Pou Chen Corporation POU CHEN GROUP No.600, Sec. 4, Taiwan Blvd., Xitun Dist., Taichung City 407, Taiwan (R.O.C.) Economic Corporate Environmental Protection Customer Service and Social Care and Performance Governance and Energy Conservation Supplier Management Friendly Workplace Community Engagement Appendix GRI G4 Appendix A: Third Party Assurance Statement 133 Appendix B: GRI G4.0 Index Table 135 Appendix C: Pou Chen Group Code of Conduct 141 Message from the Chairman 3 About Pou Chen 5 About the Report 9 Stakeholder Engagement 11 1/ Economic Performance 19 2/ Corporate Governance 25 3/ Environmental Protection and Energy Conservation 43 4/ Customer Service and Supplier Management 63 5/ Friendly Workplace 75 6/ Social Care and Community Engagement 121 PCC 2017 CSR Report 1 Economic Corporate Environmental Protection Customer Service and Social Care and Performance Governance and Energy Conservation Supplier Management Friendly Workplace Community Engagement Appendix GRI G4 Appendix A: Third Party Assurance Statement 133 Appendix B: GRI G4.0 Index Table 135 Appendix C: Pou Chen Group Code of Conduct 141 Notice to readers This English version of PCC 2017 CSR Report is translated from the Chinese version. If there is any discrepancy between the English version and the Chinese version or any difference in the interpretation of the two versions, the Chinese version shall prevail. Message from the Chairman 3 About Pou Chen 5 About the Report 9 Stakeholder Engagement 11 1/ Economic Performance 19 2/ Corporate Governance 25 3/ Environmental Protection and Energy Conservation 43 4/ Customer Service and Supplier Management 63 5/ Friendly Workplace 75 6/ Social Care and Community Engagement 121 PCC 2017 CSR Report 2 Economic Corporate Environmental Protection Customer Service and Social Care and Performance Governance and Energy Conservation Supplier Management Friendly Workplace Community Engagement Appendix GRI G4 Message from the Chairman Consolidating our leading position in the sports industry and maximizing company value Staying committed to environmental sustainability and fair labor conditions Pou Chen Corporation is a multinational compa- performance is the first step in fulfilling our corpo- ny that simultaneously provides independent and rate social responsibility. We focus on the operation high-quality footwear manufacturing services for development of the two core businesses: footwear major brands. As a result, we have to adapt our manufacturing and sporting goods retailing as well global capacity allocation to meet customer needs. as brand licensing. The 2017 consolidated revenue With that in mind, advancing smart production reached a record high of NT$ 278.632 billion, which technology, maintaining good labor relations, com- went up 1.4% over 2016. The compound annual plying with local environmental protection stan- growth rate for consolidated revenue between 2013 dards as well as international sustainability trends and 2017 was 5.3%. In addition to continuously are important issues for the sustainable operation increasing our scale of operation, we are also com- development of Pou Chen Corporation. Pou Chen mitted to creating company value. The gross profit Corporation has engaged in CSR since 1997. The margin of Pou Chen Corporation’s consolidated Sustainable Development Department (SD) was business increased from 22.3% in 2013 to 26.2% created in 2012. It is mainly responsible for inte- in 2017. The consolidated operating profit mar- grating and providing all factories with an execution gin was raised from 4.5% in 2013 to 6.1% in 2017. strategy and project management for CSR-re- The compound annual growth rate of net income lated issues in terms of sustainable production. after tax from 2013 to 2017 was 5.0%. Through the Through various sustainability innovation projects, simultaneous growth of revenue and profit, we can we engage in social participation and environmental reach the economic performance targets with the protection in order to realize the long-term vision of focus on both scale and quality. corporate sustainability and value creation. In the face of climate change, global companies are Pou Chen Corporation was selected as a constitu- actively pursuing the Paris Agreement’s tempera- ent of the FTSE4Good Emerging Index in 2015, and ture control and emission reduction targets, as well a constituent of the FTSE4Good TIP Taiwan ESG as the United Nations’ sustainable development Index by Taiwan Index Plus Corporation and FTSE indicators. Pou Chen Corporation is no exception. Russell in December 2017. The Company was again Together with our equipments manufacturers, we rated as the top 5% in the Taiwan Stock Exchange actively optimize energy-saving of our manufac- Corporate Governance Evaluation in 2017. All these turing equipment; in addition, through measures are positive affirmations for our long-term effort in such as improving equipment energy efficiency and sustainability such as environment, society, corpo- replacing fuels with high pollution and carbon emis- rate governance and economy. sion, we continue to reduce energy consumption and carbon emission during the footwear produc- As a responsible corporate, improving operational PCC 2017 CSR Report 3 Economic Corporate Environmental Protection Customer Service and Social Care and Performance Governance and Energy Conservation Supplier Management Friendly Workplace Community Engagement Appendix GRI G4 tion process. Moreover, we apply the ISO 50001 With the increasing attention and demand for energy management system to improve energy recreation and sports all over the world, fitness has efficiency and conservation. Environmental sustain- become a trend. This trend has in turn driven the ability is an increasing trend in the footwear indus- growth of the sports and recreational industry. In try. Environmental sustainability is the benchmark addition to actively creating high-tech and intel- for all production stages including design, manufac- ligent shoe factories, Pou Chen Corporation will turing, marketing, procurement and recycling. We continue to provide customers with high-quality also work closely with brand customers to adopt customized products and commercial value through environmentally friendly materials and manage upgrading automation and continuously investing hazardous materials. We select raw materials by in research and development resources to create strictly complying with the standards of international additional value, as well as building a sports and regulations, Zero discharge of hazardous chemicals recreation service platform. By communicating (ZDHC), the Manufacturing Restricted Substance and interacting with the consumers, we can rapid- List (MRSL) of brand customers, and Sustain- ly respond to consumers’ demand for sports and able Chemistry Guidance (SCG). In 2017, our RPE recreation products as well as promoting develop- chemical plant in Taiwan focused on the research ment and value creation in the sports and recreation and development of chemical materials and the related industry. This is the long-term vision of Pou development and application of shoe materials was Chen Corporation’s sustainable operation. In the once again awarded the Cleaner Production (CP) future, we will continue to advance on the road of certification. With our achievement in environmen- sustainable development by implementing the cor- tal protection being appreciated and affirmed by porate governance system, pursuing economic per- our customers, Pou Chen Corporation has become formance, accelerating the systematic scale change an important business partner for their sustainable of global operating bases, actively participating in growth. social welfare activities, and promoting environ- mental protection as well as human rights. Step by We believe that all workers have the right to work step, we will fulfill our commitment to sustainable in a safe and fair environment, which is the reason operations. why we joined the Fair Labor Association (FLA). Pou Chen Corporation is committed to and abides by the FLA Workplace Code of Conduct and Princi- ples of Fair Labor and Responsible Production. We also welcome independent third parties to conduct Chan, Lu-Min independent evaluations of our operating bases. In Chairman November 2017, Pou Chen Corporation’s workplace safety risk monitoring and responsible production were highly recognized by labor human rights ex- perts from FLA’s US headquarters. Pou Chen Cor- poration is expected to pass the certification of the FLA Board of directors by the end of 2018, which further illustrates Pou Chen Corporation’s effective risk control in daily operations. PCC 2017 CSR Report 4 Economic Corporate Environmental Protection Customer Service and Social Care and Performance Governance and Energy Conservation Supplier Management Friendly Workplace Community Engagement Appendix GRI G4 About Pou Chen 360,000 employees worldwide The footwear manufacturing (hereinafter referred to as “footwear business”) focuses on the production Annual production capacity of of athletic and casual shoes. The business model 324.6 million pairs of shoes has transformed from the initial OEM to ODM, and the Company works closely with international brand Constituent of FTSE4Good name companies. In response to the development Emerging Index trend of the industry, the Company has gradually ex- Constituent of FTSE4Good TIP panded its operations from Taiwan to China, Indone- Taiwan ESG Index sia and Vietnam to diversify the operational risks