COSCO SHIPPING International Hong Kong : 2021 - ESG Report

(Incorporated in Bermuda with limited liability)

Stock Code : 00517

Annual Report 2021

WE COMPLEMENT THE MARITIME TRANSPORT FOR BRIGHTER FUTURE

Environmental, Social and Governance Report

• 1. ABOUT THIS REPORT

  This report presents the contents of the environmental, social and governance ("ESG") as well as our sustainable development, activities, achievements and performance of COSCO SHIPPING International and its subsidiaries (the "Group") and the joint venture, Jotun COSCO, aiming to address the expectations of its stakeholders.

  • a. Reporting Period and Boundary

    The Report covers the period from 1 January to 31 December 2021 (the "reporting period"). It covers the sustainability performance and measures of our key business segments, including ship trading agency, insurance brokerage, supply of marine equipment and spare parts, production and sale of coatings, and trading of other related shipping products and services. The general disclosure in this report reflects the ESG related strategies, policies objectives, management approach and initiatives adopted by the Group, unless otherwise specified, and the key performance indicators ("KPIs") cover all subsidiaries of the Group, and are presented in aggregate figures. Meanwhile, even though the environmental and social figures of our joint venture Jotun COSCO are not consolidated, its relevant ESG initiatives are also included in this report. Overall, the reporting boundary remains the same as the prior year.

  • b. Reporting Standards and Principles

    This report is prepared in accordance with the "mandatory disclosure requirements" and adhere to the "comply or explain" provisions outlined in the Environmental, Social and Governance Reporting Guide (the "ESG Guide") under Appendix 27 of the Listing Rules issued by The Stock Exchange of Hong Kong Limited (the "Stock Exchange"), as well as the principles of materiality, quantitative, balance and consistency, taking into consideration the impacts on stakeholders and disclosure level of related issues.

    As a responsible corporate social citizen, we continuously enhance our sustainable operating environment and practices with an aim to enhance long-term shareholder returns and striving to contribute the communities where we operate.

• 2. PHILOSOPHY AND POLICIES OF CORPORATE ENVIRONMENTAL, SOCIAL AND GOVERNANCE MANAGEMENT

  2.1 Sustainability Vision

Sustainability is embedded in our business model and day-to-day operations. We are aware of the challenges facing in our industry and understand the demands from the stakeholders we serve. We endeavor to capture the opportunity created by sustainability transformation by revisiting our strategy and operations to be more aligned with our vision.

As the COSCO Kansai Companies accounted for more than 90% of the Group's energy consumption, we have formulated the following sustainability-related targets for the COSCO Kansai Companies and aimed to achieve these targets by 2030, measuring against a 2020 baseline:

• • Reduce greenhouse gas ("GHG") emission (scope 1 and scope 2) by 10%;

• • Reduce Volatile Organic Compounds ("VOCs") and Benzene emission by 5%; and

• • Reduce energy consumption by 10%.

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To achieve the above targets, the COSCO Kansai Companies have gradually increased the portion water-based coatings used in production to more than 50% in the past 3 years to reduce the overall VOCs emissions. The Group will continuously track and monitor its energy consumption and relevant emissions against the above sustainability-related targets and find ways to improve overall cost and production efficiency.

COSCO SHIPPING

COSCO SHIPPING International (Hong Kong) Co., Ltd.

• 2.2 Environmental, Social and Governance Structure

  The Group keeps abreast of the rising expectations on corporate sustainable development with respect to the latest ESG Guide issued by the Stock Exchange which puts great emphasis on the Board of Directors (the "Board") involvement in the governance of ESG issues. We continue to remain anchored with the Group's environmental and social commitments and defined clear responsibilities for the Board and the governance structure amongst the Group, laying a solid foundation for our sustainable development.

• 2.3 Board Statement

  The Board acknowledges the significance of effective sustainability practices and actively integrating ESG stems in its key business decisions. The Board is ultimately responsible for our ESG strategy and reporting and oversee our management approach and strategy to monitor ESG issues. During the reporting period, an environmental, social and governance committee (the "ESG Committee") was established to assist the Board in overseeing the Group's ESG-related strategies, policies and development plans. The ESG Committee comprising an Executive Director, a Deputy General Manager and a representative from each of Shipping Services Division, Executive Division, Strategy Development Division, Human Resources Division and Public Relations Division.

  Currently, the ESG Committee meets at least once a year and whenever necessary to identify and address ESG related opportunities, topics and risks. The Group's ESG vision, strategies and targets will be formulated by the ESG committee to navigate the Group's direction in ESG contribution and evaluate the performance. Under the ever-changing regulatory environment, the ESG Committee is held accountable for the coordination of preparing ESG reports and monitoring the Group's compliance to relevant laws and regulations. Every year, the ESG Committee reports to the Board on its work, progress and/or recommendations on ESG-related matters.

• 2.4 Environmental, Social and Governance Management Approach

  To boost the sustainable development of the Group, various ESG factors are taken into account when formulating different strategies of the Group. Considering the Group's diversified business operations, our policies are tailor-made to better suit the business models of subsidiaries and the ESG risk assessments are conducted separately. As the business environment is rapidly changing, we continue to enhance our policies to ensure its suitability by reviewing our management approach and keeping abreast of the latest market trends and industry development, as well as the regulatory requirements.

  To address the surging concerns on environmental protection of the public and tightening regulations, the respective subsidiaries of the Group has formulated their own environmental policies in compliance with the Environmental Management System Certification's management measures from International Organisation for Standardisation ("ISO"). Apart from having accreditation from recognised bodies, we are committed to minimising the environmental impacts brought by our operations. We continue to invest and upgrade our equipment to reduce our emission of VOCs. Jotun COSCO, has formulated "One Factory One Policy" ("一廠一策") that outlines the emergency procedures on tackling air pollutions in response to the regional contingency plan of Qingdao.

  To address the concern in social perspective, we are dedicated to promoting occupational health and safety ("OHS") and product quality in our operations, aiming to uphold the highest OHS and quality standards. We have continued our accreditations of Quality Management System Certification (ISO9001), Environmental and Energy Management System Certification (ISO14001) and Occupational Health and Safety Management Systems Certification (ISO45001:2018).

  Having an extensive network of subsidiaries, the Group strives to enhance its internal coordination in order to foster its sustainable development. Every year, subsidiaries are required to submit their annual quantitative performance figures and highlights of their management approach, practices and initiatives to the headquarters, while the Group continues its strategic role to formulate the business development and sustainability plan. To foster efficiency, the status of strategy implementations and other ESG-related matters are closely monitored and reported.

Annual Report 2021

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3.

DETERMINING MATERIALITY

3.1 Stakeholder Engagement

We hold a strong belief that stakeholders' opinions are the key to our future success. We value opinions from our stakeholder groups that have impacts and/or are potentially impacted by our operations as well as those external organisations that have expertise in aspects that we consider material . We engage with them through a variety of channels and collect their feedbacks and opinions on a regular basis. These opinions are crucial for our regular review, and the formulation of strategies and plans for our business and sustainable development.

Communication channels corresponding to the identified stakeholders at our daily operations are summarised as follow:

Stakeholder groupsCommunication channels Purposes

Frequency

Government authorities

• • Questionnaires

  • • Compliant operation

    • • Irregular

• • Meetings

• • Site visits

• • Information submission

  • • Governance on the environmental management

  • • Social aids

• • Tax complianceShareholders and investors

• • Post-results roadshows •

• • Company visits

• • Investment Summits

• • Telephone conferences, emails, WeChat, etc.

  To communicate and report the Company's latest developments and future directions

  • • Semi-annual/annual

  • • Real-time communication such as meetings, calls and emails

    Employees

• • Training and educational activities

  • • Reduce employee turnover

    • • Annual

• • Employee satisfaction survey

• • Annual staff meeting

  • • Enhance occupational safety and health awareness

    • • Weekly meetings, or monthly, quarterly or annual work summary

• • Work meetings

  Business partners, customers and suppliers

• • Company visits

• • Telephone conferences, emails and other electronic means

  • • Maintain stable and efficient supply chain management

    • • Semi-annual/annual

    • • Irregular meetings

• • Social media

• • Inspection and evaluationLocal communities and

• • Community projects

  • • Create Social benefits

  • • Annual

  Non-Government Organisations ("NGOs")

• • Collaborative projects

3.2 Materiality Assessment

We have reviewed our ESG material issues based on previous external professional consultancy results. With the stable diverse business nature and the continuing existence of COVID-19 pandemic, our materiality assessment has been prolonged and remains unchanged for this reporting period. Through this stakeholder engagement exercise, we have identified 27 ESG material topics, covering corporate governance, environmental, employment, operational practices and community welfare. These ESG material topics reflect the latest development of our ESG considerations in conducting our business, and were taken into thorough consideration for the preparation and compilation of this report.

The following materiality matrix summarises the ESG material issues that are relevant to us.

2021 Materiality Matrix of ESG Topics of COSCO SHIPPING International

Importance to stakeholders

23 24 20	2 5 1 13 14 15 8 3 16 17 9 10 11 12 6 7
25 26 21 22 27	18 19 4 EnvironmentalCorporate GovernanceSocial - Employment Social - Operational Practices Community

Importance to corporate development

Business compliance

10

Environmental and ecological protection

19

Differentiation of product and service

Environment compliance

11 Operational efciency of company assets

20

Equal rights of employees

Occupational health and safety

12

Continuity and security of service

21

Employee benets

Product and technology innovation

13

Response to Climate Change

22

Employment welfare

Anti-corruption

14

Low carbon operation

23

Customer privacy protection

Supply chain management

15

Economic performance

24

Labour standards

Sustainable procurement policy

16

Water resources management

25

Energy efciency and energy saving

Customer service

17

Business ethics

26

Staff development and training

Waste management

18

Serving local economy

27 Community communication and participation