three executive directors, is responsible for assessing the company's sustainable development strategy, objectives, and risks, as well as reviewing ESG-related disclosures. In 2023, the company conducted a materiality assessment outlining a process involving the identification of material topics, stakeholder engagement, prioritisation, and validation. It identified 26 strategic issues critical for achieving its ESG goals, determined by the board-level Sustainability Committee. The sustainability report's materiality matrix highlights quality control, ESG governance, supply chain responsibility management, climate risk identification, waste management, and risk governance as top priorities. The company's independent non-executive director, Mr. Ge Jun, has an academic background in sustainable development, but no board member is noted as having practical sustainability expertise. The company's vice president, Mr. Yang Zhigang, has expertise in food safety. Additionally, Mr. Ge Jun is acknowledged for his expertise in innovation and development.

The company incorporates sustainability development KPIs into annual performance contracts for management, covering areas such as nutrition product development, green factories, carbon reduction, and responsible marketing. These KPIs are used to evaluate senior and middle management performance annually and feature in the Group's annual recognition programme. The company has joined the United Nations Global Compact (UNGC), supporting its ten principles, and is committed to responsible operations and public-benefit innovations. It has also joined the FAO-endorsed Pathways to Dairy Net-Zero initiative, collaborating with the International Dairy Federation and the Global Dairy Platform to reduce greenhouse gas emissions in the dairy industry. The company aims to achieve net-zero carbon emissions by 2050, aligning with the Paris Agreement's 1.5-degree pathway, as demonstrated by its participation in climate initiatives.

Twelve of the company’s staff participated in the UN Global Compact's SDG Innovation Accelerator for Young Professionals, focusing on identifying and addressing business issues related to the Sustainable Development Goals (SDGs). The company's subsidiary, Modern Dairy, reports improvements in energy efficiency and resource optimisation through innovative measures like photovoltaic and biogas power, which help reduce costs and promote green energy. Modern Dairy also claims to have achieved 100% manure utilisation through a circular production model that includes anaerobic fermentation, biogas purification, utilisation, and post-treatment systems. The company highlights its inclusion in various sustainability benchmarking indexes, such as the MSCI ESG rating and the Coller FAIRR Protein Producer Index.

The company recognises the growing consumer demand for low-carbon products, such as plant-based and non-animal dairy alternatives, which presents a market risk to traditional dairy businesses. However, the company has not disclosed any information on tracking or reporting revenue and sales related to alternative protein sources, nor has it set a timebound target to diversify protein sources.

The company does not indicate an approach to diversifying its product range to include plant-based and alternative protein options.