Sustainability Strategy

Sustainability is an important agenda of the Master-Pack Group's corporate strategy and business culture, and is embedded in our business model to deliver long term growth and value to our stakeholders.

As a notable player in the packaging industry, our business strategy takes into perspective issues impacting the packaging industry, while keeping abreast of current expectations of our customers and stakeholders. We naturally continue our focus in addressing our material matters across our priority areas under Economic, Environment and Social ("EES") aspects to further strengthen our approach to sustainability.

Our Board of Directors has the overall responsibility for sustainability and considers EES matters that are material to our business in the formulations of our strategy. As an established packaging company, we have been in existence for more than 34 years. From a humble start we have evolved into a dynamic packaging company engaging in providing corrugated carton boxes / containers for customers in many parts of the world including North America and countries of the European Union. The value we have created supports and strengthens our business sustainability in turn enables us to continue to deliver outcomes to our stakeholders.

As testament to our steadfast commitment in advancing sustainability practices, our Master-Pack Group of companies has been recognized both locally and globally. Among our notable achievements include being awarded the Best Supplier / Outstanding Quality from our multi-national company customers. With dedicated leadership, commitment and experience, we will continue to drive sustainability in broader perspectives to continue delivering strategic sustainable goals with clearly defines targets material to our business and stakeholders, with the aim of maintaining a functioning business model which embodies our commitment and focus on the sustainability priority areas, and thus aligning our practices to the United Nations Sustainable Development Goal ("UNSDG")

Driving Sustainability

At Master-Pack Group we create long-term stakeholder value by having business strategies that consider every dimension of how our business operate in the ethical, social, environment and economic areas. Our strategic belief is to create, deliver and capture value, we need to be future ready and be part of a sustainable society. As such, our Master-Pack business model is anchored on sustainability strategies to create, deliver and share value with our stakeholders. This is reinforced by the fact that the majority of our customers are from developed countries where they expect and require us to be anchored on sustainability strategies.

We embed our sustainability in all our business operations and believe participation by the top management and employees is vital to the successful implementation of the strategies for our sustainable development. We aim to deliver financial value and societal benefits by balancing the commercial objectives with the environmental and social needs of our stakeholders, underpinned by solid governance and ethical business practices.

We set up a team among our Board members and the top management to have constant awareness of the Company's sustainable practices and develop capabilities in general Sustainable Development ideas. In fact we are interpreting Sustainable Development as part of our business planning, prioritizing sustainability ideas such as energy efficiency, waste reduction and exploring supplier networks for sustainability opportunities. It should be noted that we import materials for our corrugated products from countries with corporate sustainability practices so as to meet the sustainability requirements of our customers.

Indeed overall we feel we have move into the initial stages of Sustainability Development, and would now be ready to drive sustainable operational excellence right across the four focus areas of Economic, Environment, Social and Corporate governance. This we will elaborate in the respective sections accordingly.

Scope of Reporting

The information covered in this Sustainable Report underlies our sustainable performance as well as its strategies and practices, while highlighting the EES imprint on our business activities. Our scope of reporting for the year 2018 covers the business operations in Nibong Tebal, Penang and Kuching, Sarawak.

Governance Structure

Master-Pack governance structure is designed to build on the capacity to pursue sustainable goals. The Board through the Risk Management & Sustainability Committee forms the core of the governance structure and plays a very important role in driving sustainability within the organization. The Heads of the various departments work together as a committee ensuring the development of sustainability strategies represents all interests of the group.

Reporting to the Audit Committee and ultimately the Board, the Committee ensures accountability oversight viz the identification, management of sustainability matters within the group and have the overall responsibilities in overseeing the corporate sustainability strategy and progress of the group's sustainability performance, identifying and prioritizing material matters, revising and endorsing policies, targets and achievements for key sustainability issues and ensures adherence to regulatory requirements and that the regulatory reporting are made.

The Group Chairman/ Executive Director is of course responsible for driving the implementation of sustainability strategies, he reports to the Board of Directors and is ultimately accountable for managing material sustainability matters of the group.

Sustainability Framework

Our group corporate sustainability framework focuses on eight key areas namely:
- Governance and Ethics,
- Workforce Development,
- Health Safety and Environment measures,
- Shareholder values,
- Corporate Social Investment,
- Human Rights,
- Climate Change,
- Natural Resources.

We are committed to safeguarding the group's integrity and investment in delivering value through strong governance mechanism and ethical business practices. Our companies are certified in compliant with ISO 9001:2015 Quality Management System ("QMS") and ISO 14001:2015 Environment Management Systems ("EMS") which are audited by SIRIM on a yearly basis. We have standard operating procedures on other operations e.g. on management information system, finance that put check and balance in our management practice. We have an independent internal and external audit team that gives the Board assurance that the risk management and internal control system are operating adequately and effectively. There are also define job description and responsibilities for each department accompanied with a lean management reporting structure enabling faster communication and decision making. Everyone in the group is required to sign the Master-Pack Code of Business Conduct which lays down the business ethics that is to be practiced and complied.

Our workforce is trained and with experience people manning our modern machines and relevant tools at work. Where necessary, we send our workers for training and re-training. The whole idea is that we have a workforce equipped with the skills and mind set to deliver sustained high performance. This we carry out in the group where we also have diligent supervision which ties up with our practices of maintaining health, safety, security and environment (HSE) controls. We are committed to ensure our operations are in accordance with all the legal requirements and industry best practices to safeguard the health, safety and well-being of employees, contract workers, visitors, the surrounding communities and the local environment. That our HSE is in good operation is testified by the smooth operations of our facilities and lack of accidents in the operating period.

Our valued stakeholders are of course top priority in our sustainability framework. We make our production sound and efficient to meet customer demands. In this way we also deliver returns to our esteem shareholders through long-term creation and good economic value.

We do undertake sustainability initiatives to contribute to the well-being of society around us. For instance, we employ a total of eleven (11) single mothers as well as donate to the surrounding schools and volunteer fire brigade society.

In connection with some of our employees who are foreign workers from countries like Bangladesh, Nepal and Indonesia, we ensure that they enjoy the same privileges such as the same public holidays, salary scale and company benefits e.g. service awards, company annual dinners which are just like our ordinary workers who are local citizens. In summary, we can say that respecting human rights in our group pervades in all areas of our operations and we do make everyone comply with our code of conduct and business ethics as well as in compliance with legal requirements.

In respect to climate change, we are very much aware that our factories are located in rural areas thus, we need special care to ensure not to harm the environment that will in any way affect adverse climate change. We use energy effectively, making sure our electrical circuits are well maintain and where necessary we have replaced high energy lighting with energy saving light bulbs and equipment. For instance we have been able to recycle steam which is normally release during production back to operation process resulting in a reduction of energy and water consumption. We treat our effluents in a waste treatment plant properly before discharging the treated water. Our factory chimney gas emissions also meet the required regulation standards.

Finally, we are committed to pursuing optimum use of environmentally friendly materials in all of our factories through efficient process and application of technology. More importantly, we are committed to ensure that our commodity paper purchases are made only from suppliers who fulfill the Forest Stewardship Council Standards and other legislation.

Our Key Sustainability Pillars

Clearly from the above sustainability framework we have embedded in our corporate management systems and process five main pillars of sustainability viz. Corporate Governance wherein we uphold transparency in our actions and disclosures to ensure the highest standards of governance, business ethics and integrity in all aspects of our operations.

Secondly, we have our people whom we value and maintain. We recruit, train and retain a diverse group of talented workforce to drive on-hand the business growth strategies formulated at higher management level.

Thirdly, in the areas of security, safety and health (HSE) we made sure for the sake of sustainability, our assets are operating reliably, effectively and efficiently right across the spheres of HSE (Health, Safety and Environment) in which is our way of ensuring that our people and properties are efficiently employed.

We of course look after our Environment Stewardship as the fourth pillar of sustainability practice. We attempt to improve environmental practices and look to measure to eliminate or at least minimize environmental degradation. Sufficient to say, that where our production facilities are located, we attempt to improve environment practices and operational sustainability.

Finally, preferentially we partner with reliable people and institutions whom we know would practice sustainable culture. We look for financiers who practice like us strong sustainability culture. We source our supplies from sustainable resource suppliers, and generally we do business with people and institutions with reliable embedded sustainability cultural practices. We are definitely happy with our shareholders who support our sustainable practices.

We believe in dealing with people conscious of sustainability. We are certain where sustainability culture is the norm; together we are strengthening socio-economic growth.

Although we are a small community in the world of packaging industry, we handle items with world-wide demands. In other words our service and products have to be at world standards including having world standard sustainability process, procedures and practices.

As we are small player in the global packaging market we aspire to contribute and make a positive impact to the communities and the world we live in. So, in pursuing this aspiration, we align our sustainability practices to the UN Sustainable Development Goals whichever part relevant to the packaging industry's sustainable material matters as in those that we have chosen to be our key sustainability pillars described above.

Hopefully in a small way we contribute to good health and well-being, decent work and economic growth; sustainable communities and peace and justice in the place we work in.

Financial Sustainability, Economic, Social and Industry Growth

In pursuit of creating values and delivering long-term financial sustainability to our stakeholders, Master-Pack is committed to manage its business responsibly and aligning its business process and strategies to support sustainable development and growth wherever we are. We are focused on our commitment to drive sustainable growth through efficient cost management, service levels improvement and capitalize on opportunities to maximize value of investment and ensuring sustainable returns to our stakeholders.

We aim to deliver cost optimization effort so that we may deliver a stable performance and sustainable returns to our shareholders.

Economic Matters

We are actually in a supporting industry enjoying derived demand from other industries that require packaging services or materials. In a buoyant economy where our services and products are in great demand, we enjoy an upsurge in our revenue income. Conversely when there is slump in the economy as a whole, demand for our services and products would be affected as well. Whatever the case maybe in the economy, we are focused in our commitment to drive our sustainable growth through efficient cost management. We negotiate for fair rate for our financial borrowings from sustainable trade financing providers.

We try hard to eliminate wastages of materials and supplies in our work place. We economize in the use of power and water and overall encourage worker efficiency. We do all that at the factory level to ensure maximsing productivity and value of capital investment, thereby ensuring sustainable returns to our stakeholders.

As a listed Company on Bursa, we are much aware of the volatility in the equity market with outflows from emerging market such as ours, growing uncertainties in the global economy (which affects our export markets), political changes in the domestic front, mixed performance of the ringgit, further heightens challenges in the industry landscape as well as technological advancements. In spite of all these, Master-Pack is focused on its priority to drive sustainability growth and create significant value for its stakeholders through various strategic efforts in increasing productive capacity. This includes our strategic plan to set-up a factory in Long An Province, Vietnam.

We exercise diligent monitoring of our financial, operational initiatives and cost optimization efforts that so far have resulted in us delivering a stable performance and sustainable return to the group. This is our effort at promising industrial growth through geographical expansion.

Environmental Matters

In our small way, we show our support towards the Global Agenda on Climate Change and our country's initiatives towards energy efficiency, environment and climate change. We support all concerns on growing level of environmental awareness to protect the planet. Towards this end, we attempt to cultivate eco-mind set among our employees. Everyone in our employment is made fully aware that it is their responsibility to maintain eco-friendliness to the local environment and preserve the greenery. We strictly prohibit our employees to do any destruction of anything in our surroundings in our effort to promote bio-diversity in our factory environment. This is our way to contribute in a small manner to improve environmental sustainability.

We cannot do much to affect climate change except through reduction of energy consumption and carbon emission in our business operations. In line with this, one plant had switched from diesel fuel oil to natural gas. The emission of fumes from the chimney which uses natural gas and diesel energy has consistently recorded well below the standards allowed by the Department of Environment Malaysia. When possible we use energy saving fixtures/ equipment to reduce energy consumption in our factory and office premises.

We take initiatives to effectively and efficiently manage our use of water as we aim to keep consumption to a minimum, reuse water and prevent water pollution. We believe our efficient water management would also translate to less energy consumption which reduces carbon foot print and in turn lower our operational cost a little. Our average group water consumption cost per annum is approximately RM1.00/metric ton and initiatives are taken to continue monitor and reduce water consumption.

During the 4th quarter of 2018 we launch the implementation of Kaizen in which we learn about the seven (7) waste 'MUDA' i.e. over-production, excess inventory, waiting time, unnecessary motion, transportation, re-work and over processing. Procedures and processing method was studied, analyzed and new ways of carrying out a task were tried out with the mind-set of changing to eliminate the 7 waste. In so doing, we hope to reduce waste further through Kaizen.

Products manufactured by our factories are fully recyclable and we endeavor to enhance ways corrugated paper can be utilized. We also continuously work with customers to best design corrugated carton boxes that minimize superfluous design/ over design. Key performance indicator for waste set at 13.5% was not achieved as the group cumulative average recorded was slightly higher.

In keeping with the kaizen concept, our employees are continuously trained to identify and handle recyclable materials and reusable materials as well as being cautious in handling any hazardous waste materials.

Social Aspect of Sustainability

We believe Social Sustainability is a proactive way of managing and identifying business impact on our employees, customers, workers (in the value chain) as well as the local communities. It entails a continuous process of creating sustainable places, secure and conducive environment while maintaining long-term partnership right across our business chain-connections. We are committed to conduct our business in a manner that protects the health, safety and security of our employees, suppliers and the community around us. We do make continuous improvements in our HSE process and occasionally track our performance against industry standard best practices in our effort to raise the bar on Health, Safety, and Environmental practices. We require our business partners to comply with our standards and rules on HSE. Indeed, we comply to Zero-Tolerance Rules (ZETO) - a principle to ensure all activities are carried out in a safe manner and where non-compliance is not tolerated. Our Internal Auditor does audit our HSE practices and do give us feedback on any process and procedural breakdowns. Sufficient to say that our management is committed to workplace safety and encourage the safety culture, with everyone playing a part in keeping themselves and others safe. We should also mention that we have Emergency Respond Teams, but so far we have no need to make use of the team.

As a result of our safety culture it is our pride to record and maintain our impressive zero fatal accident rate. In fact we have zero loss time injury incidents and our loss time injury frequency is also zero for the period. In the interest of sustainability practices we continue to intensify safety awareness and reminders to our employees to continue our good track record of zero loss time injury.

In so far as physical security is concerned we feel we have the responsibility of keeping our employees, customers and visitors safe, we put in place the best security measures within and surrounding our premises at places where our factories are located. Last but not least we also pay attention to detect, respond and mitigate potential cyber disruption by initiating information security management system and our business recovery plan to mitigate security risk for our critical business applications.

Our People Our Core Strength

We are a small organization and to us our people are our core strength, and our organization success is highly dependent on their capabilities and commitment. We mentioned on our website, the composition and profile of our Board of Directors with a wide range of qualifications and experience giving the company a diversified array of discipline and outlook that are strong and strategic. As can be gleaned from the skills and experience tabulation on page 34, we can say that our directors bring in their variety of work experience and skills sets that are in the long run contributing to our sustainability process and prospects. Our employees are guided by compliance to ethical practices that sum up the group's integrity. We enhance the culture of working together to unleash potential in our employees to deliver excellent results while creating pleasant day to day work experience.

We believe human capital is fundamental for us and we are guided by a high performance culture based on mentoring, performance and delivery, subscribing to our values of innovation, unity, loyalty, integrity and professionalism, which are reflected in our daily work practices. We adopt a general policy of fairness and non-discrimination. We believe in providing equal opportunity in recruitment, career development, promotion, training and reward for all employees regardless of age, gender, race, religion, sexual orientation or disability. As at 31 December 2018, Master-Pack Group has a total of 268 employees.

Of the total of 268 people employed with us 201 are permanent and 67 are on contract which includes foreign workers and those above 60 year of age. The age profile is shown below.

Of the total 59 employees at top management, senior and mid-management level positions, 44% Female employees hold leadership positions meeting the 30% of women in leadership positions.

Like others in the manufacturing sector, we do have our share of unskilled foreign workers contributing 29% of the total workforce.

We believe in investing in training and develop initiatives which give us competitive advantage for growth and success. Our training and development strategies are result driven and hands-on, in order to meet the needs of business. A total of 4299 hours were spend for training for the two companies in year 2018. We focused in developing talent with the right competencies, knowledge and leadership skills at all levels. We groom and grow our internal talents by setting high standards of expectation and we encourage employees to take personal ownership of their career at Master-Pack.

Dynamic, talented and dedicated employees play a crucial role in our group's long-term success. We continue to retain experience, highly motivated skilled employees for the long-term and aspire to attract highly qualified and motivated new generation professionals. In our sustainability performance, we see the recruitment, promotion and retention of young talent as a key strategic tool. We recognized that a systematic approach is necessary in ensuring leadership continuity. Hence, we constantly strengthen our performance management system, energizing our high performing employees to set key performance indicators and thus assume bigger roles and responsibilities. Career development planning based on employee's development needs and the input of their superiors are also important for Master-Pack to build our pool of future leaders. Right across all management levels we have annually a good look at employees to identify and develop high potential employees to ensure sufficient talent pool for future succession and leadership needs.

The following bar chart indicates the employees by years of service. Master-Pack retains a good mix of talented experience workforce. The higher number of employees with less than 2 years' service relates mainly to the foreign workers with contracts of three (3) years.

Rewards Through Appraisal

As Master-Pack is committed to meritocracy, our rewards and compensation policies emphasize employee's performance, taking into account challenges faced, and efforts put in. Our employees' performance management is reviewed twice a year and incorporated into a structured appraisal system. We put emphasize on internal rewards recognition for our employees. We give due recognition of employees relentless efforts to achieve excellent results.

Besides recognizing employee's loyalty and contribution to organization, we also promote camaraderie, teamwork and cohesiveness. We also encourage interpersonal networking and improving work related communication. We seek employees' feedback via an annual survey and the compiled result indicates changes in employees expectation level as ratings drop by average 6.6% compared to the previous year. In the final analysis we also promote work-life balance for our company people.

Other Sustainable Matters

Master-Pack is committed to taking an active long-term role in managing relationship with our stakeholders and working as a reliable partner with the communities around us to ensure continuous improvement in our approach to sustainability and in giving back to the community. We are conscious of our role in delivering lasting impact to the community, our customers and suppliers who give us business vibrancy who are also our strategic business partners contributing to our long-term social development with the community around us.

Our suppliers are selected in accordance with our established procurement process which includes technical and commercial evaluation as well as eventual product acceptance by our discerning overseas customers. Our procurement practice takes into account the EES impacts of our business practices where various sustainability considerations including fair labour practices and safety requirements are embedded into our terms and conditions. Our procurement team ensures minimizing any non-compliant risks in the supply chain, and encourages our business partners to make continuous improvements towards sustainable business conduct. We also emphasizes on adherence to and compliance with best practices of sustainability initiatives.

Generally, we also pay attention to areas of conflict of interest, fighting corruption as well as avoidance of unethical practices. Adherence to good business ethics and observance of HSE regulations are all part and parcel of our choice of preferred partners.

We like to think especially in the export market, quality service and product excellence underpins everything that we do, and we attempt to exceed customer expectations as a matter of course. As such we take pride that the target of less than four (4) cases of customer complaints on quality and service issues were achieved with the cumulative average of 3.29 cases of customer complaint received during the year 2018. However, this was not the case for delivery on scheduled time with the target of > 80% but nonetheless the percentage had improved 11% from cumulative average of 40% in 2017 to 51% in 2018.

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