SUSTAINABILITYREPORT 2017

Materializing SUSTAINED andCONNECTED communities

3

Cover Sto

ry a

nd C

onten

ts

Contents

--- 4-5 Value Chain

--- 6-8 Message from the Managing Director

--- 9 About this Report

--- 10-16 About K. Wah Construction Materials

--- 17-19 Stakeholder Engagement

--- 20-31 Corporate Sustainability

Sustainable Development Goals (SDGs) Stories

Developing the future at Anderson Road We care about work-life balance We love a cool & healthy planet

--- 32-48 Our Four Core Drivers Safety and Environment Business Economics Our People CSR

--- 49-52 GRI Standard & SEHK ESG Content Index

--- 53-54 Performance Highlights

--- 55 Verification Statement

2

Cover Story

The handover of the Anderson Road Quarrysite to the Hong Kong government in July 2017,represented a significant sustainable developmentmilestone for K. Wah Construction Materials(KWCM). The benefits generated by this restorednatural habitat for the community and thecompany are a culmination of the hard work putin by our employees and the steady investmentsin equipment and technology we have beenembracing for more than sixty years. Today, KWCMremains firmly committed to creating an evermoresustainable value chain through continuedcollaboration with our staff and stakeholders, andto ensuring that our products and services helpcontribute to a healthier environment and ahappier society.

Materializing Sustained and Connected Communities

4 5

Value

Chain

Valu

e Chain

Anderson Road Quarry

Introducing mechanizationin quarrying

Blasting process inthe 1980s

K. Wah Stones (Holdings)Limited (currently knownas K. Wah InternationalHoldings Limited, stock code: 0173) went publicin 1987

K. Wah Concrete Co. Ltd.was established in 1983

KWCM establishedstrategic partnership with renowned iron and steel enterprises inMainland China

The 17-year spanAnderson Road QuarryRehabilitation Programmecommenced since 1997

Guangdong Huidong Quarry

50s&

60sThe70s

The80s

The90s 2000s

Supplying quality aggregatewith the latest technologiesand modernized facilities

Exploring overseas technologyof producing precast concrete products

2010s 2017

Over 53 years of quarrying and 20 years of rehabilitation, Anderson Road Quarry was officially returned to the government

6 7

Since 2013, K. Wah Construction Materials (KWCM) has voluntarily published a biennial GRI-compliant sustainability report. These reports disclose our performance in terms of corporate social responsibility (CSR) and environmental, social and governance (ESG). The primary objective of these reports is to communicate with our stakeholders as part of our drive to achieve sustainability excellence.

Throughout 2017, KWCM delivered positive financial performance across all our markets, despite a challenging macro-environment in Mainland China. In our home market of Hong Kong, we saw stable demand for construction materials with promising progress being made in various infrastructure projects. The Central Government’s Belt and Road Initiative (BRI) also helped to underpin demand for construction materials like cement in a number of geographies including Yunnan Province, where KWCM has several strategically-located production facilities.

In addition, 2017 saw KWCM complete a memorable milestone, celebrating the successful completion of the Anderson Road Quarry operation and its handover to the government during the summer. Highlights of these celebrations are

featured on the cover of this report and the sustainability impacts of the restored quarry are discussed in depth within the report.

Challenges, Risks and Opportunities

Excellent CSR is part of our DNA, and KWCM associates our Chinese heritage with our growing commitment to sustainability, our flexibility in meeting the rising demand for eco-friendly products and services and the strength of our four core sustainability drivers, which are based on our Value Creation Model (VCM) that was developed in early 2010.

Since the publication of the United Nations’ global Sustainable Development Goals (SDGs), we have begun to see substantial changes in the way sustainability is practiced in our industry.

Today, “Safety and Environment” is one of the four pillars of the company’s VCM, and the primary contributor, with ten materiality issues under its umbrella. This illustrates that environmental sustainability is of vital importance to KWCM, as it is to the majority of manufacturing industries and the global economy itself. The Safety and Environment pillar is also strongly linked to

another pillar, “Business Economics” – triggered by demand from different stakeholders in our value chain, safe, green products and services are key to sustaining our business model. In order to deliver these products and services and meet the expectations of our stakeholders, we need to strengthen our human capital by providing holistic, all-encompassing care to “Our People”.

The construction materials industry is a unique entity in the manufacturing sector; the associated supply chain has a relatively limited geographical coverage. KWCM embodies this uniqueness, as the majority of our operations are in China and our core product is cementitious – one of the industries which the Chinese government has highlighted as a target for innovation to reduce excess supply, centralize production capacity and enhance environmental and technological improvements. As a result, KWCM’s business operations are becoming more institution-driven and have different sustainability requirements. Environmental management aspects such as climate change are beginning to dominate and become the key risk and management concerns.

Innovating Carbon Management for Global Progress

Supporting the Paris Agreement which was signed by 189 countries in 2015, China’s central and local governments, in their pursuit of becoming global champions in the fight against climate change, are conducting various pilot emission trading schemes in the country’s largest industrial centers. While these schemes differ in scope and methods

around the country, all provided analytical data which aided the development of the nationwide Emission Trading System (ETS) which was officially announced in December 2017.

The ETS is expected to trigger a significant change in the construction industry, as construction methods will move from labour-intensive onsite work to prefabrication work conducted off site. This will reduce waste and increase efficiency, as well as resolve excess supply and production capacity problems for materials like cement. KWCM is taking timely strategic action in this fluid market, not only due to the economic effects an ETS will produce at the regional level, but also because Yunnan is a crucial hub for China’s BRI – this province will drive changes to the ETS as production capacity issues are resolved and economic advances are made. More importantly, we hope the experience gained will benefit local stakeholders preparing to establish a sustainable economy, for instance those who are working to develop Hong Kong as a regional green finance hub.

United Sustainability Journeys

The recent initiatives launched by our parent companies have put KWCM on the path to a successful sustainability journey. A notable achievement in the reporting period was the establishment of the K. Wah Group’s Lui Che Woo Prizes, which are awarded to those who uphold the ideal of “giving back to the society from which one benefits”. These prizes were founded by the Galaxy Entertainment Group Chairman, Dr. Lui, to recognize the outstanding achievements of individuals who

Message from the

Managing Director

Messa

ge fro

m th

e Managin

g D

irector

We want to ensure that KWCM has a positive impact on

every one of our stakeholders and on the people in the

communities in which we operate in order to make the world

cleaner, greener and more sustainable.

8 9

have contributed to civilization by bringing together different sectors of society to promote a love of “truth, kindness and beauty”.

One of the three prize categories is the Sustainability Prize, which recognizes individuals who contribute to the sustainable development of the world. In 2017, the prevention of climate change was named as a specific focus area in order to emphasize the importance of managing our impact on the environment and support our company, our group and the planet into the future.

In addition to dedicating an increasing amount of resources to encouraging our stakeholders to join our sustainability journey, we are committed to increasing transparency and communication in order to help the general public understand what sustainability may mean to them and how sustainability can create value for the wider community.

To this end, both GEG and the K. Wah International Holdings Limited have embedded more qualitative and quantitative information about sustainability in their annual reports so as to disclose the member companies’ performance in addressing ESG aspects. The many commitments we have made and initiatives we have launched have put us in an excellent position in terms of sustainability planning and execution as we work toward common sustainability goals.

Looking forward

Amid the many challenges and uncertainties we face, one certainty exists: a sustainable future cannot be achieved by the business world alone. Such a future will undoubtedly require collaboration across all sectors of society, and we look forward to working together with governments, businesses and civil society to create the innovative capabilities and solutions needed to achieve local and global sustainability goals.

Last but not least, I want to emphasize how sustainability matters have begun to affect our business more than ever during these past two years. I sincerely hope you will spend some time reading this report, in which you will find details on our management approach to sustainability, the various actions and initiatives we have planned and the results of our current sustainability activities as presented by different business units.

Most importantly, please keep sharing your valuable feedback with us. My teams are committed to addressing your thoughts and comments effectively. We want to ensure that KWCM has a positive impact on every one of our stakeholders and on the people in the communities in which we operate in order to make the world cleaner, greener and more sustainable.

Joseph Chee Managing DirectorK. Wah Construction Materials

This is the third sustainability report published by KWCM. Covering the period running from January 2016 to December 2017, the report examines the operations of our Head Office, wholly-owned subsidiaries, and joint venture (JV) plants under our management control.

This report is breaking new ground, in that we have expanded its scope, widening it from Hong Kong and the southern region to cover as many of our operations as possible. This report includes the northern, eastern and Yunnan regions of Mainland China.*

In the years ahead, we will continue to publish our sustainability reports every two years. However, we welcome your feedback and suggestions at any point. Please contact us via email at sustainability@kwcml.com.

* Please note we have not been able to include the performancedataofcertainofficesowingtothetransition towards comparable data collection systems.

Reporting Principles

All quantitative and qualitative information contained in this report makes reference to the following:

• The internationally-recognized Global Reporting Initiative (GRI) Standards issued in 2016;

• The ISO 26000:2010 Guidance on Social Responsibility;

• The United Nations Sustainable Development Goals; and

• The Business Environment Council’s Handbook of Understanding Materiality for Environmental, Social and Governance Reporting.

The findings of our materiality analysis also form an important component of this report, as they take into account stakeholder concerns and issues of material interest from our industry peers.

External Assurance

In accordance with the GRI standards: core option regarding the extent of coverage and information provided, this report has been independently verified by The Hong Kong Quality Assurance Agency with respect to GRI standards, the ISO 26000:2010 “Guidance on Social Responsibility” and Hong Kong Stock Exchange (SEHK) Environmental, Social and Governance (ESG) Reporting Guide. For details on the verification statement, please refer to page 55 of this report.

About

this Report

About th

is Rep

ort

10

HEBEI

JIANGSU

ANHUI

HUBEI

GUIZHOU

GUANGDONGYUNNAN

HuizhouShenzhenHong KongMacau

Shizong

Zhenyuan

Baoshan

ShaoguanLiupanshui

Daguan

Ezhou

Tongling

Anning

Nanjing

QinhuangdaoQiananSanhe

Maanshan

Corporate Profile

K. Wah Construction Materials (KWCM) is a wholly owned subsidiary of Galaxy Entertainment Group (GEG). KWCM is a vertically integrated resource-based company supplying aggregates, ground granulated blastfurnace slag (GGBS), cement and other downstream building materials. The company is firmly focused on creating value in a sustainable manner.

For more than half a century, KWCM has been the cornerstone on which the K. Wah Group has built its

success. A pioneer in the quarrying industry, KWCM was granted the first-ever contract for quarry rights at Hong Kong’s Anderson Road in 1964.

From our business base in Hong Kong, KWCM has branched out into Macau and Mainland China. Today, we have operations in over a dozen major cities and industrial strongholds. During 2016 and 2017, we supplied a diverse range of construction materials to major infrastructure projects in Hong Kong, Macau and Mainland China. As of 31 December 2017, KWCM and our JV companies employed more than 3,000 professionals.

About K.Wah

Construction Materials

About K

.Wah C

onstru

ction M

ateria

ls

Cementitious Products

Conventional Products

112013 2014 2015 2016 2017

12 13

About K

.Wah C

onstru

ction M

ateria

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Product Quantity

Ground Granulated Blastfurnace Slag over 14 million tonnes

Aggregates over 7 million tonnes

Cement over 12 million tonnes

Ready mixed concrete 4.4 million m3

Precast concrete pipes over 80,000 tonnes

Eco-blocks & pavers 50 million pieces

Asphalt 600,000 tonnes

Annual Production Capacity

Production Facilities Completed in 2016/2017

Selected CSR Awards in 2016/2017

Award Presenter

22nd Considerate Contractors Site Award Scheme

– Outstanding Environmental Management & Performances Award

– Bronze Award

– Considerate Contractors Site Awards (Public Works – New Works)

– Bronze Award

HSBC Living Business Awards 2016

– Green Achievement Award

– Long Term Participation Award

15th Hong Kong Occupational Safety and Health Award

– Safety Performance Award – Other Industries

CEDD Construction Site Safety Award 2015

– Gold Award – The Rehabilitation of Andersen Road Quarry

Caring Company Scheme – 15 Years Plus Caring Company Logo

Occupational Health Award 2016-17

– Joyful@Healthy Workplace Best Practices Award

– Enterprise/Organization Category – Merit Award

Hong Kong Green Organization Certification

– Wastewi$e Certificate – Excellence Level

HKCMA Directors’ Awards for Health and

Safety & Environmental Excellence 2016-2017

– Environmental Performance Award – Certificate of Merit

Green Office Awards Labelling Scheme (GOALS)

– Green Office Label

Sustainable Consumption Enterprise – Certificate of Recognition

Sustainable Business Partner 2017

2017 Corporate Partnership Award Presentation ceremony

2017 Corporate Partnership Award

Development Bureau/Construction

Industry Council

Business Environment Council

Labour Department/Occupational Safety

and Health Council

The Civil Engineering

and Development Department (CEDD)

The Hong Kong Council of Social Service

Labour Department/Occupational Safety

and Health Council

Environmental Campaign Committee

Hong Kong Construction Materials

Association Limited (HKCMA)

World Green Organisation

Business Environment Council

The Hongkong and Shanghai Banking

Corporation Limited

Evangelical Lutheran Church Social Service

– Hong Kong

Tai Po, Hong Kong

Sheung Shui, Hong Kong

Huizhou, China

Yunnan, China

14 15

To date, the Anderson Road Quarry has provided 100 million tonnes of aggregates and has established an industrial chain producing premium construction materials including concrete, asphalt, eco-bricks, pipes and precast components. The Anderson Road Quarry has also provided numerous job opportunities and has trained a number of construction industry specialists.

Despite the fact that the Anderson Road Quarry has been excavated for over half a century, the overall terrain has been protected and improved and was returned to the government in the form of 40 hectares of quality land. Using a unique “green quarrying and rehabilitation” model developed by the government and the construction industry, nearly 230,000 trees were planted. In the future, this site will become a brand-new community for 25,000 people housed in nearly 9,400 residential units.

The handover of the Anderson Road Quarry is both a milestone and a new beginning. Six years ago, KWCM commenced development of a greenfield “mega-quarry” in Huidong, Guangdong. We are applying the advanced management, technology and successful experiences gained from our work at the Anderson Road Quarry, and we have turned the Huidong Quarry into a leading model for quarrying in Guangdong Province.

Huidong Quarry now has an annual production capacity in excess of 5 million tonnes, and is designed primarily to supply Hong Kong aggregates market. These materials are very much in demand, especially in the northeast New Territories, where the on-going construction of residential properties requires a large and continuous supply of aggregates.

With over half-century of experience, a firm belief in advanced technology and a well-seasoned group of expert managers, KWCM is constantly in search of new opportunities and new ways to serve Hong Kong and Mainland China. As we move into the future, we will continue to uphold our corporate spirit of “serving the motherland with a foothold in Hong Kong and our eyes on the world”. We look forward to participating in the Belt and Road Initiative and the development of the Greater Bay Area: Guangdong, Hong Kong and Macau. Our impressive experience and the legacy of our premium brand and reputation will allow K. Wah to continue to contribute to society in numerous ways.

Business economics, one of our four core sustainability drivers, is especially critical in today’s challenging market. As highlighted in our last report, we recently revamped our financial management approach, aiming for better resource utilization and more robust cost controls to prepare for potentially unstable economic conditions. These initiatives have so far been a success, delivering new records in key performance areas. Prudent financial management is allowing us to stay on track while we continue to make investments in capital, human, social and environmental capacity to further sustain our business growth. All these investments will benefit our business over the long term, creating greater shareholder value and greener communities in the markets we serve.

Corporate Governance

As a wholly-owned subsidiary of Galaxy Entertainment Group, KWCM is committed to the highest standards of corporate governance. We fully adopt and comply with established policies, systems, and guidelines; enabling us to create sustainable shareholder value while meeting our

About K

.Wah C

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numerous obligations to shareholders and other stakeholders.

As an essential part of this commitment, we operate within a well-defined governance structure. Our core values are based on the three cornerstones of accountability, integrity, and loyalty. These values shape our corporate culture, guide us as we make decisions and conduct our business, provide a foundation for sound corporate governance, and support our corporate social responsibility endeavours and our other sustainability initiatives.

CSR Committee

In 2006, we designed and executed a CSR policy and management structure that oversees our approach to CSR, ensures protection of the environment and allows us to demonstrate care for the community and reach out to those in need. This CSR management structure allows us to fully deliver on our CSR commitments and contribute to the sustainable development of the economy, society and the environment.

KWCM’s CSR Committee has the company’s managing director as an advisor and is chaired by

a senior manager nominated by the committee, while other senior managers and volunteer representatives make up the rest of the committee. The committee is responsible for making decisions on KWCM’s CSR strategies and policies and overseeing their execution. The committee also directs and governs activities organised by the KWCM Social Club.

Sustainability Department

The Sustainability Department at our head office is responsible for the overall development and management of KWCM’s sustainability efforts according to our four core drivers, discussed in depth in the Corporate Sustainability section.

The department has also established companywidestrategies that identify, monitor, review andcontrol sustainability strategies in our businessand our products. Each of the four core drivers hasits own set of clear and quantifiable sustainabilityobjectives and performance indicators, with defineddeliverables that are incorporated into KWCM’sfuture strategy. The Sustainability Department alsoworks closely with cross-regional and functionalteams to set corporate sustainability goals andenhance the brand reputation of the company.

16 17

David Chen Hai-bo Associate Director – Regional Head (Southern Region)

The successful completion of the Anderson Road Quarry contract has allowed us to embark on another journey. With the Huidong site’s state-of-the-art aggregates plant, we are confident that we will be able to meet increasing customer demand for different community, infrastructure and property development projects.

Liu Yuan-zheng General Manager – Regional Head (Eastern Region)

We have deepened our commitment to sustainable consumption by standardizing our green purchasing requirements. This more systematic approach will allow us to save costs and further reduce the environmental impacts of our operations in this area.

Yi Jian-you General Manager – Regional Head (Yunnan Region)

Cross-regional CSR cooperation has brought more meaning to our deployment of sustainability initiatives and given them a more human scale. While offering a Hong Kong undergraduate the opportunity to apply his new knowledge in environmental engineering at our Puer cement plant through a summer internship, we also equipped him with a business mindset by teaching him sales and marketing concepts.

Tim Hui Tian-yun General Manager – Regional Head (Northern Region)

Supporting work-life balance initiatives promoted by the Group’s head office, we brought our employees closer to each other through outdoor engagements and low-carbon activities. These activities have created a stronger team which will support the company with a sustainability-oriented mindset.

United Efforts for Sustainability

Since our first formal stakeholder engagement exercise in 2013, KWCM has been regularly reviewing our communications with different stakeholder groups and making adjustments to our sustainability commitments when necessary. To address the interests and concerns of all our stakeholders, we are reporting the material matters identified in this sustainability report in accordance with international and local standards. In KWCM’s first sustainability report, we identified the report’s material aspects by reviewing the results and comments obtained from a comprehensive stakeholder engagement exercise. Since then, we have continuously reviewed the applicability of materiality matters by engaging our stakeholders through different means throughout the year. In this report, KWCM is disclosing how the United Nations’ Sustainable Development Goals have been incorporated into our VCM.

In 2017, the successful completion of the long-running Anderson Road Quarry’s operations marked a milestone in the Group’s history. As we move forward into the future, we are inspired to reflect on what we have achieved and how that knowledge can help us focus on the challenges and risks we must contend with in order to maintain our position as a leading integrated construction materials supplier. These reflections helped us define the boundaries of our current sustainability report and prioritize present and future sustainability issues.

General Engagement Approach

Internal Stakeholders: We hold regular dialogues with our people through our annual corporate forum, our HSE promotion events, regular Integrated Management System (IMS) committee meetings, director safety site walks, semi-annual appraisals, surveys and interviews.

External Stakeholders: To identify and prioritise the main sustainability issues facing KWCM, we invite external stakeholders to provide feedback and recommendations for future improvements. These stakeholders include the following groups:

• Our customers: Input from customers was obtained in regular meetings, customer satisfaction survey and interviews throughout the reporting period.

• Supply chain: During the year, we conducted a supplier survey and several interviews.

• JV partners: Regular meetings and interviews were held with our joint venture partners.

• NGOs: We organised focus groups, co-organised community events, and collaborated with our NGO partners on special projects to ensure their voices were heard.

Stakeholder Engagement

During the period under review, our operations helped create many meaningful sustainability stories. The most significant achievements came from speeding up the deployment of various localized sustainability initiatives that are aligned with our Value Creation Model (VCM). The details of these initiatives are presented in our Sustainable Development Goals Stories and in the individual VCM sections of this report.

Stak

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ent

18 19

On-going stakeholder conversations are

an integral part of our sustainability commitment.

Firstly, I congratulate KWCM with heartfelt appreciation of its completion of Anderson project as the achievement signifies the importance of construction materials industry to the community. With a long history of construction materials business management and operation, I keep very motivated when engage with every single KWCM member who fully embraces health and safety awareness with actions; the effort showcases the dedication of KWCM management on human capital investment. Over the last two years, I have seen more how KWCM spent tremendous resources in enriching its economic capital. For example, the establishment of new asphalt plant with influx of state-of-the-art facilities and practices in excelling continual environmental and safety improvements with consideration of stakeholders’ expectation; therefore, these new set-ups help KWCM to continually drive for stable and quality product and service supply for local society capital development.

With the participation of KWCM, HKCMA is on the right track to becoming a more sustainable organization in unifying efforts from all member companies for contributing local development with environmental- and social- friendly products and services. And we have achieved some wonderful milestones together. For instance, the successful establishment of Sustainability, Health, Safety & Environment Committee & Director Award program serve important platforms for all members to start with basic sustainability groundwork then exchange expertise through best practices sharing with recognitions and excitements . As one of sustainability advocates in the industry, KWCM always makes use of its effort and experience and it is vital to us working through from annual sustainability direction setting and activities planning with proper execution. The recent completion of our first materiality assessment proves our goal to the adoption of international sustainability practice such as Global Reporting Initiative (GRI) standard.

HKCMA has a lot to do further for our members along the inter-connected value chains. We take care of our voice of customers (stakeholders) with passion and commitment. With the clear direction of HKSAR Government, our priority is to provide the market

Stak

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greener products and services without compromising the highest standard of safety management.

I believe KWCM can take more efforts in various aspects in facilitating HKCMA to complete its key tasks with success. The growing importance of the development in precast products such as the reinforcement of concrete, will add values to various construction materials like steel reinforcing bar.

In addition, I’m looking forward to seeing stringent management on other environmental aspects including the air emissions and water footprint that KWCM can further utilize its knowledge and experience in driving the industrial standards to the next level. Eventually, a comprehensive benchmarking development (e.g. sustainability index) will come up as an all-round performance monitoring mechanism valuable to the market.

At the end of the day, we believe that the joint effort of all member companies with support of sustainability advocates like KWCM can ultimately transform this traditional industry to be more innovative and technology-based so as to re-educate the public how sustainable the industry can be and the level of contribution that could be made to community development.

Ambrose LinnChief ExecutiveHong Kong Construction Materials Association (HKCMA)

Sustainability is

not just related to the supply chain, it

actually represents the value chain. I m impressed that

KWCM has a dynamic Value Creation Model (VCM)

that drives its sustainability with effective development

and interaction of economic, social and human capital.

High priority

Low

Low priority

High

High

Material Aspects

Materiality Analysis

In line with the GRI materiality principles, we collected and categorized stakeholder feedback to produce a materiality matrix based on the frequency a particular matter was referenced during the various stakeholder interactions. This feedback was then further reviewed by our senior management during the annual corporate forum.

Disclosures regarding our management approach and the identification of material aspects were consolidated as supplements in the Performance Highlights section of this report, which begins on

page 53. The final material aspects of this report were based on, but not limited to:

i) Their importance to KWCM’s stakeholders;

ii) Their reasonably estimable sustainability impacts;

iii) Their level of implications to legal and other departments; and

iv) The level of disclosure provided by our industry peers.

After evaluation and detailed assessment, we proceeded to share more details with the associated stakeholders through further, more tailored, communications.

Material issues covered in this report were further categorised according to our well-defined core value drivers, as described in KWCM’s VCM, and shown in the materiality matrix so as to allow stakeholders to understand our best practices more clearly.

20 21

Corporate sustainability is fundamental to our business approach to creating long-term value for our shareholders. KWCM achieves this by integrating economic, environmental and social concerns into all our operations. In our CSR activities, we not only fulfil our corporate obligations, we go beyond compliance to create best practices.

Value Creation Model

Our four core sustainability drivers form the basic framework of our sustainability approach. This approach is supported by the regular engagement activities we conduct with our stakeholders, some of which occur on a daily basis. The feedback we gain helps us to improve our performance and maintain high standards of sustainability.

To continuously enhance our sustainability performance, during the year under review we focused on making further improvements to our core sustainability areas. Safety and the environment remained our top priorities, as our employees are our greatest business drivers and we are keenly aware of the need to provide a hazard-free and eco-friendly workplace. In terms of business economics, we redoubled our efforts to develop new low carbon products and services. To attract and retain top talent, we are working on changing the image of the construction materials industry to highlight how a career in this field can indeed be a rewarding one. With regard to our focus on CSR, we continued to make the best use of our human resources to create benefits for the

community that are both meaningful and long-lasting.

Adoption of Sustainable Development Goals

Since the publication of Sustainable Development Goals (SDGs) for 2030 through the joint effort of the United Nations and other sustainability-advocating institutes, we have already seen substantial changes in the way sustainability is practiced in our industry. We are therefore committed to adopting the most important and applicable SDGs in our longer-term business strategies; those that are consistent with our four core sustainability drivers and our other sustainability disclosure requirements, and that encompass the sustainability-related areas are relevant to our daily operations. KWCM has prioritized 6 SDGs as listed below:

• SDG 3 – Good Health and Well-Being • SDG 8 – Decent Work and Economic Growth

• SDG 9 – Industry, Innovation and Infrastructure

• SDG 11 – Sustainable Cities and Communities

• SDG 12 – Responsible Consumption and Production • SDG 13 – Climate Action

Corporate SustainabilityCorp

ora

te Susta

inability

Adoption of SustainableDevelopment Goals

Since the publication of Sustainable Development Goals (SDGs) for 2030 through the joint effort of the United Nations and other sustainability-advocating institutes, we have already seen substantial changes in the way sustainability is practiced in our industry. We are therefore committed to adopting the most important and applicable SDGs in our longer-term business strategies; those that are consistent with our four core sustainability drivers and our other sustainability disclosure requirements, and that encompass the sustainability-related areas are relevant to our daily operations. KWCM has prioritized xx SDGs as listed below:

• SDG 3 – Good Health and Well-Being

• SDG 13 – Climate Action

• SDG 9 – Industry, Innovation and Infrastructure

• SDG 8 – Decent Work & Economic Growth

• SDG 4 – Quality Education

• SDG 12 – Responsible Consumption and Production

16

“ We have a comprehensive HSE performance monitoring and review mechanism. To properly address climate change, one of our top global risks, we have been consciously linking climate change with the economic performance of our business. This allows us to better manage our operations and communicate with different stakeholders. ”

“ Though it’s difficult to define a single metric that can be used across KWCM’s diverse operations, we do take our financial performance into account when considering our carbon footprint. I am pleased to see that there was a double digit reduction in our carbon intensity (carbon footprint CO2e over EBITDA) between the 2016 and 2017 financial years. ” Alan TsoChief Financial Officer

“ The Anderson Road Fun Day was a flagship sustainability initiative of KWCM how we engaged internal and external stakeholders for signifying value creation impacts with our unique four core pillars. ”

Sara KwokCustomer Relations Manager/Social Club Chairman

Richard CheungHead of Legal/CSR Committee Chairman

Vicki WongHead of HumanResources and Administration

Nick LewisDirector,

Business Development,Engineering, HSE & Sustainability

ValueCreation

OurPeople

CSR

Safety and Environment

BusinessEconomics

Business Plan

Stakeholders

Story

1Story

2Story

3

ValueCreation

OurPeople

CSR

Safety and Environment

BusinessEconomics

Business Plan

Stakeholders

Story

1Story

2Story

3

22 23

The Anderson Road Quarry was officially handed over to the Government of the Hong Kong SAR on July 31, 2017. KWCM was the first private enterprise to ever be awarded a quarrying rights contract in Hong Kong, and we gained access to the Anderson Road Quarry in 1964. Over the ensuing five-plus decades, we established an exemplary model for the industry with our pioneering efforts to implement equipment automation and green quarrying.

For more than 50 years, the Anderson Road Quarry played a pivotal role in the development and prosperity of Hong Kong; supplying about 100 million tonnes premium aggregate to large-scale infrastructure and housing projects like the

Kai Tak Airport and the new airport at Chek Lap Kok, the Tsing Ma Bridge, Route 3, the Cross-Harbour Tunnel and the Western Harbour Crossing, upholding the principle of “construction for the betterment of the country”.

During the earliest years of its operation, KWCM sought to develop the Anderson Road Quarry into a fully enclosed and environmentally friendly aggregate production site which featured automated operations and a modern management system. The advancements we made were intended to ensure safe production, mitigate the quarry’s impact on the surrounding environment and establish the K. Wah Group as a role model for the industry with respect to sustainable development. The quarry also established a one-stop upstream and downstream industrial chain which produced such premium construction materials as concrete, asphalt, eco-bricks, pipes and precast components. Completing this long-term mission and returning this rehabilitated natural site to the Hong Kong people was a great honour for KWCM. We believe that the Anderson Road Quarry will always be remembered as a safe, green and sustainable model for the quarrying industry.

Back in 1997, KWP Quarry Company Limited, a subsidiary of KWCM, entered into an agreement with the Hong Kong government’s Civil Engineering Department (predecessor of the Civil Engineering and Development Department) called the “Rehabilitation of Anderson Road Quarry” to rehabilitate the ecological environment of the Anderson Road Quarry and ultimately create a multipurpose tract of land with more than 40 hectares available for development. After 20

From 70 quarrying sites in the past, we have developed towards modernization keeping up with the times in terms of noise, pollution, dust control, blasting and greening. We have also persisted in quality control. The construction materials of many bridges and airport runways in Hong Kong have been provided by K. Wah. We are keeping up with the international standards to support the development of Hong Kong.

I would like to thank all our staff, many have worked together with me for more than thirty years. I hope to make good use of their expertise and experience in our developments elsewhere.

As I know that there are huge demands for construction materials from large-scale infrastructure projects in China, I hope we will have the opportunity to be involved in these particular areas. We are pleased to make contribution with our decades of experience.

years of rehabilitation and enhancement work, the site now includes nearly 230,000 planted trees, a 200-metre long stairway on a major slope, a drainage system over 17 kilometres in length and a flood storage system with a capacity of 100,000 cm3 and etc.

The return of the Anderson Road Quarry to the government is not only a great milestone for this local quarry, but it also opens a new chapter in the history of Hong Kong, since the government is already planning to build a new community on the site which will create enormous benefits for the people of the city: about 9,400 private and subsidized housing flats with a planned population of about 25,000. The population intake will start from 2023-24 onwards.

To ensure that everyone shared in the success of the creation of this unique local habitat, KWCM engaged numerous groups of stakeholders. On June 11, 2017, KWCM arranged a staff fun day before the official handover of the quarry to express our heartfelt gratitude for the enormous effort put in by our staff over the years. Over 300 staff and their family members joined this fun and meaningful event and witnessed the results of their hard work. Together with the management team, staff from KWCM grouped together to form the logo of KWCM and KWP Quarry, symbolising our enduring promise to contribute to the sustainable development of Hong Kong.

To learn more about our Anderson Road stakeholder engagements and events, please navigate to K. Wah Group website to view several “making of” videos.

Lui Che-wooChairman of K. Wah Group

SDG Story 1 - Developing the future

at Anderson Road

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I would like to congratulate KWP Quarry Company Limited for the completion of the rehabilitation of Anderson Road Quarry. KWCM has rendered strong support to the development of Hong Kong’s construction industry.

Apart from accomplishing the historical mission, the quarry has also provided a valuable site with over 40 hectares in the urban area. With the infrastructures that are being carried at full speed, homes for around 25,000 people are set to be built on the former quarry site in the near future. This reflects the multi-pronged strategy adopted by the government to provide land to meet the pressing demand for housing in Hong Kong while catering to the territory’s economic development.

The rehabilitation of Anderson Road Quarry is an exemplary model in the manufacturing industry. First, we offered numerous job opportunities locally. Second, it provided a source of income for the government every year in addition to supplying quality aggregates to infrastructure and housing projects in Hong Kong. The natural landscape remains even after years of quarrying.

Over the decades, K. Wah has been equipped with unparalleled experiences, world class technologies and top notched management in quarrying. Nowadays, green quarrying and rehabilitation is a multiple-win model popular among developed countries. I will recommend this successful model to be applied in our homeland.

Lam Sai-hung, JPDirector of Civil Engineering and Development &

Commissioner of Mines

Francis Lui Vice Chairman

of K. Wah Group

On June 11, 2017, over 300 staff and their family members attended a fun day at Anderson Road which was a flagship activity co-organized by KWCM CSR Committee and Social Club. In addition to understand the sustainability of Anderson Road, all participants had fun and learning by seeing the KWCM Value Creation Model through direct communication and games.

KWCM teams and our partners are all smiles after finishing the last blasting operation at Anderson Road Quarry on December 8, 2016.

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On July 26, 2017, Mr Lam Sai-hung, JP, Director of Civil Engineering and Development & Commissioner of Mines, HKSAR Government, Dr Lui Che-woo, Chairman of K. Wah Group, Mr Francis Lui, Vice-Chairman of K.Wah Group, together with other government officials, district councilors and business partners officiated at the Anderson Road Quarry Handover Ceremony, witnessing this significant historical moment together.

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During the year under review, K. Wah Construction Materials was delighted to have been awarded the “15 Years Plus Caring Company Logo” by the Hong Kong Council of Social Service. This award is a valuable recognition of our continuous commitment to caring for our employees, the wider community and our precious environment.

Upholding the belief that “one always benefits from giving back to society”, KWCM is a consistent contributor to the communities in which we operate and to sustainable development. As a good corporate citizen, we fully support a number of philanthropic and environmental protection initiatives. We also care for our employees’ physical and mental health and encourage them to participate in voluntary services in the belief that this not only promotes a collaborative and caring spirit, but also that it strengthens employee cohesion and their sense of belonging to the company. In addition, KWCM is committed to continually improving conditions at all our locations through different initiatives that directly engage employees in improving their physical and mental health – for example placing a focus on ensuring a healthy work-life balance (WLB).

Employees need to balance their lives at work with the other activities they pursue in their personal lives. KWCM believes that a healthy WLB is especially important to our valuable employees – who are often required to fill their days with demanding tasks, diverse activities and hours of electronic communication during on-site operations. To provide a counterbalance to these challenging schedules, KWCM is committed to helping our staff seek and maintain their own

optimal WLB. We strive to ensure that the decisions, policies, values and expectations created in all KWCM workplaces support our employees in their WLB choices.

KWCM management frequently and actively models the WLB they expect their employees to exhibit. For example, the company regularly sponsors employee and family events and activities which encourage team building, friendships among employees and the inclusion of families in work events. Outdoor activities are frequently promoted, for instance sports events like basketball or football games, movies, and the company’s favourite charity events – employees are encouraged to attend all these events with their families. KWCM firmly believes that the relationships and friendships employees build with each other will encourage them to stay with the company. After all, most happy employees have a best friend in the workplace.

KWCM also supports the creativity of our employees, as we believe that this will help them think of more ways that the company can support employees in their quest for the optimal WLB. Since 2016, the KWCM Social Club has been officially promoting WLB activities every October. During the period under review, 15 activities were completed which engaged more than 800 employees in Hong Kong and Mainland China.

KWCM believes that one of the best ways to boost employee morale and help workers get to know each other in a non-stressful setting is by planning occasional company outings. During our annual “work-life balance week” held every October, the KWCM Social Club organises several meals paid

for by the company – for example, breakfast or tea sessions catered into the office or off-site at a favoured group-friendly small- or medium-sized local restaurant. Happy hours and holiday parties are other fun ways to get out of the office and bond in a non-work setting.

Striking the perfect balance between career and family has always been a challenge for front-line workers. Demanding production schedules often cause friction or suffering in work or personal lives, with employees juggling workplace stress with the daily demands of family, friends and self. KWCM understands that employees with better work-life balances tend to feel more motivated and less “stressed out” at work, which thereby increases company productivity and reduces the number of conflicts between employees and management.

Nowadays, companies with a reputation for encouraging a healthy WLB have become very attractive to employees and consequently attract better-quality candidates for new job openings. Since KWCM prioritises WLB, we believe this will create future benefits for company development – specifically, higher employee retention rates, which will result in less time-consuming training; greater company loyalty; a higher degree of in-house expertise; and most importantly, happy employees with a healthy WLB who will do a better job at work.

At the start of every year, the KWCM Social Clubpublishesaninfographic-styleeventscalendar,emailingitouttoallstaff.Thiscalendargivesouremployeesadvancenoticeandplentyoftimetoregisterforactivities which best match their interests andfitnesslevel.

SDG Story 2 - We care about

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One of our work-life balance week 2017 activities saw 30 volunteers from KWCM visit 15 elderly couples in Kwai Chung During the visit, our volunteers shared stories, played games and ate lunch with the elderly, helping make a difference in their lives.

For more than 12 years, KWCM has cooperated with the Evangelical Lutheran Church Social Service Hong Kong. Over the years, KWCM has sponsored several long-term social service projects, actively encouraging our colleagues to participate. In October 2017, our unit – the Kwai Chung Neighborhood Elderly Centre – had the pleasure of becoming one of the activity points for KWCM’s work-life balance week . More than 30 KWCM colleagues from different departments went on a home visit to see elderly people living alone in Kwai Chung District.

“Thanks to patience and attentiveness of the volunteers, the elderly were left with many positive feelings. They told me to pass on their appreciation to the KWCM volunteers for visiting them when their limited mobility did not allow them to leave their homes. For them,

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Ms Cherry Wong

Centre-In-ChargeELCHK, Kwai Chung Neighborhood Elderly Centre

this was a very satisfying day. Several of the volunteers said that this was the first time they had ever participated in an elderly volunteer service outing during working hours. This was something new for them, and this activity has reminded them to pay closer attention to those in need. We hope that this event can take place again on a weekday, as this may help spread the spirit of volunteering throughout society.”

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The world faces a number of serious global environmental risks. According to one survey, (Global Risks Perception Survey 2017-2018, World Economic Forum) one of the greatest of these is “failure of climate change mitigation and adaptation” . As part of “The Construction of an Ecological Civilization”, China has a well defined roadmap to address such risks, and the country has been advocating the rapid development and innovation of new initiatives since 2012 . Today, China is taking concrete steps and putting much effort into innovations which will curb greenhouse gas emissions and build “a beautiful China.”

KWCM has established a number of environmental taskforces in different regions of China. In addition to continually investing in technical innovations which minimize environmental impacts, the company has also committed to promoting an environmentally-conscious culture by organizing engaging programmes and activities which are in line with our value creation model. During the reporting period, KWCM expended extra resources and put particular effort into promoting the importance of living a low-carbon lifestyle to all our employees.

The twelfth of March marks China’s annual National Tree-Planting Day. On this day, millions of people in China from all walks of life put their work aside and head outdoors to “make their towns green”. This day is rumoured to date back to a proposal made by Sun Yat-sen in the nineteenth century. In February 1979, China’s Fifth National People’s Congress resolved that from then on March 12 would be known as National Tree-Planting Day; with the entire country encouraged to carry out tree-planting activities to support the forestry industry. Our continued participation in this annual day helps KWCM employees realize the urgency and importance of protecting the environment and pursuing environmentally-friendly development.

Between September and December 2017, KWCM ran a “low-carbon competition” throughout our Mainland China operations. During this period, participants took part in low-carbon and energy-saving initiatives in their daily lives through which they earned units of “green energy” which were then accumulated on a local online payment platform and used to grow “virtual trees”. Combining the internet, e-finance and a low-carbon lifestyle, the participants competed to convert these virtual trees into real ones, contributing to tree-planting and environmental protection efforts.

Any low-carbon activities completed on the platform were counted and converted into virtual green energy. These activities included walking instead of driving, paying for utilities and buying tickets online, taking public transport and other “green” activities. When enough virtual green energy was earned, the accumulated points were “converted” into real trees, which were then planted in desertified areas by environmental non-profit organizations.

Over the course of the four-month programme, a total of 150 employees generated nearly 2,000 units of energy which were converted into over 100 real trees.

In Hong Kong, KWCM proactively promoted green living in a number of ways during the reporting

period. For example, the company has been taking part in the Pok Oi Cycle for Millions, the city’s largest annual charity cycling event, for the past seven consecutive years. The event promotes cycling and the appreciation of natural habitats while raising funds for the largest nursing and residential care home for the elderly in Hong Kong. With the support of family and friends, KWCM riders successfully completed the 13km race on March 5, 2017, with riders enjoying the magnificent scenery of Stonecutters Bridge, Rambler Channel and Victoria Harbour along the route while raising money for a good cause.

In addition, KWCM has supported Earth Hour, a global movement initiated by WWF calling for greater action on climate change, for several years. In the 2017 event, KWCM encouraged our staff to turn off non-essential electric lights for one hour, from 8:30 to 9:30 pm on March 24 as a symbol of their commitment to the planet. Also, during lunch time on that day, a “green” movie session was arranged to promote employee understanding of important messages regarding climate change management.

Our low-carbon initiatives are not just limited to our offices, they are also fully adopted by our business units in different regions. For example, the quarry business unit in our Southern Region is a signatory to the Environment Bureau’s “Charter on External Lighting”. Launched in April 2016, the initiative involves switching off lighting installations which affect the outdoor environment during a pre-set time – i.e. midnight to 7 a.m. on the following day. Turning off external lighting at night not only reduces nuisance to nearby residents; shortening the hours when external lighting is used also reduces energy consumption and saves electricity.

A group of KWCM nature admirers cycling around at Nan San Wai a local signature wetland zone (September 4, 2016).

March 12 is China’s annual Arbor Day. In 2017, around 100 employees of KWCM’s Qujing cement plant joined a tree planting day. In general, activities conducted across the country on March 12 allow companies to further cultivate the spirit of teamwork in their staff while educating

and encouraging them to care about the health of the planet, beginning with their own immediate environment.

Winner of 2017 Low Carbon Campaign

Frank Shen HSE Manager (Eastern Region)

“It’s my pleasure to be the champion and to have earned the highest amount of green energy through low-carbon actions. Like other participants, our momentum to adopt green working and living modes definitely does not come from a desire for a financial reward; actually, we appreciate this great opportunity to exchange knowledge and experience with our colleagues. We are all extremely excited to see our trees planted in our home country – it is interesting, meaningful and cool!”

SDG Story 3 - We love a cool

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KWCM considers health, safety and the environment (HSE) to be a core value of our business. We are fully committed to safeguarding the health and safety of everyone affected by our business activities. As an organization that aspires to be an industry leader in HSE management, we insist that our senior management demonstrates strong leadership and a visible commitment to safety and sound environmental practices. We have a comprehensive risk management system in place that ensures a safe and healthy workplace, prevents pollution, and minimises our carbon footprint; this allows us to continue to maintain high standards in health, safety and the environment and provides a platform for continuous improvement. This system also promotes and encourages compliance with such international standards for health and safety and environmental and energy management as OHSAS 18001, ISO 14001 and ISO 50001.

In order to develop a positive HSE culture, we encourage our key stakeholders to participate in HSE activities and provide the infrastructure, systems, learning and development opportunities, and recognition schemes required to support our objectives. All business units are required to submit an HSE Year Plan, covering arrangements for budgeting, target setting, emergency procedures,

covers operations including our head office and business units under KWCM control. Through the early adoption of ISO 14001:2015, we are creating greater understanding of the important issues that can affect – positively or negatively – the way we manage our environmental responsibilities through the more systemic approach required by the ISO standard. We also hope to improve operational planning, risk management and control in procurement, design, and communication of environmental requirements that are consistent with a value-creation mind-set.

Turning Risks into Opportunities

In addition to our “Plan-Do-Check-Act” (PDCA) approach and our comprehensive Integrated Management System, we adopt a risk management approach that enables us to transform HSE risks into opportunities – both business opportunities and community sustainability opportunities. HSE risks arising from our activities and facilities are managed through a systematic process that ensures compliance with all legal requirements and the best industry practices. Through our HSE Risk Assessment Team, made up of managers, frontline workers with relevant knowledge, and HSE personnel, we determine the full scope of HSE risks and then analyse, evaluate and classify them in order to develop the appropriate risk control measures.

At our annual HSE Conference, we promote interactive activities during the preparation stage and during workshop meet-ups and follow-up activities. The ultimate objective is to sustain a PDCA culture through comprehensive engagements with both technical and communication staff; this allows us to identify the best applicable practices

training and promotional activities, with a key planning objective of ensuring that each business unit establishes a comprehensive management plan to control and mitigate any HSE risks. These year plans are also intended to create an internal benchmarking platform for meeting goals and sharing insights and success stories as part of a common agenda to drive excellence.

In 2016, we began the transition of our existing Environmental Management System (EMS) in accordance with the new standard, ISO 14001:2015. The scope of certification

Mr Joseph Chee, Managing Director of

K. Wah Construction Materials (middle), and

representatives of KWCM subsidiaries took the stage to

accept the award. This year, KWCM’s 13 subsidiaries won

the 2016-2017 Health and Safety Award, sponsored by the

Hong Kong Construction Materials Association, for its health,

safety, prevention of occupational health and safety, and

environmental protection. The excellent performance on the

ground confirms its commitment and tireless efforts towards

sustainable development.

for different business units with different and unique HSE risks and opportunities. For example at our 2017 Forum, we held our first “Best Practice Presentation Competition” – this allowed internal HSE representatives to gain technical knowledge and sharpen their presentation skills. Additionally, to cope with China’s evolving Emission Trading Scheme (ETS), we are proactively engaging in different activities and communicating with energy and carbon specialists which will allow us to better manage our low-carbon operations.

Making Safety and the Environment part of Our DNA

Awareness of the importance of workplace safety and the environment begins with our intensive employee orientation programme. During their orientation, new employees learn about the key messages, roles and responsibilities of KWCM members with regard to sustainability, health, safety and the environment as well as energy and carbon. In addition, all employees are required to sign a Personal Safety Charter, through which we instil a sense of individual accountability and encourage personal intervention and the reporting of unsafe behaviours.

Another “bottom-up” approach to improving HSE performance can be seen in our HSE Recognition Scheme. Launched in 2012, this scheme invites all employees to submit their HSE improvement ideas to the IMS Management Committee. A winning idea is then selected and an annual award presented to that employee by top management. The winning ideas in 2016 and 2017 focused on the application of lock-out-tag-out and slag auto sweeper for belt conveyer.

Our goal is to turn all potential risks into opportunities to create a unique, sustainable, hazard-free and low-carbon business model.

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Our supply chain is a vital part of our approach to sustainability, as it involves the operations, workplaces, products and services of our suppliers. Our standard management procedures regarding green purchasing take into consideration the safety, environmental characteristics, and performance – not only of the products we procure, but the suppliers we work with. The objective of this approach is to ensure compliance with all safety, environmental, legal and other requirements in order to reduce any adverse impacts of the products and services we procure.

Sustainable procurement has been a key topic for KWCM since 2016, the primary purpose being to promote environmentally conscious and socially responsible purchasing from the perspective of both suppliers and consumers. In line with our philosophy of value chain management, we are committed to reducing our negative impacts through better management of our planning and internal purchasing, and through stronger collaboration with our partners. Sustainable procurement will allow us to continually improve our performance as a responsible construction materials supplier and promote the importance of sustainable consumption to our customers and other stakeholders.

When selecting suppliers, we use a supply chain assessment process to identify the following:

• Suppliers’ stated commitments to quality, safety and the environment, improvement programmes associated with certifiable management systems and achievements or recognitions in CSR;

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• Compliance with applicable legal and other requirements of the jurisdictions in which the suppliers operate;

• Interest in and willingness to meet our HSE specifications.

As of December 2017, over 95% of our supplierswere from areas local to our operations.

Energy Efficiency

KWCM is committed to practising climate leadership in its operations by improving energy efficiency and reducing the carbon footprint of all of our operations. This not only contributes to a greener, healthier environment but also creates greater shareholder value.

KWCM is committed to continual carbon emissions reduction through different energy efficiency management initiatives. Considering the complexity and comprehensiveness of its product and service portfolio, KWCM has achieved remarkable results on maximizing our earnings with less carbon emitted during the reporting period. The CO2e EBITDA of 2017 recorded double digit reduction between the 2016 and 2017 financial years.

To put our commitments into context, the HKSAR government’s target carbon intensity reduction (against a 2005 baseline) is 50-60 % by 2020, a figure which is based on carbon emissions per dollar of GDP. However we understand that our investments in energy-intensive operations such as cement products make meeting targets in Hong Kong and China somewhat of a challenging prospect. Nevertheless, energy efficiency initiatives remain a core agenda item in our operations. We are looking to the future and we will explore every opportunity, not only to reduce our carbon footprint but to possibly generate revenue from carbon management initiatives like carbon trading in China.

We also appreciate that our carbon intensity is based on carbon emissions per dollar value of EBITDA, and while this is a good indicator of our improving carbon efficiency, we should also strive to reduce our absolute carbon footprint. In order to better understand our carbon footprint through the different stages of construction, we have been examining the carbon emission profile of products like cement through a key initiative: proactive engagement in carbon audit exercises in Yunnan region. The results of this initiative will give us insight into where we should focus our future improvement priorities.

KWCM’s Energy and Carbon Management Policy, which was developed in 2013, follows all applicable standards, including ISO 50001, and highlights our intention to reduce greenhouse gas (GHG) emissions by investing in clean and sustainable technologies.

Using the same PDCA approach as our Integrated Management System, we hold regular committee meetings, conduct reviews and carry out training in energy efficiency and carbon emission awareness to support our operational units in achieving their energy and carbon reduction targets. As shared in our last report, the relocation of our head office was a milestone in our pursuit of a greener and lower-carbon workplace, while placing the same emphasis on quality and safety aspects.

During the year under review, KWCM joined the “Fostering Sustainable Consumption for Hong Kong Business and the Community” program organized by the Business Environment Council and funded by the Sustainable Development Fund. The program aims to promote sustainable consumption and drive behavioral change in Hong Kong.

KWCM is committed to meeting all applicable Sustainable Development Goals established by the United Nations in 2015, helping society make the transition to more responsible consumption patterns by engaging our stakeholders along the entire value chain.

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Pollution Prevention

Greenhouse gas emissions play a significant role in global climate change, while air emissions affect local and regional air quality. Emissions are highly material environmental issues for energy-intensive construction materials manufacturing operations due to the nature of the technologies involved. To improve air quality in the regions in which we operate, KWCM has been proactively working on setting emissions caps in our plants for specific pollutants, such as sulphur dioxide (SO2), nitrogen oxides (NOx) and respirable suspended particulates (RSPs).

In addition, we carefully track emerging environmental regulations in order to prepare for compliance as far ahead of time as possible. Air emissions remain one of the most material environmental aspects of our generation portfolio. We take great care when conducting reviews, including our environmental impact assessments (EIAs), and are fully committed to fulfilling the requirements and recommendations stipulated in EIA reports as well as other environmental requirements. Apart from incorporating air emissions mitigation measures in our plants, we also design our facilities using advanced technologies that lower emissions.

Materials Management

The nature of our plants and the different stages of our material manufacturing processes results in different types and volumes of waste being generated. As with other emissions, the volume of

solid and liquid waste we generate is correlated with our activities and is relatively small. In China, these volumes vary with the policies of the central and regional governments. For example, projects that involve demolition and construction produce fluctuating and generally larger amounts of inert waste, while at the same time, the company produces a stable and comparatively small volume of hazardous waste. How we recycle waste plays a key role in our production and is incorporated into the product lifecycle from the initial design phase. This strategy is one way in which KWCM is leading the community to minimise our burden on landfills, an issue of high concern that is being addressed by government.

Since 2011, a Sustainable Recycling Project (SRP) Charter was implemented to systematically integrate the collection and reuse of five types of waste generated by our business units and stakeholders in Hong Kong. These include the reuse and recycling of waste glass and construction waste and the processing of rock and other selected construction and demolition waste materials from construction sites for the production of high-quality aggregates. We are also exploring partnerships with stakeholders and customers to promote shared value creation with the wider community.

We are committed to using all resources efficiently and conservatively, including water. Our construction materials product portfolio uses water in a variety of ways; and we take special care to ensure this precious resource is used wisely. Both quarrying operations and the production of building materials

consume large quantities of water. KWCM operates on a “no-discharge” principle, whereby all recycled water is consumed. In addition to complying with all statutory requirements governing wastewater discharge and pollution, as well as liquid chemical waste under management by our HSE personnel, we conduct regular assessments of our water usage and produce action plans to reduce our water consumption. Water used in our quarrying operations is mostly sourced on site, including abstracted ground or surface water at specific sites. We also treat, purify and reuse abstracted water. Collected recycled water is used for vehicle cleaning, housekeeping, and dust suppression and vegetation management.

Biodiversity Conservation

The regions KWCM operates in have varying levels of regulatory controls on biodiversity, from assessment requirements to ecological compensation and everything in between. In 2016, the Hong Kong government finalised its Biodiversity Strategy and Action Plan (BSAP), while Mainland China has been paying increased attention to biodiversity conservation matters.

In last two years, KWCM has acted proactively to promote biodiversity awareness in support of the BSAP, as enriching stakeholders’ understanding of biodiversity is a prerequisite for engaging them in conservation action. In order to engage more people with different backgrounds and interests in conservation, we shared our biodiversity management best practices during the visits arranged for external stakeholders. These visits

were designed to highlight biodiversity’s relevance to our operations and its contribution to local development, and demonstrate how everyone can contribute to biodiversity in their own way.

KWCM takes great care to protect biodiversity around our sites by identifying best practices and developing new models for employees and partners. For the Anderson Road quarry project, we undertook the largest rehabilitation project of its kind ever attempted in Hong Kong: this massive rehabilitation initiative is using 230,000 tree plantings to restore the over 40-hectare (400,000 square metre) site to its original or an improved condition. The objectives of our site management plan are to rehabilitate the existing quarry faces to create a natural-looking hillside, protect significant habitats, reduce visual impact and ensure that the Tai Sheung Tok ridgeline is maintained.

Incorporating the latest landscaping techniques and new plantings, the restoration will create an improved habitat capable of supporting a large variety of flora and fauna. It also takes into account a future housing development planned for the area. Some of the key environmental issues and constraints at the site include impacts on air quality, noise, water quality, liquid and solid waste, blasting and various visual aspects.

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We create shared value for all our stakeholders, including our customers, our investors and the community.

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Business Economics

As a responsible business organization, KWCM adds value to the lives of our employees, our customers and the community as a whole. As a company with considerable financial strength, we also place a high priority on the interests of our investors. To achieve our business sustainability objectives, we have both a medium-term and a long-term strategic framework, which includes our four-year business plan. During our annual forum, we monitor our progress against targets we have set while constantly revising and refining our growth strategies. We also contribute our expertise and services to support our parent company, Galaxy Entertainment Group, as well as the K. Wah Group.

Challenges and Opportunities

KWCM strives to meet the challenges inherent in becoming a sustainable company in the current economic environment by uncovering new business opportunities. Over the past two years, these challenges have included strict policy controls placed on heavy-polluting production operations and an excess supply of construction materials in Mainland China, as well as uncertainties around the relocation of quarrying and manufacturing sites in Hong Kong.

To meet these challenges head on, KWCM has been upgrading our management of raw materials, particularly aggregates, in anticipation of high demand for new property and infrastructure developments in our Southern Region operations, which include Hong Kong. In addition to strengthening our supply chain in Mainland China, our flagship facility in Tai Po, built in 2015, has been increasing its operational efficiency, something which will have hugely beneficial impacts on the way we manage raw materials, products and logistics.

In late December 2016, the National People’s Congress Standing Committee passed Mainland China’s first environmental protection tax law. This new law introduces a pollution tax as the main pollution regulation instrument for businesses in Mainland China. The law replaced the existing pollutant discharge fee system and has resulted in more stringent environmental emissions monitoring. Beginning in 2018, this law could create substantial financial impacts on businesses operating in Mainland China.

Since our last report, we have accelerated our efforts to transform ourselves into a sustainable company and we are now exploring opportunities arising from China’s National Emissions Trading

One of our newest operations began production in early 2016 and now has a daily production capacity of 4,000 tonnes of cement. To make full use of the facility’s resources and help it become a larger part of the industrial chain, the company has also built a 1 Mtpa aggregate production line near the cement factory. Using a four-stage screening and two-stage crushing process, the production line is able to produce high quality aggregates for the local construction market.

Scheme – the largest scheme of its type in the world. We also see business opportunities associated with China’s 13th Five Year Plan and its focus on climate change and clean energy, as well as the Belt and Road Initiative national development strategy to open up new markets in Central and West Asia, the Middle East, Europe, and countries along the coast of Africa and the Mediterranean Sea.

Partnering with local experts in product sustainability, we recently established a research center in one of our Eastern Region factories to showcase the ways in which we are committed to stakeholder engagement.

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To ensure on-time local deliveries, our plants and depots have been built in strategic locations close to our customers’ sites in Hong Kong. All ready-mix concrete trucks are installed with Global Positioning System devices to ensure the quickest, most efficient delivery of our products.

Since ensuring customer satisfaction is an on-going process, we conduct face-to-face meetings with our customers during regular site and office visits. We also seek feedback on our performance to ensure that our products and services meet our customers’ high standards. Additional channels for communicating with our stakeholders include telephone conversations; email channels, our company website and customer surveys.

On-going development work in the Guangdong-Hong Kong-Macau Greater Bay Area, is seeing the development of a world-class community that will create enormous sustainability impacts for stakeholders across the region. Expanded cooperation between these three areas will contribute more potential value to the Belt and Road initiative. As such, promoting and improving infrastructure connectivity between the eleven cities that make up the Greater Bay Area – including Hong Kong – and the rest of the world are critical to long-term success. KWCM is committed to providing quality products and services to support the various key infrastructure projects currently underway, including the Hong Kong-Zhuhai-Macau Bridge, the Guangzhou-Shenzhen-Hong Kong Express Rail Link the New Guangdong-Macau Link, and the expansion of CLK airport third runway project.

Focusing on Customer Satisfaction

At KWCM, our purpose is to deliver our products and services in a socially and environmentally responsible fashion, while making sure we are economically and environmentally sustainable. We maintain quality and environmental standards across all operations according to the international ISO 9001 and ISO 14001 certifications and the HKQAA’s QSPSC scheme for concrete products. We are also accelerating efforts to explore sustainable product certification projects in Mainland China to ensure our product and service standards continually improve.

We believe the best way to serve our customers is by keeping our focus on our mission to fulfil their requirements and discover their potential needs. For instance, we now highlight environmental requirements to our customers in Mainland China which dovetail with reform policies – this process benefits our customers and the environment and allows us to increase the number of sustainable and low-carbon products in our portfolio. In Hong Kong and Macau, our primary focus is on reliability, affordability, and making contributions to national and regional infrastructure development. We aim to do this without compromising on service or quality.

Product quality is vital to KWCM. One of our factories in Shenzhen is upgrading its quality management system to the latest version to keep pace with evolving customer requirements.

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Systemic management and document control can standardize workflows and lessen employee workload. Our factory in Nanjing has made developing these controls normal practice, and regularly issues organized document management updates.

KWCM is committed to supporting technological improvements that lead to product excellence. We were one of several documents drafting committee members facilitating the completion of the latest version of the Ground Granulated Blastfurnace Slag (GGBS) technical documents published in China in December 2017.

Gammon Construction Limited (Gammon) is a leading sustainability advocate in construction sector and committed to partnering with quality suppliers for promoting sustainable and responsible procurement, which is in compliance with its Sustainable Procurement Policy.

“Along Gammon’s value chain, we are happy to work with K. Wah family which is one of our most sustainable partnerships. While providing construction service for its property division, Gammon has been sourcing various construction materials from KWCM such as aggregates, asphalts, concrete, recycled glass and concrete eco-blocks and other precast products.

We are always impressed by the sustainability deployment of KWCM. As part of Gammon vendor performance evaluation, our teams regularly visit the production facilities of KWCM. For example the Huidong quarry which is one of the state-of-art sites where we observed different innovative HSE initiatives so as to give its customers confidence with respect to sustainable operations and products.“

Susan SiuHead of ProcurementGammon Construction Limited

42 43

Our People

use of labour in Mainland China and are working to provide them with a better working environment and a greater level of support; not only to stimulate the growth of a skilled workforce in the industry, but also to respond to the demand for labour from new and emerging industries induced by the continual economic restructuring in China.

In this complex environment, the background and tenure of our leadership group, as well as their diversity of thinking, strengthens our decision-

making capabilities and helps us to be responsive and resilient in the face of new challenges. A diverse broader workforce is also important for several reasons: it reflects the diversity of the societies in which we operate and because a sustainable workforce requires us to maintain a broad recruitment base.

As sustainability necessitates that our people are aligned with the company’s objectives, we offer employee packages that comply with legal and other requirements; we also provide comprehensive benefits and bonuses that are based on the company’s performance and financial results. During their employment with us, our employees are encouraged to pursue both personal and professional development through various types of training, as our culture respects the individual and rewards self-initiative and teamwork.

In order to prepare high-potential management personnel for more senior roles, we have a mentorship programme in place to ensure a smooth succession in our leadership ranks. Through the application of our “Eight Mindsets” model, we aim to create a harmonious culture in the workplace and encourage a healthy work-life balance by providing our employees with

Our people are the most important contributor to company growth. We ensure that our workplaces and activities put them in the best position to make these contributions.

The KWCM 8-Mindsets model leads our people to pursue both business and individual excellence.

Our P

eople

opportunities to develop their career potential and their sense of belonging.

An Equal Opportunity Employer

As an equal opportunity employer with a diverse workforce, we forbid discrimination in our hiring and promotion practices and follow all legal requirements, including the Code of Practice on Employment. We recruit people without regard to their gender, disabilities, ethnic background, religion, or other considerations. All hiring and promotion decisions are based solely on individual competencies, experience and results. Our employees have the freedom of association to join organizations and professional bodies of their choice. We respect and fully comply with all legal requirements with regard to union membership and collective bargaining. However, our management holds the belief that the most appropriate way to engage with our employees is through direct communication, rather than through intermediary organizations.

Every employee, whether they work with us on a full-time, temporary or part-time basis, is entitled to statutory benefits such as social insurance, employees’ compensation and mandatory provident fund contributions.

KWCM values our employees as highly as we doour external customers – both groups are essentialto the health and prosperity of our company. It isno exaggeration to say that our success dependson our ability to recruit and retain people of thehighest calibre. At present, we employ more than3,000 employees across more than 30 operationalsites in Mainland China, Hong Kong and Macau.Across our operations, we have implementedsystems and processes that are enabling thisdiverse and widespread workforce to developand grow.

From a human capital perspective, the major trends affecting our company are demographic and social changes and the “digitalization” of the manufacturing and construction sectors. To face these challenges head-on requires a diverse, agile and sustainable workforce. KWCM aims to build and sustain such a workforce by providing competitive benefits, training and development and by ensuring the human rights of our employees are protected and respected. We make extensive

44 45

Business Ethics and Anti-corruption

At KWCM, we maintain the highest standards of ethical behaviour in our business practices. This not only protects our reputation, it is simply the right thing to do.

To ensure compliance with the Competition Ordinance, we published a competition policy and a competition manual in July 2015 and have since communicated the key points of these documents to all relevant KWCM stakeholders through briefings and other communication channels. The company also complies with the Prevention of Bribery Ordinance and other relevant anti-corruption laws and has published a Code of Business Conduct that all employees are obliged to follow.

This Code is embedded in our company policy, our employee handbook and our employment contracts. It sets out expected standards of behaviour and provides guidelines in areas such as soliciting advantages, accepting and offering advantages, and conflicts of interest. We also communicate the importance of ethical behaviour through new employee orientation and regular employee briefings.

Employee Health

We have always believed in the transformational impacts that education can bring to employee engagement. During the period under review, one initiative was particularly exciting: a series of workplace health activities which were developed beginning in 2016. These serve as an awareness

promotion platform on how to conduct business activities while minimising health risks. These activities, including “work-life balance week”, were conducted in addition to achievements shared in Safety and Environment. We also conducted regular health talks on topics of interest to our employees.

Our primary objective is to ensure that workplace safety exists at every level. This commitment begins by ensuring that proper hardware and equipment is installed to protect our front-line employees and continues on a daily basis with our support of health-conscious activities which ensure the physical and mental well-being of our staff. This “caring company culture” links our people to the community through a number of corporate social responsibility (CSR) initiatives designed to create shared value.

Training and Development

We recognise that training and development are essential to cultivating a competent workforce and sustainable business growth. During the period under review, we continuously conducted new employee orientation workshops, provided training

Stella ZhaManagement Associate (2016-2018) “The KWCM Management Associate Program is a comprehensive training program which has provided me with structured rotation to different departments within the company.

This rotation has not only helped me gain a holistic understanding of the company, but has also developed my multi-dimensional managerial abilities. The most memorable department this rotation brought me to was the Business Development Department, where I was asked to create an investment proposal and share it with parties outside the company. This allowed me to put my academic background to good use and demonstrate my abilities in various aspects like accounting, risk management and industry analysis. I also learned how to conduct a successful business negotiation while working in this department.”

KWCM is awarded the Joyful@Healthy Workplace Best Practices Award – Enterprise / Organization Category – Merit Award by the Department of Health and the Occupational Safety and Health Council for its outstanding performance in promoting healthy eating, physical activity and mental health in its workplace. Considering its staff as its valuable asset, KWCM spares no effort to raise the standard of occupational safety. The company also provides a happy workplace to strengthen the sense of belonging of its staff and enhance the productivity and competitiveness of the workforce.

This KWCM team successfully overcame fierce competition from other groups to become the K. Wah Master Chef 2016 Contest champions!

Our P

eople

in leadership and supervisory skills and other soft and hard skills enhancement programmes such as computer skills and language skills. We also offered subsidies to help employees acquire training from outside sources in areas such as workplace safety, technical skills and professional knowledge. At the same time, we delivered or coordinated a wide variety of skills training workshops to support our employees’ training needs across all levels of the company, helping them meet and exceed their current job requirements and their career development goals. To ensure a steady supply of future leaders from outside the organization, KWCM offers a 24-month Management Associate Programme which includes job rotations, training workshops and project assignments. This programme allows our management associates to gain a greater understanding of the functional competencies that are needed when working at KWCM.

The Management Development Programme aims to develop a pool of leaders within the organization, helping us meet internal succession planning and business expansion requirements. Managerial team are able to explore and develop their leadership potential through training workshops that deepen their understanding of senior management roles at KWCM. The programme also provides structured, individualised development plans which enable managers to advance their career development goals. This and other programmes offered by KWCM during the year offered employees at all levels both vertical and horizontal career development opportunities.

46 47

CSR

One of our goals is to create upward social capital through community and stakeholder engagement.

KWCM is one of the 115 local companies or organizations that have received the “15 Years Plus” Caring Company logo; in fact, we are in the top three per cent of participating companies.

CSR

In addition to investing in our employee’s personal development, we also encourage their involvement in the community – this allows them to witness and understand the value we create for the company and for society.

The company provides direction and decides on the appropriateness of our community activities through the KWCM Social Club. Every month, club members meet to review and evaluate the progress of these activities and provide feedback to our CSR committee. The Club also periodically reviews our CSR programmes to ensure they

On February 26, 2017, KWCM participated at the Hong Kong Mine Challenge, the first mine-themed charitable race in Hong Kong, to raise funds for the conservation of culture and revitalization of the mine village. Playing the role as miners in the old days, KWCM staff completed various tasks in the Abandoned Ma On Shan Iron Mine and Mine Village while appreciating the natural landscape of Ma On Shan along the way.

Growing from a quarrying pioneer in 1950s into an integrated eco-friendly construction materials supplier of today, KWCM is glad to pass on the heritage of mining and contribute to revitalization.

KWCM does not only produce environmentally friendly construction materials products, the company also advocates sustainability in the community. In support of Food Angel, a food rescue and food assistance programme launched by Bo Charity Foundation with the mission of “Waste Not, Hunger Not”, On March 24, 2017, KWCM volunteers visited a kitchen in Sham Shui Po to assist in the processing of edible surplus vegetables and the preparation of hot meals for low-income families and other people in need. KWCM volunteers are proud that they have helped alleviate the burden of landfill spaces by reducing food waste, and showed their care to the needy through this meaningful activity.

match with our long-term strategies for community engagement and investment. Since one of our goals is to create upward social mobility through community and stakeholder engagement, KWCM has established long-term partnerships with various non-government organizations, including Evangelical Lutheran Church Social Services – Hong Kong, Pok Oi Hospital and Sowers Action.Our overall objective is to understand how these community engagement initiatives and our strategic investment in workforce development add value to KWCM and the communities in which we operate.

CSR in the Community

Our multi-pronged approach to CSR allows us to seek out various opportunities to play a meaningful role in the community in order to ensure our actions create the greatest positive impact.

In recognition of 15 years of ceaseless efforts to give back to the Hong Kong community, in March 2017 KWCM was awarded the “15 Years Plus Caring Company” logo by the Hong Kong Council of Social Service. We are grateful for this accolade, as it recognises our steadfast commitment to caring for our employees, our

environment and our community over the past decade and a half. Volunteering in the community allows our employees to make use of their skills and appreciate the real meaning of “giving”; in turn this creates a virtuous cycle, further developing the caring culture within our company.

As different communities have different needs, our business units in various regions are given the flexibility to prioritise and address the specific needs and sensitivities of the existing cultures, traditions and values of their local communities, Our local teams, who have the best knowledge of local priorities, work with stakeholders to

48

Professor Jimmy FungHead Division of Environment and SustainabilityThe Hong Kong University of Science and Technology “Sustainability is not just a trend,

but a rule of thumb for all development. Concrete production is often a resource-based and energy-intensive industry. Yet, through our student’s Capstone Project, sponsored by KWCM, over the past two years we have studied dust control and water recycling and reuse in the company’s production plants. I am impressed both by the proactive industrial initiatives taken by KWCM and the integration of sustainability into their strategic planning– together, these have helped the company achieve environmentally-friendly day-to-day operations. I am also grateful for the unceasing commitment of KWCM to co-nurturing future generations through their Capstone Project supervision. Our students have had opportunities to apply knowledge and theories learned in the classroom – putting them into practice and getting hands-on experience in environmental decision making, ultimately coming to appreciate how the industry is advancing their environmental and sustainability initiatives even with considerable physical and financial constraints. Giving such exposure and learning experiences to students demonstrates how highly the company values striving towards developing more sustainable practices. This could inspire our younger generations to ensure that sustainability is built into all sectors in the future.”

Erin NgYear 2017 GraduateEnvironmental Management and TechnologyThe Hong Kong University of Science and Technology “The KWCM Capstone Project was a great opportunity for me

to learn about teamwork, project management and most importantly, how to work for a “real” company. KWCM gave us a lot of room to express ourselves and experiment with novel ideas, and was always there to support us. We had a valuable opportunity to learn about every detail of the operation of a concrete batching plant and were given the chance to utilize our problem-solving skills to help reduce dust emissions. To me, this experience was about much more than acquiring technical knowledge and skills; it was also about observing how corporate sustainability strategies translate into action at the operational level and about my personal development. Being able to help a company solve a real-life problem from scratch has given me the confidence to start my own career, knowing that I am ready to leave school for the outside world.”

provide solutions that best match their needs and communities. During the reporting period, we promoted community initiatives in all the regions in which we operate.

We also look for opportunities to promote environmental awareness and conservation through our participation in charitable and educational programmes. During the year under review, KWCM became involved in the Environmental Management and Technology Programme at the Hong Kong University of Science and Technology. Over the past two years, our HSE and Sustainability Departments committed to projects and mentorship programmes that coach local undergraduates, teaching them essential concepts and practical skills in sustainability and HSE management. By taking a holistic approach to educating the younger generation about the construction materials industry, health and safety, and energy and environmental issues, we hope that we are helping to prepare and nurture the next generation of engineers and environmental professionals.

To contribute to a sustainable society, we participated in a variety of charitable events during 2016 and 2017. Through employee recreational activities, we were able to maximise the value and effectiveness of our CSR efforts while meeting the needs of both our employees and the community. During the reporting period, KWCM organised 10 community activities in Hong Kong.

General Disclosure

Section/ ReferenceDescriptionSEHK ESG Guide - General Disclosure & KPIs

GRI Standards Disclosure Page

102-1 - Name of the organization About this Report 9

102-2 - Activities, brands, products, and services About this Report 9

About K. Wah Construction Materials 10-16

102-3 - Location of headquarters About this Report 9

102-4 - Location of operations About this Report 9

102-5 - Nature of ownership and legal form About this Report 9

102-6 - Markets served About this Report 9

102-7 - Scale of the organization About this Report 9

Performance Highlights 53-54

102-8 KPI B1.1 Number of employees and other workers Performance Highlights - Social 54

102-9 KPI B5.2 Supply chain description Value Chain 4-5

Sustainable Procurement 34

102-10 - Significant changes to the organization and its supply chain There was no significant change in the reporting period. N/A

102-11 - Precautionary approach Message from the Managing Director 6-8

Corporate Governance

102-12 - External initiatives (Selected) - Occupational Safety Charter – N/A

Labour Department, HKSAR

- Workplace Hygiene Charter – Occupational Safety &

Health Council, HKSAR

102-13 - Membership of external associations (Selected) - Concrete Pipe Producers Association N/A

- Concrete Products Association

- Contract Quarry Association

- Green Cross Member –

Occupational Safety & Health Council

- Hong Kong Asphalt Pavement Association

- Hong Kong Construction Materials

Association Limited

- The Hong Kong Green Building Council

102-14 - Statement from the most senior Message from the Managing Director 6-8

decision-maker of the organization

102-15 - Key impacts, risks and opportunities Message from the Managing Director 6-8

Stakeholder Engagement 17-19

Corporate Sustainability 21

SDG Story 3 30-31

Safety and Environment 32-37

Our People 42-45

102-16 - Values, principles, standards, and norms of behavior About K. Wah Construction Materials 10-16

102-18 - Governance structure About K. Wah Construction Materials 10-16

102-40 - List of stakeholder groups engaged Stakeholder Engagement 17-19

102-41 - Collective bargaining agreements While none of our employees are covered by collective N/A

bargaining agreements, two-way communications between

senior management and employees are available.

102-42 - Identification and selection of stakeholders Stakeholder Engagement 17-19

102-43 - Stakeholder engagement approach Stakeholder Engagement 17

102-44 - Key topics and concerns raised, SDG Stories 22-31

and the organization’ s response

102-45 - Entities included in the consolidated financial statements The entities and financial performance data of KWCM N/A

can be found in the annual financial report of Galaxy

Entertainment Group (Hong Kong Stock Code: 27)

OrganizationalProfile

Strategy

Ethics and IntegrityGovernance

Stakeholder Engagement

Reporting Practice

http://www.galaxyentertainment.com/en/investor/

financial-reports

GRI Sta

ndard

& SEH

K ESG

Conten

t Index

49

50 51

General Disclosure

102-46 - Defining report content and topic boundaries Stakeholder Engagement 17-19

Corporate Sustainability 21

102-47 - List of material topics Materiality Analysis 19

102-48 - Restatements of information There was no restatement of information in this Report. N/A

102-49 - Significant changes in material topics and topic boundaries There was no significant change during N/A

the reporting period.

102-50 - Reporting period About this Report 9

102-51 - Date of most recent report Our Sustainability Report 2015 was published N/A

on 2 October 2016.

102-52 - Reporting cycle Biennial N/A

102-53 - Contact point for enquiries sustainability@kwcml.com N/A

102-54 - Claims of reporting in accordance with the GRI Standards GRI Standard & SEHK ESG Content Index 49-52

102-55 - GRI content index GRI Standard & SEHK ESG Content Index 49-52

102-56 - External assurance About this Report 9

Verification Statement 55

Economic

Topic-specific Disclosures

Description Section/ ReferenceSEHK ESGGuide Reference

Relevant GRI StandardsTopics Page

103-1, 103-2, 103-3 - Management approach disclosure About K. Wah Construction Materials 10-16

Corporate Sustainability 21

201-1 - Direct economic - About K. Wah Construction Materials 10-16

value generated and distributed Performance Highlights – Economic 53

201-2 - Financial implications and other risks and SDG Story 3 30-31

opportunities due to climate change Safety and Environment 32-37

103-1, 103-2, 103-3 - Management approach disclosure About K. Wah Construction Materials 10-16

202-2 - Proportion of senior management hired from 100% of our senior management (Director grade N/A

the local community at significant and above) are hired from the local community,

locations of operation i.e. Hong Kong, Mainland China and Macau.

103-1, 103-2, 103-3 - Management approach disclosure Message from the Managing Director 6-8

Corporate Sustainability 21

203-1 - Infrastructure investments and Message from the Managing Director 6-8

services supported About K. Wah Construction Materials 10-16

Business Economics 38-41

203-2 - Significant indirect economic impacts Business Economics 38-41

SDG Stories 22-31

103-1, 103-2, 103-3 B5 Management approach disclosure Corporate Sustainability 21

Safety & Environment 32-37

103-1, 103-2, 103-3 B7, Management approach disclosure Our People 42-45

KPI B7.2

205-3 KPI B7.1 Confirmed incidents of corruption There were no confirmed incidents of N/A

and actions taken corruption during the reporting period.

Reporting Practice

Economic Performance

MarketPresence

Indirect Economic Impacts

ProcurementPractices

Anti-corruption

Section/ ReferenceDescriptionSEHK ESG Guide - General Disclosure & KPIs

GRI Standards Disclosure Page

Environmental

Topic-specific Disclosures

103-1, 103-2, 103-3 A3 Management approach disclosure Corporate Sustainability 21

Safety and Environment 32-37

301-2 A3 Recycled input materials used Performance Highlights - Environmental 53-54

103-1, 103-2, 103-3 A2 Management approach disclosure Message from the Managing Director 6-8

Corporate Sustainability 21

SDG Story 3 30-31

Safety & Environment 32-37

302-1 KPI A2.1 Energy consumption within the organization Performance Highlights - Environmental 53

103-1, 103-2, 103-3 A2 Management approach disclosure Safety & Environment 32-37

A3

KPI A2.4

KPI A3.1

303-1 KPI A2.2 Water withdrawal by source Performance Highlights - Environmental 53

103-1, 103-2, 103-3 A1, Management approach disclosure SDG Story 1 22-25

A3 Safety & Environment 32-37

KPI A1.5

KPI A3.1

305-1 KPI A1.1, Direct (Scope 1) GHG* emissions Performance Highlights - Environmental 53

KPI A1.2

305-2 KPI A1.1, Energy indirect (Scope 2) GHG* emissions Performance Highlights - Environmental 53

KPI A1.2

305-3 KPI A1.1, Other indirect (Scope 3) GHG* emissions Performance Highlights - Environmental 53

KPI A1.2

305-4 KPI A1.2 GHG emissions intensity Safety and Environment 32-37

305-5 KPI A1.5 Reduction of GHG* emissions Message from the Managing Director 6-8

SDG Story 2 26-29

Safety and Environment 32-37

Performance Highlights - Environmental 53

103-1, 103-2, 103-3 A1 Management approach disclosure SDG Story 1 22-25

A3 Safety and Environment 32-37

KPI A1.5

KPI A3.1

306-2 KPI A1.3 Waste by type and disposal method Performance Highlights - Environmental 53

KPI A1.4

KPI A1.6

103-1, 103-2, 103-3 A1 Management approach disclosure Safety and Environment 32-37

307-1 - Non-compliance with environmental laws The case refers to an incident which occurred in N/A

our Hong Kong operation. A summary was

published on November 28, 2017:

We can confirm that both fines were settled and

there have been no further violations of the

specified process license conditions.

103-1, 103-2, 103-3 B5, Management approach disclosure Safety and Environment 32-37

KPI B5.2

308-1 KPI B5.2 New suppliers that were screened using We included environmental criteria in all supplier N/A

environmental criteria preferred vendors’ assessments.

Materials

Energy

Water

Emissions

Effluents and Waste

EnvironmentalCompliance

Supplier Environmental Assessment

Description Section/ ReferenceSEHK ESGGuide Reference

Relevant GRI StandardsTopics Page

http://www.info.gov.hk/gia/general/201711/28/P2

017112800581.htm?fontSize=1

GRI Sta

ndard

& SEH

K ESG

Conten

t Index

52 53

Perfo

rmance H

ighlig

hts

Social

Topic-specific Disclosures

103-1, 103-2, 103-3 B1 Management approach disclosure Corporate Sustainability 21

Our People 42-45

401-1 KPI B1.2 New employee hires and employee turnover Performance Highlights - Social 54

401-3 - Parental leave

103-1, 103-2, 103-3 B2, Management approach disclosure Corporate Sustainability 21

KPI B2.3 Safety and Environment 32-37

403-2 KPI B2.1 Types of injury and rates of injury, Performance Highlights - Social 54

occupational diseases, lost days, and

absenteeism, and number of

work-related fatalities

103-1, 103-2, 103-3 B3 Management approach disclosure Our People 42-45

404-1 KPI B3.2 Average hours of training per year Performance Highlights - Social 54

per employee

404-2 B3 Programs for upgrading employee skills Our People 42-45

and transition assistance programs

103-1, 103-2, 103-3 B1 Management approach disclosure Our People 42-45

405-1 - Diversity of governance bodies Performance Highlights - Social 54

and employees

103-1, 103-2, 103-3 B1 Management approach disclosure Our People 42-45

406-1 - Incidents of discrimination and There were no confirmed incidents of N/A

corrective actions taken discrimination in the reporting period.

103-1, 103-2, 103-3 B8 Management approach disclosure Corporate Sustainability 21

SDG Story 1 22-25

413-2 - Operations with significant actual and No significant actual or potential negative N/A

potential negative impacts on impacts were identified during

local communities the reporting period.

- KPI B8.1 Focus areas of contribution SDG Stories 22-31

Performance Highlights – Social 54

- KPI B8.2 Resources contributed to the focus area SDG Stories 22-31

103-1, 103-2, 103-3 B8 Management approach disclosure Business Economics 38-41

416-2 - Incidents of non-compliance concerning There were no confirmed incidents of N/A

the health and safety impacts of products non-compliance in the reporting period.

and services

- KPI B6.1 Percentage of total products sold or shipped This KPI is not applicable to our business. N/A

subject to recalls for safety and

health reasons.

- KPI B6.4 Description of quality assurance process Focusing on Customer Satisfaction 41

and recall procedures

103-1, 103-2, 103-3 B1 Management approach disclosure About this Report 9

B2 About K. Wah Construction Materials 10-16

419-1 - Non-compliance with laws and regulations We were not imposed any significant fine or N/A

in the social and economic area sanctions for any noncompliance with laws and

regulations in the social and economic area.

* The main Greenhouse gas emitted by K. Wah Construction Materials is carbon dioxide (CO2e). In this context, "Greenhouse Gas" refers to CO2e.

Employment

Training and Education

Diversity and Equal Opportunity

Non-discrimination

Local Communities

Customer Health and Safety

Socio-economic Compliance

Occupational Health and Safety

Description Section/ ReferenceSEHK ESGGuide Reference

Relevant GRI StandardsTopics Page

Indicator Unit 2016 2017

Virgin raw materials for production million tonne 6.8 7.6

Consumption of recycle materials million tonne 5.1 6.0

Environmental paper consumption (Head office) kg 3,368 3,193

Carbon intensity by major sources – Cement (Clinker)5 kg CO2/ tonne of product 853.2 853.1

NOx emissions tonne 2,546 2,804

SOx emissions tonne 112 123

Total greenhouse gas emissions tonne CO2e 492,231 515,291

Greenhouse gas emissions (Scope 1) tonne CO2e 239,513 253,658

Greenhouse gas emissions (Scope 2) tonne CO2e 252,718 261,634

Total harzardous waste produced tonne 24 25

Total non-harzardous waste produced tonne 19,954 28,740

Total energy consumption GJ 4,268,605 4,478,995

Total direct energy consumption GJ 3,260,676 3,432,437

Coal GJ 2,134,553 2,272,423

Blastfurnace gas GJ 948,850 977,853

Liquefied Petroleum Gas (LPG) GJ 125 159

Natural gas GJ 277 173

Diesel GJ 171,155 177,360

Petrol GJ 5,716 4,469

Total indirect energy consumption GJ 1,007,929 1,046,558

Purchased electricity GJ 1,007,929 1,046,558

Water Consumption (Head office) m3 201 214

Remarks

1. In general, these performance statistics cover all KWCM operations under management control. Separate remarks have been given for business units in which information is not fully available, due to the variable pace of development of monitoring and measurement in different regions.

2. The financial performance data of KWCM can be found in the annual financial report of Galaxy Entertainment Group (Hong Kong Stock Code: 27) http://www.galaxyentertainment.com/en/investor/financial-reports

3. The boundaries and definitions of our reported environmental performance are in line with the GEG Annual (ESG) Report 2017 while the carbon performance of Yunnan (cement) operation was explained in remark no.5: http://www.galaxyentertainment.com/uploads/investor/23963050b1f4d1e509eb2dea08edb48c313c035f.pdf

Performance Highlights1

Economic2

Environmental3, 4

Indicator Unit 2016 2017

Revenue HK$ Million 2,141 3,067

Adjusted EBITDA HK$ Million 434 744

54 55

Indicator Unit 2016 2017

No. of employee number 1,058 1,064

Employee by age, <30 % 26 23

Employee by age, 31 - 40 % 24 25

Employee by age, 41 - 50 % 28 29

Employee by age, 51 - 60 % 17 18

Employee by age, >61 % 5 6

Employee by gender, senior management - Female/Male ratio 5/42 5/39

Employee by gender, middle management - Female/Male ratio 28/83 31/85

Employee by gender, general employee - Female/Male ratio 187/713 173/731

Employee turnover % 9 11

Employee turnover by age, <30 % 13 15

Employee turnover by age, 31 - 40 % 6 14

Employee turnover by age, 41 - 50 % 9 7

Employee turnover by age, 51 - 60 % 9 7

Employee turnover by age, >61 % 6 9

Total number of employees taking parental leave number 26 9

Total number of employees taking parental leave - Return-to-work rate % 96 N/A6

Total number of employees taking parental leave - Retention rate % 85 N/A6

Permanent employee % 35 35

Ratios of standard entry level wage - Overall ratio 2.86/1 2.81/1

Ratios of standard entry level wage - Female ratio 2.37/1 2.29/1

Ratios of standard entry level wage - Male ratio 2.98/1 2.93/1

Man-days lost man-day 1,729 1,555

Accident frequency rate no. of accident per 100,000 man-hours 0.31 0.17

No. of training hour per employee number 14.6 17.5

Employee training (senior management) - HSE (hours/ employee) number 12.9 17.0

Employee training (senior management) - number 18.3 19.5Management skills and others (hours/ employee)

Employee training (middle management) - number 10.9 11.8HSE (hours/ employee)

Employee training (middle management) - number 16.8 7.6Management skills and others (hours/ employee)

Employee training (general employee) - HSE (hours/ employee) number 10.6 14.8

Employee training (general employee) - number 2.2 1.5Management skills and others (hours/ employee)

Volunteering hours7 number 213 507

Remarks

1. In general, these performance statistics cover all KWCM operations under management control. Separate remarks have been given for business units in which information is not fully available, due to the variable pace of development of monitoring and measurement in different regions.

2. The financial performance data of KWCM can be found in the annual financial report of Galaxy Entertainment Group (Hong Kong Stock Code: 27) http://www.galaxyentertainment.com/en/investor/financial-reports

3. The boundaries and definitions of our reported environmental performance are in line with the GEG Annual (ESG) Report 2017 while the carbon performance of Yunnan (cement) operation was explained in remark no.5: http://www.galaxyentertainment.com/uploads/investor/23963050b1f4d1e509eb2dea08edb48c313c035f.pdf

4. Carbon emissions data covers Scope 1, 2 and partially Scope 3. The guidelines applied were the EMSD and EPD Guidelines to Account for and Report on Greenhouse Gas Emissions and Removals for Building in Hong Kong and SZDB/Z 70-2012: Specification with guidance for verification of the organization’s greenhouse gas emissions.

5. Product carbon intensity performance related to cement was selected as per its significance among all KWCM products and development in reference to figures contained in the announcement of the National Development and Reform Commission (NDRC), dated December 4, 2017. (No. 1989 [2017] of the General Office of the NDRC)

6. The corresponding result will be ready in 2018 and communicated in next reporting period.

7. The performance data covers the performance of KWCM volunteers based in Hong Kong (Head office and part of the Southern Region).

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VERIFICATION STATEMENT

Scope and ObjectiveHong Kong Quality Assurance Agency (“HKQAA”) has been engaged by K. Wah Construction Materials Limited (“KWCM”) to undertake an independent verification for its Sustainability Report 2017 (“the Report”). The report covers the operations of KWCM’s head office, wholly owned subsidiaries, and joint venture plants under its management control.

The scope of HKQAA’s verification covers the data and information associating to KWCM’s sustainability performance for the period from January 1, 2016 to December 31, 2017. The objective of this verification is to provide reasonable assurance of the data and information disclosed in the Report to confirm their accuracy, reliability and objectivity.

Level of Assurance and MethodologyThe 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 reasonable level of assurance in accordance with the standard for the purpose of devising the verification conclusion. The extent of this verification process was provided for the Core Option of the Global Reporting Initiative Sustainability Reporting Standards (GRI Standards),the criteria set in the Environmental, Social and Governance Reporting Guide (“ESG Guide”) of The Stock Exchange of Hong Kong Limited and the ISO 26000 - Guidance on Social Responsibility.

The verification procedure covered reviewing relevant documentation, interviewing responsible personnel with accountability for preparing the Report and verifying the selected representative sample of data and information used for preparing the Report. Raw data and supporting evidence of the selected samples were also thoroughly examined during the verification process.

IndependenceKWCM is responsible for the collection and presentation of the information in the Report. HKQAA did not involve in the collection and calculation of data in the Report or the compilation of the Report. HKQAA’s verification activities are entirely independent from KWCM.

ConclusionBased on the verification results and in accordance with the verification procedures undertaken, HKQAA has obtained reasonable assurance and is in the opinion that:

• The Report has been prepared in accordance with the Core Option of the GRI Standards and the ESG Guide as well as referencing the ISO 26000 Guidance on Social Responsibility; • The Report illustrates KWCM’s sustainability performance with respect to the material aspects in a balanced, comparable, clear and timely manner; and• The data and information disclosed in the Report are reliable and complete.

The report reflects truthfully of KWCM’s sustainability performance that is commensurate with the sustainability context and materiality of the company.

Signed on behalf of Hong Kong Quality Assurance Agency

Bryan PangAssistant DirectorManufacturing and Service Business DivisionJune 2018

Indicator Unit 2016 2017

No. of employee number 1,058 1,064

Employee by age, <30 % 26 23

Employee by age, 31 - 40 % 24 25

Employee by age, 41 - 50 % 28 29

Employee by age, 51 - 60 % 17 18

Employee by age, >61 % 5 6

Employee by gender, senior management - Female/Male ratio 5/42 5/39

Employee by gender, middle management - Female/Male ratio 28/83 31/85

Employee by gender, general employee - Female/Male ratio 187/713 173/731

Employee turnover % 9 11

Employee turnover by age, <30 % 13 15

Employee turnover by age, 31 - 40 % 6 14

Employee turnover by age, 41 - 50 % 9 7

Employee turnover by age, 51 - 60 % 9 7

Employee turnover by age, >61 % 6 9

Total number of employees taking parental leave number 26 9

Total number of employees taking parental leave - Return-to-work rate % 96 N/A6

Total number of employees taking parental leave - Retention rate % 85 N/A6

Permanent employee % 35 35

Ratios of standard entry level wage - Overall ratio 2.86/1 2.81/1

Ratios of standard entry level wage - Female ratio 2.37/1 2.29/1

Ratios of standard entry level wage - Male ratio 2.98/1 2.93/1

Man-days lost man-day 1,729 1,434

Accident frequency rate no. of accident per 100,000 man-hours 0.31 0.17

No. of training hour per employee number 14.6 17.5

Employee training (senior management) - HSE (hours/ employee) number 12.9 17.0

Employee training (senior management) - number 18.3 19.5Management skills and others (hours/ employee)

Employee training (middle management) - number 10.9 11.8HSE (hours/ employee)

Employee training (middle management) - number 16.8 7.6Management skills and others (hours/ employee)

Employee training (general employee) - HSE (hours/ employee) number 10.6 14.8

Employee training (general employee) - number 2.2 1.5Management skills and others (hours/ employee)

Volunteering hours7 number 213 507

Remarks

1. In general, these performance statistics cover all KWCM operations under management control. Separate remarks have been given for business units in which information is not fully available, due to the variable pace of development of monitoring and measurement in different regions.

2. The financial performance data of KWCM can be found in the annual financial report of Galaxy Entertainment Group (Hong Kong Stock Code: 27) http://www.galaxyentertainment.com/en/investor/financial-reports

3. The boundaries and definitions of our reported environmental performance are in line with the GEG Annual (ESG) Report 2017 while the carbon performance of Yunnan (cement) operation was explained in remark no.5: http://www.galaxyentertainment.com/uploads/investor/23963050b1f4d1e509eb2dea08edb48c313c035f.pdf

4. Carbon emissions data covers Scope 1, 2 and partially Scope 3. The guidelines applied were the EMSD and EPD Guidelines to Account for and Report on Greenhouse Gas Emissions and Removals for Building in Hong Kong and SZDB/Z 70-2012: Specification with guidance for verification of the organization’s greenhouse gas emissions.

5. Product carbon intensity performance related to cement was selected as per its significance among all KWCM products and development in reference to figures contained in the announcement of the National Development and Reform Commission (NDRC), dated December 4, 2017. (No. 1989 [2017] of the General Office of the NDRC)

6. The corresponding result will be ready in 2018 and communicated in next reporting period.

7. The performance data covers the performance of KWCM volunteers based in Hong Kong (Head office and part of the Southern Region).

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SUSTAINABILITYREPORT 2017

HONG KONGHead Office and Regional Office (Southern China)Address: Suite No. 912, 9/F., Skyline Tower, 39 Wang Kwong Road, Kowloon Bay, Hong KongTel: (852) 2173 6688Fax: (852) 2808 0183Email: enquire@kwcml.com

SHANGHAIRegional Office (Eastern China)Address: Room 602, 6/F., K. Wah Centre, 1010 Central Huaihai Road, ShanghaiPostal Code: 200031Tel: (8621) 6113 3333Fax: (8621) 6113 3500Email: enquire@kwcml.com

YUNNANRegional OfficeAddress: Room 1A, Unit 2, Block 10, Sunny Lake & Splendid Life, Anning, Kunming, YunnanPostal Code: 650300Tel: (0871) 6869 7472Fax: (0871) 6869 7472Email: enquire@kwcml.com

BEIJINGRegional Office (Northern China)Address: Room 701-702, Building A, Fairmont Tower, No.33 Guangshun North Street, Chaoyang District, BeijingPostal Code: 100102Tel: (8610) 8471 5516Fax: (8610) 8471 5516-210Email: enquire@kwcml.com

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