Sunny Optical Technology (Group) Company Limited

Sustainable Development

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Green Operation

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Energy Management
The Group complies with laws and regulations such as the Energy Conservation Law of the PRC (《中华人民共和国节约能源法》), the Electric Power Law of the People’s Republic of China (《中华人民共和国电力法》), the Measures of Zhejiang Province on energy conservation supervision (《浙江省节能监察办法》), and the Measures for the Supervision and Administration of Energy Conservation in Special High-Energy Consumption Equipment (《高耗能特种设备节能监督管理办法》). Also, the Group has set up energy-saving leading groups, which are responsible for developing an energy management program: Formulating action programs to reduce energy use, and achieving energy-saving and carbon emission reduction targets by ntroducing new energy-saving equipment, optimizing power supply mode and eliminating high energy consumption or old equipment; Setting up energy saving targets and programs and evaluating progress on a regular basis; Using of clean or green energy; Investing in innovation or R&D to reduce energy consumption. While perfecting the environmental management system and rules, we also pay attention to the education, training, and supervision of green culture. We publicize the objectives and requirements of environmental management to all employees through the bulletin board, WeChat official account, and online and offline trainings to improve employees’ environmental awareness. It makes employees understand the impact of their work on the environment as well as the risks and consequences of not complying with laws, regulations and the relevant policies.

In 2023，Sunny Opotech and Sunny Optical Intelligence (Yuyao) formulated sound policies related to energy management based on the requirements of energy management systems and obtained the ISO 50001 Energy Management System Certification. Sound energy management policies and systems can make the management process and relevant standards clearer, thus significantly improving the effectiveness and efficiency of energy-saving and consumption-reduction efforts.

Sunny Automotive Optech has formulated the Regulations on the Administration of Energy and Resources (《能源資源管理規定》), which singly makes refinements on the consumption of raw materials, ancillary materials, water, electricity, paper, etc. and specifies the duties and responsibilities of the production management department, the procurement department and other departments. To ensure the effective and efficient use of energy and resources, Sunny Zhejiang Optics has formulated the Control Procedures for Energy and Resources (《能源資源控制程序》), which specifies the specific management responsibilities of each department and provides detailed instructions on the use of raw materials, auxiliary materials, water, electricity andfuel as well as the procurement of production equipment. Meanwhile, we continuously improve the value traceability system during production and operation to achieve all-round management and control on the procurement, use and recycling of resources and energy.

During the Reporting Period, Sunny Zhejiang Optics, Sunny Opotech and Sunny Optical Intelligence (Yuyao) reduced a total of 71,710.1 tonnes of carbon through the purchase of green electricity. In addition to the improvement of energy structure, we introduced an energy management platform to provide a refined management of energy usage. By the end of the Reporting Period, the platform achieved real-time monitoring of electricity consumption data of each building of Sunny Zhejiang Optics and Sunny Opotech, enabling the Group to enhance the management of energy efficiency of power-intensive equipment and thus ensure the safe and efficient operation of power distribution facilities. In addition, the platform can simultaneously provide carbon emission conversion data and early warning management of the total energy consumption, energy intensity, carbon emission and carbon intensity budget and target, helping the Group to achieve the greenhouse gas emission reduction target and the carbon peak and neutrality goals. We have confirmed the deployment of photovoltaic power generation facilities in our plants to facilitate the transformation of our energy mix.

The Group carried out the following energy conservation and consumption reduction projects during the Reporting Period:

Name of the company	Energy conservation and consumption reduction project-	Project brief introduction	Energy consumption reduction- (KWH)	Equivalent carbon emission reduction(tCO₂e)
Sunny Opotech	Managementing of public area lighting	Optimize the management of lighting in public areas	28,000.0	19.7
	Transformation of air compressor channels	Optimize the management of production capacity and the use of air compressor	72,000.0	50.7
	Management refinement	Refined control of centralized scheduling, and critical temperatures	520,000.0	365.8
Sunny Optical Intelligence (Yuyao)	Improvement of air compressors	Modified the Programmable Logic Controller (PLC) program to realize that when any cooling water pump fails, the other two cooling water pumps can be started immediately and sequentially, and the water supply can be restored before the air compressor system fails, to ensure that production is not affected	193,536.0	136.1
	Optimization of Fans Filter Unit (FFU)	Under the premise of satisfying the cleanliness of the workshop, the operating parameters of FFU are optimized	250,000.0	175.9
	Improvement of ionic air bar	Added induction device and achieve automatic control	337,500.0	237.4
Sunny Automotive Optech	Renovation of central air conditioning fans and water pumps	The fixed frequency of the central air-conditioning fan and water pump was changed into inverter mode, with an investment of RMB70,000, saving RMB630,449 in electricity bills per year	741,705.0	521.8
	Transformation of energy saving lamps	Low-wattage energy saving lights are used	66,132.0	46.5
	Modification of high-energy consumption motors	Replace high-energy consumption motors with a total investment of RMB1,240,000	1,111,023.0	781.6

Energy Management Training
During the Reporting Period, Sunny Optical Intelligence (Yuyao) conducted 5 training sessions on the standardization of the ISO 50001 energy system and the implementation of energy management policies. The relevant training included the basic concepts and principles, the setup and operation, and the application and implementation of the energy management system for enterprises. In this way, Sunny Optical Intelligence (Yuyao) helped its employees understand the statusof energy management, master energy management methods and energy-saving techniques, and ultimately improve energy efficiency. Sunny Zhejiang Optics launched a series of training on energy conservation and consumption reduction covering all employees. Based on the purpose, necessity, and current situation of energy consumption, this training helped employees understand the importance of energy conservation and consumption reduction in maintaining a green environment including lush mountains and lucid waters, and further raised employees’ awareness of energy conservation and consumption reduction as well as the importance of environmental protection.

Consumption and utilization of water resources
The Group attaches great importance to the management of water resources, and continuously commits itself to the protection of water resources. The Group mainly sources water from municipal water supply and has guarantees on obtaining sufficient water resources. During the Reporting period, there was no issue in sourcing water that is fit for purpose of the Group. In the process of operation, the Group continuously improves the water resource management measures, pursues the goal of maximization of water use efficiency, gives priority to the use of water-saving equipment, continuously optimizes the production process, improves the recycling rate of water resources and reduces ineffective water use.

The Group has developed a water use management plan：
Developing an action program to reduce water consumption;
Recycling of water to improve the efficiency of water use;
Providing employees with Water Efficiency Management Program awareness training.

The water-saving projects carried out by the Group during the Reporting Period are as follows:

Name of the company	Water-saving project	Measures and results
Sunny Automotive Optech	Recycling of cleaning wastewater	Recycled wastewater generated by the cleaning process, saving about 82,000 tonnes of water per year
Sunny Opotech	Reuse of reclaimed water	Used wastewater for cooling towers and flushing toilets, saving 9,104 tonnes of water
Sunny Zhejiang Optics	Reuse of wastewater from baths	Use wastewater generated from bath equipment for secondary recycling of cooling towers, with an investment of RMB 192,200 and saving about 48,000 tonnes of water per year
Sunny Zhejiang Optics	Reuse of reclaimed water	Newly added a group of water recycling equipment, saving 133,200 tonnes of water

Consumption of Materials
The Group uses packaging boxes, blister boxes, corrugated paper, vacuum bags, glue and other materials during manufacturing, transportation, and sales of products. To implement the concept of “reducing resource consumption and pollutant emission from the source”, we optimized the production and packaging process, used environmental materials as much as possible to reduce the use of packaging materials. Sunny Optical Intelligence (Yuyao) has formulated the Procedures on Design and Development Control (《設計和開發控制程序》) to define the principles of reduction, resource utilization, cost and harmlessness in the process of product design. Sunny Opotech has formulated the Tray Recycling Management Measures (《料盤回收管理辦法》), which defines the specific work and responsibilities of each department involved in the recycling of trays as well as the monitoring and setting up target for the recycling rate. During the Reporting Period, Sunny Opotech recycled 80% of trays.

The material saving projects carried out by the Group during the Reporting Period are as follows:

Name of the company	Materials saving project	Measures and results
Sunny Optical Intelligence (Yuyao)	Optimize packaging	Changed the blister box layout from 24 to 30, reducing annual consumption by 4,000 sets; changed the material of packaging boxes from a 7-layer board to a 5-layer board under the precondition of product reliability, saving 25% of the material
Sunny Opotech	Recycling of trays	Entered into recycling and disposal agreements with suppliers for the recycling and reuse of trays, resulting in the saving of 372.182 tonnes of trays during the Reporting Period
Sunny Automotive Optech	Adjustment Packing mode	Encouraged suppliers to optimize material packaging design, and changed from disposable packaging to multi-recyclable packaging, reducing approximately 4.8 tonnes of packaging materials used during the Reporting Period
Sunny Automotive Optech	Improvement of resource utilization	Established management provisions for R&D materials to improve material utilization and reduce material waste and loss
Sunny Zhejiang Optics	Optimization of mold design	Optimized the structure of grinding tools and improved mold applicability and material utilization, saving approximately 11% of materials
Sunny Zhejiang Optics	Reuse of gaskets	Optimized the process and achieved the reuse of gaskets while ensuring the quality of product appearance, saving 30% of gaskets and RMB1,494,000 per year

The KPIs of the Group’s resource consumption during the Reporting Period are as follows:

Category	Unit	2023	2022	2021
Total direct energy (Note 1)	MWh	616.5	485.8	582.8
Diesel oil	MWh	80.4	90.3	148.5
Gasoline (Note 2)	MWh	536.1	395.5	434.3

Total indirect energy	MWh	639,457.5	605,485.5	540,417.7
Electricity (Note 3)	MWh	537,920.7	515,283.1	540,417.7
Green Electricity	MWh	101,536.8	90,202.4	/

Total energy consumption (Note 3)	MWh	640,074.0	605,971.3	541,000.5
Energy consumption intensity (Note 4)	MWh/ RMB million revenue	23.3	19.7	14.6

Consumption of packaging materials	tonnes	2,126.3	2,548.5	2,632.9
Packaging material intensity (Note 5)	Kg/ RMB million revenue	77.4	83.0	71.1

Water consumption (Note 6)	tonnes	2,639,878.9	2,318,717.1	2,143,303.0
Water intensity (Note 7)	tonnes/ RMB million revenue	96.0	75.5	57.9

Notes
1.The average low level heating capacity coefficients for diesel and gasoline used by the Group are with reference to the “Guidelines for Accounting and Reporting of Greenhouse Gas Emissions from Electronic Equipment Manufacturing Enterprises” issued by the National Development and Reform Commission in 2015.
2.During the Reporting Period, as the COVID-19 pandemic came to an end, various business exchange activities , leading to increased usage of official vehicles and gasoline consumption.
3.During the Reporting Period, as the Group introduceded its new products and enlarged its production and office space, electricity consumption also increased. Therefore, the total electricity consumption increased by approximately 4.39% compared to the full year of that in 2022.
4.During the Reporting Period, energy consumption intensity increased by approximately 18.3% compared to 2022 due to the year-on-year increase in total energy consumption and year-on-year decrease in revenue of the Group.
5.During the Reporting Period, packaging material intensity declined by approximately 6.7% compared to 2022 due to the Group's efforts in promoting the reuse of packaging, the amount of packaging used decreased, and year-on-year decrease in revenue of the Group.
6.During the Reporting Period, water consumption increased by approximately 13.9% compared to 2022 as the Group introduceded its new products and enlarged its production and office space.
7.During the Reporting Period, water intensity increased by approximately 27.2% compared to 2022 due to the year-on-year increase in water consumption and year-on-year decrease in revenue of the Group.

Raw material usage
There are opportunities to drive positive change in the environment and communities across the world by committing to sustainable raw materials. The Group formulates relevant policies to help preserve the raw materials which we all rely on.Main Includes:Minimize the negative sustainability impacts of raw materials;Collaborate with external stakeholders on best practice for sustainable raw materials;Increase the use of third-party verified raw materials;Increase the use of recycled raw materials;Avoid raw materials from sites containing globally or nationally important biodiversity sites.During the reporting period, Sunny Automotive Optech has formulated the Administration of Green Substance to require the use of hazardous substances and pollutant concentrations to comply with laws and regulations ; All suppliers of raw materials to Sunny Optical Intelligence are required to sign the The Undertaking for Non-use of Prohibited/Restricted Substances Under Relevant Environmental Regulations and are required to provide MSDS; at the same time, all raw materials are required to provide hazardous substance test reports issued by a third party.

All subsidiaries of the Group have put in place measures to ensure the sustainability of raw materials. We prioritize the selection of environmentally friendly materials and have established the "Product Traceability Management Regulations", which require suppliers of raw materials to provide Certificate of Analysis reports for the purpose of tracing incoming raw materials; and we have provided training to the relevant departments within the company on their responsibilities relating to sustainable raw materials.

Optimizing Emission Management

The air pollutants produced by the Group are mainly volatile organic chemicals (“VOC”), nitrogen oxides, sulfur dioxide, and particulate matter. During the Reporting Period, the main source of gas pollutants in the Group are vapors from organic solvents used in the workshops and vehicle exhaust emissions. The wastewater generated by the Group mainly comes from domestic water and cleaning and grinding wastewater in production. The solid wastes generated by the Group mainly include non-hazardous waste such as domestic garbage, as well as hazardous waste generated in production such as detergents and organic solvents.

We strictly comply with relevant laws and regulations and local emission standards and conduct standardized management of all emissions. Sunny Automotive Optech has formulated the Administrative Measures on Waste Gas, Effluent, Noise and Solid Waste (《廢氣、廢液、噪聲及固體廢棄物管理規定》) to clarify the classification, collection, storage, and disposal methods of various wastes, identify the responsible department of environmental protection management, in order to properly dispose of emissions generated during operation. Sunny Zhejiang Optics has also established the Administrative Measures on Waste Gas, Effluent and Solid Waste (《廢氣、廢液、固體廢棄物等管理制度》), which aims to reduce the impact of waste emissions on the local environment and the health of personnel. In addition, we entrust a qualified third-party agency to test the emissions to ensure that the emissions meet the standards. Meanwhile, the Group is actively engaging in the building of “Zero-Waste City Cells” in Zhejiang Province. During the Reporting Period, the Group passed the “Zero-Waste Enterprise” inspection.

During the Reporting Period, the Group had no major environmental violations or penalties.

Greenhouse Gas and Waste Gas Management

During the Reporting Period, the Group set a greenhouse gas emission reduction target of 20.0% for both Scope 1 and Scope 2 greenhouse gas emission intensity by FY2025 compared to the FY2021 baseline. Sunny Opotech and Sunny Optical Intelligence (Yuyao) also set their Scope 1 and Scope 2 carbon emission targets for the Reporting Period at the beginning of 2023.

Name of the subsidiaries Carbon emission targets Completion of targets

Sunny Opotech

Carbon emission intensity to decrease by 2.0% year on year

Achieved

Sunny Optical Intelligence (Yuyao)

50.0% of green electricity consumption

Achieved

In order to conduct a better scientific inventory of all emission sources involved in the Group, we conducted a Greenhouse Gas inventory of all facilities of the Company and four subsidiaries within the reporting scope located in Yuyao City, Zhejiang Province, China, based on the GHG Protocol published by the World Resources Institute (“WRI”) and the World Business Council for Sustainable Development (“WBCSD”) during the Reporting Period. This inventory identified the Group’s GHG emissions finally, which include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons and sulphur hexafluoride.

To better meet the expectations of our stakeholders, and to enhance the Group’s ESG management with the help of capital markets and financial tools, as well as to set a benchmark in the industry, in January 2023, the Group became the first Asian technology manufacturing company to issue a sustainability-linked bond. For details, please refer to “Sustainability-Linked Financing Framework” (https://www.sunnyoptical.com/webfile/temps/202301041230331537.pdf) dated January 4, 2023.

We recognize the importance of accounting for Scope 3 emissions and are currently looking for practical ways to account for Scope 3 emissions and working to promote a green and low carbon transformation of our upstream supply chain.

Waste Gas Management
We strictly follow domestic and international standards for the management of exhaust gas emissions, and control exhaust gas emissions at the source. We also strictly monitor exhaust gas emissions from our operations to minimize the adverse impact of gas pollutants on the environment. During the Reporting Period, Sunny Zhejiang Optics newly installed 4 sets of waste gas treatment facilities (alkaline spray tower + activated carbon adsorption tower) for the treatment of coating waste gas and reduction of waste gas emissions, with an estimated total investment of RMB500,000. Sunny Optical Intelligence (Yuyao) adopted non-toxic and non-hazardous chemicals or non-toxic and low-hazardous chemical A513 to replace volatile ethanol to reduce the emission of VOC.

Wastewater Discharge Management

We control the discharge of wastewater in strict accordance with national standards. The wastewater generated by the Group mainly comes from domestic and production activities. We have built a wastewater treatment system in the factory area and have obtained a permit for the discharge of urban wastewater into the municipal government's sewage pipe network to ensure that domestic and production wastewater is discharged in compliance with regulations. In addition, the Group has implemented the separation of rainwater and sewage pipe networks in the factory area, and the rainwater is introduced into the pipeline and discharged into the river nearby.

Noise Management

The Group rationally plans the layout of each workshop to minimize noise and prefers low-noise equipment. We also install equipment on solid foundations to avoid noise from equipment vibration. Meanwhile, we perform daily and regular maintenance on equipment to ensure that problems are found and fixed in time, hence avoiding extra noise. During the Reporting Period, Sunny Optical Intelligence placed all extractor fans in designated rooms to isolate them from the operators and optimized the production process to reduce the use of extractor fans, thereby reducing the noise from 84 dB(A) to 73 dB(A).

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Green Operation

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