Message from CEO

Dear Stakeholders,

In 2021, we strengthened our sustainability commitment and successfully executed our sustainability efforts, having made definitive strides in our key Environmental, Social and Governance (“ESG”) areas. We continued to build transparency into our strategy and reporting. Through this reporting, we aim to strengthen trust with the stakeholders including our employees, customers, suppliers, partners, shareholders, peers, and communities.

In the report, I am pleased to share our vision and the progress we have made. We repeatedly remind and question what 'sustainability' means to us, to Century Bond Berhad (CBB), but before we can achieve the target of a sustainable future and upholding the United Nations Sustainable Development Goals ("UNSDGs"), we must first look directly inside our operations. So, this time around, we came closer to embracing best sustainability practices by improving the production process of this very Report. While maintaining transparency and completeness, we optimised the narratives and, in doing so, reduced the number of pages in the Report.

Other manifestations of the physical risks were abnormal storm patterns, torrential rain, flash floods and landslides, which occured in other countries where our value chains are – Malaysia, Europe, China, Indonesia, and Vietnam. Science points to the impacts of climate change growing more severe over the coming years and decades. Therefore, it was only necessarily timely to examine such fundamental questions as to how we have been and will be operating and running our manufacturing operations to chart our business growth, how we rely on our environment, and how we can work better in achieving our sustainability objectives through partnerships and engagement with corporations, governments and non-profit organisations (“NGOs”) to allow us to do more than we could on our own, for the greater benefit of present and future generations.

CENTURY BOND BHD (“CBB”)

Integrated packaging solutions provider, driven by five business Divisions: OFFSET/PAPER/CARTON/PLASTIC/OEM

Integrated packaging solutions provider driven by five business divisions, namely Offset, Carton, Paper, Plastics and Original Equipment Manufacturer (“OEM”) for Consumer Products. The Offset division is currently leading the business operating from three plants across Malaysia and Indonesia. The Carton division covers an essential industry with a presence in the Northern, Central and Southern regions of Malaysia. The Paper division operates from three plants across Malaysia and Indonesia. The other two divisions, Plastics and OEM for Consumer Products, continue to support the businesses in providing integrated packaging solutions to customers from the Electrical & Electronics and retail sectors via its plant in Senai.

Corporate Social Responsibilities

As a subsidiary of public listed investment holding of Kumpulan Perangsang Selangor Berhad (“KPS”), we seek to embed sustainability in our business by operating responsibly through the integration of three core sustainability pillars (Economic, Environment, Social) prescribed by Bursa Malaysia Securities Sustainability Reporting Guide and in compliance with Bursa Malaysia’s Main Market Listing Requirement Practise Note 9 Paragraph 6.

The Economic outlines our efforts in ensuring business sustainability via well-defined strategies, the ensuing action plans, and long-term value creation plans. It also elaborates on how these efforts directly or indirectly contribute to developing the local economy and our interaction with the economic system. In the Environment pillar, we share our initiatives in minimizing the intensity of our environmental footprint. The Social outlines our engagement with the diverse group of stakeholders, narrating how these approaches help us achieve a far greater positive impact on our stakeholder network.

Proactive steps were identified to align ourselves with the following selected United Nations Sustainability Development Goals.

TACKLING SUSTAINABLE DEVELOPMENT GOALS

INTRODUCTION

There is ample evidence that industry and manufacturing provide significant opportunities that impact the advantages and benefits of economies of scale, drive investment and innovation, create formal employment, and facilitate global trade. It can enable the structural transformation of economics, critical for economic growth, and create decent job opportunities that help achieve shared and sustainable prosperity.

ECONOMIC

The merits of the virtuous circle have been entirely borne out during the extended COVID-19 pandemic. By pegging our plans and performance on sustainability principles, we have overcome or circumvented many roadblocks in our way these past two years.

As a result, the Group has addressed and assisted all our stakeholders in weathering the challenges during this difficult period whether, they are economic aspirations, environmental goals or social objectives. In line with the previous year, our sustainability reporting is based on the GRI and F4GBM standards to achieve the relevant UNSDGs, as indicated in the Economic-related SDGs number 4 and 8.

ECONOMIC AND BUSINESS PERFORMANCE

The Group maintained an impressive growth trajectory during the reporting period on the back of sound business decisions, strong institutional fundamentals and prudent crisis management amid the volatility of a pandemic environment. We successfully navigated prevailing challenges such as a bearish market, an uncertain investment climate, disruptions to the global supply chain and delays to corporate initiatives via preemptive measures to stem the economic and social impact of COVID-19.

These action plans revolved around securing the safety of our people to protect business continuity while ensuring liquidity and engaging stakeholders consistently in a holistic approach. Our strong financial performance also reflected the judicious shift we made to invest in agile industries with high growth potential, such as manufacturing which currently constitutes more than 80% of Group business. Our healthy financial status ensured we could sustain generous returns to stakeholders, including dividends to shareholders, income security and other benefits for employees, sustained business opportunities for partners and vendors, as well as continued support for a hard-hit community.

HIRING FROM THE LOCAL COMMUNITY

At KPS, we understand the critical role we play in creating and providing employment at locations where we operate. Although the practice is not entrenched in any formal capacity, nevertheless, we consistently prioritise local over foreign employment at each of our operating sites.

That said, our Malaysian operations employ a sizeable contingent of foreigners as general workers due to the general aversion towards manual labour by the local population. In contrast, almost all our employees at executive level and above are Malaysians.

SUSTAINABLE PROCUREMENT PRACTICES AND SUPPLIER ASSESSMENT

The Group maintained an impressive growth trajectory during the reporting period on the back of sound business decisions, strong institutional fundamentals and prudent crisis management amid the volatility of a pandemic environment. Supply chains had been under increasing pressure from customers demanding customised products and immediate, inexpensive delivery. The pandemic ruptured so many of those chains, prioritising the importance of resilience and sustainability. Turning transparency, visibility and traceability - from field or source to factory to customer and beyond - into an operational reality has become as important as reliability and efficiency.

CBB has an established Procurement Policy in place with Standard Operating Procedures ("SOPs") covering all aspects of the process: from vendor assessment to evaluation; quality of products or services, reliability of service delivery, competitive pricing, bidding for contracts, invoicing, inventory responsibility, and other relevant factors. The policies and SOPs cover the procurement practices of all our subsidiary companies, and are mandated to further improve the processes according to the changing demands of their business operations.

CBB is an integrated packaging solutions manufacturer for cement bag products, non-cement bags and box cartons, serving Malaysian and overseas clientele. CBB conducts the Supplier Initial Assessment to evaluate all new suppliers, assessing their quality system, product markings, prices, delivery capability and payment terms. CBB evaluates all existing suppliers based on pre-determined criteria of service offerings, quality, delivery capability and payment terms annually.

In 2021, CBB contracted a total of 1,621 suppliers compared to 1,954 in 2020, leveraging the benefits of local sourcing, accounting for 89.6% or 766 suppliers (2020: 91% or 1,771 suppliers) compared to 10.4% or 89 non-local suppliers (2020: 9% or 183 non-local suppliers) out of its 855 suppliers. The escalating cost of materials and labour drove CBB to aim for supplier consolidation, reducing the number of suppliers and vendors to cushion the strain on finding cost-saving initiatives and reducing risk. This strategy has also allowed CBB more time to focus on improving core suppliers' quality, efficiency, and overall performance.

MATERIALS

Sustainable Materials

As the use of materials naturally contributes to the depletion of natural resources, responsible corporations focus their conservation efforts on maximising consumption and minimising wastages. Material consumption in operations:

In line with the approach outlined earlier, the Group practices the 3R guidelines of Reduce, Reuse and Recycle for all materials at our manufacturing sections as well as at headquarters and offices of subsidiary companies.

For the past few years, we have gradually reduced the number of printed copies of our Annual Reports and Sustainability Reports by using QR codes to bridge between online and offline media. We have also embarked on extensive digitalisation for presentations, meetings, communications and with legislative reforms and enforcement, we are on our way to creating a paperless organisation.

As a producer of integrated packaging solutions, CBB purchases raw paper as its primary input material and production chemicals represent the secondary input materials. 88% of its paper are certified as originating from responsibly-managed forests. CBB's consumption of materials purchased was 85.5% of materials purchased with 7.25% either kept in reserve or scrapped. Reused and recycled materials represented 7.25% of total materials consumed.

ENERGY

Energy Management

The manufacturing sector is the highest consumer of electricity among industries, according to the US Energy Information Administration ("EIA"). Although KPS’ plastics injection moulding and packaging activities are comparatively less energy-intensive, nevertheless, we strive to lower consumption for cost control and environmental reasons such as resource conservation and reduction of emissions.

Our energy needs for manufacturing operations and administration are sourced from the national electricity grid. We are committed towards optimising consumption by improving energy efficiency via various electricity-saving measures and use of alternative sources such as solar.

For FY2021, the Group consumed 28,086,795 kWh of electricity at the cost of RM11,074,450.40 in comparison to 25,713,110 kWh and RM10,707,527 the year before. The cost of electricity varies for each subsidiary depending on the respective production schedule. At this stage, the year-on-year increase/decrease in consumption does not provide a clear trend due to the volatility in production schedules during the pandemic.

As part of energy-saving measures, this subsidiary successfully implemented an initiative in 2021 after being delayed in the previous reporting period due to pandemic-related movement and operational restrictions. The installation of solar panels at all its manufacturing facilities was postponed to the following reporting year and replacement of all fluorescent lights to LED was completed by Q4 2021.

CHEMICALS

Chemicals Management

Our subsidiary companies utilise chemicals either in their production processes in the case of Toyoplas, CPI and CBB, or in the supply of water treatment chemicals by Aqua-Flo. Proper management is essential to safeguard the health and safety of employees and others since the movement and storage of chemicals can lead to spillage or leakage. It can also lead to environmental implications in ground and water contamination.

To reduce risk, all subsidiary companies have a chemical management system that essentially forms the framework for moving and storing chemicals. The system ensures the availability of comprehensive Inventory and Material Safety Data sheets, and it complies with local and international safety and environmental policies. Over and above this, they conduct regular training for employees on the safe handling of chemicals. In the event of any untoward incidents, each subsidiary has an Emergency Response Team ("ERT") to directly contain and drive the remediation. For this reporting period, none of our subsidiaries recorded any chemical related accidents or spillages.

CBB recorded 2,281.50 litres of chemical waste, which is in line with its nature of operations. CBB is driving toward using biodegradable type chemicals to reduce the impact and hazard to its employees and the environment. In 2021, 12 of 94 chemicals used by the company are already biodegradable.

WATER AND EFFLUENTS

Water Management

Although Malaysia may have vast water resources, increased demand from rapid urbanisation and industrialisation is threatening to turn the water supply situation from abundance to scarcity, according to a report by the Malaysian Water Partnership ("MWP"). In response, the MWP and the Malaysian National Committee for Irrigation and Drainage ("MANCID") have developed a Malaysian Water Vision, which among many actions, has as one of the objectives the efficient use of water resources particularly by industries. As a manufacturing-heavy group, KPS and its subsidiaries consume considerable amounts of water for its production processes. In fact, an uninterrupted supply of water is critical to our operations to produce quality products on time.

This being the case, we are committed towards water conservation and have incorporated water-saving initiatives such as rainwater harvesting and other measures to recycle and reuse water. At the same time, we also carry out awareness campaigns at our manufacturing facilities to ensure our employees practise prudent water usage in production and other functions.

The various processes of our Manufacturing subsidiaries make generous use of water resources. As such, we are cognisant of rainwater harvesting as a solution to water scarcity. CBB has taken advantage of the high annual rainfall in Malaysia by collecting rainwater and subsequently using the water in its pulp moulding process.

In the first year reporting on this metric, CBB achieved a water consumption average cost per revenue of 0.046% and this will form the baseline for future year comparisons. The subsidiary company had installed a wastewater treatment plant, which started operations in October 2020 to improve the quality of its discharge and to reduce the environmental impact.

EMISSIONS

Emissions and Initiatives to Tackle Climate Change

Global environmental bodies have been ringing the warning bells over the past two years of the pandemic, reminding governments and public sectors of the climate crisis’ dire consequences even as most attention was riveted on COVID-19. The main causes of climate change are GHG emissions, particularly carbon dioxide (CO2) from vehicle combustion and the burning of oil, gas and coal to generate electricity. Industries contribute greatly to emissions as they consume large amounts of electricity to power their activities.

The Group took a leap forward in FY2021 by committing to calculate our GHG emissions. As the exercise is an exhaustive and complex undertaking, in some cases, our subsidiary companies merely listed their various sources of emissions. Calculations are based on various carbon converters from sources including ghgprotocols.org, ecoscore.be and worldbenchmarkingalliance.org, the latter for the country-specific conversion of electricity consumption.

TOTAL GHG EMISSIONS (CO2-EQ IN KG) - CBB

Our emissions accounting is based on various benchmarks whose methodologies and conversion factors apply to a Malaysian context, in particular the source of fuel as well as type of power generation. At the same time, we also refer and compare to other benchmarks such as GHG Protocol and Intergovernmental Panel on Climate Change ("IPCC") Guidelines for National Greenhouse Gas Inventories.

In the case of emissions from mobile combustion (petrol and diesel) under Scope 1, we based our conversion factors on the European Ecoscore1 and a 2020 study on CO2 emissions by Universiti Kebangsaan Malaysia ("UKM")2.

For emissions from purchased electricity under Scope 2, we applied the projection of emissions intensity by the World Benchmarking Alliance ("WBA")3 based on Malaysia’s specific mix of power generation assets by 2023, which includes oil, gas and coal-fired as well as hydroelectric plants.

Along with our step in monitoring and disclosing of our emissions, our manufacturing operations have established action plans towards climate actions through the following initiatives:

WASTE

Waste Management, Circular Economy

Occasionally discarded as an afterthought, waste management is in fact a key factor in protecting and preserving mother nature. The safe and responsible disposal of waste reduces any negative impact it can have on the environment while the recycling of waste materials lowers overall consumption.

Proper waste management has also given rise to a circular economy in which products are repeatedly recycled for optimum use. Apart from spawning new industries, this green business model generates resource efficiency, lowers potential contamination and reduces GHG emissions.

CBB strongly subscribes to these principles with our comprehensive 3R practice of Reduce, Reuse and Recycle alongside ethical and responsible waste management at headquarters and all our subsidiary companies.

Similar to CPI, CBB introduced new waste segregation and recycling initiatives in a bid to maximise the use of its raw and other materials. The first initiative was to segregate paper, metal and plastic waste, while the second involved the recycling of ink and glue sludge into fertiliser.

In line with our efforts to improve the circular economy, the Company has also achieved zero manufacturing waste by converting all its carton trim waste into moulded pulp casings during the year, achieving this KPI (target set ≥90%) for its Materiality Matter of Waste Reduction and Environmental Initiatives. These moulded pulp casings generated RM8.84 million in revenue in the current reporting period, a 56.13% increase from RM5.63 million in 2020.

The subsidiary's raw materials and subsequent recycled consumption for its production processes were 85.50% and 7.30%, respectively. Further details are on page 69 of this Report.