Crystal International : Sustainability Report 2023

ABOUT THIS SUSTAINABILITY REPORT

Contents

About This Sustainability Report

CEO Message

About Crystal International

Our Sustainability Vision and Approach

Stakeholder Engagement

Preserving Our Planet

Driving Innovative Manufacturing

Product Responsibility

Supply Chain Management

Pioneering Social Sustainability

Awards and Recognition

Glossary

ESG Reporting Guide Index and GRI Content Index

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04

06

10

16

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42

46

50

54

74

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About This Sustainability Report

This Sustainability Report 2023 (the "Report") was prepared in compliance with the Environmental, Social and Governance ("ESG") Reporting Guide set out in Appendix 27 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"), as well as with reference to the latest Global Reporting Initiative ("GRI") Standards. Our climate-related disclosure makes reference to the framework of the Task Force on Climate-related

Financial Disclosures ("TCFD"). This is the fifteenth sustainability report of Crystal International Group Limited ("Crystal" or "Crystal International" or the "Company" or "we" or "our" or "us") (Stock code: 2232), which covers the sustainability performance for the calendar year from 1 January to 31 December 2023.

This year, our number of facilities increased from 20 to 23, driven by operational growth and business expansion. The reporting boundary of this Report covers all 23 facilities across five countries - Vietnam, China, Cambodia, Bangladesh and Sri Lanka - unless otherwise specified. This Report summarises the positive steps and actions taken to address material sustainability topics and to foster a more sustainable fashion future.

Following the successful accomplishment of three cycles of Global 5-Year Sustainability Targets in 2022, we have embarked on a new journey: Crystal Sustainability Vision 2030 ("CSV2030"). This is a comprehensive set of environmental and social indicators that sets out the rising importance of our sustainability focus. During the reporting period, we have formulated the CSV2030 framework by engaging with different stakeholders, defining eight impact areas and relevant goals to cope with a wider spectrum of sustainability challenges.

I am sincerely grateful for the staunch support from top management who are confident in our firm beliefs and sustainability targets. We are humbled that our sustainability performance received positive recognition from renowned sources. My heartfelt gratitude goes out to all factories and global employees for their hard work in making all of our remarkable achievements possible. The concerted efforts from all departments help to strengthen internal cohesion across all levels and gain the trust of our external stakeholders.

Moving forward, we are devising the action agenda of CSV2030, which may be of

most interest to our stakeholders. We will work with all operations to address the identified impact areas, to make continuous progress towards our vision in the years ahead.

We welcome your valuable feedback on this Report in relation to our sustainability work, standards, and policies. For any related enquiries, please contact us at [e-mail].

Catherine Chiu

Vice President

Corporate Quality and Sustainability

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CEO Message

Actions Build Hope

In 2023, we faced competing business and wider climate challenges. The economy experienced a slowdown and global industry encountered reduced orders and inventory stockpiles. Thanks to our team's efforts in proactive cost control and automation advances, our profit margin improved despite the external environmental factors. Amidst a year of cyclical fluctuations, our cohesiveness has empowered us to embrace greater resilience, to make fashion sustainable in a way that is good for our next generation and the planet. Sustainability has been embedded into our operations for almost two decades, enabling us to meet the rising expectations of various stakeholders and achieve excellence for customers. As our work continues, our actions build hope to optimise positive change.

Transitioning to Crystal Sustainability Vision 2030

Over the past 16 years, we have accomplished challenging and remarkable achievements in sustainability and evolved into a pioneering garment manufacturer. As our next milestone, the introduction of Crystal Sustainability Vision 2030 ("CSV2030") will guide our future sustainability agenda. CSV2030 focuses on eight impact areas addressing the emerging ESG issues in a broader scope. Referencing the United Nations Sustainable Development Goals ("UN SDGs") and considering stakeholder concerns and industry traits, CSV2030 will provide a strategic direction for all our operating facilities in devising sustainability initiatives.

Leading with Net Zero 2050

Climate change with frequent extreme weather events has made 2023 a record-breaking year. Average temperatures were higher than ever, which signals again the urgency of global efforts. Under our Crystal Net Zero 2050 Vision, we have put our unwavering focus on deploying a climate strategy through a multi-pronged approach and climate-related risk management. We rolled out a net zero roadmap, tailored potential carbon reduction by via energy efficiency enhancement and defined implementation details with all factories. Our factories have committed to adopting around 180 short- and long-term energy efficiency measures by 2028. We also started to compile our Scope 3 value chain inventory by following carbon accounting principles. We believe that preventing the climate crisis is the responsibility of everyone, and we will influence global stakeholders to seize new opportunities and join us on this journey.

Expanding with Vertical Integration

During the reporting period, we extended our capacity and strengthened vertical integration by enhancing the operation model of our fabric mill in Vietnam. To ride the tide of vertical strategy, we have taken a big step by further acquiring a fabric mill in Bangladesh, streamlining operations by taking more ownership of multiple stages of the supply chain. To support business expansion, vertical integration allows us to achieve better synchronisation of supply and demand, fewer supply chain disruptions, and greater economies of scale. We are anticipating a breakthrough in our vertical strategy with the first Crystal self-established textile mill in Vietnam under construction. With the expansion of our foothold in fabric production, along with our profound expertise, we feel motivated to bring our sustainability values to the new frontier.

Elevating Manufacturing Excellence

With wider application of automated equipment and digital transformation, we have made sustainable improvements in production through increased efficiency and productivity. We will continue to focus on upgrading and implementing automation, in order to provide more flexibility to meet customers' evolving expectations. This will enable us to stand out in a competitive market.

Spearheading with Circularity

Looking forward, we will ramp up strategic actions to drive the success of CSV2030 and net zero. In addition to climate change, circularity is also at the top of our agenda. To transition towards a circular model, we will scale up waste management and explore partnerships in expanding the use of sustainable materials.

The path is challenging, but I am confident that our ultimate aims will be achieved by collaborating with our dedicated employees, like-minded value chain partners, professional suppliers, and other committed stakeholders. I would like to thank my global teams for their extraordinary contribution over the past year. The pursuit of sustainability will set us up for future success. We will stay realistic and optimistic, and let Crystal values, culture, and spirit lead the way.

Andrew Lo

Chief Executive Officer

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About Crystal International

Founded in 1970 and headquartered in Hong Kong, the Company and its subsidiaries (collectively, the "Group") have a diversified product portfolio categorised into six product segments, in which the Group has a leading position: Lifestyle wear, Sportswear and outdoor apparel, Denim, Intimate, Sweater, and Knitted fabrics. The Group operates a multi-country manufacturing platform, with 23 production facilities including both garment factories and fabric mills spanning five countries: Vietnam, China, Cambodia, Bangladesh and Sri Lanka. As a global apparel manufacturer, Crystal International Group Limited aims to be a pioneer in sustainability.

Mission

To be the most profitable company in the industry, customer choice and employee choice.

Corporate Values

Integrity	Delight our customer
Respect for people	Live quality
Embrace innovation	Deliver bottom line results
Energise others	Boundaryless enterprise

Product Types

Lifestyle wear

Sweater

Sportswear and outdoor apparel

Denim

Intimate

Geographical Markets and Global Operations

US

36.0%Europe

17.7%

Asia

40.3%

Others

6.0%

Multi-country Network of Production Facilities

China

Bangladesh

Vietnam

Cambodia

Sri Lanka

Knitted fabrics

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About Crystal International

Corporate Governance

Crystal International is the embodiment of exemplary corporate governance, with practices that are not only in compliance with all relevant rules and regulations, including the Corporate Governance Code (the "CG Code"), but also intricately aligned with the organisation's goals and strategies. Crystal recognises the integral role that robust governance plays in achieving long-term success and is unequivocally committed to maintaining the high standards that are crucial to the sustainable growth of the Group.

To ensure that its governance framework remains effective and responsive to the evolving needs of the business, Crystal's board of directors (the "Board") undertakes regular reviews and is proactive in establishing relevant Board committees as necessary. This dynamic governance structure is designed to facilitate strategic objectives and enhance overall performance.

The composition of Crystal's Board is thoughtfully diversified. Apart from a substantial number of female Board members, it also includes members with expertise of management in different industries, such as banking and financing, technology and manufacturing. This diversity is strategic, reflecting the Company's commitment to staying at the forefront of manufacturing innovation and efficiency. Such a varied Board composition is instrumental in steering Crystal towards its vision of excellence in manufacturing capabilities.

Understanding the critical nature of board development, Crystal invests in the continuous development of its Board members. Seminars and forums are organised, as well as visits to factories in the countries where we operate. This provides Board members with deeper insights into the Company's business environment, risk management and operations. These visits are more than just informational excursions, they are integral to ensuring that Board members are well-informed and equipped with a thorough understanding of the business landscape Crystal navigates.

Our consistent application of and adherence to advanced corporate governance standards underlines our belief that such practices are not mere formalities but are, in fact, vital to driving forward Crystal's vision and long-term success.

During the reporting period, the Group was in compliance with all the provisions of the CG Code.

The Board, which comprises the Company's Chairman, Vice Chairman, Chief Executive Officer (the "CEO"), two executive Directors, two non-executive Directors and four independent non-executive Directors, has established the following five committees to oversee particular aspects of Crystal's affairs and to assist in the execution of its responsibilities.

•	Audit Committee	•	Remuneration Committee
•	Corporate Development Committee	•	Sustainability Committee

• Nomination Committee

The roles and responsibilities of each committee and details of our corporate governance framework are available in Crystal's Annual Report 2023.

ESG Ratings

A (leadership) in the Climate

Change questionnaire in 2023

14.9

Low Risk rating

Sustainability Governance

Our sustainability is led from a holistic perspective with an aligned overall direction. The Board retains overall responsibility for overseeing Crystal's strategic direction, policy and annual reporting on sustainability, guiding high level sustainability governance. The role of the Board involves steering and supervising sustainability initiatives to ensure their effectiveness and relevance in light of the evolving sustainability landscape.

We have a robust governance structure to manage our sustainability approach. The Board-level Sustainability Committee, which is comprised of our CEO and two non-executive Directors, endorses our sustainability vision and commitments, oversees the strategy formulation and management approach, and provides recommendations on the Group's sustainability framework and policies, to ensure their effectiveness and alignment with the Group's business strategies. The Sustainability Committee also reviews annual reporting, the Group's sustainability performance, material ESG issues, and related risks and opportunities, in addition to making recommendations and reporting to the Board on a regular basis.

Sustainability performance and progress towards our targets are reported to the Executive Committee ("Execo") members on a quarterly basis and to the Sustainability Committee twice a year for review and evaluation.

Authorised by the Board and led by an Executive Director, the Corporate Quality and Sustainability Department ("CQS") is delegated to develop and execute sustainability strategies and policies, drive the implementation of relevant initiatives, assess the Group's sustainability performance, identify improvement areas, and prepare the sustainability reports. The CQS and sustainability departments of our factories are responsible for executing projects, evaluating results, monitoring potential risks, and reporting on performance to senior management.

ESG Risk Management

As part of an effective risk management system to identify, assess, manage and mitigate sustainability and climate-related risks, an internal communication mechanism and reporting model are in place to keep Sustainability Committee and Execo members informed in a timely manner. All key sustainability and climate- related risks, as well as their potential impact on the Group, are reported to the Sustainability Committee on a half-yearly basis.

Please refer to the section "Stakeholder Engagement" for the process used to evaluate, prioritise and manage material ESG-related issues.

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Our Sustainability Vision and Approach

Our Sustainability Framework

Sustainability has been ingrained in our business operations since 2007, when we set out our sustainability framework. This serves as a guiding principle when formulating sustainability strategies. The five pillars of the framework and their highlighted initiatives are as follows:

Environment

• Crystal Net Zero 2050 Vision
• UN Fashion Industry Charter for Climate Action ("UNFICCA")

• Decarbonisation strategy and roadmap

• Group-wide rooftop solar plan

• CDP disclosure

• Task Force on Climate-related Financial Disclosures ("TCFD")

• Sustainable material and product development

• Holistic water conservation

• Zero operational waste to landfill
• Global partnership for climate action and circularity

Innovation

• Automation for operational efficiency and effectiveness

• Digital transformation

• Manufacturing excellence to achieve industry 4.0

• Smart factory, smart warehouse and smart laundry

• System transformation and integration

Product Integrity

• Quality policy and corporate guidelines

• Group-wide quality management system

• Digitalising quality assurance processes and quality online system

• Supply chain quality management

• Driving "Right First Time" culture and awareness

Employee Care

• People-orientedculture

• Gender equality engagement activities

• Talent development and capacity building

• CARE programme and P.A.C.E. for women empowerment

• Promoting a health and safety culture

Community Engagement

• Creating shared value with local communities

• Employee volunteering to address social needs

• Advancing collaboration for healthy and sustainable communities

• Consistent support for community resilience

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United Nations Global Compact

We joined the United Nations Global Compact in 2021 and continue to support the Ten Principles on human rights, labour, environment and anti-corruption. Acting together with more than 24,000 other participating companies and organisations worldwide, we remain committed to making the principles part of our strategy, culture and daily operations, and to engaging with our industry peers on various partnerships that advance towards the common goals of the United Nations.

The Ten Principles of the United Nations Global Compact

Businesses should:

1. Support and respect the protection of internationally proclaimed human rights.
2. Make sure that they are not complicit in human rights abuses.
3. Uphold the freedom of association and the effective recognition of the right to collective bargaining.
4. Uphold the elimination of all forms of forced and compulsory labour.
5. Uphold the effective abolition of child labour.
6. Uphold the elimination of discrimination in respect of employment and occupation.
7. Support a precautionary approach to environmental challenges.
8. Undertake initiatives to promote greater environmental responsibility.
9. Encourage the development and diffusion of environmentally friendly technologies.
10. Work against corruption in all its forms, including extortion and bribery.

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Our Sustainability Vision and Approach

Crystal Sustainability Vision 2030 - Impact for Better

Following our accomplishment of the three cycles of Global 5-year Sustainability Targets ending in 2022, we have not been complacent. Our new Crystal Sustainability Vision 2030 ("CSV2030") was established to craft a blueprint for the Group to take sustainable fashion to the new heights, on the basis of 16 years of persistent efforts for sustainability. After rounds of stakeholder engagement, review of industry best practices and analysis of macro issues, we completed the development of CSV2030 with the endorsement by the Board in 2023. With reference to the UN SDGs, CSV2030 consists of eight impact areas across environmental, social and community dimensions, as well as relevant goals associated with each impact area that we are committed to achieving by the end of the decade. These aim to tackle the sustainability issues of the industry.

The slogan "impact for better" accentuates our ambition and motive of CSV2030. It also illustrates our aspiration to positively influence various impact areas for our nature, people and communities, to create a better future in the long run. In the year ahead, we will devise a detailed agenda for concrete action, and work with all operations to continuously progress towards the new vision.

CSV2030

Impact for Better

Global NGO partnership

Provide aid to individuals living in poverty and projects partnered with global NGO

Anti-poverty

Provide aid to individuals living in poverty and projects partnered with global NGO

Renewable electricity

Maximise the use of renewable electricity

Science-aligned target

Achieve science-aligned target •35% absolute reduction

Employee communication

Apply worker voice programmes to engage for employee communication

Women empowerment

Continue empowering our female employees and advancing gender equity

Equal opportunities

Embrace diversity and inclusion in employee recruitment, compensation & promotion

	Climate-related risk management
	Ensure climate-related risks are effectively managed
	and disclosed referencing to CDP and TCFD framework
CSV2030
Impact for Better	Coal phase-out
	No coal-fired units in
	•Wholly-owned factories, mills and
	new investment by 2025
	•Core supplier by 2030

Waste diversion

Strive to divert 100% production waste from landfill

Social wellness

Engage our employees to participate in social services

Freshwater intensity

Reduce freshwater intensity by 20% per production unit (base year 2022)

	Assessment and strategy
Physical and mental health	Identify material impacts on biodiversity,
and implement focused strategies

•Provide a workplace of excellent health and safety •Launch wellness programmes to promote physical and mental heath

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Our Sustainability Vision and Approach

Highlights towards CSV2030 in 2023

12 MW				US$580,000
group-wide solar PV				contribution to
				communities

Employee wellness	100,000
programmes in all
trees planted in
operating countries

Stakeholder Engagement

The concerns and interests of stakeholders are an essential foundation in devising sustainability directions. We identify stakeholders who are affected by our decisions, activities and outcomes, and select those with whom we frequently interact to provide feedback under the reporting principles of materiality and inclusiveness.

It is important to leverage diversified communication channels and develop strong relationships in order to gather opinions from our stakeholders and stay connected. We engage with different stakeholder groups on a continuous basis actively and openly, which allows two-way transparent communication to understand their expectations, interests, requirements and needs. Our communication channels include:

Materiality Assessment

As a fundamental part of our materiality assessment, we engaged with internal and external stakeholders, who play a significant role in our operations, to identify issues related to the environment, society and the economy that are relevant to us and our stakeholders.

Through the evaluation of the feedback we collected and survey analysis, we built a materiality matrix, representing opinions across our internal and external stakeholders, including senior management, employees, business partners and NGOs.

			Bangladesh and
			Sri Lanka
60%		No coal-fired units in
of factories implemented		wholly owned factories
worker voice programmes

23%		6,500
freshwater per garment		volunteering hours
vs 2022

4.7%

absolute carbon vs 2022

•	Announcements	•	Press releases
•	Direct mails	•	Site visits
•	Focus groups	•	Sustainability reporting
•	Interviews	•	Surveys
• Intranet and external websites	•	Social media

• Meetings (virtual and in-person)

Stakeholder Groups

Customers	Governments	Shareholders	Institutions
	Suppliers		Investors
	Employees
			NGOs
Communities		Media

Follow Us on Social Media

Relevance to external stakeholders

MATERIALITY MATRIX 2023

	13	22	1	9
		18	21
	3		17
2
		20
14
4	10	5

8

12 16

6 11

19

7

15

Relevance to internal stakeholders

1. Climate change
2. Circularity
3. Sustainable materials
4. Water conservation
5. Chemical and wastewater management
6. Climate-relatedrisk management
7. Ecosystem and biodiversity
8. Sustainable product development
9. Health and safety
10. Employee wellness
11. Corporate sustainability culture
12. Equity
13. Human rights
14. Supply chain management
15. Community engagement
16. Product responsibility
17. Business performance
18. Operational resilience
19. Market presence
20. Innovation
21. Manufacturing excellence
22. Ethical business practices

EnvironmentSocial Economic

2 factories								59,000
achieved zero								women empowered
operational waste								through CARE
to landfill								since 2014
	Regenerating Nature		Resourcing People		Revitalising Community

Facebook

Instagram

YouTube

LinkedIn

Material Issues under Our Spotlight

The following topics were identified as material to our business and sustainability:

• Climate change
• Business performance
• Manufacturing excellence
• Health and safety
• Ethical business practices

These identified material topics were validated and endorsed by the Sustainability Committee, and will be prioritised in our strategic planning for greater sustainability.

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Stakeholder Engagement

Key Initiatives for Addressing Stakeholder Concerns

We strategised our course of action to actively respond to the material topics that our stakeholders are concerned about.

Global Partnerships on Sustainability

Signatory		Affiliate Partner

Climate change	• Net zero roadmap to 2050
• Interim 2030 target of reducing absolute carbon emissions by 35%
	• Group-wide rooftop solar panel plan
	• Energy-efficient manufacturing process
	• Transparency of climate action and emissions - CDP
	• Climate-related risk management - TCFD
	• Industry collaboration with customers, institutions, and NGOs
	• Increasing green energy and energy reduction capital investment in our five-
Business performance
year plan
	• Setting key carbon-reduction initiatives in our balanced scorecard
	• Enhancing factory productivity to drive down carbon emissions and costs
	• Increasing investment in green energy and energy reduction initiatives
	• Increasing research in energy-reduction initiatives
	• System transformation and integration
Manufacturing excellence
• Digitalisation and automation
	• Smart factory, smart warehouse, smart laundry
	• Smart manufacturing models - FLAP and FLOCK
	• Modernisation Centre - innovation hub of automated machine development
	and manufacturing
	• Product and value-added process innovation
	• Roadmap for artificial intelligence

Disclosing Company (Climate Change)

Member

(formerly Sustainable Apparel Coalition)

Silver Member

Manufacturer Partner

Member

Project Partner (Enabling Systemic Circularity in Fashion)

Health and safety	•	Corporate governance mechanism
	。 Awareness and promotion
		。 Operational control and tracking
	•	Social compliance policy
	• Factory health and safety preventive mechanism
	• ISO45001 Occupational Health and Safety Management System
	• Life And Building Safety ("LABS") Initiative
	• Programmes promoting physical and mental wellness
	• Master policies on business conduct
Ethical business practices
• Factory governance mechanism to raise awareness and monitor compliance
	•	Supply chain management
	• Disciplinary, grievance and whistle-blowing mechanism
	• Anti-corruption policy governing vendor management
	• Training on master policies and business ethics

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	Corporate Member			Founding Member

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