TCL Communication Technology Holdings Limited

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TCL Communication Technology Holdings Limited创 意 感 动 生 活The Creative Life

TCL ESG Report05504 E01 ESG 4CTime/date: 06-06-2017 16:04:43P.02 (02)Cre8 (852) 3693 2600About this reportThis report is the third sustainability report published by TCL Communication TechnologyHoldings Limited (“TCL Communication”) and is the second report prepared in accordancewith The Stock Exchange of Hong Kong Limited’s “Environmental, Social and GovernanceReporting Guide” (ESG) (Appendix 27 of the Main Board Listing Rules, hereinafter “the Guide”).As the Guide recommends, the report was prepared based on the reporting principles ofMateriality, Quantitative, Balance and Consistency as specified in the Guide.This report gives an overview on how TCL Communication has managed our performance onvarious sustainability aspects, including stakeholder engagement, sustainability governance,product stewardship and responsibility, employee development and wellbeing, environmentalprotection and community investment in the 2017 calendar year. Unless otherwise specified, ourreporting scope covers all operations of TCL Communication except the fixed linebusiness.02

TCL ESG Report05504 E01 ESG 4CTime/date: 06-06-2017 16:04:43P.01 (48)Cre8 (852) 3693 2600TCL Communication Technology Holdings Limited Sustainability Report 2016Contents0203040612202530373940Messagefrom the CEOSustainabilityin our bloodOur operationalsitesAn outlookMessagefrom the GMOur productsOur peopleAppendixAbout TCLCommunicationOur supplychainCommunity outreach40HKEx ESG ReportingGuide Index46Feedback form01

Message from the CEOAs a world leading provider of communication productsmanufacturer and internet service,TCL Communicationspecializes in offering smart products and service withpremium user experience. Upholdingthecorporatemission, which is to create value for customers, provideopportunities for employees, bring benefit to thestakeholders, and shoulder responsibilities to the society,the company has always been proactively fulfilled itssocial responsibilities while expandinginternationalbusiness . Also we actively promote Green Productprogress, our manufacture be awarded as “GreenManufacture” during 2017.TCL Communication dedicated itself to build ecofriendly factory, to ensure people social care anddevelopment management, guaranty product safety bystringent quality and supply chain management system,as well as emphasize energy saving and environmentprotection.The company provides a sound workingenvironment with full of potential employees, cares fortheir growth and long term development. Meanwhile, thecompany also undertake social service programs to helpcommunities to realize sustainable development.Cheng WANGCEO26 Aug 201802

TCL Communication Technology Holdings Limited Sustainability Report 2017Message from the GMFrom the beginning, quality department is leading the sustainability activityin TCL communication. We decided to do this because TCL communicationis not only a major player in the industry but also we are a responsiblecompany to the society and our customers.In 2015, we published our first sustainability report. It was the first documentto summarize all our activities around product and safety, humanmanagement, eco-rating and other sustainability activities. This report waswell-received inside the company like our sales people but also from our keycustomers. In continuing our practice in communicating our sustainabilityperformance, we published our Sustainability Report in a second year in 2016and we are doing the third now. The report is prepared in accordance withthe Environmental, Social and Governance Reporting Guide issued by theStock Exchange of Hong Kong Limited. For that, we have improved a lot ondata collection, reporting system, involvement cross-sites and crossmanagement level of the company.TCL Communication is willing to be a promoter of green practice and always looking for improvement on every aspect ofsocial responsibility for our employees, and with our suppliers, customers, and partners. Some special focuses are done onfemale employee’s management and equity.Every year, we build a new plan which is looking for some key improvements, listening to customer’s orientation andrequest. We also involve our key suppliers by looking into their practices, sharing good experience and following their progress.All these activities are monitored at top level management inside the company and subjected to many customers’ reviewsand audits. One of our goals is to spread this spirit inside the company, to all employees.For years, we have developed a strong plan for workers in global manufacturing center which was to improve their life,not only in working area but also in living environment. Besides, they have more opportunities to contact their family,more possible activities like sport sections to keep good health and so. In order to continue to improve their life andreduce unnecessary turn over, there are several channels of feedback in place.The control of resources is a key subject for us. For example, we provide training to employees about water consumption.We fully understand that it is our duty to control resources and limit emission and waste.As this never ends, every year we are looking for improvements, despite fierce competition. It is a long term strategy for TCLCommunication and in line with similar objective at TCL Corporation level. We claim to be a responsible player in theindustry and everyone in the company will have his contribution to this goal.Jun HUANGGeneral Manager of the Global Quality and Customer Care Department26 Aug 201803

About TCL CommunicationOUR BUSINESSTCL Communication Technology Holdings Limited, a global mobile terminal manufacturer and internet serviceprovider, was founded on March, 1999. Incorporated in Hong Kong, TCL Communication is a subsidiary company ofTCL Corporation which has over 70,000 employees worldwide. It provides globally its rich portfolio of product andservice under three key brands – TCL, Alcatel and BlackBerry.In 2017, TCL Communication’s total sales volume of handsets and other products reached 43.88 million units.According to telecommunication research firm IDC and company data, TCL Communication ranked top 10 amongglobal phone manufacturer in 2017.TCL Communication owned a global factory located in Huizhou, and its capacity reaches 120 Million units per year.With possess a world leading SMT production line and MMI automatic testing system, the factory has become one ofthe largest and efficient single production sites in China, and the powerful, efficient global supply chain system canhelp to keep its advantages in both quality and cost. Meanwhile, TCL Communication has established a consummatequality management system, which has certificates of ISO9001, ISO14001, OHSAS18001, SA8000, TL9000 and GSV andmeets the requirement of QC080000.As a contributor to the 3GPP standardization effort, TCL Communication have been engaged actively since early 2015in the prototyping of 5G technologies to prepare the introduction of our first 5G products in second half of 2019 in line with the market demand for 5G wireless broadband access in North America and Europe markets. TCLCommunication has invested in the research and development of 5G technology in collaboration with partnerssuch as SEQUANS COMMUNICATION, the Hong Kong Applied Science and Technology Research Institute (ASTRI),EURECOM and Creonic. With many dedicated research projects and development equipment, the company hasbecome one of the few companies in the world who owns or licenses 2G, 2.5G, 2.75G, 3G, 4G and 5G patentedtechnologies. This greatly enhances the efficiency of research and development.04

TCL Communication Technology Holdings Limited Sustainability Report 2017OUR STRATEGYAs part of TCL Corporation, we have adopted the Mother Company’s “Double ” strategy, which refers to “Intelligence Internet” and “Products Services”. “Intelligence Internet” refers to introducing smart products that interconnect throughnetworks, resulting in a significant transformation in how we live and work; “Products Services” refer to enriching users’lives through devices and smart solutions that connect them.The company has rapidly advanced the development of applications and services, focusing on mobile internet application , cloudservices, third-party payments, tablets, Mobile Broadband (MBB) and wearable devices, and mobile devices to create a unique andsmart open ecosystem.To achieve this goal, TCL Communication relies on various non-financial capital, namely manufactured, human, intellectual,social/relationship and natural capital. Managing such capitals contributes to the long-term success of our “Double ”strategy.Financial capitalManufactured capitalMaintaining a healthy financial status ensures undisruptedOur facilities, equipment and incoming materials are assetsoperation and continuous growth of the company, thusthat generate profit so we work to protect them from climatecreating values for our customers, employees andchange-related risks and incidents such as fire.stakeholders in the long run.Human capitalIntellectual capitalOur products are designed and manufactured by ourInnovation is a driver of ouremployees. Innovative talents and skilled labour areacquisitionessential to competitiveness and the quality aourcomprehensive training program is provided to all employees.products. As such, we offer a fair, fulfilling and excitingOur strategy is to offer a platform that allows our employeeswork environment for everyone. In particular, the safetyto show their trueof our employees is our top priority.strengthen our connections as a team. Protecting our owncolours,wemaintainmoraleandintellectual properties is also a priority for us.Social/relationship capitalNatural capitalTo be successful in the global market, we work to buildTCL Communication is concerned with the sustainability oftrust and confidence with our customers and suppliers.the environment. A healthy eco-system is fundamental to anQuality is only part of our offerings — we insist onenjoyable world, and a market which customers demanddistributing safe products with accessibletechnology-enabled lives. Global warmingafter-salesandnaturalservices. Being a powerful buyer, and acting on behalfresource scarcity is increasingly a risk to mankind. As such,of our customers, we make efforts in promoting sustainablewe are aware of how our products help to shape a low- carbonand ethical business practices across the supply chain.and resource-conserving economy. Consumption of naturalcapital is a cost to us.05

Sustainability in our bloodSUSTAINABILITY GOVERNANCEGiven how various forms of capital connect with our business strategy; our Board of Directors takes full responsibility forthe formulation of our sustainability strategy and its incorporation into our core business strategy. We also aim to be astransparent as possible on how our strategy is executed so the Board is also responsible for the authenticity of the contentof our report. Besides, the top-down approach enables execution of sustainability-related policies, procedures and programs.Under the leadership of the Board, a Corporate Social Responsibility (CSR) Committee was established in 2015. It isresponsible forSetting the tone of TCL Communication’s sustainability commitmentFormulating the sustainability strategyEvaluating the effectiveness of sustainability programsIdentifying sustainability risks and determining the respective internal controlsCommunicating our sustainability performance to key customersOverseeing the preparation of the sustainability reportThe Committee is led by Lv Xiaobin, Senior Vice President of TCL Communication and General Manager of GlobalManufacturing Centre. There are four sub-teams in the Committee, each of which is led by a senior employee. The foursub-teams are the Employees Team, the Environment Team, the Supply Chain CSR Management Team and the CSRLeadership Team.In order to strengthen the CSR awareness and knowledge of top management and CSR staff, TCL group invited CSR expert to giverelated training in August, 2017, and all CSR staff in TCL Communication attended the training.(Senior Executive)Employee06EnvironmentSupplier CSR

TCL Communication Technology Holdings Limited Sustainability Report 2017ROBUST MANAGEMENT SYSTEMSBECHS Management SystemTCL Communication utilizes a comprehensive Business Ethics, Environment, Corporate Responsibility, Health andSafety ycertifiedstandards,includingISO9001/TL9000, ISO14001, SA8000 and OHSAS 18001. The system is fully integrated into our blueprint for continuous operationalimprovement. In 2012, the Supplier Code of Ethics was introduced and our supplier audit program was officially launched.In 2017 we passed the TUV audit of new version TL9000 and SA8000. Continuously pass OHSAS18001, ISO14001 audit. Now we areworking on the planning and implementation of new version 1SO14001.Achievement in EcoVadis ratingEcoVadis operates the first collaborative platform providing Supplier Sustainability Ratings for global supply chains. Asaresponsible supplier to major international brands and retail giants, we have participated in the EcoVadis rating programsince 2010. The rating reflects our performance on green operations, product stewardship, employment practices, humanrights, ethics and sustainable procurement aspects, and also the existence of policies, actions and performance disclosureon these aspects. Such information affects the buying decisions of existing and potential customers.TCL Communication has been rated based on the supporting documents provided and standpoints published by other ratingagencies, NGOs and local authorities.The latest rating was publicly available in Aug 2017.As our BECHS Management System matures, our rating has improved year-by-year.In 2017, we achieved theGolden LEVEL EcoVadis RatingEcoVadis rating of TCL Communication.The latest rating was publicly available in Aug. 2017.0707

Sustainability in our bloodDeutsche Telekom Best Practice in CSR AwardTCL Communication has joined Deutsche Telekom’s Supplier Development Program since 2014. To recognize ourcommitment and achievement in employee care, energy conservation and green production, Deutsche Telekom presented TCLCommunication the Silver Award for the Best Practice in CSR in 2016 and 2017. We have had good achievements in several KPIsassessed by the judging panel, including employee satisfactory rate, employee turnover rate, limitation to working hours, andsupplier performance in sustainability.As early as in 2008, our Global Manufacturing Centre in Huizhou had established a sustainability managementsystem and also certified with the SA8000 standard. Being part of the Deutsche Telekom’s Supplier Development Program,we established a corporate level CSR Committee to determine the agenda and direction of sustainability managementfor the company. The Award has been a great encouragement to the company and a motivation to more investment toenhancement of sustainability performance. We won sustainability program silver awards twice in 2016 and 2017, andin2017 rank Top1 among silver awards winners.Certified as “green factory” by government:Background:In 2017, China government organized the countrywide evaluation of industrial energy saving and green development.Evaluation and selection:GMC was certified as “green factory” with good performance through the evaluation on infrastructure, management system,energy resources input, products, environmental emissions, performance.Rank:One of 25 green factories in all industries of Guangdong province. One of 5 green factories in electron industry ofGuangdong province.0805504 E01 ESG 4C.indd 808/06/2017 20:05:03

TCL Communication Technology Holdings Limited Sustainability Report 2017PRIORITY AREASWe are pleased that both our internal and external stakeholders have recognized our sustained effortinaddressingenvironmental, employee, operation, business partner and social needs, particularly in our responsive and proactiveapproach to sustainability development. There are some key areas in which our stakeholders expect us to further enhanceour approach to sustainability:Keysustainabilitytopic areasHighlights of Expectations Stakeholders would like toobtain TCL ategysustainabilityinformation/reportsregularly with goals forsustainable developmentOur approachIn this Sustainability Report, we have outlined therelevance of sustainability to our business, anddiscussed the way to respond to sustainability risks andopportunities ahead. In the future, we will continue tocommunicate this information regularly on our globalwebsite and push e-mails.planSuppliers’ sustainability performance is evaluatedthrough our own audit program. We will communicate Supply ChainManagementBe transparent onwith our customers to further explore their specificsustainability performance ofneeds to information on our supplier evaluationTCL Communication’sresults. On the other hand, suppliers will be invited tosupply chainclient-organized seminars so that suppliers can learndirectly from our clients their expectation tosustainability performance. SustainableProduct DesignContinuous development ofsustainable and innovativeWe will continue to develop product that are moreenergy efficient and made from recyclable materials.products0905504 E01 ESG 4C.indd 908/06/2017 20:05:03

TCL ESG Report05504 E01 ESG 4CTime/date: 06-06-2017 16:04:43P.10 (48)Cre8 (852) 3693 2600Sustainability in our bloodMateriality analysis resultsA range of environmental, social and governance issues are generated by our business. Materiality assessment is carried outto priorities the significance of each issue according to stakeholders. The materiality assessment is conducted mainly based onthe stakeholder engagement survey. The following significant issues have been identified:The EnvironmentEmployment and Labor PracticesResource ConservationLaborWasteHealth & SafetyManagementStandardEnergy EfficiencyStaff CareSustainable ProductsWorking EnvironmentGreenhouse Gas EmissionsTraining and DevelopmentWater UsageOperating PracticesThe CommunityProduct Quality & SafetyCommunity InvestmentsProduct InnovationIntellectual PropertyCustomer CareCustomer PrivacySupply Chain ManagementConflict MineralAnti-corruptionIn this report, we have identified 20 material issues and thus the disclosure of our management and performance of thesustainability issues will be reported under the relevant chapters.10

OURPRODUCTS

Our productsOur products and services are our vehicles of living out our purpose of enhancing customer experiences andimproving their quality of life through technology. We design and build products for an impact — so that everyonecan enjoy the benefits of connected devices. Product safety is a pre-requisite to achieve this purpose. Our qualitysystem is well operated to ensure that every product shipped is up to the required safety standards. Recognizinghow our products shape the world, such as how they affect our energy consumption patterns and they becomehazardous when they reach the end of their lives, we are mindful to limiting the life-cycle environmental footprintof our products. We work to minimize the use of materials, and promote a circular economy that closes the loop.QUALITY PRODUCTS, SAFE PRODUCTSProduct quality assuranceTCL Communication’s Quality Management System is certified to TL 9000 Standards. TL 9000 is the Quality ManagementStandard for Information and Communication Technology Sector based on the ISO9001 Standard.Quality control starts at selection of suppliers. A comprehensive supplier selection and assessment process has beendeveloped to ensure the quality of suppliers and their products. The key components of our phones are supplied by renownedenterprises. All suppliers have acquired ISO9001: 2008 quality management system certification. A corresponding robust testingapproach and standard has been set up for incoming electronic parts, metal componentsand plastic materials. We haveadopted the 5M1E management approach for controlling quality of parts and used advanced equipment for testing. Six-Sigma,MSA, SPC and APQP approaches are also adopted in controlling quality throughout the manufacturing process. An antistatic management system has been implemented. Our principle is “not to produce, deliver and accept defective products”.We control and manage product reliability across the entire product life-cycle, including the project definition, researchand development, production and maintenance stages. Reliability is integrated into the planning of research and developmentand quality control. By simulating and analyzing product malfunctions, we can identify deficiencies and continuously improve thereliability of relevant standardized modules. Most instrument calibration processes are carried out in our own measuring room orby experienced external measuring institutions. In order to understand and ensure the stability of our instruments,inspections and scientific analysis with MSA tools are conducted regularly.Safe productsOur products comply with the local safety standards for every market we ship to. This includes CE for Europe, FCC forthe US and CCC Mark for China. TCL Communication has rigid limits for the surface temperature of phones andconducts phone surface temperature tests under scenarios such as mobile calling, surfing the Internet, playing videos, runninggaming applications, taking photos and charging.To make sure our products conform to environment requirements, we observe REACH, RoHS and Halogen-Free requirements.Our manufacturing arm carefully monitors incoming raw materials and requires our suppliers to declare their compliancewith RoHS Directive and Halogen-Free. Tests are arranged for REACH, RoHS and Halogen-Free compliance of our products12

TCL Communication Technology Holdings Limited Sustainability Report 2017with a third party certified by the China National Accreditation Service. In 2017, all products shipped to Europe metthe RoHS requirement Directive and REACH Regulations. Certain halogen-containing substances, such as PolyVinyl Chloride(PVC) and Brominated Flame Retardant (BFR), have been known for their potential health risks. Some of our products are freefrom these substances. Our packaging and any paper manuals are printed with non-petroleum based ink, which is considered tobe of lower health and environmental risk when accidently inhaled or disposed of.Our products emit radio waves. They are designed and manufactured to comply with the radiofrequency exposure thresholdsrecommended by the International Commission on Non-Ionising Radiation Protection and by the Council of the EuropeanUnion.PRODUCT ENVIRONMENTAL STEWARDSHIPCommunicating environmental performance of productsAs we design and manufacture our products and respective packaging, we aim to minimize their impact on the environment.To us, our products may be impactful as energy is consumed and raw materials are extracted, and harmful substancesmay be released throughout their life-cycles. The environmental performance of all our products are evaluated through our ecorating system, which is designed based on customers’ requirements, the European regulations and end users’ expectations.Common evaluation criteria of these eco-rating systems include selection of raw materials, environmental footprint during themanufacturing stage, and selection of packaging materials, energy efficiency and recyclability. Eco- ratings for all of ourproducts are made available to customers on request.Energy efficiency of phonesOur products are designed to achieve outstanding energy efficiency. For example, the AC-DC conversion efficiency for ourchargers is improved to reduce energy loss. From 2016, chargers which are accessary of our products shipped to EU andNA reached Energy Efficiency Level VI determined by the US Department of Energy. The energy efficiency of our productshas also met the California Energy Commission’s requirement, where only compliant products can be sold according to theState Law.Battery designUnwanted phones impact the natural environment as they are disposed of. Electronic waste often contains toxic substancesand shall be treated properly. Therefore, we design to limit the levels of mercury, lead and cadmium in our batteries. Theyare at safe levels and have met the Battery Directive requirement.PackagingTCL Communication is aware of the impact of disposal of packaging, given the quantity of products and the vast number ofmarkets we reach. Our products are mainly packed in a carton commercial-unit (hereinafter ‘CU’) box, cavity trays madeof paper or plastic and plastic bags. Our products are designed to limit the use of packaging materials and promote theuse of sustainable materials.Our CU boxes have been reduced in density while still maintaining the same strength. The weight and volume of theboxes have been reduced up to 16%, which helps to enhance goods transport efficiency.1According to the latest figure published by the UK Government, the carbon footprint of disposal of 1 tonne of paper to landfills isapproximately 314kg CO2-e.1305504 E01 ESG 4C.indd 1308/06/2017 20:05:06

Our productsIn 2017, we decided to use light air pallet with the weight of 3kg during delivery instead of wooden pallet or box, which weighs 15to 24kg. The air pallet is made of EPS and non-toxic PET polyester film, which made it much lighter than other pallet like woodenpallet. First we started to use the air pallet in US early 2017, then Europe and by the end of 2017, we have finished the switch inIreland, Netherlands in Europe and UAE, KSA in Middle East. This has greatly helped in improving transport efficiency and reducingenergy.2017 Quantity ofpackaging materials usedCU BOXESReducing the packaging forAlcatel POP4 mobile nnes)988As compared to the predecessor model POP3, the packaging materialused for POP4 models has been reduced. The surface area per box was680cm2 for POP3 and was 516cm2 for POP4. 40 tonnes of paper hasbeen avoided by reducing the size of CU boxes. Using smaller CU boxesand avoiding the use of plastic trays for POP4 reduce transport costs andcarbon emissions.POP31405504 E01 ESG 4C.indd 1408/06/2017 20:05:11

TCL Communication Technology Holdings Limited Sustainability Report 2017Our products are made ofPhone recyclingIn compliance with the WasteElectrical and Electronic EquipmentDirective of the European Union, onaverage,86.7%of the materialsused in our products arerecyclableAlcatel partners with local recyclers in various locations. In Europe, in compliance with the WEEE Directive, Battery Directive andPackaging Directive, TCL Communication has set up mechanisms for collecting obsolete handsets, post- consumerpackaging and batteries.In 2017, we have collected obsolete handsets, packaging materials and batteries in following quantities:Obsolete handsetsCountrySpainItalyFrance and overseas ItalyFrance and overseas FranceGermanyNetherlandsTotalQuantity collected (tons)206.6201.4133.747.945.9635.4Quantity collected (tons)3436231071101505504 E01 ESG 4C.indd 1508/06/2017 20:05:12

Our productsPackaging materialsCountryQuantity collected (tons)SpainFrance and overseas 14179In Australia, we partner with MobileMuster, the official product stewardship program of mobile phone industry. Throughthis partnership, we are committed to ensure obsolete mobiles and accessories are recycled responsibly instead of beingsold for reuse or end up in landfills. In-box prepaid satchels are provided to end users, who can mail the obsoletehandsets for free to MobileMuster for handling. Furthermore, we’re also involved in a commercial recycle program in parallelto Mobile Muster. It’s a government regulated program to ensure Operators/Distributors who have second grade product areremoved from Australian market in an environmentally friendly way. Our recycler partner is e-cycle.In-BoxPrepaidSatchelOnce the obsolete phones are collected, they are dismantled and sorted into batteries, printed circuit boards, handsets,chargers/accessories, plastics, metals and cardboard packaging. Materials recovered from the parts are as follows:PartsMaterials recoveredLithium ion and nickel metal hydride batteriesCobalt, lithium and nickelNickel cadmium batteriesNickel, cadmium and copperCircuit boardsGold, silver, copper and leadPlastic casingPlastic palletsCopper wiringCopperOther accessoriesPlastics, ferrous metal and non-ferrous metalPackagingPlastics and paper1605504 E01 ESG 4C.indd 1608/06/2017 20:05:13

TCL Communication Technology Holdings Limited Sustainability Report 2017CUSTOMER CAREGlobal product maintenance networkProviding accessible maintenance solutions to customers creates confidence in our products. We make sure all users ofour products can access self-help solutions or our global customer care services. Our hotline service is accessible fromall over the world and operates with more than 20 languages. We have 279 repair centres globally. Our phones andaccessories are guaranteed based on local regulations. Call centres and our global repair centre network are available incountries and regions where products are shipped. Where the repair centres are operated by business partners, theirperformances are monitored closely.Global Repair NetworkEuropeRepair Centers: 170North AmericaRepair Centers: 4ChinaLatin AmericaRepair Centers: 2Collection points: 116Service points: 358Repair Centers: 51Collection points: 1,045Service points: 1,055Middle East and AfricaRepair Centers: 31Repair Centers: 21Collection points:

TCL Communication Technology Holdings Limited, a global mobile terminal manufacturer and internet service provider, was founded on March, 1999. Incorporated in Hong Kong, TCL Communication is a subsidiary company of TCL Corporation which has over 70,000 employees worldwid

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