Page 1

Happiness

CONTAGIOUS

SUSTAINABLE DEVELOPMENT REPORT


CONTENTS SUSTAINABLE DEVELOPMENT REPORT TRAPHACO 2017

AT TRAPHACO, WE ARE EXPECTED NOT ONLY TO ENJOY THE HAPPINESS ALONE BUT ALSO TO SPREAD IT OUT TO THE STAKEHOLDERS AND TO CREATE SUSTAINABLE HAPPINESS IN THE LONG RUN.

05 06

Overview of the Report Statement from the Chairwoman of the Board

GENERAL INFORMATION 10 12 14 16 18 20

Introduction of Traphaco The history of formation and development Line of business and business area Organization Chart of Traphaco JSC Basic financial indicators for the period of 2013 - 2017 Business performance in 2017

OVERVIEW OF SUSTAINABLE DEVELOPMENT 24 29 30

Highlights in development activities in 2017 Awards and Prizes in 2017 The Sustainable Development Strategy for the period of 2017 - 2020

SUSTAINABLE FOUNDATION 53 60 72 78

Sustainable Development Management in Traphaco Risk management towards sustainable development Regulations on transactions/contracts with related parties Identify key lines of business

ECONOMIC GROWTH 82 84 87 88

Management method Ensuring effective, sustainable growth Indirect contributions to the economy Integrate ESG in business operations

SOCIAL RESPONSIBILITY 94 Management method 96 Sustainable human resources 114 Human rights are guaranteed 118 Responsibility for investment in product development 126 Sustainable communities ENVIRONMENTAL PROTECTION 136 138 140 153

Management method Typical Projects Mitigation activities Table of GRI G4 compliances


Happiness

CONTAGIOUS

Mr. Ma A Thao’s family - the H’mong ethnic group cultivates Actiso for Traphaco in Sapa.

GreenPlan is like a long journey, imprinted with the footsteps of farmers across fileds of medicinal herbs. Like the topsoil, the happiness of the farmers is simple, initiating from their early cooperation with Traphaco and fruitfully blooms for each harvest. Every step we take, every place we come, is marked by the radiant, heartfelt smiles. “To feel their happiness, for Traphaco people, that is sufficient”. GreenPlan Project Team - Traphaco Green Project.

3


Fruiful smiles of artichoke farmers in Sapa, Lao Cai.

4

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


OVERVIEW OF THE REPORT THIS REPORT DOCUMENTED IMPORTANT ACTIVITIES OF TRAPHACO JOINT STOCK COMPANY AND ITS SUBSIDIARIES (HEREINAFTER REFERRED TO AS "TRAPHACO") REGARDING SUSTAINABILITY ISSUES IN 2017. TRAPHACO’S APPROACH TO SUSTAINABILITY ISSUES IS CLOSELY CONNECTED WITH THE LONG-TERM OBJECTIVE OF ECONOMIC GROWTH, SOCIAL DEVELOPMENT AND ENVIRONMENTAL PROTECTION, HENCE VALUABLE CONTRIBUTION TO THE COMMUNITY DEVELOPMENT. In previous years, the Company’s performance on the environmental and social aspects were evaluated and published in Traphaco's Annual Report. However, with the approved strategy and the increasing awareness that sustainable development is really important to the long-term development, we have implemented Traphaco's first independent sustainability report in 2017. The independent implementation of the sustainability report clearly demonstrates our commitment to the disclosure and transparency of non-financial information of the Company, in accordance with regional and worldwide practice. The content of sustainable development is actively shared by Traphaco to its stakeholders to identify issues of mutual interest. These issues continue to be assessed and considered in relation with current operations, sustainable development strategies of the Company, thus, to identify the key issues to be implemented. They were all reviewed and improved as well as reflected in the Sustainable Development Report 2017. The report is structured in the following parts:

1

2

3

General information about the Report

General information on sustainable development in Traphaco

Foundation for sustainable development at Traphaco

4

5

6

Economic Growth

Social Investment

Environmental Protection

In the sections we describe the management method and align the goals and activities with the global sustainable development goals (SDGs). Report range: Sustainable development activities at Traphaco Joint Stock Company. Reporting Period: Jan 1, 2017 – Dec 31, 2017. Applied standard: The report is "Conformable" in accordance with the GRI G4 Core Guide. See GRI Compliance Table at the end of this report.

CONTACT To send questions and recommendations related to the sustainable development of Traphaco as well as the content of the Report, please contact us with the information below: Ms. Dao Thuy Ha Manager Marketing Division - Traphaco JSC, Phone: (84.24) 3683 0751 Email: hadt@traphaco.com.vn

5


STATEMENT FROM THE CHAIRWOMAN OF THE BOARD

Dear Shareholders, Investors, Customers, Partners, and Employees,

TRAPHACO

HAS

ESTABLISHMENT

EXPERIENCED AND

45

DEVELOPMENT,

YEARS

OF

ESPECIALLY

AFTER THE EQUITIZATION, TRAPHACO HAS TAKEN OFF AND REACHED NEW SUMMITS, BECAME ONE OF TOP TEN BEST COMPANIES IN VIETNAM’S PHARMACEUTICAL INDUSTRY AND WAS AWARDED NATIONAL MEDAL FOR ACCOMPLISHMENTS IN THE RENOVATION PERIOD. THERE ARE MANY FACTORS THAT HAVE BUILT UP A DYNAMIC, CREATIVE, DIFFERENT AND SOLID TRAPHACO AS IT IS TODAY, BUT THE MOST IMPORTANT ONE IS THE ORIENTATION TO SUSTAINABLE DEVELOPMENT. FOR US, "SUSTAINABLE DEVELOPMENT IS A RED THREAD RUNNING THROUGH TRAPHACO’S DEVELOPMENT.

6

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


Ladies and Gentlemen,

Ladies and Gentlemen,

So far, Traphaco has always set the goal to develop a green economy with three pillars: high economic efficiency, social responsibility and environmental protection. Those three pillars are equally important and they together created the success of Traphaco. That success is clearly proved by the formation of Traphaco’s value chain: GACP-WHO standardized material - modern technology plants - extensive distribution system.

TRAPHACO'S STRATEGY ANNOUNCED AT THE 2017 GENERAL MEETING OF SHAREHOLDERS CLEARLY EXPRESSED TRAPHACO'S THINKING AND ACTION PRIORITIZE SUSTAINABLE DEVELOPMENT WITH THE MISSION "TRAPHACO - THE GREEN WAY OF LIVING: PIONEERING IN MANUFACTURING “GREEN” MEDICINE TO PROTECT PEOPLE’S HEALTH.

Raw materials with GACP standard not only provide high quality raw materials for the best products but also contribute to enhance living (and intellectual) conditions for residents in cultivation areas, especially for ethnic minorities. Newly built plants spend 20% of their investment on environmental treatment, up-todate production technology combined with the application of advanced management systems, minimizing environmental impacts, resulting in high productivity, business efficiency with energy saving and waste minimization. The modern distribution system has been expanded to meet the needs of customers with good products, perfect service quality, and information on health care for the community. Together with other enterprises, Traphaco grasped the tremendous opportunities offered by the 4th industrial revolution by taking full advantages of rich and systematized database, applying information technology in all activities of the Company; exploring the market demand and new technology to create new products. Technology revolution can only be effective when we have the human resources to meet its needs. In Traphaco, human resources are fosterred, promoted amidst a friendly working environment of democracy, safety, encouraging responsible dedication from every member. In Traphaco, they are appreciated and respected; their talent and potential are encouraged to the fullest; their contributions are well rewarded with the finest salary policy and welfare. "Traphaco has the best working environment in Vietnam" is one of the five major objectives of the 20172020 Strategy.

Traphaco's strategic objectives for the period 2017-2020 are set under the consideration to 17 sustainable development goals of the United Nations. This has significant impacts because investors always highly appreciate enterprises with sustainable development. For investors, prestige in the market is not only achieved by business efficiency but also built on the respect for the rule of law and the credibility of the social community. And investment efficiency will increase with the tangible and intangible values of enterprises. Ladies and Gentlemen, Traphaco has set many challenging but feasible goals in 2018. We all have consistently, creatively and effectively co-operated on the path of sustainable development. For the time to come, Traphaco wishes to prolong this meaningful journey with greater mutual support and commitment to successfully accomplish the 2018 goals, the pivotal year for 2020 Strategic Objectives. For the development of Traphaco and a better wealthier society, for the Earth - our beloved shared home, for our present-day happiness and our children’s well-being, together, we heartfully commit to preserve and uphold the core values of Traphaco: Pioneering, Creativity, Responsibility, Identity on the path to sustainable development. Staying on the right track with worldwide development, Traphaco is firmly believe to flourish and achieve higher peaks. Our sincerest thanks go to all of you who have been always going us on the path of sustainable development - the green way of Traphaco. Thank you very much./.

MSc. Md. VU THI THUAN Chairwoman of the BoD 7


01

GENERAL INFORMATION After 45 years of endless dedication to healthcare matters of the communities, Traphaco has not only accomplished its mission but also thrived rapidly to be rewarded with National Medal of Honor for Labor Heroes in the renovation age, and to early actualize its goal of becoming the No. 1 pharmaceutical enterprise in Vietnam in terms of growth of revenue profit and market capitalization in 2020.


OVERVIEW OF TRAPHACO

Head office: 75 Yen Ninh, Ba Dinh, Hanoi.

TRAPHACO JSC was established on 28th November 1972. OVER 45 YEARS OF ESTABLISHMENT AND DEVELOPMENT, TRAPHACO HAS BECOME THE LEADING PHARMACEUTICAL BRAND OF VIETNAM PHARMACY. TOTAL NUMBER OF EMPLOYEES as of 31/12/2017

PRODUCT PORTFOLIO:

255

40

27,000

Staff

24

BUSINESS AREA

702

Branches nationwide

Agents

Temporary members

Clients nationwide

Traphaco has more than 200 licensed products including domestically produced and imported products. In that Boganic, HHDN (cerebral blood circulation improvement) - Cebraton or Tottri are ranking the first in their drug class.

4 Subsidiaries - 3 factories which meets GMP-WHO standard

Medicine extract factory

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

Traditional medicine factory

Modern pharmaceutical factory

Pharmaceuticals and functional foods factory


MISSION

Pioneering in creating Green Pharmaceutical products to protect human health.

VISION

1

BY 2020, BECOMING THE NO. OF GROWTH RATE OF REVENUE - PROFITABILITY AND MARKET CAPITALIZATION.

CORE VALUES PIONEERING

CREATIVITY

RESPONSIBILITY

IDENTITY

& leading in green value chain management, creativity and application of new technologies and knowledge.

Creating products and services with perfect quality bearing the Traphaco knowledge hallmarks.

Committing and performing commitment of responsibility to society, shareholders, clients, partners and employees on the principle of mutual benefit.

Identity of Traphaco culture and people: Desire, passion, dedication.

Green Pharmaceuticals: is pharmaceutical produced on the basis of green supply chain from raw materials to clean production technology, environment friendly service and distribution system.

GENERAL INFORMATION

11


THE ESTABLISHMENT AND DEVELOPMENT HISTORY

1972 - 2001

2002 - 2009

1972

2002

Establishing production team belonging to Railway medical company.

Establishing the first branch in Ho Chi Minh City.

1994

2004

Railway Pharmaceutcal Company (RAPHACO).

Inaugurating and putting Hoang Liet Pharmaceutical Factory - Hoang Mai - Hanoi into operation.

1998 The first northern GMP pharmaceutical factory in Phu Thuong.

1999 Annual General Meeting of founding shareholders, Traphaco became one of the pioneering pharmaceutical enterprises in equitization.

2001 Changing name to Traphaco JSC, with the purpose of performing multi-lines business, suitable with the new economic trend.

2006 Establishing Central Branch in Danang City. Establishing Traphaco High Tech JSC (Traphaco CNC).

2007 Conducting IPO, raising charter capital from VND 20 billion to VND 80 billion. Inaugurating the traditional medicine manufacturing factory in Van Lam - Hung Yen reaching to GMP-WHO standard.

2008 On 26th November, 2008, TRA’s stock code was officially traded on Ho Chi Minh City Stock Exchange (HOSE) with the charter capital of VND 80 billion.

2009 Launching Traphaco Sapa One Member Limited Liability Company in Lao Cai, Traphaco owned 100% capital.

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


45

OVER

YEARS

2010 - 2015

FOR HEALTH FAITH AND SUSTAINABLE HAPPINESS

2017

2010

2017

Celebrating 10th anniversary of equitization, being awarded Labor Hero title.

Launching the Sustainable Development Strategy 2017 - 2020.

2012

Celebrating the 45th anniversary of the Company and receiving the Certificate of Merit from the Prime Minister.

On the 40th anniversary of the Company’s traditional day, Traphaco was awarded First-class Labor Medal.

2014 Changing new OTC sales policy based on the principle of co-interests; Applying information technology in distribution system administration.

2015 Starting the construction of Vietnam Pharmaceutical Factory in Vietnam with a total estimated value of VND 500 billion.

2020 VISION: BECOMING THE NO. ENTERPRISE VIETNAM’S PHARMACEUTICAL INDUSTRY IN TERMS OF GROWTH RATE OF REVENUE - PROFITABILITY AND MARKET CAPITALIZATION

GENERAL INFORMATION

13


INDUSTRY AND BUSINESS AREA

BUSINESS • • • • • • • • • •

Producing and trading pharmaceuticals, chemicals and medical supplies Purchasing, cultivating and processing medicine Preparing prescribed medication Consulting on pharmaceuticals and cosmetics manufacturing Importing and exporting raw materials, auxiliary materials, medicines Manufacturing and trading cosmetics Producing and trading food Consultancy on scientific services, technology transfer in the field of medical and pharmaceutical areas Producing, trading alcohol, beer, beverage (not including bar business) Importing and exporting the Company’s trading products

BUSINESS AREA OTC STRUCTURE

ETC STRUCTURE

(Pharmacies)

(Hospitals)

18.3% 30.1% 47.4%

11.2% 61.8%

8.8%

4.2% 18,3%

Northern

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

Northern Central

Central

South


02

Distribution subsidiary

Hoang Sa Island

24

Branches nationwide Ly Son

40

Agent nationwide Phu Quy

Truong Sa Island Phu Quoc

Con Son

27,000 CLIENTS NATIONWIDE

GENERAL INFORMATION

15


ORGANIZATIONAL CHART TRAPHACO JOINT STOCK COMPANY

GENERAL ASSEMBLY OF SHAREHOLDERS

BOARD OF SUPERVISORY

BOARD OF DIRECTORS

SUBSIDIARIES

CEO

Deputy DirectorGeneral

Production Director

Production workshops

Deputy DirectorGeneral

Deputy DirectorGeneral

Chief accountant Director

Import-Export Director

R&D

Quality management

Import Export Material Supply

Planning division

HR division

Administration division

Marketing division

Financial & Accounting division

Board of risk management

: Direct guidance : Controlling

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

Nghe An branch

Central branch

Ho Chi Minh branch

Northern Central Central Southern branches branches branches branches

Note:

16

Sales division


TRAPHACO GREEN VALUE CHAIN

TRAPHACO'S MISSION IS TO PIONEER THE CREATION OF GREEN PHARMACEUTICALS WITH THE GREEN VALUE CHAIN FROM RAW MATERIALS TO CLEAN PRODUCTION TECHNOLOGY, DISTRIBUTION SYSTEMS AND ENVIRONMENT-FRIENDLY SERVICES. TRAPHACO GREEN VALUE CHAIN Traphaco’s approach to sustainability derives from the long-term objective of economic growth in combination with the objectives of social development and environmental protection, thereby contributing to the comprehensive development of the community. The Sustainable Development Strategy of "Green Health Path" has become the leading brandname in traditional pharmaceutical section, with market share is twice as big as that of the runner-up. Major brands have high recognition and popularity among consumers, ranking the first in their drug class. As reported by IMS, by Quarter 4 of 2017, Traphaco's market share accounted for 3% and ranking No. 2 in terms of revenue (second to Sanofi) in OTC channel. In comparison with other pharmaceutical companies listed on the stock market, Traphaco ranked second regarding revenue, profit and market capitalization. Traphaco has 3 products at the top of their drug class. In which, Hoat huyet duong nao (cerebral blood circulation improvement – HHDN) ranked No. 1 in the cerebral and peripheral vasotheraputics class; Boganic ranked No. 1 in the cholagogues and hepatic protectors class. Tottri ranked No. 1 in the antivaricosis/antihaemorrhoidal preparations class. HHDN and Boganic are in the top 20 OTC pharmaceuticals with top revenue in the market.

NÃO KHỎE làm chủ cuộc sống

MATERIALS standardized by GACP-WHO

TECHNOLOGY modern and environment friendly

PRODUCTS Green pharmaceuticals: High Safety Quality Effectiveness

SERVICE Technology application, extensive distribution system, realiable healthcare Sử dụng counselling.

Tự do vui sống

GENERAL INFORMATION

17


BASIC FINANCIAL INDICATORS FOR THE PERIOD OF 2017 - 2020

TTRAPHACO CONTINUES TO IMPLEMENT ITS STRATEGY OF BECOMING NUMBER ONE ENTERPRISE VIETNAM’S PHARMACEUTICAL INDUSTRY IN TERMS OF GROWTH RATE OF REVENUE - PROFITABILITY - AND MARKET CAPITALIZATION IN 2020. THE YEAR 2017 HAS PASSED WHICH RECOGNIZED THE GREAT CHANGES AS WELL AS IMPRESSIVE RESULTS OF TRAPHACO.

Annual growth rate

18

Unit

2013

2014

2015

2016

2017

Total assets

VND Billion

1,088

1,132

1,297

1,357

1,510

Owners’ Equity

VND Billion

684.00

788.60

881.58

929.00

1,031

Net revenue from sale of goods and rendering of VND Billion services

1,682

1,651

1,982

1,999

1,870

Net profit after tax attributable to shareholders of VND Billion the parent company

149.42

145.82

180.97

210.58

241.06

Return on Assets (ROA)

%

16.65

14.72

16.77

17.07

18.04

Return on Equity (ROE)

%

30.16

22.19

23,20

23.03

24.41

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


PROFIT REACHED

241

BILLION VND INCREASING BY 14% COMPARED TO 2016

REVENUE

1,870

BILLION VND INCREASING BY 11% COMPARED TO 2016

MARKET CAPITALIZATION

4,800

BILLION VND 20 TIMES OF AFTER TAX PROFIT

GENERAL INFORMATION

19


MAJOR ACHIEVEMENTS IN 2017

TAC

INTEGRATING SUSTAINABILITY IN CORPORATE GOVERNANCE

11

MEMBERS of the Steering Committee for Sustainable Development Strategy at Traphaco.

INVESTING IN HUMAN RESOURCE DEVELOPMENT

82

TRAINING COURSES for staff.

956

Issued A STRATEGIC HANDBOOK to inform and engage all employees in building up sustained Traphaco culture.

PEOPLE PARTICIPATED the training programs on the Company’s Strategy.

25

BILLION VND in the Welfare and Remuneration Fund in 2017.

15%

of staff participating in community activities in 2017.

18/12

monthly salary paid to employees in 2017.

20

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

KDC

MAINTAINING SUSTAINABLE BUSINESS GROWTH

11%

Net revenue growth.

14%

Gross profit growth.

71.2

VND BILLION contribution to the state budget.

124.35

VND BILLION dividend for shareholders.

204

VND BILLION for employees.


FOR THE DEVELOPMENT OF THE COMMUNITY

THE COMMUNITY

25

BILLION VND investment in community activities in 2017.

18

YEARS in a row Free health care counselling sessions and gifts for the elderly, women across the country.

10

YEARS sponsorship of National Fund for Vietnamese Children.

200

PRODUCTS & CLIENTS

08

RESPONSIBILITY WITH THE ENVIRONMENT

ISSUE THE QUALITY - ENVIRONMENT MANUAL TO ALL EMPLOYEES

473

NEW PRODUCTS Launched in 2017, focus on emerging diseases in residential areas.

VND MILLION Cost of electricity consumption decreases compared to 2016, equivalent to 270 kW.

57

1,560

27,000

2,000

PROMOTION PROGRAMs Gratitude for clients.

PHARMACIES-PARTNERS directly served across the country.

m3 The water is circulating and reused.

TONS OF MEDICINAL RESIDUALS were used as microbiological fertilizer for the medicinal herbs plantations of Traphaco.

VND million/ha/year Income of local people in the medicinal herbs plantations of Traphaco.

21


02

OVERVIEW OF SUSTAINABLE DEVELOPMENT Traphaco always aims to develop the green economy with three important objectives: high economic efficiency, social responsibility and environmental protection. It is the value chain that has brought Traphaco's success and future-oriented sustainability: GACP-WHO standard material - Modern technology plants - Extensive distribution system.

Trapaco staff provide technical guidance in cultivating artichoke for ethnic minorities in Sapa, Lao Cai.


HIGHLIGHTS IN DEVELOPMENT IN 2017

ESTABLISHMENT OF THE STEERING COMMITTEE FOR SUSTAINABLE DEVELOPMENT STRATEGY AT TRAPHACO In 2017, Traphaco Joint Stock Company has set up Steering Committee for Implementation of the Sustainable Development Strategy 2017-2020, in charge of sustainable development of Traphaco with detailed tasks assigned to each division; engaging in individual work goals. Currently, the Committee consists of 11 members.

ACTIVE PARTICIPATION IN SUSTAINABLE DEVELOPMENT ACTIVITIES: RAISE AWARENESS OF THE BUSINESS COMMUNITY AND PROFESSIONAL KNOWLEDGE OF THE FULL-TIME STAFF At the Vietnam Business Forum for Sustainable Development held in April 2017, Traphaco had a sharing session on the implementation of the Sustainable Development Report, the challenges and the actual implementation of enterprises. The sharing has got the attention of many enterprises with the feedback related to the implementation issues in their units. Also this year, Traphaco has sent its staff to workshop by the Global Reporting Initiative (GRI).

ORGANIZING 616 MEETINGS, NEARLY VND 25 BILLION FOR COMMUNITY ACTIVITIES Traphaco's public health counselling activities are closely coordinated with associations, authorities, lines and received enthusiastic participation of citizens all over the country. The result of that continuous dedication is the recognition of the State and the social community with the reward "Top 10 Corporate Social Responsibility" in 2011, 2013 and 2015.

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


ATTENDING THE CONFERENCE ON THE DEVELOPMENT OF THE NORTHWEST PHARMACEUTICAL REGION At the Conference on the Development of the Northwest Pharmaceutical Region jointly held by CPV Party Central Committee’s Commision for Economic Affairs, the Northwest Steering Committee, Ministry of Health and Lao Cai Province, Traphaco shared about the development of the medicinal herbs plantations of the Company in the districts of Sapa, Bac Ha and Bat Xat which has contributed significantly to protecting and caring for people's health and actively alleviating hunger and reducing poverty for the ethnic people in the North West region in general and in Lao Cai in particular.

ATTENDING THE CONFERENCE ON THE DEVELOPMENT OF THE NORTHWEST PHARMACEUTICAL REGION At the Conference on the Development of the Northwest Pharmaceutical Region jointly held by CPV Party Central Committee’s Commision for Economic Affairs, the Northwest Steering Committee, Ministry of Health and Lao Cai Province, Traphaco shared about the development of the medicinal herbs plantations of the Company in the districts of Sapa, Bac Ha and Bat Xat which has contributed significantly to protecting and caring for people's health and actively alleviating hunger and reducing poverty for the ethnic people in the North West region in general and in Lao Cai in particular.

OVERVIEW OF SUSTAINABLE DEVELOPMENT

25


HIGHLIGHTS IN DEVELOPMENT IN 2017

THE INAUGURATION OF THE SMART PHARMACEUTICAL PLANT Traphaco’s new plant is built on an area of 46,288 m2 with a total investment of VND 477 billion, including 3 workshops and 5 production lines.

WITH THE APPLICATION OF INFORMATION TECHNOLOGY IN THE MANAGEMENT AND OPERATION OF PRODUCTION, THE PLANT IS SYNCHRONIZED AND ITS PRODUCTION LINES ARE FULLY AUTOMATED.

The inauguration ceremony was selected by the Vietnam Journalists Association into Top 10 Scientific and Technological Events of 2017.

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


"ARTICHOKE FESTIVAL" AND THE CAMPAIGN "CARE YOUR LIVER BEFORE IT IS TOO LATE" With the mission of caring for the public health, the campaign "Care your liver before it is too late" with MC Quyen Linh was held as an urge to raise people’s awareness and pay more attention to have a healthy liver. Also in this campaign, MC Quyen Linh and Traphaco organized the Artichoke Festival, handing artichoke seeds and saplings to Sapa farmers to start the new promising crop.

TRAPHACO CONDUCTS THE ACCEPTANCE OF THE PROJECT OF "PERFECTING THE MANUFACTURING PROCEDURES OF MEDICINAL HERBS SUPPLEMENTS FOR DIABETES TREATMENT WITH BẰNG LĂNG NƯỚC (LAGERSTROEMIA SPECIOSA), GIẢO CỔ LAM (GYNOSTEMMA PENTAPHYLLUM) AND TRI MẪU (ANEMARRHENA ASPHODELOIDES)" The project is managed by the Ministry of Industry and Trade,Traphaco is in charge of coordinating with Hanoi Medical University, Ha Noi University of Pharmacy, Institute of Chemistry - Vietnam Academy of Science and Technology. The project has been highly evaluated by the State Council of Acceptance for many new findings in the study of herbal medicine and for Andiabet - a supplement in the treatment of diabetes. Its natural origin has been studied in detail and preserved throughout manufacturing process, meeting the strict standards of quality control and assessment in treatment effectiveness and safety for users. The result of the project brings about a safe and effective product for diabetes treatment; its implications open up many issues to be addressed in the fields of medicine and pharmacy.

OVERVIEW OF SUSTAINABLE DEVELOPMENT

27


HIGHLIGHTS IN DEVELOPMENT IN 2017

TRAPHACO YOUTH ORGANIZES THE PROGRAM "ASSITING STEPS TO SCHOOL - NAM SAI 2017"

Going 300km to Nam Sai, Traphaco youths has given students of Nam Sai Primary School a mini library, more than

200 uniforms and many gifts for students suffering disadvantages but getting excellent academic achievement.

ONLINE DISCUSSION: THE CONTROL OF PHARMACEUTICAL QUALITY, HELD BY THE MINISTRY OF HEALTH AND THE THANH NIEN NEWSPAPER To widely communicate with citizens about solutions to prevent "junk", poor quality medicinal products; and update information on the results of the implementation of the GACP-WHO standard, the Ministry of Health, the Thanh Nien newspaper with Traphaco organized online discussion "Quality control of pharmaceutical materials". Particularly, the guests had given advice about harmful effect from using herbal medicines and pharmaceuticals of unknown origin.

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


AWARDS AND PRIZES IN 2017

10

TOP

SUSTAINABLE DEVELOPMENT ENTERPRISE OF VIETNAM IN 2017 Traphaco was honored as one of the Top 10 Sustainable Development Enterprise for the 2nd time consecutively in the Chart of stable enterprises in 2017 in production area. This award also strongly affirmed that the Traphaco’s “The Path of Green Health” strategy is a convincing demonstration of sustainable development, combining business interests with environmental and social benefits. Traphaco made the “hat-trick” for 2017 Annual report award Traphaco's Annual Report incorporated the Sustainability Report in the year 2016 has achieved the "miracle triumph" of all three awards of the 10 Best Annual Report jointly held by the Ho Chi Minh City Stock Exchange, the Investment Review Journal and Dragon Capital Fund: Top 10 Best Annual Report, Top 3 Best Annual Report with excellent content of Corporate Governance, and Inclusiveness for Sustainability Report. Best enterprise for employee Surpass more than 300 applications, Traphaco is one of 10 enterprises to receive this prestigious certificate. Known as an enterprise with extremely good policies for employees, creating jobs for farmers in the area of medicinal herbs plantations.

Excellent enterprise for the cause of community health care At the anniversary of the International Day of the Elderly held at the Vietnam-Soviet Friendship Cultural Palace in September 2017, Traphaco was honored as an Excellence Enterprise for the cause of community health care. On this occasion, Traphaco gave more than 1,100 gifts to the elderly delegates from Hanoi city. Traphaco, in association with the Central Association of Elderly People, visited and presented gifts to 50 disadvantaged people with the value of VND 500,000 per gift. OVERVIEW OF SUSTAINABLE DEVELOPMENT

29


THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

IMPACTS FROM SUSTAINABLE DEVELOPMENT TRENDS TO TRAPHACO

1 IN THE TREND OF SUSTAINABLE DEVELOPMENT, TRAPHACO RECOGNIZES SOME RISKS AND CHALLENGES THAT MAY AFFECT ITS OPERATION. THESE CHALLENGES AND RISKS ARE ASSESSED IN TERMS OF THE IMPACT ON TRAPHACO'S BUSINESS AND THE INTERESTS OF ITS STAKEHOLDERS:

1

Challenges from climate change

2

Opportunities from sustainable development

3

Trends in sustainable development in worldwide pharmaceutical industry

Challenges from climate change "Vietnam is not a big emitter, but if the sea level rises by 1m, 40% of the Mekong Delta, the country's largest granary will be submerged," – said Pham Binh Minh, Deputy Prime Minister, Minister of Foreign Affairs of Vietnam while delivering a speech at the UN climate summit in New York. According to a UN report, the cause of 90% of climate change is man-made, the rest 10% is natural. Climate change has raised the global temperature by 2-5°C in the 21st century, with negative consequences for people and the environment. Vietnam’s total economic loss due to environmental pollution in recent years has been at least 1.5% - 3% of GDP. The effects of climate change on the economy pose a risk to Traphaco's business operations, for it has declined citizens’ incomes and their priorities for health care can be replaced to serve short-term goals.

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


Diseases get more serious and human health has deteriorated Climate change has an indirect impact on human health through pathogenesis, which increases the likelihood of disease outbreaks and the spread of epidemics, resulting in human resources risks for Traphaco.

Climate change causes flooding and salinity intrusion, which pose a risk to agricultural and fisheries insurance. Increased rainfall along with sea level rise causes flooding and salinity intrusion in the areas, especially in areas such as the Mekong Delta. This affects Traphaco's medicinal herbs plantations, regarding planting scope, yield, harvest quality, etc. These impacts have endangered the input materials of Traphaco.

Adaptation and adjustment to climate change is a global imperative. In order to do this, the Government's determination, international support and, in particular, the joint efforts of the business community to promote the use of green energy to replace fossil fuels are needed. Traphaco acknowledges its responsibility to jointly address the challenges that help mitigate the effects of climate change.

Prolonged droughts increase the risk of fire. Only from the beginning of the year, hot weather with a recorded high temperature in the North to South Central cause severe droughts for more than 190,000 hectares and more than 44,000 livestock and poultry died. This is also a risk for Traphaco in preserving and developing GACP-WHO medicinal herbs plantations, or maintaining production at plants.

OVERVIEW OF SUSTAINABLE DEVELOPMENT

31


THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

ESTABLISH BETTER POSITION AND ENHANCE PRESTIGE OF TRAPHACO IN THE MARKET THROUGH THE ENTERPRISE’S RESPONSIBILITY FOR COMMUNITY DEVELOPMENT AND BETTER BRAND-BUILDING ACTIVITIES IN THE MARKET".

2 Taking opportunities from sustainable development Demographic factors With a young population, a large workforce with knowledge, a rapidly growing middle class; the Vietnamese’s awareness of diseases has also improved markedly, which is expected to bring great opportunities for the healthcare sector, especially the pharmaceutical sector. Meanwhile, the average growth in annual drug spending is over 14% between 2010 and 2015, and will continue until 2025. The pharmaceutical industry in Vietnam is expected to continue to grow at double digits. This will be an opportunity for pharmaceutical companies like Traphaco -- with the ability to provide a wide range of high-quality health care products and distribution systems in 63 provinces – to enjoy advantages in exploiting market potential, especially in the retail market.

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More demanding consumer behavior With the opening of the economy, the integration of culture is also taking place on a large scale. People have many opportunities to contact with cutting-edge ideas from developed countries. This changes consumers’ attitude to products. Their demands for healthcare products are more stringent, more diverse. This requires enterprises to carefully study the market and create high quality products to meet the increasing demand of consumers; especially the middle class has been increasing rapidly. Sustainable development is increasingly getting attention It is a chance for Traphaco to build a sustainable value chain through the introduction of requirements for suppliers, and the establishment of criteria for research and development with in-depth consideration on Governance - Social - Environmental issues.


3 Trends in sustainable development with the pharmaceutical industry in the world Pharmaceutical companies are making more public commitment to sustainable development, investing in "green" pharmaceuticals as well as the equipment and manufacturing practices needed to meet these goals. For example, in November 2015, five major pharmaceutical companies in the world signed an an agreement on climate commitments and declared their goals, including reducing carbon emissions, reducing the use of water and wastes need to be buried, and better exploiting renewable energy.

The pharmaceutical industry is approaching environmental sustainability in two ways: maximizing the efficiency of resources in business operations to minimize the environmental footprint, and using less hazardous materials when possible to reduce the environmental pressure. The goal is to minimize environmental impacts while maintaining benefits to product users. Sustainability is currently the goal of most pharmaceutical companies. The practice of sustainable development is applied not only in production but also in the sale and distribution of products. Whenever possible, sustainability also applies to the design of new products.

SUSTAINABILITY is the objective of every pharmaceutical company

OVERVIEW OF SUSTAINABLE DEVELOPMENT

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

Pharmaceutical technology is complex but is becoming greener

Smart medicines preparation and packaging

Due to cost and sustainability issues, pharmaceutical research companies in recent years have introduced the use of chemical and green technologies in manufacturing process. They have developed sophisticated systems to measure potential environmental consequences. Health and safety during the selection of reagents and solvents are taken into serious consideration. Sustainability indices are often used to compare alternative processes (Curzons et.al. 1999).

Although the use of adjuvants in production is not related to chemical synthesis process, they can generate significant waste streams, mainly related to post-production cleaning. However, these wastes can be easily treated by modern technologies such as reverse osmosis and activated carbon.

Solvent is the largest waste in pharmaceutical production and the reuse of solvents is made to minimize resource consumption. Non-recyclable solvents will be used in incineration equipment.

Packaging minimization is also the focus of much effort in the industry, although this is sometimes hampered by other conventional or legislative requirements, for example: pills now must be packaged in the blister pack and the medicinal label must include information in Braille (EC, 2004). Both these commendable rules have unfortunately led to an increase in packaging. Green supply chain Distribution and sales systems seem to be less related to sustainability. But there are significant challenges in this area, such as the use of motor vehicles to transport and distribute products. Transportation traffic is reported to be up to 730 million kilometers, 90% of that was combined with sales and marketing. This equates to 18,300 rounds around the world and produces 150,000 tonnes of greenhouse gas emissions (AstraZeneca, 2008b). Companies are addressing this issue in two ways. The immediate goal is to improve the efficiency of travel by using more effective means and secondly, extending driver training to include eco-driving techniques.

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THE “FRUITFUL CROP” SMILES OF MEDICAL HERBS CULTIVATING FARMERS IS THE MOTIVATION FOR US TO BE AWARE OF OUR RESPONSIBILITY IN THE SOCIAL CONTRIBUTION AND LOCAL DEVELOPMENT...

OVERVIEW OF SUSTAINABLE DEVELOPMENT

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

TOWARD A

SUSTAINABLE W RLD

BUSINESS IS RECOGNIZED AS AN IMPORTANT FACTOR IN THE REALIZATION OF SUSTAINABLE DEVELOPMENT GOALS IN 2017 - 2030

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VIETNAM COMMITS TO SUCCESSFULLY IMPLEMENT ITS SUSTAINABLE DEVELOPMENT GOALS

In May 2017, Vietnam announced a National Action Plan to implement the 2030 Agenda for Sustainable Development, which outlines the 17 sustainable development goals of Vietnam by 2030, including 115 items in line with the goals of sustainable global development adopted at the UN Summit in September 2015. Vietnam has always considered sustainable development a common goal in the country's development strategy and is committed to the successful implementation of its SDGs. Viet Nam's achievements in socio-economic development after more than three decades of Doi moi, including the successful implementation of the MDGs, provide a solid foundation for the realization of SDG.

At the launching ceremony of the assessment program, the announcement of sustainable enterprises in Vietnam 2018 - CSI, Dr. Nguyen Huu Ninh, Nobel Peace Prize winner on climate change, commented: “Traphaco is a gold exemplifier. It has proven that Vietnamese businesses can make sustainable development even better than multinational enterprises�.

CONCERTED EFFORTS TO REALIZE CIRCULAR ECONOMY In recent years, the world economy has witnessed the shift from a traditional linear economy to a circular economy where waste - instead of being thrown away and polluting the environment - will be "revived" in the form of different resources and involved again in the process of production and consumption. Of the 17 global targets (SDGs), there are up to two-thirds of environmental targets - an imperative not only in Vietnam but all over the

world. Accordingly, green growth is seen as the answer to the question, "How does today's development not affect future generations?" The realization of the green growth strategy requires not only the active role of the government, environment organizations but also the significant contribution of enterprises, as each and every business activity creates the impact on all aspects of social life as well as the development of the country.

OVERVIEW OF SUSTAINABLE DEVELOPMENT

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

ORIENTATION AND DETAILED ROADMAP ARE MADE BASED ON EVALUATION OF ACTIVITIES FINISHED IN THE PERIOD 2011-2016; ANALYSIS OF TRAPHACO PERFORMANCE, IMPACTS AND OPPORTUNITIES FROM SUSTAINABLE DEVELOPMENT, HENCE VISION AND DEVELOPMENT DIRECTIONS FOR THE 2017-2020 PERIOD.

TRAPHACO UNDERSTAND THAT IT REQUIRES GREAT ENDEAVOUR OF ALL OF US RIGHT FROM TODAY TO BUILD A BETTER FUTURE IN THAT JOURNEY, ENTERPRISE ALWAYS SERVES AS A POSITIVE FACTOR. TO REALISE THAT GOALS, WE NEED TO BUILD A CONCRETE ROADMAP TO COMPENSATE SHORTCOMINGS OF RESOURCES THAT PEOPLE HAVE OVER-EXPLOITED IN THE PAST AND IN THE PRESENT.

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SUSTAINABLE DEVELOPMENT GOALS OF THE UNITED NATIONS

OVERVIEW OF SUSTAINABLE DEVELOPMENT

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

TRAPHACO’S STRATEGY FOR SUSTAINABLE DEVELOPMENT IN 2017 - 2020

GENERAL OBJECTIVES AS ONE OF THE LEADING PHARMACEUTICAL COMPANIES IN VIETNAM, TRAPHACO IS WELL AWARE OF ITS ROLE AS NOT ONLY AN ECONOMIC LEADER BUT ALSO A PIONEER IN DECLARING AND REALIZING THE SUSTAINABLE DEVELOPMENT STRATEGY BY MAKING BUSINESS DECISIONS, ENSURING ECONOMIC GROWTH AND ENVIRONMENTAL PROTECTION, CONTRIBUTING TO THE HEALTHY DEVELOPMENT OF COMMUNITY."

Traphaco always attaches economic growth to environmental protection and social responsibility - three fundamental factors for the long-term success of Traphaco. In particular, economic objectives are the most important goal since the implementation of this goal is a necessary condition for the implementation of social and environmental goals. The realization of economic objectives is combined with the implementation of other social and environmental objectives to ensure a balance between the interests of the parties involved in current and future activities, therefore, sustainable development strategy is guaranteed to be well performed in the long-term.

GENERAL OBJECTIVE Being the number one pharmaceutical enterprise in vietnam in terms of growth rate of revenue profit and market capitalization. Becoming the leading green Brand in vietnam. Market capitalization value: VND 10,000 million. Total revenue: VND 4,000 million. Total profit: VND 500 million.

The technology reaches the highest standard in the pharmaceutical industry in Vietnam.

Modern management system based on integrated information technology.

Traphaco people are happy, satisfied with their life and work, the working environment ranks in the best range in Vietnam.

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VISION, MISSION

Mission

Vision

Pioneering in creating Green Pharmaceutical products to protect human health.

1

By 2020, becoming the No. pharmaceutical company in Vietnam in terms of growth rate of revenue - profit bility and market capitalization.

Core Values PIONEERING

CREATIVITY

RESPONSIBILITY

IDENTITY

Pioneering and leading in green value chain management, creativity and application of new technologies and knowledge.

Creating products and services with perfect quality bearing the Traphaco knowledge hallmarks.

Committing and performing commitment of responsibility to society, shareholders, clients, partners and employees on the principle of mutual benefit.

Identity of Traphaco culture and people: Desire, passion, dedication.

GREEN PHARMACEUTICALS IS PHARMACEUTICAL PRODUCED ON THE BASIS OF GREEN SUPPLY CHAIN FROM RAW MATERIALS TO CLEAN PRODUCTION TECHNOLOGY, ENVIRONMENT FRIENDLY SERVICE AND DISTRIBUTION SYSTEM.

OVERVIEW OF SUSTAINABLE DEVELOPMENT

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

THE ROADMAP OF STRATEGY IMPLEMENTATION

2019 -2020

SUSTAINABLE ADDED VALUE (AV); SUSTAINABLE PROFIT; TOTAL FACTOR PRODUCTIVITY (TFP); HIGH-TECH COMPANY; ORGANIZATION OF LEARNING; VALUES SYNERGY.

SUSTAINABLE

2017

SPEED-UP

ACCELERATING THE MODERNIZATION OF ADVANCED MANAGEMENT SYSTEM ON INFORMATION TECHNOLOGY FOUNDATION INTERGRATED STANDARD PRODUCTION; DEVELOPMENT OF R&D AND THE DISTRIBUTION SYSTEM; WORK PERFORMANCE.

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THE LEADING GREEN

BRAND IN VIETNAM

2018

VALUE CHAIN SYNCHRONIZATION;

DEVELOPMENT

DEVELOPMENT BASED ON MODERN, PRONFESSIONAL FOUNDATION; LEAN & POWERFUL - INTEGRATED ERP; RESOURCES SYNCHRONIZATION.

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

THE SUSTAINABLE DEVELOPMENT MODEL AT TRAPHACO

SDG1: Putting poverty in all forms, everywhere.

Based on the specific content of the 17 United Nations sustainable development goals, Traphaco has selected and integrated sustainable development goals in its strategic orientation for sustainable development in the 2017-2020 period. Industries include:

SDG8: Promoting sustainable, effective and longterm economic growth; Create jobs and increase productivity for everyone.

SDG3: Ensure healthy living for the community.

SDG9: Building a solid infrastructure, accelerating industrialization, openness and sustainability, encouraging innovation. SDG12: Ensure responsible consumption & production.

SDG13: Action to Respond to Climate Change. SDG15: Protect, regenerate and encourage the sustainable use of terrestrial ecosystems, sustainable forest resource management, anti-desertification, soil erosion and biodiversity loss.

ECONOMIC GROWTH

ENVIRONMENTAL PROTECTION

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STRATEGIC ORIENTATION FOR SUSTAINABLE DEVELOPMENT

SOCIAL INVESTMENT


EFFICIENT AND SUSTAINABLE GROWTH OBJECTIVE 1 (SD8) Promoting sustainable, effective and long-term economic growth; Creating jobs and increasing productivity for everyone

OBJECTIVE 3 (SD9) Building up solid infrastructure, promoting open and sustainable industrialization and encouraging innovation.

OBJECTIVE 2 (SD12) Ensuring Responsible consumption and production.

Optimizing the capacity, effectiveness of corporate governance and the Green Value Chain. Improving business efficiency by better business scale and boosting productivity to increase Traphaco's value, making it the leading Green Trademark in Vietnam. Investing in research and development activities, especially in time-honoured tradition of medicinal herbs, using high quality medicinal herbs grown in Vietnam to create modern products to serve domestic demand and overseas market. Increasing efficiency through investment in the cutting-edge technology of Vietnam’s pharmaceutical industry, maximising the efficiency of resource use, and application of clean and environment-friendly technologies. Building modern management system based on IT-integrated technology. Establishing the best working environment; ensuring the salary, remuneration, welfare for employees, creating motivation and encouraging creativity.

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

MEANINGFUL CONTRIBUTION TO SOCIETY DEVELOPMENT

OBJECTIVE 4 (SD1) Reducing poverty in all forms, in all places.

OBJECTIVE 5 (SD3) Ensuring a healthy living condition and improving wellbeing for all ages.

Pioneering in the campaign “Buy Vietnamese”: using Vietnamese materials, Vietnamese knowledge to provide the best healthcare products. Transferring techniques and mornitoing cultivation and development of medicinal herbs in localities to help increase income and stabilize the life of ethnic people and farmers. Making medicines more accessible to communities through continuous innovation to improve product quality, labor productivity, costs optimization, and medicines creation to meet the demands of the society.

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JOINT EFFORT IN PROTECTING ENVIRONMENT OBJECTIVE 10 (SDG15) OBJECTIVE 9 (SDG13) Taking action to respond to Climate Change.

Protecting, regenerating and encouraging the sustainable use of terrestrial ecosystems, sustainable forest resource management, antidesertification, soil erosion and biodiversity loss.

Ensuring the preservation of ecosystems, biodiversity, desertification, rehabilitation of degraded lands and soils. Reforestation of vacant, bare hills by cultivating medicinal herbs in GACP - WHO standards. Minimizing activities that generate waste and pollute the environment, contributing to the improvement of natural environment and human health. Utilizing energy efficiency through the rational use of energy resources and natural resources.

OVERVIEW OF SUSTAINABLE DEVELOPMENT

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THE SUSTAINABLE DEVELOPMENT STRATEGY FOR THE PERIOD OF 2017 - 2020

PLAN FOR IMPLEMENTATION IN 2018 To fulfill mentioned objectives, Traphaco has always carried out and implemented the following specific tasks: Seize the opportunity: The result of integrating Sustainable Development Goals into business strategies. Welcome partnership and cooperation: An enterprise alone cannot realize SDGs goals. Take action: Implementing activities with stakeholders in all business activities of Traphaco. Fields of Artichoke, bird-eye view, Sapa, Lao Cai.

Governance and transparency: More transparency to make more informed decisions.

EFFICIENT AND SUSTAINABLE GROWTH

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1

Promoting sustainable, effective and long-term economic growth; Creating jobs and increasing productivity.

2

Optimizing the capacity and effectiveness of corporate governance and the Green Value Chain.

3

Improving business efficiency by business model and improving quality and productivity at Traphaco to increase efficiency and increase Traphaco’s value, to become the leading Green Trademark in Vietnam.

4

Investing in research and development activities, especially researching and exploiting traditional medicine knowledge of Vietnamese people, using high quality medicinal herbs grown in Vietnam to create modern products to serve domestic demand and export.

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CONTRIBUTE TO GENERAL DEVELOPMENT OF THE SOCIETY

1

Increasing efficiency through highest standards technology investment in pharmaceutical industry in Vietnam to increase the efficiency of resource use, and more application of clean and environmentally friendly technologies; Modern management system based on integrated information technology.

2

Establishing the best working environment in Vietnam; Ensuring the salary, bonuses, welfare for employees, creating motivation for work and encouraging creativity.

3

Ensuring responsible consumption and production.

4

Pioneering in responding to the “Buy Vietnamese� campaign using Vietnamese materials, Vietnamese knowledge to serve health care service.

5

Guiding and transferring techniques of cultivation and development of medicinal plants in localities to help increase income and stabilize the life of ethnic people and farmers in medicinal plant cultivating areas.

6

Ensuring a healthy living condition and improving well-being for all ages.

JOINTLY PROTECT THE ENVIRONMENT

1

Taking action to Respond to Climate Change: Carrying out the Carbon Footprint Report of the parent company and member companies.

2

Reforestation of vacant, bare hills with medicinal herbs cultivation zone with GACP - WHO standards.

3

Minimizing activities that generate waste and pollute the environment, contributing to the improvement of natural environment and human health.

4

Utilizing energy efficiency through the rational use of energy resources and natural resources.

5

Protecting, regenerating and encouraging the sustainable use of terrestrial ecosystems, sustainable forest resource management, anti-desertification, soil erosion and biodiversity loss.

OVERVIEW OF SUSTAINABLE DEVELOPMENT

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03

SUSTAINABLE FOUNDATION In Traphaco, human resources are invested, promoted by a corporate culture of happy and democratic working environment where responsible dedication of every member is encouraged and appreciated. Employees can fully perform their talent, enjoy rewarding remuneration policies and more important, find their sastisfactory career path and expected future.


At Traphaco Joint Stock Company, in order to create a solid and lasting foundation for sustainable development strategies, we understand that it’s critical to have a proper management framework as it creates and promotes internal resources so that leaders at all echelons understand and implement a unified strategy. In addition, stakeholder engagement is a key element in the consultation, interaction and identification of issues related to sustainable development in an effective and consistent manner, ensuring harmony and integrity. LONG-LASTING

HAPPINESS

FOR ALL PARTIES IN THE COMPANY’S JOURNEY OF SUSTAINABLE DEVELOPMENT.

Management and Mornitoring sustainable development

The sustainable development foundation is built and analyzed based on three pillars: Identify key issues

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Associate stakeholders


SUSTAINABLE DEVELOPMENT MANAGEMENT IN TRAPHACO

THE ROLE AND RESPONSIBILITY OF THE PARTIES IN SUSTAINABLE DEVELOPMENT MANAGEMENT

Corporate governance is considered the key for sustainable growth and development in long-term by Traphaco. Beside building a strong governance structure based on obeying Vietnam’s law and application of international practices, Traphaco has adopted internal management regulations with the aim to create a coherent process to control and supervise the Company’s activities professionally, clearly and efficiently, contributing to ensure shareholders’ interest in harmony with other stakeholders’ including clients, employees and community in long-term.

At Traphaco, during the implementation and realization of sustainable development, all levels from the Board of Directors, subcommittees assisting the Board of Directors, Board of Supervisors, Executive Board to divisions and subsidiaries are involved in sustainable development to ensure long-term growth.

GOVERNANCE MODEL AT TRAPHACO

GENERAL ASSEMBLY OF SHARE-HOLDERS BOD Secretary

BOARD OF DIRECTORS HR & Remuneration Subcommittee

BOARD OF SUPERVISORS

CEO

Development Policy Subcommittee Audit Subcommittee

R&D

Marketing division

Quality management

Financial & Accounting division

Import Export Material Supply

Risk Management Committee

Planning division

Sales division

HR division

Nghe An branch

Administration division

Central branch

Traphaco Sapa One-member Co., Ltd (100%) Traphaco Hung Yen Co., Ltd (100%)

Traphaco CNC JSC (51%)

Daklak Pharmaceutical & Medical Supplies JSC (58%)

Ho Chi Minh branch

SUSTAINABLE FOUNDATION

53


SUSTAINABLE DEVELOPMENT MANAGEMENT IN TRAPHACO RESPONSIBILITIES OF THE BOARD OF DIRECTORS Set strategic goals and orientations for sustainable development

1

From 2017, Traphaco has announced to introduce sustainable development in its development strategy with the commitment of senior leaders to ensure the implementation of three objectives in socio-economic and environmental aspect.

2

This strategy is realized through specific objectives for each functional division and subsidiary. These targets are quantified into key performance indicators (KPIs), which include financial (economic) and non-financial (environmental and social) indicators.

3

Traphaco develops the orientation for sustainable development from the senior leaders to the divisions to evaluate these KPIs and report to the Board. Traphaco's business is closely linked to social and environmental issues.

Board of Directors and Board of Supervisors, Traphaco.

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Assessment of capacity and implementation methods related to sustainable development

1

2

3

Realization of strategy through performance indicators

Monitor and direct issues related to sustainable development

Supervise the making of sustainable development report

• Strategies and action plans related to socio-economic and environmental issues are presented at the Annual General Meeting of Shareholders.

• The Board regularly reviews the implementation of the socioeconomic and environmental objectives through direct reports from the Executive Board, reports at regular meetings of the Board, written comments, and analysis of the socio-economic and environmental impacts, risks and opportunities.

• The Board supervises the implementation of Traphaco's strategy, which includes a sustainable development strategy.

• Accordingly, the Board of Directors will execute Resolutions approved by the General Meeting of Shareholders, the Executive Board will concretize into action through activities in Traphaco and its subsidiaries. • Managers and Functional Division heads are responsible for concretizing goals into departmental indicators and continuing to roll out to subsidiaries. At each unit, strategy, action plan, development objectives of the unit are disseminated to the staff through business meeting, training for all the staff.

• In the guiding documents, the BoD frequently requests the Executive Board to focus on forecasting, updating and closely monitoring the actual situation of the economic, social and environmental situation in business activities, to have timely adjustments and promptly offer suitable and effective solutions, so that successful implementation of annual business plans and business strategies can be gurranteed.

• The Board of Directors is responsible for approving guidelines for implementation and approval of audited financial statements and sending them to the Board of Supervisors for appraisal before submission to the General Meeting of Shareholders for final approval. • The Board of Directors assigns the Executive Board and the Unit to be responsible for reporting on sustainable development, ensuring the content is in line with international standards and Vietnamese standards.

• Monitor the implementation of the Group's decisions, resolutions and policies issued by the Board in relation to sustainable development and environmental and social issues.

SUSTAINABLE FOUNDATION

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SUSTAINABLE DEVELOPMENT MANAGEMENT IN TRAPHACO THE ROLES AND RESPONSIBILITIES OF THE SUBCOMMITTEES IN IMPLEMENTING THE STRATEGY FOR SUSTAINABLE DEVELOPMENT

Development Policy Sub-committee This sub-committee, established by the Board of Directors, is a body in the managerial structure of Traphaco. This sub-committee is primarily responsible to the BOD regarding issues of sustainable development.

Its main functions contain: • Propose and advise the BoD on development strategies, objectives and solutions to implement the short-term and long-term strategy for production, business and investment; • Propose and advise the BoD on the long-term and short-term development strategies of subsidiaries to ensure that the plan is in line with the Company's overall strategy and objectives; • Propose, contribute to the Board of Directors’ approval on: annual financial plan, short-term and long-term financial plans, plan for buying and selling shares of other companies, joint ventures and strategic cooperation.

Human Resources & Remuneration Sub-committee This sub-committee, established by the Board of Directors, is a body in the managerial structure of Traphaco JSC. It coordinates with the Development Policy Subcommittee to review issues related to sustainable development in its authorized activities.

Its main functions contain: • Recommend and propose options for the scale and management system in the Company; • Give advice to the BoD on the appointment and dismissal of managers and their salaries; • Review and give advice to the BoD on the long-term human resources development plan; headhunt and facilitate managers; • Propose regulations, salary budgets and related regulations for the Company.

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Audit Sub-committee

Its main functions contain:

The audit sub-committee is a part in the managerial structure of Traphaco JSC, which was established by the Board of Directors. The Audit Subcommittee, together with the Development Policy Subcommittee, is responsible for reviewing and addressing issues related to sustainable development of Traphaco's operations in relation to the key functions and responsibilities of the Subcommittee.

• Select an independent auditor, evaluate the independence of independent audit and apply criteria to consolidated financial report of subsidiaries with associates;

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

• Consider the effectiveness of the Company's risk management, its compliance with the law, company charter, management regulations and internal management regulations…


Board of Supervisors of Traphaco

RESPONSIBILITIES OF THE BOARD OF SUPERVISORS

Board of Supervisors has 03 members elected by the General Assembly of Shareholders for the period 2016-2020 to carry out monitoring activities regulated by law and the Company’s regulation.

Board of Supervisors conducts the following main tasks: Monitor the implementation of the Charter and Resolutions approved by the annual and tenured GMS. Supervise financial activities; monitor the implementation of BoD and Executive Board in accordance with regulations, the Charter of the Company and the operating regulations of the Board. In the fiscal year 2017, the Board of Supervisors, together with BoD, recommended and supervised the establishment of corporate governance regulation in accordance with best practices, strengthening measures to monitor the compliance with the Charter, regulations, enforcement of AGM and BoD’s resolutions, and ensuring transparent financial activities.

SUSTAINABLE FOUNDATION

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SUSTAINABLE DEVELOPMENT MANAGEMENT IN TRAPHACO RESPONSIBILITIES OF EXECUTIVE BOARD

CEO • Traphaco’s CEO is responsible for managing the business activities of the Company in order to exercise the rights and responsibilities of the owner, shareholder or capital contributor in relation to its subsidiaries and enterprises. The Company is responsible for implementing the sustainable development in the actual operation of the Company through the establishment of specific targets for each functional division and subsidiary;

Executives Board • Implement the sustainable development plan under the direction of CEO, facilitating and supervising issues related to sustainable development.

• CEO is responsible to the Board of Directors for organizing and supervising the implementation of the strategic objectives and development orientations of the Company, its Subsidiaries and Traphaco-invested enterprises in order to preserve, raising capital, improving business efficiency, efficiently using all resources. • Direct and monitor the performance of the development objectives in subsidiaries, ensuring the relative balance of the economic, social and environmental factors. • Make periodic reports on the socio-economic and environmental impacts, risks and opportunities for the BoD to consider changes in production and business activities or to make extraordinary reports when the socio-economic and environmental situation has a profound effect on the operation of enterprises.

• Introduce and implement initiatives and measures to ensure sustainable development in accordance with the orientation and suit the characteristics of each unit according to the strategy and development orientation of the Company. • Implement sustainable development and monitor the performance of the Company and its subsidiaries in a sustainable manner, ensuring a relative balance of economic, social and environmental factors. • Propose ideas and initiatives for sustainable development in cooperation with the Divisions of the Company and its subsidiaries, to actualize these ideas under the direction of the Board. • Managers of functional divisions coordinate in implementing and promoting sustainable development in Traphaco.

ROLES AND RESPONSIBILITIES OF SUBSIDIARIES Traphaco’s subsidiaries

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Coordinate to raise awareness and to promote business activities towards sustainable development, ensuring the interests of the unit and the common interests in the short, medium and long term.


THE TOTAL REMUNERATION FUND OF BOARD MEMBERS AND MEMBERS OF THE BOARD OF SUPERVISORS IS APPROVED IN 2017

Payment rule

The monthly payment for members complies with the rate stipulated in the Decision of the Board of Directors on the issuance of regulations on remuneration, bonus and operating expenses for members of the Board of Directors, the CEO and member of the Board of Supervisors of Traphaco JSC.

The 2017 payment of remuneration

Based on the above remuneration rate and based on the actual number of members of the Board of Directors, the Board of Supervisors at each time in 2017, the remuneration payment in 2017 as follows:

Wage to members of Board of Directors in 2017 (Unit: VND)

Full name

Md. Vu Thi Thuan

In charge of x

Mr. Tran Tuc Ma

Term

Date of assignment/ leaving post

Term 2011- 2016, 2016 - 2020

Be assigned on 03/30/2016

Hold concurrently

x

Monthly wage

140,000,000

Term 2011- 2016, 2016 - 2020

31,000,000

Mr. Nguyen Anh Tuan

x

Term 2016 - 2020

27,000,000

Mr. Nguyen Hong Hien

x

Term 2016 - 2020

23,000,000

Mr. Marcus John Pitt

x

Term 2016 - 2020

66,000,000

Secretary to BOD

x

10/2016

4,000,000

Wage to members of Board of Supervisors in 2017 (Unit: VND)

Term

Date of assignment/ leaving post

Duong Duc Hung

Term 2016-2020

Be assigned on 30/03/2016

Do Thi Khanh Van

Term 2011-2016, 2016-2020

10,000,000

Nguyen Thanh Hoa

Term 2016-2020

10,000,000

Full name

Secretary to BOD

10/2016

Monthly wage 26,000,000

4,000,000

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MANAGING RISK TOWARDS SUSTAINABLE DEVELOPMENT

Risk Management (RM) is a management activity that the Board has paid a lot of attention and investment into. This activity is the basis for the company’s strategic decisions in balancing risks and benefits. In addition, risk management plays an essential role in supporting other business management systems and processes. With the message “Effectiveness is the goal - Determination is the solution", in the last year, risks management activities helped to minimize potential risks and contributed to the implementation of the strategic objectives, and ensure thestrong and sustainable development.

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ORGANIZATION STRUCTURE OF RISK MANAGEMENT Traphaco is always ready to face the emergence of risks, identify key risks that need to be addressed, and at the same time gradually evaluate the risks in a comprehensive manner, includes new risks arising

from environmental and social changes, strengthen measures to manage quantifiable risks such as economic losses and qualitative risks such as risk of continuity of business operation and reputation risk.

Risk management system of Traphaco

STRATEGIC MANAGEMENT

The main strategic objective

Strategy Risk

Prioritize social responsibility

Risk report

Urgent risk External factors having implicit risks

LIST OF RISKS OF TRAPHACO

Risks from production and business activities

Risk identification

Risk management process

Risk prevention plan

Risk monitoring & measuring

Risk assessment

Risk monitoring and rep

orting

Specifies the approach to come to consensus for risk management activities including risk identification, risk assessment and risk monitoring in accordance with ISO 9001, ISO 14001. Ensure that all staffs in the Company are fully aware of risks in daily operations.

ISO 9001

ISO 14001

Quality management system

Environmental Management System

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MANAGING RISK TOWARDS SUSTAINABLE DEVELOPMENT

FINANCIAL RISK LR GA E L

ISK

OP ER ATI ON

AL RI S

K

STRATE GICA

L RI

SK

NT RISK LOPME DEVE BLE INA STA SU

THE RISK OF CORPORATE GOVERNANCE IN THE YEAR 2017

RISK MANAGEMENT IS A MANAGEMENT ACTIVITY THAT THE BOARD HAS PAID A LOT OF ATTENTION AND INVESTMENT INTO. THIS ACTIVITY IS THE BASIS FOR STRATEGIC DECISIONS OF THE COMPANY IN BALANCING RISKS AND BENEFITS. IN ADDITION, RISK MANAGEMENT PLAYS AN ESSENTIAL ROLE IN SUPPORTING OTHER BUSINESS MANAGEMENT SYSTEMS AND PROCESSES.

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STRATEGIC RISK MANAGEMENT Good strategic risk management leads the company in the right direction, achieve targeted goals with lowest cost in the shortest possible time.

By 2020, Traphaco aims to rank No. 1 among Vietnamese pharmaceutical companies in terms of growth rate of revenue-profitand-market capitalization. The Strategy Committee always updates information on these indicators of domestic pharmaceutical companies, identifies Traphaco’s location at times, and provides timely advice and warnings to Traphaco’s Executive Board. Follow up and achieve the set strategic goals. At the higher level, the Board of Directors also has members in charge of risk management, ensuring that strategic risk management is fully and effectively implemented, in the right direction.

The development goals of revenue and profits determine the existence and development of each enterprise. Not just the development, sustainable development is also the goal of Traphaco in particular and of other large enterprises in general. The “Sustainable Development Strategy for the 2017-2020 period” was scientifically conducted by the Traphaco Strategy committee and the Consultation Team of the International Economics and Trade Institute, with leading experts on strategy and corporate governance. In order to manage the implementation of the strategy as well as the risk management during the implementation of the strategy, the overall objectives of the strategy must be broken down into the objectives of component strategies, quantified in detail and divided into time slots by yearly goals. The company’s annual objectives are divided into the goals of the divisions, subsidiaries. This process is closely monitored by the Standing Deputy Chairperson of the Strategy Committee and Monitoring Team.

One of the strategic objectives of 2017 is to successfully build and operate the most modern pharmaceutical factory in Vietnam. Risks can occur when the factory is slow to finish or finish without registration number of the product. This would cause great damage to the Company in terms of finance and reputation. To avoid this risk, the Project Committee of Vietnam Pharmaceutical Factory always closely controls the progress of the contractors, and construction packages. The R&D Division prepares for the registration of products for the new factory, which ensures that when the factory meets the conditions for production, the products circulation registration numbers are ready. It can be said that the company management is very good compared to some companies in the industry, avoiding underuse of new plant. Previously, the company also prepared reserves for the time when the new factory goes into operation; ensuring products quantity always meets the market demand. Operating of a new factory with high technology is also a pressure on the operating system. Priority is put on strict adherence to the processes. The training and improving know-how level of workers, access to new technology are applied immediately upon receiving the new system line. Machinery maintenance and repair schedule is strictly followed. SUSTAINABLE FOUNDATION

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MANAGING RISK TOWARDS SUSTAINABLE DEVELOPMENT LEGAL RISK MANAGEMENT Good legal risk management helps the company to control the system effectively, safely, legally, proactively and well responds when the risk occurs.

Traphaco always respects the law. This is reflected in the regulations and cultural identity of Traphaco. Constant and unsynchronized changes in laws and regulations will affect the Company’s development direction, business operations. If the Company does not understand the law, does not update the new regulations, the risk of litigation, dispute, and compensation is likely to happen. 2017 is the year marked with the legal risk management of the Company. The Legal Unit under the Risk Management Committee is established with the function of advising and advising the Board of Directors on matters related to the organization and operation of the Company; Control the compliance with law internally and act as a focal point for resolving disputes relating to the Company. In addition, the Company

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maintains an annual contract with a law firm to give advice on legal issues of the business. Legal RM activities undertaken in 2017: »» Give comments on draft circulars related to drug registration, labeling of drugs and drug materials, regulations on recognition of traditional medicines exempted from clinical trials, and regulation of drug procurement at public health facilities. »» Analyze and evaluate the impact of: Decree No. 71/2017/ND-CP, Decree No. 54/2017/ND-CP, Circular 95/2017/TTBTC. »» Complete legal documents database on internal network, regularly update new documents and send to related divisions. »» Brand protection, coupled with anticounterfeit, and fake goods. The protection of the brand must be closely linked with enhancing the affirmation of class by quality, reputation and coordination with the market management authorities. In 2017, the Inspectorate of the Ministry of Science and Technology has a memorandum on the recall of Bogan Actiso Forte products for the infringing company - Viet Phap JSC.


FINANCIAL MANAGEMENT Financial risk management is a very important management activity: financial risk can be considered “tycoon” of all risks, because after all, all the risks that occur will result in financial losses (immediate or longterm) for the business.

Management of receivables. The implementation of sale policy by immediate payment method with the pharmacy clients is always well executed. In addition, the company also has strict regulations on inventory levels, inventory levels at the appropriate level. The Company has managed the risk of receivables at the best level. The risk of exchange rate and credit is controlled by the Company through the appropriate use of bank loans, capital and foreign currency regulation. Financial costs are low. Interest rates are always at preferential rates. To identify financial risks, the Company analyzes financial statements for timely assessment of financial risks, if any. Traphaco hires a reputable independent auditing firm (Big 4) to audit its parent company quarterly (Ernst & Young auditing company), audits major project such as the Vietnam Pharmaceutical Factory Project, Factory manufacturing, processing, trading pharmaceutical materials, pharmaceuticals, functional foods at block F5 in Dong Pho Moi Industrial Park, Lao Cai City (Deloitte Auditing Company). The results of the audit show that: There are no serious distortions in the Company’s operations in general and in the financial sector in particular. The participation of the members of the Board of Directors of the parent company’s Board of Supervisors, the controllers of subsidiaries and members of the Board of Supervisors of the member companies has contributed to the financial risk management more effectively.

In order to minimize the risk of share price, price risk of capital instruments arising from investments in affiliated companies, the Board of Directors always study carefully and carefully for each investment decision to associate companies. The review of contracts between the parent and subsidiary companies that the Board of Supervisors performs in 2017 may be considered a typical risk management activity (both legal risk management and financial risk management) because these are contracts of great value. At present, Traphaco has been developed into a system with value chain from raw materials, production, processing and distribution of finished products. Transactions between Traphaco and its subsidiaries (purchase of raw materials, semi-finished products, service fees, royalty fees...) are strictly controlled, with focus on the reasonable transaction price avoiding risk of Tax recollection and fines in cases of transactions related to transferring price. SUSTAINABLE FOUNDATION

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MANAGING RISK TOWARDS SUSTAINABLE DEVELOPMENT

OPERATIONAL RISK MANAGEMENT Risk Management Process RMP66 has been deployed to all processes, across all areas of the company, execute risk-based management for business.

In 2017, we have implemented a complete cycle of closed RMP with full steps: risk identification and evaluation, risk scheduling, risk processing, and result reporting. »» Rate of risk has been eliminated or reduced to 85%. »» The quantity risk is reduced 15%. »» The severity of risks is reduced 45%.

RISKS RELATED TO SUSTAINABLE DEVELOPMENT Traphaco's objective of sustainable development risk management is to maintain and develop the Company in association with environmental protection activities and to contribute to the building of community and society.

One of the key drivers of the increased demand for sustainable risk management is the need of more stringent conformity to national and international laws in governance and operation of the Company. In 2017, Traphaco has focused on managing sustainable development risk in two aspects: »» The environmental and social impacts to Traphaco; »» Impacts of Traphaco's business activities on the environment and society;

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IMPACTS OF TRAPHACO'S BUSINESS ACTIVITIES ON THE ENVIRONMENT AND SOCIETY Sustainable development Strategy

We build and integrate our vision of sustainable development into a business strategy that ensures business profitability, dividend for shareholders and sustainable development goals.

Financial reports and report on corporate governance

We develop mechanisms for providing non-financial information and financial reports to enhance the transparency of information provided to stakeholders, establishing a positive image of the business in the eyes of investors and the community. In addition, information for the management of divisions is always updated, ensuring the information of operation and financial activities is reported timely and accurately to the Company leaders.

Investment in human resource

The competition in the labor market is increasingly acute, leading to the risk of brain drain, failing to retain quality personnel in the Company. To avoid this risk, the Company always creates a good working environment, with opportunity to advance and develop further in career, encouraging morale of employees. The change in payroll and remuneration policies with 3Ps – the modern method that is being applied by many large firms is being researched, established and completed. In order to increase the staff's attachment to the Company as well as to better understand the employees, Traphaco also cooperated with Anphabe to conduct "Traphaco Human Resources Survey". As a result, the Company has developed an appropriate personnel policy and increased the satisfaction of "Traphaco people". In addition to the positive results such as Traphaco employees (82.7%) enjoyed excellent performance, far above the industry average (64.8%) and Vietnam (63.1%), the Company paid much attention to indicators that need to be improved, such as the level of satisfaction in mid-level managers who want more initiatives in their work.

82.7

Traphaco staff's happiness level at excellent are of survey-respondent staff.

%

SUSTAINABLE FOUNDATION

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MANAGING RISK TOWARDS SUSTAINABLE DEVELOPMENT

Information security

Company's strategic positioning has also mentioned "Modernizing supply chains based on advanced technology and modern management systems", the application of ERP in entire the system brought outstanding advances in business; or the application of electronic invoices in business in 2017 brought great benefits to business. Besides, information security is a risk management activity that must be put in first priority.

• Divisional data stored on the central data system has not been screened carefully at divisions or personal emails have been used for work; which lead to the risk of data loss. To avoid this risk, in the IT policy of Traphaco in 2017, the IT division of the Company has developed and issued policies to store and use data in divisions, forbidding the use of personal emails on the job and prevent this access in corporate network. • Facing the risk that server room can not meet the needs of increasing use, Traphaco has upgraded the facilities and equipment, added remote warning and screening devices for server room. • Softwares accessible to the Company’s server were not strictly controlled, making it hard to track data usage, posing the risk of data stealth and leakage. The risk management approach adopted by IT in 2017 is to review the control mechanisms in accessibility of existing software and updating the system.

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Traphaco members support Artichoke growers during the Leaf-cutting festival in Sapa, Lao Cai.

Guaranteed raw material input

Input material is an important factor in the production process, occupying a large proportion in the cost structure and has great influence on the Company's production and business activities. Good planning and risk minimization ensure smooth production flow, reasonable costs, and optimal profitability. • For pharmaceutical raw materials and imported materials, exchange rate and evaluation on suppliers are carefully controlled, regularly and periodically. • For medicinal herbs, seasonal factor and stable sources of raw materials are issues of great concerns. Company leaders have connection with local authorities, and commitments to farmers through contracts to grow medicinal herbs and balance interests between farmers and the Company. The Company has "local" staff, the Greenplan project operation is to connect four "partners": Government - enterprises scientists - farmers to ensure active development of medicinal herbs plantations according to GACP - WHO standards to meet high quality raw materials and stable production.

SUSTAINABLE SUSTAINABLE FOUNDATION FOUNDATION

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MANAGING RISK TOWARDS SUSTAINABLE DEVELOPMENT

Effective sales policy

When implementing the sales policy, if Business Division does not comply with the Company's sales policy, it will lead to the risk of losing clients’s trust and getting no revenue growth. To minimize this risk, the Company has made a survey on clients’ compliance to sale policies in 2017 through 2 criteria: • Supporting retail price by "Mystery shopper" program, thus controlling the retail price of the Company, resulting in stable profit for clients. • Examining the activities of the provinces & branches in terms of: sales, market, salary & expense management.

Traphaco staff instructs clients to use DMS software to get orders at the pharmacy.

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IMPACTS OF ENVIRONMENT AND SOCIETY ON TRAPHACO Traphaco is a pharmaceutical enterprise. As a result, the risks from the social environment have a direct impact on the business operations of Traphaco, especially the GreenPlan project, which grows and harvests medicinal herbs that meet GACPWHO standards. Traphaco's objective in risk management is to control the size and extent of potential loss and ensure that production flow is smooth, cost effective and optimized. In addition to the risk management, Traphaco has internal control and supervision units involving in the whole risk management system to ensure steady growth, efficiency and sustainable development. Artichoke plant in Sapa, Lao Cai.

EXECUTIVE BOARD To control the implementation of the business plan and the sustainable development strategy in the period 2017-2020 in each division and subsidiary, CEO decided to establish Overseer Committee on Nov 30, 2017.

Functions and duties of the Overseer Committee

1

Oversee the implementation of the work flow in divisions, subsidiaries and assigned units.

2

Oversee the implementation of work reports of divisions, subsidiaries and assigned units.

3

Evaluate the performance of staff and divisions as required by the CEO.

4

Assist the VP of Strategy to evaluate monthly KPIs within the Company.

5

Recapitulate emulation programs (organized by the Company’s Party cell/Trade Union/...).

6

Other work required by the CEO.

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STRONG CONNECTION WITH STAKEHOLDERS

In order to synchronize all resources, we need the consensus of shareholders, the co-operation and trust of partners, the support from the society and above all, the endeavor of all staffs. In our viewpoint, the win-win principle is the key factor to create a tight connection between Traphaco and other partners.

STAKEHOLDERS OF TRAPHACO:

MANAGEMENT METHOD We identify stakeholders based on the possible mutual effects between Traphaco's activities on individuals or organizations who are interested in influencing current Traphaco operations. We build and develop relationships based on long-term interests between parties. This relationship is based on trust, transparency, and respects of corporate ethics. We reach out to stakeholders through a variety of channels in proper ways to listen to opinions and interests on Traphaco's operations, especially in corporate governance, economic growth, social and environmental contribution. Dialogues with the parties also help Traphaco proactively identify issues, as well as helping Traphaco to objectively review policies, reporting and disclosure information outside.

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STAKEHOLDERS OF TRAPHACO For each target group, Traphaco uses different approaches to access information. Every feedback is carefully researched and considered for proper adjustments in our policies and practices.

»» Meet investors in persons; »» The AGM; »» IR newsletters; »» Website Traphaco;

Methods of Approach and Receiving feedback from stakeholders:

»» Programs of Exchange information, cooperation, introduction to investors.

SHAREHOLDERS/ INVESTORS

PRESS AGENCY

REGULATORY AUTHORITY

»» Meet investors directly; »» The AGM; »» IR newsletters; »» Website Traphaco; »» Programs of exchange information, cooperation, introduction to investors.

»» Agents, counselors in direct contact with clients; »» Client service center and 24/7 hotline; »» Client response channel integrated on the website system.

CLIENT

LOCAL COMMUNITY

»» Participating in conferences and seminars organized by the Government, the Ministry;

»» Collaboration with local authorities to contact, inquire after local people.

»» Joining organizations, associations: Vietnam Insurance Association; Business Council for Sustainable Development; World Economic Forum…

»» Employee’s Annual Meeting; »» Internal publication: Internet channel, periodical newsletters, Traphaco's research journals; »» Training programs.

EMPLOYEE

PARTNERS/ SUPPLIERS

»» Meeting face to face; adding provisions in bidding regulations and contracts with suppliers.

INVOLVEMENT OF STAKEHOLDERS IN TRAPHACO'S POLICIES AND ACTIVITIES Stakeholders are important partners; their feedback is a valuable source of information for strengthening operation and better growth. After meeting and discussions, we have seen our shared concerns and their importance to Traphaco’s development. This lays the foundation for us to develop the content of the Sustainability Report 2017. By assessing the importance of issues, we make investments, allocate resources that best meet stakeholder expectations, and ensure sustainable development of the Company.

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STRONG CONNECTION WITH STAKEHOLDERS

STAKEHOLDERS

CONCERNS

Ø Effective and sustainable economic growth;

SHAREHOLDERS/ INVESTORS

Ø Information transparency, guranteed interests of investors; Ø Corporate governance competence, market value of stocks and market capitalization; Ø Dividend.

Ø Brandname and prestige of the Company;

CLIENT

Ø Diverse products and effectiveness; Ø Win-win sales policy; Ø Attentive customer care.

Ø Opportunities for training and promotion;

EMPLOYEES

Ø Welfare policy, remuneration and benefits for employees; Ø Good working environment, strengthening cohesion of workers; Ø The contributions of employees are appreciated.

LOCAL COMMUNITY

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Ø Increased income, new jobs for local people; Ø Counseling for community health; Ø Measures to protect the environment.


ACTION OF TRAPHACO

VALUES FOR THE PARTIES

Maintain the growth rate of revenue and profit;

Achieve stable growth in revenue, profit and key performance indexes. Gross profit of the Company in 2017 increased by 14% compared to the same period.

Strongly welcome domestic and foreign investors; Implement transparent information and disclosure policy, and equally serve shareholders and investors; Perfect the corporate governance model, the system of regulations on management, to implement the system of risk management, internal control, compliance monitoring, etc.

Enhancing Traphaco's prestige through honoured awards, reinforcing the trust of clients/customers; Researching and developing high quality and effective treatment lines; Develop sales policies to ensure clients’ interests; Improving the quality of salemen and customer service; Expand distribution network to 24 branches nationwide; Applying information technology in products distribution, creating conditions for Vietnamese medicines to expand the market and reach more consumers.

To build human resources with high professional qualifications, attitudes, motivation to fulfill the mission and value of Traphaco; To ensure welfare and remuneration for employees; To encourage employees to improve their professional skills to better serve their work. To uphold and improve the quality of training programs for employees; To call for staff to participate in community activities.

Carry out social responsibility through activities: develop local medicinal herbs plantations to ensure household economy hence better local economy; poverty reduction; gratitude for people with merits; investment for the young generation; Health-care counselling for the counselling sessions nationwide;

Ensure regular dividend payment to shareholders / investors: Dividend since the listing is maintained at 20% -30%; Traphaco's market capitalization in 2017 reached VND4,800 billion (20 times more than its gross profit), compared with VND3,900 billion at the end of 2016.

Brand prestige is improved (Top 40 Most Valuable Brand in Vietnam, Vietnam's Most Prestigious Pharmaceutical Company); Providing customers with high quality products and highly effective treatment; Awarded Prize of High quality Vietnamese goods for continuous 18 years; Approaching and directing 27,000 clients nationwide through modern management system. Investing in nearly 3% of OTC sales for customer service.

Total funds for welfare and remuneration in 2017 was VND 25 billion (compared with VND 15 billion in 2016); Employees received 18/12 monthly salary in 2017. Average income reached VND 21.57 million/person/month, increased 7.5% compared to 2016. To organize 82 training programs with 3,015 participated trainees for all staffs in the Company. The training cost was VND 2,022,559; Reward 20 excellent staff of the Company with a study tour abroad.

Approximately VND 25 billion for community activities, of which 80% (about VND 20.5 billion) was spent on health care.

community through

Protect the living environment of the community through the application of environmental management system ISO 14001: 2015, ISO 9001: 2015 at Traphaco’s plants.

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STRONG CONNECTION WITH STAKEHOLDERS

STAKEHOLDERS

CONCERNS

Ø To carry out the undertakings of the Government;

REGULATORY AUTHORITIES

Ø To fulfil obligations to the state budget; Ø To implement responsible investment, research and development of green products; Ø To offer solutions for addressing climate change.

PRESS AGENCY

PARTNER/ SUPPLIER

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Ø Financial transparency; Ø Improve communication with the media about the operation of the Company.

Ø Specific requirements for investment projects and social-environmental issues; Ø Environmental and social responsibility of suppliers.


ACTION OF TRAPHACO

VALUES FOR THE PARTIES

Proactive in deploying the campaign “Buy Vietnamese”, contributing to the increase in the use of qualified madein-Vietnam drugs, promoting the pharmaceutical industry in Vietnam;

Contributing nearly VND 1,000 billion to the state budget since the listing.

Development of green products to ensure healthy life for the community;

Provide quality products, effective treatment for the community. For 18 years, we have obtained the prize for high quality Vietnamese products. Boganic was honored in the top 10 Vietnamese brand name for the second time.

Maintaining a quality management system that meets the GPs standards at Traphaco's plants.

Efficiently and effectively use of resources.

Closely connected with the media, ensuring that communities and stakeholders are well-informed of Traphaco's activities, honestly and objectively;

In 2017, Traphaco held a press conference to launch the campaign "Care your liver before it is too late" with the cooperation of MC Quyen Linh; with journalists held "Artichoke Festival” in Sapa, Lao Cai;

Increasing the amount of information through press releases, short articles, in-depth analysis to targeted press agencies.

Attending "Online Exchange: Quality control of phamaceuticals" organized by the Ministry of Health and Thanh Nien Newspaper; The inauguration ceremony of Hung Yen “smart” generics plant was solemnly held, with the coverage of many newspapers; The event was also voted by Vietnam Journalists Association as the Top 10 scientific and technological events of 2017; Hundreds of articles, reports on Traphaco newspapers and media in 2017.

Include environmental and social responsibility in the contract terms.

Monitor the practice in employment and environment of suppliers;

BM63/07 "Evaluation Checklist at NCU" has criteria for production environment, waste treatment system.

Include environmental and social clauses in contracts with major contractors.

BM75/02 "NCU's Commitments on Health, Safety, and Environment" clarifies requirements when working within the Company. Prioritize suppliers that meet regulatory requirements, compliance with laws and processes unharmful to environment. PL63/02 "Criteria to Select Competitor": Plus points for NCU with excellent technology certification (Environment friendly, energy effiency ...).

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DETERMINING THE CRUCIAL FIELDS

Traphaco interacts with stakeholders to actively capture their interest in sustainable development at Traphaco. We have devoted our efforts to tackle issues identified as critical.

Traphaco has consulted experts in sustainable development on the issues that are considered essential that Traphaco needs to consider at the present time. At the same time, we also consider the views of employees through the review of proposals and comments raised through internal channels. The assessment of key issues for the Company is based on the analysis of business strategy of the Company, the analysis of press information and business environment of the industry. From there we select the key issues of interest. The magnitude and scope of the issues continued to be screened, analyzed and clarified in discussions with relevant divisions and submitted to senior leaders to identify issues of priority for implementation in 2017.

PROCESS OF DETERMINING THE CRUCIAL FIELD

78

Identifying areas related to sustainable development that may affect Traphaco

Selecting key areas of interest

Building critical matrix

Identifying priority areas for 2017

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


MATRIX TO IDENTIFY CRITICAL ISSUES By evaluating issues after considering level of interest of the parties and the extent of their impact on the business, Traphaco develops a "Matrix to Identify Critical Issues" to prioritize and allocate resources

appropriately to best meet the expectations of stakeholders as well as ensure the sustainable development of the Company.

5.0 4.5

12 Product liability

Crucial criteria for related parties

4.0

3

3.5

Diversity and equal opportunity 9 Local community 11

3.0

Equitable remuneration 10

Energy 6 Employment

Indirect economic 2 impact 7 Safety and health

8 Education and training 4 Wastewater and waste

5 Compliance

2.5

1 Economic efficiency

2.0 1.5

14 Human rights

1.0

13 Supplier Assessment

0.5 0.0 0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Impact on Traphaco The 14 areas covered by the Report are weighted according to the matrix of the key sectors of Traphaco and are classified into 3 groups:

ECONOMY

ENVIRONMENT

SOCIETY

1

Economic efficiency

3

2

Indirect economic impact

4

Energy Wastewater and waste

6

5

Compliance

7 8 9 10 14

11 12 13

HR management Employment Safety and health Education and training Diversity and equal opportunity Equitable remuneration Human rights Community Local community Product liability Supplier Assessment

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Prime Minister Nguyen Xuan Phuc visited TrapacoSapa Pharmaceutical Extraction Plant.


04

ECONOMIC GROWTH The ultimate goal of an enterprise is profit; however, it can not be separable from the national interests. Traphaco does not only act towards a green development but also operate on the basis of law abiding spririt and the trust of the community society, government, and ministries, which adds to traphaco's tangible and intangible values.


MANAGEMENT METHODS

Traphaco has considered securing economic objectives the foundation for the sustainable development strategy, since only building a solid resource for the enterprise can Traphaco provide lasting benefits to clients, shareholders, employees and the community.

In order to establish a firm economic foundation, Traphaco ensures the annual steady growth of the total assets, revenue and profit, and maintains the leading market share of key products, harvesting the advantages of the strongest distribution network in the pharmaceutical industry; its solvency is always guaranteed. These activities are reflected through 3 specific contents as follows: »» Ensuring the economic growth. »» Contributing indirectly to the economy »» ESG in the supply chain Associated with the SDGs.

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TYPICAL PROJECTS Highlights of 2017 scientific activities:

THE INAUGURATION OF THE SMART PHARMACEUTICAL PLANT THE PHARMACEUTICAL PLANT OF TRAPHACO IS A CLEAR EVIDENCE OF EFFECTIVE GROWTH, SUSTAINABLE INVESTMENT; EXPRESSING THE VIEWPOINTS OF SUSTAINABLE DEVELOPMENT BASED ON 4.0 TECHNOLOGY AND THE ENVIRONMENTFRIENDLY AND GUARANTEED SOCIAL VALUES. The most modern production technology in the pharmaceutical industry Comprehensive waste treatment system Management and operation by an information technology system

The total investment of the new Plant is

VND

477 BILLION

The project started in May 2015 with the total cost of VND 477 billion, located in Van Lam Industrial Zone – Hung Yen. Only after 2 years of implementation, basically, the important construction items have been completed, and the GPs-WHO certificate was conferred by the Ministry of Health on May 30, 2018, setting a "new record" in the pharmaceutical industry in Vietnam.

With a desire to "Raise the standard of medical examination and treatment in Vietnam, approaching the modern medical trends in the world", Traphaco inaugurated the most modern pharmaceutical plant in Vietnam, which confirms its innovative pioneering position, and catching up with modern and advanced pharmaceutical production technologies applied in countries having the world’s leading pharmaceutical industries (Europe and America). With the application of information technology to the management and operation, the Plant is synchronized and fully automated for the production line: The line of eye-nose drops of BFS technology - the most advanced in the pharmaceutical industry; the line of pill production is equipped with the automatic and consecutive system, which is operated by the European standards for robotic arms. Large-scaled and automatic lines of siro production are based on the principle of "No touch, No dust" to minimize human intervention and improve the product quality. Annually, Vietnam’s National Health Insurance Fund spends about VND 50 trillion on drugs supplied to hospitals, which suggests an enormous need for high-quality drugs for treatment. Traphaco will be the pioneering pharmaceutical enterprise heading towards higher standards such as GMP/ EU so that Vietnamese people have the opportunity to use "foreign drugs at a domestic price”.

ECONOMIC GROWTH

83


ENSURING EFFECTIVE & SUSTAINABLE GROWTH

02

nd

From the fifth place among listed pharmaceutical companies in 2011, Traphaco has risen strongly to the

Traphaco owns a complete value chain, a strong brand and a nation-wide distribution system with

place in terms of revenue and profit

24

Serving over

01

branches

27,000

distribution subsidiary

OVERACHIEVING THE CONSOLIDATED PROFIT TARGET

clients

300

260 228

250 200

203 171

163

150

Compared with the plan, the consolidated after-tax profit reached VND 241.06 billion, up 14% over the same period in 2016.

100 50

(Billion VND)

2013

2014

2015

2016

2017

CONTINUEING TO HAVE GOOD FINANCIAL PERFORMANCE INDICATORS AMONG LISTED MEDICAL COMPANIES Profit margin The rate of return on the Company’s revenue has increased steadily over the years. In particular, in 2017, this ratio increased by 2.5% compared to 2016. The Return on equity (ROE) was 24.41% and Return on assets (ROA) reached 18.04% in 2017, recognizing an improvement compared to 2016.

Profit margin (%) Return on assets (ROA)

24.41 22.19

23.20

23.03

16.77

17.07

18.04

16.65

13.92

14.72

2013

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

Return on sales (ROS)

30.16

10.18

84

Return on equity (ROE)

9.90

2014

10.32

2015

11.42

2016

2017


Profit margin

2013

2014

2015

2016

2017

Return on assets (ROA)

16.65%

14.72%

16.77%

17.07%

18.04%

Return on equity (ROE)

30.16%

22.19%

23.20%

23.03%

24.41%

Return on sales (ROS)

10.18%

9.90%

10.32%

11.42%

13.92%

Solvency Traphaco's solvency Traphaco's solvency chart chart compared other listed compared to othertolisted pharmaceutical companies (%) pharmaceutical companies (%)

24.41

24.41

18.04

18.04

13.92

13.92

22.73

22.73

15.99

15.99

15.81

on assets (ROA) Return on Return assets (ROA) on equity (ROE) Return on Return equity (ROE)

15.81

10.07 10.07 8.01

22.62

22.62

17.40

17.40 15.68

10.0715.50 10.07 8.01

15.68

19.51 17.66 16.01

19.51 17.66 16.01

15.50 9.52

9.52

9.09

9.09

on sales (ROS) Return on Return sales (ROS)

TRA

TRA DHG

DHG IMP

IMP DMC

DMC OPC

OPC PME

PME

In 2017, Traphaco’s ROE and ROA indicators enjoyed 1st ranks compared to other listed pharmaceutical companies. TRA

DHG

IMP

DMC

OPC

PME

Return on assets (ROA)

18.04%

15.99%

8.01%

17.40%

9.52%

16.01%

Return on equity (ROE)

24.41%

22.73%

10.07%

22.62%

15.68%

19.51%

Return on sales (ROS)

13.92%

15.81%

10.07%

15.50%

9.09%

17.66%

In 2017, Traphaco continued to gain good indicators compared to the pharmaceutical companies listed on the HOSE such as account receivables turnover,

ROA, ROE; and was one of the companies with high dividend payouts (30%).

Source: Traphaco Financial Report throughout the years, Financial statement of 2017 of other listed companies.

ECONOMIC GROWTH

85


ENSURING EFFECTIVE & SUSTAINABLE GROWTH

50

TRAPHACO HAS BEEN AMONG FORBES’ TOP LISTED COMPANIES IN VIET NAM FOR 5 YEARS (2013, 2014, 2015, 2016, 2017)

The “Top 50 listed companies in Vietnam” is designed to provide information on listed companies with excellent business results and high profits for investors. These companies have outstanding business performances in 12 industries with a dominant position in the market. The list is based on five criteria: The annual growth rates of sales, profits, average return on capital (ROC), return on equity (ROE) and earnings per share (EPS).

INCREASING PROFIT BY CUTTING COSTS

Production line at Traphaco Plant.

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Cost reduction is achieved by improving the supply chain efficiency (cutting raw material costs, production costs, transportation costs, and commissions ...): In our supply chain, we strive to reduce the costs incurred in various forms: the extraction plant is built near the medicinal herbs plantations to save on transportation costs and ensure the high quality of medicinal herbs. The production lines apply modern and environment-friendly technologies with high productivity, limiting the waste of energy and environmental treatment costs. We also set up channels to interact directly/indirectly with our clients, pharmacies, hospitals and end-users, to shorten distances and secure benefits for stakeholders.


INDIRECT ECONOMIC CONTRIBUTIONS

SIDING WITH THE SUSTAINABLE DEVELOPMENT STRATEGY OF TRAPHACO, FARMERS WORKING ON THE MEDICINAL HERBS PLANTATIONS AND STAFF OF THE COMPANY PARTICIPATING THE GREEN VALUE CHAIN HAVE THEIR “SUSTAINABLE EMPLOYMENT” SECURED. The affluence of the farmers. Payment of dividends to shareholders

Total investment for community activities

Unit: billion VND 2011

24.67

2012

24.67

2013

37

2014

74

2015

74

2016

103.63

2017

124.35

Total dividends paid to shareholders of Traphaco from 2011-2017 is VND 462.4 billion. In 2017, Traphaco maintained the dividend rate of 30%, equivalent to VND 124.35 billion (up 20% compared to 2016), which is high compared to the average rate of the pharmaceutical market.

Traphaco’s budget for community activities each year accounts for 1-3% of the revenue. In 2007, the absolute number was VND 25 billion. Among these, the public health care counselling activities have been particularly focused. In addition, Traphaco has actively contributed to humanitarian, charitable, and benevolent activities with the desire to build a happier and better life. Philanthropic programs are frequent, indispensable events, and enthusiastically supported by the leaders to the employees of Traphaco. Jobs creation and local economy development Affirming the pioneering role of a leading pharmaceutical brand in sustainable development, Traphaco has guided and transferred technology to farmers in mountainous and remote areas to jointly build and develop medicinal herbs plantations. The pioneering development of medicinal herbs plantations does not only move towards the sustainable development of Traphaco, creating competitive advantages in the domestic and international pharmaceutical markets but also brings stable incomes for the households in the raw material areas, where the Company leaves its footprint, with a profit of VND 8.6 million/ha/month to VND 16.6 million/ha/month. According to the sustainable development strategy of Traphaco, the farmers and the staff of the Company participating in the Green Value Chain have their "sustainable employment" secured. ECONOMIC GROWTH

87


ASSOCIATE ESG IN BUSINESS OPERATIONS

DEVELOP THE GREEN SUPPLY CHAIN

The Green Supply Chain - Traphaco's distinctive Green Value Chain, is the foundation for us to carry on the pioneering mission of creating Green Pharmaceuticals to protect human health. The Traphaco Green Value Chain is ideally linked to sustainability, in particular to social and environment-friendly investments, and in all activities from raw material inputs to production and distribution of products and services to patients. Traphaco's Green Supply Chain

SUPPLIER OF RAW MATERIALS

Suppliers

Manufacturing

Hoang Liet Dietary Supplement Manufacturing Plant

SUPPLIER OF PHARMACEUTICAL MATERIALS

Traphaco Hung Yen Pharmaceutical Plant

Traphaco CNC Plant

TraphacoSapa Medicinal Extract Plant

Sales Division (North)

Central Branch

Nghe An branch

GREEN TECHNOLOGY

GREEN PRODUCT

WAREHOUSE OF FINISHED PRODUCT

Daklak Pharmaceuticals & Medical Materials Company

GREEN MATERIAL

Branchs in HCM city

PHARMACEUTICAL REPRESENTATIVES

GREEN SERVICE

Distribution system DRUGSTORE

HOSPITAL

Usage

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PATIENT


CONTROLLING INPUT MATERIALS BY GREEN INGREDIENT TARGETS First of all, Green Raw Materials are closely associated with the establishment and development of sustainable growing areas. These regions for growing medicinal plants meet the requirements of the World Health Organization (GACP-WHO) Guideline for Good Agricultural And Collection Practices. The production of GACP-WHO pharmaceuticals aims to ensure: Having good, stable, affordable and durable pharmaceutical supplies; conservation of medicinal plants and biodiversity and environmental protection. More importantly, this practice helps patients reduce the burden of treatment costs, and creates highincome jobs for hundreds of farmers and people of ethnic minorities in remote areas. In the future, besides guaranteeing the quality and quantity of input materials to stabilize the production, the Company will supply the local market with medicinal plants under the name Traphaco, and the international market under Vietnamese names. Green materials are obtained by the environmentfriendly procedures of planting and harvesting that have been carefully researched and developed. In addition to creating a source of quality materials of sufficient quantity, in collaboration with scientists, Traphaco is particularly keen on acquiring and exploiting indigenous, traditional knowledge and experience in using medicinal plants to discover the formula for high therapeutic effectiveness. Green materials also mean that the company is interested in using environmentfriendly materials, excipients and solvents that are safe or less harmful to the environment and the health of workers; and the economical use of raw materials.

The GACP-WHO medicinal herbs plantation of Traphaco in Nam Dinh. In addition to providing quality medicinal materials for production, the company's medicinal plants contributes to increasing carbon storage and absorbing CO2, thus, slowering the warming of the Earth. For all raw materials suppliers, the Company focuses on and asks for the commitment to complying with codes of conduct, fair business practices and ethics among suppliers, contractors, which demonstrates the core social responsibility and morale as defined by WHO. Setting these conditions, Traphaco acts as the coordinator of the supply chain for green materials.

MODERNIZE THE PROCESSING AND PRODUCTION TOWARDS GREEN TECHNOLOGY The Company pays attention to applying green technology (modern and environment-friendly technology) at every stage of its production process. In its production of pharmaceutical materials, the Company cooperates with the Institute of Medicinal

Materials, Vietnam Academy of Agriculture... to study and carry out the environment-friendly processes of planting/harvesting and to ensure the safety and effective provision of materials, reducing energy consumption (electricity, coal) and minimizing the use of organic solvents.

ECONOMIC GROWTH

89


ASSOCIATE ESG IN BUSINESS OPERATIONS

In its production of pharmaceutical products, the Company applies energy saving technology, reducing dust emission; The lines use less harmful materials for the environment (aluminum-aluminum blisters instead of PVC blisters). The Company offers environment-friendly solutions such as increased packaging productivity, automation, and replacement of hazardous materials, contributing to the improvement of environmental performance. Fully aware of the severe competition in the pharmaceutical market, Traphaco is determined to build the most modern pharmaceutical plant in Vietnam, with EU-standard production lines, equivalent to those of the world’s leading producers. A successful registration of the GMP-EU standard will serve as a powerful pass for Traphaco into the ETC market (treatment system) apart from the OTC channel. Green technology is not only present in the production line but it can also be easily spotted in the working environment with nature-based designs (office ventilation systems, green fences, etc.) Further more, the Company pays due attention to the collection

The BFS production line of eye drops at Traphaco Hung Yen Factory. of residues, the classification and treatment of waste according to regulations; and the selection of decent waste treatment companies with appropriate technologies to ensure environmental safety.

GREEN PRODUCTS - THE KEY OBJECTIVE THAT MAKES TRAPHACO DIFFERENT The Company is committed to providing high quality products and services that meet the needs of clients. Users are very interested in the effectiveness and safety of traditional herbal medicines or herbal products. To confirm the quality of Traphaco products, the Company, in collaboration with the treatment facilities, has been evaluating the effectiveness of treatment of traditional medicines. Over the years, the Company has carried out many projects to assess the treatment potency of 11 green products. The results show that the green products of Traphaco are highly effective in treatment, which helps increase the trust of physicians and patients for Traphaco and its products. At present, Traphaco has 53 products on the list of medical products sponsored by Vietnam’s National Health Insurance Fund, and among them, 5 products of "Vietnamese drug star" are Boganic, Ampelop, Duong cot hoan (bone strengthening), Hoat huyet duong nao (cerebral blood circulation improvement), Didicera. This

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is the Company’s significant contribution to the health care service for Vietnamese people, especially the poor.


DEVELOP GREEN SERVICES WITH BREAKTHROUGHS IN THE BUSINESS OPERATIONS

DEVELOP EFFECTIVE PRODUCT POLICIES The Company has developed the product policies both intensively and extensively including modern forms such as hard capsules, soft capsules, lengthenedpotency tablets, powdered mix ... to meet the demands and tastes of different groups of clients. In addition, Traphaco builds sales policies on the basis of mutual benefits. In 2017, Traphaco maintains a 19% discount rate for contract-signing clients that meet the Company's criteria. Many promotion programs are also offered, together with the message about Traphaco’s added value to clients on many advertising channels, helping pharmacies in introducing products to consumers.

Traphaco’s driving force is the continuous improvement and innovation, ensuring the competitive advantage. The success of Traphaco is a testament to the development of interlinkages from R&D, production to marketing, all aspects throughout the Green Value Chain.

BUILD A WIDE DISTRIBUTION NETWORK Traphaco's distribution of product is in accordance with the Company's vision as part of its goal of providing Green Services. By 2017, Traphaco has developed a nation-wide distribution network in all provinces and cities of Vietnam, providing products to more than 27,000 companies, clients and distribution partners across the country. In addition, the Company has established relationships with foreign partners to export its medicinal products to the international market (Myanmar, Cambodia, Russia, Italy ...) and import products of high competitiveness to meet the domestic demands.

COMMUNITY SERVICE The Company is a typical example of linking production and business with community care to make life better and happier. In addition to producing and supplying the market with safe and high-quality medicines, consultation and guidance on their safe, suitable and effective usage is also pioneered and maintained by Traphaco over the past 19 years.

INTEGRATE SUSTAINABILITY THE SUPPLY CHAIN

IN

With a nationwide network, Traphaco uses products and services by hundreds of local and foreign suppliers. Ensuring sustainability is one of the priorities of Traphaco's supply chain management. We select suppliers who are conscious of environmental protection, employee rights, and ethical business. The assessment of environmental, social and governance risks in the supply chain is not only important to Traphaco but also to our investors and clients. Taking the issue of sustainability into account when making procurement decisions helps us adhere to our sustainability goals, especially with regard to environmental issues.

ECONOMIC GROWTH

91


05

SUSTAINABLE SOCIETY The happiness of the farmers is as simple as soil. It is seeded with traphaco and blooms every harvest season. Every step we take, every place we reach is marked with radiant, heartfelf smiles. “Touching happiness, for traphaco-ers, is sufficient.�

Children of ethnic families whose parents work for Traphaco in Sapa, Lao Cai.


MANAGEMENT METHOD

To Traphaco, human is the engine of innovation and the key to success. Humans and the development of human resources are the key driving force of business development over 45 years of Traphaco’s formation and developement. Besides the objective of strong economic growth, traphaco’s sustainable development strategy heads towards the balance with the interests of the community and the environment, "setting community benefits as the foundation for all operations". Therefore, community service is traphaco’s emphasis. For social investment, we focus on developing human resources and ensuring human rights in every operation of the

company. With a desire to bring about a better life to the community, traphaco is committed to investing in community projects and realizing product responsibility. To Traphaco, community activities are long-term investments for the company. On behalf of shareholders, we implement community development projects, giving the community and traphaco benefits by maximizing the values brought to the locals and the impact level of Traphaco in local areas.

FROM OUR POINT OF VIEW, A SUSTAINABLE SOCIETY MEANS A SUSTAINABLE COMMUNITY, ENSURING HUMAN RIGHTS, SUSTAINABLE RESOURCES, TOGETHER WITH THE COMPANY’S DEVELOPMENT, AND THE MOST IMPORTANT, IS TO CREATE AND COMPLETE THE PRODUCTS VALUABLE TO THE SOCIETY AND THE COMMUNITY.

NO POVERTY

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GOOD HEALTH AND WELL-BEING


BUILD ONE OF

THE BEST WORKING ENVIRONMENTS

IN VIETNAM To actualize one of the general objectives to be achieved by 2020 TRAPHACO PEOPLE ARE HAPPY with their life and work, making TRAPHACO one of the best working environments in Vietnam. In September 2017, Traphaco conducted a human resources survey with the participation of 827 employees, both staff and managers, working in all divisions such as Sales, Marketing, Finance, Risk Management, Administration, R&D, Quality Control, Production, etc., focusing on those who have 6-11 years working for Traphaco.

and other fields in Vietnam, Traphaco’s employees tend to rank higher in "Reason Attachment" and "Emotion Attachment", leading to higher positiveness in both "Voluntary Effort" and "Stay Commitment". Overall, the happiness level of Traphaco's employees is excellent (82.7), more than the averages of the sector and the nation.

The result, published by Anphabe, in comparison with the pharmaceutical industry

Specifically, at the happiness index of 82.7, Traphaco employees have a good level of happiness. The average happiness index of the pharmaceutical industry is 64.8 points (survey conducted with 1,749 people in the pharmaceutical industry) and of Vietnam’s labor force is 63.1 points (survey conducted with 26,128 employees in different industries). Traphaco staffs have the highest points in:

1

2

Trust in the sustainable development

Strong attachment to coworkers

3 Positive referral about the Company

SOCIAL RESPONSIBILITY

95


SUSTAINABLE HUMAN RESOURCES

Human resources are the sap, the driving force and big target of the company

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HUMAN RESOURCE MANAGEMENT STRATEGY Traphaco considers human resources the sap of the Company, training the basic factor to meet the strategic objectives, and the quality of employees one of the most important competitive advantages. Therefore, the labor policies are always prioritized by the Company. Employees in Traphaco are always guaranteed with their material incomes and spiritual gains, a good working environment, receiving due respects and plenty of thriving opportunities.

Number of staff

Percentage over total number of Traphaco staff

702

100%

0

0%

691

98.43%

11

1.57%

Male

395

56.26%

Female

307

43.74%

Under 30

146

20.79%

30 - 50

507

72.22%

Over 50

49

6.99%

Labor structure in 2017 according to criteria Nation Vietnamese Foreigner Structure by ethnicity Kinh Ethnic minorities

WORKFORCE STRUCTURE IN TRAPHACO By 31/12/2017, the total number of employees is 702, and 255 collaborators, down 9.4% compared to 2016 (due to the transfer of staff from Traphaco to Traphco Hung Yen). Gender composition is quite balanced as male employees accounts for 56.26% and female employees 43.74%. The number of middle-aged employees (those from 30 to 50 years of age, with solid professional and rich experience) accounts for 72.22%, young employees under 30, 20.79% and those who are over 50, highly experienced and has a lifetime relationship with the Company, 6.99%.

Gender

Age

Training Post-graduate

41

5.84%

Graduate

230

32.76%

Other

431

61.40%

468

66.66%

42

5.98%

192

27.36%

Division Sales Production Office

In terms of qualifications, the number of employees who has a college or postgraduate degree accounted for

39%

With the increase in quantity and quality of workforce, Traphaco has successfully achieved business and sustainable development requirements of the Company, reflected by the growth in sales and profit of the Company in the year of 2017 compared to 2016.

SOCIAL RESPONSIBILITY

97


SUSTAINABLE HUMAN RESOURCES

In 2017, Traphaco's turnover rate is 2.71%, in which that of male employee is higher than that of female. Over 50-year-olds tend to have the highest job retention rate (0%), while the leaving rate of employees under 30 years old is 0.85% and those who are from 30-50 years of age show the highest leaving rate, 1.85%. Age

2017 Statistics

<30

The number of employees terminating labor contract, other

Number (person)

The number of employees being transferred to Traphaco Hung Yen Co., Ltd

Number (person)

Retirement

Ratio (%) Ratio (%) Number (person) Ratio (%)

Gender

30-50

>50 0

6

13

0.85

1.85

27

99

3.85 0

Male

Female

10

9

1.42

1.28

4

40

90

14.1

0.57

5.7

12.82

0

14

2

12

1.99

0.28

1.71

EDUCATION AND TRAINING Training courses the Company provided

Sustainable human resource development is central to our longterm strategy. The company has a policy of training and developing human resources to meet the change of technology, the increasing demand of clients and the development needs of individuals. The company always encourages employees to participate in learning and training in order to improve their professional skills to better serve their work.

Organizing training courses at the Company: Using companyâ&#x20AC;&#x2122;s own staff or outsourcing experts for training and teaching. Training budget paid by the Company in 2017 is VND 2,022,559,000. Assigning staff to participate in external training courses: The Company sends staffs to attend advanced training courses in professional skills or skills suitable for each position. All expenses for the training were paid by Traphaco JSC. Regular training: Managers at all levels are responsible for training their employees to have the best work skills. Managers should always keep in mind that training and upgrading their qualifications and staffsâ&#x20AC;&#x2122; is a matter of urgency and this is one of the important tasks in the work plan while maintaining regular training. Self-learning: Employees are responsible for self-learning to improve their professional knowledge, skills and work skills to meet the requirements of the job. Expense (if any) shall be paid by individuals.

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IMPROVE THE QUALITY OF HUMAN RESOURCES AND BUILD LONG-TERM VALUE FOR EMPLOYEES

Training results in 2017 2017 No

Content

Unit

Implemented

1,000

2,022,559

% over total implemented

General report 1

Total cost of training: Training cost/person/year

2

2,113

Total count of trainees:

Number of trainees

3,015

Number of trainings/person/year

Number of trainees

3.2

Course

82

Compliance, mandatory: 16 courses

Number of trainees

473

15.69

1,000

150,079

7.42

Management skills 14 courses

Number of trainees

235

7.79

1,000

688,496

34.04

Soft skills and professional skills 36 courses

Number of trainees

2,185

72.47

1,000

1,091,270

53.95

Attending seminars, conferences, listening to seminars, ... 11 course

Number of trainees

117

3.88

1,000

30,900

1.53

Support advanced training (University, Graduate,...): 5 courses

Number of trainees

5

0.17

1,000

61,814

3.06

3

Number of training courses

4

Average satisfaction level/total training courses completed: 96.47% Analysis by training content

1 2 3 4 5

SOCIAL RESPONSIBILITY

99


SUSTAINABLE HUMAN RESOURCES

TYPICAL EXAMPLES

COMPANY STRATEGY TRAINING PROGRAMS 2017 IS THE YEAR TRAPHACO DECLARED THE COMPANY STRATEGY FOR THE PERIOD 2017-2020 AND FOR ALL EMPLOYEES THROUGHOUT THE COMPANY TO UNDERSTAND AND ACHIEVE THE GOALS SET OUT BY THE STRATEGY, THE COMPANY HAS IMPLEMENTED A SERIES OF TRAINING PROGRAMS - “COMPANY STRATEGY FOR 2017-2020” WITH 956 PARTICIPANTS / 9 PROGRAMS IMPLEMENTED FOR DIFFERENT TARGET GROUPS.

The program is designed with three topics to provide practical knowledge and information needed in the international pharmaceutical market, domestics and the current situation as well as solutions to implement the strategic goals that the Company set out:

Session 1: Strategy Overview Session 2: Traphaco’s Strategy for the 2017-2020 period Session 3: Discussion on related issues The training and communication program helps the trainees to understand the company strategy, the importance of strategy development in each stage and the specific objectives of the Company’s Strategy for the 2017 – 2020 period as well as specific strategies for each division.

956

participants / 9 programs were conducted for different target groups.

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SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

Attending the program is an opportunity for employees coming from member companies, branches, units and divisions of the Company to share and exchange ideas and views with trainers, Strategy Committee members in order to realize the objectives set out in the strategic plan from a variety of perspectives, thereby gaining a more comprehensive view of action for the Company’s overall development.


RECOGNIZING AND CULTIVATING TATLENTS, ENHANCING THE ATTACHMENT OF EMPLOYEES RECRUITING AND ATTRACTING TALENTS To attract and retain staff, the recruitment activities of Traphaco are public and transparent with full procedures, clear standards, fairness guarantee, and priority given to the development of internal human resources. Traphaco always welcomes dynamic,

Age

Data of 2017

Number of recruits in 2017

enthusiastic and aspiring candidates who are ready to take on the challenges of Traphaco's business and environment. In 2017, Traphaco has recruited 56 new employees, 61% as compared to 2016, as follows:

Number (person) Percentage (%)

Sex

<30

30-50

>50

Male

Female

35

17

4

36

20

5

2.42

0.57

5.13

2.85

WELFARE POLICY Income, bonus and welfare for workers were secured. On-site poisoning bonus; gasoline, telephone support; special support regime for female staff; vacation; Bonuses for holidays; Gifts for employees who are children of war invalids and martyrs; Gifts for children on the occasion of Mid-Autumn Festival, 01/6; Maintaining the commendation ceremony for the children and employees who have academic achievements ... Total expenditure on welfare funds in 2017 is VND 25 billion.

25

VND BILLION Expenditure on welfare and welfare funds in 2017

Implement the current labor regulations, make communication activities through annual employee conferences, trade unions, internal surveys to understand the aspirations, as well as to share the business direction, results of Traphaco activities, to align and harmonize the goals and motives individuals with the common goals of the organization.

SOCIAL RESPONSIBILITY

101


SUSTAINABLE HUMAN RESOURCES

LABOR HEALTH-CARE POLICY

In 2017, Traphaco continued to show its interest in the health of its employees through the availability of regular medical staff and medical care for workers; yearly medical examination for workers with expanded examination list, increasing the maximum benefit for workers.

With the strength of products to protect customers against health risks, Traphaco regularly organizes consultancy programs with the participation of experts and doctors for internal customers and staff to enhance the knowledge of health care and protection, especially for women workers.

OCCUPATIONAL HEALTH AND SAFETY

Traphaco follows the GRI G4 guidelines on occupational safety and health issues.

The Company manages the occupational safety and health through the Safety Committee, and the network of staff in charge of safety issue and the Fire Safety and Emergency Response Team. The Safety Committee is a bridge between employers and employees in occupational safety and health. The Company applies OHSAS 18001 (Occupational Health and Safety Assessment Series) to manage occupational health and safety.

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Functions and duties of the Safety Committee • Function: To advise and assist the employer in organizing the implementation, inspection and supervision of the observance of occupational safety and health, food hygiene and safety, fire and explosion prevention and flood prevention and response in the Company. • Responsibility:

1

Coordinate with other divisions in carrying out the work »» Develop regulations, procedures, and measures to ensure occupational safety and health (OSH), food hygiene and safety (FHS), fire and explosion prevention (FEP), in the Company. »» Manage the monitoring of the registration and inspection of machines, equipments, supplies and substances subject to strict labor safety requirements. »» Develop annual plans of OSH, FHS, FEP, and urge and supervise the implementation of these plans; evaluate risks and develop emergency plans. »» Organize activities of propaganda and dissemination of regulations on OSH, FHS, FEP, storm and flood prevention from the State and the Company to all employees.

2

»» Provide trainings on OSH, FHS to employees. »» Conduct inspections on OSH, FEP at least once a month at the production units; Check the working environment, food safety in the kitchen of the Company at least once a month. »» Monitor the situation of work-related injuries and illnesses; Propose to the employer measures to mangage and take care of employees’ health. »» Organize emergency responses: plans, preparation of forces, facilities, finance and willingness to perform tasks when emergencies occur within the Company or locality when required.

Propose to the employer »» Participation in inspecting the observance of regulations of OSH, FHS, FEP according to the current law provisions.

»» Measures to overcome shortcomings of OSH, FHS, FEP.

3

Monthly or ad-hoc reports on violations of OSH, FHS, FEP; OSH risks.

4

Recommendations on rewards and disciplines regarding collectives and/or individuals in implementing OSH, FHS, FEP.

SOCIAL RESPONSIBILITY

103


SUSTAINABLE HUMAN RESOURCES

Functions and tasks of the Safety Committee (continued): • Ensuring occupational safety and health is one of the rights of employees. In 2017 the Company conducted trainings and disseminations of knowledge on occupational safety and health: »» Ensure that employees receive sufficient training duration and contents: Group 1: 8-hour training course

Group 2: 24-hour training course

Group 4: 8-hour training course

• The number of procedures issued and amended in 2017 regarding occupational safety and health: »» Newly issued: 15 »» Revised: 02 • Occupational Safety and Health Risk Assessment: »» Number of job positions evaluated: 04

Group 3: 12-hour training course

Group 5: 56-hour training course

»» Number of hazards detected: 30 »» Number of high-level hazards: 5

Group 6: 4-hour training course

»» Fully provide the information on the workrelated hazards and harmful factors to the employees by identifying hazards, disseminating the identification plates to the employees working at the following positions: Ethylene oxide operation, laser printer etching operation, warehouse locations ...;

• The Safety Committee conducts a monthly inspection of the whole plant to actively identify hazards and improve safe working conditions. The Company encourages and commends employees for their positive contributions to reducing the risks and identifying dangerous and harmful factors. »» Number of hazards identified and resolved: 62 »» Number of hazards to be resolved on schedule: 54 »» Number of hazards resolved with slow progress: 8 »» Number of remaining hazards: 0

»» Provide safety training in insect control; »» Provide training on fire prevention and firefighting skills to employees. 12

100.0%

100.0%

100.0%

90.0% 10

10

100.0%

100.0% 100.0%

100.0%

85.7% 71.4%

9

7

7

7

6

6

6 5 4

4

70.0%

RIH Overcame RIH Fix rate

71.4%

66.7% 8

4

4

4

5

40.0% 5

5

4

4

4

4

4

4

4 10.0%

2

0

-20.0%

Jan + Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Hazard diagram 104

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


• This activity is regularly by month and creates a characteristic culture of Traphaco. • Inspections in 2017 No.

Content

Quantity

Device name and quantity

1

Inspection of equipments with strict requirements on safety

24

Elevator (04 units) Forklifts (02 units) Autoclave, 2-shell boiler, steam generator, compressed air container (17 units) HVAC system (01 system)

2

Industrial gas system

2

Gas system of the canteen Gas system of the Research and Development division...

3

Gas Detector

4

Research and Development area and the canteen

4

Grounding resistance

4

Around the plant

5

Dust particles mearsuring machine Airflow testing machine, hygrometer, thermometer Light intensity meter Temperature sensor meter Engine speedometer

5

Inspection of measuring equipment

6

Differential pressure gauge and pressure gauge

199

Auxillary system of the plant Quality Inspection Division Research Division

Type of injury, injury rate: 0

Rate of occupational diseases: 0

• In 2017, no injuries or deaths occurred to employees and contractors working in the Company.

• No cases of occupational diseases were detected during the periodic health examination in 2017.

• Total number of contractor's employees receiving information on occupational safety and occupational health: 30.

»» »» »» »» »»

Type I health: 85 Type II health: 375 Type III health: 214 Type IV health: 59 Type V Health : 01

• Lost working-day rate: 0 »» This rate shows the actual working-day of the casualty who has not worked since the day of the accident (excluding scheduled holidays: vacation, holiday, weekend). »» Lost working-day does not include the date of the incident. Low safety-related indicators affirm positive trends in employee morale and productivity.

SOCIAL RESPONSIBILITY

105


SUSTAINABLE HUMAN RESOURCES

Result of monitoring and measuring the working environment • The Company always ensures the employees work in good working conditions with minimal health risks. The two evaluation results of the working environment in 2017: No indicator exceeds the threshold and the results are reported to all employees. »» Indicators in evaluation: 374 »» Indicators that meet the standards: 374 • According to the results, the noise is within the range of 64.8 - 84.9 dB, lower than the permitted standard of 85dB (Decision 3733/2002/QD-BYT: Promulgating 21 labor sanitation standards, 05 principles and 7 specifications on labor sanitation. • In terms of the microclimate, physical elements such as "noise, brightness, special physical elements" at the measuring locations are within the permitted limits of Labor Standards 3733/ QD-BYT/2002 by the Ministry of Health. • Management measures: To ensure the noise level is always lower than the permitted standard and protect the health of workers in the plant and no effects are spread to the surrounding environment, the Company has introduced some measures to reduce noise and vibration as following: »» Maintain and replace the noise absorbers, and the anti-vibration on HVAC pipe systems. »» Check for worn-out parts and lubricate or replace parts monthly. »» Provide labor protection for positions with noise higher than 80 dB. 106

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

Measurement results of the working environment test in 2017

No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Factor tested Temperature Humidity Wind speed Brightness General noise Noise frequency spectrum Total dust Dust respirator CO2 CO NOx SO2 NH3 H2S HCL H2SO4 NaOH HNO3 Toluen Acetonitril Methanol

Total samples

Number of samples within limit

Number of samples exceeding the limit

44 44 44 44 12

44 44 44 44 12

0 0 0 0 0

38

38

0

38 31 38 4 4 4 4 4 6 2 2 2 3 3 3

38 31 38 4 4 4 4 4 6 2 2 2 3 3 3

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

• The control of microclimate conditions is managed through the HVAC system (Heating, Ventilation, and Air Conditioning) to the production lines. »» The technology of the system: When the system is taking air from the surrounding environment, the air follows the pipeline entering the treatment system (AHUs), which consists of three levels of pre-filtering – intermediate – refining; it is a circulating system, which adds air to the treatment and delivers to the production room. The same amount of air is then taken from the production room back to the pipeline through filters and will be taken out by the exhaust system. • For locations with chemical vapors, the Company ensures that hood systems work well and workers are provided with adequate personal protective equipment: Shoes, safety goggles and masks/respirators. »» Principles of operation: The fans of the hood draws poison air generated during the experiments and push it into the air processing tower. At the tower, this air is sprayed with solution (diluted NaOH) moving in the opposite direction to absorb, neutralize the toxic gas. Then the air is absorbed into activated charcoal before being discharged into the external environment.


The employer and the representative of employees jointly enter into an agreement, stating the provisions on OSH as follows:

1

The employer is responsible for equipping the employees with protection equipment and improving the working conditions. Each year, those who are directly involved in the production process are given 2 sets of blouses, caps, masks, slippers, soap, gloves, etc., depending on the characteristics of each type of work.

2

The protection equipment given to employees must be of a quality standard and suitable to the users.

3

The employer must regularly prepares prevention plans for labor accidents and occupational diseases, examine and measure hazardous elements, and establish ventilation systems equipped with heat fans and internal work safety regulations.

4

The employer must periodically inspect and repair machines, equipment, workshops and warehouses according to the labor safety and labor hygiene standards.

5

Employees must be instructed fully and must comply with the regulations on labor safety, occupational health and labor regulations of the Company.

6

Employees must: »» Make maximum use of labor protection equipment according to work requirements. »» Be responsible for maintaining personal protective equipment; safely operate and maintain machinery and hygiene at work. »» Strictly follow regulations on fire prevention and fighting and actively participate in overcoming the consequences of unfortunate events.

7

When recruiting and arranging labor, the employer must base on the health standards prescribed for each type of work; provide adequate training and instructions and inform the employees about the regulations and measures on work safety, hygiene and accidental precautions in the work of each employee.

8

Employees must have their health checked when recruited and the Company will hold a medical examination once a year.

9

The employer will equip helmet for workers: 01 unit/person/2 years.

10

The employer will equip rain coats for workers: 01 unit/person/01 year.

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SUSTAINABLE HUMAN RESOURCES

EFFECTIVE WORK MANAGEMENT SYSTEMS AND REMUNERATION BY PERFORMANCE EFFECTIVE MANAGEMENT SYSTEM (KPI)

Effective management systems continue to be applied and increasingly improved to enhance efficiency in practice.

Since its inception, this system has been helping to align Traphaco’s goals to each division and staff, contributing to improve business efficiency by equipping every individual in the team the power and tools to clearly identify Traphaco’s expectations, enabling individuals to operate effectively, to leverage their abilities and potential and to contribute to the success of Traphaco. Maintaining good implementation of “Establishing KPIs and KPIs Assessment” process and appraising the results of the monthly assessment. The KPI committee shall review the results of the quarter, six-month and annual performance objectives of the division in order to advise the CEO on the adjustment (if any). The results of KPI’s quarterly and annual performance evaluation are used by Traphaco as a basis to adjust salaries, incentives and human resources development. This policy ensures that employees are paid consistently, transparently and in a manner consistent with the nature of their work, work efficiency and effort, motivating them to work.

PAYROLL POLICY BY EFFECTIVENESS In addition to the salary paid to employees in the year, including basic salary and salary based on work performance or contract salary, Traphaco also applies other remuneration policies to employees such as reward for completion of production plan Quarterly, on the occasion of the establishment of Traphaco, Tet holidays; toxic bonuses, petrol, telephone, working allowance, uniforms, meals, social insurance, health insurance, etc. In particular, in 2017, Traphaco has improved the new payroll regulations by 3Ps (P1 by position, P2 by capacity and P3 by individual performance). The payment of salaries, bonuses under the 3Ps will be an advanced payroll system that ensures

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fairness, competition and transparency, motivates employees and will be a good basis for evaluating staff competence. This is the reason for increasing the labor productivity and efficiency of production and business. The 3P payroll regulations were officially introduced in January 2018.

IN 2017, TRAPHACO EMPLOYEES RECEIVED 18/12 SALARY MONTHS. AVERAGE INCOME REACHED VND 21.57 MILLION/PERSON/ MONTH, INCREASED 7.5% COMPARED TO 2016.


Traphaco employees' income in 2017 includes: • Basic salary, fixed monthly salary; SALARY

• 13th month salary; • Performance-based salary • Salary for annual holidays that employees have not taken. • Quarterly bonus from the Company's after-tax profits;

OTHER BENEFITS

• Benefit on the occasion of Traphaco's foundation day, Tet holidays and other holidays; • Phone allowances, travel allowances, gasoline, vacation, uniform, lunch .... Full implementation of the compulsory Social Insurance, Health Insurance, Unemployment Insurance, periodic health check.

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SUSTAINABLE HUMAN RESOURCES

Traphaco's corporate culture is an intangible asset, encompassing all the cultural values that have been built and formed throughout the course of existence and development, and it has becomes the spiritual values, perceptions, and traditions that shape the feelings, thoughts and behavior of each employee.

CORPORATE CULTURE DEVELOPMENT

Traphaco staff visiting a resort in Ha Long, Quang Ninh.

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In 2017, Traphaco developed and issued the Handbook of Strategy to help staff better understand the strategic objectives 20172020 that Traphaco has planned scientifically and methodically, with the hope to boost the motivation, voluntary effort and work cooperation. Heading towards the goal of

becoming the No. 1 pharmaceutical company in Vietnam in terms of growth of revenueprofitability-and-market-capitalization, and the leading Green Brand in Vietnam by 2020, Traphaco is quietly making a "Revolution" in many areas to achieve the core values: Pioneering-Innovation-Responsibility-Identity.

PIONEERING

INNOVATION

RESPONSIBILITY

IDENTITY

Becoming the leading enterprise in green value chain management, in creativity and in the application of new technologies and knowledge.

Creating products and services with perfect quality bearing Traphaco’s knowledge hallmarks.

Committing and performing commitment of responsibility to society, shareholders, clients, partners and employees on the principle of mutual benefit.

Traphaco aims to build Traphaco people with three criteria: Desire, passion, and dedication.

Traphaco has been transforming powerfully, bearing its identies characterized by 45 years of history but it always catches up with the development trend of the new era, the 4.0 technology and sustainable development. Maintaining a distinct cultural identity based on four core values helps making Traphaco differential, create a brand identity and improve the competitive advantage of Traphaco. Playing an integral part in creating and communicating this culture is the leaders and employees of Traphaco through the actions and attitudes of each individual in internal and external communications. The "Message of the Year" emulation campaign has gradually become an expected and indispensable activity at Traphaco. Emulation programs are aimed at breakthrough targets of the year such as: "Beyond yourself" - 2012; "Fighting waste for business development and employee benefits" - 2013; "Customeroriented Traphaco" - 2014; "Developing corporate culture” - 2015; "Work Performance”

- 2016 and "Realization of Strategic Goals” - 2017. These programs have been helping divisions to set goals, directing individuals towards the Company's common goals, and creating new values. In addition to the emulation programs, Traphaco has a tradition of caring for the employees, not only by income, but also by spirit via the activities of the trade union, youth union of the Company. Competitions, sports and cultural activities, as well as emulation programs have brought great values to the company and its employees. These events are also a chance for the Company to revisit the existing values and appreciate the achievements of previous generations. The culture building and developing activities have brought Traphaco's members closer together, and given them a better sense of commitment. This bond helps Traphaco become a unified, future-oriented unit with the goal of becoming the No.1 pharmaceutical company in Vietnam.

SOCIAL RESPONSIBILITY

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SUSTAINABLE HUMAN RESOURCES

EMPLOYEES’ ATTACHMENT TO CORPORATE ACTIVITIES

ATTACHMENT IN BUSINESS - EACH MEMBER IS A BRAND AMBASSADOR

In 2017, Traphaco offered a number of training programs on branding, introducing products for branches/regions, especially for direct sales staff (medical representative) so that each Traphaco employee is able to understand the value of Traphaco and have full information exchange with clients. In addition to the in-depth training sessions, Traphaco’s brand values and products are regularly updated on the tablet of each medical representative via the DMS sales software. Other information is updated on the Company's internal information systems: website (01 on the company information and 05 on its products), 08 Fanpages, Intranet, SMS, Internal Newsletter (2 issues/year), Radio News, ... All contributions and feedback of staff and clients are recorded and timely responsed to increase the value of Traphaco brand not only with 27,000 clients nationwide but also increase the pride of each employees in the Company. Traphaco staff are satisfied with the work and the working environment in Traphaco.

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Mrs. Nguyen Thi Lan - Deputy CEO of Traphaco JSC received the title of Top 50 Vietnamese Attractive Employers in 2017.

Traphaco reached the Top 50 Best Workplaces of Vietnam in 2017 / Top 50 Attractive Employer Brand in 2017 On March 22, 2018 in Ho Chi Minh City, Anphabe, a job search and site review company, held the conference on Vietnamâ&#x20AC;&#x2122;s Best Workplace with the theme: 'Believe in change'. At the conference, the awarding ceremony of Best Workplace of Vietnam in 2017 was held, and Traphaco JSC was honored Top 50 Attractive Employers of Vietnam. This award served as fine evidence for the realization of one of the five strategic objectives of Traphaco in 2017-2020: Traphaco-ers are happy and satisfied with their lives and work; Traphacoâ&#x20AC;&#x2122;s workplace is one of the best in Vietnam.

SOCIAL RESPONSIBILITY

113


HUMAN RIGHTS ARE SECURED

EQUAL TREATMENT OF EMPLOYEES

Equal treatment plays an important role in creating a good working environment, motivating staff, promoting their abilities, and strenthening the bond with Traphaco. Traphaco's human resources policies are aimed at the following main objectives: • No discrimination on the basis of sex, ethnicity, color, social status, marital status, creed, religion, health status or the reason of establishment of, membership acquisition and involvement in trade union activities according to the provisions of labor law. • Equal pay for employees on merit. • Respect and listen to the opinions of the employees. All employees have the right to comment on the construction and development of Traphaco. • Every employee has the same opportunity in recruiting, training and promotion.

Rate of female staff in Traphaco

43.74%

Rate of female recruits in 2017

35.71% (20 people)

Rate of female employees holding managerial positions in 2017

3.41% (24 people)

Rate of female staf holding senior management positions compared to the total number of 40% (02 people) senior managers of the Company Rate of female officers holding middle management positions compared to the average 31.42% (22 people) number of mid-level managers of the Company

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In Traphaco, the number of female employees is 307, accounting for 43.74% of the labor force. To ensure fairness in all activities of the business, and to take care of the material and spiritual life as well as to create conditions for female staff to truly participate in the professional work, planning and appointment to the leadership positions, the activities of the "Women's Committee" is maintained regularly. Together with the Trade Union, Traphaco's "Women's Committee" plays an important role in bringing the issue of gender equality into the process of formulating and implementing policies in the Company. To ensure female staff enjoy the State's welfare policies such as: taking leaves, participating in the purchase of health insurance, social insurance, periodic health examination, special allowance for female employees who participate in building the corporate culture. Traphaco encourages female employees to improve their management skills, professional skills, foreign languages and computer skills; Traphaco always creates favorable conditions in terms of time, work schedules and expenses for females to fully participate in training sessions and experience exchanges domestically and abroad. Traphaco's executive and management apparatus involves female officials. In addition, Traphaco organizes an Annual Employees' Conference so that employees are able to openly discuss provisions relating to their interests in the Collective Bargaining Agreement.


SINCERELY APPRECIATE THE CONTRIBUTIONS OF THE EMPLOYEES

Traphaco understands that in order to succeed and reach the destination, the Company needs to rely on a human resource of determination and consensus towards the common goal.

Therefore, Traphaco always respects the contribution and dedication of staff to the success of Traphaco. This is reflected in the policy of remuneration and good welfare, which indicates not only the assurance of material benefits but also Traphacoâ&#x20AC;&#x2122;s recognition about the work commitment and dedication of the staff. Annually, the Company celebrates and awards 20 excellent employees of the year with a trip abroad.

The Traphaco Youth Union supports farmers during the Actiso cutter day in Sapa, Lao Cai

SOCIAL RESPONSIBILITY

115


HUMAN RIGHTS ARE SECURED

FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

Traphaco respects the right to freedom of association of employees, such as the Companyâ&#x20AC;&#x2122;s trade union and divisional trade union. Trade unions at Traphaco always play an important role in representing and protecting the legitimate rights and interests of employees. Traphaco supports the activities of the trade union; Traphaco is willing to cooperate with and create necessary conditions for the trade unions to organize cultural activities, sightseeing tours, benefits on Tet holidays, making visits to sick people

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and developing policies that affect employees and their family members, ... The local trade union also joins the Company in signing the labor contract with employees, cooperates with the Company to build collective labor agreement and internal labor regulation, and gives opinions on social insurance and health insurance for employees. The Annual Employeesâ&#x20AC;&#x2122; Conference is an opportunity for employees to consider and contribute their ideas to adjust the Collective Bargaining Agreement; It is also an opportunity for the Leadership to listen to and receive opinions, aspirations as well as to answer directly questions related to the labor regime in the Company.


CHILD LABOR

Traphaco is committed to not using child labor in all business activities of the Company. This committment is realized by the recruitment requirements of the Company and its subsidiaries. There are many reasons for child labor but the main cause is poverty. Surveys by authorities show that the poorer the regions such as Northwest, North East, North Central Coast, the more common child labor. Because of poverty, children have to work at a very early age, and they even do hard, harmful, dangerous work to earn money. At present, because the financial budgets of many families suffer due to unemployed parents and low incomes, the wave of migration from rural to urban is increasing, which cause child labor to rise. The GreenPlan - Research and development of medicinal plant areas of Traphaco has contributed significantly to sustainable poverty reduction, creating jobs for farmers, especially ethnic minorities in the Northern mountainous provinces. The income earned by farmers ranges from VND 8.6 million to VND16.6 million per hectare per month. Specifically with artichoke, each family can harvest 40-60 tons of medicinal herbs per

hectare per year, corresponding to about 7-8 leaf cuttings, and they can make about VND 200 million per hectare per year. Traphaco is committed to purchasing at preferential prices for people, giving them stable incomes to settle down, build family economy and send their children to school. Traphaco is committed to not using child labor in all business activities of the Company. This committment is ensured by the recruitment requirements of the company and its subsidiaries. Traphaco focuses on job securities and care for employees, ensuring the increase of average income of at least 5% per year, which helps stabilize the family economy. Fun activities for the children of the employees are held annually on the occasion of the International Children's Day on June 1, Mid-Autumn Festival; Traphaco also gives gifts and awards to children who have high achievements in learning, opens short courses in art and music, which gives the children opportunities to learn, make friends and share. These activities aim to help the children develop well, integrate into life with confidence; At the same time, with these programs, Traphco hopes to raise the awareness on issues of taking care of and creating conditions for the development of children of the employees.

Children of ethnic families whose parents work for Traphaco are on their way to school in Sapa, Lao Cai.

SOCIAL RESPONSIBILITY

117


RESPONSIBILITY FOR INVESTMENT IN THE DEVELOPMENT OF PRODUCTS

PRODUCT INVESTMENT TOWARDS THE COMMUNITY

Traphaco has been producing most of the popular types of medicinals: Tablet pill, film coated tablet pill, sugar-coated tablet pill, syrup, solution, drug for external use, drug for internal use, powder ..., adopting the diversification strategy to meet demand and users. Traphaco offers products that are unique in formulas, highly effective, safe for users, and able to compete with imported products. Annually, the products are evaluated for overall quality, which is specified in the process of periodic evaluation of the overall product quality issued by the Company.

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Raw material supplies Due to the characteristics of domestic raw materials, the quality of inputs is dependent on objective conditions such as weather, crop, geographic location, as well as farmer production techniques. However, compared to other companies that produce traditional medicines, Traphaco has a dominant advantage in terms of raw material supply, including the North's favorable weather advantage (suitable for growing and expanding certain types of medicinal herbs) and the convenience of transportation and procurement of raw materials. After nearly 10 years of implementation of the GreenPlan project "Research and Development of Traphaco's sustainable pharmaceutical resources", Traphaco has a raw material plantation of over 36,300 hectares for 5 medicinal herbs of GACP-WHO standard. In 2016, the yield of quality-controlled medicinal herbs from the plantations including those of GACP-WHO standards reached 2,989 tons (accounting for 88.4% of the total production demand); the total material demand for production was 3,383 tons, including more than 100 kinds of medicinal herbs, and 100% of raw materials are controlled to meet quality standards; domestically-made materials accounted for 91.3% of the total production demand; plantations of medicinal herbs are located in 24 provinces across Vietnam. The rest of raw materials for production are imported directly from manufacturers or distributors of pharmaceutical ingredients with famous brand names and reputation in the world such as: Univar - England, Roquette - France, Eastman-Estonia - USA, Merck Germany ... Besides, the Company also has many suppliers in Asian market from Korea, Japan, China… Traphaco’s demand for materials is about 23 tons/day, including pharmaceutical-chemical and pharmaceutical ingredients, packages, aluminum film, PVC, ... The raw materials used are specified in quota and registered to reduce shrinkage, and lessen unsuitable products each year.

Testing at Traphaco Hung Yen Plant.

Research and development activities With the economy growing in the period of industrialization, environmental pollution, food contamination has become a national problem. Population is increasing at high level, and the living condition in many areas such as remote and rural ones is low. In addition, GDP per capita of Vietnam was estimated around VND 53.5 million in 2017, while the cost of medical treatment is on the rise, leading to the inability of people to invest in personal health care, especially, in periodic health screening for early detection and treatment. Currently, Vietnam is considered one of the leading countries in the world of metabolic diseases (diabetes, cardiovascular diseases, high fat lelves in the liver and in the blood, ...), poison-related illnesses (alcoholic and chemical hepatitis, cirrhosis, cancer, ...); the high number of patients of contagious diseases (infections, eye diseases, respiratory diseases, etc.) is due to Vietnam’s hot and humid tropical climate. Realizing that the tendency of disease development is becoming more and more complicated, Traphaco focuses on investing in the research and development of new products to meet the increasingly diverse demand of medical examination and treatment of Vietnamese people, especially their strict requirement in quality and cost. Setting specific targets of developing new products each year, Traphaco is expanding its list of medicines and health food to new treatment groups such as: Diabetes (Andiabet), digestive disorder (Oviotic), detoxification, treatment of fat liver (new Boganic products), respiratory products (Methorphan Ivy), the strengthening of the immune system (Antot Thymo) , products in the musculoskeletal group (SeaCan, Lubrex Gold, Totcos) and beauty products (Trasoyal, Solutab), which are soon introduced to market in the period 2017-2020.

The herbal medicine plantation of GACP-WHO of Traphaco in Nam Dinh. SOCIAL RESPONSIBILITY

119


RESPONSIBILITY FOR INVESTMENT IN THE DEVELOPMENT OF PRODUCTS

Invest in science and technology

Being a pharmaceutical manufacturing company, in order to approach and catch up with increasingly advanced and strict standards of the industry, Traphaco focuses on investing in research and production technology. Currently, Traphaco owns 4 plants which meet GPs-WHO standards.

• The medicinal material extracting plant applies advanced technologies in pharmaceutical processing (microwave drying), ensuring the smoothness of the extracted fractions according to production standards without losing their intrinsic pharmacological activity. • The traditional medicine plant applies advanced technology in the production of modern dosage forms. Medicinalherb-originated products have also been studied to rapidly transfer from traditional form (balls, tablets) to new, modern forms (capsules, nano, ...) for superior performance and the product quality is increased, and product durability is extended. • The generic plant adopts the newest pharmaceutical technology in the world, with three workshops and five automatic production lines, which completely self-contained, minimizing human intervention in the manufacturing process. • The plant producing cosmetics and dietary supplements meets the GMPWHO standards although this is not obligatory.

Intellectual Property Aware of the clients' rights to use protected products, the responsibility for helping users improve their awareness and at the same time making them loyal customers, the Company conducts intellectual property activities. Until now, the Company has owned 10 utility patents and exclusive industrial designs, 3 trade names, along with about 200 product names. Traphaco not only registered in Vietnam but it is also registered in 10 other countries around

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the world such as: Japan, USA, Australia, Laos, Thailand, Singapore, Malaysia, Cambodia, China, Indonesia. In 2016, for the 8th year in a row, Traphaco entered the "Top 10 Famous Trademarks of Vietnam" granted by the Vietnam Intellectual Property Association.


TRAPHACO'S

1

ORIENTATION IS TO BECOME THE NO.

PHARMACEUTICAL BRAND IN VIETNAM

In-depth study With its reality-based and humanbased science, Traphacoâ&#x20AC;&#x2122;s products are not only a result of ministerial and state-level scientific projects, but also from traditional medical remedies that have been used for thousands of years. In parallel with modernization, Traphaco has confirmed the effectiveness, safety and quality through the implementation of clinical research, toxin idetification tests in collaboration with major hospitals such as National Hospital of Traditional Medicine, K Hospital, Military Hospital 108, and Bach Mai Hospital, etc. The BFS production line of eye drops at Traphaco Hung Yen Factory.

Brand investment

TOP

10

FAMOUS TRADEMARKS OF VIETNAM by the Vietnam Intellectual Property Association.

Traphaco's orientation is to become the No. 1 pharmaceutical brand in Vietnam, a consumer-oriented business with the aim of caring for the public health. The Company does not only strive to meet the technical requirements, features, and quality products but also creates the image of trust and familiarity to customers. Bearing that goal in mind, in the past years, the Company has implemented many effective activities in promotion and branding. Traphacoâ&#x20AC;&#x2122;s budget for these activities each year account for 17% of revenue.

Process of quality inspection of products and services Process of quality inspection of products and services Traphaco has established and implemented an effective quality management system from the production stage to the product distribution phase.Quality Management Systems are regularly updated and upgraded to meet international and regional standards such as WHO GMP / GLP / GSP (accredited by Vietnam Drug Administration) ISO 9001: 2015 (certified by Bureau Veritas). All Traphaco products have undergone a stringent inspection process, both in terms of quality and packaging, before being distributed to the market.

SOCIAL RESPONSIBILITY

121


RESPONSIBILITY FOR INVESTMENT IN THE DEVELOPMENT OF PRODUCTS

The process of quality assurance of the company is shown in the following diagram:

INGREDIENTS

SAMPLE STORAGE

UNQUALIFIED (DISCARDED)

INGREDIENT TESTING

QUALIFIED (ACCEPTED) PRODUCTION ORDER PRODUCTION

QUALITY CONTROL

RECYCLED RE-TESTING

HALF-FINISHED PRODUCT SAMPLE STORAGE

UNQUALIFIED

QUALIFIED (ACCEPTED)

HALF-FINISHED PRODUCT TESTING

QUALITY CONTROL

DISCARDED

PACKAGING

SAMPLE STORAGE OF FINISHED PRODUCTS

UNQUALIFIED

FINISHED PRODUCT TESTING

QUALIFIED (ACCEPTED)

OUTPUT

DISTRIBUTION

In order to meet the requirements for sufficiency, timeliness and accuracy of the testing activities, the Company has purchased modern and suitable analytic equipment, which are properly installed and set up. All the testing equipment is operated, appraised/fine-tuned according to approved processes.

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Client Management, Satisfaction Evaluation, Product-Complaint Settlement

Since 2010, Traphaco has run the client service unit to manage client relationship and care. The data on client information is controlled by decentralized management to ensure the effectiveness in production and business operations, and to provide timely care. Client data are strictly controlled.

Measurement of client satisfaction is carried out in accordance with the annual Client Satisfaction Process for price, product quality, product form, preferential sales policy, support, care, the attitude of service, delivery, accuracy of data when working with clients ... In 2017, 100% of pharmacies felt satisfied and highly satisfied with the gratitude program of the Company. Over 95% of clients rated Traphaco’s service as good and quite good, 100% of clients are satisfied with the quality products ... (survey directly 1700 clients who are drugstore owners). Listening to and reporting complaints by clients are the responsibility of every individual working for Traphaco, which has been clarified in the Company's Procedures

for Handling Complaints and Questions, not only about product, but also about the services and policies ... The Company conducts a satisfaction survey through its TNS independent monitoring system (10,000 clients are surveyed per month) to timely overcome any shortcomings detected and to improve the clients’ satisfaction. The Company receives feedback from every consumer directly (on dosage, instructions, treatment, combination ...), from pharmacies (on policies, product prices , GACP ...), or from doctors and physicians (on medical information, point of sales to guide patients), ... in many ways: direct contact, through the medical representative, marketing staff, or by calls at the customer care center, by mail, email, and online interaction on the website and fanpage... Depending on each complaint, some shall be handled immediately or sent to higher officials or must be reported to the competent agencies. Timely information disclosure when there is a product misunderstanding

Traphaco DHG Pharma Pymepharco

VIETNAM REPORT

Domesco Imexpharm Bidiphar Hataphar

Financial score Media Coding score Survey score

OPC Mekophar Naphaco

According to an independent study by Vietnam Report Jsc and VietNamNet Newspaper on Top 10 Vietnam’s Prestigious Pharmaceutical Companies in 2017, Traphaco continues to hold the No. 1 position. In the view of experts, Traphaco is considered the leading enterprise with strong financial power, getting the highest communication score, and successful in brand positioning in the pharmaceutical market of Vietnam. SOCIAL RESPONSIBILITY

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RESPONSIBILITY FOR INVESTMENT IN THE DEVELOPMENT OF PRODUCTS

Communication on key products

Being the most famous pharmaceutical brand in Vietnam, Traphaco is aware of its responsibility not only in the health care of Vietnamese people, but also in raising awareness of self-care and disease prevention of the community. Every year, Traphaco conducts communication campaigns for key products, in line with seasonal patterns of disease or on holidays. Boganic, Hoat huyet duong nao (Cerebral blood circulation improvement) â&#x20AC;&#x201C; Cebraton and Tottri are the three major product lines that Traphaco has focused on communicating via mass media (TV, VOV, newspaper) or digital media platforms (Facebook, online newspapers, Youtube, websites, ...). In 2017, four major media campaigns were launched with a total budget of VND 107.7 billion, which resonated and drew public attention to health concerns and active prevention.

124

Campaign Healthy Liver - Happy New Year

Campaign Care your liver before it's too late

Warnings of alcohol overuse, excessive eating during Tet that leading to liver damage.

By statistics, Vietnam is in the group of countries with the highest incidence of liver cancer in the world. The campaign helps raise public awareness about the dangers of liver disease.

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


Boganic's “Care your liver - before it's too late” campaign with the cooperation of MC Quyen Linh is the highlight, which raised strong support across the country. Currently, about 10 million Vietnamese are infected and more than 10,000 new cases of liver disease are reported each year. Boganic Traphaco wishes that this campaign, with the image of MC Quyen Linh and the contribution of the press, will spread the message, protecting the liver is also to protect our lives. In this campaign, Boganic joined by MC Quyen Linh and journalists also visited the

clean medicinal material plantations in SaPa; and paid visits to farmers here. According to Quyen Linh, he accepted the invitation because it is a very humanitarian communication campaign to raise the awareness of and to trigger active prevention against the liver disease in the community while this silent disease is on the rise and robs the lives of millions. Besides, this project also helps people in the area of medicinal herbs to eradicate hunger, reduce poverty, and improve their living.

Campaign Cebraton - A healthy brain - master of your life

NÃO KHỎE làm chủ cuộc sống

Warning of the negative impact of stress caused by busy work or examinations, risk of brain ischemia in young people (25-45 years).

Campaign Tottri - Live happily

Tự do vui sống

Raise the awareness of the recurrence risk of hemorrhoids and call for actions to prevent the recurrence, to reduce the impact of the disease and to lower the cost of treatment for patients.

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125


SUSTAINABLE COMMUNITY

DEVELOPMENT OF PHARMACEUTICAL ECONOMICS FOLLOWING THE SUSTAINABLE DEVELOPMENT STRATEGY OF TRAPHACO, THE FARMERS AND STAFF OF THE COMPANY PARTICIPATING IN THE GREEN VALUE CHAIN ARE ENSURED THEIR â&#x20AC;&#x2DC;SUSTAINABLE EMPLOYMENT.

The family of Mr. Ma A Thao - a medicinal-plant farmer for Traphaco in Sapa, Lao Cai. 126

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GREENPLAN PROJECT - CREATE SUSTAINABLE LIVELIHOODS FOR FARMERS Traphaco is now cooperating with more than 675 households growing/collecting medicinal plants in compliance with GACP-WHO, and thousands of households growing/collecting medicinal plants following controlled standards according to GACP-WHO. The Company provides stable incomes for local farmers/collectors and moreover, enriches the households in the raw material areas where it leaves its footprint, ranging from VND 8.6 million to VND 16.6 million/ha/month. Siding with the Sustainable Development Strategy of Traphaco, the farmers and staff of the Company participating in the Green Value Chain are ensured their "sustainable employment."

675 16.6

HOUSEHOLDS GROWING/COLLECTING MEDICINAL PLANTS IN COMPLIANCE WITH GACP-WHO.

MILLION/HA/MONTH Stable income for households in the raw material areas where the company leaves its footprint.

Some figures The area of Artichoke plantation of Traphaco in two districts of Sapa and Bac Ha, Lao Cai reaches 60 hectares with the yield of 2,200 tons of fresh medicinal herbs per year. Number of participating households: 156 households; of which 80% are ethnic minorities; the number of people involved is 1,300 people.

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127


SUSTAINABLE COMMUNITY

According to the local authorityâ&#x20AC;&#x2122;s assessment, the economic efficiency of growing Artichoke for Traphaco is five times higher than that of rice and ten times that of maize. Farmers are provided technical guidelines and pledged to purchase materials at high prices by Traphaco, which helps them have a good and stable source of income, many households have been able to buy "Artichoke televisions", "Artichoke motorcycles" from the sale of medicinal materials for Traphaco.

GACP-WHO

At the same time, with the implementation of pharmaceutical production in compliance with the GACP-WHO Guideline, Traphaco achieves the objective of cultivating and collecting good quality medicinal plants sustainably and in a manner of respect as well as support the preservation of medicinal plants in particular and the environment in general.

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With the desire to develop the cultivation of medicinal herbs to become a cultural characteristic of H'mong and Dao ethnic minority groups in Sapa, Lao Cai, Traphaco Joint Stock Company and the local authorities organize "Artichoke Plantation Day" on the occasion of the beginning of the new Artichoke crop (in August every year). After months of hard work and control of medicinal plants according to GACP-WHO standard, in March, when harvest yield of Artichoke leaves is highest, Traphaco continues to organize the "Artichoke Cutting Day" to congratulate farmers on having a good harvest.


Artichoke Plantation Day in Sapa, Lao Cai.

SOCIAL RESPONSIBILITY

129


SUSTAINABLE COMMUNITY

CONTRIBUTE TO THE COMMON DEVELOPMENT OF THE SOCIETY

Free health care advice and gifts for the elderly, women across the country for 18 years in a row.

Sponsorship/support programs for the disadvantaged elderly.

TOTAL WORTH OF

TOTAL WORTH OF

BILLION VND up to 12/31/2017

BILLION VND up to 12/31/2017

20.6 Supporting people in the Central region, giving medicine in free healthcare consultation sessions...

TOTAL WORTH OF

01

BILLION VND up to 12/31/2017

130

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

2,5

Sponsorship/support programs for children. Of which, 10 consecutive years sponsored the program "Spring for children".

TOTAL WORTH OF

500

MILLION VND up to 12/31/2017


TRAPHACO, WITH THE DESIRE TO CONTRIBUTE TO A BETTER QUALITY AND HAPPIER LIFE, ACTIVELY SUPPORTS HUMANITARIAN, SOCIAL-CHARITABLE, GRATITUDE ACTIVITIES; SOCIAL-CHARITABLE ACTIVITIES ARE FREQUENT, INDISPENSABLE ACTIVITIES WHICH ARE RECEIVED ENTHUSIAISM FROM TRAPHACO’S LEADERS TO EMPLOYEES. TRAPHACO’S BUDGET FOR COMMUNITY ACTIVITIES ACCOUNTS FOR 1-3% REVENUE EACH YEAR. IN 2017, THE TOTAL AMOUNT SPENT ON COMMUNITY ACTIVITIES WAS NEARLY VND 25 BILLION.

SOCIAL RESPONSIBILITY

131


SUSTAINABLE COMMUNITY

EVALUATE THE EFFECTIVENESS OF COMMUNITY ACTIVITIES By frequently and solemnly supporting social activities in highly responsible manner, Traphaco has been recognized by organizations and the public as a Corporation with a strong sense of social responsibility and a spirit of â&#x20AC;&#x153;loving other""Businesses - Entrepreneurs do good deed".

In 2017, Traphaco, for the second time, participated in the corporate assessment program through the Corporate Sustainability Index (CSI). This is an initiative of the Vietnam Chamber of Commerce and Industry and the Vietnam Business Council for Sustainable Development to promote sustainability in the business community, to build measure of business value based on sustainable development criteria.

"Supporting steps to school" program offers books for children in Nam Sai, Lao Cai.

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At the announcement ceremony of Sustainable Development Businesses, Traphaco continues to stay and is also the only pharmaceutical company in the list of Top 10 Sustainable Businesses. In addition, Traphaco has also, many years in a row, been awarded the Top 10 Viet Nam Gold Star Enterprises exemplary for Social Responsibility and been recognized as a National Brand due to the fact that Traphaco always defines its sustainable brand consisting of Quality - Creativity â&#x20AC;&#x201C; Pioneering Capability criteria.

Traphaco staff donate blood to save people for a better life.

Tree planting festival of Traphaco on New Year's Day.


ACTIVELY IMPLEMENT COMMUNITY HEALTH CARE COUNSELING

18 500 Through

CONSECUTIVE YEARS

HEALTH CARE COUNSELING SESSIONS PER YEAR

TRAPHACO ACTUALIZES THE MISSION OF HEALTH PROTECTION FOR VIETNAMESE

616

Advocacy Conferences Seminars on Health Promotion nationwide

They are real numbers about the public health care service that Traphaco is still working on. Health counseling, medicine distribution and Healthy Living Magazine are free to millions of members of the Elderly Association, Women's Union, Red Cross, Veterans Association, and Retirement Association…nationwide; especially in rural and remote areas; Those are always the most practical approach for Traphaco to carry out the mission of protecting the health of Vietnamese people. In the year 2017, Traphaco has exceeded the quantity of 616 Conferences – Seminar on Healthcare Promotion throughout the country (increase 28.9% compared to 2016) with a total cost of over VND 20 billion.

Traphaco's social investment activities are fully implemented on all issues mentioned in GRI G4. In addition to maintaining existing activities, we aim to align Traphaco's partners and suppliers with the goal of social development, employee rights protection, respect for human rights and contributions to local community building. We determine the common development of the society is also a driving force for long-term development for businesses, preparing for our next growth in the future.

SOCIAL RESPONSIBILITY

133


06

ENVIRONMENTAL PROTECTION The development of enterprises is associated with the development of social civilization, for common prosperity, for the Earth - the common house, for not only our happiness today but also the future of the descendants


METHOD OF GOVERNANCE

As a pharmaceutical enterprise, Traphaco is aware that the production and trading of medicines - chemical & beauty products - dietary supplement have an impact on the environment. Therefore, for internal activities, we focus on controlling the consumption of fuel, raw materials in production and waste treatment at Traphacoâ&#x20AC;&#x2122;s plants - ensuring that the environmental standards are met; Minimize the use of non-renewable energy and natural resources, thereby contributing to the reduction of greenhouse gas emissions. Environmental management system under ISO 14001: 2015 environmental management system. In 2017, the Company has assessed the conversion from ISO 14001: 2010 to ISO 14001: 2015.

During the transition we have combined with the review unit to consider compatibility issues such as: The involvement of managers and staffs in environmental management, environmental aspects, meaningful environmental aspects, follow and compliance with legal requirements, control of energy use, water and waste control, environmental cost savings initiatives, potential environmental incidents, etc., to help employees better understand and create an environmentfriendly organization by themselves. For stakeholders, environmental issues are included in the content of exchanges related to sustainable development and assessment based on the level of interest of the parties. In particular, environmental criteria are also considered in Supply Chain Management and Traphaco's investment project evaluation.

sdg13

Climate action

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sdg15

Life on land


INCORPORATION OF ENVIRONMENTAL OBJECTIVES INTO OPERATION

ENVIRONMENTAL COMPLIANCE

ENERGY

ENVIRONMENTAL SPILL INCIDENT

WATER

BIODIVERSITY

WASTEWATER & WASTE EMISSIONS

ENVIRONMENTAL PROTECTION

137


EXAMPLES PROJECT

INCORPORATION OF ENVIRONMENTAL OBJECTIVES INTO OPERATION TYPICAL PROJECTS CONTRIBUTION OF BIODIVERSITY CONSERVATION THROUGH PROJECT

GREEN

Biodiversity conservation is one of the benefits of Traphaco's GreenPlan project, thanks to the application of the GACPWHO standard in the development of medicinal herbs plantations and use them in the medicinal ecosystem, as well as in the Company's pharmaceutical production activities". According to the WHO guidelines on growing and collecting medicinal herbs, all three issues in biodiversity are concerned in GreenPlan including: genetic diversity - conservation of precious genetic resources, restoration of original genes of high medical value species, species diversity - species variety and ecosystem diversity – the whole surrounding environment of plantations and interactions between organisms in that environment.

The herbal medicine ‘Dinh lang’ (polyscias fruticosa) plantation meeting GACP-WHO standard in Nam Dinh.

The Artichoke plantation meeting GACP-WHO standard in Sapa, Lao Cai.

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After nearly 10 years of implementing GreenPlan Project, Traphaco has developed a raw material plantations of over 36,300 hectares, of which 36,200 hectares meets the GACP-WHO standard for collecting (producing ‘Che day’ (Ampelopsis cantoniensis) and ‘Rau dang dat’ (Glinus oppositifolius)) and 104 hectares meets GACP-WHO standard for growing (Artichoke, ‘Dinh lang’ (polyscias fruticosa) and ‘Bim bim biec’ (ipomoea nil blue picotee)). The raw materials areas in the country stretches across 27 provinces from North to South Vietnam. Typical growing and harvesting areas include: Artichoke plantations in Sapa and Bac Ha districts, Lao Cai province, polyscias fruticosa cultivating in Hai Hau and Nghia Hung, Nam Dinh province, Angelica sinensis plantation in Bac Ha, Lao Cai province, Ampelopsis cantoniensis plantations in 2 districts in Sapa, Bat Xat (Muong Hum). Besides the medicinal herbs growing areas which have been certified meeting the GACP-WHO standard by Ministry of Health, Traphaco has continued to work on the development and registration of other medicinal herbs plantation such as: ‘tam that’ (panax pseudoginseng), ‘duong quy’ (angelica sinensis), chrysanthemum ... Traphaco, has combined with experts in agricultural techniques and pharmacists specializing in pharmaceutical materials, guidance, training on the application of GACP-WHO, strictly control cultivating, irrigating, improving land; to commit to the minimum use of all agrochemicals used to stimulate growth or to preserve medicinal herbs, and only apply when no other measures are taken, all of which must be documented; to ensure that it does not adversely affect forest ecosystems and local soil ecosystems; to request the individuals and units planting medicinal herbs for the Company to sign a commitment on environmental protection and fire prevention and fighting.


In addition to preserving genetic resources and ecosystems (natural systems), Traphaco recognizes that biodiversity also includes both cultural variety (social systems) and indigenous cultures are also very important aspects.

The ‘Bim bim biec’ (ipomoea nil blue picotee) plantation meeting GACP-WHO standard

In a new step, Traphaco has successfully carried out the study of "Exploiting and developing Hoai Son Genetics, Coix lacryma-jobi as an ingredient in the production of medicines," which is part of the State level mission of the Ministry of Science and Technology. The study is implemented from July 2011 with a large workload (42 scientific subjects) in many fields: Biology, Botany, Agronomy, Pharmacy ..., bring back 29 scientific products (6 products of type I, 20 products of type II, 3 products of type III), training 1 master of pharmacist, 3 graduated pharmacists. The total cost of implementing is VND 6.6 billion, of which VND 3.2 billion from the science development fund, VND 3.4 billion from Traphaco’s investment. The study brings many new results related to the identification of Hoai Son medicine, a popular medicine but also mistakenly used or counterfeit produced in Vietnam. Ultimately, the study’s findings contribute to the orientation, development of high quality pharmaceutical materials, stable and having economic efficiency; the study’s recommendations open up many content to address in the field of Agriculture and Medicine.

Hoai Son plantation.

Cultural diversity associated with indigenous peoples is threatened by the "civilized" economy and society. Protecting this cultural diversity is essential as it is often the basis for sustainable development. The development of medicinal herbs is accompanied by the respect and preservation of the culture of local people, especially in ethnic minority and remote areas.

In the upcoming steps, the GreenPlan project will expand the development of "Herbal Culture", to build a value chain that starts with the community associated with Tourism - Culture - Herbs. In addition to the development of pharmaceuticals in the traditional way is the production of medicinal herbs for traditional medicine, pharmaceutical industry ... based on the way at locality, Traphaco has interested in the idea of developing medicine associated with tourism, based on taking use of the comparative advantage of biodiversity, landscapes and cultures of indigenous peoples.

ENVIRONMENTAL PROTECTION

139


ACTIVITIES FOR MINIMIZATION OF ENVIRONMENTAL IMPACT

IDENTIFICATION OF ENVIRONMENTAL ASPECT ON SUPPLY CHAIN ALL OF ACTIVITIES ON THE SUPPLY CHAIN OF TRAPHACO JOINT STOCK COMPANY ARE IDENTIFIED OF ENVIRONMENTAL ASPECTS, TO IDENTIFY THE SIGNIFICANT OF ENVIRONMENTAL ASPECTS. FROM THAT POINT, OBJECTIVES, INDICATORS AND THE ENVIRONMENTAL MANAGEMENT PROGRAM HAVE BEEN SET UP.

Environmental aspects of the supply chain: Solid wastes, domestic wastes, hazardous wastes, natural resources, waste water, air pollution, dust, noise.... With respect to each aspect, management measures aim to limit the impact on the environment: • Vehicles have to be eligibly registered for entry into service before running on roads. • Orders are arranged for delivery on an appropriate route to save fuel consumption, reduce emissions to the environment. • Packaging materials are selected with a priority be given to environment-friendly and recyclable. • Conventional and hazardous waste are classified at source. • Equipment maintenance/Equipped with noise muffler.

Identify and assess the environmental aspect in 2017 Production No and business activities

1

140

2

Identify

Condition Level Frequency

Results C=S*F

Management measure 10

Input

Output

Aspect

3

4

5

6

7

8

9

Tea residuals

Domestic solid waste

Normal

1

3

4

Leftover

Solid waste

Normal

1

4

4

Waste

Solid waste

Normal

2

3

6

1

Domestic activities

Water, tea, food

2

Use drugs, return products, Finished withdrawal product products

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


Production No and business activities

1

Identify

Condition Level Frequency

Input

Output

Aspect

3

4

5

2

6

7

Results C=S*F

Management measure

9

10

8

»» Vehicles have to be eligibly registered for entry into service before running on roads.

3

Transportation: Circulation, distribution

Gas, Emmission petroleum

4

Discharge after use / Unused drugs expired

Package after use / Finished products

Waste

Natural resources

Normal

Solid wastes

Normal

2

3

1

»» Orders are arranged for delivery on an appropriate route to save fuel consumption, reduce emissions to the environment.

6

4

»» Packaging materials are selected with a priority be given to environmentfriendly and recyclable.

4

The environmental impact associated with each environmental aspect is assessed on two sides: Potential for adverse effects Frequency of occurrence is evaluated over the time of the incident. Score

Frequency of occurrence

1

2

3

May occur one Occurs every time in more than quarter to year a year

Time period

4

Occurs weekly to Occurs from day monthly to week

Consequences of adverse effects can be caused to the environment Pollution Level (S)

Level

Criteria

1

2

3

4

Level of impact Impact range

Very small and not prominent

Local

Local and in the company

Company and outside

Contamination concentration vs. environmental standards

Below the allowable threshold

~ to 1 times

1 to 1.5 times

≥ 1.5 times

Use of natural resource

Use clean energy (wind - sunlight)

Utilization of soil, water ... types of renewable resources

Hardly to renewable such as coal, oil and natural gas...Nonrenewable resources

Utilize, exploit and pollute the resources

Complaints from related parties

None

Not satisfactory comment

Complain

Complain

Violation of laws and other requirements

None

Risk of violation

Signs of violations

Violation

Control ability

Controlled

Can be controlled internally

Hard to be controlled Uncontrollable internally

ENVIRONMENTAL PROTECTION

141


ACTIVITIES FOR MINIMIZATION OF ENVIRONMENTAL IMPACT

Significant environmental aspects are: having management requirements of the law or of the unit or aspects with the evaluation results â&#x2030;Ľ 8 points. (Result = Consequences x Possibility) In 2017, our Company has identified four significant environmental aspects and introduced management measures The significant environmental aspects in 2017 No.

1

4

Evaluation Management score measure

Significant environmental aspects

Division

Activities

Noise

Quality Assurance, Manufacturing Plant

Operation of HVAC system, generator station, manufacturing of drugs in the plant

8

Equipped with noise-canceling ear buds.

*

6

Measure of management hazardous waste

*

8

Measure of operation wastewater system

*

2

Hazardous waste generated

All divisions

Operation of HVAC system, compressed air, wastewater, RO, office printing, manufacturing, testing

3

Wastewater

Quality Assurance

Operation of sewage system

Emission

Quality Testing, Manufacturing plant

Modeling, manufacturing

8

Use filtering and maintenance system from HOOD.

Notes

*

Results of annual emission monitoring.

Note: measures required by law are marked with a *. Significant environmental management measures are measured by specific numbers: Management measures

Equipped with noise-canceling ear buds Measure of management hazardous waste Measure of operation wastewater system Operating the HOOD cabinet system

Measurement results

Labor Environment Measurement result (Safety and Health Section) Number of violations on management of waste classification and collection: 0 Result of wastewater: Passed (See details on wastewater monitoring results). Results of output emission monitoring: Passed (See details on emission results)

Control of the significant environmental aspects is to ensure the health of employees and the health of the surrounding community and to comply with the requirements of environmental legislation.

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USE SUSTAINABLE MATERIALS Volume of materials used in 2017

In 2017, Traphaco Joint Stock Company has introduced the "Criteria for Competitive Selection of Supplier", which clearly demonstrates the Company's encouragement of suppliers to adopt a safe environmental management system that provides safety workplace for the supplier's employees and create an environment of GREEN - CLEAN - BEAUTY for the surrounding community. Ensure suppliers are on the path of sustainable development for the community."

No

Supplies

I

Production materials

Unit

Amount

Ton/year

2,190

Ton/year

248.6

II

Packing

1

PVC

2

Aluminum foil

Ton/year

40.3

3

Box + Prescription

Million sets/year

44.7

4

Plastic bottle 5ml

Million sets/year

3.0

5

Plastic bottle 10ml

Million sets/year

10.9

6

Plastic bottle 25ml

Million sets/year

0.3

7

100ml plastic vial

Million sets/year

0.3

8

Plastic bottle 250ml

Million sets/year

0.2

9

Plastic bottle 500ml

Million sets/year

2.8

10

Glass bottle 60ml

Million sets/year

2.1

11

Glass bottle 100ml

Million sets/year

0.3

12

Glass jar of 125ml

Million sets/year

0.1

13

Tube

Million per year

5.8

14

Aluminum bag

Million per year

11.9

15

Boxset

Million per year

0.5

16

Glass tube 10ml

Million per year

12,5

The raw materials for production are mostly imported from European countries, produced by the world's most advanced technology and environmentally safe by limiting carbon emissions into the atmosphere.

Addition / subtraction to competitive score = ÎŁ (point * weight) / total weight Criteria

Grounds for assessment

Level

Certification Management System

GMP PIC/S, GPM EU, GACP Pursuant to the certification GMP WHO, other GMP of management system that ISO9001, ISO14001, OHSAS, supplier has ISO22000, HACCP, GDP, GSP

Plus mark +0,5 +0.3 +0.1

ENVIRONMENTAL PROTECTION

143


ACTIVITIES FOR MINIMIZATION OF ENVIRONMENTAL IMPACT

ENERGY CONSUMPTION AND EFFICIENCY Energy consumption in the organization Use non-renewable energy sources The Company uses gas and DO oil for two main purposes: cooking, making testing products and running generators in unexpected case of electrical failure or notification of power outage from the regulator. Unit

Usability/year

Total gas consumption in 2017

Kg

3,591

»» Gas for cooking

Kg

2,781

»» Gas for researching products

Kg

810

Liter

300

Unit

Cost/year

VND

4,601,000,000

kW

2,416,800

»» For production

kW

2,296,626

»» For Office electricity

kW

120,174

Total amount of DO oil for generator

Consumption of raw materials from renewable sources

Total electricity cost in 2017 The Company mainly uses electricity to serve production and daily life, total power consumption in 2017 Specifically:

Electricity consumption in 2017 500,000 400,000 300,000 200,000 100,000

(Month)

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Compared to 2016, the Company’s electricity consumption is down by 10.1% (2016: 2,686,080 kW), a part of the reduction of energy consumption due to the shift of production to two plants which are Traphaco Hung Yen and Traphaco CNC and the application of measures to reduce energy consumption for developing sustainable environment.

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GREEN energy

CLEAN ENVIRONMENT

Propagate electricity and water saving to employees by training, posters.

Limit the temperature of air conditioning on hot days.

MEASURES TO REDUCE ENERGY CONSUMPTION

Use LED bulb to replace Compact bulb.

Use inverter to automatically turn on/off for HVAC system.

Have regulations about time, turn on duration, minimum outdoor temperature, closed-door when enter air-conditioning room ... for each division, each staff.

Comment Electricity consumption has increased in the months of Jan, March, Jun, Jul, Aug due to production demand and the months of Jun, Jul, Aug in hot summer weather, high-powered of HVAC system + use of air conditioning.... Total energy consumption in the organization: (Unit Jun) = Non-renewable Fuels + Renewable Fuels = 8,889,988 x106 (Jun). Source of conversion factor http://convertlive.com http://www.cng-vietnam.com/vn/10/bang-quy-doi-nhien-lieu

ENVIRONMENTAL PROTECTION

145


ACTIVITIES FOR MINIMIZATION OF ENVIRONMENTAL IMPACT

EFFECTIVE USE OF WATER RESOURCES Input water by source Total water usage: 34,325 m3. Data are updated directly from the supplier’s water meter. Water supplier: Hanoi Clean Water Limited Company. Water provided by the supplier are met QCVN02/2009/ BYT of National Technical Regulation on domestic water quality. Every month the Company requests the water supplier to provide the results of water supply monitoring. Twice a year, the Company evaluates the water quality in internal pipelines.

Results of water quality monitoring in the Company’s pipelines No

Criteria

Unit

Methods

1

Color

Pt-Co

2

Taste

-

3

Turbidity

NTU

TCVN 6184:2008

4

Concentration of residual chlorine (Cl2)

mg/L

TCVN 6225-3:2011

5

pH

6

Ammonium

mg/L

TCVN6179- 1:1996

7

Iron (Fe)

mg/L

8

Pecmanganat index

9 10

TCVN 6185:2008 Feeling

127/NC/ 1809

127/NC/ 1810

<3

<3

127/NC/ QCVN 02:2009/ 1811 BYT (I) 4

15

No strange No strange No strange scent or taste scent or taste scent or taste

No strange scent or taste

0.29

0.40

0.55

5

< 0.003

< 0.003

< 0.003

0.3-0.5

7.35

7.55

7.30

6.0-8.5

< 0.01

< 0.01

< 0.01

3

SWEWW 3111B: 2012

< 0.035

< 0.035

< 0.035

0.5

mg/L

TCVN 6186:1996

0.8

0.8

1.6

4

Độ cứng (CaCO3)

mg/L

TCVN 6224:1996

108

110

142

350

Clorua

mg/L

TCVN 6194:1996

16

18

21

300

-

TCVN 6492:2011

Notes: 127/NC/1809: water supply in the canteen; 127/NC/1810: Water supply at technical floor; 127/NC/ 1811: Water supply at tap.

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Unlike the electricity reduction of 10.1%, the consumption of water has increased by 9% (in 2016: 31,387 m3) caused by the production of solutions in high volumn. In addition to the increase in production, the Company always attaches great importance to energy saving and sustainable development. In 2017, the Company has focused on improving each small production step, in order to limit the use of energy sources:

1

Circulation of water from the RO system to cool the equipment with an estimated water reuse of 1,560 m3. Percentage savings by input water ratio ~ 4.5%.

2

Optimizing sanitation processes for: wash bottles, sanitary equipment, workshops with standard procedures.

3

Continuous production to reduce the number of times for machines cleaning, reduce the energy consumption of water, reduce the waste water.

4

Use wastewater after standard treatment for irrigation and campus sanitation: about 2% of water input.

5

Use of administrative measures: Use water saving posters, instruction in frequently use water areas.

6

Remind of keeping the equipment on and off for the right purpose and educate energy saving in internal trainings.

ENVIRONMENTAL PROTECTION

147


ACTIVITIES FOR MINIMIZATION OF ENVIRONMENTAL IMPACT

EMISSION CONTROL EFFICIENCY Emissions from generators: Only use generators in unexpected cases such as power failure. In order to save energy, reduce emission, the Company plans to actively schedule production as soon as there is notice of power failure. Exhaust emissions from vehicles entering and leaving the plants (vehicles of employees and vehicles transporting raw materials and finished

products) shall be minimized and controlled by the following measures: »» Spray water onto roads in dry days. »» Disseminate and sign the regulations on safety and environment with all contractors/ suppliers when entering the Company.

Results of emission monitoring in 2017 Indicator

Noise

Unit

Standards/Comparative Standards

Limit

Results on 23 May 2017 North east corner

South east corner

North west corner

South west corner

dB

QCVN 26:2010/ BTNMT

< 70

63.9

66.5

65.3

65.2

Total suspended dust

µg/m3

QCVN 05:2013/BTNMT

<300

281

287

285

281

SO2

µg/m3

QCVN 05:2013/BTNMT

<350

161

154

158

150

NO2

µg/m

3

QCVN 05:2013/BTNMT

<200

48

52

47

45

CO

µg/m

3

QCVN 05:2013/BTNMT

<30,000

<5,000

<5,000

<5,000

<5,000

Temperature

0C

QĐ 3733/2002/QĐ-BYT

-

32.4

32.9

31.1

31.2

Humidity

%

QĐ 3733/2002/QĐ-BYT

-

81.6

78.7

78.3

78.6

m/s

QĐ 3733/2002/QĐ-BYT

-

0.89

0.46

0.74

0.93

Wind speed

Mornitoring results of exhaust gas from HOOD cabinet Indicator

Unit

Comparative Standards

Results on 23 May 2017 TH1

TH2

TH3

TKC

< 50

<0.1

<0.1

<0.1

1.86

< 1,000

<30

<30

<30

<30

QCVN 19:2009/BTNMT

< 50

1.57

1.81

<1.0

1.2

mg/Nm3 QCVN 19:2009/BTNMT

< 7.5

<2

<2

<2

<2

Sulfur dioxide, SO2

mg/Nm3 QCVN 19:2009/BTNMT

< 500

<6

<6

<6

<6

Nitrous oxide, NOx (caculated in NO2)

mg/Nm3 QCVN 19:2009/BTNMT

< 850

<5

<5

<5

<5

Ammonia & ammonium compounds

mg/Nm3 QCVN 19:2009/BTNMT

Carbon oxide, CO

mg/Nm3 QCVN 19:2009/BTNMT

Hydrochloric acid, HCl

mg/Nm

Hydrogen sulphide, H2S

3

Do not use transportation vehicles which are too old, or exceeded the circulation duration limit. All trucks must be periodically inspected by the Vietnam Register 148

Limit

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

on Environmental Safety to be allowed to operate and are regularly maintained.


WASTEWATER AND WASTE CONTROL Wastewater Type of wastewater: Industry and living. The Company has procedures and appoints staffs to monitor and operate the daily wastewater treatment system, to check the quality of wastewater after treatment and to take measures to improve in time. Have a daily log for system operation. The technology of wastewater treatment system »» Industrial wastewater collection and treatment system is built based on biotechnology, designed capacity of 30 m3/ day and night.

»» The daily-life wastewater collection and treatment system applies the technology of mobile microfiltration, designed capacity of 50 m3/day and night. Discharge modes: Continuity. Discharge method: Self flowing. Wastewater receiving sources: Wastewater after treatment is discharged into the common drainage system of Hoang Liet Ward, Hoang Mai District, Hanoi. Criteria applicable to wastewater: QCVN 40: 2011/BTNMT (National Technical Regulation on Industrial Wastewater) and QCVN 14: 2008/ BTNMT (National Technical Regulation on Domestic Wastewater).

Analysis results of wastewater at the final point of discharge before being discharged into the environment: No

Criteria

Unit

Date of sampling Temperature

2

Colors

3

pH

4 5

Sample 2

Sample 3

Sample 4

Accepted value

15/02/2017 23/05/2017 08/08/2017 06/11/2017

Date of result 1

Sample 1

06/03/2017 07/06/2017 25/08/2017 15/12/2017 C

0

28.7

29.5

25.8

< 40

6

46

27

<5

< 150

-

7.81

6.83

7.89

7.65

5.5-9

BOD5 (20 C),

mg/L

<0.8

8.7

13.6

42.4

< 50

COD

mg/L

87.6

73.1

115.4

87.2

< 150

6

Suspended Solid dust (TSS)

mg/L

6

32

21

10.1

< 100

7

Total cyanide

mg/L

0.021

0.0047

0.0057

0.08

< 0.1

8

Total phenol

mg/L

<0.003

<0.003

<0.003

<0.05

< 0.5

9

Sulfur

mg/L

<0.022

0.032

<0.022

0.32

< 0.5

10

Ammonium (calculated in N)

mg/L

0.1

3.32

1.05

0.051

< 10

11

Total nitrogen

mg/L

11.89

10.81

10.08

<0.0001

< 40

12

Total phosphorus (in P)

mg/L

0.14

1.47

0.08

0.71

<6

13

Chloride

mg/L

46

57

38

<0.015

< 1,000

14

Residual chlorine

mg/L

<0.17

<0.17

<0.17

<015

<2

430

4,300

4,300

2,400

<5,000

15

Pt-Co

23.7

0

Coliform

Bacteria/ 100 ml

ENVIRONMENTAL PROTECTION

149


ACTIVITIES FOR MINIMIZATION OF ENVIRONMENTAL IMPACT

No

Criteria

Unit

Sample 1

Sample 2

Sample 3

Sample 4

Accepted value

16

Total dissolved solids (TDS)

mg/L

254

497

389

981

< 1200

17

Nitrate (NO3-) (calculated in N)

mg/L

3,174

1.01

5,895

48

< 60

18

Vegetable oil and grease

mg/L

<0.3

<0.3

1.0

3.5

< 24

19

Total surfactants

mg/L

0.045

0.247

0.203

4

< 12

20

Phosphate (PO43-) (calculated according to P).

mg/L

0.036

1.38

0.08

<0.1

< 12

(Source: Report on environmental monitoring results of Hoang Liet Manufacturing Plant - 2017).

Unit in charge: the Labor environment Monitoring and Analyzing Station. Comment: The wastewater after treatment at the final discharge point of the system before being discharged into the environment at all times of the year meets the standards of wastewater according to the norms in the discharge permit.

Waste and hazardous waste The Company has made the report and registration of the hazardous waste source with the Department of Natural Resources and Environment of Hanoi and was granted the register of hazardous waste source owner, hazardous waste code: 01.000054.T, dated 02/29/2008 and the second re-issuance of

Register of hazardous waste source owner, hazardous waste management code: 01.000054.-DC1, dated on 05/05/2011 (due to the addition of the list of hazardous waste), and the third re-issuance code 01.000054T dated 11/26/2014.

Waste volume and treatment methods No

Name of waste

Weight (kg) Treatment method

Treatment unit

Management Board of Hoang Mai 1.

Domestic waste

2.

Scrap: Packing carton, raw materials

3.

Hazardous waste

9,200 Burn

28,834 Recycle

890 Clean, burn, burry

Recycled garbage accounts for 75% of the Company's waste. The reuse rate is high as the Company selects environment-friendly inputs and the waste sorting is done well in Traphaco. Waste materials are sold

150

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

District Project.

Construction

Investment

Công ty TNHH Đầu tư Tiến Dũng Urenco Urban And Industrial Environment Joint Stock Company Urenco10, transport and treatment of hazardous waste annually

to the collectors for input materials for other production stages, to limit the emission of waste to the environment.


Measures for waste management and recycling

1

Classify at source, disseminate and implement waste classification regulations in each division or unit.

2

Place collection bins at places that are convenient for identification, storage.

3

Carry out regular transportation of waste and recycle waste according to the Company's regulations.

4

Recycling contract has been signed with Tien Dung Investment Limited Company.

5

Domestic waste has been signed with Hoang Mai Project Management Unit.

Measures to manage hazardous waste

1

Regularly collect, classify and store wastes in separate tanks, with HWs label in strict compliance with the provisions of Circular No. 36/2015/TT-BTNMT.

2

Regulations and instructions are disseminated to all employees in the Company.

3

Storage houses have shelves, walls, lock doors and have a warning sign in accordance with TCVN 6707:2009.

4

Assign the specialized taskforce to perform the task of monitoring and managing hazardous wastes.

5

The contractors entering the workplace are disseminated and complied with the Company's waste management procedures.

RESTRICTED LIMITATION OF ENVIRONMENTAL INCIDENCE Environmental incident prevention and response is an important regulation defined in Section 3, Chapter X of the Environment Protection Law 2014 and many other provisions such as regulations on environmental protection planning. The Company’s Safety Committee has identified the risks causing environmental incidents in the production and business stages: wastewater spills, chemical spills, microbial leaks, floods, etc. For each specific situation there are different preventive measures, which are specified in the "Emergency Response Process" which clearly identifies some emergency situations. »» SOP on responses in the case of sewage spills. »» SOP Guideline for dealing with chemical spills and microbial leaks. »» Flood prevention. In 2017, the Company has no environmental incidents.

ENVIRONMENTAL COMPLIANCE The Company complies and does not violate environmental legislation and follow the guidance of the environmental management agency. »» Maintain updating and evaluating the influence of legal documents on the Company’s system. Systemize relevant legal documents that are constantly updated on the Company’s internal network and inform the influence of the documents to related divisions.

ENVIRONMENTAL PROTECTION

151


FOR SUSTAINABLE FUTURE

152

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


GRI G4 COMPLIANCE TABLE We firstly make this Report to serve our own businesses in implementing the Sustainable Development Strategy. Only when each member of Traphaco knows and understands what needs to be done on this issue and put it into action, the Sustainable Development Strategy has been successfully implemented. The GRI G4 Guide is a comprehensive assessment of the sustainability of the business, so Traphaco has actively researched and applied for the Sustainable Development Report for 2017.

ENVIRONMENTAL PROTECTION

153


GRI G4 COMPLIANCE TABLE

GRI

Disclosure Item

Report of Traphaco

Page

GENERAL STANDARD DISCLOSURE OVERVIEW 1. Strategy and Analysis

154

G4-1

Statement from the most senor decision-maker of the organization about the relevance of Message from the Chairman of the BOD. sustainability to the organization and its strategy

6

G4-2

Description of key impacts, risks, and opportunities.

60

G4-3

Name of the organization.

G4-4

Primary brands, products, and/or services.

G4-5

Location of organization’s headquarters.

G4-7

Sustainable Risk Management.

Overview of Traphaco.

10

Nature of ownership and legal form.

Organizational chart Traphaco Joint Stock Company.

16

G4-8

Markets served.

Business lines and network.

14 - 15

G4-9

Scale of the reporting organization.

Overview of Traphaco.

10

G4-10

Employees distribution.

Traphaco employees distribution.

97

G4-11

Percentage of total employees covered by 100% (for more infomation, refer to promoting collective bargaining agreements. workplace democracy.

G4-12

Describe the organization’s supply chain.

G4-13

Significant changes during the reporting period Traphaco have no significant changes relating to regarding size, structure, or ownership. these matters.

Engaging ESG in business activities.

G4-15

• Community Performance Assessment Table; • Regulations on the Organization and Operation of the BoD; • Process of contractor management on safety, health and environment; • Regulations on Management of Contracts and Transactions between Traphaco JSC and Related Parties, Externally developed economic, environmental • Regulations on Appointment, Reappointment and social charters, principles, or other initiatives and Dismissal of managerial personnel in the organization exposed. Traphaco JSC; • Regulations on TRAPHACO’s capital representatives at enterprises; • Risk management process; • Process of evaluating and selecting suppliers of raw materials; • Client Satisfaction Assessment Process; • Process of inspection, supervision and measurement of labor safety.

G4-16

• Vietnam Business Council for Sustainable Development • Hanoi SME Association; • Vietnam Intellectual Property Association; • Vietnam Association for Anti-Counterfeiting and Trademark Protection; • Vietnam Pharmaceutical Companies Association; • Members of VCCI; • Members of Vietnam Industry and Trade Association; • Members of Vietnam High Quality Products Association.

List memberships of associations.

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn

114 88 - 91


GRI

Disclosure Item

Report of Traphaco

Page

2. Report boundaries G4-17

a. Related parties included in Consolidated Consolidated Financial Report in “Traphaco 2017 financial reports or similiar documents. Annual Report” b. Reports of parties not including in Consolidated fiancial reports or similiar documents.

G4-18

Process for defining the report content and the Overview of the report. Aspect Boundaries.

G4-19

List all the material aspects in the defining report Determining the crucial fields. content process.

G4-22

Reasons of information changing and explaination Add two more related parties compared to the toward its effect. 2016 Report.

G4-23

Significant changes from previous reporting Implement independent Sustainable Development Report. periods in the scope and aspect boundaries.

5 78 - 79 72

Stakeholder Engagement G4-24

List of stakeholder groups engaged by the organization.

G4-25

The basis for identification and selection of engaged stakeholders.

G4-26

Organization’s approach to stakeholder engagement Strong connection with stakeholders.

G4-27

Key topics and concerns that have been raised • Involvement of stakeholders in Traphaco's policies and activities; through stakeholder engagement, how the organization has responded (including through • Matrix to identify critical issues. reporting).

Stakeholders of Traphaco.

73 74 - 77 73 79

GRI Content Index G4-28

Period reporting.

Overview of the report

G4-29

The most recent reporting period.

2018 (implementation of Sustainable development report 2017)

G4-30

Reporting cycle.

Annual.

G4-31

Contacts if available.

Contact.

G4-32

The ‘in accordance’ option the organization has chosen. Overview of the report.

5

5 5

Evaluate performance and efficiency of the BOD SPECIFIC STANDARD DISCLOSURES ECONOMIC OBJECTIVES 1. Economic efficiency DMA

General management approach disclosure.

Management methods.

82

Economic Performance G4-EC1 Direct economic value generated & distributed Assuring efficient, sustainable growth.

87

FS

Commentary added about community investment program values and opportunities of organization’s activities. Impacts from sustainable development trends to 30 - 31 G4-EC2 Climate change effect toward financial Traphaco. implications,risks and opportunities of organization's activities.

155


GRI G4 COMPLIANCE TABLE

GRI

Disclosure Item

Report of Traphaco

G4-EC3 Coverage of the organization's defined benefit Labor health care policy. plan obligation.

Page 102

G4-EC4 Significant financial assistance received from Not applicable. government. 2. Market Presence Performance indicators G4-EC7 Development and impacts of infrastructure and service investment for community benefit Indirect economic contributions. through business activities.

87

G4-EC8 Significant indirect economic impacts. 3. Procurement Practices Performance indicators G4-EC9 Prpportion of spending on local supplier at Greenplan project - create sustainable livelihoods significant locations of operation. for farmers.

127

ENVIRONMENTAL OBJECTIVES 1. Materials G4-EN1 Materials used by weight or volume.

Use sustainable materials.

G4-EN2 Recycled input materials used.

Traphaco does not use raw materials from recycled products as its specific characteristics is to produce and do business of pharmaceuticals for protecting health.

143

2. Energy Performance indicators G4-EN3 Enery consumption within the organization. G4-EN4 Enery consumption outside the organization. G4-EN6 Reduction of energy consumtion.

Energy consumption and efficiency.

144-145

Effective use of water resources.

146-147

G4-EN7 Reduction in energy requirements of products and service. 3. Water G4-EN8 Water withdrawal by source. 4. Biodiversity G4EN11

Operational sites owned, leased, managed in, or Contribution of biodiversity conservation through adjacent to, protected areas and areas of high 138-139 green project. biodiversity value outside protected areas.

G4EN12

Significant impacts of activities, products, and services on biodiversity. Contribution of biodiversity conservation through 138-139 green project. Habitats protected or restored.

G4EN13

5. Emissions, waste and wastewater

156

G4EN19

Innitiavtive to reduce emission causing Green raw materials. greenhouse effect and achieved reduction..

89

G4EN22

Total wastewater flow in feature and destination Wastewater.

149

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


GRI

Disclosure Item

Report of Traphaco

Page

G4EN23

Total waste weight by types and disposal Waste. methods.

G4EN25

Weight of transported, imported, exported, or 150-151 treated waste deemed hazardous under the Waste: (Table: Waste volume and treatment terms of the Basel convention 2 annex I, II, III, methods). and Viii, and percentage of transported waste shipped internationally.

G4EN26

Identity, size, protected status, and biodiversity value • Wastewater; of water bodies and related habitats significantly • Environmental compliance (Wastewater meets 149-151 the quality standards and there is no violation affected by the organization’s discharges of water regarding environmental issues). and runoff.

SOCIAL OBJECTIVES 1. Labor practices and decent work DMA

General management approach disclosure.

Management method.

94

2. Employment G4-LA1 Total number and rate of new recruitment and Workforce structure in Traphaco. resignation rate by age, gender and region.

97-98

G4-LA2 Benefits for full-timed employees (not for Sincerely appreciate the contributions of the temporary or part-time employees). employees.

115

3. Occupational Health and Safety G4-LA6 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities. G4-LA7 Workers with high incidence or high risk of Occupational health and safety. diseases related to their occupation.

102-107

G4-LA8 Health and safety topics covered in formal agreements with trade unions. 4. Training and Education G4-LA9

Average hours of training per year per employee by gender and employee category.

G4LA10

Programs for skills management and long- Improve the quality of human resources and build term academic that support the continued long-term value for employees. employability and assist employee in managing career endings.

G4LA11

Percentage of employees receving evaluation Effective work management of effectiveness performance and regular career remuneration by performance. progression.

systems

and

98-99

108-109

5. Diversity and Equal Opportunity G4LA12

Composition of governance bodies and breakdown of employees per employee category according to Workforce structure in Traphaco. gender, age group, minority group membership, and other indicators of diversity.

97

6. Equal reward scheme regardless gender G4LA13

Ratio of basic salary and remuneration of women Equal treatment of employees. to men by employee category.

114

157


GRI G4 COMPLIANCE TABLE

GRI

Disclosure Item

Report of Traphaco

Page

7. Supplier Assessment for Labor Practices G4LA14

Percentage of new suppliers that were screened Associate esg in business operations. using labor practices criteria.

88

HUMAN RIGHTS Investment G4-HR1 Total number and percentage of significant investment agreements and contracts that include Associate esg in business operations. human rights clauses or that underwent human rights screening.

88

SOCIETY Local Communities DMA

General management approach disclosure

Management method.

94

G4-SO1 Percentage of operations with implemented Contribute to the common development of the 130-131 local community engagement, impact society. assessments, and development programs. Supplier Social Assessment G4-SO9 New suppliers that were screened using social Associate esg in business operations. criteria.

88

PRODUCT RESPONSIBILITY 1. Product and service labeling FS15

Policies for the fair design and sale of financial products and services.

2. Customer Health and Safety Percentage of significant product and service Responsibility for investment in the development G4-PR1 categories for which health and safety impacts of products. 118-125 are assessed for improvement. 3. Product and Service Labeling G4-PR3

Requirements for product information and labeling.

and

service

G4-PR5 Result of surveys measuring customer satisfaction.

158

SUSTAINABLE DEVELOPMENT REPORT 2017 www.traphaco.com.vn


SUSTAINABLE DEVELOPMENT REPORT

BASED ON DIGITAL TECHNICAL PLATFORM

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TRAPHACO JOINT STOCK COMPANY | 75 Yen Ninh, Quan Thanh Ward Ba Dinh District, Hanoi, Vietnam | (+84.24) 3734 1797 | (+84.24) 3681 5097 | www.traphaco.com.vn

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Traphaco SR2017 - Sustainable Development Report  

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