Zhumadian Henan Valiant Braking System Corporation Social Responsibility Report (2020)

I. Corporate Governance System

Sound corporate governance is the intrinsic driving force behind a company’s sustainable development. Since its establishment in 2013, the company has seamlessly integrated corporate governance with production and operational activities. In strict accordance with the requirements of the Company Law and relevant national laws, regulations, and rules, the company has established a modern enterprise system, refined its corporate governance structure, and standardized its operational procedures. A systematic and scientific set of rules has been put in place, based on the company’s Articles of Association and underpinned by key frameworks such as the Rules of Procedure for the Shareholders’ Meeting, the Rules of Procedure for the Board of Directors, the Rules of Procedure for the Supervisory Board, and the Detailed Rules of Operation for the General Manager. This has created a balanced mechanism of checks and balances among the shareholders’ meeting, the board of directors, the supervisory board, and management, ensuring that all business activities—including production and operations—are conducted in a healthy and sustainable manner and thereby promoting the company’s sustained and sound development.

II. Company Development

Focusing on the themes of reform and innovation, the company has thoroughly implemented the Scientific Outlook on Development, innovated its marketing strategies, proactively responded to market changes, pursued independent innovation, placed great emphasis on financial budgeting and cost assessment, strengthened its ability to defend against and control risks, and thereby continued to drive sustained and rapid growth in its business performance.

We attach great importance to product R&D and technological innovation, continuously upgrading our mechanical manufacturing capabilities. We remain committed to management innovation and the promotion of standardization, gradually moving toward refined management. Among the company’s most prominent and significant achievements in establishing a green factory is the major technological and process innovation we’ve undertaken. By adopting a single-step spin-forming process combined with centrifugal casting, we have revolutionized the production of automotive brake drums—completely transforming the traditional manufacturing process that relied on casting. This innovative approach has eliminated the four highly polluting and energy-intensive steps—“sand mixing, mold making, core production, and core setting”—from the conventional brake drum production process. As a result, our new process is not only more efficient and energy-saving but also cleaner and more environmentally friendly, truly achieving energy conservation, emission reduction, and green environmental protection.

In 2019, we sold 600,000 units of lightweight bimetallic composite brake drums, generating total revenue of 300 million yuan and contributing 25 million yuan in profits and taxes. In 2020, we anticipate producing and selling 800,000 units of composite brake drums, with total revenue expected to reach 420 million yuan.

The company’s domestically pioneering bimetallic composite brake disc for commercial vehicles has entered the small-batch production phase and has already been granted a patent. The company plans to begin construction of a brake disc factory in 2020. Upon completion, the factory will have an annual production capacity of 2 million units, generating annual sales revenue of 800 million yuan and contributing 75 million yuan in profits and taxes annually.

The aluminum alloy forged wheel hub jointly developed by the company and Beijing Jiaotong University is currently in the R&D phase and is expected to be launched onto the market in the second half of 2021.

III. Product Management

The product’s manufacturing process is at a leading level domestically. The company’s developed bimetallic composite brake drum, along with its associated technologies and processes, has successfully broken the U.S. technological monopoly and surpassed domestic competitors in the same industry. In 2016, this technology was awarded the Second Prize for Scientific and Technological Progress in China’s Machinery Industry. In 2017 and 2018, it respectively received Excellence Awards at the 6th and 7th China Innovation and Entrepreneurship Competitions. It was also recognized as an Outstanding Enterprise in the 9th and 10th Henan Provincial Innovation and Entrepreneurship Competitions. In 2017, it won the Second Prize in Henan Province’s inaugural “Yu Chuang Tian Xia” Competition, and in 2018, it ranked among the Top Ten in the Henan Province Finals of the “Maker China” Competition.

Product research and development and technological innovation have achieved outstanding results and have received full recognition from the government and all sectors of society. Over the past several years, HJZD Company has successively been recognized as a National High-Tech Enterprise, a National Science and Technology-based Small and Medium-sized Enterprise, a “Specialized, Fine, and New” High-Quality SME in Henan Province, a Key Pre-IPO Enterprise in Henan Province, the Henan Provincial Engineering Technology Research Center for Lightweight Composite Brake Drums, a recipient of the 2018 Special Fund for Advanced Manufacturing in Henan Province, a Industry-University-Research Cooperation Base of Henan University of Science and Technology, one of the Thirty Emerging Enterprises in Zhumadian City’s Strategic Emerging Industries, an Outstanding Enterprise in Industrial Economic Innovation and Development in Zhumadian City for 2017, an Excellent Non-Publicly-Owned Enterprise in Zhumadian City, one of Zhumadian City’s Ten Landmark Equipment Manufacturing Enterprises, and a recipient of the 2018 Mayor’s Quality Award in Zhumadian City.

The product quality has also been recognized and affirmed by customers. The company has launched the construction of a “Quality Management System,” vigorously promoting the “craftsman spirit” and rigorously focusing on quality management details on the production line every day. We have established a product quality tracking system, with each outgoing product equipped with information such as a QR code—effectively giving each product an “ID card.” Our products have successively passed the inspection and testing reports from two national-level laboratories: Shaanxi Automobile HanDe Axle and Liuzhou Automobile FangSheng Axle. Our products are now supplied as components to China’s top five automakers—First Auto Works, Second Auto Works, Sinotruk, Shaanxi Automobile, and Beijing Foton—and have also been exported to the United States. The demand for our products far exceeds supply, making our company the hidden champion in China’s bimetallic composite brake drum industry. Our products’ quality and performance have reached internationally leading levels.

IV. Talent Development

The company has introduced a series of preferential policies and implemented measures to attract and recruit talented individuals, ensuring that they genuinely feel our commitment is sincere and heartfelt—welcoming them with joy and enabling them to work with satisfaction. Thanks to these efforts, over the past few years we have recruited more than 50 engineering and technical personnel from across the country, many of whom hold associate degrees or higher and possess mid- to senior-level professional titles, thereby providing a solid talent base for the company’s technological innovation and development.

The company places great emphasis on enhancing employee qualifications. It has established and implemented a “three-level education” training system—covering the company, departments, and workshops (teams)—and conducts assessments of newly hired and transferred employees every two months to comprehensively evaluate their safety awareness and technical operational skills. The company rigorously focuses on training in safety and technical operating procedures, as well as identifying potential risks during work processes. Workshops have also introduced a “mentor-apprentice” skill-training program. In total, the company has organized and carried out various on-the-job training sessions for more than 400 employees, ensuring that all employees who take up their posts meet the standards required for skilled workers.

The company pays close attention to the occupational health and well-being of its employees, has launched the construction of an “Occupational Health System,” and provides free pre-employment medical examinations as well as periodic health check-ups for employees. To date, more than 400 occupational health records have been established, safeguarding employees’ right to health. The company has also stepped up training on occupational health knowledge and actively promoted the “Handbook for the Prevention and Control of Occupational Diseases,” thereby continuously enhancing employees’ awareness of self-protection. Furthermore, the company has strengthened supervision and management over the distribution and use of personal protective equipment (PPE), ensuring strict compliance with industry standards in the allocation and issuance of PPE. During routine inspections, any instances of improper use of PPE by employees are promptly corrected.

Most of the company’s employees come from rural areas and, under current social conditions, their living standards are still relatively modest. Guided by the employees’ immediate interests and fundamental needs, the company has addressed their housing issues. Moreover, the dormitories are equipped with amenities such as air conditioners, water heaters, and washing machines. The company provides meal services to its employees at prices below cost, and frequently organizes free dining events. Workers in the workshops receive two free additional meals each day, ensuring that employees can eat their fill and enjoy high-quality meals at prices significantly lower than those on the market.

The company’s trade union has been conducting registration and assistance programs for employees living in poverty. Since 2015, it has provided assistance to more than 40 employees, with a total of 80,000 yuan in aid funds. At the same time, the company actively fulfills its social responsibilities by providing support to impoverished rural areas and disadvantaged college students through various means, including employment recruitment, material donations, and cash contributions. The total value of donated materials has exceeded 3.1 million yuan.

V. Environmental Protection

The company attaches great importance to environmental protection efforts and firmly adheres to the development philosophy that “lucid waters and lush mountains are invaluable assets.” It strictly implements the new requirements and arrangements set forth by the 19th National Congress of the Communist Party of China regarding ecological civilization and environmental protection, making environmental protection an integral part of its corporate sustainable development strategy. The company places high priority on energy conservation, emission reduction, and environmental governance, actively fulfills its social responsibility for environmental protection, and proactively pursues environmentally friendly and resource-efficient development. It strives to forge a path that balances economic and social benefits while promoting harmonious coexistence between enterprises and the surrounding environment.

The company has increased its investment in environmental protection facilities, spending over 1.5 million yuan on environmental equipment, including four electrostatic dust removal systems, two photo-oxidation environmental protection systems, two pulse dust removal systems, two plasma dust removal systems, online dust monitoring equipment, and secondary smoke and dust collection systems. Additionally, the company has optimized its production processes by establishing enclosed, automated spray booths and installing spray water curtain systems to minimize the escape of smoke and dust.

The company has strengthened its management and development of environmental protection systems, rigorously implemented the responsibility system for environmental protection work, and initiated the establishment of both an “Environmental Management System” and an “Energy Management System.” Environmental management indicators have been integrated into every stage of the product production process. A target responsibility system has been established, spanning from senior and mid-level management down to team-level operations, thereby creating a comprehensive management network. An online monitoring system has also been set up to promptly report on production-related pollutant emissions. Personnel found lacking or negligent in environmental protection management will be subject to performance evaluations, ensuring that responsibilities are clearly defined and rewards and punishments are strictly enforced.

The company has strengthened its promotion of environmental protection concepts by disseminating environmental knowledge through various channels such as slogans, promotional brochures, and bulletin boards, thereby enhancing employees’ environmental awareness. The company has also stepped up efforts to improve the appearance and environment of its premises, implementing beautification, hardening, greening, and lighting projects in the factory area’s construction and management. More than 1,000 trees of various species have been planted, resulting in a green space area exceeding 20,000 square meters and an overall green coverage rate of 27.57%. The company utilizes modern information technologies—including the OA office system, financial ERP management, and an internal network—to promote paperless office operations and actively advance the building of a resource-saving society.

The company encourages employees to engage in technological innovation and invites all staff to participate in a campaign to solicit rationalization proposals under the theme of “Energy Conservation, Cost Reduction, Increased Production, and Enhanced Efficiency.” Employees are encouraged to propose innovative improvements in areas such as waste recycling, optimization of production systems, and equipment upgrades, thereby reducing energy consumption, enhancing resource recycling, and further advancing energy-saving and emission-reduction efforts.

Through technological innovation, the company has revolutionized its production processes by completely eliminating four highly polluting and energy-intensive procedures: sand mixing, molding, core making, and sand removal. As a result, it can save nearly 20,000 tons of non-renewable mineral resources annually, such as molding sand, coal powder, and bentonite, while also reducing solid waste emissions by nearly 20,000 tons per year. Moreover, since this product is 20% to 30% lighter than conventional products, it enables an additional 9,000 tons of cargo transport each year, saving 18,000 tons of fuel and reducing fuel costs by 125 million yuan annually. If this technology were to be widely adopted nationwide, it could save 8 million tons of non-renewable mineral resources annually, reduce solid waste emissions by 8 million tons, increase cargo transport capacity by 1.8 million tons per year, save 3.6 million tons of fuel annually, and cut fuel costs by 25 billion yuan annually. This project will break the U.S. technology monopoly and boasts high potential for widespread application, delivering significant economic, social, and environmental benefits.

Zhumadian Henan Valiant Braking System Corporation