What is the proper way to not approve a change to a contract that has been changed and initialled by the other party.

If you sent a draft contract to someone, and they made a change and initialed it,  if you wanted to accept the change, you would initial it next to their initials.  Since you don't agree, you should not initial it, and you can send them a letter saying you do not agree to their change.  If the contract had been agreed to and signed by both sides before the other side made a change, the contract, without the change, is still valid. If the sides never were in complete agreement, then there is no valid contract in effect.