ESG Report 2023

95 Regulatory Increased Greenhouse Gas Emission Pricing Climate-related Risks - Transition Risks The country has implemented a carbon emissions trading mechanism. Self- owned power plants of the company are i n c l u d e d i n t h e n a t i o n a l c a r b o n emissions trading industry, which may increase operational costs due to purchasing carbon emission quotas for compliance. Increasing greenhouse gas emission p r i c i n g s i g n i f i c a n t l y a f f e c t s t h e electricity and chemical industries, leading to rising energy prices or material supply shortages and indirectly increasing operating costs. Dual Control of Energy Consumption and Carbon Intensity for Existing Products and Increased Supervision Set energy-saving and emission reduction targets, actively take measures to reduce greenhouse gas emissions, and gradually reduce carbon intensity and total emissions. Improve energy efficiency by using high- efficiency energy-saving equipment instead of obsoleted high-energy consumption equipment and retrofitting high-energy- consuming equipment for energy savings. Improve energy structure by using clean energy and renewable energy sources such as photovoltaic power generation. Strengthen energy-saving and emission r e d u c t i o n ma n a g eme n t , t r a i n i n g , a n d promotion throughout the production and operation process to enhance employee energy-saving awareness. Strengthen energy control, establish energy (such as steam) use application systems, and e n h a n c e e n e r g y u s e a s s e s sme n t s i n production workshops. To comply with policy requirements, research and develop low-energy- consuming new technologies and processes, thereby increasing research and development expenditures. Replace and procure new energy- saving equipment, leading to increased capital costs. Stringent policies lead to increased compliance costs. Hire consultants to assess our energy-saving status and implement targeted improvements based on professional assessment results to minimize risks due to policy and regulatory changes. Improve product yields to reduce unit product raw material and energy consumption. RISK CATEGORY RISK POTENTIAL IMPACT RESPONSE MEASURES Regulatory Environmental, Social and Governance Report 2023 The United Laboratories International Holdings Limited Rising Raw Material Costs Impacted by climate change, global energy transformation, etc., prices of energy (coal, electricity, steam), water, raw materials (glucose, corn starch, etc.) are rising, and some bio-based raw materials are difficult to obtain, leading to increased production costs. Actively engage in technological innovation, seek alternative raw materials and energy sources, establish multiple energy supply channels. Strengthen strategic cooperation with s upp l i e r s ( s u c h a s s i gn i ng l ong - t e rm contracts to avoid price fluctuations), increase key supplier inventories, regularly analyze supplier supply risks. Based on market conditions, prepare raw material reserves in advance to avoid supply disruptions. Improve production technology, increase product yield, control production costs, and reduce raw material and energy consumption. Establish emergency plans and make relevant arrangements to cope with sudden power and water restrictions. Market