Our Sustainability Governance Structure
We recognise the importance of implementing robust ESG governance to manage and enhance the Group’s sustainability performance. To assist the Board in its oversight of ESG-related matters and drive integration of ESG considerations into our business activities, the Group established a dedicated Sustainability Committee (“the Committee”) under the Board on 1 January 2021. Chaired by our non-executive director (“NED”) Mr. Tan Wee Seng, and with executive directors, Mr. Ding Shui Po and Ms. Ding Mei Qing, and independent non-executive director, Ms. Chan Yee Wah, as members, the key responsibilities of the Sustainability Committee include:
- Proposing and recommending to the Board on the Company’s sustainability objectives, strategies, priorities, and goals;
- Overseeing, reviewing and evaluating actions taken by the Company in furtherance of the sustainability priorities and goals;
- Reviewing and reporting to the Board on sustainability risks and opportunities;
- Identifying, monitoring and reviewing material sustainability issues that could impact the business operations and performance of the Company;
- Overseeing and reviewing the Company’s sustainability policies, practices, frameworks and management approach, and to recommend improvements;
- Reviewing and advising the Board on the Company’s annual ESG Report and any relevant public disclosures as regards to its sustainability performance;
- Performing such further functions related or incidental to the foregoing which the Committee deems appropriate.
For details, please refer to the Terms of Reference of the Sustainability Committee.
Key ESG Governance Activities in the year
Between 1 January 2021 and the date of this report, the Sustainability Committee conducted three meetings to review and approve the proposed sustainability framework and targets submitted by the Sustainability Working Group. A “10-Year Sustainability Plan” was set out in 2021 to reflect the Group’s ambition toward sustainable development in the next ten years.
Risk Management and Internal Control
Risk management is integrated into the Group’s business and decision-making processes. The Board recognises its overall responsibility for the Group’s risk management and reviews its effectiveness on an ongoing basis.
The risk management system of the Group is consisted of a defined management structure with limits of authority and well-established policies and procedures, and are designed to facilitate effective and efficient operations, ensure the reliability of financial reporting and compliance with applicable laws and regulations, identify and manage potential risks, and safeguard assets of the Group. In addition, the Group conducts regular reviews of the effectiveness of the risk management systems from time to time to ensure they can meet and deal with the dynamic and ever-changing business environment.
Xtep Risk Governance Organisation Structure
The primary responsibilities of each party of the Group’s risk governance structure are as follows:
Risk Identification and Management
The Company has established a risk governance organizational structure with clear responsibilities and authorities. The processes used by the Group for identification, assessment and management of material risks are summarised as follows:
Climate-related Risks and Opportunities
We continue to review our risk profile and identify and assess potential ESG-related risks. We are aware of the emerging issue of climate change and its effect on the Group. Such climate changes, including global temperature increases and changing climate patterns worldwide, can present physical and transition risks to our operations. Physically, more frequent extreme weather conditions may disrupt our supply chain, and the increasing temperature may ultimately affect people’s outdoor recreational activities, which would subsequently affect our product sales. Besides, China and other countries’ plans to transition to a low-carbon economy may also require additional investments in renewable energy and other efficiency initiatives, which could increase our production costs.
We are in the course of formulating policies on climate change. We already have implemented various initiatives to mitigate the impact of climate change by managing our energy consumption and developing environmentally friendly products. During the year, we established a long-term Sustainability Plan to provide a clearly defined path for the Group to achieve sustainable growth. In addition, we will pay attention to the risks and opportunities associated with climate change and review our management approach as appropriate in the future.
Conflict of Interest
We strive to avoid any potential conflict of interest or appearance of conflict. Our Anti-Corruption Policy sets out the professional and ethical standards for our employees to observe in all business dealings, and we are drafting the management measures related to conflict of interest. In addition, all suppliers are required to comply with our Supplier Code of Conduct to ensure that they are fully aware of the Group’s requirements.
Our internal audit function is performed by its risk management and internal audit department, which plays a vital role in assessing the effectiveness of the risk management and internal control systems of the Group and reports to the Audit Committee regularly. The Board and the Audit Committee considered that the risk management and internal audit department was provided with adequate resources and budget and qualified staff with sufficient experience and training programs to perform its internal audit function.
We have established preventive, monitoring and controlling measures to ensure compliance with relevant business operation laws and regulations. During the reporting period, the Group complied with all code provisions and, where appropriate, adopted the best-recommended practices as set out in the Corporate Governance Code, except code provision A.2.1 (chairman and chief executive officer).
Under code provision A.2.1 of the Corporate Governance Code, the roles of the chairman and chief executive officer should be separate and should not be performed by the same individual. The Group does not at present separate the roles of the chairman and the chief executive officer. Mr. Ding Shui Po is the chairman and chief executive officer of the Group. He has extensive experience in the sportswear industry and is responsible for the overall corporate strategies, planning and business management of the Group. The Board believes that vesting the roles of chairman and chief executive officer in the same individual is beneficial to the business prospects and management of the Group. The balance of power and authorities is ensured by the operation of the Board and the senior management, which is comprised of experienced and high calibre individuals. The Board currently consists of three executive directors and three independent non-executive directors and has a vital independence element in its composition.
Anti-corruption and Whistleblowing Policy
We are committed to achieving and maintaining the highest possible standards of openness, integrity and accountability. To prevent as far as potential violations and ensure that operations comply with high ethical standards, the Group has specific whistleblowing policies for employees, business partners and other relevant stakeholders to report illegal or non-compliant activities involving the Group to the risk management and internal audit department and the Audit Committee confidentially. The identity of the whistle blowers and the relevant whistleblowing records are kept strictly confidential.
Employees are made aware of the Group’s “Anti-fraud complaints reporting management system” and the “Code of integrity”, which details our anti-corruption requirements concerning relevant national policies such as the “Basic Norms for Internal Control” and “Guidelines for Application of Enterprise Internal Controls” published by the Chinese government. To raise staff awareness regarding anti-corruption topics, we organised anti-corruption training for new joiners in 2021 to build a culture of integrity among them. The training was also recorded and provided to employees in an e-learning format.
In 2021, there was one non-compliance of the Group’s staff, which was investigated and verified internally. The staff was handed over to the authorities for the offence.
Data Security and Customer Privacy Protection
We recognise the increasing concerns over data privacy and acknowledges our responsibilities in safeguarding customers’ data and information. We have formulated and implemented various internal policies strictly according to laws and regulations, including the “Cyber Security Law of the People’s Republic of China” and “Personal Data (Privacy) Ordinance of Hong Kong” to manage and protect the safety of our customers’ data and information.
Our commitment to data security and customer privacy protection is formalised in the “Policy on Data Governance”, which is based on the following fundamental principles:
We continually improve our data security measures to ensure they meet the latest regulatory requirements and reflect the expectations of our stakeholders.
Intellectual Property Protection
We respect intellectual property rights and endeavour to protect the Group from reputational damages arising from the infringement of its intellectual property. In managing intellectual property rights, we strictly comply with relevant laws and regulations such as the “Patent Law of the People’s Republic of China” and “Trademark Law of the People’s Republic of China” and have in place a dedicated team to monitor and avoid infringement. We also have high expectations of our suppliers and have included confidentiality clauses and other specifications in supplier contracts to protect the Group’s intellectual property and patents.