Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 01 / 02 CONTENTS About Zhonghuan Semiconductor 03 01 02 03 Social Recognition and Honors 04 关于中环股份 01 Environmental, Social and 环境、社会与公司治理体系 05 02 Facilitating Low-carbon 08 Creating Social Values 26 Consolidating Business 36 Governance System Transformation Management 推动低碳转型 10 创造社会价值 14 夯实经营管理 17 Social Responsibility Management System 05 53 [Topic] Identifying Climate Change Risks and 08 Pooling Team Strength 26 Corporate Governance 36 Opportunities Communication with Stakeholders and 06 54 应对气候变化 10 凝聚团队力量 Society Co-building 1533 Risk公司治理 and Control 1838 Analysis of Material Topics 对标索引表 55 Promoting green transformation through 14 创新绿色产品 12 共建美好社会 16 风险管控 19 technological innovation 报告编制说明 56 低碳智慧运营 13 ESG Key Quantitative Performance 40 Practicing Low-carbon Smart Operation 20 Benchmarking Index Tables 43 Definitions of Proper Nouns and Acronyms 47 Report Preparation Instructions 48 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 03 / 04 About Zhonghuan Social Recognition Semiconductor and Honors Tianjin Zhonghuan Semiconductor Co., Ltd. (hereinafter referred to as "Zhonghuan Semiconductor" or the "Company", Stock Code 002129) is a company integrating scientific research, production, operation and venture capital investment in the semiconductor Award Awarder material industry and the new energy photovoltaic industry, which has been listed in Shenzhen Stock Exchange. The Company has ten high-tech subsidiaries, six R&D centers at provincial and ministerial levels, one post-doctoral research station, and staffs over 10,000 Forbes, 2021 The China's Most Innovative Company Forbes Media Group employees. Forbes, 2021 The China’s Most Sustainable Employer Forbes Media Group Focusing on the "green, low-carbon and sustainable development", the Company practices the concept of automatic, intelligent and smart manufacturing, and advances innovation in technology and product specification constantly in semiconductor material and new China Enterprise News Group and the Organizing Committee of 2021 Top 500 Chinese Brand Influencers energy photovoltaic industries with a view to giving back to shareholders and society while propelling its own rapid development and Releasing China Brand Influence Evaluation Results the overall progress of the industry. Its products are widely applied in industries such as integrated circuits, consumer electronics, grid transmission, wind power generation, rail transportation, new energy vehicles, 5G, artificial intelligence, photovoltaic power generation Top 50 Enterprises in China's Electronic Materials Industry China Electronics Materials Industry Association and industrial control. Top 10 Professional Suppliers of Semiconductor Materials China Electronics Materials Industry Association ◎ General Information of Zhonghuan Semiconductor Enterprise with Standard Conditions in the Photovoltaic Department of Electronic Information under the Ministry of Manufacturing Industry Industry and Information Technology 2021 Top 500 Chinese ESG Excellence Enterprises Sina Finance The Second Batch of Intelligent Photovoltaic Pilot Demonstration Department of Electronic Information under the Ministry of Chinese Corporate Name 天津中环半导体股份有限公司 Enterprises Industry and Information Technology Industrial Internet Benchmark Factory Project Industry and Information Technology Department of Jiangsu English Corporate Name Tianjin Zhonghuan Semiconductor Co., Ltd. Intelligent Manufacturing Demonstration Factory Project Industry and Information Technology Department of Jiangsu Semiconductor materials, new energy photovoltaic silicon wafers, photovoltaic Major Business Lines cells and components 2020 PVBL Top 20 Module Brand with the Most Value Photovoltaic Brand Lab (PVBL) No. 12 East Haitai Road, Huayuan Industrial Zone (Huanwai), Hi-tech Industrial Tianjin Municipal Science and Technology Bureau, Jiangsu Headquarters National High-tech Enterprise Provincial Department of Science and Technology/Department Park, Tianjin of Finance of Jiangsu Province/Jiangsu Provincial Tax Service Main operating locations of the Tianjin Municipality, Inner Mongolia Autonomous Region, Jiangsu Province, Enterprise with Specification Announcement in the Photovoltaic Department of Electronic Information under the Ministry of company and its subsidiaries Ningxia Autonomous Region Manufacturing Industry Industry and Information Technology Ownership and Legal Form Listed on Shenzhen Stock Exchange (Stock Code 002129) Tianjin Leading Cultivation Enterprise in Science and Technology Tianjin Municipal Science and Technology Bureau Organization Size 13,371 employees Tianjin New Little Giant with Professional, Proficient and Special Tianjin Industrial and Information Technology Bureau Features China Association for Public Companies, China Photovotaic Industry 2021 Leading Enterprise in Wuxi Key Industrial Clusters Wuxi Bureau of Industry and Information Technology Association(Executive Director), China Semiconductor Industry Association, Membership of the Association China Electronics Materials Industry Association, Tianjin New Energy Municipal Enterprise R&D Center Hohhot Bureau of Science and Technology Association 2021 High-tech Enterprise Selected for Cultivation Wuxi Bureau of Science and Technology Hohhot Enterprise R&D Center Hohhot Bureau of Science and Technology 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 05 / 06 Environmental, Social and Communication with Stakeholders and Analysis of Material Topics Governance System According to industrial features and operating characteristics of the Company, and benchmarking the experience and practice of the industry at home and abroad, the Company identifies shareholders, customers, employees, governments and regulatory agencies, partners, communities and the public as major stakeholders, and actively communicates with them through such channels and modes as the website, media, meetings, reports and activities. The Company pursues the corporate vision of " Environmental friendliness, Employee support, Social respect and Customer trust ", and ◎ Main Stakeholders of Zhonghuan Semiconductor and Major Modes of Communication with Them practices reform to bring work and life with more dignity to all employees and stakeholders. Integrating environmental and social responsibilities into strategic business activities, the Company prudently manages environmental Key stakeholders Topics of concern Communication and response and social risks, improves the management system, strengthens supply chain management, reduces resource consumption and environmental emissions, facilitates innovation-driven development and cultivates innovative talents to contribute to global progress. Performance appraisal of General Meeting of Shareholders, executives, industry development, Shareholders and senior management financial reports, performance protection of investor rights and reports, road shows, etc. Social Responsibility Management System interests, anti-corruption Product exhibitions, customer Effective social responsibility management is attributed to the emphasis by the senior management and the establishment of a surveys, technical seminars, B2B governance system. The Company has built a social responsibility management system that is involved by the management, is Customer service, product quality, (e.g., E-tapeout system, WIP report coordinated among functional departments horizontally, and covers subsidiaries vertically. And the working team of the system is Customers R&D and innovation and WAT report), customer service composed of the heads of functional departments. hotlines, customer satisfaction surveys, etc. ◎ Social Responsibility Management Framework of Zhonghuan Semiconductor Employee activities, employees' congress, corporate intranet, Concerns Eco-environment-E Social responsibility-S Corporate governance-G Employee recruitment, talent employee training, employee Employees training, employee retention and self-service system, employee safety production Project Management handbook, internal corporate Organization publications, etc. Department, Strategic Development Planning Department, Board of Directors and Senior Responsible departments Department and Compliance Management Management Party-Mass Service Department, R&D Center Compliance management, Department Inspections, correspondences, and Production Department emissions management, Governments and regulatory agencies policy implementation, information environmental management and disclosure, etc. use of water resource Proposing the sustainable Managing environmental Prompting employee development vision of the risks in the whole value growth Company Public bidding meetings, strategic Industrial development and green chain Facilitating innovation Developing a social Partners cooperation negotiations, products Items to be managed Producing products and customer responsibility plan of the exchanges and mutual visits, etc. that are more resource- satisfaction Company intensive with less Supporting community Disclosing goals and pollution prosperity management progress Volunteer activities in communities, information social welfare projects, targeted Community development, social Communities, the public and media poverty alleviation and projects welfare and rural revitalization supporting other social Goal to be pursued The common development of economy, environment and society undertakings 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 07 / 08 Facilitating Low-carbon In 2021, the Company fulfilled inspections specific to social responsibility topics according to the Sustainability Reporting Standards (GRI Standards), domestic and international policies and standards, and considering the focuses of internal and external stakeholders, peer Transformation benchmarking analysis results, industrial features, and strategic directions. Following the procedures of identification, evaluation and selection, the Company, cooperating with professionals, defined 20 social responsibility topics with strong materiality as the focuses of its actions and reports, and prioritized these 20 topics by the current urgency. In 2021, in order to better cater to the development needs of the industry, the Company strengthened compliance management to ensure the orderly business development and the return on investment of investors. In line with the new Work Safety Law of the People's Republic of China , the Company launched an information management platform for safety production, and built a dual prevention mechanism of managing and controlling safety risks by levels and identifying and tackling potential hazards to fulfill safety responsibility for all employees. Following low-carbon development, the Company stepped up carbon emission inspection and more [Topic] Actively Responding to Climate Change accurate disclosure to facilitate the construction of green factories. Moreover, the Company actively expanded the achievements of poverty alleviation and responded to the call for rural revitalization to serve the prosperity and harmonious development of society continuously. Climate change mitigation and adaptation has become one of the most pressing issues of the 21st century. Global warming continues to increase the frequency of extreme weather events and is bringing about new policy changes globally, driving technological innovation and progress across industries, and influencing a shift in green thinking among consumers and investors. Mitigating climate ◎ Table for Analysis of ESG Material Topics of Zhonghuan Semiconductor in 2021 change is important for companies themselves and for the world. To this end, the company is identifying its own climate change risks and opportunities, improving energy efficiency in its production processes to achieve energy savings and reduce emissions, while also contributing to the goals of “ emissions peak and carbon neutrality ”. Stakeholders/urgency Low Middle High Identifying Climate Change Risks and Opportunities Performance appraisal of Protection of investor rights Investors Industrial development executives and interests Global climate change not only results in various extreme weather phenomena, but also affects economic and social activities seriously. Anti-corruption Compliance management Paying attention to global climate change trends, the Company has identified risks and opportunities of climate change referring to the recommendations proposed by the Task Force on Climate-related Financial Disclosures (TCFD) under the Financial Stability Board (FSB), and improved management according to identification results to minimize carbon footprint generated in production and operation activities. Customers Customer service Product quality R&D and innovation Governance Employee retention Employees Employee recruitment Talent cultivation Safety production Strategy Green products Use of water resource Environment Environmental management Waste management Carbon emission Risk management management Performance Society Social welfare Community development Rural revitalization and goals 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 09 / 10 The Company takes topics concerning climate change mitigation and adaptation as its ESG focuses. The Board of Directors reviews climate and energy policies, and annually deliberates the analysis and quantitative performance disclosure of climate change topics in the Environmental, Social and Governance Report of the Company. The General Manager reviews and analyzes the climate change-related affairs of the Company regularly, Governance summarizes the low-carbon development trend and reports the trend to the Board of Directors, and arranges guidance and resources required by relevant topics to the environmental management department of the Company. Multiple departments of the Company work together, forming a proper organization for managing climate change topics. The Company identifies and analyzes major climate-related risks and opportunities, and evaluates their potential impact on its operation and finance. Strategy Business units take management actions in terms of low-carbon operation, response to climate change and natural disasters, and support for clean energy development. The Company identifies potential risks and opportunities in its business and operational activities referring to the TCFD risk analysis framework. Risk The Company identifies and defines the materiality of risks and opportunities based on their probability of management occurrence and severity of impact. The Company works out measures for elimination, mitigation, transfer or control of different types of risks Climate change risks identified by the Company include three types of transition risks: policy and law risks, technical risks and market and opportunities. risks, and acute and chronic physical risks. Main opportunities include products and services, adaptability, energy source and resource efficiency. The Company collects data related to greenhouse gases emission activities regularly every year, makes Performance peer benchmarking and inter-annual comparison, and discloses results in the ESG Report to evaluate its ◎ Identication Matrix of Climate Change Risks and Opportunities and goals climate change management performance and formulate improvement plans. High Acute physical risks Policy and legal risks Products and services In order to better cope with potential risks and opportunities of climate change, the Company identifies the risks and opportunities of Chronic physical risks Adaptability climate change related to its own operation through policy survey, peer benchmarking, and reference to expert opinions, and evaluates Impact of risks and opportunities the impact of risks and opportunities on its financial situation. Technology risks ◎ Analysis Process of Climate Change Risks and Opportunities Climate-related risks Market risks Energy source Physical risks Identication Evaluation Analysis Transition risks Identify climate change Evaluate the impact of Analyze the level of Reputation risks Resource eciency risks and opportunities climate change risks impact and probability related to the business and opportunities on the of occurrence of Climate-related opportunities and operation of the finance and strategy of climate change risks Company under the TCFD the Company according and opportunities, and Opportunities framework. to expert opinions. determine the priorities of risks and opportunities. Low Probability of risks and opportunities High 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 11 / 12 Main risks of climate change identified Measures Source Identification of Greenhouse Gas Emissions Policy and legal risks In 2021, the Company invited third-party organizations to conduct greenhouse gas emissions accounting in accordance with ISO Take climate change as Increased compliance cost to meet regulatory requirements, or 14064-1:2018 Greenhouse gases — Part 1: Specification with guidance at the organization level for quantification and reporting of a key topic which should lawsuits and penalties if the Company fails to meet regulatory greenhouse gas emissions and removals. According to the result, Scope 1 emission are mainly from fuel combustion, fugitive emissions be communicated with requirements in environmental management. stakeholders through ESG and process emissions. Scope 2 emissions are mainly from purchased electricity, heating consumption, steam consumption and Technology risks reports and other channels. cooling consumption. Direct impact of technological advancement related to clean Track applicable laws, energy on the business and products of the Company as a clean regulations and policies Greenhouse gas emissions (Scope 1) Greenhouse gas emissions (Scope 2) energy solution provider under the influence of climate change. every year, and make data statistics of greenhouse purchased electricity, heating consumption, steam consumption Market risks gas emissions every fuel combustion, fugitive emissions and process emissions Foreign customers raise requirements for sustainable and cooling consumption year to respond to policy Transition development management and greenhouses gas emission requirements timely. risks management, as the Company develops business in both Observe national laws and domestic and foreign markets. Therefore, the greenhouses gas regulations in corporate Energy Management management results of the Company affect the judgment and activities and throughout decision-making of customers when they engage in business the process of products Responding to the national strategic goals of " emissions peak and carbon neutrality" actively, the Company analyzes the energy and services, strengthen consumption structure of its production bases through carbon inventory. In 2021, the company conducted energy accounting in 10 with the Company. source control, facilitate new energy photovoltaic and semiconductor materials subsidiaries. According to the results of the accounting, electrical energy was Risks Reputation risks the construction of smart the main source of energy at each production site, accounting for more than 95% of the overall energy use. Clean energy accounts for With the transition to a low-carbon economy, stakeholders factories, implement clean more than 2% of all energy use. expect that the Company takes proactive management actions production, develop green and improves information transparency when responding to and environmentally- Based on the accurate analysis of energy consumption structure, the Company has implemented process improvement, equipment climate change. If the Company fails to properly respond to friendly products, make rational use of resources, optimization and upgrading, new material R&D, and replacement of traditional materials with new ones in terms of production energy, these demands, its reputation will be impaired. innovating low-emission or no-emission technologies continuously in the production process. For power energy, all production bases, dispose "waste water, Acute physical risks exhaust gas and solid focusing on energy conservation in technology, management and structure, make improvements through waste heat recovery, use of Climate change is signaled by extreme weather conditions which waste" responsibly, prevent natural resources for air conditioning and refrigeration, and equipment energy efficiency enhancement in order to reduce electricity become more severe and more frequent. The production bases and control pollution. consumption and carbon emissions. of the Company in Tianjin, Wuxi, and Hohhot may be affected Manage energy and water by typhoons, rainstorms, ice and snow accompanied by power consumption statistically Physical every year, and implement ◎ Key Energy Conservation Eorts and Achievements in 2021 outage and flood, which may cause safety production accidents risks or production suspension. energy-saving projects. Work out response plans for Chronic physical risks environmental emergencies Optimization of production energy consumption Achievement Climate change will lead to global warming and rising sea level to improve the emergency so that the Company encounter a risk of shortage in water response capacity of the sources needed for production. Company. Improve the process, upgrade silicon wafers to be thinner and bigger, and further thin 4 million kWh electric saved diamond wire saws to improve the wafer output rate throughout the year Electric power saved throughout Upgrade production equipment Main opportunities of climate change identified Measures the year 70,000 kWh Opportunity Main descriptions —— types With favorable policies of carbon neutrality, the green and Products and low-carbon products and solutions of the Company will be Optimization of energy consumption Achievement services preferred by consumers better, meet the emerging needs of customers, and bring more room for performance growth. Continue to invest in The Company keeps investing in the development of low- R&D of green and low- Equip transformers with capacitor compensation cabinets additionally 5.17 million kWh electric carbon products and solutions, and works with suppliers and carbon products, and saved throughout the year Opportunities Adaptability customers to build a green and low-carbon ecosystem in develop energy-saving and order to improve its adaptability to climate change. environmentally-friendly Make refrigeration free of charge: Upgrade piping systems, and adopt plate heat The Company facilitates energy conservation and emission products and solutions to exchangers without power sources to enable refrigerators to short-circuit, leaving 2.72 million kWh electric Resource help customers reduce their refrigerators to stop run saved throughout the year reduction by improving resource use efficiency to cut its eciency carbon footprint. operating cost. The Company replaces traditional high-carbon energy with Conduct frequency conversion retrofit for water pumps, exhaust fans and refrigerators 1 million kWh electric saved Energy source clean energy and low-carbon energy to cut energy cost in the throughout the year future. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 13 / 14 Optimization of power energy consumption Achievement Promoting green transformation through technological innovation Apply green energy and lay photovoltaic cells on roofs 610,000 kWh electric saved Driven by China's goals of carbon peaking by 2030 and carbon neutrality by 2060, and the Paris Agreement, the global energy throughout the year structure is transforming from high-carbon fossil energy to green, low-carbon renewable energy. As an important part of renewable energy, photovoltaic power will be also taken as major energy by China in the future, embracing a sustained and rapid development Upgrade LED lamps 510,000 kWh electric saved stage. It will function as a strong impetus for the achievement of " emission peak " and "carbon neutrality". The Company is committed to realizing the rational price of photovoltaic power in global power grids by promoting the continuous reduction of photovoltaic power throughout the year generation LCOE (levelized cost of energy) and the optimization of BOS cost based on technological innovation. Enable automatic control 120,000 kWh electric saved throughout the year ◎ Social Recognition and Honors in Technological Innovation Apply green energy and lay photovoltaic cells on roofs 390,000 kWh electric saved Awards Awardees Awarders throughout the year National Awards Tianjin Huanzhi New Energy Technology Tianjin Municipal Science and Technology National High-tech Enterprise Co., Ltd. Bureau, Tianjin Advanced Semiconductor Materials - Semiconductor Materials Business Unit: Take multiple measures, saving 2.67 million kWh electric power throughout the year Top 50 Enterprises in China's Electronic China Electronics Materials Industry Zhonghuan Semiconductor Materials Industry (The Second Place ) Association Top 10 Professional Suppliers of Green energy application: Install solar panels on the roof of existing workshops with installed capacity totaling 1.2 MW, China Electronics Materials Industry Semiconductor Materials (The Second Zhonghuan Semiconductor generating 290,000 kWh renewable energy, a share of 10.9% of the total electric power consumption by buildings. Association Place ) Automatic control: Optimize the control systems of PCW water pumps, which enables automatic control of PCW according Jiangsu Provincial Department of Science to the actual demand, cutting electric power consumption by 120,000 kWh throughout the year. Zhonghuan Advanced Semiconductor and Technology/Department of Finance National High-tech Enterprise Materials Co., Ltd. of Jiangsu Province/Jiangsu Provincial LED lamp upgrade: Replace ordinary lamps in the workshops with energy-saving LED lamps, cutting electric power Tax Service consumption by 170,000 kWh throughout the year. Municipal Awards Refrigeration free of charge: Take cooling water as a free cold source in winter to supply cooling water to equipment that needs cooling throughout the year, reducing the energy consumption of water chilling units in winter and cutting electric Hohhot Bureau of Science and Hohhot Enterprise R&D Center Zhonghuan GCL power consumption by 2.09 million kWh throughout the year. Technology Inner Mongolia Zhonghuan Advanced Hohhot Bureau of Science and Municipal Enterprise R&D Center Semiconductor Materials Co., Ltd. Technology 2021 High-tech Enterprise Selected for Zhonghuan Advanced Semiconductor Wuxi Bureau of Science and Technology Cultivation Materials Co., Ltd. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 15 / 16 Extreme Clean Energy Solution New Energy Photovoltaic Materials In 2021, amid the LCOE reduction and sustainable development in the photovoltaic industry, large-size and high-power products saw In 2021, the photovoltaic industry chain saw intensified competition. As a leader in the new energy photovoltaic silicon wafer industry, strong demands and popularity in the market. Seizing the opportunity of global clean energy development, the Company consolidated the Company has cut costs and improved unit production efficiency through technological innovation. In the production of silicon its product technology advantages, and enhanced its global competitiveness, with the development and integration of two major wafers, the Company has advanced wafer thinning applications and enhanced the yield of Grade A silicon wafers significantly relying platforms of G12 large-size silicon wafer and efficient imbricated module technology as its focus. on advanced thinning and slice production experience and technology accumulation and cooperating with downstream customers. In the production of crystals, the Company has reduced the consumption rate of silicon materials per unit product by nearly 3% on year- Semiconductor Materials on-year basis through a series of technological advancements, rising the utilization rate of silicon materials, and has eased the cost pressure of downstream customers relying on G12 differentiated product advantages. Firmly adhering to the strategy of " Domestic leading, global catch-up ", the Company comprehensively benchmarking itself against advanced international manufacturers, continuously expanding its product lines, constructing a global marketing network in order to a G12 solar silicon wafer products are the world's rst 210 "leading" brand in the global market. Zhonghuan Advanced Semiconductor Materials Co., Ltd. was awarded the 2021 Jiangsu Province mm G12 ultra-large solar monocrystalline silicon wafers Industrial and Information Industry Transformation and Upgrading Special Funds (Third Batch) Project by the Jiangsu Provincial (diameter: 295 mm, i.e., 12 in), with the area increased Department of Industry and Information Technology and the Provincial Department of Finance, and the Zhonghuan Semiconductor by 80.5% compared to that of conventional M2 products. Wafer Factory invested by Zhonghuan Advanced Semiconductor Materials Co., Ltd. was evaluated as the Industrial Internet Benchmark As a result, the generated output per cell hits 10.01 Factory Project. W, nearly twice the power generated by conventional products. Additionally, efficient battery technology is In 2021, the 8-12-inch silicon wafer project of Company in Wuxi was put into production rapidly, consolidating its national industrial adopted, which reduces LCOE by over 6%, and increases layout based on its manufacturing bases in Inner Mongolia, Tianjin, and Jiangsu. By the end of 2021, it achieved its set targets of the component power up to 600 W. The Company continues monthly production capacity of 750,000 8-inch wafers and 150,000 12-inch wafers. to facilitate the dual-platform technology application of "G12 + imbrication". G12 photovoltaic silicon wafers and imbrication products have become the key and effective products to realize the rational price of photovoltaic power Combining advantageous resources of Inner Mongolia, Tianjin and Jiangsu, Zhonghuan Semiconductor in global power grids. plans to manufacture semiconductor materials, and put the project into production by 2023, with expected Huansheng Imbricated Module 3.0 monthly production capacity reaching 1.1 million silicon wafers sized 6-inch or below, 1 million 8-inch silicon wafers, and 700,000 12-inch silicon wafers. The covered area is about 134.65 square meters. It adopts Huansheng high-power imbricated monocrystalline photovoltaic modules. The 7 MWp Roof Distributed Photovoltaic Power Project of National Exhibition and Convention Center (Phase I) was fully connected to the grid on January 30, 2021. The project fully adopts Huansheng high-power imbricated modules, and enables the annual average power generation capacity to reach 14.7284 million kWh, which saves 4,830.92 tons of standard coal and reduces coal dust emissions of 4,006.12 tons, carbon dioxide emissions of 14,684.22 tons, sulfur dioxide emissions of 441.85 tons, and nitrogen oxide emissions of 220.93 tons, equivalent to new 707.55 trees. Industrial Bases of Zhonghuan Semiconductor Materials Co., Ltd. in Jiangsu, Tianjin and Inner Mongolia 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 17 / 18 Stick to R&D and Innovation Improve Quality Management Adhering to the business concept of "long-distance running" competition, the Company practices a new business mode of Referring to the international leading quality management concept, the Company has established a quality management system complementing advantages each other, cooperating with powerful partners and pursuing common development globally. Furthermore, covering the whole customer service process in its production bases, and worked out quality control procedures considering five it highly respects intellectual property around the world, strives to form an independent intellectual property system by actively main factors affecting product quality, namely personnel, machines, raw materials, methods and environment to ensure quality control promoting its independent innovation. To this end, it has launched intensive innovation, integrated innovation, joint innovation, fully. By the end of 2021, the Company has passed ISO9001 quality management system certification for its ten subsidiaries including collaborative innovation and other innovation activities in terms of technologies, products, and business activities, developing into an Zhonghuan Photovoltaic, Zhonghuan GCL, Zhonghuan Applied Materials, Huanou Semiconductor Materials Technology, Huanzhi New international company initially. Energy Technology, Zhonghuan Advanced Semiconductor Materials, Huansheng Photovoltaic and Huansheng New Energy. The Company has 1 national technology center, 6 provincial and ministerial R&D centers, 2 provincial and ministerial key laboratories, Enhance Customer Service Experience 10 high-tech subsidiaries, and 1 national technology innovation demonstration subsidiary. The Company has a R&D team with 1,000- odd members, including 2 with doctoral degree or above and 111 with master degree or above, a share of 11% of total technicians. In addition, it has employed several international expert teams and engineer teams. Based on the corporate strategy of "developing into a global leader in semiconductor photovoltaic materials, and catching up and The Company has always stressed cooperation among enterprises, universities and research institutes. It actively builds ties beyond strategy in semiconductor materials", the Company set up the Customer Quality Center in 2021. Focusing on customer with universities and scientific research institutes in various forms, strengthens exchanges and cooperation with domestic and quality service and product standard management, the Center conducts intensive quality management in the life cycle of products foreign counterparts, and effectively organizes and applies social resources to serve its own innovation and advance technological for a balance between internal/external quality and the manufacturing link in order to enhance product quality, speed up response to development and innovation of the industry. customers, and improve customer service quality and customer experience. ◎ Enterprise-University-Research Institute Cooperation Programs ◎ Assignment of Responsibilities in the Customer Quality Center The Company cooperates with Shandong University on process optimization of "G12 large-sized silicon wafer" products. Associate Quality Director Chief Engineer Product Quality Manager The two sides cooperate to implement analog simulation and set up a laboratory. The Company verifies the Make product quality Identify product improvement Work out customer quality simulation results and optimizes the process according to the results acquired by optimizing parameters in improvement directions improvement plans simulation based on the field test results timely. Conduct product change Organize standard changes Guide factories to prepare management and control Provide technical support improvement measures Plan product quality standards Formulate product shipment Organize internal evaluation The Company cooperates with Hebei University of Technology on Hold quality analysis meetings Decrease external customer and internal control standards R&D of silicon crystal growth technology. complaints Evaluate BU targets The two sides cooperate to mainly study crystal growth, monocrystal defects, silicon wafer polishing, and silicon wafer testing technology,etc. Account Manager Standard Manager Resident Engineer Communicate with customers Review and file standard Identify and analyze product Protect Intellectual Property regularly changes quality problems Communicate external customer Optimize standards regularly Collect customer quality data The Company values the protection of intellectual property, strengthens the use of patent information, improves innovation, and actively information to the internal Check the implementation of BU Maintain and develop customer applies for patents by establishing a full-time patent team, establishibng a patent management system, and working out effective work Conduct client-side data standards relationship procedures. It also invests more fund and personnel in protecting intellectual property in order to enhance the quantity and quality monitoring and communicate of independent intellectual property, and form an effective patent layout on core technologies and basic products dominated by core monitored results to the internal patents for invention and based on utility model patents. Track customer complaints in a closed loop In order to ensure technological innovation, and lower or avoid intellectual property control risks, the Company focuses on the technological investment and process innovation of imbricated module products protected by intellectual property and supported by industry-leading technology when developing its photovoltaic module business. Also, it adopts G12 platform technology to maintain its leading position in the performance of differentiated products. By December 31, 2021, the Company has had 975 authorized intellectual property items, including 154 patents for invention, 797 utility model patents, 1 design patent, 21 integrated circuit layout designs, and 2 software copyrights, and had 613 patents under application, including 475 patents for invention and 138 utility model patents. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 19 / 20 In the process of customer quality service, the quality team of the Customer Quality Center, the responsible department of the factory and the sales team carry out a series of rapid responding measures such as internal closed-loop verification at the customer information Practicing Low-carbon Smart Operation platform according to customer complaints, entrusted survey feedback, customer quality agreements, special customer requirements and potential customer quality requirements identified. They work to respond to single and individual problems, and collect and tackle general quality problems to continuously enhance product quality. Moreover, the Company adjusts the quality management framework, As a new energy enterprise with the vision of "keeping environmentally friendly", the Company is obliged to support the achievement delivers quality customer service before, in and after sales in the full cycle covering order, technical review, manufacturing supervision, of two goals, emissions peak and carbon neutrality. For one thing, the Company strives to lessen energy consumption for production, on-site installation, and even safety training in order to improve customer service quality. Furthermore, the Company takes preventive cut emissions generated in production, better resource recycling and utilization, and take other measures to reduce carbon emissions actions to speed up response to customers and reduce customer complaint rate for better customer satisfaction. The results of return in the given production and operation process. For another, the Company continues to promote intelligent manufacturing, upgrade visits to customers in 2021 showed that customer satisfaction was higher than 90%. and introduce new technologies, and facilitate the application of Industry 4.0 production modes in order to enhance flexible and lean manufacturing capacity, and contribute to environmental protection and low carbon depending on intelligent technologies. Consolidate Internal Quality Management Competence ◎ Social Recognition and Honors in Low-carbon Smart Operation Focusing on the development strategy of "catching up and surpassing", the Company conducted quality management competitiveness Awards Awardees Awarders analysis from multiple dimensions in 2021 to explore opportunities for improving the quality system, supply chain quality, process quality, customer service quality and reliability monitoring. With these efforts, the Company has developed and implemented a strict Tianjin Institute of Industry and Green Factory of the Year 2021 (National) Tianjin Zhonghuan Advanced product standard management process in order to ensure continuous improvement and upgrade of product standards, acquire cutting- Information Technology edge technology information and customer needs timely, and improve product quality and process control. In 2021, the Company Tianjin Institute of Industry and Green Factory of the Year 2021 (National) Huanxin developed standards for wafer and crystal products, and updated over 10 standards covering the full range of G12 products. Information Technology Wuxi Bureau of Industry and Wuxi Green Factory Zhonghuan Applied Materials Information Technology 107 Efficient Imbricated Solar Cell Module Wuxi Bureau of Industry and ◎ Products Standard Management Process Huansheng Intelligent Workshop Information Technology Wuxi Bureau of Industry and Wuxi Intelligent Factory Zhonghuan Advanced Information Technology Identication of customer needs, frontier policies, laws and regulations, and introduction of new technologies Wuxi Bureau of Industry and 2021 Wuxi Intelligent Workshop Zhonghuan Applied Materials Information Technology Focus on identifying the potential product needs of customers accurately, and try to strike the balance between the business indicators of the Company and its product performance. Green Factories Introduce new technologies, new products and new equipment to facilitate Adhering to the concept of “Environmental friendliness, Employee standard changes according to customer quality feedback, peer benchmarking support, Social respect and Customer trust ”, the Company keeps results, and the latest changes in policies, laws and regulations. its leading position in innovation worldwide of automation technology application, recycling technology application, low-emission or no- Product standard management Product development control procedures emission technology in the production process in order to cut costs, improve product quality, and implement manufacturing with less labor. Share information through the customer information platform and the external To achieve safety and environmental protection goals, the Company information sharing platform in the process of product standard design and implements applicable laws, regulations, rules and normative documents maintenance. concerning safety production, operates the ISO14001 environmental management system effectively, practices the "target + process" dual Allow factories to participate in the standardized evaluation of plans, and evaluation mechanism for safety and environmental protection, and takes identify, improve and optimize Loopholes. effective measures to reduce energy consumption and wastes. Product shipment standard Product internal control standard The Company entrusts a qualified third party to monitor all pollutants discharged annually according to the requirements specif ied in The Customer Quality Center is responsible for approval and filing management the pollutant discharge permit. The local environmental protection of standards, and each BU is responsible for publicizing and implementing department also conducts supervisory environmental inspections standards, and working out standards for product shipment and internal regularly. In 2021, there was no illegal pollutant discharge in the control. production bases of the Company. In 2021, the Company deployed 15 production plants in four production bases in Tianjin, Jiangsu, Inner Mongolia and Ningxia. Ten out of them have passed ISO14001 environmental management system certification, and three are undergoing system certification. Besides, two production plants have been rated as national-level green factories and one production plant has been rated as municipal-level green factories. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 21 / 22 Water Resource Management Valuing sustainable use of water resources, Zhonghuan Semiconductor adopts an external tool - the Aqueduct Water Risk Atlas of the ◎ Water Conservation Eorts and Achievements of the New Energy Materials Business Unit World Resources Institute (WRI) to evaluate water pressure for 15 production plants that have been put into operation nationwide. As shown by WRI data, a total of 15 production plants that have been put into operation, including 2 located in areas with extremely high water pressure and 3 in areas with high water pressure for the Semiconductor Materials Business Unit, as well as 4 in areas with Collection and reuse Achievement extremely high water and 6 in areas with high water pressure for the New Energy Photovoltaic Business Unit. Recycle waste water for toilet 60,000 tons water saved flushing throughout the year ◎ Analysis of Water Pressure in the Areas Where the In-service In order to weaken the dependence on local water resources, all Projects of Zhonghuan Semiconductor are Located production bases have made efforts to reuse water resources through collection and reuse, reuse by equipment, and Water pressure High Extremely high wastewater regeneration. The Company has 6 production plants Recycle condensate water 50,000 tons water saved that are subject to major pollution discharge control by the local throughout the year environmental protection department, including 5 plants that Semiconductor have been announced as the pollution discharge bases under 3 2 materials key control for water environment. Within the above production bases are equipped with sewage treatment stations. The Reuse by equipment Achievement New energy production waste water is treated by an independent system 6 4 until the treated water meets discharge requirements and then photovoltaic is discharged to the local sewage treatment stations for further Recycle washing water treatment. through Litian sand carbon 30,000 tons water saved filters throughout the year ◎ Water Conservation Eorts and Achievements of the Semiconductor Photovoltaic Business Unit Reuse by equipment Achievement Waste water regeneration Achievement Water-saving renovation of the overflow tank of the washing machine for water conservation purpose, which cuts tap water consumption by 500 tons throughout 500 tons water saved Recycle concentrated water 180,000 tons water saved throughout the year throughout the year the year Waste water regeneration Achievement Recycle rinse water 260,000 tons water saved throughout the year Regenerate production waste water 180,000 tons water saved throughout the year 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 23 / 24 Emission Management Intelligent Factories Production bases treat exhaust gas generated in the production process in exhaust gas treatment systems before emission. Exhaust Apart from labor and cost reduction, intelligent manufacturing also involves a necessary path to the next generation of products and gas treatment equipment comes with two categories: organic exhaust gas treatment equipment, and acid-base exhaust gas treatment solutions with better quality. Sticking to the concept of "Intensive innovation, integrated innovation, joint innovation, collaborative equipment. Substances discharged from exhaust pipes after treatment meet the Integrated Emission Standard of Air Pollutants . innovation", the Company continues to facilitate the construction of industrial automation, intelligent logistics, industrial big data platforms, and promote the application of Industry 4.0 production modes in the operation process and operation scenarios of its Hazardous wastes generated by production bases of the Company mainly include acid-containing waste liquid, waste packaging business sectors. All these efforts are made to enable its intelligent manufacturing mode, enhance its leading quality control ability and materials such as empty barrels, waste fillers such as waste activated carbon, waste rubber and rubber-containing waste such as technical cooperation ability fully, and help it develop into a benchmark that affects the industry, leading industrial transformation and plastic barrels, waste engine oil, waste mineral oil and other oily wastes. The Company employs qualified service suppliers to treat upgrading with advanced manufacturing and intelligent manufacturing to promote high-quality development of the industry. hazardous wastes said through neutralization, physical and chemical process, recycling, land-filling, incineration and regeneration. General wastes generated in the production process include sludge after water treatment, silicon sludge, waste silicon wafers, waste In 2021, the Company was granted five honors in the "Guang Neng Bei" Photovoltaic Industry Evaluation initiated by SOLARBE, silicon rods and other waste products, as well as diamond wire, waste crucibles and other consumables. The Company entrusts including "Photovoltaic 'Beacon' Award", "2021 Excellent Product", "The Most Influential Photovoltaic Enterprise", "The Most Influential qualified service suppliers to treat these wastes through composting, land-filling and recycling. Photovoltaic Intelligent Manufacturer" and "The Most Influential Photovoltaic Module Enterprise". ◎ Pollutant Emission Management ◎ 2021 "OPTICAL ENERGY CUP" Honors Categories Treatment Discharge exhaust gas that meets the discharge standard after purifying and absorbing treatment in scrubbing Acid and alkaline exhaust gas towers, and discharge waste water generated to the sewage treatment system Alkaline exhaust gas (ammonia mainly) Purify exhaust gas in scrubbing towers Exhaust gas Conduct catalytic combustion for organize exhaust Organic exhaust gas gas after absorbing treatment by activated carbon or 2021 Excellent Product - Type-P Ultra-thin The Most Influential Photovoltaic Photovoltaic Beacon Award concentrating treatment Silicon Wafer with Mass Production Materials Enterprise Dust exhaust gas (fine silica particles mainly) Treat exhaust gas by dust control units Discharge waste water that meets the discharge standard Ph (hydrogen ion concentration), COD (chemical Waste water into the designated urban sewage pipe network after oxygen demand), ammonia nitrogen and fluorinion treatment in the sewage treatment system Employ a qualified service supplier for treatment Sludge after water treatment (composting or land-filling) General Waste products (such as silicon sludge, waste Employ a qualified service supplier for treatment (recycling) The Most Influential Photovoltaic The Most Influential Photovoltaic wastes silicon wafers and waste silicon rods) Intelligent Manufacturer Module Enterprise Consumables (such as diamond wire and waste Employ a qualified service supplier for treatment (recycling) crucibles) Under the background of Industry 4.0 Production, the Company improves the "Stereotype" and "Deep Blue AI" learning models of the wafer Employ a qualified service supplier for treatment manufacturing process constantly, relying on digitization, automation and intelligence, and enhances its flexible manufacturing ability to Acid-containing waste liquid (neutralization and physical and chemical treatment) achieve manufacturing transformation. The intelligent manufacturing progress, and lean and flexible manufacturing enhancement of the Company contribute to the significant rise of labor productivity, continuous fall of factory operation cost, constant rise of product quality and Waste packaging materials (such as empty barrels) Employ a qualified service supplier for treatment (recycling) consistency, and effective improvement of comprehensive utilization of resources. Employ a qualified service supplier for treatment (land- In 2021, the company launched high-efficiency solar ultra-thin silicon monocrystalline wafer intelligent factory project of Tianjin Huanou New Hazardous Waste fillers (such as waste activated carbon) filling, incineration and regeneration) Energy Technology Co., Ltd. for the purpose of building the G12 factory following the concept of designing a intelligent chemical factory in a wastes new generation. At the same time, in order to promote the matching of crystal production capacity, the Company has launched high-efficiency Rubber-containing waste (such as waste rubber Employ a qualified service supplier for treatment solar ultra-thin silicon monocrystalline wafer intelligent factory project whose annual production capacity reaches 25GW ("DW Phase III") and and rubber barrels) (incineration) high-purity solar ultra-thin silicon monocrystalline material intelligent factory project whose annual production capacity reaches 30GW ("DW Phase IV"). ("DW Phase IV"). All of these projects are designed as industrial 4.0 intelligent plants to accelerate large-scale production and Oily waste (such as waste engine oil and waste Employ a qualified service supplier for treatment large-scale applications of company G12 single crystal silicon products, and will create share value with upstream and downstream industrial mineral oil) (incineration and recycling) chains. In addition, the Company designs a new production base following the Industry 4.0 system, empowering the industry with the "Deep Blue" intelligent manufacturing model, to build a benchmark factory for intelligent manufacturing. In 2021, the 3GW efficient imbricated solar cell module intelligent factory invested and constructed by Huansheng New Energy an intelligent manufacturing demonstration factory. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 25 / 26 Creating Social Values ◎ Industry 4.0 Construction "Stereotype" takes engineers as the core. It works Focusing on Industry 3.0 and overall product quality to form a process model and an operation model management, the Company improves granularity relying on practical experience and incident handling in product management, and establishes a quality experience, and establish monitoring factor parameter management system to enable traceability and control library and a stereotype model database. in the product life cycle. Pooling Team Strength Combined with the "Deep Blue" learning model, the The Company strives for lean flexibility. It continues Company enables the "adaptation" of the "stereotype" to propel flexible manufacturing and integrate flexible optimal solution and strengthens the flexible production lines, flexible supply chains and flexible manufacturing abilities to realize flexible production marketing under the guidance of lean management lines, flexible supply chains and flexible marketing. concept. With employment and promotion based on abilities, a well-established pay system, employee benefits, long-term talent development strategies, and characteristic cultural activities, the Company strives to help employees adapt to changes and embrace multiple challenges actively in the future, and sticks to the “people-oriented” concept to promote the steady and quality development of Zhonghuan Semiconductor for a long term. Thanks to its sustainable business strategy and technological innovation strength, the Company was titled “Forbes, 2021 The China’s Most Sustainable Employer”. Zhonghuan Advanced Semiconductor Materials Co., Ltd.: An Industrial Internet Benchmark Factory Relying on the integrated management and control platform, Zhonghuan Semiconductor Silicon Wafer Factory practices intelligent factory, information-based management and lean manufacturing to establish an information-based, digital and Employee Recruitment and Retention intelligent semiconductor wafer internet industrial benchmark factory. Adhering to the people-oriented concept, the Company has worked out the Recruitment Management Procedures , the Employee Improved management efficiency based on information: Set up MES, PLM, ERP and other systems building on platforms Management Regulations and other regulations in accordance with applicable laws and regulations such as the Labor Law of the and work with intelligent equipment to enable optimization in production site, production management, and operation People's Republic of China and the Labor Contract Law of the People's Republic of China to ensure that employees enjoy equal rights management. in recruitment, employment, compensation, benefits, training and promotion regardless of ethnicity, gender and religious belief. Whole process optimization for a new business mode: Optimize products, assets and business throughout the process, The Company redoubles its efforts to protect the safety and health of female employees and minors during production. Referring to empower intelligence into industrial equipment, production process, and better safety and environmental protection the Special Regulations on Labor Protection of Female Employees and the Law of the People's Republic of China on the Protection management to achieve an innovative model of business based on intelligent production. of Minors , the Company has formulated the Special Protection and Management Regulations of Female Employees and Minors. The document prohibits the recruitment of minors under the age of 16 by verifying the valid identity certificates of applicants by various Intelligent production measures Achievement methods in employee recruitment, entry approval, entry registration and other links, and specifies labor taboos and legitimate rights of female employees in special physiological periods such as menstruation, pregnancy and lactation period. Besides, the Company prohibits forced labor and ensures that all employees enjoy rest days in accordance with the policies of the Company and national laws Flexible manufacturing in sticking, wire cutting, Production of thin slices, and silicon cost reduction and regulations. degumming and cleaning, inspection and other links by 11.8%; Rise in labor productivity by 300% Compensation and Incentive Measures The Company concludes collective contracts and collective negotiation agreements on wages every year with all employees, and purchases social insurances fully for employees, including endowment insurance, medical insurance, work injury insurance, Huansheng New Energy: An Intelligent Manufacturing Demonstration Factory unemployment insurance and maternity insurance. The collective negotiation agreement on wages concluded in 2021 clarified the increase of total wages and per capita wages by 13% and 17% respectively. Huansheng New Energy has built a new efficient imbricated solar cell module The Company keeps improving its medium and long-term incentive mechanism and its benefit sharing mechanism between employees smart factory featuring digital, information-based, integrated and intelligent. and the employer to ensure the Company, its shareholders and employees share consistent interests so that all parties focus on The factory involves simulation design, an intelligent equipment platform, digital the long-term development of the Company and create value for shareholders. Furthermore, the Company upgrades the corporate intelligent production workshops, artificial intelligence technology application, governance structure, and betters the long-term and effective incentive and restraint mechanism to ensure its stable and sound Internet of Things construction among workshops, an intelligent information development for a long term, fully mobilize the enthusiasm and creativity of employees, attract and retain excellent management talents management and control platform, data collection and analysis, an advanced and business talents, and enhance cohesion among its employees and its competitiveness. control system, and 5G network in workshops in order to realize intelligent manufacturing. Intelligent Manufacturing Factory 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 27 / 28 The Company attaches great importance to the work-life balance of employees. In 2021, its labor unions at all levels organized 80 The Second Employee Stock Ownership Plan employee activities in various forms, including vocational skills competitions, sports events, activities for festivals, fellowship activities, family day activities and interest club activities, which enhanced the cohesion among employees, increased communication among The Second Employee Stock Ownership Plan (Draft) and its Summary Proposal adopted by the Company on February employees and spread Zhonghuan culture. 1, 2021 approved the implementation of the second employee stock ownership plan. Employees participating in this plan did not exceed 464 in total, including 7 directors, supervisors, and senior executives, and 457 other key employees in management, technology, and marketing. Employees participating in the employee stock ownership plan totals 461, holding stocks amounting to RMB91,102,800. On 29 September 2021, the Company considered and passed the "Proposal on the Allocation of Reserved Shares of the Second Employee Stock Ownership Plan", which proposed to allocate RMB3,987,000 of incentive fund and 7,974,000 shares of the Second Employee Stock Ownership Plan to 47 incentive recipients. Spreading Zhonghuan Culture Building on the corporate culture accumulation of 63 years, the Company has established a corporate culture system covering the "people-oriented" core concept, the original aspiration of "long-lasting growth of Zhonghuan Semiconductor", the vision of " 2021 employee stock ownership plan Environmental friendliness, Employee support, Social respect and Customer trust ", and the core value of "engineer-respected culture, entrepreneurship mindset, three Don'ts, and change being better". Based on the corporate culture system, the In June 2021, the Company formulated and passed 2021 Employee Stock Ownership Plan (Draft) . In the plan, the special Company has defined business management concepts, talent management principles, organizational management principles incentive fund did not exceed RMB 324,120,000. The number of underlying stocks that could be purchased and held and business management principles. The culture system, together with concepts and principles, works to regulate and guide was capped to approximately 10.6689 million, accounting for 0.35% of the total share capital of the Company currently. the positive and negative conducts of employees. Employees participating in this plan did not exceed 815, including 11 directors, supervisors and senior executives, and 804 other employees at most. In addition, the Company makes efforts to operate its WeChat official account "Happy Zhonghuan", promote the outstanding deeds of model figures by launching an interview column "Zhonghuan Figures", better the corporate culture IP system by upgrading Zhonghuan IP Image 2.0 Version and creating IP character derivative emojis, organize corporate cultural activities, such as "Three Cups of Coffee", peripheral products of corporate culture and Family Day activities, to provide younger and 2021 Stock Incentive Plan benchmark-based communication channels, and implement clear and effective practices. Guided by the corporate culture, Zhonghuan Semiconductor strives to simulate organizational vitality, enhance the happiness of employees, and inject new In June 2021, the Company formulated and passed 2021 Stock Option Incentive Plan (Draft). In this plan, 34 employees momentum into its high-quality development. including directors, senior executives and core business (technical) employees who worked in the Company and its subsidiaries when the plan was announced were granted 4,856,800 stock options as an incentive, accounting for 0.16% of the total share capital of the Company at that time by the exercise price of the stock options granted RMB30.39 per share. Benefits and Activities In addition to statutory benefits such as "five social insurances and one housing fund" and "paid leaves" in accordance with national regulations, the Company has also developed a complete employee welfare system, including annual physical examination, holiday benefits, employee birthdays, greetings to employees in case of marriage, childbirth, disease and retirement, and condolences to employees in case of their deaths or the deaths of their direct relatives. Also, the Company cooperates with well-known domestic shopping platforms in in-house purchase activities among employees, allowing employees to enjoy exclusive preferential policies, in order to improve their sense of happiness. What's more, the Company reconstructed dormitories in 2021, and completed the renovation of dormitories in Yixing and Tianjin plants as planned. To be specific, Yixing Plant has provided 642 white-collar apartments for 562 employees and 668 blue-collar apartments for 1,900 employees. Tianjin Plant has upgraded 521 rooms in the dormitory, accommodating 1,424 employees. Employee Group Activities, IP Zhonghuan Emoji Image White-collar Apartment in Yixing Plant 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 29 / 30 Talent Cultivation Advocating the Spirit of Craftsmanship In order to establish a sound training system, inherit the corporate culture, and support the achievement of strategic goals, the Company has set up Zhonghuan Training Center, including four sectors with eight major training courses. Four sectors include Crystal In August 2021, the labor union of the Company Management College, Crystal Intelligence College, Crystal Materials College and Crystal Skills College. Building on common strategic o rgan ize d a vo c ati o nal sk ills c o m p eti ti o n goals, the Management Training focuses on leadership cultivation by developing talents and overall corporate culture. The Intelligence themed as "dream with ingenuity, innovation Training, Materials Training and Skills Training pay attention to professional competence cultivation. Moreover, Zhonghuan Training with competition, and technological progress Center is provided with a number of resource sharing libraries, including lecturer library, evaluation center, course library and case for a better future". Focusing on operation and library, to help the Company gather experience. The online learning platform of Zhonghuan Training Center is an important move to production, this competition included nine events, foster a learning organization, and shares resources with the industries/companies. such as wire cutting for wire net, grooved sheave replacing, furnace disassembly and cleaning, remote crystal pulling, wire disconnection by all- ◎ Online Learning Platform Architecture of in-one machines. Nearly 600 participants from Zhonghuan Training Center Tianjin, Inner Mongolia and Yixing competed fiercely on the field, with 72 front-line employees w i t h exc e l l e n t s k i l l s w i n n i n g p r i z e s . T h e Inheriting the corporate culture and supporting the competition reflects the craftsmanship spirit of achievement of strategic goals technical talents to keep improving and pursue excellence and stimulates the vitality of the Leadership Professional competence employees in creativity and innovation fully. They are all contributors to the quality development of the Company. Crystal Management Crystal Intelligence Crystal Materials Strategic consensus Crystal Skills College College College College New employee orientation Semiconductor materials Intelligent manufacturing Lean manufacturing Corporate culture Talent cultivation Team heads Devices Lecturer library Evaluation center Course library Case library Resource sharing Internal trainers, Online + oine tools External and Management college professors Evaluation technology internal courses and production and industry experts certication technology Platform Co-building Online Learning Platform of Zhonghuan Training Center Vocational Skills Competition 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 31 / 32 Increase More Talent Training Channels Safety Production In order to facilitate the growth and development of employees, to help employees to improve themselves , the Company has provided various talent training channels, including university-enterprise cooperation to attract talents, management training programs to The Company adheres to the safety management policy of "observing laws and regulations, putting people first, practicing safety production and reducing 100% Rate of employees' participation in cultivate new talents, and new manager training programs for talent growth. occupational risks", and complies with the Work Safety Law of the People's safety training Republic of China , the Law of the People's Republic of China on the Prevention and Control of Occupational Diseases and other applicable national occupational 100% health and safety production laws, regulations and standards. And it has The Company has signed university-enterprise cooperation agreements with 5 universities, namely established an occupational health and safety management system according Tianjin University, University of Chinese Academy of Sciences, Jiangsu University of Science and to GB/T45001-2021, and obtained ISO45001 Occupational Health and Safety University- Technology, Inner Mongolia University and Nankai University, aiming to establish scholarships, set up Management System certificates for its eight production bases. Rate of identification and rectification of enterprise training practice bases, customize training, implement intern programs or part-time exercise programs, potential security hazard cooperation build student career development think tank resources, and provide employment recommendations. In line with occupational health and safety production laws, regulations and In the future, the Company plans to launch university-enterprise cooperation with 35 undergraduate standards, the Company has formulated the Safety Management Manual and 27 colleges and 28 vocational colleges to expand talent recruitment and training channels. management regulations to define safety production goals, and keeps monitoring and measuring systems by process methods to ensure its effective operation and continuous improvement. In 2021, the Company achieved all safety production 100% Rate of employees' participation in the goals successfully. And its 11 production subsidiaries carried out 709 safety emergency plans of production safety accidents One-year growth plan: The one-year training plan works to enable graduates to deeply understand training activities and 271 safety drills totally. the corporate culture of the Company, integrate into the organization, grasp the role cognition as newbies, master communication and coordination skills and improve self-management skills so that they are able to work independently after one year. The training emphasizes on the responsibility of graduation students for their own personal development, and values the role of self-motivation and growth aspirations in their development. According to Rule 721 of adult learning, the plan covers various training modes for graduates, including learning in work practices and learning from role models (tutors), and learning in courses. 1+X training mode: Management Intensive management and control in course learning: Strengthen supervision of learning training process, arrange learning tasks monthly, work out learning goals and plans, and conduct scoring program management. Talent evaluation: Conduct evaluation every 6 months and 12 months, grant outstanding graduates bonus as an incentive according to evaluation results, and select top 30% trainees in the year-end elevation to join the Elite Training Camp directly. Interpersonal connection of graduates: introduction before employment, induction training, mid/ final training, and "tree hole" feedback mechanism of graduates; Graduate training review mechanism: Organize the company-level graduate training review In 2021, the new Work Safety Law of the People's Republic of China came into force. This new version specifies information- quarterly. based construction, establishment of a dual prevention mechanism involving management and control of safety risks by levels and identification and response of potential hazards, and improvement of the risk prevention and removal mechanism. The Company further Allow subsidiaries to arrange tutorial teaching, regular training interviews, symposiums and other improves its internal safety management system according to the above requirements. training courses and other diversified growth training accompaniment independently to facilitate the growth of trainees. The Company has launched a safety production information management platform, providing interfaces for the Group, regions, sectors, and the Company. It includes 38 sub-modules out of 10 management modules with 80 specific work tasks. This platform has achieved six major functions: the visualization of basic management information for safety production standardization; real-time pushing of plans/tasks and real-time tracing in the whole process; professional risk identification and control for establishment of a risk database; potential hazard identification/dynamic management and control of special operations; real-time collection of dynamic safety It is a new manager training program dedicated to internal promotion and external introduction. information by the system for establishment of a database; regular identification of safety production laws, regulations and standards by The program helps new managers inherit corporate culture, improve management abilities, the expert team for establishment of a safety think tank. The key and difficult problems in real-time safety supervision, trend analysis of New manager promote the implementation of corporate strategies, and transfer from key business employees potential hazard data and other aspects in factories were thus solved. training to managers in order to cultivate managers who are able to master strategies, pass on culture program and lead teams. The Company invites safety experts to promote the dual prevention mechanism of managing and controlling safety risks by levels and The new manager training system is characterized by normal, rolling and systematic training, identifying and tackling potential hazards, and organizes on-site training and exchanges related to the dual prevention mechanism in and enables experiential learning and action learning to cultivate all-round talents from multiple the production bases of Hohhot, Yixing and Tianjin. Also, it identifies the management and control performance of safety risks by levels dimensions. in all areas, working procedures and positions to ensure that safety risk management and control is implemented fully. Moreover, it organizes meetings on problem rectification and improvement to clarify identification methods of risks and formulating principles of management and control measures to practice identification, management and control of risks in place. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 33 / 34 Co-building a Better Society In 2021, the Company organized on-site audits for 30 qualified suppliers in such aspects as compliance with laws and regulations related to environment, labor and ethics, quality management systems, and management of toxic and hazardous substances. There were no serious violations of laws and regulations. Social and environmental changes affect the development of the Company. In the context of a community with a shared future for Management of Conflict Minerals mankind, the Company upholds a responsible development attitude, and pays attention to social development. In internal operation, the Company builds a responsible production value chain, and strengthens cooperation and management of its partners to jointly promote Raw materials provided by the Company’s suppliers, a semiconductor and new energy photovoltaic manufacturer, may involve sustainable development. In external communication and response, the Company remains a high sense of social responsibility, mineral materials from conflict minerals. Hence, the Company requires its suppliers to fill in the Supplier Basic Information Form. If contributes to society whiling developing its main business, and strives for a better society with communities. mineral materials from conflict minerals are involved, it is needed to investigate whether the source of mineral materials fails to meet RMI requirements referring to the updated content at the Responsible Minerals Initiative (RMI) website. If tin materials are needed in production, the Company requires its suppliers to provide certificates of origin if they supply tin materials to the Company to ensure that Fostering a Responsible Value Chain the tin materials used by the Company are not conflict minerals. Upon investigation, the tin materials purchased by the Company are all mined and processed in China, and there are no suppliers failing to meet the requirements. In order to ensure sustainable and sound business cooperation with partners for virtuous circle, and build cooperative relationship on the basis of trust, honesty, frankness and integrity, the Company has formulated the Supplier Management Regulations , the Supplier Audit Management Regulations , and the Code of Conduct for Partners of Zhonghuan Semiconductor, resulting in normalized management and Contributing to Social Prosperity process of supplier introduction, audit, quality management and improvement. Besides, the Company has established compliance standards and moral requirements for its business. With a clear division of duties, the Strategic Management Department, Procurement Department In 2021, the first year of embracing a moderately prosperous society in all respects, the Company actively responded to expanding and production subsidiaries of the Company jointly participate in supplier management and audit. poverty alleviation fruits, promoting rural revitalization and consolidating poverty relief achievements by targeted assistance. As one of ten major targeted poverty alleviation projects determined by the State Council, poverty alleviation through photovoltaic programs In supplier audit, the Company pays attention to the performance of suppliers in quality, on-time delivery rate, cost advantage, plays a positive role in social development and industrial drive. With a innovative mechanism and standardized operation, the Company environmental protection and labor safety. For new suppliers, the Company reviews their certification of ISO14000, OHSAS18000 practices photovoltaic programs for poverty alleviation, driving the development of labor and material resources in underdeveloped and other environmental and occupational safety systems, and their management of hazardous substances. For existing suppliers, the areas. Its efforts integrate new energy utilization, energy conservation and emission reduction into poverty alleviation, fully pushing the Company organizes annual supplier audits and quality audits. If suppliers are found not to meet the requirements of the environmental rural revitalization strategy. system or the management requirements of the Company in labor and goodwill during auditing or cooperation, the Company will urge them to rectify. If they still fail to meet the management requirements of the Company within the rectification time, the Company will The Company actively implements national policies, such as the Opinions of China Securities Regulatory Commission on Giving Full start the supplier knockout procedure. Play to the Role of the Capital Market in Serving the National Poverty Alleviation Strategy, the Opinions of the National Development and Reform Commission on Poverty Alleviation by Photovoltaic Power Generation , and the Guiding Opinions on the Implementation ◎ Classication and Quality of Raw and Auxiliary Materials Provided by Suppliers in 2021 of the 13 th Five-Year Plan for Renewable Energy Development. As a response, it launches poverty alleviation by photovoltaic power generation in Inner Mongolia, Hebei, Yunnan, Sichuan and other regions. Considering the industrial characteristics and resource advantages of different regions, Zhonghuan Semiconductor selects poverty-stricken regions meeting photovoltaic construction Class of raw and auxiliary materials Scope Quantity conditions, and actively carries out photovoltaic power generation projects for poverty alleviation, driving local development Materials, components and parts that have significant Class A 85 impact on product quality Auxiliary materials and inner packaging materials other than Class B 20 Class A and Class C Outer packaging materials and auxiliary materials that have Class C 4 low impact on product quality ◎ Supplier Audit Principles Consider the following aspects when selecting suppliers to be audited: (1) Suppliers providing key materials, especially Class A materials; (2) Suppliers with a high supply share of materials in each class, and those with insufficient supply capacity; (3) Suppliers with frequent quality problems, and those with quality feedback that cannot be closed for a long time; (4) Suppliers with a score less than 65 points in the annual supply evaluation. In principle, suppliers providing Class A materials should be audited on site at least once every three years. Where suppliers do not meet the requirements of the environmental system or the management requirements of the Company in labor and goodwill, the Company will urge them to rectify. If they still fail to meet the management requirements of the Company within the rectification time, the Company will start the supplier knockout procedure. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 35 / 36 Consolidating Business scientifically and effectively. For one thing, the Company leverages land and light resources for electric power generation to improve the regional environment and power supply structure. For another, it helps poverty-stricken population with revenue from power Management generation to contribute to the fight against poverty. Moreover, following the principle of "employing local talents", the Company recruits local graduates and professionals in electric power, numerical control and other relevant majors to engage in operation and maintenance of power plants, and employs local labor force from poor families to weed and clean photovoltaic panels in power plants, solving some employment problems according to local conditions. By the end of the reporting period, the Company has constructed 6 photovoltaic power plants for poverty alleviation, which are all ground-based centralized power plants, with project investment amounting to 1,055.8124 million yuan. The photovoltaic power generation projects implemented by the Company stably increase the income of the impoverished people to get out of poverty, effectively protect the ecological environment, and create a "multi-benefit" effect in terms of actively promoting supply-side structural reform in the energy sector. Corporate Governance Fighting Against the Epidemic with Full Efforts An effective governance system helps ensure the sound and continuous operation of the Company, and plays an incentive role with more effect, allowing the internal and external members of the Company to enhance thorough understanding of the Company with a After the outbreak of the epidemic, the Company has taken combined measures for epidemic prevention and control to collect view to coordinated development. Valuing the rights and interests of investors, the Company discloses information through multiple information concerning epidemic situation, predict and control epidemic situation properly, and minimized risks timely. At the beginning channels and communication modes. Furthermore, the Company works out scientific procedures for remuneration and performance of the epidemic, the responsible department has formulated the management plan of leading cadres, the emergency plan for the supply appraisal of the senior management, safeguards their rights and interests that are consistent with those of the Company, and chain, and the management plan for the personnel in the epidemic area and those passing through the epidemic area during COVID-19 strengthens their enthusiasm to contribute to the Company constantly with their abilities. prevention and control period. According to deployment, the Company has made great efforts to strengthen epidemic prevention and control among employees, and do a good job in workplace disinfection to ensure the personal safety of employees and the normal progress of production and operation. Besides, the Company strives for epidemic prevention and safety, production and construction, and normal life of employees, sticking to the people-oriented concept, so as to truly implement the corporate vision of " Environmental Protection of Investor Rights and Interests friendliness, Employee support, Social respect and Customer trust ". The Company actively discloses and communicates information to shareholders and creditors to ensure that all investors are informed Responding to the call of the state, the Company rises to the challenge by shouldering important responsibilities for epidemic of major developments affecting the business conditions of the Company timely and have access to information about the Company. prevention and control and industrial development. It redoubles efforts to fight against the epidemic, stabilize investment, and drive To this end, the Company releases information to investors through conferences, publications and online platforms, including development by making steady progress in the global layout of its business sectors, which shows its firm determination to scientific annual general meetings of shareholders, extraordinary general meetings, annual and interim reports issued regularly as well as epidemic prevention and the management accumulation of lean production and manufacturing capabilities, and the fulfillment of announcements, briefings and press releases. corporate responsibility. The Board of Directors of the Company attaches great importance to the management and maintenance of relations with investors. It has established a good IRM operation system extending the responsibility of investor relations management to the Company's controlling shareholders, management and sponsor institutions, and deepening the scope of investor relations management to various types of investors such as institutional investors, strategic investors, small and medium investors, including controlling shareholders, management and sponsor institutions. It maintains continuous communication with the capital market through various forms such as investor hotlines, the interaction platform of Shenzhen Stock Exchange, online performance briefings, receptions of investors for survey. In 2021, the Company convened 4 general meetings of shareholders or extraordinary general meetings. For major projects, the Company held investor briefings and media briefings to safeguard investor rights and interests. For major matters, the Company communicated with investors effectively through on-site exchanges, and Q&A meetings for media and related institutions. Besides, it organized investors to visit the Company for survey, and attend strategy meetings, roadshows, and reverse roadshows of securities companies. It answered more than 3,300 calls from investors, answered nearly 400 questions raised by investors on the interaction platform, held 7 briefings on corporate performance and special matters, and received more than 2,000 investors. Performance Appraisal of Executives The Company practices strict decision-making procedures for the remuneration of its senior executives. The Remuneration and Appraisal Committee is responsible for formulating the remuneration plan for senior executives, and the remuneration and performance appraisal of senior executives should receive deliberation and approval by the Board of Directors before implementation. The remuneration and performance appraisal of directors and supervisors should be reviewed and approved by the Board of Directors and the General Meeting of Shareholders. In addition, the Board of Supervisors and independent directors, as a supervisory body, should express their opinions on whether the remuneration plan is conducive to the sustainable development of the Company, and whether there is any situation that obviously impairs the interests of the Company and all its shareholders. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 37 / 38 Determination Basis Risk Management and Control Basis for Performance-related Remuneration The Company determines remuneration according to position value and personal ability oriented to charge and value creation mainly, and performance appraisal results as a supplement. With practicing the corporate culture, the Company strengthens the responsibility As risk weaknesses restrict the overall progress of the Company to a certain extent, the Company focuses efforts on risk management and result orientation in performance appraisal, advocates that "all resources are easily accessed by contributors ", and adopts a salary while developing constantly, and observes applicable compliance regulations. Furthermore, the Company has worked out a series of structure of "salary + bonus + long-term incentives". regulations and rules to regulate corporate operation, reduce risks in operation procedures and moral constraints, and promote its steady development. Basis for stock option incentives In addition to performance-based remuneration and benefits, a stock option incentive plan has been deliberated and approved Compliance Management by the General Meeting of Shareholders to improve the effective incentive and restraint mechanism for a long term and better the remuneration evaluation system of the Company. The Company has introduced the stock option incentive plan dedicated to directors, To practice corporate compliance governance by law, the Company fulfills a series of compliance tasks, compliance training senior management, middle management and core technical (business) employees. The plan functions to grant the groups said and popularity in such aspects as market and trading partner compliance, protection of corporate intellectual property and core stock options, and relate the performance results to the exercise of rights in order to motivate the work enthusiasm and creativity of competitiveness, financial and tax compliance, information security, safety and environmental protection, labor employment, listing employees. compliance and quality control. Besides, according to the corporate strategy and the characteristics of the rapid development stage, the Company has gradually established an audit supervision, prevention and control system covering prevention before incidents, Evaluation Management management and control during incidents, and supervision after incidents. In line with applicable laws and regulations, the Company conducts audits in related transactions, guarantee business, fund raising, foreign investment and major engineering projects to ensure the legality and compliance of corporate business and the truthfulness and integrity of information disclosed. An effective performance appraisal mechanism is an important guarantee for improving the remuneration system. The Company has introduced a systematic and scientific performance management system to provide an evaluation basis for the remuneration of senior executives. The Company integrates KPI and CPI effectively in performance appraisal. Guided by corporate culture, CPI works to strengthen the work style and core competence of cadres and the professional spirit of employees. KPI is mainly related to Market To meet the needs of foreign customers on supply chain traceability, the Company employs a law firm to organizational performance and personal key tasks to realize the common development of the organization and employees. transaction launch the supply chain traceability investigation and establish the traceability mechanism. and business With the ever-increasing national supervision and punishment for monopolistic actions, the Company partner gives risk warnings for anti-monopoly declaration in the legal support of projects, and cooperates with Remuneration and performance appraisal management compliance business units to make anti-monopoly declarations. The Company organizes the year-end evaluation for senior executives according to its operating conditions and individual performance, and determines their annual income according to evaluation results. Stock option incentive evaluation management Safety and environmental In accordance with the Law of the People's Republic of China on the Prevention and Control of Solid The evaluation for the stock option incentive plan mainly involves corporate performance and individual performance. The corporate protection Waste Pollution , the Company sorts out solid waste treatment procedures and documents to improve its performance is the basic condition to exercise stock options and the precondition of individual performance appraisal. The Company compliance solid waste treatment mechanism. formulates and revises the performance appraisal indicators of all positions every year, and determines the weight and target value of each performance appraisal indicator according to the importance of each indicator. Then, the Company makes statistics on the completion of performance appraisal indicators, and finally figures out the performance appraisal results of individuals. Information The Company works out the information security strategy based on the trade secret protection system, security and develops the data security management requirements for its digital transformation department compliance pursuant to the Data Security Law of the People's Republic of China . The Company revises its corporate management regulations in terms of competition restrictions, anti- corruption, anti-malfeasance, faithful performance of duties and personal information protection, and Labor safety also incorporates these aspects into the Employee Handbook . The Company works out the competition restriction management requirements and work plans for its human resource department. The Company organizes the employees of all departments to receive compliance training on export Compliance control and economic sanctions, and helps the human resource department carry out training on labor training and protection and competition restrictions. publicity The Company teams up with its subsidiaries to conduct compliance publicity focusing on trade secret protection and learning of the Constitution . 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 39 / 40 Anti-corruption ESG Key Quantitative Performance The Company makes efforts to improve Party conduct and In order to build a fine Party culture and a corruption-free combat corruption, following the guideline of "addressing Party among suppliers, prevent and control integrity risks, and both symptoms and root causes, valuing both punishment enhance the awareness of integrity and self-discipline between Topics Items for quantitative disclosure Unit 2021 2020 and prevention, and giving priority to prevention". To this the Company and its suppliers, the Company has worked out Total assets at the end of the period 100 million yuan 779.79 587.2 end, the Company has formulated a series of supervision the Code of Conduct for Zhonghuan Semiconductor Partners and management regulations related to compliance with pursuant to the Contract Law of People's Republic of China , Operating revenue 100 million yuan 411.05 190.57 disciplines and laws, including anti-corruption, such as the the Anti-Unfair Competition Law of the People's Republic of Net profit 100 million yuan 40.30 10.89 Working Rules on Honesty and Self-discipline of Leading Group China , the Criminal Law of the People's Republic of China Members , the Measures for Deepening and Standardizing the and other applicable laws and regulations based on the CPC Earnings per share Yuan 1.3162 0.3770 Economy Implementation of Combating Corruption and Upholding Integrity Central Committee’s eight-point decision on improving Party Cash dividends 10,000 yuan 35,549.07 18,197.56 in the Company , the Management Regulations of Zhonghuan and government conduct and requirements in work with honesty Semiconductor on Combating Commercial Bribes , the Code and integrity. A total of 632 partners have signed the Code of 1.1 yuan for every 0.6 yuan for every Cash dividend plan 10,000 yuan of Conduct for Zhonghuan Semiconductor Partners and the Conduct . 10 shares 10 shares Management Measures for Punishing Employees Receiving Gifts , R&D investment 10,000 yuan 257,653.92 90,921.98 and has released them on its intranet for popularity. In order to regulate complaint and report management, the Company provide clear reporting channels such as e-mails, Proportion of R&D expenditure in % 6.27 4.77 In order to strengthen internal control, prevent operation risks hotlines and mailboxes, and encourages employees and external operating revenue and moral risks, and encourage, integrity of employees in parties to report corruption cases of both enterprises and Proportion of R&D employees in total key positions, the Company has formulated the management individuals in business operation to the internal audit department % 8 8.64 employees measures for employees in key positions to strengthen or the audit committee, such as bribery, extortion, fraud, money management and rotation of key positions, supervise leaders, R&D Number of patents piece 975 732 laundering and other illegal conducts. cadres, and employees in key positions to fulfill their duties, and Number of patents for invention piece 154 127 hold any violators accountable. There are 2,027 employees in key positions who have signed the Employee Integrity and Self- Reporting Hotline and Email of Zhonghuan Number of utility model patents piece 797 582 Semiconductor discipline Commitment . In addition, the Company triggers an Number of patent under application piece 613 518 integrity index survey, with 3,240 participants. In the survey, the participants are asked to score the overall performance First pass yield of products % 96 93 Reporting Hotline: 23789766-3228 of Zhonghuan Semiconductor, their own business sector, and Quality feedback frequency time 940 1,042 functional departments/business modules. As a result, the Discipline Inspection Email: jiwei@tjsemi.com integrity index score exceeds 9 points (out of 10). Product quality General quality feedback frequency time 414 705 Major quality feedback frequency time 5 0 For protection of informers, the Company is responsible for justice and equity of the reporting process and results, and protects the personal Batch feedback frequency time 1,173 807 privacy and reporting materials of informers. Electric power consumption MWh 4,414,449.08 3,067,424.01 Natural gas consumption m3 2,880,687.82 806,550.70 ◎ Anti-corruption Supervision and Reporting Procedures Steam consumption m 3 99,613.55 27,594,561.30 3 Water consumption m 29,410,088 14,195,157.56 Including: consumption of water from m3 1 2 3 4 5 10,677,112 7,299,259.31 Resource the municipal water supply network consumptio Recycle/reused water consumption m3 562,662,547 16,774,292 Total volume of packaging materials used for the shipment of finished Ton 119,78 7,670.47 Register the Arrange full-time Complete the Hold meetings to Send products reported cases employees or set investigation and review reported conclusions to Recycling volume of packaging immediately. up a special team evidence collection cases and informers. materials used for the shipment of Ton 289.3 185.4 to follow up and within the prescribed investigation results, finished products investigate reported time, draw preliminary and work out cases, and collect conclusions, and report handling plans. evidence. conclusions to the management. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 41 / 42 Topics Items for quantitative disclosure Unit 2021 2020 Topics Items for quantitative disclosure Unit 2021 2020 Exhaust gas emissions 10,000 m3 403,632.85 499,187.54 Average training hours of all employees Hour/person 28.78 26.8 x Nitrogen oxide (NO ) emissions kg 95,866.29 16,464.16 By gender, Male employees Hour/person 28.06 26.2 2 Sulfur dioxide (SO ) emissions kg 0 408.35 Female employees Hour/person 32.16 28.9 By function, Management Hour/person 20.09 33.4 Greenhouse gas emissions (Scope 1 & Ton of carbon 3,774,515 0 scope 2) dioxide equivalent Professional Hour/person 1.54 22.3 Employee Of which, Greenhouse gas emissions Ton of carbon training Technology Hour/person 1.36 24.2 Emissions 20,597 / (Scope 1) dioxide equivalent Marketing Hour/person 0.51 28.2 Greenhouse gas emissions Ton of carbon Operation Hour/person 314.60 20.3 3,753,918 / (Scope 2) dioxide Number of courses at the online No. 1,093 910 Waste water discharge 10,000 m3 1,122.62 941.901 learning platform Number of trainees No. of ppl 136,476 84,968 Non-hazardous waste discharge Ton 75,208.50 67,020.49 Coverage of physical exam % 100% 100% Total hazardous waste discharge Ton 1,050.21 2,968.88 Number of employees who died caused Number of employees No. of ppl 13,371 10,258 No. of ppl 0 0 by work injuries Proportion of male employees % 81.27 79.26 Number of work injuries case 7 27 Health and Proportion of female employees % 18.73 20.74 safety Total working days lost due to work Day 540 1,977 injuries Proportion of female executives % 30 30 Frequency of safety education and Proportion of employees under the age time 709 413 % 6,386 4,904 training activities of 30 Frequency of emergency drills time 271 112 Proportion of employees aged 30 to 50 % 6,851 5,236 Number of directors in the Board of Employee No. of ppl 9 9 Proportion of employees over the age Directors recruitment % 134 118 of 50 Number of female directors in the Board No. of ppl 4 4 Proportion of employees with the Han Proportion of female directors in the % 12,359 9,572 % 44% 44% nationality Board of Directors Proportion of employees with ethnic Number of independent directors in the % 1,012 686 No. of ppl 3 3 minorities Board of Directors Average wage growth rate % 8 7.73 Proportion of independent directors in Corporate % 33% 33% the Board of Directors Number of employees in need receiving governance No. of ppl 29 33 Number of general meetings of assistance time 4 4 shareholders Proportion of trained employees in total % 64.95 24.3 Number of meetings by the Board of employees time 17 22 Directors By gender, Male employees % 82.63 76.3 Number of meetings by the Board of time 9 12 Female employees % 17.37 23.7 Supervisors By function, Management % 4.48 41.6 Number of meetings by special Employee time 16 23 committees of the Board of Directors Professional % 44.79 2.5 Number of completed corruption Technology % 40.63 24.2 lawsuits filed against the issuer or its case 0 0 Anti-corruption employees Marketing % 2.20 1 Number of employees receiving anti- Operation % 7.90 30.7 No. of ppl 1,300 270 corruption training 1. Source of statistical data: Tianjin Zhonghuan Semiconductor Co., Ltd. and its subsidiaries. Such data is consistent with that in the consolidated statements of the Annual Report. Among them, the statistics of greenhouse gas emissions are Tianjin Zhonghuan Advanced Materials Technology Co., Ltd., Tianjin Huanou Semiconductor Materials Technology Co., Ltd., Huanxin Technology Development Co., Ltd., Tianjin Huanzhi New Energy Technology Co., Ltd., Zhonghuan Advanced Semiconductor Materials Co., Ltd., Wuxi Zhonghuan Applied Materials Co., Ltd., Huansheng Photovoltaic (Jiangsu) Co., Ltd., Inner Mongolia Zhonghuan Advanced Semiconductor Materials Co., Ltd., Inner Mongolia Zhonghuan GCL Photovoltaic Materials Co., Ltd., Inner Mongolia Zhonghuan Photovoltaic Materials Co., Ltd. 2. In 2021, the consumption of resources (electric power consumption, natural gas consumption, water consumption, and packaging materials used for the shipment of finished products) increased significantly compared with that in 2020 as the Company expanded its production with rising production capacity. 3. The GHG emission statistics for the GHG categories include CO2, CH4, N2O, HFCs, PFCs, SF6, NF3 and follow the ISO 14064-1:2018 Greenhouse gases — Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals. 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 43 / 44 Benchmarking Index Tables Articles of the Guidelines for Social Responsibilities of Listed Companies issued by Shenzhen Stock Exchange Chapters in the Report The Guidelines for Social Responsibilities of Listed Companies issued by Shenzhen Stock Article 26 Promoting green transformation through technological innovation Exchange Chapter 5 Environmental Protection and Sustainable Development Article 27 Promoting green transformation through technological innovation Articles of the Guidelines for Social Responsibilities of Chapters in the Report Listed Companies issued by Shenzhen Stock Exchange Article 28 Practicing Low-carbon Smart Operation Chapter 1 General Provisions Article 29 Practicing Low-carbon Smart Operation Article 2 Social Responsibility Management System Article 31 Practicing Low-carbon Smart Operation Article 3 Social Responsibility System Chapter 6 Public Relations and Social Welfare Undertakings Article 4 Risk Management and Control Article 32 Co-building a Better Society Article 5 Social Responsibility Management System Article 33 Co-building a Better Society Chapter 2 Protection of the Rights and Interests of Shareholders and Creditors Article 34 Co-building a Better Society Article 7 Corporate Governance Chapter VII System Development and Information Disclosure Article 8 Corporate Governance Article 36 Report Preparation Instructions Article 9 Corporate Governance Article 10 Corporate Governance Article 11 Corporate Governance The Main Board Information Disclosure Business Memorandum - No. 1 Document: Matters Article 12 Corporate Governance Related to Disclosure in Periodic Reports issued by Shenzhen Stock Exchange Chapter 3 Protection of the Rights and Interests of Employees Content in Main Board Information Disclosure Business Memorandum - No. 1 Document: Matters Related to Chapters in the Report Article 13 Pooling Team Strength Disclosure in Periodic Reports Article 14 Pooling Team Strength 1. Overview Article 15 Pooling Team Strength Briefly state the purpose and concept of fulfilling social Social Responsibility Management System Article 16 Pooling Team Strength responsibilities by the Company. Article 17 Pooling Team Strength 2. Fulfillment of Social Responsibilities Article 18 Pooling Team Strength (1) Protection of the rights and interests of shareholders and Corporate Governance creditors Article 19 Pooling Team Strength (2) Protection of the rights and interests of employees Pooling Team Strength Chapter 4 Protection of the Rights and Interests of Suppliers, Customers and Consumers (3) Protection of the rights and interests of suppliers, Article 20 Promoting green transformation through technological innovation Co-building a Better Society customers and consumers Article 21 Promoting green transformation through technological innovation Addressing Climate Change Article 22 Promoting green transformation through technological innovation (4) Environmental protection and sustainable development Promoting green transformation through technological innovation Article 23 Co-building a Better Society Practicing Low-carbon Smart Operation Article 24 Risk Management and Control (5) Public relations and social welfare undertakings Co-building a Better Society Article 25 Risk Management and Control (6) Targeted poverty alleviation Co-building a Better Society 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 45 / 46 GRI Sustainability Reporting Standards (GRI Standards) Indicators in GRI Indicators in GRI Indicators in GRI Indicators in GRI Chapters in the Report Chapters in the Report Chapters in the Report Chapters in the Report Standard Standard Standard Standard 102-1 About Zhonghuan Semiconductor Social Responsibility Management Practicing Low-carbon Smart 103-1 Co-building a Better Society 102-43 301-1 System Operation Management 102-2 About Zhonghuan Semiconductor 103-2 Co-building a Better Society method Social Responsibility Management Practicing Low-carbon Smart 102-3 About Zhonghuan Semiconductor 102-44 Materials 301-2 103-3 Co-building a Better Society System Operation 102-4 About Zhonghuan Semiconductor 102-45 Report Preparation Instructions Practicing Low-carbon Smart Supplier 308-1 Co-building a Better Society 301-3 environmental Operation 102-5 About Zhonghuan Semiconductor 102-46 Report Preparation Instructions evaluation 308-2 Co-building a Better Society Practicing Low-carbon Smart 102-6 About Zhonghuan Semiconductor Social Responsibility Management 302-1 103-1 Pooling Team Strength 102-47 Operation System Management 102-7 About Zhonghuan Semiconductor Practicing Low-carbon Smart 103-2 Pooling Team Strength 302-2 method General 102-48 Report Preparation Instructions Operation 102-8 About Zhonghuan Semiconductor 103-3 Pooling Team Strength disclosure 102-49 Report Preparation Instructions Practicing Low-carbon Smart Social Responsibility Management Energy 302-3 401-2 Pooling Team Strength 102-12 Operation System 102-50 Report Preparation Instructions Employment Practicing Low-carbon Smart 401-3 Pooling Team Strength Social Responsibility Management 102-51 Report Preparation Instructions 302-4 102-13 Operation System 403-1 Pooling Team Strength 102-52 Report Preparation Instructions Practicing Low-carbon Smart Social Responsibility Management 302-5 403-2 Pooling Team Strength 102-16 Operation System 102-53 Report Preparation Instructions 403-3 Pooling Team Strength Practicing Low-carbon Smart 102-18 Corporate Governance 102-54 Report Preparation Instructions 303-1 Operation 403-4 Pooling Team Strength Social Responsibility Management Sustainability Reporting Standards 102-20 102-55 Practicing Low-carbon Smart Occupational 403-5 Pooling Team Strength System (GRI Standards) 303-2 Operation health and Social Responsibility Management 103-1 Corporate Governance Water resource safety 403-6 Pooling Team Strength 102-21 Practicing Low-carbon Smart System Management and waste 303-3 103-2 Corporate Governance Operation 403-7 Pooling Team Strength method water 102-22 Corporate Governance 103-3 Corporate Governance Practicing Low-carbon Smart 403-8 Pooling Team Strength General 303-4 Social Responsibility Management Operation disclosure 102-29 System 201-1 Corporate Governance 403-9 Pooling Team Strength Practicing Low-carbon Smart Economic 303-5 102-30 Risk Management and Control 201-2 Addressing Climate Change Operation 403-10 Pooling Team Strength performance Social Responsibility Management 201-3 Pooling Team Strength 305-1 ESG Key Quantitative Performance 404-1 ESG Key Quantitative Performance 102-31 Training and System education 205-1 Risk Management and Control 305-2 ESG Key Quantitative Performance 404-2 Team Strength Pooling Social Responsibility Management 102-32 Anti-corruption 205-2 Risk Management and Control 305-3 ESG Key Quantitative Performance Diversity System and equal 405-1 Team Strength Pooling 205-3 Risk Management and Control Emission 305-4 ESG Key Quantitative Performance opportunity Communication with Stakeholders and 102-33 Analysis of Material Topics 305-5 Building Green Factories Promoting green transformation Anti- 406-1 Team Strength Pooling 102-35 Corporate Governance through technological innovation discrimination 103-1 305-6 ESG Key Quantitative Performance Practicing Low-carbon Smart 102-36 Corporate Governance Operation Freedom of 305-7 ESG Key Quantitative Performance association 407-1 Team Strength Pooling 102-37 Corporate Governance Promoting green transformation and collective 306-1 ESG Key Quantitative Performance Management through technological innovation bargaining 103-2 102-38 Corporate Governance method Practicing Low-carbon Smart 306-2 ESG Key Quantitative Performance Operation Child labor 408-1 Team Strength Pooling 102-39 Corporate Governance Sewage and 306-3 ESG Key Quantitative Performance Promoting green transformation waste Forced or 102-39 Corporate Governance through technological innovation 306-4 ESG Key Quantitative Performance compulsory 409-1 Team Strength Pooling 103-3 labor Practicing Low-carbon Smart Social Responsibility Management Operation 306-5 ESG Key Quantitative Performance 102-40 System Local 413-1 Co-building a Better Society Environmental community Social Responsibility Management 307-1 ESG Key Quantitative Performance compliance 102-41 System 414-1 Co-building a Better Society Supplier social Pooling Team Strength evaluation 414-2 Co-building a Better Society Social Responsibility Management 102-42 System 2021 Environmental, Social and Governance Report 2021 Environmental, Social and Governance Report 47 / 48 Definitions of Proper Nouns and Acronyms Report Preparation Instructions Proper nouns/acronyms Denitions Report Scope It refers to the final result of the design process for integrated circuits (IC) or printed circuit boards tapeout The Report covers Tianjin Zhonghuan Semiconductor Co., Ltd. and its subsidiaries. Unless otherwise specified, this scope keeps (PCB) before they are sent for manufacturing. consistent with that in the consolidated financial statements of the Annual Report of Zhonghuan Semiconductor (Stock Code: 002129). It is also known as workshop production management. It refers to a product in process, an assembly line, or a work-in-progress area of the work center to store raw materials, finished products and Full name of company Abbreviation of this report WIP(Working In Progress semi-finished products. Usually, it means raw materials claimed that have undergone some, not all, manufacturing procedures, or that are not put into warehouses of finished products as they have not Inner Mongolia Zhonghuan Photovoltaic Materials Co., Ltd. Zhonghuan Photovoltaic received quality inspection. Inner Mongolia Zhonghuan GCL Photovoltaic Materials Co., Ltd. Zhonghuan GCL WAT(Wafer Acceptance It refers to the test of the special test pattern, and the application of electrical parameters to monitor Test) whether each process keeps normal and stable. Inner Mongolia Zhonghuan Advanced Semiconductor Materials Co., Ltd. Inner Mongolia Zhonghuan Advanced It refers to the levelized cost of energy (power generation), generally measured in megawatt hours Wuxi Zhonghuan Applied Materials Co., Ltd. Zhonghuan Applied Materials (MWH). It is often used to compare and evaluate the comprehensive economic benefits of electric LCOE(Levelized Cost of power generation relying on renewable energy (photovoltaic energy, wind energy, bio-energy and Tianjin Huanou Semiconductor Material Technology Co., Ltd. Huanou Energy) geothermal energy) compared with traditional electric power generation modes (coal, natural gas and large hydro-power stations). Tianjin Huanzhi New Energy Technology Co., Ltd. Huanzhi BOS cost refers to the cost of the system other than photovoltaic modules. It mainly covers the cost BOS (Balance of System) Tianjin Zhonghuan Advanced Material Technology Co., Ltd. Tianjin Zhonghuan Advanced of main equipment such as inverters, brackets and cables, the cost of civil engineering, installation cost engineering, project design, engineering acceptance, and related cost at the early stage. Tianjin Huanxin Technology Development Co., Ltd. Huanxin Imbricated module technology refers to a technology in which cells are sliced and then welded into Zhonghuan Advanced Semiconductor Materials Co., Ltd. Zhonghuan Advanced strings with dedicated conductive adhesive materials. Cells that are connected by imbrication have Imbricated module no metal grid lines on the surface, and no gap between them. This technology makes full use of the Huansheng Photovoltaic (Jiangsu) Co., Ltd. Huansheng technology usable surface area of modules and reduces the loss of traditional metal grid lines, thus improving the conversion efficiency of modules greatly. Huansheng New Energy (Tianjin) Co., Ltd. Huansheng New Energy It refers to a process cooling water system that is mainly used for cooling process equipment. PCW(Process Cooling The PCW system is equipped with a chilled water system and a cooling water system that work Water) independently. Chilled water is provided by chillers, and exchanges heat with cooling water to cool equipment by reducing the temperature of cooling water. Time Frame The manufacturing execution system, as a management system for workshop production, works to The Report is an annual report and ranges from January 1, 2021 to December 31, 2021. Some text information may be beyond this MES(Manufacturing scope and has been explained accordingly. transmit information to optimize production activities during the process from the issuance of the Execution System) work order to the completion of the finished product. Product lifecycle management is applied within an enterprise with a single workplace or multiple PLM(Product Lifecycle workplaces, and between enterprises with collaborative relationship in the product R&D filed. It Reporting Basis supports a series of application solutions, such as information creation, management, distribution Management) and application throughout the product life cycle. It can integrate human resources, processes, The Report is prepared in accordance with the Guidelines for Social Responsibilities of Listed Companies and the Main Board application systems and information related to products. Information Disclosure Business Memorandum - No. 1 Document: Matters Related to Disclosure in Periodic Reports . Enterprise resource planning refers to a management platform that provides decision-making and The Report is prepared based on some indicators in GRI Sustainability Reporting Standards (GRI Standards 2016) (For details, please ERP(Enterprise Resource operation means for the decision-makers and employees of an enterprise, following systematic refer to the index tables). Planning) management ideas and relying on information technology. Investors relation management functions to maximize the value of relevant stakeholders, win wide recognition from investors as scheduled, regulate the operation of the capital market, enable the Data Interpretation IRM(Investors Relation external to engage in constraint on and incentive of corporate operation, maximize the value of Management) shareholders, protect the interests of investors, and ease pressure from regulators by managing The data and cases in the Report come from the original records or financial reports acquired from the actual business of the Company. information communication content and channels between a company and the financial community The financial data in the Report are denominated in RMB. If the financial data here in conflicts with that in the annual financial report of or other circles according to the principles of financial communication and marketing. the Company, the annual report shall prevail. 2021 Environmental, Social and Governance Report Reliability Assurance Zhonghuan Semiconductor undertakes that there are no false records, misleading statements or major omissions in the Report, and the Board of Directors of the Company is responsible for the authenticity, accuracy and integrity of the Report. Contact Information Tianjin Zhonghuan Semiconductor Co., Ltd. Tel.: +86-022-23789766 Email: tjsc@tjsemi.com Fax: +86-022-23789786 For more information concerning the social responsibilities of the Company, please visit the official website of Zhonghuan Semiconductor (https://tjsemi.solarbe.com/). 关于中环股份 环境、社会与公司治理体系 01 02 01 推动低碳转型 10 02 创造社会价值 14 03 夯实经营管理 17 ESG关键量化绩效 53 获得荣誉 54 应对气候变化 10 凝聚团队力量 15 公司治理 18 对标索引表 55 创新绿色产品 12 共建美好社会 16 风险管控 19 报告编制说明 56 低碳智慧运营 13 Address: No.12 East Haitai Road, Huayuan Industrial Park, Hi-tech Industrial Zone, Tianjin Postal code: 300384 Tel: 022-23789787 Email: investment@tjsemi.com Website: https://www.tjsemi.com