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This is the Environmental, Social and Governance (“ESG”) Report prepared by the Group pursuant to the Environmental, Social and Governance Reporting Guide provided in Appendix 27 to the Listing Rules on the Stock Exchange (“the Guide”). This report covers our operations in Hong Kong, Vietnam and China for the financial year end 31 December 2016. As the Group’s cement plant employed 92% of the Group’s total employees and its operation has the most impact on environment, emphasize has been put on the Group’s cement plant in Vietnam based on the materiality principle, while other operations were covered as well but in brief. The Board has reviewed and approved this ESG Report. This ESG Report addresses all the General Disclosures under each Aspect of the Guide.

Environment

The Group recognizes the importance of adhering to environmental laws and regulations and adopting of proper environmental policies are essential to the sustainability of the corporate growth. The Group’s operations have been strictly following the environmental laws and regulations in their respective countries. The Group’s cement plant in Hue, Vietnam has specifically set up an ISO department, with purposes of formulating the Group’s environmental policies and ensuring the cement operation is in all time complying with the policies. The ISO department also keeps an eye on the latest development of the environmental laws and regulations in Vietnam and to make sure the cement plant is in compliance with the relevant laws and regulations from time to time.

1. Emission

The main environmental issues associated with cement production are the consumption of raw materials and energy, as well as emissions to air. The key polluting substances emitted to air are dust, carbon dioxide (CO2), nitrogen oxide (NOx) and sulphur dioxide (SO2). Other less polluting substances include carbon oxides, polychlorinated dibenzo-p-dioxins and dibenzofurans, total organic carbon, metals, hydrogen chloride and hydrogen fluoride.

1.1 Carbon dioxide (CO2)

CO2 is released as a by-product during calcination, which occurs in the upper and cooler end of the kiln, or a precalciner, at temperatures of 600-900°C, and results in the conversion of carbonates to oxides. At higher temperatures in the lower end of the kiln, the lime (CaO) reacts with silica, aluminum and iron containing materials to produce minerals in the clinker, an intermediate product of cement manufacture. The clinker is then removed from the kiln for cooling, grounding to fine powder, and mixing with a small fraction (about five percent) of gypsum to create the most common form of cement known as Portland cement.

1.2 Nitrogen oxide (NO x)

Nitrogen Oxide (NOx) is a family of poisonous, highly reactive gases. NOx is a by-product produced by the clinker burning process under exceptional high temperature. Efficient technical measures are required to reduce its emission in the process. NOx often appears as a brownish gas and it is a strong oxidizing agent, playing a major role in the atmospheric reaction with volatile organic compounds (VOC) that produces smog on hot summer days.

1.3 Sulphur dioxide (SO2)

Sulfur dioxide is an invisible gas with nasty and sharp smell. It reacts easily with other substances to form harmful compounds, such as sulfuric acid, sulfurous acid and sulfate particles. The main source of sulfur dioxide in the air is industrial activity that processes materials containing sulfur such as the electricity generation from coal, oil or gas. Sulfur oxides, mainly SO 2 , are generated both from the sulfur compounds in the raw materials and from sulfur in fuels used to fire a preheater.

1.4 Dust

Dust emissions originate mainly from the raw mills, the kiln system, the clinker cooler, and the cement mills. A general feature of these process steps is that hot exhaust gas or exhaust air is passing through pulverised material resulting in an intimately dispersed mixture of gas and particulates.

1.5 Water

Waste water discharge is usually limited to surface run off and cooling water only and causes no substantial contribution to water pollution. The storage and handling of fuels is a potential source of contamination of soil and groundwater. Apart from that, the environment can be affected by noise and odors.

1.6 Environmental issues control and future plan

Regarding environmental issues such as emission, dust, noise, water, the Group appoints environmental monitor company every year in performing related measurements on quarterly basis in accordance with respective Vietnam environmental legislation, measurement and analysis as follows:–

Vietnam environmental measurement standards       Appendix 1

No. Item Measurement and Analysis Method
1 Air Quality
1.1 Air Quality (Dust Content) TCVN 5067:1995
1.2 Amount of Dust TCVN 5704:1993
1.3 NO2 TCVN 6137:2009
1.4 SO2 TCVN 5971:1995
1.5 CO ASTM D1945
1.6 H2S MASA Method 701
2 Noise, Vibration, Meteorological Observation
2.1 Noise TCVN 7878:-2:2010
2.2 Vibration TCVN 6963: 2001
2.3 Meteorological Observation
(Temperature, Humidity, Wind speed and pressure)
QCVN46:2012/BTNMT
3 Exhaust Gas
3.1 Amount of Dust and Content (CO, NOx, SO2) TCVN 5977:2009
4 Waste Water
4.1 pH TCVN 6492:2011
4.2 DO (Dissolved Oxygen) TCVN 7325:2004
4.3 Color TCVN 6185:2008
4.4 Hardness (CaCO3) SMEWW 2340C:2012
4.5 TSS (Suspended Solids) TCVN 6625:2000
4.6 COD (Chemical Oxygen Demand) SMEWW 5220-C:2012
4.7 BOD5 (Biochemical Oxygen Demand) TCVN 6001:2008
4.8 Fe (Iron) TCVN 6177:1996
4.9 Zn (Zinc) TCVN 6193:1996
4.10 Pb (Lead) SMEWW 3113B:2012
4.11 Cd (Cadmium) SMEWW 3113B:2012
4.12 Mn (Manganese) SMEWW 3113B:2012
4.13 Hg (Mercury) TCVN 7877:2008
4.14 As (Arsenic) TCVN 6626:2000
4.15 Oil, Grease TCVN 5070:1995
4.16 Coliform TCVN 6187-2: 2009
4.17 E. Coli TCVN 6187-2: 2009
5 Surface Water
5.1 pH TCVN 6492:2011
5.2 DO (Dissolved Oxygen) TCVN 7325:2004
5.3 Color TCVN 6185:2008
5.4 Hardness (CaCO3) SMEWW 2340C:2012
5.5 TSS (Suspended Solids) TCVN 6625:2000
5.6 BOD5 (Biochemical Oxygen Demand) TCVN 6001:2008
5.7 Fe (Iron) TCVN 6177:1996
5.8 Zn (Zinc) TCVN 6193:1996
5.9 Pb (Lead) SMEWW 3113B:2012
5.10 Cd (Cadmium) SMEWW 3113B:2012
5.11 Mn (Manganese) SMEWW 3113B:2012
5.12 Oil, Grease TCVN 5070:1995
5.13 Coliform TCVN 6187-2: 2009
5.14 E. Coli TCVN 6187-2: 2009

All the measurement results are required to compare with respective Vietnam National Standards such as:

  • QCVN 05:2013/BTNMT (National technical regulations on Surrounding Air Quality)
  • QCVN 06:2009/BTNMT (National technical regulations on hazardous substances in ambient air)
  • QCVN 40:2011/BTNMT (National technical regulations on Industrial Wastewater)
  • QCVN 23:2009/BTNMT (National technical regulations on Emissions of Cement Production)
  • QCVN 24:2016/BYT (National technical regulations on permissible levels of noise at workplace)
  • QCVN 26:2016/BYT (National technical regulations on permissible value of microclimate in the workplace)
  • QCVN 27:2016/BYT (National technical regulations on permissible levels of vibration in the workplace)
  • Decision No. 3733/2002/QD-BYT (Decision about Workplace environment: 21 occupational health standards, 5 basic principle and 7 Working hygiene parameters)

According to all environmental measurement quarterly report in 2016, the Group’s cement plant has complied with all the above-said Vietnam Nation standards and requirements.

To strengthen the emission control, the Group has appointed a Chinese company to perform the feasibility study on Flue Gas Monitoring System and Selective Non-Catalytic Reduction (SNCR) system. The Flue Gas Monitoring System allows us to online monitor flue gas and provides content analysis such as CO2, NOx, SO2, HCL, temperature, humidity, substance etc.

The principle of selective non-catalytic reduction (SNCR) is to making atomized ammonia water and urea as reducing agent. At specific temperature, these reductors will restore the NO x to N and HO without catalyst. For the maximum SNCR performance, ammonia water will be sprayed into smoke at proper temperature. With higher temperature, the N in ammonia will be oxidized to NOx. The NOx will cause lower processing efficiency, as low as minus. On the other side, lower temperature will cause ammonia water inactive and ammonia escape.

2. Use of Resources

The Group aims to improve efficiency in the consumption of electricity for its Saigon Trade Center and other leasing properties in Vietnam, Hong Kong and China. The lightings in all public areas have gradually been replaced by energy- efficient alternatives with longer life spans, such as LED light bulbs. Energy-saving protocols have also been implemented, such as the timely switch-off of air-conditioning system of the premises.

For the Group’s cement plant, the cement production process consumes huge amount of electricity energy. Electricity cost represents around 20% of the cement plant’s total production cost.

To reduce electricity consumption, the cement plant has conducted a research on the “Waste Heat Recovery (“WHR”) Power Systems”. In late 2016, the cement plant appointed a Chinese consultancy company to perform a feasibility study on the WHR boiler steam turbine generator system target to be installed in the plant’s existing cement production lines.

The WHR system utilizes wasted heat currently emitted from the cement production lines. The WHR boilers will generate steam using the wasted heat exhausted from the cement plant, and the steam will be fed into the steam turbine generator to generate electricity. It can reduce power consumption from the national electricity grid which will lead to the reduction of fossil fuel combustion at the national electricity grid’s connected power plants.

3. The Environment and Natural resources

The procurement of local raw materials forms the basis of the manufacture of cement. The raw materials needed to produce cement (calcium carbonate, silica, alumina and iron ore) are generally extracted from limestone rock, chalk, clayey schist or clay.

The Vietnam Government imposes fees and charges for the use of raw materials. During 2016, the cement plant has paid timely on all charges and fees in accordance with respective decisions issued by Vietnam Government such as mine restoration fund (2463/QD-BTNMT; dated 23/12/2010), environmental protection charges for mineral exploitation (66/2016/ TT-BTC dated: 29/04/2016), mining right charge (3027/QD-BTNMT ; dated 25/12/2014), environmental and natural resources tax (12/2016-TT-BTC dated: 20/01/2016)

Regarding the limestone mine exploitation, the respective Government department assists and instructs the cement plant on how to minimize implications from the mine exploitation. At the end of each year, the cement plant is obliged to provide the mine’s geographic map to the local Environment department office for record and review. During the year, the cement plant has rented certain land from the local Government for the planting of trees and vegetation as one of the company’s policy to improve the environment.

Social

1. Employment

As at 31 December 2016, the Group had about 1,050 employees, of which 92%, i.e. about 966 employees were working for the cement plant.

According to the employment record as at 31 December 2016, more than 85% of total employees work with the Group for more than 5 years. The base salary level for all employees is above the minimum salary requirement in respective areas. All employees in Vietnam have participated in the social insurance, health insurance and unemployment insurance in accordance with the Vietnam Social and health insurance laws.

According to the Vietnam labour law (10/2012/QH13), trade unions have been established in the Group’s cement plant in Hue and each of its subsidiaries. The management supports and works closely with the trade unions to exchange and manage labour issues of the local employees.

Besides, the cement plant has signed a collective labour agreement with each trade union in accordance with the Vietnam labour law (10/2012/QH13). The collective labour agreement is a written agreement between a labour collective and the employer in respect of working conditions that both parties have agreed upon through collective negotiation. The signed collective labor agreement has been registered with the provincial state management agency on labour and the Ministry of Labour, War Invalids and Social Affairs office in Hue and Ninh Thuan.

2. Health and Safety

The Group has compiled with the Vietnam labour law and collective labour agreement on labour safety and hygiene. The Group’s cement plant provides personal protective equipments (such as safety helmets, gloves, ear plugs, eye protection, high-visibility clothing) to the employees where working environment required.

Besides, the cement plant has its own safety team to monitor workplace safety, provide safety training and handle occupational accident. Also, the cement plant has set up cleaning team in each company to maintain the workplace hygiene and cleaning.

For labour health, the cement plant arranges medical check-up for all employees twice per annum. All employees have done the medical check-up in May and October of 2016.

The Group is not aware of any material non-compliance with the relevant laws and regulations relating to providing a safe working environment & protecting employees from occupational hazards during the reporting period.

3. Development and Training

The Group recognizes the importance of having a skilled workforce in order to achieve strategic and operational plans and is committed to providing an environment that is conducive to effective performance and promotes training and development opportunities for all staff. The Group’s cement plant provides equal opportunity for all staff to develop their knowledge, skills and abilities through a blend of learning methods including mentoring, coaching, on the job learning, courses, conferences and seminars. The training needs of staff will be identified by individual departments and be approved by the General Manager in line with best practice and legislative guidelines.

The cement plant arranged security training and fire prevention training courses to all security staff in September and October of 2016 respectively. Related training courses were being organized by local police and fire department as well during the year. Besides, a “chemical material accident and safety training” courses was organized by Hue Technical School to the staff working in Quality Assurance, safety and material control department in December 2016.

4. Labour Standards

All employees of the Group are recruited through the Human Resources Department to ensure they fulfill the job requirements underlying their respective positions. The Group regularly reviews its employment practice and Group’s guidelines on staff recruitment to ensure that it is in full compliance with the employment laws and other regulations related to, among other things, prevention of child labour and forced labour. According to the Vietnamese law, the employment of children under the age of 15 is prohibited. In 2016, the youngest employee working in the cement plant was aged 19.

According to the cement plant’s human resources record, more than 90% of total employees have Year 9 or higher education background, while 50% of total employees have Year 12 or higher education background in Vietnam.

The cement plant provides the ISO and work safety training to all staff after joining the company and also encourages each department to organize appropriate work-skill development training.

The Group is not aware of any material non-compliance with the relevant laws and regulations relating to prevention of child and forced labour.

5. Supply Chain Management

According to the Group’s purchasing policy and procedure, prior to the purchase of goods and services, sufficient justification must be presented to demonstrate the need for the goods and services to be procured. The approval from General Manager is required for any acquisition of goods and services.

Based on purchase requisition request(s) provided by user department, the purchasing department will seek for appropriate suppliers and perform quality and price comparison for the General Manager to review and approve. All goods received are required to be inspected by user department.

For production materials procurement, in general there are 2 to 3 qualified suppliers for supplying each type of production material. It can avoid the issue of excessive concentration on single supplier for particular production material supply. The Group’s Quality Assurance Department is required to inspect the quality of each log of production material being received.

For supplier selection, purchasing department will make recommendation to the General Manager and the consideration shall be based on pricing, good and service quality, reliability and market goodwill.

6. Product Responsibility

The brand name of the Group’s cement products, namely “KIM DINH” has been widely recognized in the local market, especially around the regions of the central Vietnam.

All our clinker and cement products have been awarded by QUACERT with the respective Vietnam product standard certificates.

Product Product Standard Reward Date
Clinker TCVN7024:2002 04/04/2005
Portland Cement PCB30 TCVN6260:2009 29/04/2002
Portland Cement PCB40 TCVN6260:2009 29/04/2002
Portland Cement PC40/td> TCVN2682:2009 29/04/2002
Portland Cement Type I & V ASTM C150/C150M-12 05/06/2003
Portland Cement PCSR40 TCVN6067:2004 18/03/2002

Also, all our cement products are complied with Vietnam National standards on products, goods and construction materials (QCVN16:2014/BXD)

Furthermore, the Company has been awarded by QUACERT with the certificates of ISO 9001, ISO 14001 and OHSAS 18001, demonstrating that our cement plant has already established a well-recognized management system.

Vietnam Certification Centre (QUACERT) is the National Certification Body of Vietnam established by the Ministry of Science and Technology as a subsidiary of the Directorate of Standards, Metrology and Quality (STAMEQ), to support the state management over standardization. QUACERT performs respective product review every 9 months. All product certificates are required to renew every 3 years.

7. Anti-Corruption

The Group has developed an anti-corruption policy statement which is applied to all personnel of the Group (including direct and indirect subsidiaries and controlled affiliates, individually and collectively). All personnel are responsible for complying with this policy and all applicable anti-corruption laws in the performance of their duties for the Group.

The Group is not aware of any material non-compliance with the relevant laws and regulations relating to bribery, extortion, fraud and money laundering during the reporting period.

8. Community Investment

In 2016, the Group has developed Corporate Social Responsibility policy as our guideline for community investment and donation in Vietnam. The purpose of this policy is to establish a fair, consistent and transparent process by which requests for support for eligible charities will be managed. Our community investment focuses on poverty group, child education, medical and health services. In 2016, the Company has contributed to the Huong Tra Community fund for the local people health improvement and “Operation Smile”, an organization for reconstruction surgery for Vietnam’s children facial deformities

In 2017, we are planning to work with Hue local Government for further community investment on poverty group and child education.