Sustainability

HOME Sustainability Environmental-friendly

Environmental-friendly

Supply Chain

Raw Materials Suppliers Communications and Appraisal ｜Raw Material Procurement Strategy ｜Transportation Supplier Management

Suppliers are an important part of the company formation. The Company sees its suppliers as important partners. There are expectations that through a strong management mechanism, ensure the ethical standards and responsible conduct of the partnering suppliers and their commitments to protecting human rights and the environment. It is an aim to seek for and to develop a long-term collaborative relationship built on the foundation of trust and safety.
The Company commits to effectively manage the impacts of its products and procurement to the society and environment. In concert with the corporate sustainability and long-term development goals, the Company has formulated the “Supplier Code of Conduct”, and “Declaration of Non-use Conflict Minerals”, and has made these code and declaration into a statement that will be available for signing by domestic and international suppliers for the first time in 2021. Most suppliers have signed the statement and responded. Amended certain parts of the standard in 2022 to improve its consistency with the current status. The “Declaration of Non-use Conflict Minerals” established in 2022 highlights the Company's focus on human rights and conflict minerals issues.
We are committed to working with our suppliers to ensure that the production process has minimized the negative impact on safety, health, environment, quality and society. The Company also works toward the following goals:

Insist on ethical standards and responsible conduct with the partnering suppliers in seek of trust and cooperation as the foundation for long term cooperative development relationship.
Select suitable suppliers to reduce possible negative impacts on the environment and society due to production activities. For example: reduce wastewater and generation of wastes, and water saving, energy saving and use of qualified mineral products.
Through telephone (including Line and WeChat), factory visits, video con-calls and other methods to strengthen contacts with the suppliers to ensure the suppliers are protecting employee health and safety and human rights of specific groups (females, minorities, aborigines, or people with disabilities). A zero-tolerance policy should also be in place for child labor.

Environment Aspects

In compliance with related regulation requirements for environmental protection, employee health and safety of the local area.
Protect the lives and health of employees and nearby residents.
Effectively utilize resources through energy saving, reduction of waste discharge and the wasting of water resources.

Social Aspects

Support human right protection.
Against forced labor and discrimination and prohibit child labor.
Maintain and respect labor rights and interests.

Management Aspects

In compliance with related trade regulations of the local region.
Against corruption assuring the Company’s ethical corporate management code.

The Company gives priority consideration to suppliers meeting the Company’s “Supplier Code of Conduct” and “Non-Conflict Minerals Declaration” in principle, and suppliers with actual compliance of local environmental and social regulations. The Supply Chain Department will conduct appraisal and unscheduled on-site inspection for review of cooperative suppliers. The QHSE policy includes the four major aspects of quality, safety, health, and environment, and QHSE has been added to the supplier evaluation since 2017. The questionnaire content and scoring criteria are reviewed annually to make the evaluation items and results more rigorous and rationalized. In 2022, the English and Chinese language versions of the questionnaire were added, and new suppliers are required to sign a “Non-Conflict Mineral Product Declaration”, or if they do not sign, the transaction will be suspended.
The Company issued code of conduct statements to 60 key raw material suppliers in 2021. 59 statements were eventually collected, representing a 98% return rate. 16% were from foreign suppliers and 10% were from domestic suppliers.
It is expected that 60 copies of revised version of the “Supplier Code of Conduct Statement” and “Non-Conflict Minerals Declaration” will be issued to key raw material suppliers by the end of 2022.

Raw Materials Suppliers Communications and Appraisal

Raw Materials Suppliers Communications
Adhering to the production philosophy of the Company's Quality, Health, Safety, and Environment (QHSE) policy "Friendly citizen, friendly environment, lean production, energy saving and carbon reduction, and quality assurance", it is anticipated that the cooperative suppliers abide with related regulations growing together for sustainable management. Apart from maintaining contacts with suppliers using emails and communicating software, we will also make actual visits to the factories and perform the questionnaire assessment to understand the suppliers' capability on production environment and waste treatment. This is to assess the level of implementation of their environmental policies.

Due to the impacts from COVID-19 between 2020 ~ 2022, it was not possible to make overseas trips to the factories. Therefore, changed the communication methods with the suppliers to the use of communication software for maintaining contacts. Each month arranged video conference calls with major suppliers. The issues discussed are related to the stability of good supply, status of the pandemic and shipment situations. In 2022, a total of 33 video conference calls have been conducted. Since there have been restrictions on overseas travelling in recent years, video con-call software is making rapid developments. The suppliers have also gradually get used to this type of communication method. Hence, video con-call method has been listed as one of the communication methods.

New Suppliers Evaluation
Survey the capabilities of the new suppliers in environmental management, health and safety management, quality management and so on through the QHSE questionnaire. Arrange for personnel to conduct onsite surveys where necessary.

Result
In 2022, there is an increase of 10 suppliers. Out of which, 5 are vendors from China, 3 vendors from Taiwan, and 2 vendors from India. Due to the impacts of the COVID-19 pandemic, there are no visiting records for this year. However, the suppliers are still requested to conduct the QHSE questionnaire for self-evaluation. After the evaluation by the supply chain department, there have been no discoveries of negative significant impacts. The qualified rate for suppliers of the Company accounts for 100%.

Annual Evaluation for Cooperative Suppliers
Each year, the evaluation of the suppliers is on their accuracy in delivery and quality. Supplier appraisal will be conducted for the top five (ISO system) suppliers who topped the ranking for the annual procurement amount and key raw materials (GMP system).

Result
In 2022, individual appraisal was conducted for a total of 14 suppliers. Out of which, there are 9 key raw materials suppliers, and 5 suppliers who topped the top 5 in the annual procurement amount. Appraisal content is mainly on quality, stability of delivery and transportation and so no items for appraisal. Qualified vendors account for 14 vendors with qualified rate at 100%, and they are Grade A suppliers. There are no vendors who have not met qualifications.

Raw Material Procurement Strategy
In terms of raw material procurement strategies and plans, below are the plans for execution by the Company:

Purchase from supplier	Confirm the quality first: Foreign suppliers are required to provide quality certification (COA) first, while Chinese suppliers are required to send samples to the quality inspection department of our subsidiary in China for analysis, and shipments will be made only after they pass the quality test. The domestic supplier should attach COA confirmation to the shipment and must pass our quality control inspection before it is allowed to be stored, in order to reduce the risk of return and exchange. 2Local procurement principles: Considerations will be given first priority to domestic suppliers for the supply of goods. The overseas suppliers are second in priority. This helps to shorten the time for supplying goods and transportation costs. However, considering that some of the raw materials rely on imports and the inconveniences of transportation overseas, testing centers are set up in major raw materials importing areas such as China. With the centers, testing of the raw materials can be conducted first before shipment in case the raw materials failed the testing and have to be returned. The complex paperwork will generate costs in economic, environment and so on, and these costs can be prevented this way. The international shipping policy: We only ship entire containers to avoid shipping small quantities several times. We also use multiple containers to reduce the number of shipments. If the shipment is LCL, it will be shipped via CFS. Port of shipment for China procurement: We do not concentrate on a single port (e.g., Shanghai port), but ship the goods nearby, e.g. Shandong manufacturers ship from Qingdao port, while Fujian ship from Xiamen port. This can avoid using too much land transportation and can also spread the risk of congestion in a single port.
Packaging Reduction	No usage of plastic films for shipment goods packed in 200L barrels. Goods are fixed with packing belts. We avoid excessive packaging under the condition that it does not affect the quality of the products. Committed to using large packages such as bulk bags or ISO TANK for transporting imported/exported raw materials and finished products. Reduce packaging materials and excessive wastes of resources. The domestic liquid bulk raw materials procurement shall use tank trucks for transportation, these tank trucks can be reused. Use the storage tank to preserve them reduces resource waste and excessive labor. Liquid non bulk raw materials use tank or steel drum for circular transportation. Recycling and reusing of bulk bags and pallets. Gradually using plastic pallets in replace of the wooden pallets. In 2022, the raw material pallet imported from China is changed to plastic pallet. The price is cheaper and can also be sold to recyclers to achieve recycling and reduce resource waste. Concentrated pallet wastes handling outsourced to qualified environmental protection company for recycling.
Reduce impact on the environment	Using connecting carriers for transportation in the factory to reduce the need for forklifts, so that we can save labor. Electric forklifts are used in warehouses to reduce emissions and protect the environment and human health. The accessory product generated from the manufacturing process is recycled or sold after the treatment to reduce waste generation. Reduce the input volume of raw materials, reduce cost and waste, e.g., reduce the usage of TMOF from 800kg to 750kg in the manufacturing process. Purchase the pallet made of recycled plastic for export (PP material) first. 50 pallets were purchased in 2022, accounting for 0.7% of the exported pallets in 2022.

Transportation Supplier Management

Transportation suppliers are important part of the Company’s supply chain. The management of the transportation suppliers are divided into new transportation supplier evaluation and the annual assessment of cooperative transportation suppliers. Currently, there are 3 qualified transportation suppliers for the Company.
In terms of the annual appraisal for the cooperative transportation suppliers, there are 3 suppliers undergoing the assessment in 2021. The appraisal contents include on time delivery, transport process, licenses and so forth items. Based on the appraisal result, the suppliers are Grade A suppliers, and the qualifying rate is 100%.
In 2021, there have been no significant road transport accidents. There is only one incident where the driver who was unfamiliar with the roads, the car sunk into the muds on the roadside when backing up the car. Related personnel went forward to assist immediately and there are no personnel injuries or deaths and leakage of goods. The incident has been listed into the appraisal assessment record and the transport safety event is counted under other items.

Evaluation of New Suppliers
Transportation business evaluation survey table. Arrange for personnel for onsite inspection where necessary.
Survey items are:

Licenses of new suppliers: Approval license for chemical control shipments, and personnel professional trainings.

Transport equipment capacity: Installation of GPS, arrangements of vehicles and drivers.
Safety management capability: Vehicle maintenance and repair through ISO 14001 Environmental management system.

Result
In 2022, we added 1 transportation supplier in Taiwan. After the appraisal of its certifications, transport equipment capacity, safety management, and so on, they were listed as Grade A qualified supplier.

New Suppliers Evaluation
Assessment of the suppliers on accuracy of delivery, and whether there are unusual situations (such as damage and replacement of equipment or road accidents). The assessment is conducted in December each year by the unit receiving and shipping goods.

Result
4 transportation providers were evaluated in 2022. The evaluation focused on the timeliness of delivery, the appropriateness of the transportation process, and the expiration of licenses. 4 out of these four suppliers were qualified, 3 of them were A-grade suppliers and 1 of them was B-grade supplier. There are no vendors who have not met qualifications.
There were no traffic accidents in 2022. There was 1 incident of container deformation, which was found to be caused by improper delivery. There were no injuries or cargo spills, and the incident was included in the assessment.