Sunny Optical Technology : Environmental, Social ...

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 2382.HK)

2023 Environmental, Social and

Governance Report

Content

03 About the Report

05 Chairman's Statement

07 About the Group

02PART

27 Green Operation

1. Environmental Management

1. Response to Climate Change

1. Improvement in Resource Utilization

1. Emission Management

01

01PART

13 Strengthening Management

1. Corporate Governance

1. Risk Management

1. Business Ethics

1. ESG Governance

1. Communication with Stakeholders
2. Materiality Assessment

03PART

43 Product Liability

44 R&D Innovation

1. Protection of Intellectual Property Rights

1. Product Quality Control

1. Information security management

1. Customer Rights and Interests Protection

04PART

59 Supply Chain Management

1. Supply Chain Management System

1. Conflict Minerals Procurement
2. Supplier Communication

06PART

93 Community Welfare

1. Support for Education
2. Public Welfare and Voluntary Service

05PART

65 Friendly Workplace

1. Employer Brand Value
2. Safeguarding Employees'Rights and Interests

1. Development and Training of Employees

1. Employee Care

1. Occupational Health and Safety

98 Appendix I

Independent Practitioner's Limited Assurance

Report

100Appendix II

Responsibility KPIs

102Appendix III

Environmental, Social and Governance

Reporting Guide Comparison Table

105Appendix IV

GRI Index

02

2023 Environmental, Social and

Governance Report

About the Report

This report is the 2023 Environmental, Social and Governance ("ESG") Report issued by Sunny Optical Technology (Group) Company Limited (the"Company "or"Sunny Optical Technology"), which mainly summarizes the ESG work methods, commitments and strategies of the Company and its subsidiaries (the "Group").

Reporting period

Unless otherwise stated, the report covers the period from 1 January 2023 to 31

December 2023 (the"Reporting Period").

Definitions

For ease of presentation and reading, in this report, all of the"Group"，"we"or "us"refer to Sunny Optical Technology (Group) Company Limited and all its sub- sidiaries, and the"Company"，"Sunny Optical Technology"refers to Sunny Optical Technology (Group) Company Limited.

Reporting Boundary

The scope of this report covers the Company and its main subsidiaries located in Yuyao City, Zhejiang Province, the People's Republic of China (the"PRC"or "China"), namely Zhejiang Sunny Optics Co., Ltd. ("Sunny Zhejiang Optics"), Ningbo Sunny Opotech Co., Ltd. ("Sunny Opotech"), Ningbo Sunny Automotive Optech Co., Ltd. ("Sunny Automotive Optech") and Yuyao Sunny Optical Intelligence Technology Co., Ltd. ("Sunny Optical Intelligence (Yuyao)")(Note 1,2). During the Reporting Period, the main operating revenue of the four subsidiaries covered in this report accounted for more than 90.0% of the revenue of the Group.

Reporting Principles

This report has been prepared in accordance with the Environmental, Social and Governance Reporting Guide in Appendix C2 (《環境、社會及管治報告指引》 附錄 C2) to the Rules Governing the Listing of Securities published by the Stock Exchange of Hong Kong Limited (the"Hong Kong Stock Exchange") and Global Reporting Initiative Standards 《( 可持續發展報告指南》)("GRI standards") issued by the Global Sustainability Standards Board ("GSSB") , and complies with its reporting principles:

Notes

1.1.The content of Strengthening Management、Friendly Workplace、Community Welfare and related Key Performance Indicators (KPIs) covered the Group.

2.2.The content of Green Operation, Product Liability and Supply Chain Management and related KPIs covered the Company and four subsidiaries including Sunny Zhejiang Optics, Sunny Opotech, Sunny Automotive Optech and Sunny Optical Intelligence (Yuyao).

03

About the Report

Materiality

Quantitative

Balance

Consistency

During the preparation of this report, important stakeholders have been identified, and important ESG issues have been determined through materiality assessment;

This report uses quantitative data to present KPIs in environmental and social areas, with explanations provided to illustrate their purposes and impacts;

Based on the principle of balance, this report objectively presents the current state of the ESG management of the Group;

Unless otherwise stated, this report uses consistent data statistics methods compared with that in the 2022 ESG Report, and no major changes have occurred.

Data Explanation

Unless otherwise stated, the data used in this report mainly include the internal statistical data and relevant public data of the Company and its four subsidiaries. The Group provides reasonable assurance that there are no deceptive records, misleading statements or major omissions in the content of this report. The currency in this report is denominated in Renminbi"(RMB").

Publication Method

This report is published in an electronic format on the websites of the Company (http://www.sunnyoptical.com) and HKEXnews of the Hong Kong Stock Exchange (http://www.hkexnews.hk). This report is in Chinese and English. If there is any inconsistency, please refer to the Chinese version.

Contact Method

If you have any queries or suggestions in relation to this report or the ESG management of the Group, please contact us through e-mail ([e-mail]).

04

2023 Environmental, Social and

Governance Report

Chairman's Statement

"In 2023, we were dealing with an extremely complex and difficult business environment due to the sluggish global economic recovery, insufficient consumer demand, continuous international geopolitical conflicts, global supply chain restructuring, and intensified industry competition. The Group maintains our strategic focus to face up to the challenges, looking for new revenue sources and cutting back on expenditures. We increased the ratio of sales to existing customers, leading the industry in the sales of our three main products - handset lens sets, handset camera modules, and automotive camera modules. Meanwhile, the Group kept committing ourselves to the enhancement of social values.

We firmly believe that apart from business development, managing environmental, social and governance ("ESG") issues wisely can not only reduce operational risks, but also improve internal governance, attract talent, and expand markets, thereby enhancing our overall competi- tiveness. On January 1, 2023, we appointed a new female independent non-executive director, intending to improve the diversity and independence of the Board of Directors. To manage risks better, the Group has gradually incorporated climate-related risks into its enterprise risk management system, whereby climate-related risks and opportunities are identified, and relevant controls and policies are introduced to ensure sustainable and stable development.

As part of our environmental efforts, we implement the"dual carbon"strategy, embracing the green and low-carbon development philoso-

Ye Liaoning

Chairman and Executive Director

05

Chairman's Statement

phy in the design, research & development, production, and application of products. To reduce greenhouse gas emissions, we have increased the proportion of clean energy use; replaced energy-consuming equipments; optimized the layout and configuration of equipment and introduced advanced electrified and digitalized management platforms to improve energy utilization. During the Reporting Period, Sunny Opotech and Sunny Optical Intelli- gence(Yuyao) established an energy management system and passed the ISO 50001 certifica- tion. We carried out 9 energy-saving projects throughout 2023, saving a total of 3,319.9MWh of electricity and reducing 2,335 tonnes of carbon dioxide emissions; and 4 water-saving proj- ects, saving 270,000 tonnes of water.

Regarding the social aspect, the Group upholds the people-oriented concept and responds to what employees want, what society needs, and what the public expects. By pushing for a responsible supply chain and supporting rural revitalization, public welfare, and charity with all efforts, we have extended warmth and care with compassion. To improve employees' sense of security, belongingness, and happiness, we have implemented a variety of talent retention initiatives and employee care activities. During the Reporting Period, the Group was selected for the"Pilot Scheme for Improving the Quality of Life of Employees"by the All-China Federation of Trade Unions. Furthermore, we require our suppliers to comply with international laws and regulations, industry standards and the Group's policy and requirements on human rights management, business ethics, hazardous substances management, and conflict minerals management, and to work with us to create a sustainable win-win ecosystem. We also take an active part in public welfare and charity, contributing to local socio-economic development by supporting education, poverty alleviation, and environmental protection.

In 2023, thanks to the unremitting efforts of our people, the ESG performance of the Group has been widely recognized by society. During the Reporting Period, the international authoritative rating agency MSCI upgraded the Group's ESG rating from"A"to"AA", and the CDP (Car- bon Disclosure Project) raised the Group's rating on climate change mitigation. Furthermore, the Group was awarded the"Sustainable Development Model of 2023"in the 13th Philanthropy Festival (2023) and the"Top 100 Chinese ESG and Low-carbon Companies Listed Overseas of 2023"in the"ESG Charity Foundation"ratings for performing well in green development, social responsibility, and governance. These are the recognitions of our sustainability efforts by external organizations, and the encouragements for us to keep moving forward and never let up.

As we enter a new stage, we will have more responsibilities to shoulder. Looking ahead to 2024, despite the challenging external environment, the Group will stick to its strategic posi- tioning, take advantage of the global business presence, and work with stakeholders to explore sustainable ways of development to address global challenges.

Ye Liaoning

Chairman and Executive Director

China

April 20, 2024

"

06

About the Group

About the Group

Established: In 1984

Stock Code: 2382.HK

Number of Employees: 29,524 (as of 31 December, 2023)

Headquarter Location: No. 66-68, Fengle Road, Yuyao, Zhejiang Province, China

Scope of Experience: Global leading integrated optical components and products manufacturer

Global Deployment: China, Vietnam, India, South Korea

Website: https://www.sunnyoptical.com

During the Reporting Period, the Compa- ny's MSCI ESG rating was upgraded to AA. The Company has been included in indexes such as Hang Seng Index, Hang Seng China Enterprise Index, Hang Seng TECH Index, Hang Seng Corporate Sustainability Index, Hang Seng ESG50 Index, HSI Low Carbon Index and FTSE4Good Index Series.

The Group is principally engaged in the design, research and development ("R&D"), manufacture and sale of optical and optical-related products. Such products include optical components (such as vehicle lens sets, optical parts of vehicle light detection and ranging ("LiDAR"), virtual reality ("VR") Perception and Interactive Spatial positioning lens sets, handset lens sets, glass spherical and aspherical lenses and other optical components) (the "Optical Components"), optoelectronic products (such as vehicle modules, VR folded path ("Pancake") modules, VR visual modules, handset camera modules, Robot Vision Module and other optoelectronic modules) (the "Optoelectronic Products") and optical instruments (such as intelligent inspection equipment and microscopes) (the"Optical Instruments"). The Group focuses on the application fields of optoelectronic-related products, such as vehicles, VR/augment reality ("AR"), robots and handsets, which are combined with optical, electronic, algorithm and mechanical technologies.

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2023 Environmental, Social and

Governance Report

Global Deployment

The Group's production bases in China are located in Yuyao of Zhe- jiang Province, Zhongshan of Guangdong Province, Shanghai and Xinyang of Henan Province, respectively. In order to promote its global layout and satisfy the demand in overseas markets, the Group has established production bases in India and Vietnam, respectively. Meanwhile, in order to have timely insight into the industry opportunities and cater to the customers for rapid R&D, the Group has set up R&D centers in China, and South Korea to provide more international technical support and reserves.

Henan	Shanghai
Xinyang, Henan	Shanghai
	Zhejiang
Guangdong	Yuyao, Zhejiang
Zhongshan, Guangdong

South Korea

India China

Vietnam

Production base

R&D centers

Brief introduction of four subsidiaries covered in this report are as follows:

Sunny Zhejiang Optics

Primarily engaged in the design, manufacture and sales of handset lens sets, sensing lenses, display optics, refractive and diffractive optics and other optical components.

Sunny Opotech

Primarily engaged in the design, manufacture and sales of optoelectronic products including handset camera modules, three-dimensional"(3D") optoelectronic products, etc.

Sunny Automotive Optech

Primarily engaged in the design, manufacture and sales of optical components and assemblies applied in the vehicle indus- try. Such products include optical components, such as vehicle lens, LiDARs, head-up displays, and smart headlamps.

Sunny Optical Intelligence (Yuyao)

Primarily engaged in the design, manufacture and sales of vision sensing products applied in the areas such as AR/VR/mixed reality ("MR"), smart home (smart doors, smart locks/smart home appliances/home services robots), smart commercial (personal verification terminals/commercial service robots/smart logistics terminals).

09