Issue Date: August 3, 2023
 

Suppliers are important partners in our sustainable operations. Coretronic has 1,688 suppliers in the Taiwan and China plants (including 1,511 domestic suppliers, accounting for 90%, and 177 foreign suppliers). We classify and manage suppliers based on their characteristics and the goods/services they provide. We prioritize local procurement to promote local economic development, ensure operational stability, accelerate production efficiency, and minimize carbon emissions from transportation.
 

To achieve "sustainability and mutual benefit" with our suppliers, we have developed the "Sustainable Supplier Management Regulations" for production material suppliers. We require our suppliers to adhere to the regulations, conduct risk assessments and audits, provide training and guidance, and at the annual supplier conference, we acknowledge outstanding suppliers and discuss sustainability trends to ensure the sustainable operation of our suppliers. In addition, we have established the "RBA Code of Conduct Management Handbook" according to the RBA Code of Conduct to manage our suppliers. We urge our suppliers to prioritize ethical practices, labor rights, environmental protection, and health and safety issues. We thoroughly implement risk management and BCP to establish a sustainable supply chain. If our suppliers have any suggestions or inquiries about sustainability, please contact us at CSR@coretroic.com

Sustainable Suppliers Code of Conduct

 

Regulations

Supplier and Contractor Sustainability Commitment Statement

• We developed the "Supplier and Contractor Sustainability Commitment Statement" based on the RBA Code of Conduct and required all production material suppliers (excluding customer-specified suppliers and affiliated companies) to sign it. This ensures their compliance with RBA 7.0, "Green Product Warranty" (guaranteeing their products meet the "Green Product Procurement Specifications" and providing RoHS tests and lab reports certified by a third party, environmentally hazardous substance questionnaire, lead-free component reliability report, SDS, COA, and comprehensive test reports), "Responsible Minerals Procurement Policy", "Declaration on Non-Use of Conflict Mineral", "Integrity Commitment", and "Environmental Sustainability and Occupational Safety and Health Policy." In 2022, 500 suppliers were required to sign the "Supplier and Contractor Sustainability Commitment Statement," and 479 suppliers have already signed, with a signing rate of 96%.

Conflict Minerals Management

Conflict metal refers to minerals from the conflict mining area of the Democratic Republic of the Congo. These minerals are refined into tantalum (Ta), tin (Sn), tungsten (W) (referred to as tri-T mineral), gold (Au), and cobalt (Co), which are used in electronics and other products, respectively. Some of the metal minerals have become the main source of financial resources for armed rebel groups in the African Democratic Republic of the Congo. They are used to trade arms, carry out bloody conflicts with the government, and desecrate local civilians. As a result, international disputes have arisen. As a global citizen, we recognizes that the exploitation, trading, processing, and exporting of mineral resources in conflict-affected and high-risk areas have risks that may cause major adverse effects, and we recognize that we have respect for human rights, do not contribute to conflicts and are not environmentally friendly. And society has a negative impact. We declare and promise not to accept the use of metals from conflict mining areas. At the same time, we also require our suppliers to:

1. Must fulfill social environmental responsibility.
2. Ensure that products do not use “conflict minerals” from Democratic Republic of the Congo and its neighboring countries and regions.
3. Trace all sources of Au, Ta, Sn, W, and Co contained in all products.
4. Intolerance cannot be done in any way to benefit, encourage, assist or facilitate any party to commit serious human rights violations.
5. It will not tolerate any direct or indirect support from organized armed groups that have been mined, transported, traded, processed or exported through mineral resources.
6. Do not provide, promise, give or demand any bribe and resist bribery or extortion. It will not cover up or falsify the origin of mineral resources, and falsely report the taxes and expenses that mineral resources exploitation, trade, processing, transportation, export and other activities Bribery with royalties will pay to the government.
7. Do not participate or benefit from mining resources on land that does not receive free, prior, informed consent from local and indigenous peoples, including those with legal title, lease, and concession or permitted.
8. This requirement is communicated to its upstream supplier.

We consider conflict-free minerals as key raw materials and manage them accordingly. We do not accept gold, tantalum, tin, tungsten, cobalt, and mica illegally mined from the Democratic Republic of the Congo and neighboring conflict regions. Therefore, we established a "Responsible Minerals Procurement Policy" and "Declaration on Non-Use of Conflict Mineral" based on the RBA Code of Conduct and added them to the "Supplier and Contractor Sustainability Commitment Statement." In addition, we announced conflict mineral control requirements to suppliers at the annual supplier conference. All production material suppliers must sign the "Supplier and Contractor Sustainability Commitment Statement" and comply with conflict minerals regulations. We also publish relevant policies and investigation results on our official website.

The Visual Solutions Business Group conducts a more detailed conflict minerals investigation on production material suppliers using RMI CMRT 6.22 and EMRT 1.11 questionnaires. The response rates are 94% and 91%, respectively. In the future, we will re-evaluate the recipients of the questionnaires and consider excluding customer-specified suppliers or suppliers who have declared their compliance with conflict minerals regulations. We will also guide non-compliant suppliers to make improvements to increase the response rate.

The Energy Saving Business Group conducts investigations on suppliers of production electronic materials using RMI CMRT 6.22, EMRT 1.02, and EMRT 1.11 questionnaires. The response rates are 100%.

Risk Assessment

• RBA Self-Assessment Questionnaire : To effectively assess the sustainability risks of production material suppliers, we send the RBA self-assessment questionnaire to all suppliers who require an RBA audit. This allows suppliers to self-assess their sustainability performance before their on-site RBA audit.
• Online Sustainability Questionnaire Platform : To better understand the ESG sustainable development of suppliers and to facilitate their transformation into sustainable supply chains, we conducted a sustainability questionnaire investigation in 2021. We plan to establish an "Online Sustainability Questionnaire Platform" in the "Online Green Supply Chain Platform" by 2025, allowing suppliers to complete it online. Based on their self-assessment results, we can evaluate suppliers' awareness and level of sustainability management to plan appropriate improvement measures for suppliers. Since 2022, we have also discussed with third-party verification agencies to explore more efficient, comprehensive, and credible ways to assess and investigate suppliers' sustainability risks.
• Strategic Material Stocking System : We prioritize controlling and managing key raw materials with high supply risks. Based on market demand and supplier delivery speed, we determine the number of days and quantities of the material stocking to ensure a stable supply of raw materials and reduce the risk of the supplier impacting company operations. In the future, we will continue to seek and cultivate local suppliers who can provide high-quality products that meet environmental protection standards. We will prioritize local procurement to shorten transportation distances and reduce carbon emissions.
• Annual Supplier Financial Risk Assessment : Since 2020, the Procurement Department has provided the Finance Department with a list of suppliers with potential risks approved by business unit supervisors for the annual supplier financial risk assessment. The Finance Department rate the risk level based on the supplier's open financial data, financial statements, and reports from third-party credit investigation companies (such as Dun & Bradstreet or companies cooperating with a credit insurance company). The final results are submitted to the CFO for approval, and the Procurement Department removes high-risk suppliers based on the results. In 2022, we conducted a financial risk assessment on 4 suppliers. Based on the results, we rated 2 suppliers as moderate risk and 2 as low risk. We have formulated risk management policies accordingly.
   

  Target	Strategy	Performance
  Prevent supply disruption Improve supply performance and resilience Strengthen the labor flexibility and adaptability of employees	【Visual Solutions Business Group】 In response to the COVID-19 situation in various regions, we are exploring production and supply solutions for Taiwan and China. We have multiple suppliers for the same component, and we prepare a 2-week to 1-month inventory of finished goods to ensure the stable operation of Kunshan plants. In accordance with government policies, we investigate China suppliers' employee attendance, PCR tests, logistics, inventory, financial status, and availability of anti-pandemic supplies. We develop different response strategies for different policies in various regions and coordinate resources when necessary to ensure the stable production of all products and deliver them to customers on time. April 2022 Kunshan Lockdown: We integrated organizational resources and implemented remote production. We arranged precise supplier shipment schedules to maintain stable production and ensure on-time delivery so our operations are not interrupted.	All suppliers have maintained stable production. 100% delivery rate and material readiness rate. Kunshan plants is operating stably and has not been affected. Kunshan Lockdow: Used Coretronic Optics (Suzhou) as a transshipment depot to facilitate supplier delivery and relocated the production base to Tainan Plant 2. When the pandemic slowed down, we sought approval from the local government approval for closed-loop production to reduce operational impact.
  	【Energy Saving Business Group】 Implement regional supply chain and multi-source procurement. Ensure the supply capability of suppliers through regular evaluation mechanisms. Establish a remote supply system operation mechanism.	Promote the verification mechanism for suppliers of the same type of goods. 100% completion of annual supplier evaluations and audits. Conduct remote operation drills for procurement personnel.

Training

　 　 　 　 　 　 　 　 　 　 　 　 　 　

Location	Kunshan Plants	Wujiang Plants
Session	1	1
Number of Participants	42	70
Main Topics	ESG Trends and Sustainable Environment Case studies of smart manufacturing/automation management, smart supply chain cloud platform, and Coretronic Robotek (Kunshan). Best Supplier of the Year Award: Energy Saving and Emissions Reduction Award, Sustainability Award, and Excellence Award. 2 suppliers shared their experiences.	Green product design from a global environmental perspective. Incorporate sustainability thinking into the supply chain and carbon footprint management to achieve carbon neutrality goals. Sustainable environmental trends and sharing of achievements by green companies. Introduction to green products, regulatory requirements, and implementation results.

Best Supplier of the Year Award

★Kunshan plants: presented the "Energy Saving and Emissions Reduction Award," "Sustainability Award," and "Excellence Award" to 22 outstanding suppliers of the year. The "Energy Saving and Emissions Reduction Award" is presented to suppliers who recycle packaging materials and use reusable plastic frames for delivery. The "Sustainability Award" is presented to suppliers who completed deliveries during the pandemic, with priority given to Kunshan plants. The "Excellence Award" is presented to suppliers who made significant contributions to achieve customer demands despite the impact of the pandemic.

★Wujiang plants: presented the "Green Product HSF Excellent Management Award," "Energy Saving and Emissions Reduction Award," and "Sustainability Award" to 11 outstanding suppliers of the year. The "Green Product HSF Excellent Management Award" is presented to suppliers who provide materials complying with green product requirements and demonstrate excellent performance overall. The "Energy Saving and Emissions Reduction Award" is presented to suppliers who implement carbon-reducing measures during the transaction period, such as electricity conservation, water conservation, and waste management. The "Sustainability Award" is presented to suppliers whose supply performance and adaptability help improve the resilience of the supply chain system within a specified period.

• Since 2019, Wujiang plants have encouraged suppliers to save energy and reduce carbon emissions. In 2022, 26 suppliers participated, with 8 of them participating for 4 consecutive years.
• Wujiang plants hold supplier conferences regularly, inviting outstanding suppliers to share their energy-saving experiences, as well as discussing the impact of COVID-19 and ways to strengthen sustainable supply chain management. The goal is to improve supply chain crisis response and adapt to climate change.
• Together with our suppliers, we will continue to take green actions to reduce the impact of enterprise risks and build a sustainable supply chain.

Circular Economy Collaboration with Suppliers

We implement waste recycling programs with our suppliers to recycle packaging materials (e.g., plastics and paper) and use reusable packaging for shipping. Besides, we have reduced the raw material consumption for packaging or containers and promoted circular economy concepts, such as recycling and waste reduction, to protect the environment. In 2022, 14 suppliers participated in recycling acrylic protective sheets, cardboard boxes, trays, pallets, foam boxes, and other materials, achieving a 98% recycling rate.

Supplier Partnership Recognition by CDP

The 2022 CDP Supplier Engagement Rating recognized Coretronic for outstanding performance. We achieved a leadership level score of A-, higher than the industry, Asian, and global average scores (C). Coretronic is committed to supplier partnerships and value chain partnership engagement for climate change mitigation and adaptation. The evaluation criteria include "Supplier Engagement," "Targets," "Scope 3 Emissions," "Overall CDP Climate Change Score," and "Governance." Coretronic achieved the leadership level score of A for 2 consecutive years in the "Supplier Engagement" and "Other Indirect GHG Emissions" categories. In the future, we will continue to invest in value chain management and work with our suppliers and customers to bring the best operational resilience.

Local Procurement

We recognize the impact of the environmental footprint in the procurement of raw materials and components. Therefore, local procurement is a key strategy in finding suppliers. We also encourage our suppliers to prioritize local procurement to protect the environment. Please refer to the figure below for the procurement percentage in 2022. Among them, the Visual Solutions Business Group of the Taiwan and China plants (Kunshan) has a lower percentage of local procurement because the key components must be purchased from specific foreign suppliers to maintain product quality. Efforts will still be made to purchase other components locally.