Kia Lim : Annual Report 2023-Part 2

SUSTAINABILITY STATEMENT

INTRODUCTION

The Board of Directors of Kia Lim Berhad ("Kia Lim" or "the Company") and its subsidiaries ("the Group") recognises the importance of corporate sustainability as its commitment to grow its business in a sustainable path and response responsibly to the stakeholders, environment and society by maintaining the balance of ecosystem.

This Sustainability Statement ("the Statement") outlines the sustainability matters throughout the Group in the environmental, social and governance issues of our business operations, approaches and activities, including our efforts at improving our practices to achieve our long-term goals.

We have identified issues that are material to our organisation from a sustainable perspective, and our best efforts and strategies to address them. Qualitative and quantitative data is provided wherever possible. We will strive to improve our disclosure in future reports and are committed to monitoring and measuring our progress in implementing sustainability throughout the Group.

REPORTING SCOPE & PERIOD

This Statement covers the sustainability performance for the Company and its subsidiaries' current manufacturing of bricks and related products. This Statement covers the reporting period from 1 January 2023 to 31 December 2023, which historical data of the preceding years is included for comparison, where available and relevant.

REPORTING GUIDANCE AND ASSURANCE

This Statement is prepared in accordance with the Main Market Listing Requirements ("MMLR") of Bursa Malaysia Securities Berhad ("Bursa Securities") and with reference to the Sustainability Reporting Guide and Toolkits (3rd Edition) by Bursa Securities.

This Statement has been reviewed by the Management and approved by the Board. The Sustainability policies, initiatives and data published in this Statement have been internally collected, processed, verified and validated which are considered reasonably appropriate and acceptable. All of these have been verified by our respective heads of departments within the Group. We have not sought any external assurance for this Statement. The Group however acknowledges the verification credibility by third-party, and will consider to seek external assurance in the future as we continuously enhance our reporting processes.

OUR MILESTONE OF ACCOMPLISHMENTS

In 2023, we have accomplished several remarkable fulfillments of sustainability initiatives under our three (3) pillars of Environment, Social and Governance ("ESG") to express our persistence in conserving our business operations in a sustainable way.

We are optimistic towards our ESG performance across our business activities, aligning with the global sustainability scorecard and contributing to a sustainable future.

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KIA LIM BERHAD Reg. No. 199501013667 (342868-P)

SUSTAINABILITY STATEMENT

ESG Scorecard Highlights

YEAR 2023

Achieved annual	Maintained water
average electricity
consumption under
consumption under 45
3.50 Megalitre
kWh per Metric Tonne
annually

Recorded ZERO case	Maintained at least
of workplace fatalities	30% of female
	directorship

Maintained at least 4	Recorded ZERO
training hours per
employee	complaint for human
	right violations

Maintained at least 90%

Recorded ZERO case of

spending on local suppliers

bribery & corruption

Recorded ZERO complaint on cybersecurity breaches

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ANNUAL REPORT 2023

SUSTAINABILITY STATEMENT

SUSTAINABILITY GOVERNANCE

The sustainability governance structure serves as the foundation for supporting the implementation of sustainability initiative, business performance, determine goals, improve the reporting process, strengthen interrelation with our stakeholders. The importance of sustaining governance is vital to prioritise the well-being of stakeholders in the present as well as in the future.

This objective is to ensure the overall accountability across the organisation with the sustainability measures. The sustainability in the Group is implemented on a top-down approach. The optimum responsibility of the Board is to oversee and promote the embed sustainability align with the Group's business strategy. The Board is backed by the key management and has set up a Sustainability Working Group ("SWG") from a diverse department within the organisation to nourish the Group's inaugural sustainability disclosure.

Sustainability Governance Structure

The Board has overall responsibility for the Group's sustainability governance.

The SWG is chaired by the Chief Executive Officer and assisted by the General Manager. Overseeing the SWG for the Group's progress in sustainability programmes, and to ensure disclosures are aligned with the Bursa Securities' Listing Requirements.

The Chief Sustainability Officer ("CSO") plays the role to develop and implement sustainability strategies, measure and report performance of related sustainability Initiatives. Additionally, CSO is collaborating with members of SWG to integrate sustainability into the overall business strategy.

To enhance sustainability initiatives, the SWG shares the Group's sustainability objectives with its members, which includes department heads and managers responsible for implementing sustainable practices throughout the Group. These individuals also have a critical role in promoting sustainability awareness among employees.

SUSTAINABILITY MATTERS

Board of Directors

⬇

Sustainability Working Group

(SWG)

⬇

Chief Sustainability Officer

(CSO)

⬇

Member of SWG

In line with Bursa Securities' MMLR Amendment dated 26 September 2022, we disclose nine (9) key sustainability matters as required for the first year across the Group by convening the responses from key Executives and members of Management who are deeply involved in the operations. The sustainability matters are identified and how they are being managed by the Group as follows:

ENVIRONMENT	SOCIAL	GOVERNANCE
• Energy Management	• Health & Safety	• Supply Chain
• Water Management	• Diversity	Management
• Anti-Bribery and Anti-
	• Labour Practices &
	Corruption
	Standards	• Cybersecurity
	• Community / Society

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KIA LIM BERHAD Reg. No. 199501013667 (342868-P)

SUSTAINABILITY STATEMENT

ENVIRONMENT

The major environmental challenges in business are climate change, scarcity of natural resources, pollution and waste. As such, the Group has initiated an environmental planning and policy that distinctly feature our commitment in ensuring that environmentally hazardous substances or wastes are well managed before discharging from our premises. To achieve this, we implemented various initiatives in energy management and water management for our business operations.

The Group is committed to supervise and manage the energy management to optimise efficiency of production in order to reduce the unnecessary energy waste and carbon footprints.

Total Electricity Consumption is based on the combination of electricity usage from the production. Average Electricity Consumption is based on the electricity consumption over the total production in Metric Tonne.

In 2023, the Group consumed 6,537 Megawatt of electricity in comparison to 6,754 Megawatt in 2022. In energy management, we aim to consistently maintain the annual average energy consumption at a level below 45 kWh per Metric Tonne, reflecting our commitment to energy efficiency and sustainable operational practices.

The Group acknowledges the importance of conserving water resources and persistently exploring sustainable channels by reducing reliance on direct water usage from Ranhill SAJ.

In 2023, the Group reported the utilisation of water at 2.74 Megalitre in total. Notably, the Group significantly reduced 17% in water consumption when comparing to the water usage of 3.28 Megalitre in 2022. Thanks to the alternative water source from rain water harvesting, which is mainly used for cleaning purposes in factory.

The Group has maintained direct water consumption below 3.50 Megalitre, the low consumption of direct water resources indicates our commitment and obligation over sustainable water management and also our efforts in improving the water usage efficiency within the Group. The Group will constantly enforce water conservation measures by prioritising the usage of water responsibly.

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ANNUAL REPORT 2023

SUSTAINABILITY STATEMENT

SOCIAL

The Board acknowledges its responsibility to prioritise the safety and wellbeing of our employees, customers, and the communities in which we operate. The social pillar holds significant importance for us as we believe that people are at the core of our business. Hence, we consistently invest in ensuring the safety and health of our employees, deliver excellent customer service, and work towards the betterment of the communities we are committed to.

Health & Safety

The Group's operating plants comprise of different range of machineries, whereby certain machineries are automated and certain machineries are semi-automated or even manual. For the automated machines, workers will only be required to monitor that the machines are functioning smoothly whereas for the semi-automated and the manual machines, constant attention is required at all times. Possibility of accidents occurring is considered high due to reasons of negligence by workers or safety measures or safe practices are not in place.

Further to that, lack of good health and safety practices and enforcement may lead to occurrences of industrial accidents and stop orders on machine operations. Based on regulations, the Group is susceptible to penalisation or Directors being brought to court by authorities and this will cause unwanted operational stoppage and eventually an adverse effect to the Group's profits. Managing and enforcing the health & safety practices at all operating plants is essential and being constantly emphasised and enforced.

The Group has in place a complete Occupational Safety & Health Policy that highlights its commitment to prevent injury, ensure compliance to laws and regulations in relation to occupational health and safety and promote a culture whereby all employees share the commitment to prevent injury at all cost.

To ensure compliance and a safe working environment, Safety, Environmental and Security Committee ("SESC") is established and tasked to manage health & safety related issues at the operating plants. SESC will conduct regular audits to check on the functionality of fire extinguishers, condition of the air compressors, first aid kits and also on the compliance of wearing personal protective equipment at the operating plants. SESC also continuously reviews the system that is in place, and where necessary, new measures are introduced to improve the safety and hygienic working conditions and/or minimise workplace accidents.

Diversity

Kia Lim strives to cultivate a sustainable working environment that adopts diversity within the organisation. By accepting the diversity culture, it helps the organisation to contribute diverse ideas, creativity, and innovation and also accelerate problem solving, leading to business success.

The Board appreciates the benefits of having gender diversity in the boardroom as a mix-gendered board would offer different viewpoints, ideas and market insights which enable better problem solving than the boardroom that dominated by one gender. In 2023, we continue to maintain the aspiration of Malaysian Code on Corporate Governance 2021 that all boards of listed issuers should comprise at least 30% women directors.

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KIA LIM BERHAD Reg. No. 199501013667 (342868-P)

SUSTAINABILITY STATEMENT

SOCIAL (CONT'D)

Labour Practices and Standards

The Group is committed to contribute human capital investment in promoting sustainable growth across the Group by continuously providing its employees the space of learning and development through upskilling and the latest knowledge. The trainings provided to employees consist of e-learning module and physical class training programmes. These trainings offered to employees are based on voluntary and/or mandatory depending on the job performance reviewed by each head of department.

The Group recorded a total of 1,200 training hours in 2023, of which each employee has attended at least four (4) training hours.

The table below shows the total training hours spent in the breakdown of employee categories.

The Group complies with the local labour laws and regulations concerning the minimum wage policy to promote the welfare of its employees. The Group ensures all employees are offered with equal opportunities. The Group emphasises zero-tolerance for any form of discrimination, harassment and unfair treatment against race, religion, gender, age, disability and nationality, as introduced in Kia Lim's Code of Conduct and Ethics Policy. The Group recorded ZERO complaint for human right violations.

In addition, the Group also recorded a low turnover rate by employee cateogries for years 2022 and 2023 as per the chart below.

We are trying our best to treat every personnel with dignity and respect within the workplace. Hence, we are committed to cultivate a positive and sustainable working culture where everyone can flourish and devote to our collective business growth and prosperity.

Community / Society

As a corporate entity, the Group has continued to fulfil its share of social obligations and responsibility owed to the public.

We always strive to give something back to the neighbouring communities in which we operate. It is the Group's culture to encourage its Management and employees to be involved in welfare work and charity activities, and the spirit of caring and sharing has been amply demonstrated by them.

We have continued to fulfil our Corporate Social Responsibilities ("CSR") by extending financial and non-financial assistance to various worthy societal causes.

The CSR activities undertaken in 2023 were as follows:

• During the year, the Group has given financial assistance and in-kind contribution for various charitable causes and to certain needy bodies, such as schools, flood victims, etc.
• A financial contribution was given to the surrounding communities to help in the flood prevention.
• The Group collaborated with General Hospital Batu Pahat to hold a blood donation campaign in factory to boost the blood donation pool from suitable blood donors and help to improve the blood shortage from the blood banks and hospital.
• The Group organised a "Gotong Royong" campaign to emphasis on the importance of clean and safe workplaces as well as to create awareness and promote team work spirit.

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ANNUAL REPORT 2023

SUSTAINABILITY STATEMENT

SOCIAL (CONT'D)

Community / Society (Cont'd)

Going forward, the Group will continue to help the community by undertaking CSR programmes that will benefit the underprivileged and less fortunate people.

GOVERNANCE

Supply Chain Management

We collaborate with supply chain partners to ensure their operations are in line with our standards and expectations. All service providers and suppliers for the Group are required to declare and comply with Anti-Bribery and Anti-Corruption Policy via the Declaration Form. All procurements are conducted in compliance with Manual of Authorisation & Spending Limits and Purchasing Policy.

We place great emphasis on supporting our local community, and one way we demonstrate this is by prioritising our procurement spend on local suppliers. By partnering with local suppliers, we aim to strengthen our local economy while also building lasting relationships that benefit all parties involved. Furthermore, we believe that sourcing goods and services locally helps to reduce our carbon footprint and supports sustainable business practices.

In 2023, the Group contributed 94.63% of total procurement on local suppliers while only 5.37% on foreign spending.

Anti-Bribery and Anti-Corruption

A resilient governance structure underpins the success in a business landscape of our organisation. We commit to endorse Anti-Bribery and Anti-Corruption ("ABAC") practices by maintaining high standards of ethics.

Our stringent policies and procedures, coupled with periodic briefings and awareness campaigns, serve as a communication bridge to our employees on the importance of ethical conduct and our steadfast commitment to maintaining a culture of integrity.

ABAC awareness has been conducted in 2023 by displaying posters in our workplaces. ABAC policy has been reviewed and available on our Kia Lim's website. Besides, ABAC short briefings were conducted in small group basis especially for our workforces in factory.

The Group recorded ZERO case of bribery and corruption within our organisation in 2023 whereby no employee was disciplined or dismissed due to non-compliance with the ABAC Policy.

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KIA LIM BERHAD (Reg. No. 199501013667 (342868-P))

SUSTAINABILITY STATEMENT

GOVERNANCE (CONT'D)

Cybersecurity

Cybersecurity is a surging issue of importance as the threats of data losses and data leakage can gravely affect the whole business ecosystem within our organisation. Hence, we are committed to safeguard the privacy and security of our customers' data.

The Group acknowledges that collection, use, processing and storage of sensitive personal data for our stakeholders and other third parties must comply with the laws and regulations. As such, the Group ensures business activities are in compliance with Personal Data Protection Act ("PDPA"). The Group has put in place a PDPA Policy and PDPA awareness briefing is conducted for every employee, and related training will be conducted once a year.

To prevent data losses, our Information Technology ("IT") department is responsible for performing regular checking on server and also implementing automatic data back-up internally with physical access restriction, except for authorised personnel. Moreover, to prevent data leakage or data damage from external parties, double layer of cybersecurity protection has implemented and being reviewed on a timely basis by IT department. Our IT department is responsible to monitor the Firewall system to avert the external cyber-attack in our organisation. Then, the department ensures all the systems and software including Antivirus Software are up-to-date and the licenses are genuine.

In 2023, the Group recorded ZERO complaint concerning breaches of customer privacy and losses of customer data. The Group continuously monitors and reviews our systems to ensure that our customers' data is well protected, and we are dedicated to staying at the forefront of best practices in data privacy and security.

CONCLUSION

Kia Lim is committed to contribute and promote sustainability initiatives throughout our business operations in order to comply and develop an eco-friendly culture for our stakeholders. To achieve our ESG goals, we aim to diminish our carbon footprint, conserve scarce resources and mitigate business impacts. We will continuously monitor our ESG journey and ensure our business activities align parallelly, and that will lead us moving towards a more sustainable future in this industry.

Note:

Further to the launch of the Bursa Malaysia ESG Reporting Platform on 4 December 2023, Kia Lim had complied with the disclosures that adhere to the prescribed format mandated by Bursa Malaysia's enhanced sustainability reporting requirements via the said platform and the summary performance data table is provided on pages 79 and 80 of this Annual Report.

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ANNUAL REPORT 2023

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RELATION TO FINANCIAL STATEMENTS

The Directors are required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of the income statement and cash flows of the Group and of the Company for the financial year. The Statement by Directors pursuant to Section 251(2) of the Companies Act, 2016 is stated on page 46 of this Annual Report.

The Directors are of the view that, in preparing the financial statements of the Group and of the Company for the year ended 31 December 2023, the Company has adopted appropriate accounting policies that are consistently applied and supported by reasonable and prudent judgments and estimates. The Directors have also considered that all applicable accounting standards have been followed during the preparation of audited financial statements.

The Directors are responsible for ensuring that the Company keeps adequate accounting records that disclose with reasonable accuracy the financial position of the Group and of the Company to enable them to ensure that the financial statements comply with the requirements of the Companies Act, 2016.

The Directors have ensured timely release of quarterly and annual financial results of the Group and of the Company to Bursa Securities so that public and investors are informed of the Group's development.

The Directors also have general responsibilities for taking such steps as are reasonably available to them to safeguard the assets of the Group, and to detect and prevent fraud and other irregularities.

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KIA LIM BERHAD Reg. No. 199501013667 (342868-P)

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION

The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of risk management and internal controls to safeguard shareholders' investments and the Group's assets. The Bursa Malaysia Securities Berhad's ("Bursa Securities") Listing Requirements require directors of public listed companies to include a statement in their annual reports on the state of their risk management and internal controls framework. The Bursa Securities' Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers ("Guidelines") provides guidance for compliance with these requirements. Set out below is the Board's Statement on Risk Management and Internal Control, which has been prepared in accordance with the Guidelines.

BOARD RESPONSIBILITY

The Board of Directors ("Board") is responsible for the adequacy and effectiveness of the Group's Risk Management and Internal Control System. The Board recognises the importance of good corporate governance and is committed to maintaining a sound system of internal control and risk management. This includes the establishment of an appropriate control environment and risk management framework, processes and structures and continually reviewing the adequacy and integrity of the said systems to safeguard shareholders' investment and the Group's assets. The Board is pleased to provide the following statement, which outlines the nature and scope of risk management and internal control of the Group during the year.

The Board has set up a separate board committee, Risk Management Committee ("RMC"), to be responsible for the risk management function, the details of which can be found in Corporate Governance Overview Statement.

The system of risk management and internal control covers risk management, finance, operations, management information systems and compliance with relevant laws, both local and foreign, all other regulations, policies and procedures.

Whilst acknowledging its responsibilities, the Board is aware of the limitations that are inherent in any systems of internal control and risk management, such systems being designed to manage, rather than eliminate, the risk that may impede the achievement of the Group's business objectives. Accordingly, it can only provide a reasonable combination of preventive, detective and corrective measures but not absolute assurance against material misstatement or losses, fraud or breaches of laws or regulations.

The Group's risk management and internal control framework is an ongoing process, and is in place for identifying, evaluating and managing significant risks faced or potentially to be encountered by the Group throughout the financial year. The process is regularly reviewed by the Board.

The implementation of the risk management and internal control system within the Group inclusive of design, operation, identification, assessment, mitigation and control of risks, are operated with the assistance of the Management throughout the period. The Board has received assurance from the Chief Executive Officer ("CEO") that the Group's risk management and internal control system is operating adequately and effectively in all material aspects, based on the risk management and internal control system of the Group. The Group's internal audit and risk management function has been outsourced to an independent professional consulting firm, who reports directly to the Audit Committee ("AC") and RMC. The internal auditors carried out periodic internal audits on the system of internal controls based on the key risk areas identified and defined in the scope of the 3-Years Internal Audit Plan reviewed and approved by the AC.

Risk Management Framework

The Group has an embedded process for the identification, evaluation, reporting, treatment, monitoring and reviewing of the major strategic, business and operation risks within the Group. The AC, RMC and Board review the effectiveness of the risk management function and deliberate on the risk management and internal control frameworks, functions, processes and reports on a regular basis.

For the period under review, the Board of is assisted by the internal auditors and the management to effectively embed risk management and controls into the corporate culture, processes and structures within the Group. The risk assessment from the business units are consolidated and updated into the Group Risk Register, highlighting the major risks and the existing key controls. They are then compiled into Group Risk Profile based on the impact and likelihood of occurring, for the Board attention in managing and monitoring these risks.

The framework is continually monitored to ensure it is responsive to the changes in the business environment and clearly communicated to all levels.

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