The Long Run of Sustainable Business: Li-Ning's "Acceleration" in ESG

ESG as a holistic concept has been formally proposed by the United Nations for 20 years. Over the past two decades, sustainable development has gradually evolved from a concept into an important part of creating value for enterprises and building a sustainable ecosystem.

Sustainable business is based on establishing the purpose and role of business with a social purpose, thereby reexamining various aspects of enterprise strategy, operations, production, and sales to seek the optimal path between economic, social, and environmental interests, promoting the harmonious development and overall progress of business, society, and the environment. The integration of sustainable concepts with industries has become a hot topic of industry concern. How to explore the path of sustainable development at the business level has become an important issue facing enterprise development.

On April 23, Li-Ning Group (02331) released the "2023 Environmental, Social, and Governance (ESG) Report." This is Li-Ning Group's 18th consecutive year of publishing corporate social responsibility/ESG reports. As early as 2006, Li-Ning Corporation released its first corporate social responsibility report. In 2014, it proactively released its first ESG report, demonstrating Li-Ning's advanced sustainable awareness.

Li-Ning's sustainable strategy aims to integrate responsible concepts into the entire value chain of product design, material procurement, production processing, marketing, and waste disposal, improve social and environmental management systems, and move towards a sustainable vision through innovation and transformation. This report not only showcases Li-Ning's sustainable development achievements in areas such as "environmentally friendly material innovation and application," "intelligent green operation," and "responsible supply chain system construction," but also presents innovative breakthroughs in product design, production manufacturing, supply chain management, marketing sales, and consumer services with various data and examples, providing the latest sustainable answers.

Environmentally Friendly Products, an Innovative Practice Leading Sustainable Consumption

Looking at the sports equipment market, with the steady advancement of the national "dual carbon" goals and the continuous increase in consumer demand for sustainable consumption, the entire industry is accelerating its green transformation.

Green, low-carbon, innovation – in fact, these industry buzzwords are not unfamiliar to Li-Ning. As early as 2019, Li-Ning Corporation officially launched the "Li-Ning BOOM" lightweight rebound technology platform, becoming a revolutionary part of Li-Ning's independent technology matrix; in 2022, Li-Ning released BOOM silk shoe upper technology using bio-based products as raw materials and applied BOOM technology from the midsole to the upper. In 2023, Li-Ning Corporation further advances in the sustainable field, actively engaging in strategic cooperation around environmental protection technology and production materials, and promoting environmental materials to diversify scenarios through independent research and innovation, providing sustainable consumption choices for sports enthusiasts.

According to the report, Li-Ning's new low-carbon materials for footwear products include BOOM silk technology, BOOM sole material, GCR, and GCU, and have achieved good results in product applications. As of 2023, the application rate of BOOM silk uppers in Li-Ning running shoe products is about 60%; compared to using traditional sole materials, Li-Ning has reduced carbon emissions by approximately 1500 tons, 438 tons, and 1176 tons respectively by using GCR, GCU, and BOOM sole materials Li-Ning also cooperates with professional third parties to calculate the carbon footprint of the Flash 10 basketball shoes and Ultra Light 21 running shoes to be launched in 2023, obtaining ISO 14067 certification. The carbon footprint of the Flash 10 is 8.74 kg CO2-e/pair, and the Ultra Light 21 is 6.39 kg CO2-e/pair. Compared to the previous generation products, the carbon footprint has been reduced by over 30% after applying environmentally friendly materials and production processes.

In terms of clothing products, Li-Ning has achieved breakthrough results by using a large amount of recycled materials in its products and packaging. In 2023, Li-Ning used approximately 2839 tons of recycled environmentally friendly yarn, reducing carbon emissions by about 2731 tons. By using environmentally friendly packaging bags made of 100% recycled polyethylene material, the total carbon reduction is about 1500 tons compared to using virgin plastic packaging.

Li-Ning not only provides environmentally friendly products to consumers but also integrates environmental concepts into professional sports, leveraging its rich professional event resources to promote a sustainable lifestyle. In the 2023-2024 season of the Chinese Basketball Association (CBA), Li-Ning will produce game uniforms using environmentally friendly yarn made from recycled plastic bottles, recycling over approximately 166,400 plastic bottles, weighing 3808 kg in total.

From material research and development to product integration, Li-Ning's continuous exploration and innovation in green technology and production materials are driving the diversified development of environmentally friendly products, providing consumers with more green choices.

From headquarters to bases to stores, Li-Ning's operations are becoming greener

If the low-carbon innovation of products such as running shoes and game uniforms is the visible side for consumers, the green transformation of R&D, production, logistics, and other links that support corporate operations requires a joint determination for change across the entire value chain, as well as sustained resource investment. Currently, Li-Ning has implemented the concept of green operations in all aspects of the company's daily operations, including the company's headquarters, logistics bases, and extending to terminal stores.

Li-Ning has chosen to start its actions from the corporate strategic level. In 2022, Li-Ning gradually researched and formulated a company-wide carbon reduction and carbon neutrality plan, covering the three headquarters in Beijing, Shanghai, Shenzhen, two innovative R&D supply bases in Hubei and Guangxi, as well as various offices, stores, supply chains, warehousing logistics, business travel, involving Scope 1, Scope 2, and some Scope 3 carbon emissions within the company's scope With the environmental goals and plans becoming clearer, various departments are also in operation, accelerating the implementation of low-carbon transformation.

According to the latest report, the Beijing Li-Ning headquarters has built a 1.16MW photovoltaic power station in the park, equipped with more than 5000 solar panels, and is expected to generate over 1.5 million kWh of electricity in 2023. At the same time, office buildings such as the Shanghai Li-Ning Center and Shenzhen Li-Ning Center have upgraded and implemented intelligent office systems to reduce the consumption of water, electricity, and other resources.

In the Li-Ning East China Smart Logistics Center in Jiading, Shanghai, Li-Ning has improved operational efficiency and accuracy in sorting, storage, and operations through the use of intelligent park platforms and automated equipment. They have also implemented a "dark factory" to operate without lighting conditions, reducing the warehouse's energy consumption.

In the flagship store of the Shanghai Li-Ning Center, which directly communicates with consumers, Li-Ning is becoming a link between green operation and sustainable consumption for users.

From the initial design of this flagship store, Li-Ning has used a series of environmentally friendly building materials and technologies, such as straw-based straw board materials, which are formaldehyde-free and degradable, reducing the reliance on increasingly scarce resources such as wood. It is worth mentioning that Li-Ning has adjusted the lighting scheme in store operations, reducing the number of lights by 18% compared to traditional schemes. They have also set up real-time energy consumption monitoring and smart control systems covering major equipment such as air conditioning, lighting, and advertising screens. This system can intelligently switch between various operating modes such as staff mode, business mode, and closing mode, effectively improving energy management efficiency.

It is understood that the flagship store features a range of products including basketball, running, fitness, and sports lifestyle, as well as a coffee area. The over 800 square meters of store operations are maintained in an orderly manner through low-carbon systems, providing not only a new sports experience center that integrates shopping, sports, and leisure but also a new attempt by the brand store in low-carbon operations.

Supply Chain Management, Responsibility Leads to Long-Term Success

Walking alone may be fast, but walking together is far. For the long-term issue of sustainable development, relying solely on energy conservation and emission reduction is far from enough. It also requires the joint efforts of the industry's upstream and downstream to promote sustainable transformation together. This requires the collective efforts of supply chain partners As a leading domestic sports brand, Li-Ning plays a key role in coordinating the upstream and downstream supply chain in the industry, managing various types of suppliers such as materials, production, and logistics. Over the years, Li-Ning has been committed to building a responsible supply chain system, achieving sustainable development through upgrading management systems, strengthening accountability audits, conducting risk assessments, and other means of achieving multi-party win-win outcomes.

In 2023, Li-Ning further upgraded and optimized its supplier management system, introducing a supplier sustainability project scoring mechanism for the first time. It evaluates suppliers on energy and carbon emission management, resource recycling, environmental material applications, and provides training to help suppliers continuously improve their environmental management quality.

In addition, Li-Ning conducted third-party social responsibility audits on 126 suppliers, covering approximately 83% of finished and semi-finished product suppliers. Ultimately, all participating suppliers received green and blue ratings, with no yellow or red-rated suppliers.

Regarding environmental protection, since 2020, Li-Ning has been conducting carbon audits on major suppliers. By 2023, Li-Ning had completed carbon audits for approximately 40 suppliers. Additionally, Li-Ning provided training to suppliers on energy and carbon emission management, jointly discussing future energy-saving and carbon reduction plans, laying a solid foundation for developing supplier and product carbon footprint reduction plans in the future.

From running shoes to apparel, from stores to parks, from self-operation to moving forward hand in hand with supply chain partners... Li-Ning Group, guided by a long-term vision, has been advancing further and deeper on the path of sustainable development.

In the endless marathon of sustainable development, Li-Ning has recently put forward the slogan "Look Further Run Further" as a sustainable motto.

With a long-term perspective and a firm determination to move forward, this is not just an attitude, but also a commitment