SUSTAINABILITY

SUSTAINABILITY

INNOVATIVE SOLUTIONS & SERVICES

FY2020 Summary Report from the Sustainability Committee.

For the past decade, Frontken Group has been committed to health, safety, environmental and corporate responsibility and sustainability development. We are focused on providing our customers around the world with products, services and technologies that help to improve and achieve the sustainable Environment 5.0 and Society 5.0 and make an explicit and positive contribution to the challenges of the Sustainable Development Goals today.

The year 2020 was impaired by uncertainties about the future caused by the COVID-19 pandemic. At the end of January 2020, we set up the Emergency Response team, which reports directly to our executive board members, and promptly implemented a number of countermeasures. We are constantly working to gather information and deploy measures regarding the ever changing management and operational situations, while ensuring the health and safety of our employees.

At the fiscal 2020 meetings of the Sustainability Committee, members discussed specific measures required to achieve Environmental Vision 2050, which aims to reduce greenhouse gas emissions by 50% by 2050, as well as confirmed the progress and reviewed targets for 2025 and 2035. In addition, the committee evaluated and identified risks and opportunities related to the environment including climate change following the TCFD (Climate-related Financial Disclosures) recommendations, and discussed the direction of the Company's environmental initiatives, such as waste recovery and recycling based on this and efforts toward a circular economy.

Over the past several years, we have explored ways to grow our business while tackling challenges associated with the reduction of greenhouse gas emissions. Through the development and spread of products and services that contribute to energy conservation and the mitigation of global warming, we aim to reduce the world's greenhouse gas emissions while further developing our businesses. We will focus on disclosing environmental, social and governance (ESG) information, including climate change.

In FY2020, we strengthened the Frontken Group’s (“Group”) commitments to various aspects of sustainability development, especially on the environment sustainability and emissions and climate changes. Our sustainability report covers our accomplishments in financial year 2020 (“FY2020”) during which time we took important steps to strengthen and integrate our sustainability vision, which is key to the long-term sustainable growth, development and profitability of the Group. We have dedicated additional resources to fully control and integrate our sustainability initiatives. These initiatives are aimed to recognise opportunities for profitability, continuous improvement, build enterprise value, preserves business integrity and protects our reputation.

At the Group level, we build advanced technology to help our customers to develop sustainable products and services that make their critical parts last longer, perform better and look beautiful and recyclable in their critical processes. In short, we research, develop and build advanced technology to support and extend the critical processes for our customers’ businesses. Our technology helps customers to (a) PROTECT the surfaces of their critical parts used in everyday production; (b) PRESERVE their critical parts materials, so that they last longer in everyday production; (c) PROVIDE for a sustainable future via recycling, repairing, refurbishment and re-coating.

We continue to develop business opportunities in alignment with our Sustainable Development Goals that are most relevant for the Group by re-engineering more shared values from fewer resources and turning societal concerns and environmental challenges into our product and services innovations for our global customers. We believe in delivering both stakeholders and social values for the long-term growth by building excellent corporate governance that will contribute positively to the society and the environment. We have spent considerable time and resources in shifting our business models towards becoming more sustainable. We have also focused on identifying new opportunities, as evidenced by our investments in the re-engineering of our water usage and conservation systems as well as our waste treatment and discharge systems, that have become the leader in terms of semiconductor parts processing support technology as well as in environmental sustainability.

Our Board and Management, through our internal and external stakeholders engagement and materiality assessment of our business, had earlier identified key trends and topics that are critical to the continued success of our business, such as reducing emissions to environmental, reducing energy use and waste and improving safety and productivity, creating an inclusive social platform and good corporate governance, business continuity plan, etc. We have always and will continue to constantly review such risks as important opportunities to strengthen our risk management, and create long-term value and sustainable growth for the Group. The assessment and improvement of our operational sustainability have been integrated as part of the Group’s strategic formulation. The Board will continue to provide oversight with the support of the Sustainability Management Committee and Risk Management Committee where the ESG etc are reviewed and implemented.

In FY2020, the Group continued to improve and strengthen and focus on the six “Core Areas for Action on Sustainability’’. These six dimensions of sustainability development are (a) responsible management; (b) responsible innovation and service; (c) responsible green production; (d) responsible workplace; (e) responsible supply chain; and (f) inclusive society and communities. Based on the key issues we identified, we have laid out a set of strategy and long-term goals in this report as our “Frontken 2030 Vision”. In the long-term vision, we aim to benchmark our sustainability development with the GRI Framework and United Nations Sustainable Development Goals; Responsible Business Alliance Framework (RBA); Bursa Malaysia FTSERussell ESG Model Framework; and by continuing to make efforts in the economic and ESG dimensions of our business, and make a contribution towards resolving environmental and social issues.

We continuously improve and equip our engineers and employees to ensure they are able to continuously contribute to our sustainability development vision. For example, every employee’s responsibilities are included in their personal objectives and incentives, and is linked to our business operational requirements:

(a) Innovative Value Creation through product and service portfolios – designed to bring tangible benefits to our customers with competitive advantage and deliver positive social and environmental impact for sustainability development.

(b) Maximizing Resource Productivity through operations – designed to optimize all resources productivity in our production, operations and supply chain including critical materials used, eliminating waste and reducing variable cost; so as to make us more competitive and sustainable.

Some of the highlights of our achievements are summarised as follows, with more details within our Group Sustainability Report FY2020, where we measure and report our sustainability performance.


FY2020 Achievement of Sustainability Goals

Responsible Management

Frontken views the sustainable development of its management team characters and capabilities as a key part of its corporate social responsibility. We focus on financial prudence, discipline and integrity with strong risk management. We are committed to high standards of corporate governance to sustain growth and performance, and to safeguard stakeholders’ interest and maximise long-term shareholder value. Our guiding principles are summarised as follows:

(a) Our management activities and practices embrace triple bottom line optimization which include positive triple bottom line that protects, creates, and sustains social, environmental, and economic business value.

(b) Our management decisions and practices embrace risk management, ethical decision making and create moral excellence in both process and outcome.

Responsible Innovation and Service

In FY2020, we led the advanced precision cleaning and coating in the 3nm process technology in Taiwan and 8nm process technology in Singapore. We also led the most advanced precision cleaning and coating for the next generation memory wafer process in both Taiwan and Singapore. In FY2020, our R&D team researched and developed more environmentally friendly methods for our chemical management, coating and cleaning process, we improved our production process flow and productivity, and most importantly we replace the dangerous and hazardous steps and processes that are not safe and conducive to the physical and mental health of employees and the environment.

Our sustainability development efforts have been devoted to the environmental safety management; and the related innovation projects were designed to effectively reduce occupational hygiene risk, improve workplace environments and employee health management. We have successfully established an automated cleaning system which significantly reduces employees’ exposure to hazardous substances. For our effort, our subsidiary Ares Green Technology received an award from a major customer on the Supply Chain Environment, Safety and Health for our outstanding efforts.

In the reporting period of FY2020, we achieved the following:

(a) INNOVATION - Research and development capability ratio per unit of dollar revenue/RND Cost for each period of 71. (baseline data for FY2019 is 68).

(b) INNOVATION PROJECTS FOR SUSTAINABILITY DEVELOPMENT:

(i) Accumulative green power project (KW) since 2018 = 1,021,294

(ii) Accumulative DIW recycling project since 2018 (Ton) = 159,440

(iii) Accumulative waste recycling project since 2018 (Kg) = 127,644

Responsible Green Production

The Group has continued to improve its green production method through its research and development to meet the operational challenges that global warming may bring by making progress through innovation. In FY2020, our production capacity has increased while processes continue to grow more complex, but through our efforts, unit production average power usage is reduced to 10.16 kWh per part produced; the unit production average water usage is reduced to 0.12 cubic metre per part; and unit production average waste produced is maintained at 0.0004 ton (0.4kg) per part.

To assess the environmental impact of the Group's business activities as a whole, including its value chain, the Group in FY2020 began calculating Scope 1, 2, and 3 of the greenhouse gas (GHG) emissions. The calculation is based on the GHG Protocol, which is the most widely used international accounting and reporting tool. We have identified Scope 2 electricity consumption as having the greatest potential impact on achieving our stated energy and emissions targets. Most of our energy use is associated with our production. Optimizing energy efficiency in our operations is a key component of the Group’s overall sustainability strategy. We are committed to continue to cut energy usage to lower our utility costs and reduce our environmental footprint. We are committed to doing our part to achieve a low-carbon future. We’ve already boosted the share of renewable power in our energy mix. Our sources of renewable energy include: On-Site Generation: renewable power generated by renewable energy sources (i.e. solar).

We continue to enjoy savings from our scrubber overhaul and replacement and energy saving lighting system projects implemented:

(a) We implemented the optimization of energy conservation for our scrubbers; which are our single biggest user of electricity. It is important that our scrubbers operate in the most efficient manner. We achieve this through our scrubber overhaul and replacement programme.

(b) We are also exploring the use of energy conservation Performance Enhancement Lighting Management System (PELMS), allowing lighting levels to be automatically managed based on motion detection.

(c) We continue to enhance the energy conservation initiative by using energy savings lightings at our offices.

(d) We implemented renewable power in our energy mix. In our Taiwan plant, we installed solar photovoltaic systems on the roof of the plant to generate electricity and achieve an average monthly power generation of up to 30,000KWp, and we accumulatively used 1,021,294 KW of green power since 2018.

(e) We implemented the energy conservation transformation of the chiller system, office air conditioning system, dust-collecting and exhaust system and lighting system, including the adoption of frequency conversion technology, the installation of flow monitoring & control system and the replacement of energy-saving lightings, and have achieved considerable good results. Consequently, we have saved more than 100,000 KWh of electricity every month since the implementation of this project.

In the reporting period of FY2020, we achieved the following:

(a) GHG EMISSIONS DATA

(i) Scope 1 = 1,332 tCO2e

(ii) Scope 2 = 10,188 tCO2e

(iii) Scope 3 = 36,789 tCO2e

(iv) GHG Emission per unit of revenue dollar in million RM = 3.62 tonnes of CO2e /Revenue in million RM

(v) GHG Emission per unit of production = 5.18 kg of CO2e /part

(vi) Average electricity use per unit of production = 10.16 kwh/part

(vii) Average water usage per unit of production = 0.12 cubic metre /part

(viii) Average waste produced per unit of production = 0.4 kg/part

(b) WATER CONSERVATION

Reduce 14% our water consumption per unit of production. (Water consumption baseline data FY2018 = 0.14 cubic metre /part).

(c) WASTE REDUCTION

Reduce 11% our waste generated in kg per unit of production. (Waste generated baseline data FY2018 = 0.45 kg/part).

(d) CHEMICAL MANAGEMENT Increase 24% of environmentally friendly chemical use in kg per unit of production. (chemical use baseline data FY2019 = 0.99 kg per unit of production).

Responsible Workplace

The Group implemented COVID-19 Prevention Programs in the workplace which include : conducting a hazard assessment; identifying a combination of measures that limit the spread of COVID-19 in the workplace; adopting measures to ensure that workers that are infected or potentially infected are separated and sent home from the workplace; and implemented protections from retaliation for workers that raised COVID-19 related concerns.

In recognition of the “new normal” in light of the ongoing COVID-19 pandemic, we implemented diverse working styles as a driver of telecommuting innovation, in order to improve productivity and allow employees to use their abilities to the utmost. In addition, we are also implementing job descriptions, performance management, and other systems to clarify the role of, expectations for, and output of each employee’s position, and accelerate the pivot to job-based human capital management.

We see it as our responsibility to provide a safe and injury-free working environment which is set out in our Health, Safety and Environment policy statement. This policy supports the Workplace Safety and Health (WSH) regulations in most of the jurisdictions we operate in. We actively promote awareness on workplace occupational health and safety. We aim to elevate the safety standards for our stakeholders through our WSH work plan. We expand our WSH measures such as training and education, fire safety improvements as well as onsite safety inspections. We believe that all workplace injuries are preventable, and our ultimate goal is to achieve zero injuries through continued investment in and focus on our core safety programs and injury reduction initiatives. To raise employees awareness, we institute a WSH mandatory training programme for our operation employees to equip them with the knowledge (such as understanding safety responsibilities and covering materials needed for specific jobs – electrical safety, ergonomics, control of hazardous materials and chemical safety) so that they may comply with the same in the performance of their assigned roles.

We are 100% compliance with all regulatory requirements relevant and applicable to the health and safety performance of our operations and processes. We have a health and safety system to identify and evaluate health and safety hazards and risks on work tasks, work areas, equipment, and operations, and to identify the controls needed to prevent or minimize worker exposure to health and safety risks. We continuously implement regular internal audits and third-party audits to review and qualify our safety system. During the COVID-19 pandemic, the ESH and Sustainability team developed detailed Health and Safety Protocols for all our sites and operations and to support our employees. For more information, please refer to our COVID-19 Protocol Policy below.

In the reporting period of FY2020, we achieved the following:

(a) WORKPLACE HEALTH AND SAFETY

(i) Zero incidents of health and safety fatalities;

(ii) we have one incident of ESH-Related notices of violation;

(iii) We have a very low health and safety recordable injury rate of 0.04 hour per 100 employees.

(b) WORKPLACE COVID19 PROTOCOL

(i) Zero incidents of COVID19 infection and transmission for the period.

Responsible Inclusion and Diversity

Our employees are the key assets for the success of our Company due to their daily commitment, team cohesion and their problem solving ideas. We are committed to support their talents, knowledge, experiences and skillsets via continuing training and education process, so that they can develop and grow with the Group.

The Group recruits and employs people based on their talents, without regard to their nationality or race, around the world in a fair, open, and just fashion. We strive to groom and retain a diverse and robust talent pool to support and drive our growth through continuous training and development and instilling a strong culture of safety and excellence, whilst encouraging work-life balance. These are implemented through talent development, groom leaders, knowledge training and exchange, health & safety, employee wellness, etc. We employ people based on their talents, without regard to their nationality and race. We offer good terms of compensation above the industry average, leave and benefits that meet employees’ needs, a variety of training courses, and do our utmost to create a safe and healthy work environment.

The Group believes that the continuous improvement and learning, development and growth of our employees are our key differentiators to achieve our sustainability, competitive and resilience in our business operation. We continuously promote every opportunities to motivate and engage our employees and train our workforce with the right skillsets and knowledge to prepare them for the future; especially in the new normal environment. We are committed to inspire passion in our people by providing opportunities for strengthening their domain expertise and personal growth. We continue to focus our training and education efforts toward building a knowledgeable future-ready and responsive workforce, in order to remain sustainable and competitive within the dynamic business environment. This includes equipping our employees with essential soft and hard skillsets and domain knowledge, as well as upskilling and re-skilling employees to support our sustainability development and transformation initiatives for our business operation.

We take employees’ engagement very seriously as we know that engaged employees feel happier at work, perform better and are more motivated to succeed - ultimately contributing to our better business performance. We are committed to building stronger relationships with and among our people, developing talent and enabling them to grow their career with us. We are in regular discussions with our employees to discuss important labour issues such as staff development and re-skilling.

We open a variety of communications channels to ensure our employees feel comfortable asking questions and sharing their views about our business directly with their senior management. Open and direct communication has been a hallmark of our culture. We believe that our success depends upon all employees understanding how their work contributes to the Group’s overall business strategy.Our goal is to enable and drive the Group’s business success by having employees perform at their best every day.

We are committed to creating a better world through our service and the passion of our employees. We believe that the health of our Group and local economies both depend on an increasingly inclusive community. We believe that to maintain interaction with local communities and actively participate in public welfare activities is one of the most important ways to make contribution to the society. We empower our employees to extend their values into our local communities for corporate social responsibility (CSR). We provide overseas internship opportunities for students from Singapore ITE college, and holds two sessions of more than 40 days in June and December every year for this purpose. At the same time, the Company also hired two disabled people to make our contributions to caring for the society. In addition, the Group's employees also actively participated in the following social impact activities : (a) blood donation activities since 2019, and so far, a total of 534 bags of blood have been donated; (b) employees continue to provide support to vulnerable groups in Singapore in the fight against COVID-19including donating of masks to hospital staff during the COVID-19 period; (c) donate food to vulnerable and less privileged groups and the elderlies.

In the reporting period of FY2020, we achieved the following:

(a) TRAINING

(i) Increase 20.54% of training hours invested to 14,479 hours;

(ii) Achieve 92% of all employees are trained and educated in their respective work scope.

(b) SOCIAL IMPACT

(i) The amount of volunteerism hours invested was reduced by 20% to 4,422 hours due to COVID-19 pandemic.

(ii) The total number of persons that received the benefit through our initiatives to support schools and non-profit organizations via social projects was increased by 118% due to increased donations during the COVID-19 pandemic.

(c) LABOUR PRACTICE

(i) Achieve zero incident of unfair employment practices;

(ii) Achieve zero incident of violation of labour laws;

(iii) Achieve employee retention rate of more than 95%.

(d) HUMAN RIGHTS

(i) Achieve zero incident of unfair harassment and unlawful discrimination practices.

(e) INCLUSION AND DIVERSITY

(i) Achieve zero incident of unfair harassment and unlawful discrimination practices.

(f) EQUAL OPPORTUNITY

(i) Achieve zero incident of unfair discrimination practices.

(g) TALENT DEVELOPMENT

(i) Achieve zero incident of unfair discrimination practices.

Responsible Supply Chain

The Group’s business operation requires raw materials, chemicals, consumables, equipment and supplier services. Our operation will be disrupted if our suppliers cannot deliver their products or perform their services. Therefore, we are committed to working proactively together with suppliers to mitigate supply chain risk, optimized delivery, cost and time, and improve suppliers’ businesses to grow sustainably.

The Group is committed to achieve Sustainable Supply Chain and we take responsibility to ensure that our business operations including our key suppliers adopt the best practice of procurement and management of supplies, insurance, and other aspects of operations related to our business sustainability. We implemented the Sustainable Procurement and Supplier Management Policy to ensure excellence in procurement with transparency, fairness, and alignment with best practices that represent the highest standards of quality, integrity and excellence. We respect the unique customs and cultures in communities where we operate. Our Sustainable Procurement and Supplier Management Policy are based on the Responsible Business Alliance (RBA) Code of Conduct framework.

The Group understands the importance of environmental risks in our value chain and we are committed to collaborating with environmentally responsible suppliers. We also recognise the importance of sustainable sourcing and procurement and is committed to responsible supply chain management practices, and developing a strong sustainable relationship with our suppliers; including labour practice, human rights, supplier diversity, environmental impact, data security and material sourcing. We actively collaborate with our suppliers to further our sustainable development efforts. We work with our suppliers to achieve a sustainable business ecosystem based on a philosophy of co-success.

We are committed to grow together with our suppliers by carefully managing the risks and opportunities of our supply chain and considering sustainability at every stage of selecting, operating, and evaluating suppliers. We adopt a risk-based supply chain management practice to ensure that our supply chain is sustainable and resilient. We believe our competitive advantage can be improved by our supplier capabilities. We help all suppliers to abide by our Supplier Code of Conduct and related guidelines, and to manage their work environment risks related to human rights, EHS and ethics in compliance with local regulations and global standards. Our supply chain is committed to our Supplier Code of Conduct and comply with applicable laws and regulations. The Supplier Code of Conduct is based on the UN Global Compact Framework and RBA; and it is to mitigate any social, economic and environmental risks by setting the standards for our suppliers to conduct their business.

We seek to develop relationships with suppliers that share similar values and conduct business in an ethical manner. We are pleased to work with suppliers to ensure an understanding of and compliance with the requirements set forth in our Supplier Supply Chain Sustainability Guidelines:

(a) Compliance with the laws and regulations of all the countries where we operate including all the laws relating to the business related and non-business related transactions.

(b) Support fair employment practices consistent with our commitment to human rights in our workplace. Establish a strong and direct relationship with our employees through open and honest communications with fairness, dignity, and respect.

(c) Respect human rights without discrimination, harassment of any kind, abuse or other inhumane treatment including no child labour or forced labour; proper management of employees’ work hours, breaks and holidays and prohibition of excessive overtime work; payment of the legally mandated minimum wage and to pay at least a living wage; and no inappropriate wage abatement; respect for employees’ right.

(d) Recognize that climate change issues and conserve and protect the natural environment including reduce environmental negative impacts and prevent pollution.

(e) Conduct fair business transactions including prevent all corruption types; offer no bribes or illegal contributions.

(f) Ensure safe and healthy workplaces and maintain a good working environment.

(g) Ensure the quality and safety of products and services.

(h) Ensure accurate, timely and appropriate disclosure of information.

(i) Intellectual property rights are to be respected, transfer of technology and know-how is to be done in a manner that protects intellectual property rights, and customer and supplier information is to be safeguarded.

In the reporting period of FY2020, we achieved the following:

(a) Achieve sustainability qualification of our top 10 key suppliers based on total spend cost for each reporting segments.

Conclusion

The Group will continue to be committed to deliver value to all our stakeholders through sustaining growth in our businesses, protecting the environment, empowering lives of people and nurturing communities where we operate. We will also continue to build the Group on the foundation of responsible management, responsible innovations, responsible employees and responsible green production and inclusive society and communities. Based on our core values of integrity, commitment, innovation, and customer trust, we hold ourselves to the highest standards of corporate governance. We believe employees are its most important asset, and works actively to build a collaborative team with shared vision, balanced culture and positive values. We provide customers with the most advanced and comprehensive process technologies and services through continuous innovation, green production and sustainable supply chains friendly to the environment, and take action to give back to society.

Our report highlights the Group’s products and services that contribute to our customers’ sustainability goals, such as precision recycle cleaning, refurbishment, re-coatings for critical parts that extend the parts’ life, products that prevent corrosion and conserve natural resources and other products and services that support the enhanced performance of wafer manufacturing processes. We also report on our efforts to ensure that we conduct our business in a socially responsible manner along with our entire value chain, from the materials we buy and the production method in which our products and services are used.

Our employees are continuously developing and producing products and services and/or working together with our customers to enable them to optimise the use of our technology. Our employees are critical to our sustained success. Our report explains our efforts to ensure the health and safety of our employees, and at the same time support their development and job satisfaction. We also recognise the important work we do to protect the communities where our employees live and work by ensuring that our production facilities adhere to rigorous environmental standards.

On behalf of the Board and Management of the Frontken Group, we would like to thank all our employees, partners and stakeholders who have been with us throughout our sustainability journey, especially during such a difficult period this year. We look forward to your continued engagement, partnership and support. On behalf of all of us at Frontken, we hope this report provides you with new insights into our business and the ways in which we embrace sustainability.