2023

ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) REPORTAbout the Report ｜2 0 2 3

About the Report
The 2023 ESG Report is the eighth annual report of China Shengmu Organic Milk Limited to disclose
the information on its environmental, social and governance performance.

Reporting Period
The report highlights our sustainability performance for the period from January 1, 2023, toDecember 31, 2023.

Reporting Scope
The report covers the information of China Shengmu Organic Milk Limited and all of its branches
and subsidiaries, which is consistent with the scope of Shengmu’s consolidated financial
statements.

Reporting Cycle
The report is issued on an annual basis, consistent with the release cycle of the Company’s financial
statements.

Data Source

02

Response to the Four Reporting Principles in the HKEX ESG Reporting Guide
Materiality:
The report shall disclose the materiality matrix of major topics, elaborate the determination process
and final results of major topics, describe significant stakeholders and targeted communication
measures. For details, please refer to “Stakeholder engagement” and “Identification of material topics”
sections in “Sustainability Management”.
Quantitative:
The key performance of the relevant historical data disclosed in the report can be measured, so thatthe benefits of environmental, social and governance and management systems can be assessed andverified. The environmental data disclosed in this Report shall be marked with reference standards,
methodologies, and parameters.
Balance:
The report aims to provide an objective and impartial picture of the Company’s performance.
Information used comes from internal documents, statistical reports, and publicly disclosed sources
and is presented without any inappropriate modifications.

Data and cases used in the report mainly come from the official documents, statistical reports, andpublicly disclosed sources of China Shengmu Organic Milk Limited. Unless otherwise specified, alldata denominated in “Yuan” are presented as RMB; all data denominated in “USD” are calculated
based on the 2023 annual average exchange rate (1 RMB=0.14191 USD) as announced by the
People’s Bank of China (PBoC).

Consistency:
Compared with the Company’s ESG Report in 2022, there are no major changes in the reporting
scope or statistical methods in this report. The statistical caliber of some data has been adjusted, andthe past historical data has been retrospectively adjusted, so that various ESG performance data canbe compared horizontally, as detailed in each chapter of this report.

Reporting Guidelines

References to China Shengmu Organic Milk Limited

The report is compiled in accordance with the ESG Reporting Guide in Appendix C2 to the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (hereinafterreferred to as the “HKEX ESG Reporting Guide”), including provisions on “comply or explain” basis
and mandatory disclosure requirements therein contained. Furthermore, information disclosure on
climate in the report is made in partial compliance with requirements set out in the Guidance on
Climate Disclosures published by the HKEX.

As used herein, “China Shengmu”, “Shengmu”, “the Company”, and “we” all refer to China Shengmu
Organic Milk Limited.

Accessibility
This report can be read or downloaded on the website of the HKEX or Shengmu’s official website.
This report is available in Chinese and English. The Chinese version shall always prevail in case ofany discrepancy or inconsistency between the Chinese version and its English translation.

03

01

Sustainable Corporate Governance20

1.Sustainability Management

22
24
25
26

2.Sustainability Influence
3.Intelligent Operation
4.Compliance Operation

Contents
About the Report

02

Message from the CEO

06

02

Product Responsibility

28

1. IFRS Sustainability Disclosure
2.Supplying High-quality Raw Milk
3.Strengthening Supply Chain Management

About Us

08

Corporate Culture

09

Brand Concept

10

Major Achievements in 2023 12
Honors and Awards
Our Actions to UN SDGs
(SDGs）
04

14
16

4.Guaranteeing Animal Welfare
5.Facilitating Dairy Industry

03

Environmental Responsibility

50

52
2.Guaranteeing Employees' Rights and Interests 54
3.Protecting Health and Safety of Employees
58
4.Facilitating Career Development
61
5.Focusing on Humanistic Care64
1. IFRS Sustainability Disclosure

05

66

30
32
34
35
36

1. IFRS Sustainability Disclosure

68
70

38

Outlook 2024

72

Verification Statement

74
76
80

40
2.Intensifying Pollution Prevention and Control 43
3.Promoting Energy Conservation and Carbon 45
4.Protecting Natural Resources

Employer Responsibility

Community Responsibility

1. IFRS Sustainability Disclosure

Reduction04

2.Delivering Caring and Kindness with
Donations from Shengmu
3.Giving Full Play to Industrial Advantages toPromote Rural Revitalization

HKEX ESG Reporting Guide Indicators
Feedback Form

71

48
05

Message from the CEO ｜2 0 2 3

Message from the CEO
The passage of time is just like the flow of water, which goes on day and night. As sustainable development
was unprecedentedly brought into spotlight across the world in 2023, it has become a consensus of theinternational community to jointly promote the long-term and harmonious development of environmental
protection, social responsibility, and good governance (ESG). In the face of unexpected situations andchallenges at home and abroad, we have responded calmly, adhered to long-termism, and strengthened
scientific research and innovation, leading the industry, achieving outstanding performance, leading theindustry, and continuously enhancing corporate operation and competitiveness for sustainable development.

Sticking to Ecological Priority and Moving Towards Green and Low-carbon Development
We always adhere to the concept of green agriculture and low-carbon organic milk, and resolutely embark
on the road of high-quality development guided by ecological priority and green development. In 2023, we
followed the natural nature, acted as shepherds, and sought a sustainable development path with diverse andharmonious life forms in the natural world, and won the 2023 Ernest & Young Sustainability Excellence Awards
for the case of “A New Natural Economic Mode with Benefiting Nature as a Core”. Furthermore, we actively
pushed ahead our pastures’ environment management system certification, continued to respond to the
Carbon Disclosure Project (CDP) questionnaires on climate change and forests, and never ceased examining
and improving our climate risk management.

strategic partners, suppliers and communities as shared destiny, continuously reinforcing the mechanism of
mutual influence, empowerment, value creation, risk sharing, and benefit sharing. In 2023, Shengmu attended
the first FAO Global Conference on Sustainable Livestock Transformation and the WAFI Entrepreneurship
Forum, hoping to spread the advantages of organic agriculture concept and practices to a wider audience.
We actively promoted scientific and technological innovations to empower high-quality development, and we
implemented a diverse talent structure to safeguard employee rights and continuously cultivated a competitive
talent pool. We focused on the construction of sustainable supply chains and strive for win-win cooperation
with strategic partners. We cared for vulnerable groups, carried out educational assistance activities, andconveyed love and responsibility.
We raise cows in deserts, nurture people in desert, and persist in sustainable development in desert. Looking
to the future, we firmly believe in long-termism and will continuously build an internationally leading organic
industry in Ulan Buh desert, and implement the guiding principles of General Secretary Xi Jinping on “building
Inner Mongolia into a production, processing and export base in China for green agricultural and animal
products” to provide a demonstration model for the further promotion of organic agriculture on a global scale.
Zhang Jiawang, CEO and Executive Director of China Shengmu Organic Milk Limited

Persisting with Quality Control and Building a Top Brand for Organic Milk
We persist with quality control over the whole supply chain from grass planting to cow breeding to milk
processing, building the world’s first fully organic dairy farming system in the desert, and continuing topursue innovation and improvement of our products and services to set a quality benchmark for China’sorganic milk. In 2023, all lab projects of Shengmu passed CNAS review, demonstrating strong technicaltesting capability and quality assurance in the field of raw milk production. Relying on pastures, we focuse on
animal welfare in breeding, and reinforce the closed-loop organic ecological benefits of organic planting andbreeding to create a high-quality, high-yield, low-pollution and low-riskgreen agricultural mode and let light-hearted cows to produce highquality organic milk.

Seeking Common Prosperity with Partners
for Sustainable Development
We always uphold the common prosperity of business value
and social value, and regard shareholders, employees,

06

07

About Us ｜Corporate Culture ｜2 0 2 3

About Us
China Shengmu Organic Milk Limited, as China’s
largest organic dairy company, produces desert
organic raw milk in a circular way integrating
planting, breeding and processing. The businesscovers the entire value chain of the dairy industry,including pasture growing, dairy cow cultivation,and raw milk processing. In July 2014, the Company
successfully listed on the main board of the HKEX
(stock code:1432), becoming the world’s first stock in
the organic raw milk industry and the first domestic
raw milk brand to obtain organic standards of China
and the EU. With the safe milk source base as thecore, the Company adopts an organic approach
to pasture growing and dairy farming, produces
high-quality organic raw milk, and consolidates
partnerships with downstream liquid milk productenterprises.
Since its inception, China Shengmu, with the visionof developing into a top brand in the global organic
milk industry, has always adhered to the core

Corporate
Culturevalues of “Integrity, Excellence, Pragmatism, andPassion.” The Company has innovatively combined
desert governance with circular agriculture, taken
advantage of the favorable geographical conditions
and natural environment of the Ulan Buh Desert toimprove the ecological environment and develop
the sand industry on a large scale, and thus
formed an organic industry chain. It has becomea pioneer in China’s organic circular industry inthe desert and the world’s largest producer oforganic raw milk. As the dairy industry speeds
up its modernization, capital, talent, and otheressential resources are rapidly concentrating
towards leading enterprises. In the process ofindustry transformation, China Shengmu has put
forward a new development philosophy, adheringto the concept of “Youth, Openness, Reform” andjointly promoting “Sustainability and Common
Development” of the industry to build a top brandin the global organic milk industry.

MissionServing the country and promoting
agriculture to strive for excellence andcommon development

VisionDeveloping into a top brand inorganic milk worldwide

Core
ValuesEra View: Embracing the new era, embracing global competition, andcontributing to the great rejuvenation of the Chinese nation
Agricultural View: An industry with promising prospects
Corporate View: Giving back to society and strengthening the country
Work View: Integrating into the corporate culture and pursuing excellence
Success View: Creating value and benefiting societyLife View: Happy and blissful life

08

09

Brand Concept ｜2 0 2 3

Brand Concept
The brand concept of Shengmu is an extension of the connotation of its “S Plan” and lies at the core of its
determination to embark on a new path towards organic, eco-friendly and sustainable development, embodying
Shengmu’s commitment to sustainable development, promoting green transformation of development, andsteadfastly following the road of high-quality development guided by eco-prioritized and green development.
It practices the concept of green agriculture and low-carbon milk, adheres to the harmonious coexistence ofhumans and nature, and creates a new natural economic business mode centering on “benefiting nature andpromoting benevolence in business”.

•Action Plan for Shengmu “S” Plan

Planting•The Connotation of Shengmu’s “S” Plan

03
Sustainability

Imprinting the conceptof sustainability into
the DNA of corporate
development, dedicating
to energy conservation,
carbon reduction, andbiodiversity protection

02
Superior

Pursuing excellent
quality and striving
to become the top
brand in the globalorganic milk industry

01

Security

Ensuring food production
safety, environmental
safety, and animal safety

Satisfaction

Focusing on achieving“producing the world’s
most popular organic
milk in the world”•Developing grower partnerships•Providing support to local farmers•Improving community environment andinfrastructure•Protecting women’ s rights

04
SpiritRooted in the Ulan Buh
Desert, forging ahead,and persevering spiritof enterprises

Breeding

05

Land

Sands

Relying on the desert,
creating an innovative
combination of cultivation
and breeding, and a green
organic desertification
control industry chain•Sustainable agriculture• “Zero Deforestation” actions•Carbon sequestration through planting trees•Water conservation•Biodiversity conservation•Smart herd management•Low carbon energy-saving technology•Animal welfare•Expertise sharing•Industry sustainability exchanges

06

Smile

Hoping that everyone
associated with Shengmu
can smile at the thoughtof Shengmu

Transportation•Reducing the carbon footprint of transport•Ensuring transport quality and safety

07

10

11

Major Achievements in 2023

Major Achievements in 2023
Environmental
Performance

23,333.33

SocialPerformancehectaresdesert has been transformed into high-quality pastures

220

21
7

square kilometers

desert transformed 220 into oases

98+

milliontrees planted

1.38

million tons

a cumulative carbon sequestration achieved

11.96%The greenhouse gas (GHG) emission per cow(scope 1 and 2) reduced from the level in 2022

7.59%

The energy consumption intensity per cow
reduced from the level in 2022

2

Governance
Performance

pastures ofShengmu were rated as S

pastures ofShengmu were certified
by China Good Agricultural
Practice (GAP)

includingincluding7

organic
pastures5organic
pasturestesting centers were certified to ISO/IEC17025 by
China National Accreditation Service for Conformity
Assessment (CNAS)

346

upstream partners got supports in the dairy
industry chain

64,088hours

USD 499.67

with a year-on-year
milliongrowth of

5.52%

The inventory of cows was

136,566
organic cows

compared to the previous period

96,165non-organic cows

4.44%

increased by

The annual milk yield per cow reached11.38 tons

increased by nearly

40,401

8.20%

year on year

Built

professional and technical training via both online andoffline channels employees received

41

Revenue washours

with an average per person

USD 361,100

34
18

pasturesorganic
pasturesincluding

1

A2
pastureand16

non-organic
includingpastures2

DHA
pastures

Organized a total of
training sessions on integrity, compliance,
anti-corruption, and safety and health32

of donations to charities

The fulfillment rate addressing major risks was

10,092
USD95.51

local livestock-farming households
got help and generated

12

million tons

92.3%

Successfully obtained

47

trademark registration certificates13

Honors and Awards ｜2 0 2 3

Honors and Awards

Included in Corporate Climate Target Setting, Action
Received the title “Nation Key Leading Enterprises inAgricultural Industrialization” by the Chinese Ministry ofAgriculture and Rural Affairs

Won theShortlisted as

Pioneering Award for ESG Disclosure Contribution

GoldenKey-SDG Forerunner Enterprises

sponsored by the Hong Kong Quality Assurance Agency (HKQAA)

selected by the China Sustainability Tribune

and Global Collaboration Towards A Net-zero
Future - Accelerate 2030 Agenda for Sustainable
Development Through Global Development
Initiative , a report issued by the United Nations Global
Compact

Won the 18th People’ s Corporate Social

Responsibility - Green Development Awardhosted by People.cn

Received the“7th China Excellent IR Best ESG Award”

sponsored by the International Road Show Center (IRSC)

Selected as the

Selected as the2023 Excellent ESG Practices Case of Listed

top 10 projects in the 2023 Paulson Prize for
Sustainability

Company by the China Association for Public Companies (CAPCO)

by the Paulson InstituteRated asErnst & Young Sustainability Excellence Awards Best Case of the Year

14

15

Our Actions to UN SDGs ｜2 0 2 3

Our Actions to UN SDGs
We have made an effort to contribute to SDGs by incorporating sustainability management into our organic dairy
and desertification control system. We are committed to upholding sustainability to safeguard our home planet.
SDG targets
1.3 Implement nationally appropriate social protection systems and measures for all, including minimum standards, to extend the coverage ofthe poor and the vulnerable by 2030.
1.4 By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as wellas access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate newtechnology and financial services, including micro-credit.
11.5 By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related
extreme events and other economic, social and environmental shocks
and disasters.
1.A Ensure significant mobilization of resources from a variety of sources, including through enhanced development cooperation, to provide
adequate and predictable means for developing countries, in particular the least developed countries, to implement programmes and policies
to eradicate poverty in all its dimensions.
Our actions
1. Facilitated the development of animal husbandry in Dengkou County, Bayannur City, where the Company is based, and promoted theemployment of the poor and increased local the income and prosperity of the population.
2. Engaged in the rebitalization of the countryside, and organized the foundation ceremony of the project of revitalizing the milk industry of
the county and the Shengmu Industrial Park to build the Shengmu Dairy Industrial Park.

•USD 361,100 of donations were made to charities•Efforts have been made to help 10,092 local livestock-farming households generate RMB673 million in income
SDG targets
2.4 By 2030, ensure sustainable food production systems and implement resilient agricultural practices to increase productivity and production,
help maintain ecosystems, strengthen capacity for adaptation to climate change, extreme weather, drought, flooding and other disasters andprogressively improve land and soil quality.
2.A Increase investment, including through enhanced international cooperation, in rural infrastructure, agricultural research and extension
services, technology development and plant and livestock gene banks to enhance agricultural productive capacity in developing countries, inparticular the least developed countries.
Our actions
1. Adopted organic farming practices and increased the use rate of organic fertilizers to improve soil fertility and the drought resistance of crops.
2. Recycled cow manure to produces organic fertilizers and upgraded our manure composting plants to greatly shorten the compostingprocess of organic fertilizers and increase their production efficiency. The processed organic fertilizers can improve aggregate stability andmoisture and nutrient retention capacity of sandy soil.
3. Adopted scientific cow breeding practices to increase milk production.

•The annual milk yield per cow reached 11.38 tons, representing a nearly 8.20% year-on-year increase
SDG targets
3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe,
effective, quality and affordable essential medicines and vaccines for all.
3.9 By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution andcontamination.
Our actions
1. Updated the Safety Management Policy, conducted occupational health and safety training, and took measures to prevent occupational
diseases and accidents and protect the health of employees.
2. Promoted employee health by offering an annual free physical examination and regularly assessed occupational hazards in the workplace.
3. Equipped pastures and administrative buildings with Automated External Defibrillator (AED) to safeguard the health of our staff.
4. As the industry’s leading organic milk producer, Shengmu’s products have high nutritional value, and the pure and safe source of milk isguaranteed. We provide the world’s highest quality desert organic milk.

•USD 68,556.72 was invested for offering occupational health examinations•USD 484,608.46 was invested in buying safety protective equipment•USD 480450.50 was invested in employer’s liability insurance premiums

SDG targets
4.3 By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.
4.4 By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, foremployment, decent jobs and entrepreneurship.
Our actions
1. Launched the Ace-100 Differentiated Talent Development Program to diversify career paths and improve the leadership and professional
skills of our employees at all levels.
2. Encouraged employees to pursue further education and obtain professional certificates or titles, so as to promote the continuous
development of the Company and employees.

•One employee with bachelor’s degree was enrolled in postgraduate program; and three employees withmaster’s degree were enrolled in doctoral program•12 employees applied for middle-rank professional title, and five employees applied for vice-seniorprofessional titles•20 and 100 employees were selected as directors and managers respectively
SDG targets
5.1 Eradicate all forms of discrimination against all women and girls everywhere.
5.A Undertake reforms to give women equal rights to economic resources, as well as access to ownership and control over land and otherforms of property, financial services, inheritance and natural resources, in accordance with national laws.
5.C Adopt and strengthen sound policies and enforceable legislation for the promotion of gender equality and the empowerment of all womenand girls at all levels.
Our actions
1.Eliminated gender discrimination and achieved gender pay equity. The ratio of male to female employees in the Company is 6:4.
2. Established a women’s federation to protect the rights of female employees and increased the proportion of female management.

•A total of 966 female employees were hired•Women account for 16% of middle management

SDG targets
6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials,
halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally.
6.4 By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater toaddress water scarcity and substantially reduce the number of people suffering from water scarcity.
Our actions
1. Installed a smart water metering system to achieve real-time monitoring of water use through the Internet of Things (IoT) and prevent any
waste of water resources in a timely manner.
2. Recycled the waste water of the dairy farms, reduced the use of groundwater, and cut the discharge of biogas slurry.

•The new process saved 0.4 tons of groundwater per ton of fresh milk
SDG targets
7.2 By 2030, substantially increase the proportion of renewable energy in the global energy mix.
7.3 By 2030, double the global energy efficiency improvement rate.
Our actions
1. Actively improved the energy mix, built a number of photovoltaic and methane power stations, and electrified loaders in our pastures.

•Distributed photovolatic power generation facilities with a capacity of 2.5MW for cow sheds were installed
SDG targets
8.2 Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus
on high- value added and labor-intensive sectors.
8.5 By 2030, achieve full and productive employment, decent work and equal pay for equal work for all women and men, including for young
people and persons with disabilities.
8.7 Take immediate and effective measures to eradicate forced labour, modern slavery and human trafficking and secure the prohibition andelimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms.
8.8 Protect labour rights and create safe and secure working environments for all workers, including migrant workers, in particular women
migrants, and those in precarious employment.
Our actions
1. Created a diverse and inclusive environment based on the principles of equal and diverse employment, adhered to equal pay for equal
work, and resolutely eliminated the use of child labor and forced labor.
2. Attached a lot of importance to corporate culture and created Shengmu’s “family” culture to enrich the life of employees and extend
employees’ care to their families.
3. Directly and indirectly created jobs for local residents and increased the annual per capita income of local farmers and herdsmen.

•Employees raised a USD 193,692.96 of mutual aid fund
•USD 170,859.64 was invested in staff activities and tourism

16

17

O u r A c t i o n s t o U N S D G s ｜2 0 2 3SDG targets
9.4 By 2030, upgrade infrastructure and improve industry to make it more sustainable, and enhance resource-use efficiency and greater
adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with theirrespective capabilities.
Our actions
1. Replaced all boilers with air heat source pumps, improved the recycling process of waste heat, and effectively reduced energy consumption.
2. Recycled cow manure to produce organic fertilizers and bedding for dairy cows, thereby enhancing the comprehensive value of resourcesand greatly reducing CO2 emissions.
3. Increased the use of renewable energy, and used electric loaders at pilot pastures.

•8,039 tons of carbon dioxide equivalent (CO2e) have been reduced in GHG emissions through thereplacement of bedding for cows
SDG targets
10.2 By 2030, empower and promote the inclusion of all people in social, economic and political life, regardless of age, gender, disability, race,
ethnicity, origin, religious belief, economic status or other distinction.
Our actions
1. Paid attention to workplace diversity and cultural diversity, cared for ethnic minority employees, respected their customs and living habits,
and ensured that ethnic minority employees enjoy equal treatment.

•848 ethnic minority employees were hired
SDG targets
11.A Support positive economic, social and environmental links between urban, peri-urban and rural areas by strengthening national andregional development planning.
Our actions
1. In the Ulan Buh Desert, Shengmu built high-quality pastures, improved infrastructures, and transformed a large area of desert into oases,
greatly benefiting local residents.

•A cumulative amount of USD 1.21 billion was invested in the Ulan Buh Desert•23,333.33 hectares of desert areas were transformed into high-quality pastures•220 square kilometers of desert areas were transformed into oases•193.3 km-long roads were built•277.9 km-long power lines were built•11 reservoirs were built•Nine organic manure composting plants were set up•One bio-organic fertilizer processing plant was establishedSDG targets
12.2 By 2030, achieve the sustainable management and efficient use of natural resources.
12.4 By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance withagreed international frameworks, and significantly reduce their release to air, water and soil to minimize their adverse impacts on human healthand the environment.
12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse.
12.6 Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability
information into their reporting cycle.
Our actions
1. Created the world’s first desert-based organic circular industry chain that integrates planting, breeding and processing to produce highquality organic raw milk;
2. Engaged qualified third-party providers with hazardous waste disposal qualifications to dispose of our hazardous wastes throughsterilization, pulverization, fermentation, etc.
3. Integrated sustainability into industrial development and our daily operations, and took scientific management measures to promotesustainable use of natural resources, reduce pollution, and minimize environmental impacts.
4. Regularly disclose our sustainability management strategy, practices and performance in annual ESG report.

•36 training sessions on environmental protection were launched18

SDG targets
13.3 Strengthen education, publicity and climate change mitigation, adaptation, impact reduction and early warning, and enhance thecapabilities of personnel and institutions in this regard.
Our actions
1. Promoted industrial desertification control by planting trees and building organic pastures to turn the desert into an oasis and build anorganic ecosystem, improving the local ecological environment and biodiversity, and enhancing the ability to adapt to climate change.
2. Took the lead in the organic milk industry to propose an emissions reduction pathway, released the carbon reduction strategy and action
plan, and effectively completed carbon inventories.
3. Completed the questionnaires of the Carbon Disclosure Project (CDP) on climate change and forests and emphasized GHG emissions
measures including reducing fossil energy consumption, carbon sequestration in deserts, and forest protection measures such as herbaceoussand fixation and water conservation.

•GHG emissions were 662,373.52 tons of carbon dioxide equivalent (CO2e)•Compared with that data in the 1980s, the amount of solar radiation in the Ulan Buh Desert decreased
by 40%–45%; sand and dust storms decreased by 80%–90% average wind speed decreased by 21.41%andprecipitation increased by 30.36%
SDG targets
15.1 By 2020, in line with obligations under international agreements, ensure the conservation, restoration and sustainable use of terrestrial andinland freshwater ecosystems and their services, in particular forests, wetlands, mountains and dry lands.
15.5 Take urgent and significant action to reduce the degradation of natural habitats, halt the loss of biodiversity and, by 2020, protect andprevent the extinction of threatened species.
Our actions
1. Worked with Bayannur Daily to launch a tree planting event with the theme “Greening the Ulan Buh Desert” at Shengmu’s the sixteenth
pasture in Bayannur.
2. Through continuous transformation of desert ecology, the Ulan Buh Desert has formed a regional microclimate, and the number of species
has increased to hundred, including nationally endangered species. In addition to forage crops and medicinal herbs, new varieties of plants
such as alfalfa, oats, corn, and dandelions have grown widely in the original desert areas. Animals such as lizards, foxes, hares, and gazelles
also began to appear frequently, and even birds like waterfowl, egrets, and owls began to settle in this desert oasis.

•Compared with levels in the 1980s, the number of species has increased to several hundred, including
national level endangered species.
SDG targets
16.5 Substantially reduce corruption and bribery in all their forms.
16.6 Develop effective, accountable and transparent institutions at all levels.
16.7 Ensure responsive, inclusive, participatory and representative decision-making at all levels.
16.b Promote and enforce non-discriminatory laws and policies to push sustainable development.
Our actions
1. Continuously improve corporate governance, reinforce the fight against corruption, and strive to build an efficient and transparent
governance system.
2. The application of digital system integrating logistics, capital flow, and information flow into one achieved horizontal integration of forage
crop cultivation, food production, feed factories, and pasture management, and realized standardization, refinement, and transparency ofinternal management and control.

•The proportion of females in our upper management reached 15.38%
SDG targets
17.16 Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and shareknowledge, expertise, technology and financial resources, to support the achievement of the Sustainable Development Goals in all countries, inparticular developing countries.
17.17 Encourage and promote effective public, public-private and civil society partnerships, building on partnership experience and funding
strategies.
Our actions
1. Established close strategic partnerships with universities and other companies in the dairy industry, and combined strengths with ourpartners to jointly promote the development of green and organic agriculture.
2. Established an interest linkage mechanism with suppliers to provide them with technical and financial support, and worked together tobuild organic supply chain.

•346 upstream partners on the industry chain got support

19

01

Sustainable
Corporate Governance
Shengmu is committed to developing sustainable and stablecorporate management, establishing a more independent, efficientand professional Board of Directors, focusing on corporate
compliance, risk management and internal control, and taking
national laws, regulations and regulatory requirements as thecriterion to strengthen the implement of the system, promote theimprovement of business practices, accelerate digital operations,effectively safeguard the rights and interests of investors, and strive
to create a sustainable development model for global enterprises.

20

21

｜ Sustainability Management ｜Sustainability Management

Stakeholder Engagement

Shengmu’s sustainable development management work is guided by the UN 2030 SDGs, and continuously
integrates corporate social responsibility (CSR) into daily operations. To achieve the optimal allocation of resources
and inputs and more efficiently drive progress towards SDGs, the Company has formed a three-level sustainability
management structure with the Board of Directors as the highest decision making body, strengthening
communication with stakeholders, and actively promoting the realization of sustainable development goals thatbest match Shengmu’s mission, business model, professional capabilities and influence.

Sustainability Management Structure
We highly value the importance of ESG risk
management and continue to improve ESG
governance structure and management
mechanism. In response to our ESG management
and business development needs, a Strategy
and Sustainability Committee under the Board of
Directors was established.

Major stakeholders

Major concerns

Means of communication

Sustained and stable return on investment
Timely information disclosure
Business compliance

Annual general meetings of shareholders
Annual reports and corporate
announcements

Improve business performance and consolidate
the leading position in the industry
Regularly disclose relevant company information
Improve the internal compliance system

Employees

Career development space
Compensation and benefits
Occupational safety and healthInternal website
WeChat official accountGeneral Manager’s Mailbox
Staff meetings

Improve employee recruitment, promotion andother related internal management systems
Enrich employees’ lives
Provide diversified work and life security

Suppliers

Transparent, fair and open procurement
Timely performance of contractual obligations
Growth of suppliers and win-win outcomes

Procurement and tendering
announcements and information publicity
Regular communication of quality
requirements
Supplier conferences

Ensure transparency throughout the
procurement process
Ensure timely payment to suppliers
Promote effective communication with suppliers
Support the growth of suppliers

Customers andpartners

High-quality products and services
Customer needs
Common development of the industry

Customer communication
Industry-level exchanges

Strengthen quality control
Improve innovation capabilities
Promote industry networking

Government

Development of local communities andrelated industries
Compliance operation
Taxes payment in accordance with law

Meetings with government representatives
Regular visits
Inspection by government officials

Provide jobs and contribute to tax revenue
Support government supervision and improve
the internal compliance monitoring system
Comply with laws and regulations

Communities

Development of local communities
Charity work

Communication with community
representatives
Charity and volunteer activities

Maintain close communication with local
communities
Carry out charity donation and assistance

Shareholders
Board of Directors ofShengmuStrategy and Sustainability
Committee

Sustainability
Department

Functional
Departments

We have established an normalized stakeholder communication mechanism based on the demands of various
stakeholders through targeted and diversified communication methods to actively respond to the needs of relevant
parties, thereby promoting the implementation and improvement of Shengmu’s sustainable development work.

Shengmu’s pastures
in Bayannur andHohhotShengmu Forage(Including Shengfeng
Agriculture)Feedfactories

Other relevant
departments

Response

Identification of Material Topics
Board of Directorsof Shengmu

Strategy andSustainability
Committee

Sustainability
Department

Functional
departments

Members of the Boardof Directors

Chairman andmembers of theCommittee

Head and members ofthe department

Head and members ofthe department•Formulate the Company’ssustainability management
policy, strategy and targets,and identify material factors•Monitor and evaluate theCompany’s sustainability
performance and report to
the Board of Directors•Do a good job in reportingand distributing information tofacilitate the implementationof specific work

•Regularly monitor the
implementation of theCompany’s sustainability
work•Control possible risks inthe pursuit of sustainable
development•Incorporate sustainability
work into the Company’s
daily operations andhold regular meetings tocoordinate and resolve
relevant issues•Identify and assess risks
and opportunities

22•Monitor and report the
progress of each project•Regularly report the
progress of relevant
initiatives/projects to the
Sustainability Department•Provide timel feedback
on problems encounteredduring the strategy
implementation (such asadequacy of resources, etc.)

The Company strives to combine material topics
with sustainability governance, and continues toimprove its sustainability governance to meetstakeholders’ needs and expectations to theutmost extent.
The selection of Shengmu’s material topics
The selection of material topics:
The Company identifies 23 material topics bybenchmarking against international standards andinitiatives including GRI Sustainable Development Report
Standard, HKEX’s ESG reporting guideline, SASB Standards
and the UN SDGs.
The analysis of material topics:
The Company derives the matrix of material topics inthe report based on the importance of the topic to theCompany and its stakeholders, as well as the importanceof the influence on the Company’s financial and sustainable
development.
Matrix of material topics and prioritization:
In view of each topic’s influence on finance, stakeholders
and sustainable development, the Company ranks all
topics in terms of materiality and responds all topics in thereport. Topics of high materiality and topics of medium-tohigh materiality will be disclosed in the report.

Environmental topics
Social topics
Governance topics

23

｜ Sustainability Influence ｜ Intelligent Operation ｜Sustainability InfluenceIntelligent Operation

As the sustainability philosophy plays an increasingly important role in world economic growth, physical capital
is not the sole determinant of corporate value, and multiple non-financial factors also matter significantly tocorporate value creation and long-term development.

Based on strategic development considerations and the goal of realizing smart management, Shengmu deeply
applies cloud platform, SAP system, RPA robot, Internet of Things, big data and other technologies, integrating
the original scattered application systems to break the information “isolated island”. An integrated and unified
application platform has been established with SAP-ERP as the core and supplemented by systems in various
professional field.

Natural capitalSocial capital

The inventory of renewable and nonrenewable resources that benefit
humankind

The network that can promote internaland external cooperation and features
shared criteria, values and awareness

Data element assetization
Human capital

Knowledge, skills, capabilities andqualities for individuals to improve theirwork performance and lives

Manufacturing capital

All machinery equipment and financial
assets that are used to make products
and provide services

As Shengmu has close relations with the nature, human capital and society, its production and operations can
produce material impacts and reliance on multiple forms of capital. Since our operations involve activities in
the primary industry (husbandry), the second industry (food processing) and the tertiary industry (distribution,
logistics, etc.), any unsustainable production and consumption in response to market demands might undermine
each link’s effort to promote ecological environment, people’s well-being and social development. In 2023,
Shengmu evaluated and analyzed the materiality of influence and dependence in the value chain, and finallyidentified and determined that natural capital, human capital and social capital have significant impact anddependence on the key links of Shengmu’s production and operation. At the same time, the value created byeach capital is monetized.
NaturalcapitalSocialcapitalHumancapitalManufacturing
capitalEnvironmental compliancePrevention and control ofnatural disasters
Green operations

Product quality
Anti-corruption compliance

Labour rights
Staff representatives

Intelligent operation
Inclusive finance

Influence onsociety

Discharge of waste
Emission of GHGs
Emission of waste gases
Climate regulation

Food health
Rural revitalization
Sustainable industry chains
Industrial development
Public charity

Staff training
Employee health and safety
Employee well-being
Gender rights_

Reliance on
capitalFresh water
Pastures
Lands

Partners on industry chains
Industry-level resources
Social recognition

Working experience
Skills and knowledge
Labour availability

Animal welfareIntellectual property

RMB160.6102 million

RMB3.280146 billion

RMB282.8038 million

RMB39.1229 million

USD22.7923 million

USD465.4855 million

USD40.1327 million

USD5.5519 million

Influence on
ShengmuMonetization
performance

24

Business integration

Work collaboration
Shengmu’s
targets
for digitaltransformation:Work intelligence

Scenario modeling
Digital intelligencefor decision-making

Case
Using digital elements to build intelligent pastures
Shengmu takes advantage of digital technology to build standardized, refined and intelligent pastures, allowing technology to inject
new impetus into this traditional industry. With the technical assistance of Tencent Cloud, China Shengmu has taken a series ofmeasures to seek digital transformation.
Improving work collaboration. Based on enterprise WeChat, Shengmu has built a digital base for on-site management of organizationand personnel to achieve collaboration among various business modules. Through product functions such as Tencent Micro Card andLexiang, Shengmu has realized the integration of gate machine, access control, consumption and work attendance information andone-card access in various departments from the group to the pasture, and set up a unified online platform for corporate culture andcommunity, properly carrying out knowledge asset accumulation and professional training.
In an effort to achieve the transformation from cow farming in desert to digital breeding, Shengmu has explored to utilize digitaltechnology to cow growth chain and pasture management chain. Shengmu has established a big data platform base as a data
source, and then applied block chain AI and other technologies to build a cow traceability management and control system, aherd management system, a big data system and a collaborative system to achieve a 360-degree all-round cow indicator systemmanagement. On this bases, various data models are generally constructed, ultimately realizing intelligent management nad control of
all aspects of pasture and providing intelligent auxiliary decision-making for the management.
In 2023, big data and AI technologies were gradually piloted and implemented in all pastures of Shengmu. At the same time, Shengmu
will also promote the implementation of more intelligent pastures and digital-real integration applications in the agricultural and animalhusbandry industry chain, including digital twin pastures and block chain tracing system, to achieve further refined management andimprove both quality and efficiency.

25

｜ Compliance Operation ｜Compliance Operation

Anti-corruption and Integrity

In order to effectively prevent and control major risks and minimize the impact of risks on the Company’s
operation and development, the Company strictly abides by the Supervision Law, Contract Law, Company Law,
Anti-Monopoly Law, and Anti-Unfair Competition Law to strengthen internal control, risk management and anticorruption, protect intellectual property rights, and promote compliance operations.

Innovative Risk Management
We follows the requirements of the Corporate Governance Code in Appendix 14 to HKEX listing rules andthe Basic Standards for Enterprise Internal Control to improve internal control and risk management systems
and mechanisms, organize internal audits and risk assessments, strengthen risk prevention level, and provide
guarantee for corporate sustainable development.

The Company attaches great importance to anti-corruption and integrity. By improving the constructionof organizations and systems, the Company comprehensively regulates employee organization, work andlife disciplines, punishes violations of laws and disciplines, and creates a good and upright entrepreneurial
atmosphere for Shengmu’s high-quality development. In 2023, the Company found no major corruption cases.

Integrity policy

The Company formulated a series of policies and systems such as the Measures for theManagement of Gifts, Business Entertainment Expenses Management System and Standard Codeof Conduct for Employee Investment and Shareholding to standardize daily work management.

Integrity commitment

We organized 377 employees at the manager level and above to establish “Integrity files”, arranged
83 employees at the director and above level to sign “Integrity commitment letters”, and organized
57 employees in positions of authority and power to attend the warning education on integrity forsupply chains in Mengniu Dairy.

Integrity review

We strengthened daily inspections to promote the implementation of strict corporate governancesystems and standards, such as prohibition against smoking, alcohol, gambling and data falsification,etc., carried out special inspections to facilitate high-quality development, ensure that inspections
and rectification problems are not repeated, and safety, environmental protection, bidding andprocurement, and sales are the focus.

Integrity ecology

Adhering to the tenet of “cooperation and development for an integrity ecology”, we signed an
integrity agreement with all suppliers and partners to optimize business cooperation and integrate
integrity into Shengmu’s ecosystem.

Self-examination andself-correction

We carried out special campaign on self-examination and self-correction to a total of 83 middle andsenior managers.

Integrity reminder

During important holidays, such as May Day, Mid-Autumn Festival, National Day, and Spring Festival,
timely integrity publicity and reminders on integrity are carried out to effectively prevent corruption
problems.

Reporting method

Reporting hotline: 15148021310 15148031310
Reporting email: jjjc@smorganic.cn

In 2023625

19follow-up measures
were taken

The fulfillment rate of
responses to major risks reachedspecial follow-up
reports were issued

92.3%

0

major risk incident
occurredIn 2023, we formulated 26 implementation plans of risk response, developed a risk response appraisal system
to incorporate risk management into the overall scope of assessment, improved digital intelligence of risk
management, and established and executed functions such as key risk information capture and core data
early warning. We also independently developed a risk framework for animal husbandry to provide risk tools to
empower the business.

Shengmu’s Risk Response
Appraisal System

Dimension 1:
Execution of the content of the risk
response execution letter
Dimension 2:
Whether it can help solve the problem
Dimension 3:
Whether risk response is used to help
achieve performance

26

Other
assessment–The party
being served(40%)

Selfassessment--Leadingdepartment(40%)

Professional
department--Riskmanagement
department(20%)

Dimension 1:
Response plans execution level
Dimension 2:
Fulfillment of process indicators
Dimension 3:
Fulfillment of outcome indicators

Dimension 1:
Is communication efficient
Dimension 2:
Whether materials are submitted in a timely
mannerDimension 3:
Is the content of the report accurate

Protection of Intellectual Property Rights
We strictly abide by the Patent Law, the Copyright Law and other relevant laws and regulations, set up a special
fund for the declaration and protection of trademarks, patents, and technologies, discover, avoid and prevent
potential intellectual property (IP) risks that may arise in technological innovation, and optimize patent technicallayout and improve the quality of intellectual property rights. Before or when deploying business strategy andplan, we develop a trademark and brand strategic planning, calrify project drivers and grasp the scope, quantity,and subsequent protection of trademark registration.

In 202347

trademark registration certificateswere successfully obtained

2

announced
trademarks

10

trademarks werereviewed

6

core
trademarks

27

02

Product
Responsibility
Shengmu has always been committed to realizing
the grand vision of “developing into a top brand in
the global organic milk industry”, strictly controlling
quality throughout the entire value chain from raw
material procurement to the supply of organic raw
milk, and building a full-process organic industry
chain covering organic environment, organic planting,organic breeding and organic products. We havealso worked together with our supply chain partners
to build an organic ecosystem, taking high-quality
product as the cornerstone to promote enterprises
to achieve sustainable and high-quality development.

28

29

｜ IFRS Sustainability Disclosure ｜IFRS Sustainability Disclosure

Relevant Opportunities and Potential Impacts of Product Responsibility
Potential Impacts

Opportunity Management andCountermeasures

Operation
opportunity

Value chain cooperation is consolidated
by enhancing mutual trust with
suppliers; by exchanging with industry
experts, we promote the innovationof breeding technologies, improve thelevel of production and operation, andincrease income.

•Build deep relationships of mutual trust with suppliers to ensure astable and transparent supply chain.
•Strictly screen and foster high-quality suppliers, and promote theirtechnical upgrading and service optimization.
•Establish an industry exchange platform, introduce advanced
breeding technologies, and improve production efficiency.

Marketopportunity

The increasing market demand for
healthy food and more attention paidby consumers to the quality of raw
materials in supply chain add premium
to certified organic products.

•Increase input and maintain authoritative organic certification toensure the quality of raw materials at source.
•Strengthen brand promotion, and highlight organic certification
marks and health values.
•Develop new organic products that meet market needs, and takeadvantage of market premium to improve profitability.

Brand
opportunity

We earnestly fulfill our social
responsibility, expand thecommunication channels of
stakeholders, build a responsible brandimage, and win the trust of customers
and financial institutions.

•Build multiple communication channels, and promote
communication and interaction with stakeholders through social
media, corporate official website, public relations activities, etc.
•Create a positive brand image, integrate marketing andcommunication resources, and improve brand reputation.

GovernanceIn terms of ensuring the quality of raw milk, we haveidentified the Safety and Quality Center as the core
hub for quality control and strictly monitored quality
management tasks from product source to terminal.
Shengmu cooperates with various pastures to ensurethat the production process and the quality of raw
milk comply with the national and international foodsafety and quality standards.

In terms of supply chain management, theProcurement Center developed the SupplierManagement Policy to systematically manage theselection, evaluation, cooperation, and performanceappraisal of suppliers to ensure the quality ofmaterials and a stable supply, and build a fair,transparent and sustainable supply chain system.

StrategyWith the mission of “providing the world’s highest quality desert organic milk”, Shengmu takes root in the Ulan
Buh Desert, joins hands with partners, and follows the basic rules of food safety, biological safety, production
safety and environmental safety to promote corporate development and create an organic ecosystem. By
identifying risks and opportunities related to the industry chain and formulating corresponding response
strategies, we ensure that the Company maintains stable operation in a complex and ever-changing market
environment, continuously optimizes the industrial structure, and enhances core competitiveness.

Risk Management
Risk Identification

Relevant Risks and Potential Impacts of Product Responsibility
Potential Impacts
Operation risks(S)

Compliance risks(S/M/L)

Reputation risks(S)

Risk Management and Countermeasures

Consumers’ higher requirementsfor organic brand certification bringpressure on industry chain traceability
and data transparency, and lead to theincrease of operating costs.

•Strengthen supply chain supervision, improve supplier standards,
and provide technical training and support.
•Proactively disclose production information on initiative to enhancecredibility.

Violations of animal protection andpublic food safety incidents cause
income loss.

•Prevent all kinds of quality risks through source control, production
process management, quality monitoring and tracing, andindependent third-party testing and certification.
•Consistently focus on animal welfare in the process of farming,
improve the health and disease prevention and control capacities
of cows, and ensure the health and comfort of cows in the wholeprocess of milk production.
•Improve the internal management system, strengthen supply chain
monitoring, and enhance transparency and regulatory compliance.

Product quality issues may trigger acrisis of consumer trust, and impact
on brand reputation.

Note: S for short-term; M for medium-term; L for long-term•Establish and improve a strict quality management system.
•Strictly abide by food safety laws and regulations, and conduct
regular food safety risk assessments and self-inspections.

•Identify the impact ofrisks on Shengmu based on
product quality, supply chain
management and strategic
partners.

•Fully implement 6S refined management of
pastures, and strictly control quality from feed
procurement, raw milk production totransportation.
•Establish interest linkage mechanism with
suppliers.
•Increase investment in facilities and devices foranimal welfare.
•Build strategic partnership with peers anduniversities.

Risk Monitoring/Reporting•Establish traceability system to monitor the wholeprocess of raw milk production in real time.
•Monitor the behavior of suppliers, and provide
sustainability-related training.
•Reinforce the professional veterinary teambuilding.
•Build a platform of exchange and learning withexperts and scholars.

Targets and Indicators
We have established indicators and targets related to Shengmu’s social responsibility, and continuously
monitored the performance and disclosed the progress to facilitate sustainable development of the Company.
SASB Indicator
FoodsafetyFB-MP-250a.1
FB-MP-250a.3

Use ofantibiotics in
FB-MP-260a.1
animal products
Animaland feedprocurement

30

Risk Control/Mitigation

FB-MP-440a.2

Content of the Indicator

Unit

2023

Product defect rate examined by Global Food Safety Initiative (GFSI)%

0

Substantial defect rate of products%0

Corrective action completion rate for minor non-conforming products%

0

Number of product recalls announced

number of times

0

Total weight of recalled products

ton0

Proportion of cows treated with medically important antibiotics%

0

Proportion of cows treated with non-medically important antibiotics%

0

Proportion of contracts signed by producers located in areas of high orvery high baseline water pressure

%

89.90

31

｜ Supplying High-quality Raw Milk ｜Supplying High-quality Raw MilkIn 2023

As a key leading enterprise in agricultural industrialization, Shengmu constantly promotes agriculturalmodernization and improves product quality and safety standards. We continue paying attention to the welfare
of dairy cows, and strive to build a full-process organic production model covering the entire industrial chain,with the commitment to supplying the market with the best organic raw milk.

21

Creating Organic Industrial Chain
We innovatively combine desert governance with circular agriculture, take advantage of the favorable
geographical conditions and natural environment of the Ulan Buh Desert, and carry out large-scale ecologicalgovernance and the desert industrial construction, thus forming an original “planting, breeding and processing”
organic industrial chain, achieving improved breeding of dairy animals, high-quality forage, standardized
production, and producing high-quality organic milk.

Organic environment

Organic planting•The Ulan Buh Desert, located at 40° north latitude, isan ideal milk source zone.
•The cow farms in desert are a natural line of defense
against pollution and infectious disease. Abundantsunshine is conducive to calcium synthesis in cows. Sandbaths can help cows maintain healthy skin and fur andprevent mastitis.

•The Yellow River used to run across the desert, helping
create fertile land that is suited for cultivation of highquality forage crop.
•We strictly follow organic standards in the cultivationand management of crops, without pesticides or artificial
fertilizers, and obtain the organic product certification.
•We have 230,000 mu (about 153.33 square kilometers)of high-quality organic pastures.

Organic breeding•No hormones or antibiotics in diet, drinking water, and medication.
•Equipped with professional nutritionists and health doctors to carry out regularcow disinfection and health care. We lay out high-temperature fermentation andharmless cow dung bedding, clean cow dung three times a day, etc. to ensure aclean and comfortable living environment.
•We have built 34 pastures, including 18 organic pastures (including one A2
pasture) and 16 non-organic pastures (including two original DHA pastures).
•The total number of dairy cows on land was 136,566, of which 96,165 wereorganic dairy cows, a year-on-year increase of 4.44%; the number of non-organic
dairy cows was 40,401.
•The annual milk yield per cow reached 11.38 tons, representing a nearly 8.20%
year-on-year increase.

Organic products•Shengmu organic milk has
passed two high-standard
organic certifications: EU organic
certification and COFCC organic
certification.
•Shengmu organic milk has
won the gold medal of China
International Organic Food Expofor 11 years in total.

Strictly Controlling Product Quality
We regard quality and safety as the foundation of the enterprise, strictly abide by the Food Safety Law of the
PRC, Dairy Product Quality and Safety Regulations , and National Food Safety Standards for Raw Milk as wellas our own internal quality management policies such as the Raw Materials and Raw Milk Quality Management
Policy. In order to ensure the safety of the entire industrial chain, we have established a management strategy
with quality as the core, and fully implemented the 6S refined management model of the pastures. Focusing on
the core concept of “safety of milk is the most important”, we have implemented various management strategies
from raw and auxiliary material procurement, milk production at source to transportation. Strict quality control isimplemented in all aspects to ensure the safety of milk source.
32

2

pastures were rated as S
by Modern Dairy Industry
Evaluation

including7

testing centers were certified to ISO/IEC17025
by China National Accreditation Service forConformity Assessment (CNAS)

organic
pastures7

pastures were certified by
China Good Agricultural
Practice (GAP)

including5organic
pasturesthe Eighth Pasture obtained Dairy Cow Cultivation - Quality
Management System Certificate

The qualified rate of S-grade milk reached93.91%

Ensuring the quality andsafety of raw materials
and auxiliary materials•During the supplier admission process, all indicatorof raw and auxiliary material samples are tested. Only
those how pass the test can enter the admission
review process; cooperative suppliers conduct
quarterly quality assessments, and only the top three
can continue to cooperate. High-quality supplier are
selected and the raw milk quality is ensured from thesource.
•Carry out competency certification for dairy cow
feed testing institutions and conduct benchmarking
with multiple testing institutions to ensure the accuracyof dairy cow feed testing results.
•Establish an internal feed traceability system toachieve full-process testing and archiving from feed
procurement to pasture use.

Ensuring the quality andsafety of raw milk
•From the moment the cow produces milk to the raw
milk comes out, the production process is monitored inreal time in a scientific and rigorous way.
•Invite experts to conduct training and exchange
meetings on raw milk testing procedures and slowantibody testing methods to improve raw milk testing
capabilities and ensure the high quality of raw milk.

Ensuring the quality andsafety of milk transportation•Transporters should transport milk according to thelocation and route specified y the Company; ensurethat the milk delivery trucks is in good conditionand not damaged; in case of leakages or any otherproblems, repair must be done in a timely manner.
•During the transportation process, transporters are
required to keep their phone on for a close contact,
and there should be no phenomenon of shutting downor not answering the phone.
•During transportation, it is not allowed to open
seals without permission, resell milk, adulterate, etc.;
a dedicated vehicle must be used, and goods are notallowed to be carried in the same vehicle.

At the same time, we rely on a sound planning and management system and efficiently integrate resources tomeet various customer needs to the great extent. Whether it is to meet the unstable ordering demand of small
customers or cooperating with large customers’ switching needs from conventional products to organic milk andfunctional milk, we can provide strong support and guarantee.
Service
improvement
Supplyguarantee•Provide authoritative milk SGS test report and routine quality test report;•Assist in applying for sales certificate of organic products;•Strictly review the qualifications of pastures and promote the technical upgrading of pastures.

•Make annual plan, rolling plan + monthly plan and ten-day plan;•Ensure a stable and sufficient supply with an annual achievement rate of 103%.

33

｜ Strengthening Supply Chain Management ｜ Guaranteeing Animal Welfare ｜Strengthening Supply Chain Management

Guaranteeing Animal Welfare

Shengmu continues to optimize the supplier management mechanism, and is committed to improving
communication and cooperation with suppliers, increasing support for strategic suppliers, jointly building a
responsible supply chain system, and working with partners to seek steady development.

Cattle health is an essential guarantee to improve the production level of dairy cows. In the process of breeding,constant attention is paid to improving animal welfare, promoting the health conditions and disease prevention
and control abilities of dairy cows, ensuring health and comfort in milk production of dairy cows, and allowing
dairy cows to produce high-quality organic milk.

Supplier Management
We adopt the method of transparent procurement according to the law, formulate the Supplier Management
System , strengthen supplier management in procedures including supplier access, evaluation and withdrawal,
select high-quality suppliers, and ensure the quality of raw materials. We formulate a convention on integrity andself-discipline for purchasing personnel, sign anti-commercial bribery contracts with all cooperative suppliers,
severely punish suppliers for violateions of relevant laws and regulations, and optimize the business environment.
We stick to the responsible procurement, and promise that 100% of the soybeans purchased by the Company
come from countries and regions without deforestation risk and land conversion risk.

Comfortabletemperature

We have installed cooling systems
such as fans and sprinklers inpastures to ensure cows stay cool inthe summer and thermal insulated
curtains and hot water storage tanks
to keep cows warm in the winter.

NutritionalbalanceOur professional nutritionists andhealth doctors create balanced dietsfor dairy cows and ensure cows are
scientifically fed and cared for.

Entertainment

We have built a playground for dairy
cows and performed rotary tillage withregular sand changes to keep it soft.

Diseaseprevention &control

We have formed professional
veterinary team to formulate technicalstandards and operating proceduresfor disinfection of living environmentof dairy cows, regular mosquito and fly
killing, health care and hoof trimming,
vaccination, and disease prevention
and control to effectively prevent andreduce the incidence of dairy cow
disease.

In 2023346

supplier
partners

including2organic raw
materials suppliers

321

domestic
companies

Supplier evaluation

Supplier accessAll suppliers are required to provide
certificates such as quality, environmental,
safety, and organic qualifications. We conduct
a comprehensive assessment of the qualityof their raw and auxiliary materials with highstandards. If the assessment is qualified, they
can directly obtain access qualifications. If
the assessment is pending and the accessqualification will be obtained after therectification is completed.

25

overseascompanies

Clean
environment

We clean the manure three times
a day to ensure that “the manure
has been cleared and the feed has
provided”.

High-qualityrest

We lay beds with high-temperature
fermented harmless cow dung bedding
every day, allowing the cows to sleep
on “Simmons”. Scientifically designed
lighting systems and automatic cow
brushes are designed to improve thequality of cows' rest and life.

Supplier withdrawal

We conduct quarterly supplier cooperation
evaluation from aspects such as material
evalution, supply process, service evaluation,etc. Positive incentives will be given toqualified suppliers. Unqualified suppliers are
required to rectify deficiencies. Otherwise,
they will be blacklisted.

We strictly implement the supplier exit
mechanism. Suppliers who engage inadulteration, violate integrity management,
have safety risks, provide false qualification
document, or are ranked in the bottom
10% of the comprehensive ranking will be
added to the blacklist and undergo exit
management.

Supplier Capability Building
We have established close interest alignment
and technical partnership with suppliers, and arecommitted to solving their financial problems andproviding necessary technical support, enhancing
the comprehensive capabilities of supplier partners,
creating a supplier ecosystem, and promoting joint
development.
Technical support•We regularly visit, inspect, andcommunicate with suppliers o every year
to timely identify supplier risks and solve
existing problems, give constructive advice tocooperative suppliers on planting base scale,production operation processes, quality
control, and long-term planning, and shareexperience in dairy cow cultivation, forage
planting, planting and breeding integrationand quality improvement.
•While carrying out regular cooperation
to ensure suppliers’ profits, we also promoteand encourage suppliers to carry out organic
certification, provide training on organic
planting and organic certification, andcollaborate with suppliers to grow together.
34

Financial support•By conducting green certification forour supply chain, we help suppliers obtain
substantial interest rate discounts.
•We strengthen the cooperation with banks
to provide “Chun Yu Loan” for silage corn
suppliers.
•Through innovating financing products,
simplifying financing procedures, improving
financing efficiency, and reducing operation
costs, the financing cost of our suppliers has
been kept around LPR, laying the foundation
for the sustainable development of ourindustrial chain.

Case
China Shengmu joined hands with suppliers to reachstrategic cooperation in supply and demand of silage corn.
In 2023, Shengmu reached the strategic cooperationof “integrating planting and breeding” of silage corn. By
implementing the Company’s policies and providing resources
and financial support, Shengmu successfully enhanced theconfidence of suppliers for cooperation, enlarged the planting
area, formed a virtuous circle of complementary advantages
between supply and demand, resource sharing, cost sharing
and income sharing, achieved a win-win goal, and demonstrated
efficient supply chain management and the development modelof innovative agricultural industrialization.

Case
Story of pasture employees and calves:
Devoting myself to what I love with respecting for life as the work bottom line
Gongbao Lengzhi, a Tibetan employee working at the Calf
Department of the 19th pasture of Bayannur, has won therespect of all with his excellent professionalism and dedicatedwork attitude. Upholding the philosophy of “treating calves aschildren”, Gongbao Lengzhi has always insisted on adopting
unique and meticulous breeding methods for calves, such as
observing the calves’ subtle behaviors during routine inspection,
detecting potential illnesses through observing the details of
the calves’ milk intake, so as to achieve early discovery andtreatment of illness and nip it in the bud. Gongbao Lengzhi
always ensures the suitable quantity of grass used for barns,
which not only saves cost but also makes sure calves living underthe most comfortable conditions. These seemingly ordinary but
wise practices have brought benefits to other employees in thedepartment. “Respecting life and protecting life are the bottom
line I set for living and for working,” said Gongbao Lengzhi.

35

｜ Facilitating Dair y Indus tr y ｜Facilitating Dairy Industry
Shengmu actively participates in the revitalization of dairy industry and joins hands with industry partners
and authoritative experts to thoroughly discuss the future trends and development strategies of China’s dairy
industry through domestic and foreign communication platforms, integrate core resources such as excellent
talents, advanced technologies and sufficient funds, and jointly build a bridge for cooperation to establish an
ecosystem of dairy industry with shared resources and coordinated development, and take practical actions tofully promote the high-quality leap of China’s dairy industry.

Deepening Industry-level Exchanges
We keep a keen insight into the dynamics of dairy industry, actively participate in various domestic andinternational industry events such as the Dairy Conference of China, share our own practical achievements andadvanced experience, and work together with outstanding peers and experts in the industry to explore and plan
the strategic blueprint for the sustainable development of dairy industry in the future.

Strengthening Strategic Partnerships
We adhere to the concept of win-win cooperation and establish close cooperative relationships with strategic
partners such as peers, scientific research institutions, and universities, to achieve complementary advantages
and resource sharing, and jointly create a development situation of joint progress and win-win cooperation.
Meanwhile, we actively carry out cross-sector and in-depth strategic cooperation with multiple parties to jointly
explore and practice the deep integration path of desert governance and green sustainable development.

Case
Shengmu convened the First International Conference on Organic Agriculture in Deserts and Dry Lands
On September 4, 2023, the First International Conference on Organic
Agriculture in Deserts and Dry Lands was held by China Shengmu in
Bayannur, with the theme of “Ecological and Societal Restoration by
Farming Organically”. The purpose of this conference was to learn fromthe best practices of organic agriculture in preventing and transforming
desertification, and to provide support for mitigating and adapting toclimate change and restoring biodiversity. The conference built a platform
for communication and cooperation on desert governance and organic
agricultural development in dry lands, and played a positive role inpromoting the development of organic agriculture in deserts and dry lands
all over the world.
At the conference, China Shengmu Organic Milk Limited signed a MOU
with IFOAM ASIA, and decided to establish an international organic
agriculture network for deserts and dry lands, build a platform open to
all stakeholders in the organic industry in deserts and dry lands aroundthe world, and promote cooperation in organic agriculture through jointly
agreed actions.

Strategic cooperation between China Shengmu and multiple partners promotes the implementation of thephilosophy that “lucid waters and lush mountains are invaluable assets” in the desert.
On July 14, 2023, a seminar on the green development of desert sponsoredby China National Sand Control and Desert Industry Society (CNSC) and
the People’s Government of Byannur Municipality and hosted by China
Shengmu was held in Bayannur. Experts and scholars from CNSC, Beijing
Forestry University, and Inner Mongolia Academy of Agricultural & Animal
Husbandry Sciences made themed reports and conducted exchanges ondesert governance in the Ulan Buh Desert. CNSC and China Shengmu
signed the Cooperation Agreement on Exemplary Programs of Lucid
Waters and Lush Mountains as Invaluable Assets and Research Projects of
Sustainable Utilization of Water Resources in Desert. China Shengmu will
join hands with various partners to adhere to the integrated protection andsystematic management of mountains, rivers, forests, fields, lakes, grassand sand as the core, continue to innovate industrial sand control model,
continuously improve the comprehensive benefits of sand control, andstrive to set a green desert control model with sound ecology and solidindustrial development.

36

Case
China Shengmu attended FAO Global Conference on Sustainable Livestock Transformation, demonstrating theoriginal circular economic model of Chinese enterprises
In November 2023, China Shengmu attended the Global Conference on Sustainable
Livestock Transformation of Food and Agriculture Organization (FAO) of the United Nations
held at the FAO headquarters in Rome. Participants carried out in-depth exchanges
on cooperation around the four themes of “better production, better nutrition, better
environment, and better life”. China Shengmu demonstrated its effective practices in
improving the quality of livestock products, ensuring food safety, optimizing the utilizationof environmental resources and improving farmers’ livelihood by sharing its original circular
economic model of “forage-dairy cow-manure-organic fertilizer-pasture planting”.
Shengmu attended the 14th Dairy Conference of China and the 2023 China Dairy 20 Summit, sharing a promising
blueprint with peers
In July 2023, as a member of China Dairy Top 20, Shengmu was invited to attend the 14th
Dairy Conference of China and the 2023 China Dairy 20 Summit to discuss with representatives
and experts of the industry about the ways for Chinese dairy enterprises to achieve highquality development in the new era. At the conference, D20 companies, represented by China
Shengmu, elaborated on the ten new competition categories of the industry, jointly issued the
Chongqing Declaration on High-quality Development of Dairy Industry in China, demonstrated
the experiences and practices for innovative development of enterprises, and expressed theirconfidence and determination in high-quality development.
China Shengmu attended WAFI Entrepreneurs Forum, exchanging views with industry partners on thetransformation of agriculture and foodIn November 2023, China Shengmu attended the Entrepreneurs Forum of World Agrifood
Innovation Conference in Beijing. China Shengmu discussed food security, agriculturaltransformation, entrepreneurial leadership, opportunities and challenges of agricultural andfood transformation and other issues with well-known enterprises, research institutions andexperts from all over the world, and put forward replicable cases and solutions to promote
the sustainable development and multi-party cooperation of global livestock industry.
Investors of China Shengmu conducted a field research and communication activity for investors to promote indepth exchanges between the capital market and the dairy industry
On June 29, 2023, China Shengmu joined hands with Mengniu Dairy to conduct fieldresearch for investors in Dengkou County of Bayannur, Inner Mongolia, inviting morethan 50 well-known domestic and foreign investment institutions, brokerage analysts,
representatives from ESG rating agencies and the media community to carry out indepth discussion on the organic raw milk business of China Shengmu and its sustainable
development strategy. This activity enhanced investors’ impression of Shengmu in desert
governance, improvement of ecological environment, high-quality raw milk production and
ESG practices. Through interactions and exchanges, China Shengmu effectively deepened
capital market’s understanding of advantages of upstream milk sources and the sustainable
development strategy, and increased investors’ confidence in the dairy industry.
37

03

Environmental
Responsibility
A sound ecological environment is the most universal way to improve
people’s well-being. We take it for granted, but none can live without
it. Green and low-carbon development is crucial for the high-quality
economic development and a good ecological environment. With
the overall green transformation of economy and society in China,
it is time for enterprises to initiate self-revolution for the adjustment
of industrial structure and the change of development mode, whichconstitutes a challenging opportunity.

38

39

｜ IFRS Sustainability Disclosure ｜IFRS Sustainability Disclosure

Risks and Potential Impacts Related to Environmental Responsibility
Potential Impacts

GovernanceBeing committed to environmental protection, Shengmu pursues the harmonious coexistence between man andnature throughout the production process, and establishes a complete green management system to provide a
set of feasible solutions for the industry to achieve the carbon peaking and carbon neutrality goals.
The Board of Directors is deeply involved in discussions on carbon emission reduction, discharge reduction, theuse of green energy and other issues, and advance relevant work within the scope of environmental governanceof Shengmu from top to bottom. On key environmental issues such as climate change, the duties of the Boardof Directors include：•To review and guide climate-related
strategies•To supervise the setting of carbon
reduction targets of the Company•To supervise and guide the formulationof green transformation plans•To monitor the progress of advancing theCompany’s carbon reduction targets•To monitor the implementation of thegreen transformation plans•To review and guide the climate risk
management process

The Strategy and Sustainablility Committee is established under the Board of Directors. It is composed of the
Chairman of Board, the President of the Company and two other directors. It is responsible for supervising andevaluating the progress and effectiveness of the Company’s climate change and other sustainable development
issues and projects. The committee reports to the Board of Directors every six months.
The Sustainability Department under the Strategy and Sustainablility Committee is responsible for soliciting
issues and project materials related to climate change, such as energy conservation and emission reduction,
carbon emission management and desert governance, from various functional departments before the board
meeting, and submitting them to the Strategy and Sustainability Committee for review. After the program ispassed, the Sustainability Department will work with relevant functional departments to formulate detailed
implementation plans, assign them to corresponding functional departments, and supervise the implementation
progress and effectiveness of the program.

Strategy
Shengmu has always attaches importance to the impacts that production and operation exert on environmentand climate. The goals of achieving carbon peak by 2030 and carbon neutrality by 2060 set by China have put
forward new requirements for Shengmu to handle issues regarding environment and climate change. Focusing
on the carbon peaking and carbon neutrality goals and the Paris Climate Agreement , Shengmu submitted its
emissions reduction target to the Science Based Targets initiative (SBTi) in 2021 and made a commitment to
reduce the global temperature by 1.5° C aligned with the Paris Climate Agreement .At the same time, Shengmu
emphasizes the harmonious coexistence between human and nature, makes a commitment to zero deforestation,scientifically formulates a "carbon baseline" inventory audit process including cattle intestinal fermentation,
manure management and energy consumption, and draws a “Shengmu Emission Reduction Roadmap” based on
the inventory results to scientifically achieve carbon reduction targets.
Shengmu pays special attention to the protection of natural resources. By carrying out projects of diversified
capital accounting, Shengmu incorporated the identified material topics and results into corporate decision-making
and management, and took into account environmental and social factors in major events and project decisions.
40

Physicalrisk

Transformation
risk

Risk Management andCountermeasures

Acuterisk (S)The Company’s pastures are located in the Ulan Buh Desert,
where sandstorms may damage the infrastructure and affectthe health of dairy cows.

Chronic
risk (L)Extreme weather, such as rainstorm, caused by global climatechange, may cause the shortage of feed such as soybean andforage grass, leading to increasing prices and consequent
increase of procurement cost.

Policies
and laws(S/M/L)

China has established a strict policy management system inthe field of environment. Especially since China put forward thecarbon peaking and carbon neutrality goals, the relevant policy
requirements have become more stringent, and the regulatory
pressure faced by enterprises has gradually increased. If they
are not properly managed, enterprises may also face thelitigation risk.
Policies and regulations are becoming stricter, and somebusiness premises are located within the “ecological redline”
area or pose a major threat to regional biodiversity, resulting inhigh taxes or fines.

•Strictly abide by national environmental laws
and regulations, vigorously promote low-carbon
transformation, and set corporate carbon emission
reduction targets.
•Pay close attention to and understand the emerging
laws and regulations, focus on the new trends andrequirements of animal husbandry and dairy industry
mentioned in the laws and regulations, and makearrangements as early as possible.
•Ensure not crossing the “ecological redline” and conformto the Yellow River Protection Law since Shengmu
operated in the Ulan Buh Desert in 2010.

Science(S)

Low-carbon technology transformation is faced with challenges
including the increasing costs, increasing demand for scientificand technological talents and new energy development.
Ecological-friendly transformation is faced with challenges
including increasing costs and increasing demand for scientificand technological talents.

•Improve the production efficiency of pastures andreduce energy consumption by implementing technicaltransformation projects.
•Carry out diversified capital accounting projects to help
enterprises identify nature-related opportunities.

Market(L)

Consumers prefer to buy organic milk, and are concerned withthe actual actions taken by the enterprise in mitigating climatechange. The change of consumption tendency may lead to thedecline of demand for certain products.

•Increase the cost input and reduce carbon emissions in
the process of cattle feeding and raw milk production.
•Adopt the original organic circular industrial chain
throughout the process created by Shengmu, strictly
follow the organic standards for planting and managing
organic crops, conduct on-site evaluation on pasturesand formula optimization with expert teams on aregular basis, and continuously enhance the traceability
and transparency of the industrial chain.

Reputation(S)

If the Company’s emission reduction management and energy
efficiency management measures are not effective, exerting adestructive impact on the climate and the Company’s reputation, it
will be difficult for the Company to attract and retain stakeholders,such as consumers, employees and business partners, resulting ina decrease in the Company’s demand for organic milk, orders, andthe Company’s operating income.
Negative incidents related to biodiversity will have an impact on
the Company’s reputation, thus affecting its financial performance.

•Attach importance to the management of climatechange and other environmental topics, and avoid
negative incidents as much as possible.
•Establish a “zero deforestation” supply chain to promote
the sustainable development of suppliers.

•Carry out risk assessment on a regular basis andformulate environment-related contingency plans.

Note: S for short-term; M for medium-term; L for long-term

Opportunities and Potential Impacts Related to Environmental Responsibility
Potential Impacts

Opportunity Management andCountermeasures

Financial
opportunity

Carrying out climate/nature-related management facilitatesreceiving low-interest loans from financial institutions.

•Promote benefit-sharing locally and obtain low-interest
loans from financial institutions after earning green
finance certification of supply chain.

Marketopportunity

The market demand for healthy food is increasing, andconsumers pay attention to the quality of raw materials insupply chain, adding market premium to certified organic
products.

•Make efforts to become the first domestic raw milk
brand to be certified by organic standards of China andthe EU.

Brand
opportunity

The Company establishes a responsible brand image to win thetrust of customers and financial institutions and enhance brandvalue.

•Actively fulfill environmental responsibilities and pursue
the goal to become the “TOP 1 brand” of organic milk in
the world.

41

｜ IFRS Sustainability Disclosure ｜ Intensifying Pollution Prevention and Control ｜Intensifying Pollution Prevention and Control

Risk Management
Shengmu regularly carries out the identification, analysis and evaluation of risks such as climate change. The
methods used for identification and evaluation are a combination of bottom-up (that is, business is submitted tosenior management level by level) and top-down (through interview with senior management) patterns, and finally therisk matrix method was used to select the important risks and opportunities in various fields such as climate change.

Risk Identification•Identify relevant
environmental risks fromthe aspects of climatechange and biodiversity.

Risk Control/Mitigation•By analyzing the relationship between theoperation of Shengmu with upstream anddownstream business and the nature, andascertain the substantial influence anddependence on natural capital to identify andmanage the risks and opportunities faced bynatural capital in the value chain of Shengmu.

Risk Monitoring/Reporting

We strictly abide by the Animal Husbandry Law of the People’s Republic of China and the Regulation on
the Prevention and Control of Pollution from Large-scale Breeding of Livestock and Poultry. Meanwhile, ourEnvironmental Protection Policy is under ongoing improvement. For waste gas, waste water, solid waste, etc.
generated in the operation process, resource recycling is the highest priority, and waste that cannot be recycled
must be treated before being discharged.
Solid waste
management•Incorporate biodiversity and climate management
into Shengmu’s core strategy of “benefiting
the nature and doing business for goodness”,
promote the systemic management of
biodiversity as soon as possible, and strengthen
the internal understanding of the relationshipbetween them through information disclosure.

Waste gasmanagement

In the light of the Soil Pollution
Prevention and Control Action
Plan , we formulated the Hazardous
Waste Management Policy tofurther standardize the management
requirements of general solid waste,hazardous waste, construction waste
and household waste across the wholeprocess covering generation, collection,
storage, transportation, and disposal.

Policyimplementation

We strictly comply with the Law of
the People’s Republic of China on thePrevention and Control of Atmospheric
Pollution , and devote to reducing theemissions of waste gas.

We continued to improve the Environmental
Protection Policy, increase supervision during
the production process and conduct regularenvironmental and safety inspections to ensure
the reduction of pollutants from the source.
In 2023, Shengmu focused on training in four
aspects including environmental laws andregulations, compliance, ledger training andenvironmental emergency drills. A total of 36
environmental training were held, with 2,600
people participated in.

Targets and Indicators
In accordance with the Company’s scientific and effective carbon reduction targets, Shengmu integrates carbon
reduction into all operational links, builds a dual-driven green low-carbon ecosystem of “carbon reduction inplanting and breeding, and carbon sequestration in agriculture, forest and grassland”, and contributes “wisdomof Shengmu” to addressing climate change and sustainable development.

Shengmu abides by the environmental laws and regulations of the place where it operates, sets clear objectives
to reduce the environmental pollution caused by the business, and continuously monitors and improves its
performance in relevant aspects.

In 2023
SASB Indicator
GHG emission
Energymanagement

Water
Management2023

Scope 1 Emissions

ton

491,988.00

78.90

Total energy consumption

GJ

1,537,563.92

SO2 emission (ton)

Proportion of electricity from the grid%80.12%

Total water withdrawal

ton

3,383,613.20

Proportion of water withdrawal in areas
with high/extreme water shortage%

100

Violations of the requirements of water quality
licenses, standards and laws and regulations

number ofviolations

0

Animal wastes and manure produced

ton

1,295,453.77

Proportion managed according to thenutrition management plan%

100

FB-MP-160a.2

Proportion of pasture managed according to
NRCS protection plan standards (by area)%

100

FB-MP-160a.3

Animal protein yield under CAFOs

metric ton

726,154.34

FB-MP-130a.1

FB-MP-140a.1

FB-MP-140a.3

FB-MP-160a.1
Land use andecologicalimpact42

Total emission of waste gas (in cubic meter)

Unit

FB-MP-110a.1

Content of the Indicator

0.05

NOx emission (ton)78.85

Soot emission (ton)0achieving net-zero emission ofwaste gas in two consecutive years

Total hazardous wastes (ton)2,628.37
Weight of medical wastes (ton)

150.62

Weight of cattle died of diseases (ton):

2,477.75

Total non-hazardous waste (tons)

1,292,976.02
43

｜ I n t e n s i f y i n g Po l l u tio n P r eve n tio n a n d C o n t r o l ｜ P r o m o ti n g E n e r g y C o n s e r va tio n a n d C a r b o n Re d u c tio n ｜2,682.31

2,628.37
2,477.75

0.018

2,493.95

2,204.30

Promoting Energy Conservation andCarbon Reduction

0.022
0.016

2,035.25
0.009
0.007

169.05150.62
2023

2022

Hazardous wastes(ton)

Medical wastes
(ton)

0.007

188.362023

2021
Weight of cattle died of
diseases (ton)2022

Shengmu GHG Emission Intensity Projection(kg CO2e/kg FPCM, 2020-2025E)

2021
Amount of hazardous waste
generated per RMB10,000 ofincome (tons/RMB10,000)

Amount of hazardous
waste produced by a single
cow (tons/head)* Due to business expansion and new pasture construction, the amount of hazardous wastes in 2023 increased compared with that in 2022, but theamount of hazardous wastes generated per RMB10,000 of income was the same as that in 2022, indicating hazardous waste management.

8,729,269.40

In terms of climate change, Shengmu conforms to the requirements of the times, plays a leading role in theindustry, makes scientific carbon emissions planning, and strives to achieve the target of carbon neutrality in theindustry. The Company started to respond to CDP questionnaires on climate change and forests in 2022. As aclassic standard for disclosure methodology and corporate procedure of carbon emission, CDP questionnaire on
climate change empowers enterprises to continuously examine and improve their own risk management systemin the field of climate change.

Yearly linear
reduction rate:

Yearly linear
reduction rate:

8.9%

-45%
1.2

700

1.0

0.99

700

650

654
626

0.85

1,292,976.02

0.8

1,292,976.02

1,180,559.42

1,180,559.42

71.2498.735 3.673

2023

2022

2021

Cow manure production (tons)

2023

27.9788.659 3.539

2021

2022

Non-hazardous waste(tons)

Amount of non-hazardous
waste produced by asingle cow (tons/head)Amount of non-hazardous waste
generated per RMB10,000 ofincome (tons/RMB10,000)

Case
Bedding of Cow Manure
In 2023, China Shengmu launched four projects of cow manure
bedding. By changing manure treatment from drying field toaerobic fermentation, the treated manure was used as organic
bedding. Such project can not only reduce the use of sand andgravel, but also reduce greenhouse gas emissions. In 2023, China
Shengmu completed the replacement of cow bedding materials
on four pastures, and reduced the emission of 8,039 tons of CO2
equivalent through manure management. Cow manure can berecycled on pasture, thus reducing environmental risks.

0.73

Promoting the environmental system certificationof pastures
In 2023, China Shengmu carried out theenvironmental system certification of
one pasture, and finally completed thecertification through on-site training, systemestablishment, preliminary examinationand certification review. Based on therequirements of environmental system
certification, the Company further
clarified various management elements
and applicable laws and regulations in
the environmental field, improved andstandardized various management policies,
continuously promoted the effectivenessand management level of operation, andcomprehensively advanced the high-quality
development of pastures.

576

0.66

553

550

2021

2022

2023

2024

2025

0
2020

2021

2022

2023

2024

2025

The target carbon emissions in 2023 were reduced to 607,000 tons, the actual carbon emissions were598,000 tons, and carbon emissions per kilogram of fat and protein corrected milk are 0.85Kg CO2e/Kg
FPCM, with a target completion rate of 100%. Main measures for energy conservation and carbon reduction:
Control dietary protein levels, promote low-protein diets, study the impact of amino acid balance on
production, reduce the amount of soybean cake, avoid nitrogen waste, reduce urea nitrogen levels, andincrease reproductive rate.
Improve the feed efficiency of dairy cows by breaking down walls, installing roller blinds, and equipping with fansto improve ventilation in the barn; modify the bed height and level the bed to increase the lying rate and time ofcows, improve the feed conversion rate of cows, and reduce carbon emissions.
Actively deploy the use of renewable energy, continue to build a number of photovoltaic power stations and biogas
power stations from 2023, and electrify pasture loaders.
(10,000 tons of CO2 equivalent)
35.42

14.00
10.64
8.58

Intestinal
fermentation
44

607

600

0.6
0.0
2020

4.2%
-21%

1.19
1.11

8,729,269.40

Shengmu GHG Emission Projection(k ton CO2e, 2020-2025E)

Manuremanagement

Energyconsumption

Feedprocessing45

｜ Promoting Energy Conservation and Carbon Reduction ｜ Protecting Natural Resources ｜

2023

2022

2021

2023

2022

2021

Total GHG emissions (ton of CO2 equivalent)

662,373.52

626,000.00

654,000.00

Electricity (kWh)116,221,187.00

107,750,814.00

90,576,236.69

Scope 1 emissions (ton of CO2 equivalent)

491,988.00

524,506.95

568,686.24

Coal consumption (ton)

0

0.00

2,503.79

Increase in Scope 1 (ton of CO2 equivalent)

579,988.00

524,506.95

568,686.24

Diesel consumption (ton)2,404.67

3,071.26

2,687.56

Reduction in Scope 1 (ton of CO2 equivalent)

88,000.00//

Energy use per cow (ton of standard coal/head)

0.12

0.13

0.14

Scope 2 emissions (ton of CO2 equivalent)

106,388.00

101,493.05

85,313.76

Energy use per RMB10,000 of income (ton ofstandard coal/ RMB10,000)

0.051

0.053

0.054

Scope 3 emissions (ton of CO2 equivalent)

63,997.52//

GHG emissions per cow – Scope 1 and 2 (ton/head)

4.04

4.59

5.34

GHG emissions per RMB10,000 of income(ton/RMB10,000)

1.70

1.88

2.10

GHG emissions per kilogram of milk (ton/kg)

0.82

0.99

1.10

* The Scope 1 GHG emissions are calculated in accordance with 2006 IPCC Guidelines for National Greenhouse Gas Inventories , and CO2 emissions from fossil fuels
are converted from the use of coal and diesel oil. The Scope 2 GHG emissions are calculated in the light of 2017 Baseline Emission Factors for Regional Power Grids in
China and the HKEX Reporting Guidance on Environmental KPIs. Each MWh of electricity consumed in North China is converted to the production of 0.9680 tons of
CO2 emissions , which is calculated from electricity consumption.
* New Scope 3 GHG emissions introduced in 2023 includes indirect greenhouse gas emissions from waste disposal and upstream and downstream transportation,of which the emission factors related to hazardous waste disposal come from the Guidelines for the Compilation of Provincial Greenhouse Gas Inventories , and theemission factors related to upstream and downstream transportation come from 2006 IPCC Guidelines for National Greenhouse Gas Inventories .
* In 2023, the scope of accounting for Scope 1 of GHG emissions was expanded. For Scope 1, the increase of GHG emissions expanded from fuel combustion to carbon
emissions from intestinal tract and manure of cattle, and the data of the past two years were retrospectively adjusted. The reduction of Scope 1 GHG emissions camefrom carbon sequestration of biomass such as afforestation, while other types of biomass were added to the calculation in 2023. The relevant emission factors comefrom the 2006 IPCC Guidelines for National Green House Gas Inventories .

* According to the General Rules for Calculation of the Comprehensive Energy Consumption (GBT2589-2020), the power conversion coefficient is 0.1229 kgce/kWh, andthe diesel conversion coefficient is 1.4571 kgce/kg. Calculations shall be conducted accordingly.
* As a result of business expansion, electricity consumption in 2023 was higher than that in 2022, while energy consumption per unit slightly decreased over the same
period, indicating improvements in the energy consumption structure.

Protecting Natural Resources
Reasonable utilization of water resources serves as a prerequisite for the sustainable development of Shengmu.
Attaching great importance to the sustainable utilization and conservation of water resources, we strive tostrengthen the water-saving management across the entire value chain so as to reduce resource waste.
3,383,613.20
2,733,130.00
2,640,610.00

Case
Installing Distributed Photovoltaic Panel in the Barn

22.86
20.05

As the Group was introducing the development of green electricity, in order
to increase the use of green electricity, China Shengmu cooperated withphotovoltaic enterprises in 2023 and took consideration of the policy guidancefrom the government and the overall evaluation to install photovoltaic panels on
the barn roofs of smart pasture. The project of building distributed photovoltaic
project with a distributed scale of 2.5MW has been approved. It is expectedthat it can meet the demand of daytime power consumption for the operationof devices on the smart pasture after it is put into use. This project is ofgreat significance to support traditional animal husbandry to achieve energy
transformation and grow into green and low-carbon new pasture.

Promoting the Use of New Energy Vehicles
Against the backdrop of advancing the carbon peaking and carbon neutrality
goals, in order to reduce the use of fossil energy and increase the proportion of
new energy, China Shengmu cooperated with loader manufacturers in 2023 todevelop electric loaders that are suitable for breeding and can reduce the diesel
consumption on pasture. By the end of 2023, this project completed the trial of
two finished vehicles for pasture and achieved satisfactory results.

46

21.55

9.61
8.19

2023

2022
Water consumption
(ton)

2021

2023

2022
Water consumption
per cow (ton/head)

2021

2023

8.46

2022

2021

Water consumption per
RMB10,000 of income(ton/RMB10,000)* As a result of business expansion, gross water consumption in 2023 was higher than that in 2022. Meanwhile, due to the improvement of waste heat recovery
technology in the milking parlor, the electricity consumption was converted into water consumption, so the unit water consumption was higher than that in 2022.

47

｜ Protecting Natural Resources ｜CaseDeveloping the project of waste heat recovery of fresh milk in the milking parlor
In 2023, in order to improve energy efficiency and reduce emissions,
Shengmu cooperated with a third party to develop the project ofwaste heat recovery in the milking parlor, and put it into use on
five pastures, achieving the results of energy saving and emission
reduction. Each ton of fresh milk could reduce the use of 0.4 tonsof groundwater and provide 5kWh of heat. The original fresh milk
cooling technology adopts two-stage cooling. Groundwater is usedin the first stage; while the improved technology replaces the original
groundwater cooling with one ton of circulating cold water, andrecycles the waste sensible heat of fresh milk to heat the cleaningwater in the milking parlor. The advantages of the new technology
include: it is more conducive to the quality assurance of fresh milk;
the cooling process is stable and not affected by the environment; it
reduces the working load of refrigeration equipment; it decreases theenergy consumption of water heating in the milking parlor; there is noneed to use the underground water for cooling; and less waste water
is produced in the milking parlor.

Installation of filtration devices for oxidation pond on pastures
In 2023, in the context of the Company’s low-carbon and water-saving
efforts, a total of 16 filtration devices were installed in the oxidation
ponds on pastures of the group. With these devices, the Company
can greatly reduce the environmental risk concerning the drainage ofoxidation ponds. The oxidation pond water enters the drip irrigation
system for planting through the device, solving the problem that theoxidation pond water cannot be returned to the field in summer, andsolving the water shortage problem for autumn farmland irrigationand configuring a mixing tank in combination with the oxidation pond
to effectively comprehensively utilize the oxidation pond water. After
three months of operation, the accumulated filtered water in theoxidation pond reached 25,000 cubic meters, which was used toreplenish water of the droppers for 646 mu (about 43.067 hectares)of silage corn around the oxidation pond. When the equipment isfully put into use, it is expected to save 500,000 cubic meters ofgroundwater for irrigation.

China Shengmu was awarded the 18th People’s Corporate Social Responsibility Award– Green
Development AwardIn December 2023, the 2023 People’s Corporate Social Responsibility
Ceremony and the Awarding Ceremony of the 18th People’s Corporate
Social Responsibility Award, which were instructed by People’s Daily
and hosted by people.cn, were held in Beijing. Themed on “Embracing
the future with bravery, persistence and endeavor”, the event wascomposed of five parts, including “Getting rich in the countryside”,“Green solutions sheet”, “Building to lasting industry”, “Pursuing
dreams for the future” and “Thousands of miles of galaxy toward
prospect”. Representatives from political, business, education, media
and other communities were invited to attend the ceremony, providing
a great opportunity for enterprises to demonstrate their outstanding
practices and fruitful achievements in the field of social responsibility.
China Shengmu was awarded the 18th People’s Corporate Social
Responsibility Award– Green Development Award for its longterm efforts and outstanding contributions in the field of ecologicalcivilization construction and social responsibility.

48

Shengmu adheres to the concept of “grass is suitable for grass, and forest is suitable for forests”. Based on the“low coverage sand control theory”, Shengmu builds a systematic sand industry system and creates a threedimensional ecosystem that combines “trees, shrubs, and pastures” to integrate large areas. Trees serve as firstlevel protection, and trees and shrubs serve as second- and third-level protection, providing comprehensive windprotection and sand fixation to reduce land desertification.
Through our relentless work, we have created a regional microclimate in the Ulan Buh Desert. Since 2014, there
have been nine heavy fog events in the Ulan Buh Desert. The desert has even experienced a few snowfalls,
which are extremely rare, in recent years. Change in regional climate has led to an increase in biodiversity in thedesert. In addition to forage crops and medicinal herbs, new varieties of plants such as alfalfa, oats, corn, anddandelions have been proliferating in the once arid areas. Lizards, foxes, hares, yellow sheep and other animals
have also begun to appear frequently. Even waterfowl, egrets, owls and other birds have begun to settle in thisdesert oasis .

In 2023
For more than 10 years, Shengmu has been in the Ulan Buh Desert:

23,333.33

invested a total of

USD1.21hectaresdesert has been transformed into high-quality pastures

billion220

98+

built of roadinstalled of power line

desert transformed 220 into oases

193.3

kilometers

9organic manure fermentation plants

138

millionmilliona cumulative carbon sequestration achieved

trees planted

277.9

constructedkilometers

11

reservoirs

1

bio-organic fertilizer processing plantCompared with the 1980s
decreased the amount of desert radiation by

40%-45%the average wind speed by

21.41%

the amount of sand dust by

80%-90%increased the precipitation by

30.36%49

04

Employer
Responsibility
Talents are the key driver for the growth of an enterprise. Shengmu
has always adhered to the core management ideas of “peopleoriented” and “caring for employees”, giving top priority to respecting
and safeguarding the legitimate rights and interests of employees,
and is committed to building a career development platform for theemployees and making efforts to create a inclusive, fair and orderly,
healthy, safe, comfortable and friendly, a positive work environment,
and work together with employees to build a harmonious andprogressive home.

50

51

｜ IFRS Sustainability Disclosure ｜IFRS Sustainability Disclosure

Opportunities and Potential Impacts Related to Human Capital

Governance
The Human Resources Department, in chargeof human capital management, stays compliant
with national laws and regulations, and act inaccordance with the Company’s rules and policies.
With continuous efforts to improve labor relations
management system, we ensure that employees’rights are protected in all aspects, including
compensation and benefits, career development andworking environment. In 2023, the Compensation
Management Policy and Broadband Compensation
Management Policy outlined in a more sound,rational framework came into effect, enabling us tounleash employees’ passion and creativity througheffective performance-linked compensation anddiscipline management scheme.

Safety and Environmental Protection Department,in charge of safety and health governance, ensuresthat the Company strictly abides by the Work Safety
Law of the People’s Republic of China , Prevention
and Control of Occupational Diseases Law of thePeople’s Republic of China , and other national laws
and regulations. While implementing a work safetyaccountability scheme and seeking to raise employee
safety awareness, we care about the physical andmental health of employees, and endeavor to createa safe, healthy and harmonious working environment.

Risks and Potential Impacts Related to Human Capital

Failure to comply with employmentrelated laws and regulations in thecourse of employment may give rise tolabor disputes or arbitration, exposing
the Company to litigation risks or
administrative penalties.

A diversified, equal and inclusive
working environment helps to enhance
employees’ happiness and sense of
belonging, and fully tap into theirpotential.

•Eliminate any form of differentiation and discriminatory behavior;•Elect employee representatives to facilitate the communication
between employees and the Company; and elect deputies to the
local people’s congress to build collaborative bonds amongst theCompany, the local government, and the society.

Marketopportunity

Comprehensive compensation andwelfare scheme and talent training
scheme can ease shortage of local
herdsmen due to underdeveloped
living, working, education and medical
conditions.

•Continuously optimize the salary and welfare system in accordancewith the relevant laws and regulations and in consideration of theCompany’s current operational status.
•Improve employee’s living conditions, organize cultural and sports
activities, and provide aids to employees in financial and otherdifficulties.
•Build a differentiated talent team and help employees to improvetheir professional skills.

By identifying risks and opportunities, the Company continues to improve and update human resourcesmanagement system from all aspects, ensuring that the employees receive fair treatment and effective
safeguard in terms of compensation and welfare, career development, working environment and safety.

Enshrining the core enterprise development strategy of cultivating high-quality talents, we identify human capitalrisks and opportunities in the Company’s daily business operations, formulate targeting strategies to unlock
human potential to the greatest extent, so as to promote the robust operation and sustainable development of
the Company.

Potential impacts

Business
operation
opportunity

Risk Management

Strategy

Policy and Legal
Risks（S/M/L）

Opportunity Management andCountermeasures

Potential Impacts

Risk Management and Countermeasures•Enshrine employment equality.
•Enter, sign and execute employment contracts in accordance withgoverning laws and regulations.
•Timely pay for social security.
•Ensure that employee wages are not lower than the local minimum
standard.
•Abide by the national special rules on labor protection of female
employees.
•Explicitly prohibit the use of child labor and forced labor.

Reputation Risks（S）

Insufficient employee health andsafety protection schemes may lead tosafety accidents due to lack of safety
awareness and improper operation.

•Continue to improve production safety facilities, secure safety
protection equipment, enhance the level of hygiene management,
and cover the costs of employee health check-up.
•Actively implement production safety responsibilities, standardize
the safety management system, and regulate all aspects ofproduction and business management.

Operation Risks（S/M/L）

Failure to provide employees withadequate training resources may resultin employee capabilities failing to keep
up with the Company's development
needs, affecting the Company's long-term
development.

•Establish a comprehensive information sharing mechanism andplatform.
•Introduce digital tools to optimize the information management
process.
•Enhance employee engagement to build team cohesion.

Risk Identification•Identify risks related tohuman resource to theCompany from multiple
aspects, including
employee’s rights andinterests, health and safety,
career development andemployee care.

Risk Control/Mitigation•Sign and execute employment contracts in strict
compliance with employment laws andregulations to ensure legal employment.
•Stick to employment safety red line, establish
and strengthen employee health and safety
management schemes.
•Create a diverse, equal and inclusive workplace.
•Improve compensation and benefit system andtalent training system.

Risk Monitoring/Reporting•Conduct regular employee satisfaction surveys togather employee feedback and suggestions.
•Conduct compliance monitoring in terms of
employment, overtime, social security
contributions, and work safety.
•Establish a sound training system and track
employee’s professional growth trajectory.

Targets and Indicators
We set up a series of human capital-related indicators and targets, andcontinuously track employee performanceand report on developments to support the Company’s sustainable development with an optimized manpower
structure.
SASB Indicator
Health andsafety of
employees

Content of the Indicator

Unit

2023

Total recordable incident rate (TRIR)%

0

Workplace fatality rate%

0

FB-MP-320a.1

Note: S for short-term; M for medium-term; L for long-term

52

53

｜ Guaranteeing Employees’ Rights and Interests ｜Guaranteeing Employees’ Rights and Interests
We advocate a people-centered concept, effectively safeguard employees’ legitimate rights and interests interms of equal employment, compensation and welfare, and other aspects. We organize training on labor law
and regulations and interpretation meetings on social security and employment policies. In 2023, no child laboror force labor incident occurred in Shengmu.

Age

Optimizing Compensation and Welfare System
We constantly optimize the compensation and welfare system, adhere to the principle of equal pay for
equal work, and provide employees with highly competitive compensation. In 2023, we established andimplemented a more scientific and reasonable compensation management system, incorporating factors suchas employee organizational contribution, job evaluation, competency, and cultural discipline performance into
the compensation and performance evaluation system. While stimulating the vitality of talents, we fully respect
employees’ fruits of labor.

2023

2022

2021

under 30
846

under 30
879

under 30
781

30-50
1,440

30-50
1,472

30-50
1,469

50 and above
415

50 and above494

50 and above
432

2023

2022

2021

Bachelor degree
or above
506

Bachelor degree
or above
387

Bachelor degree
or above
331

Junior college
525

Junior college
675

Junior college
533

Senior high schooland below
1,670

Senior high schooland below
1,783

Senior high schooland below
1,818

2023

2022

2021

Mainland China
2,699

Mainland China
2,844

Mainland China
2,682

Hong Kong, Macao
and Taiwan
2Hong Kong, Macao
and Taiwan
1Hong Kong, Macao
and Taiwan
0(Unit person)

Level ofeducation(Unit person)

Building Diverse and Inclusive Workplace
We explicitly prohibit differential treatment and discrimination based on gender, age, race, religion, education,and culture. We attach great importance to the career development of female employees, providing them with asuitable development platform. Meanwhile, we care about ethnic minority employees by respecting their customs andlifestyles and helping them in work and life, with the aim to build a high-quality, multi-ethnic work team.

Diversified quantitative performance of Shengmu employees
Total
employees

2022

2023

2021

Region(Unit person)(Unit person)

2,701

Labor type

2,845

2,682

2023

2022

2021

Contract
employees
2,701

Contract
employees
2,845

Contract
employees
2,682

Non-contract
employees0

Non-contract
employees0

Non-contract
employees
0

2023

2022

2021

2023

2022

2021

Total ethnic minority employees 848
including 40% minority women

Total ethnic minority employees 764
including 42% minority women

Total ethnic minority employees 680
including 41% minority women

Total male
employees
1,735

Total male
employees
1,780

Total male
employees
1,691Long-tenured employees(5 years and above)646

Long-tenured employees(5 years and above)
618

Long-tenured employees(5 years and above)578

Total female
employees
966

Total female
employees
1,065

Total female
employees
991

Total employee representatives
40

Total employee representatives
5

Total employee representatives
5(Unit person)

GenderOthers(Unit person)(Unit person)

54

55

｜ Guaranteeing Employees’ Rights and Interests ｜Expanding Employment Channels
We continue to attract outstanding talents through external recruitment platforms, internal competitions andcampus recruitment. At the same time, we have expanded employment channels and realized the organic
integration and allocation optimization of university-enterprise resources to increase the reserve of technical,
management and compound talents.

Employee turnover statistics

In 2023
We hired a total candidates
through campus recruitment

227

The Company effectively protects the rights and interests of employees, supports their development, cares
for their lives, and maintains a relatively stable employee structure. In 2023, the employee turnover rate inShengmu’s functional positions remained stable at 2%, the same as in 2022.

We set up the “Shengmu Talents” Scholarship of Inner
Mongolia Agricultural University and awarded a total of

USD 21,286.5

2021

人

48

52

46

Turnover rates

%

2%

2%

2%

Male employee turnover rate

%

69%

85%

91%

Female employee turnover rate

%

31%

15%

9%

Turnover rate of employees under 30

%

25%

19%

9%

Turnover rate of employees aged 30-50

%

60%

67%

80%

Turnover rate of employees aged 50 and above

%

15%

13%

11%

Employee turnover rate in mainland China

%

2%

2%

2%

Employee turnover rate in Hong Kong, Macao and Taiwan

%

0%

0%

0%

Employee turnoverby gender
We co-founded an autonomous region-level modern
industrial college with Hetao College and a municipal-level
modern industrial college with Xilingol Vocational College.

Employee turnoverby ageCase
Shengmu joined hands with universities for win-win development to boost employment

2022

Total number of employees turnover
candidates throughsocial recruitment

2,032

2023

Employee turnoverby region

Paying attention to effective integration between the talent supply chain and the industrial value chain, Shengmu strives toestablish long-term strategic cooperative relationships with various universities to obtain customized talent supply, create
internship and training bases, and enable in-depth integration of industry, academia, and research, thus easing the employmentpressure of graduates.
In October 2023, China Shengmu and Gansu Polytechnic College of Animal Husbandry and Engineering held a symposium on
university-enterprise cooperation at in Bayannur, Inner Mongolia. The two sides had in-depth discussion on feasible universityenterprise cooperation modes in terms of talent cultivation and the construction of employment base, and held the opening
ceremony of the joint employment center. Meanwhile, the two sides further agreed to promote joint employment and training,
secure graduates’ job hunting whilst providing the Company with high-quality talents.

56

57

｜ Protecting Health and Safety of Employees ｜Protecting Health and Safety of Employees

Case

The Company adheres to the core values of people-oriented safety management, always insists on treating
employee safety as primary concern, attaches great importance to production safety, sticks to safety red lines,
continuously strengthens and improves the safety management system, and is committed to providing all-roundprotection for the life safety of all employees. We pay 100% of social insurance for our employees, including
pension, medical insurance, work injury insurance, unemployment insurance and maternity insurance. In 2023,
no workplace death occurred in Shengmu.
Content of the indicator

Unit

2023

2022

2021

Investment in occupational health examination

USD10,000

6.86

5.31

4.29

Investment in safety protective equipment

USD10,000

48.46

71.24

69.11

Investment in the renovation of sterilization rooms
dormitory and other construction expenses

USD10,000

2,618.74

95.08

48.11

Investment in employer’ s insurance

USD10,000

48.05

20.54

27.06

Investment in medical insurance and work injury
insurance

USD10,000

57.22

53.76

51.77

*In 2023, expenses on sterilization rooms, dormitory renovation and other construction included the construction costs of a new pasture.

Workplace Safety Management
We adhere to the concept of “life first, safety first” and the purpose of “production must focus on safety”.
In accordance with national and local safety-related laws and regulations, we strictly implement safety
management responsibilities, conduct strict search for safety hazards, and severely punish violations and ask
accountablility for safety accidents. At the same time, the Company adopts a “four zero-tolerance” requirement
towards casualties, accidents, infectious disease and safety blind spots. In 2023, we updated and implemented
the Workplace Safety Management Policy and Workplace Health Management Policy, stipulating the Company’s
workplace safety management throughout all business operations including production, operation, use, storage,transportation and disposal.

In 2023
The Company obtained the Occupational
Health and Safety Management System
Certificate for its excellent performancein occupational health and safety
management of dairy cow cultivation andall associated activities.

58

Installation of skid-mounted explosion-proof fuel dispensers to enhance workplace safety
The Company has long been committed to improving the safety
management level and ensuring operation and production
safety. In 2023, we stepped up the safety evaluation of skidmounted fuel dispensers in Bayannur and formulated 20 safety
evaluation reports. We also strengthened lightning protection
inspection of our pastures and skid-mounted fuel dispensers in
Hohhot and Bayannur, generated a total of 32 detailed lightning
protection inspection reports, and thus effectively safeguarding
the sound and safe operation and production in Shengmu.

Employee Health Management
We always pay close attention to the physical and mental health of employees, provide free annual healthexamination services, take practical actions to ensure the dining safety of all employees, and regularly conduct
rigorous monitoring and assessment of occupational disease risk factors in the production area, and focus on
occupational health and safety in the working environment. We also carry out comprehensive investigation andtimely rectification of potential health and safety hazards. In addition, we actively implement the “Yongjun Plan”
to care for employees, add emergency rescue facilities and equipment, and provide employees with timely andeffective first aid measures.

In 2023

1,268

on-the-job occupational health examinations for
employees working at our pastures

600

other unscheduled on-the-job occupational healthexaminations

Case
Installation of live-saving Automated External Defibrillators (AEDs) in the workplace to ensure
an AED could be accessed within 4 minutes
In 2023, the Company continued to install automated external
defibrillators (AED) in every office building and pasture. It alsoorganized a series of first aid trainings to improve employees’
emergency response capabilities and skills to provide immediate
response to cardiac arrests, safeguarding workplace health.

59

｜ Protecting Health and Safet y of Employees ｜ Facilitating Career Development ｜Health and Safety Education
We actively conducted safety training and continuously improve the internal training system. Throughstrengthening education and guidance, we strive to enhance the occupational safety awareness of employees
and take practical actions to effectively protect their health and safety. In 2023, the Company organized all kindsof online and offline safety trainings.
Specialized training conductedby the Safety and Environmental
Protection Department

Targeting the entire workforce, various trainings were carried out covering workplacesafety management system, occupational health management system, dual-prevention
mechanism, methods of safety risk screenings, and prevention of occupational
diseases. A total of 25 trainings were organized in 2023.

Regular training conducted at
pastures

Monthly safety trainings targeting pasture workers were organized at all pastures of
the Company to enhance employees’ safety awareness and safe operation conduct. A
total of 384 trainings were carried out in 2023.

Facilitating Career Development
The Company integrates the concept of “continuous improvement through continuous learning” into
comprehensive talent training system, adheres to the orientation of specialization, professionalization,internationalization and corporatization, introduces internal mentor model, and establishes a talent development
mechanism focusing on internal management talents. In addition, the Company also facilitates internal promotion
and supports the career development of talents, providing a solid talent base for the development of theCompany.
Content of the indicator

Unit

2023

2022

2021

Total hours of traininghour

64,08859,696/

Total training hours per employee

hour/person

41

40.6

40

Average training hours for male employees

hour

42

41

41

Average training hours for female employees

hour

39

39

38

New employee on-boarding safety
training

For new employees, on-boarding safety training was carried out, focusing on essential
DE safety knowledge and operating standards education, covering practical skills suchas fire and explosion prevention, electrical safety, and the use of protective equipment.

Average training hours for the senior management

hour

21

20.5

/

Training during key safety
monitoring periods such as during
public holidays

The Company conducted work safety training sessions prior to major festivals andimportant events, such as Chinese New Year, International Workers’ Day, Mid-Autumn
Festival, National Day, Safety Month and Fire Prevention Month. A total of 8 trainings
were conducted throughout 2023.

Average training hours for the mid-level management

hour

31.5

30

20

Average training hours for the front-line employees

hour

42

41

41

Throughout the Company, regular safety drills such as fire drills and emergency
evacuation drills were carried out to improve employees’ self-rescue and mutual rescue
skills in the event of emergencies.

Total number of employees trained

number of people

49,071

40,9796,460

Total investment on employment training

USD10,000

30.08

15.52

12.06

Percentage of the senior management trainings

%

100%

14%

/

Percentage of the mid-level management trainings

%

65%

57%

44%

Percentage of male employees trained

%

100%

100%

100%

Percentage of female employees trained

%

100%

100%

100%

Other safety trainings

At the same time, we insisted on checking the qualifications of those responsible for production safety,
occupational health and hazardous chemicals management positions and administrators. As of the end of thereporting period, a total of 204 employees have obtained the “three certificates” for work safety, occupational
health, and hazardous and chemical management, and have effectively worked with certificates in accordancewith laws and regulations.

Building Talent Training System
We provide differentiated training for personnel at all levels. The Ace-100 program enables to enhance theleadership and professional skills of all levels of management and technical personnel. At the same time, weare committed to discovering and cultivating talents with high-potential, and building a talent pool to ensure asustainable supply of talent for core and key positions.

In 2023

2,159

training sessions were organized

60

49,071

employees were trained

41

hours
with an average per person61

｜ Facilitating Career Development ｜Leaders

Technical
personnel

Targeting general managersof pastures and directors of
supporting departments tocultivate future leaders of theCompany

Targeting general managers
and department managers of
pastures to cultivate elites for theCompany•292 employees attended theelite personnel training camp

Targeting department supervisors/
team leaders and other key
employees at the grassroots level tocultivate technical personnel with acraftsmanship spirit•158 employees
attended the technicalpersonnel training camp
Lecturers

Elitepersonnel

Targeting heads of supporting
departments, general managers,
core internal training instructor andpersonal administrators of pastures tocultivate core internal training lecturers

Targeting interns to build a poolfor excellent team leaders andmanagers

We focus on the all-round development of employees and provide diversified training programs to comprehensively
improve employees' performance in theoretical literacy, professional skills, general abilities, and leadership.

Shengmu manager
training camp

Selection and trainingof reserve cadres

Professional and generalmanagement skills training

A development institute has been
established for middle and senior
managers of Shengmu to cultivate
and improve their comprehensive
management capability.

Provide Company’s reserve cadreswith internal mentorship and careerdevelopment planning, improve theircomprehensive capability in terms ofmanagement, business operations andteam building via a series of systematic
professional trainings.

Targeting at the entire workforce, the online
courses can improve employees’ politicalaccomplishment and professional skills.
Targeting at pasture managers, the trainings
can improve their professional skill;targeting at
grassroots managers, the trainings can improvetheir management skills.

Interns

10 professional online
courses were offered.
2 training sessions of Cow
Signaling were organizedwith 40 participants; andfour training sessions on
Stress-free cattle handlingwere carried out with 80
participants.

2 special manager training

Targeting new employees toenhance their basic capabilities
as well as motivations, highquality, competence, andpotential

New
employees

camps were held.
48 director-levelparticipants were trainedwith a passing rate of

20 director-level and100manager-level

100%. 5 “outstanding
student” were awarded.

reserve cadres wereselected.

•60 attended the
supporter training campAce-100 DifferentiatedTalent Development
ProgramCase
Shengmu elite personnel training camp cultivates future senior managers
Pasture managers form an important part of the Company’s
strategic talent pool to provide management support and drive
the Company’s sustainable development. Shengmu cotinuously
provides future general managers and department managersof pastures with a series of customized professional training,hands-on practice and mentor programs to cultivate theirleadership and team building capabilities in terms of pasturemanagement. By doing so, not only do we fulfil the Company’s
need in key posts, but we also manage to support theCompany’s sustainable development and inject strong impetus
into industrial upgrades.

Motivating Employees to Pursue
Further Study and Professional Titles

Smoothing Channels for Promotion

Concerned about the professional development of
employees, we have an incentive system to supportand encourage employees to pursue further study,
vocational certificates, and professional titles during
their employment with the Company. We also inspire
the enthusiasm and initiative of employees forlearning, build an enabling environment for careerdevelopment, and advance the Company’s talentdevelopment.

We have established an employee development
platform, improved the selection and competition
mechanisms, set up a talent pool, and implemented
incentive policies to encourage employees to fully
display their strength through self-recommendation
or attending examinations or contests. These have
not only provided fair opportunities for employees
but also effectively reduced the employee turnoverrate, ensuring the stability of the talent pipeline.

In 2023

In 2023

1
3

20
100

employee with bachelor’s degree were accepted bypostgraduate program
employees with master’s degree were accepted bydoctoral program

12
62

mployees applied
for the middle-rank
professional titles

5

selected
director-level
manager-level
reserve cadres

employees applied
for the seniorprofessional titles63

｜ Focusing on Humanistic Care ｜Focusing on Humanistic Care

Extending happiness and care

The Company is committed to creating an efficient, healthy, and caring workplace. By helping those in need,
we have carried out diverse humanistic activities to enhance their sense of belonging and cohesion, and provide
them with a happy, harmonious and warm working environment.
Content of the indicator

Unit

2023

2022

2021

Investment in team building activities andcompany trips

USD10,000

17.09

17.83

0.00

Accumulated days of maternity andchildcare leave

day

3,603

4,041

2,607

Building of a platform for employee care

Enhancing Employees’ Satisfaction
We establish an employee satisfaction management mechanism. In 2023, we conducted four quarterly surveys
and result analysis on employee satisfaction with the canteen service in terms of dining environment, nutrition,
food taste and service attitude, and proposed improvements and requirements based on the survey results.

In 202372%

of the employees participated in
the satisfaction survey

We pay attention to creating a caring work atmosphere. By organizing recreational and parent-child activities,
we balance the life and work of employees. We also offer our hands to those employees in need to enhance thesense of happiness amongst employees and their family members and create a humanistic working and living
environment.
We are devoted to cultivating a caring culture. A
fund has been established to carry out a variety of
support programs, providing financial support andother welfare packages for employees in difficulty.

In 2023
total was raised for employees in need

Fostering a sense of family
We inherit and carry forward the traditional virtuesof respecting the elderly and caring for the youngof the Chinese nation, and practice the culture offilial piety with practical actions. By carrying out
activities such as trips for employees to take theirparents, parent-child summer camps and various
welfare activities, employees’ sense of belonging andemotional ties to the Company are further enhanced.

USD193,698.96
Case

96.16%
satisfaction rate

At the same time, we hold employee representative congress on time to ensure that the legitimate rights andinterests of all employees are fully protected, democratic management promotes company development, andcontinuously enhances employees’ sense of belonging.

Case
Shengmu employee representative congress strengthens the harmonious bonds between the
Company and the workforce
In April 2023, Shengmu held an employee representative
congress and approved a number of important corporate
policies on recruitment and employment, salary management,
integrated working hours system, welfare management, leave
management and mutual fund management. The congressensures that the Company operates in a standardized, fair andjust manner, while creating a friendly and safe working andliving environment for the employees.

Summer camp for outstanding employees and their family
members aims at fostering a sense of family
In August 2023, we organized a university-visiting summer camp in Beijing foroutstanding employees and their family members. Participants visited famous scenic
spots, including Tsinghua University Art Museum, Summer Palace, Tiananmen Square,
the Great Wall, Olympic Sports Center, and the Palace Museum. The activity has
strengthened the emotional bonds between employees and their family members,leaving them with a happy and unforgettable memory.

Shengmu employees’ “Love You Day” with every bit of heartwarming care
To promote the corporate culture and convey the care and warmth of the Shengmu
family, Shengmu have set up the 21st day of each month as Shengmu’s “Love You Day”.
On that day, a birthday party will be held for employees whose birthday falls in themonth. At the carefully decorated party venue, a cake and gifts will be presented.

Shengmu “magpie bridge” matchmaking event builds anemotional communication platform for Shengmu employees
To facilitate networking and friendship building between employees, especially single
employees who want to find their life partners, the Company organized an internal
matchmaking event on the Chinese Valentine Day of 2023. Named after the traditional
Chinese love story of the magpies forming a bridge to connect lovers, the event
promoted friendship amongst single employees.

64

65

05

Community
Responsibility
While pursuing self-development, Shengmu pays close attention to
the communities and social demands. We give back to society with
our actual deeds by expanding public welfare practices in areas suchas community building, committing ourselves to rural revitalization,and passing the power of kindness.

66

67

｜ IFRS Sustainability Disclosure ｜IFRS Sustainability Disclosure

Opportunities and Potential Impacts of Community Responsibility

Governance
It is clarified that the Administration Department of Shengmu is responsible for matters relating to community
responsibility, public welfare and charity work, ensuring the effective fulfillment of its corporate social
responsibility and sound operation of charitable activities.

Brand
opportunity

The specific measures taken by the Administration Department to promote the implementation of publicwelfare projects are:Planning and implementation ofcharity work

According to the Company’s overall strategy and requirements of social responsibility,
planning and implementing a series of charitable projects in the fields of community,
education, environmental protection and other public welfare.

Resource allocation andfund-raising

Integrating internal and external resources, raising charitable funds, and allocating themto various public welfare projects in a reasonable manner to ensure the efficient use ofcharitable funds.

Maintenance ofpartnerships

Establishing and maintaining good communication and cooperation relationships withgovernmental agencies, non-profit organizations, schools and other partners to jointly
promote the launching of various public welfare activities.

Compliancesupervision

Ensuring that all charitable activities comply with national laws, regulations andindustrial rules; and supervising the transparency and fairness of charitable projects
through a sound audit mechanism.

Evaluation anddissemination of outcomes

Evaluating the effects of charity projects that have been implemented, and informing
both internal and external stakeholders of Shengmu’s public welfare practices throughpublic relations and publicity, so as to enhance its social influence and brand image.

Potential Impacts

Opportunity Management and Countermeasures

By engaging in community services
and carrying out public welfare
activities, the Company can build agood social image and reputation,enhance the trust of consumers andthe public in the brand, and increase
its market share and competitiveness.

•Plan and implement public welfare activities with influence andsocial value in accordance with the Company’s characteristics andadvantages.
•Promote community development and create jobs.
•Encourage employees to participate in various public welfare
activities.
•Expand communication channels and increase brand recognition.

Risk Management
Shengmu actively practices community responsibility, regards risk management as a core priority in its publicwelfare and charity activities and daily operations, and has successfully built a rigorous and sophisticatedmanagement system through scientific planning, fine execution and continuous improvement to ensure that theenterprise’s public welfare actions meet social expectations. Shengmu is determined to make contributions tocommunity development, environmental protection, education support and many other fields, and to achieve theharmonious coexistence of economic benefits and social benefits.
Risk Identification•Identify the risks related
to community responsibility
from the aspects of rural
revitalization and publicwelfare and charity work.

Risk Control/Mitigation•Cooperate with local governments, cooperatives,and financial institutions to facilitate integrated
development of communities and alleviate thenegative impacts that the Company may have on
the production and living of local residents.

Strategy
It is our aspiration to become a caring enterprise that pays attention to and meet the needs of society. By
constantly identifying and evaluating the risks and opportunities in the field of community responsibility andmanagement of public welfare and charity work, we enhance our capacities of fulfill social responsibility, improve
the outcomes of public welfare projects, and promote the Company’s public image and brand image. We strive
to create economic value while giving back to society earnestly and promoting the harmonious development ofcommunities.

Reputation risk
(S/M/L)

Faced with diversified social needs
and increasing public expectations, if
Shengmu improperly handles it whensetting public welfare targets andbalancing the interests of different
parties, it is likely to trigger controversyof public opinions.

Risk Management and Countermeasures•Establish a public opinion monitoring system.
•Maintain close cooperation and good communication withgovernments, non-profit organizations, communities and otherstakeholders.
•Join hands with stakeholders to carry out rural revitalization
projects.
•Promote the development of agricultural inclusive finance.

•Establish a regular communication mechanismwith neighboring communities to keep us timelyinformed of community needs and concerns.
•Track and manage the potential environmental,social and economic benefits and impactsof pasture construction and operation on local
communities.

Targets and Indicators
We set up indicators related to the public welfare of Shengmu, and continuously monitor the performance anddisclose the progress to create value for communities on a reasonable level.

Risks and Potential Impacts of Community Responsibility
Potential impacts

Risk Monitoring/Reporting

TargetCharitable
donation

Total amount of annual
public welfare investment

Unit

2023

2022

2021

USD 10,000

36.11

88.89

29.27

Note: S for short-term; M for medium-term; L for long-term
68

69

｜Delivering Caring and Kindness with Donations from Shengmu ｜Giving Full Play to Industrial Advantages to Promote Rural Revitalization ｜Delivering Caring and Kindness with Donations
from Shengmu

Giving Full Play to Industrial Advantages toPromote Rural Revitalization

While caring for the growth of young people, Shengmu provides health and nutrition support for the staff
who work on the front line of public services, practicing the philosophy of caring for the society and building aharmonious and beautiful life.

The Company introduces new development philosophy, actively promotes the transformation and upgradingof the industry towards the direction of a green and high-quality industry, and injects strong impetus into theprocess of agricultural and rural modernization. Meanwhile, we persist in fulfilling our social responsibility, makefull use of our advantageous resources, actively participate in rural construction and development projects, andpromote the development of surrounding areas with practical actions.

In 2023
Shengmu carried out donating activities

22

total amount of

USD361,152.28

In 2023
Bayannur:

generating profits

The amount of silage corn purchased wasCase

648,000

tons

Shengmu provides services on the front line as a caring enterpriseWith a strong sense of social responsibility, China Shengmu is devoted
to public welfare undertakings. In 2022, the Company organizedmany donation activities for key public services and social and cultural
institutions in different fields, such as fire brigade, the Red Cross
Society in Dengkou County, Retirement Bureau, and Agui Temple.
Shengmu provided nutritious dairy products for the fire brigade to
improve the physical strength of firefighters who safeguarded people’s
lives and properties at all times, and expressed Shengmu’s respect for
their selfless dedication. Through donation to the Red Cross Society in
Dengkou County, Shengmu helped it to carry out humanitarian relief
and various public welfare activities, bringing health and care to people
in need. Considering the historical contributions and practical needsof veterans, the Company donated dairy products to the Retirement
Bureau, which was a manifestation of respect and care for themand helped to improve their quality of life. Donations to Agui Temple
and other religious and cultural sites represented its support for theprotection of traditional culture and the harmonious developmentof communities. Through these activities, Shengmu not only passed
the power of care and kindness, but also strengthened the close ties
between enterprises and various fields of society, jointly promotingsocial progress and development.

Shengmu spreads love and ignited hope through student aid on Children’s Day
China Shengmu cares about the growth of children and teenagers
and cooperates with a number of enterprises to carry out student aid
activities. On June 1, 2023, China Shengmu joined hands with Hohhot
Tianhao Cement Co., Ltd. to carry out the activity of “Student Aid onChildren’s Day”, donating USD 1419.1 in cash to 150 students of Shaerqin
Central School, which not only eased the students’ financial burden,
but also stimulated their thirst for knowledge and expectation for the
future, further enhancing the society’s attention to the development ofchildren and teenagers in underdeveloped areas.

70

USD74.36
6,750

millionbenefiting of local farmer

households

Bayannur:

generating profits

The amount of silage corn purchased was

234,000

tons

USD21.14
3,342

millionbenefiting of local farmer

households

Case
The ecological construction of Shengmu empowered rural
revitalization and increased the income of farmers
China Shengmu has always been combing the ecological construction of the Ulan Buh Desert with rural revitalization, and actively
devoted itself to promoting the improvement of ecological environment and regional prosperity and development. In recent years,
Shengmu has continuously increased its investment in eco-agriculture, consolidated the basic construction of industrial environment, andvigorously supported farmers of surrounding areas to plant 18,278.85 hectares of silage, which benefited 10,092 households of farmers
and increased their income by USD95.51 million, with an increase of USD9465.40 of per capita income, radiating 1.45 million mu (about
96,731 hectares of external base. Meanwhile, Shengmu provided jobs for thousands of people of ethnic minorities and promoted national
solidarity and progress through industrial revitalization.
In response to the revitalization plan for the dairy industry of the Inner Mongolia Autonomous Region, Shengmu has invested USD1.21
and transformed a total of 23,333.33 hectares of desert into high-quality pasture, greatly improving the local ecological environment
and making it full of vitality. In terms of infrastructure construction, Shengmu has completed 193.3 kilometers of road construction, 277.9
kilometers of wire installation, and established supporting facilities including 11 reservoirs, 9 organic manure fermentation plants, and one
bio-organic fertilizer processing plant. , bringing modern agricultural production conditions to desert areas.

71Outlook 2024

Outlook 2024
The canal network meandering across the land of Hetao is the demonstration of people’ s wisdom to adapt tonatural conditions for thousands of years; and also a big and ripe fruit of people’ s pursuit for a better life andtheir passionate creativeness. On this land full of wisdom and diligence, China Shengmu also has contributed its
ecological share.
In 2024, Shengmu will continue making efforts to ecological industrialization and industrial ecology, vigorously
promote industrial sand control, strive to make the Ulan Buh Desert a demonstration zone that produces thebest organic milk in the world and a national ecological civilization demonstration zone, and provide organic andnatural solutions for the global response to climate change.
We will promote sustainable development through practicing longtermism.
The Company will continue to improve the governance system of sustainable development, deeply promote theintegration of the idea of sustainable development into corporate governance, and promote the improvement of
the quality and efficiency of business operations. We will strive to ensure the integrity and compliance operations,maintain the strict control of product quality throughout the entire process by collaborating with industrial chain
partners such as suppliers, and join hands with industry elites, including associations, institutions, peers, experts
and universities, to seek the future of sustainable development of dairy industry.

72

We will promote growth of everything with the way of nature.
The Company will continue to adopt the desert organic milk industrial chain consisting of desert governance,
the combination of planting and breeding, and organic circulation, constantly put the development models
of ecological agriculture, circular agriculture, water-saving agriculture, regenerative agriculture and organic
agriculture into practice, vigorously build the “low-neutral carbon pastures” , research and develop “low-neutralcarbon raw milk” , accelerate the transformation into a green and low-carbon enterprise, and create a new
natural economic business model with natural benefits as the core to protect our home planet.
We will promote people-centered philosophy and devote with love and the sense of responsibility.
The Company will adhere to the implementation of a diversified talent strategy, protect the rights and interestsof employees, and continue to cultivate a highly competitive talent team. At the same time, the Company will pay
more attention to the construction of a sustainable supply chain and win-win cooperation with strategic partners;
care for disadvantaged groups, actively carry out student assistance activities, and convey love and responsibility.
In the future, Shengmu will adhere to the new development philosophy that focuses on “youth, openness, reform,
sustainablility and common development” , promote the high-quality development of sustainable agriculture,develop the original practices of planting grass to control sand and raise cow to promote biodiversity, and leave
future generations with lucid waters and lush mountains and a prosperous Ulan Buh!
73

Ve r i f i c a t i o n S t a t e m e n t

VERIFICATION STATEMENT
Scope and Objective of Verification

Conclusion

Hong Kong Quality Assurance Agency ( “HKQAA” ) has been engaged by the China Shengmu Organic
Milk Limited (Stock Code: 1432) “Shengmu” to undertake an independent verification of its 2023
Environmental, Social and Governance Report ( “the Report” ). The Report stated the economic,
environmental and social performance of Shengmu in the period of 1st January 2023 to 31st December
2023 for its main operations in China. The objective of this verification is to provide a limited assurance
on the reliability of the report content in accordance with the Appendix C2 “Environmental, Social andGovernance Reporting Guide ( “ESG Guide” )” of the Main Board Listing Rules of The Stock Exchange ofHong Kong Limited.

Based on the verification results, HKQAA has obtained limited assurance and is in the opinion that:•The Report has been prepared in accordance with the ESG Guide;•The Report illustrates the sustainability performance of Shengmu in a balanced, clear and timely
manner; andLevel of Assurance and Methodology
The process applied in this verification was based on the International Standard on Assurance
Engagements 3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical
Financial Information issued by the International Auditing and Assurance Standards Board. Our evidence
gathering process was designed to obtain a limited level of assurance as set out in the standard for the
purpose of devising the verification conclusion. The extent of this verification process covered the criteria
set in the ESG Guide.
The verification process included verifying information relevant to reporting and management procedures,
including stakeholder engagement methods and result, and materiality assessment processes. In
addition, system and process for collecting, collating and reporting sustainability performance data wereverified. Raw data and supporting evidence of the selected representative samples were also thoroughly
examined during the verification process.

Nothing has come to HKQAA attention that the selected sustainability performance information and datacontained in the Report has not been prepared and presented fairly and honestly, in material aspects,
in accordance with the verification criteria. In conclusion, the Report reflects truthfully the sustainability
commitments, policies and performance of Shengmu, and discloses their sustainability performance thatis commensurate with their sustainability context and materiality.
Signed on behalf of Hong Kong Quality Assurance Agency

K.T. Ting
Chief Operating Officer
April 2024

Independence
China Shengmu Organic Milk Limited is responsible for the collection and presentation of the information
presented. HKQAA does not involve in calculating, compiling, or in the development of the Report. Our
verification activities are independent from Shengmu. There was no relationship between HKQAA and
Shengmu that would affect the independence of HKQAA for providing the verification service.

74

75

｜ HKEX ESG Reporting Guide Indicators ｜HKEX ESG Reporting Guide Indicators
Aspects, general

Description

disclosures and KPIs

Page of disclosure

Description

disclosures and KPIs

Page of disclosure

Subject Area A: Environmental

Aspect 3: The Environment and Natural Resources

Aspect A1: Emissions

General Disclosure

Policies on minimizing the issuer’s significant impacts on theenvironment and natural resources.

P49

KPI A3.1

Description of the significant impacts of activities on the environment
and natural resources and the actions taken to manage them.

P49

Information on:(a) the policies; and(b) compliance with relevant laws and regulations that have asignificant impact on the issuer relating to air and greenhousegas emissions, discharges into water and land, and generation of
hazardous and non-hazardous waste.

P40-43

KPI A1.1

The types of emissions and respective emissions data.

P43-44KPI A1.2

Direct (Scope 1) and energy indirect (Scope 2) greenhouse gas
emissions (in tonnes) and, where appropriate, intensity (e.g. per unit ofproduction volume, per facility).

P45-46

General Disclosure

KPI A1.3

Total hazardous waste produced (in tonnes) and, where appropriate,
intensity (e.g. per unit of production volume, per facility).

Aspect 4: Climate Change
General Disclosure

Policies on identification and mitigation of significant climate-related
issues which have impacted, and those which may impact, the issuer.

P40-42KPI A4.1

Description of the significant climate-related issues which have
impacted, and those which may impact, the issuer, and the actions
taken to manage them.

P40-42

P43-44

Subject Area B: Social

Total non-hazardous waste produced (in tonnes) and, whereappropriate, intensity (e.g. per unit of production volume, per facility).

P43-44KPI A1.5

Description of emission target(s) set and steps taken to achieve them.

P42、P45-46

KPI A1.6

Description of how hazardous and non-hazardous wastes are handled, anda description of reduction target(s) set and steps taken to achieve them.

P42、P44KPI A1.4

Employment and Labor Practices
Aspect B1: Employment

Aspect A2: Use of resources76

Aspects, general

General Disclosure

KPI B1.1

General Disclosure

Policies on the efficient use of resources, including energy, water andother raw materials.

P40-42、P47

KPI A2.1

Direct and/or indirect energy consumption by type (e.g. electricity, gasor oil) in total (kWh in '000s) and intensity (e.g. per unit of production
volume, per facility).

P47

KPI B1.2

Information on:(a) the policies; and(b) compliance with relevant laws andregulations that have a significant impact on the issuer relating tocompensation and dismissal, recruitment and promotion, working
hours, rest periods, equal opportunity, diversity, anti-discrimination,and other benefits and welfare.

P52-54

Total workforce by gender, employment type (for example, full- or
part-time), age group and geographical region.

P54-55

Employee turnover rate by gender, age group and geographical region.

P57

Aspect B2: Health and Safety

KPI A2.2

Water consumption in total and intensity (e.g. per unit of production
volume, per facility).

P47

KPI A2.3

Description of energy use efficiency target(s) set and steps taken toachieve them.

P40-42、P47

KPI A2.4

Description of whether there is any issue in sourcing water that is fit for
purpose, water efficiency target(s) set and steps taken to achieve them.

P48

KPI A2.5

Total packaging material used for finished products (in tonnes) and, if
applicable, with reference to per unit produced.

Not applicable

General Disclosure

Information on:(a) the policies; and(b) compliance with relevant laws and regulations that have asignificant impact on the issuer; relating to providing a safe working
environment and protecting employees from occupational hazards.

P58-60KPI B2.1

Number and rate of work-related fatalities that occurred in each of
the past three years including the reporting year.

P58-60KPI B2.2

Lost days due to work injury.

P58-60KPI B2.3

Description of occupational health and safety measures adopted, andhow they are implemented and monitored.

P58-6077

｜ HKEX ESG Reporting Guide Indicators ｜Aspects, general

Description

disclosures and KPIs

Page of disclosure

Aspect 3: Development and Training
Policies on improving employees’ knowledge and skills for discharging
duties at work. Description of training activities.

P61-63

KPI B3.1

The percentage of employees trained by gender and employee
category (e.g. senior management, middle management).

P61

KPI B3.2

The average training hours completed per employee by gender andemployee category.

P61

Aspect B4: Labor Standards

KPI B4.1

Information on:(a) the policies; and(b) compliance with relevant laws and regulations that have asignificant impact on the issuer relating to preventing child and forcedlabor.
Description of measures to review employment practices to avoid
child and forced labor.

P52-54

P52-54General Disclosure

Description of steps taken to eliminate such practices when discovered.

Information on:(a) the policies; and(b) compliance with relevant laws and regulations that have asignificant impact on the issuer relating to health and safety,
advertising, labeling and privacy matters relating to products andservices provided and methods of redress.

P30-33

Percentage of total products sold or shipped subject to recalls forsafety and health reasons.

Not applicable

KPI B6.2

Number of products and service related complaints received and how
they are dealt with.

P30-33

KPI B6.3

Description of practices relating to observing and protecting
intellectual property rights.

P27

KPI B6.4

Description of quality assurance process and recall procedures.

P32-33

KPI B6.5

Description of consumer data protection and privacy policies, and how
they are implemented and monitored.

Not applicable

Aspect B7 ：Anti-corruption

Not occured

Operating Practices

Information on:(a) the policies; and(b) compliance with relevant laws and regulations that have asignificant impact on the issuer relating to bribery, extortion, fraud
and money laundering.

P27

KPI B7.1

Number of concluded legal cases regarding corrupt practices brought
against the issuer or its employees during the reporting period andthe outcomes of the cases.

P27

KPI B7.2

Description of preventive measures and whistle-blowing procedures, andhow they are implemented and monitored.

P27

KPI B7.3

Description of anti-corruption training provided to directors and staff.

P27

Aspect B5: Supply Chain Management

78

Page of disclosure

KPI B6.1

General Disclosure
KPI B4.2

Description

disclosures and KPIs

Aspect B6 ：Product Responsibility

General Disclosure

General Disclosure

Aspects, general

General Disclosure

Policies on managing environmental and social risks of the supply chain.

KPI B5.1

Number of suppliers by geographical region.

P34

KPI B5.2

Description of practices relating to engaging suppliers, number ofsuppliers where the practices are being implemented, and how they
are implemented and monitored.

P34

KPI B5.3

Description of practices used to identify environmental and social risks
along the supply chain, and how they are implemented and monitored.

P34

KPI Disclosure

Policies on community engagement to understand the needs of thecommunities where the issuer operates and to ensure its activities
take into consideration the communities' interests.

P68-71KPI B5.4

Description of practices used to promote environmentally preferable
products and services when selecting suppliers, and how they are
implemented and monitored.

P34

KPI B8.1

Focus areas of contribution (e.g. education, environmental concerns,
labor needs, health, culture, sport).

P68-71KPI B8.2

Resources contributed (e.g. money or time) to the focus area.

P68-71

P34

Community
Aspect B8 ：Community Investment

79

Feedback Form
Dear readers:Thanks for reading the 2023 Environmental, Social and Governance (ESG) Report ofShengmu . For better ESG practices and CSR capabilities, we will appreciate it if you
could give your feedback on the report.

1. How do you rate the report?
１
２
３
４
５
2. The report reflects Shengmu’s major impacts on environment, society and governance:
１
２
３
４
５
3. The information and indicators disclosed are clear, accurate, and complete:
１
２
３
４
５
4. How do you rate Shengmu’s efforts in stakeholder engagement?
１
２
３
４
５
5. How do you rate the layout and design of the report?
１
２
３
４
５
6. How do you rate the publicity of the report?
１
２
３
４
５
7. Which part of the report attracts you most?

8. Other suggestions and advice on the report:

80

Cherish resources and your eyesightThis report is printed on FSC-certified renewable
paper with pulp sourced from responsible andsustainable forests.

(stock code:1432)
Unit A, 32 / F, CoFCO Building, 262
Gloucester Road, Causeway Bay, Hong Kong
Shengmu Headquarters, Kaifang Street,
Shaerqin New Industrial Zone, Hohhot
Economic and Technological Development
Zone, PRC
0471-3188899 ext.8000
smhr@smorganic.cn