We expanded our line of organic cotton and recycled cotton yard products. During the year, we launched several apparel products made of organic cotton and recycled cotton yarn.
Greener strides
- Sustainability Report
- 10 YEAR SUSTAINABILITY PLAN
- ENVIRONMENTAL PROTECTION
Greener strides
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Our Sustainability Framework and Strategies
Climate change remains a pressing concern and as a member of the global community, the Group is committed to addressing the defining issue by developing our "10-Year Sustainability Plan". Devised by the Sustainability Committee, the plan sets forth the 12 key themes as categorized into three material topics — supply chain management, environmental protection and social responsibilities. The plan guides our efforts in minimising environmental impacts across our operations from 2021 to 2030.
China has demonstrated its unwavering determination in combating climate change as the Chinese government announced the national ambition of reaching a carbon emissions peak in 2030 and achieving carbon neutrality by 2060. XTEP has been actively working on our environmental protection targets, ranging from sustainable product innovation, chemical use, energy saving and air emissions, water management and waste management to support the country’s commitment towards sustainable development.
Besides the "30•60 target", the Chinese government also introduced the "1+N climate policy system" and the national emissions trading scheme on the Shanghai Environmental & Energy Exchange which aim to promote sustainability development in all industry sectors. With favourable policy direction and clear strategic planning, XTEP will further advance in our sustainability journey and maintain the status of sportswear market leader.
Supply Chain Management
SocialResponsibility
EnvironmentalProtection
Focus areas and progress
of sustainability targets
The Sustainability Development goals are 17 interconnected goals set up by the United Nations in 2015. Serving as the blueprint to achieve a better and more sustainable future for all, the 17 goals cover economic, socio-political, and environmental targets to be achieved by 2030.
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Environmental Protection
There has been a rise in consumer awareness towards product environmental impact, and we are seeing the same demand from our consumers. The Group highly values the voices of our customers and strives to minimize undesirable environmental impact throughout our operations and production processes. In particular, we are exploring innovative green materials and implementing various environmental initiatives to reduce our operational footprint.
Our ISO 14001 - certified Environmental Management System closely monitors the environmental performance of our daily operations and ensures full compliance with increasingly stringent environmental regulations. To align with the national ‘30•60’ net-zero ambitions, further to our existing 10-Year Sustainability Plan, we are currently engaging with a third-party consultant to formulate a long-term decarbonization plan in response to different climate scenarios.
Green Product Innovations
Green materials and sustainable design along the value chain. Recognising the potential adverse effects incurred throughout product lifecycles, we have been investing extensive effort in developing and adopting more environment-friendly materials to lessen the environmental footprint of our lines of products. We seek to minimize our environmental impact in three main areas of the sportswear product lifecycle, namely raw material selection, production process, and end-of-life disposal.
During the year, we continue to steadily increase the usage of environment-friendly materials in our production. As one of the most commonly used crops in the textile industry, cotton is the primary natural fibre used in our apparel products. It is well-known that cotton cultivation is associated with different environmental and social impacts. The production and processing of cotton are water-intensive, and the runoff of pesticides and fertilizers from cotton farms may contaminate the nearby water and soil. The heavy use of these chemicals also raises concerns regarding the health of farm workers and populations in proximity.
To reduce the environmental impact induced by our production, we are currently focusing on using organic cotton, recyclable plant-based materials, and biodegradable materials as a green substitute for our apparel and footwear product production. Below are examples of green materials and their applications:
Recycled Materials
There has been a growing movement in the industry to utilize recycled materials for producing fabrics and other materials for apparel and footwear products. Using recycled materials can divert plastics and other non-biodegradable materials from landfills while bringing potential energy savings to the production process.
In 2022, we launched footwear products under the K-Swiss and Palladium brands, utilising recycled nylon, recycled PET bottles and recycled rubber in the shoe insoles, foam and bottom line. In addition, Merrell launched a new product in the MOAB series, which features 100% recycled laces and webbing and 100% recycled breathable mesh lining. Palladium also utilized organic materials certified by OEKO-TEX standards, Global Organic Textile Standards, Better Cotton Initiative, and Global Recycled Standards, in 55 footwear products, such as Revolt Collection and Troop Runner Flex.
In 2023, Saucony will launch new footwear where recycled PET bottles constitute 5% of the product. Palladium will introduce 65 footwear products made of mostly certified eco-friendly materials such as plastic bottle-made gauze fabric, recycled outsole, midsole and insole. K-Swiss will launch 29 footwear products utilising green materials, including recycled metal parts and rubbers. In addition, all inner boxes of Saucony and Merrell’s products will be using environmentally friendly materials in 2023.
Biodegradable Materials
PLA is a biodegradable material fermented and extracted from corn, straw, and other crops containing starch. When buried in the soil under specific conditions, it can be naturally degraded within one year. XTEP launched its first PLA products in 2020 and has advanced the use of biodegradable materials in its products ever since.
Through our ongoing effort in PLA product refinement, we further raised the PLA content in our T-shirts launched in the second quarter of 2022 to 76%, compared to 19% in the first PLA product launch in 2020 and 60% in 2021. In 2022, we completed the trial production of the 100% PLA windbreaker.
Other Materials
We are conscious of our raw materials’ origin, as ethical and ecological concerns arise from low traceability and poor transparency. Therefore, Palladium and Saucony source their leather from suppliers with a gold rating in environmental management from the Leather Working Group.
We are also developing eco-friendly products using other materials to reduce environmental impact. Basic materials and midsole provider of Saucony jointly develop bio-based expanded thermoplastic polyurethane (ETPU), a more environment-friendly material for soft and elastic midsoles. Merrell launched a new line of sports shoes with midsole foam comprising 51% sugar cane and 5% coffee grounds. K-Swiss produced footwear products utilizing a special, eco-friendly dye made from almond shells and saw palmetto leaves.
Case study
XTEP’S first Mass Balance low-carbon eco-friendly running shoes 360-ECO
During the year, we have released our first Mass Balance low-carbon eco-friendly running shoes “360-ECO”, empowering innovation and development through technology, and helping sports enthusiasts enjoy a healthy and sustainable lifestyle. The newly launched low-carbon eco-friendly running shoes have been certified by the ISCC (International Sustainability and Carbon Certification) as having biomass raw materials that boast a lower carbon footprint and can even achieve zero-carbon emissions throughout the product lifecycle, thus contributing to the realization of the country’s dual-carbon goals.
Compared with traditional petroleum-based polyurethane raw materials, this constitutes a reduction in carbon emissions of 212g, and a carbon reduction rate of 81%, based on a shoe in size 41. This is another step in developing eco-friendly products, with XTEP having released the 100% polylactic acid windbreaker this June. XTEP has therefore achieved two breakthroughs, spanning apparel to footwear and from the raw materials of polylactic acid to palm oil.
In 2022, we launched a footwear product for Merrell with BLOOM performance midsole foam made of 10% algae biomass harvested from lakes and rivers. Benefits of the utilization include keeping ecology in the waterway in balance, using less non-renewable oil, and using pesticide-free feedstock.
Aligning with our long-term Sustainability Plan’s focus on product sustainable innovation, four targets have been established to increase the amount of product manufactured with a high proportion of recycled materials in selected product lines. For more details, please refer to the focus areas and progress of sustainability targets in the “10-Year Sustainability Plan” in the “Our Sustainability Framework and Initiatives” section.
Use of ChemicalsAs a responsible sportswear producer, the Group is committed to ensuring our product safety and proactively researching alternatives to chemicals of concern. We fully comply with our internal standards and the national use of chemicals standards in all our operations.
During the year, our brands continued to minimize harmful chemicals used in their productions. Merrell cooperated with Bluesign dyeing auxiliaries’ manufacturers for 80% of its garment production and aims to maintain and exceed the high percentage by 2025. While Saucony increased its fluorine free water-repellent adoption rate in garment production to 10%, gradually progressing towards its 40% target by 2050. Palladium and K-Swiss conducted rigorous training on properly handling chemicals and reducing chemical use by increasing the penetration rate of water-based glue for shoe products.
In supporting the Group’s sustainability plan focusing on chemical use, we have established four targets to increase the amount of product manufactured toward a toxic-free environment in selected product lines. For details, please refer to the focus areas and progress of sustainability targets listed in the “10-Year Sustainability Plan” in the “Our Sustainability Framework and Initiatives” section.
Promoting industry developmentAs a sportswear industry leader, we recognize the significance of continual improvement to accommodate the ever-changing market demands. The development of new industry standards following the latest technological advancements enables industry peers to adopt better manufacturing practices while producing apparel and footwear products. During the year, the Group participated in several initiatives to promote sustainable growth of the industry. We joined the drafting of seven industry standard and guidelines, which includes ‘Supercritical carbon dioxide dyeing of knitwear’ and ‘Footwear — Testing method of the proportion of materials for uppers’. Participation in drafting such standards could enhance the Group’s involvement in industry-wide initiatives yielding meaningful discussions bringing closer alignment of actions across the sector and raising the bar towards achieving a common goal.
Advocating sustainable consumptionThe Group endeavours to promote a responsible way of using products and services among our customers. During the year, our footwear product for Merrell participated in the Tmall Sustainable Living Festival as a green and low-impact product. The promotional event called for all consumers to incorporate sustainability into their daily life by making eco-friendly purchases.
New green products are launched every season to widen our customers’ eco-friendly choices. To improve the sustainability of sportswear items, we actively explore the use of different recycled and bio-based organic materials in our products. It is also a key element of our footwear to include recyclable components such as a detachable foam insole, shoelaces and ribbons, to further minimize consumers’ environmental footprint from purchasing our sustainable products.
Reducing footprint
along operations
Climate-related risks and opportunities
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The unequivocal impact of climate change calls for an immediate response from corporates to assess and manage climate-related risks, particularly those with potential impact on business operations. The Group continuously reviews and implements different climate risk management initiatives to maintain vigilance in managing climate-related factors and risks across our operations.
Physical risks such as global temperature increases, changing climate patterns worldwide and more frequent extreme weather conditions could negatively affect our operations by disrupting our supply chain and reducing the resilience of our assets. Transition risks, including policy changes and shifts in market preferences, could also significantly impact our business. For example, the global trend of transitioning to a low-carbon economy may increase our production costs by requiring additional investment in sustainable energy and other energy efficiency initiatives. However, these risks are accompanied by opportunities created by developing new technologies and products in response to climate change.
During the year, we engaged a third-party consultant to assist the Group in reassessing our GHG emission baseline and exploring possible options to achieve carbon neutrality by 2050. The findings will be used to formulate a plan to mitigate risk and create resilience strategies across our entire value chain.
Energy efficiency and carbon reductionThe Group is committed to reducing carbon emissions and other air pollutants and supporting the transition to a low-carbon future through environmentally friendly energy sources. We are working on the following initiatives to improve energy efficiency in our operations.
At the Group’s production facilities, we carried on the adjustment and upgrade of lighting controls and manufacturing equipment at our production facilities for energy saving. During the year, we upgraded night lights in corridors of our dormitories with motion sensors and replaced all lighting in our factory with energy-efficient LED lights, saving electricity use.
Furthermore, we made efforts to adopt cleaner energy sources. The water heating system in the dormitory was upgraded to a smart energy hot water device running on a heat pump and electricity for greater energy efficiency. All boilers at production sites are powered by natural gas, improving energy efficiency and reducing air pollution and greenhouse gas emissions. Regular maintenances were also conducted to reduce any potential waste of resources from boilers due to equipment ageing or failure. We also trialled renewable energy at our Hunan factory by installing solar panels. The solar panel system has reduced our use of grid electricity and even generated excessive renewable electricity at times that could be sold back to the grid. The Group is also engaging a third-party consultant for exploring and planning of implementing solar projects at our factories to reduces our carbon footprint and contributes to a more sustainable future.
At our branded stores, factories, and headquarters, we post energy-saving guidance and internal communication materials such as posters to promote awareness of our employees in energy conservation. In addition, we closely monitor electricity consumption at all of our operations to promptly identify any abnormalities in energy usage.
In supporting the Group’s sustainability plan focusing on energy saving and air emissions, we established four targets for responsible energy use to improve the environmental footprint at our production sites. Please refer to the focus areas and targets in the “10-Year Sustainability Plan” in the “Our Sustainability Framework and Initiatives” section. A long-term decarbonization plan is currently under development with the support of a third party consultant to explore feasible emission reduction approaches and the green energy potential of the Group. We are setting emission boundaries and undergoing scenario analysis to evaluate the decarbonization actions required across our business operations and establish decarbonization targets in the longer term.
Total Energy Consumption by Location (kWh)
Total Energy Consumption by Location (kWh)
- The total amount of liquefied petrol gas consumption decreased by nearly 100% compared with 2021. This is mainly due to the switch from consuming liquefied petrol gas to electricity in our Fujian Jinjiang main factory.
- The total amount of natural gas consumption increased 55% compared with 2021. This is mainly due to the opening of Fujian Shishi factory and increased usage in our Fujian Quanzhou main factory.
- The total amount of diesel consumption increased 34% compared with 2021. This is mainly due to the opening of Fujian Shishi factory and increased usage in Fujian Quanzhou Koling factory and Fujian Quanzhou main factory.9Energy conversion factors are referenced from the United Kingdom Department for Environment, Food & Rural Affairs conversion factors 2021.
- The increase in energy consumption mainly due to the extended reporting scope from 12 to 18 running clubs in 2022.
- Emission factors are referenced from the Guide to Calculating and Reporting Greenhouse Gas Emission in Industry and Other Sectors (Trial) issued by the National Development and Reform Commission of the People’s Republic of China and the average emission factor of the national grid in 2022 announced by the Ministry of Ecology and Environment of the PRC.
- Scope 1 emission has increased significantly in 2022 due to increase consumption of gasoline in our headquarters.
The Group delivers high-quality sports products to customers worldwide through our extensive network of stores in Mainland China and overseas. In the distribution and delivery process, significant carbon dioxide and other air pollutants are emitted, especially during COVID-19 as the number of online shoppers rose rapidly. As an effort to mitigate our environmental impacts during our logistics activities, several measures were adopted. For example, the Group converted the use of industrial electricity to commercial electricity in our logistic centre to minimize the carbon emissions in our production during the year. We also worked closely with our suppliers to ensure sustainable practices are implemented throughout the supply chain, such as examining their pollutant discharge permit and hazardous waste disposal contract.
Water ManagementMost of the Group’s water consumption occurs during the production process and its dormitories. We have implemented several measures to improve water efficiency at our factories and dormitories, including process improvements and water recycling and reuse measures. In addition, we have adopted water-efficient appliances in our factories and dormitories to minimize water wastage. In 2022, we continuously adjusted the water pressure of our living quarters. We installed timers to control the flushing frequency of the washrooms in our factories and dormitories, which reduced the water flow rate and subsequent consumption.
Our core XTEP brand partnered with a third-party consultant to investigate water management conditions and collect water consumption data from production factories. Peer benchmarking was also conducted to devise the optimal water reduction targets, measures and long-term plans for the brand. Meanwhile, Saucony and Merrel replaced underground plumbing pipes in factories with exposed pipes to prevent undetected water leakage. Their water usage for manufacturing in 2022 reduced significantly by 50% compared to 2020.
In supporting the Group’s sustainability plan focusing on water management, we established two targets to address and improve water efficiency in our production. Please refer to the focus areas and progress of sustainability targets in the “10-Year Sustainability Plan” in the “Our Sustainability Framework and Initiatives” section.
Packaging Materials and Waste ManagementSince 2020, the Group has gradually introduced sustainable packaging into our products to reduce the associated environmental impact. We have replaced the tags and quality certificates of the XTEP brand’s apparel and accessory products. We also provide shoe boxes with handles for our customers to reduce the use of plastic bags. In 2022, 95% of wrapping paper from K-Swiss and Palladium was FSC-certified. From 2023, all inner boxes for product orders of Saucony and Merrel will adopt environmentally friendly materials.
Industrial glues and containers are the most common hazardous waste we produce during manufacturing. This year, we replaced our industrial glues with water-based adhesive as it contains less volatile organic compounds (VOCs). Over 50% of glue applied on Saucony footwear products are water-based, producing less environmental impact and creating a safer work environment.
The Group is cautious about managing our hazardous waste. Complying with local laws and regulations on hazardous waste disposal, we appoint qualified third-party companies to properly handle and dispose of hazardous waste, including plastic buckets and activated carbon. We have set a goal of “zero chemical and explosion incidents” and are fully compliant with regulations in hazardous waste disposal.
Many of our workers live in dormitories, generating a considerable amount of domestic waste at our sites. For general waste management, we uphold the principles of reducing, reusing, and recycling throughout the different functions of the Group. All recyclable waste is categorized and recycled centrally, and external contractors are appointed to properly handle and dispose of non-recyclable general waste.
In supporting the Group’s sustainability plan focusing on waste management, we have established two targets to minimize waste production and achieve 100% harmless treatment of hazardous substances. Please refer to the focus areas and progress of sustainability targets in the “10-Year Sustainability Plan” in the “Our Sustainability Framework and Initiatives” section.
Air Emissions and Wastewater Discharge
A certain amount of air pollutants is emitted from the boilers and other equipment in our production process. We have switched to powering our boilers with cleaner natural gas rather than diesel to reduce such air emissions. This change has resulted in less air pollution and greenhouse gas emissions and improved energy efficiency. Other than that, we treat the exhaust gas from our production process with activated carbon filters which are replaced annually by qualified company before being released into the atmosphere. The approach removes and decomposes pollutants safely before emission. During the year, Palladium and K-Swiss upgraded the exhaust gas collection hood of the waste gas treatment system, ensuring its consistent best performance. Moreover, we are considering developing an energy data reporting system to enable standardized emissions data collection and calculation processes, which can provide data accuracy and create a more robust air emission management system.
Our wastewater discharge is not subject to specific requirements from the government as the wastewater is mainly domestic with insignificant chemicals. We discharge such sewage into the municipal wastewater network in compliance with local regulations in all our operations.
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