Supply chain sustainable management

Sustainable
Supply
Chain
Management

Supply chain sustainable development

As one of the domestic benchmark companies, CGPC works together with suppliers to jointly undertake corporate social responsibility and formulate a letter of commitment for supplier CSR, the implementation status, and future planning:

Policy Commitment

Improve the safety environment for workers and strive to protect the environment.

Fulfill social responsibility and improve competitiveness.

Enhance partnership and share sustainable business opportunities.

Establish a supplier management mechanism to improve risk control and management capabilities.

Strategy

Enhance procurement performance, establish strong partnerships.

Foster a culture of safety awareness, creating a collaborative work environment.

Sharing the corporate social responsibility.

Short-term

Short-term: 2023-2024

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Supplier signing of the “Supplier Social Responsibility Commitment” achieved 100% in 2023.

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2023-Future Goals: Collaborate with research and development on three annual projects, subject to market conditions:1. Development of recycled plastics, 2. Biodegradable, 3. Low-carbon and recyclable raw materials.

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In 2023, the “Supplier Code of Conduct and Quality Requirements Self-Evaluation Form” was proposed to investigate the risks of negative environmental and social impacts.
Medium term

Medium term: 2025-2026

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On-site audits will be conducted on 12 suppliers annually, and the development of incorporating sustainability self-assessment forms for field audits will be undertaken.

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Encourage suppliers to jointly participate in social activities at least once/year.
Long-term

Long-term: 2027-2030

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Based on the results of factory audits, establish a communication platform with suppliers. For the deficiencies, we assign the relevant professionals to provide suggestions and assist in planning.

Supply chain ESG risk management

Risk items and attributes	Suppliers (Chemicals)	Construction contractors
Risk items and attributes	Environmental (E)、Social (S)、Governance (G)
Potential risk	a.Chemical manufacturing process(E) b. High-dust, high-temperature, high-noise or high-humidity workplace(E) c.VOC (volatile organic compounds) escape risk (E) d.Labor-intensive industries (S) e.Supply chain disruption/delay risk(G) f.Quality risk(G)	a. High-dust, high-temperature, high-noise or high-humidity workplace (E) b.Risk of working at heights. (E、S) c.Labor-intensive(S) d.Industrial safety risks such as cutting or welding(S) e.Construction disruption/delay risk(G) f.Construction quality risk(G)
Number of audits and homevisits	4 companies (Audit)	To be conducted together with the contractors' project construction assessment
Audit details	Environmental aspect (E) : Whether or not the manufacturing and storage of environmentally controlled substances are conducted in accordance with the laws and regulations. Governance(G)： Quality, production and order management, customer complaints and satisfaction follow-up, employee education and training, and external processing management.
Number of qualified households	4 companies (100% qualified rate)

Supply chain risk management

Supply chain risk assessment

CGPC has established an electronic procurement process platform. Based on the basic principles of fairness, impartiality, and openness, any behaviors of fraud and favoritism have been eliminated. We have established smooth communication channels with suppliers to avoid risks, and evaluate, prevent, and respond to sustainable supply chain risks. The execution plan for growth with suppliers is as follows：

Risk assessment and prevention

In addition to the supply chain security requirements, the special conditions for chemical suppliers are identified as follows:

Chemical process leakage and pollution risks.

The risks of occupational safety and environmental pollution in workplaces with high dust, high temperature, high noise, or high humidity.

Risk of working at heights.

Industrial safety risks such as cutting or welding (S)

VOC (volatile organic compounds) escape risk.

Labor-intensive industries.

Supply chain and engineering disruption/delayed delivery and completion risk.

Raw material and process quality risk.

Preventive approach

Implement supplier sustainable self-assessment questionnaire for initial risk identification information.

Establish long-term collaborative relationships with suppliers, develop new suppliers, and coordinate long- term material preparation systems.

Establish an internal safety stock system and reference point for requisition according to the delivery schedule to prevent the risk of materials outage.

Procurement personnel undergo education and training on supply chain sustainability.

Environmental safety and health education and training for contractors.

Response to impact

Adjust the supply proportion of suppliers and take alternative suppliers or have them complement one another.

In terms of the engineering part, the environmental safety and health unit immediately starts an investigation on personnel safety, equipment damage and environmental impact, summarizes the results and submits such to the relevant units to take response measures, as well as understand the status.

Future plan

Chemical suppliers are listed as key points, and aspects such as the procurement amount, tender amount for construction and the importance are included in the factory audit of the abovementioned SDGs, and establish risk assessment measures according to the results.

Place it under restriction, and provide consultation according to the risk assessment measures and the risk levels after assessment.

The Company has established a grievance mechanism which can accept complaints through writing, communication channels with stakeholders, or through the mailbox of the Audit Committee. After receiving a grievance case and depending on the severity of the case, the Company will designate relevant personnel to investigate and notify the parties concerned and relevant personnel to attend on-site explanation, handling the case in a fair and reasonable manner.

Supplier and contractor management

1. Suppliers and contractors grow together

In addition to implementing the existing evaluation system for suppliers and contractors, CGPC plans to start a trial implementation of on-site evaluation system for raw materials suppliers in the future according to the abovementioned sustainable development strategies, and assign procurement, manufacturing, environmental safety and health and personnel units to conduct the on-site audit of services and raw materials provided. The document and deficiencies are recorded and discussed, so that we can review them with the suppliers regularly and give suggestions for improvement.

2. Supplier management and evaluation

In response to changes in production operations and environmental protection policies, CGPC regularly evaluates the inclusion of new suppliers based on items such as service, quality certification, packaging quality, environmental protection, industrial safety, and delivery deadlines to ensure that every raw material and service obtained are of sufficient quantity, high quality, low price, while meeting the requirements of environmental protection, as well as industrial safety and policies and regulations.

Supplier management

01

Develop suppliers
Vendors' sample testing and qualification review
02

Qualification certification
Documentation of qualified suppliers "Group's Supplier Application Form/Qualified Vendor Application Form"
03

Continuous evaluation
Annual supplier evaluation process "Supplier Evaluation Form"

Evaluation items for qualified raw material suppliers

Evaluation results of CGPC's qualified raw material suppliers and qualified material suppliers in the last 3 years
By company	Raw materials and upplies	Item	2021	2022	2023
CGPC	Raw materials	Number of companies evaluated	166	158	132
	Raw materials	Qualified rate	100%	100%	100%
	Materials	Number of companies evaluated	20	27	49
	Materials	Qualified rate	100%	96%	100%
CGPCP	Raw materials	Number of companies evaluated	12	12	12
	Raw materials	Qualified rate	100%	100%	100%
	Materials	Number of companies evaluated	11	9	19
	Materials	Qualified rate	100%	100%	100%
TVCM	Raw materials	Number of companies evaluated	16	14	17
	Raw materials	Qualified rate	100%	100%	100%

Evaluated once a year with a score of 75 or above is considered qualified.

Because TVCM does not have packaging materials or supplies, it is not included as part of the supplier evaluation.

3. Selection and evaluation of contractors

The procurement unit mails the Construction Contractor Survey Form to selected contractors and asks them to fill out the form, apply company seal stamps on the form then send it back. Survey forms with incomplete submission of supporting documents will not be evaluated and such contractors will not be allowed to undertake the Company's projects.

Project construction evaluation

Project construction evaluation items

Evaluation results of CGPC's project contractors (qualifying score of 70 and above) in the last 3 years
By company	Item	2021	2022	2023
CGPC	Number of companies evaluated	81	31	47
CGPC	Qualified rate	100%	100%	100%
CGPCP	Number of companies evaluated	8	4	8
CGPCP	Qualified rate	100%	100%	100%
CGPC	Number of companies evaluated	23	12	24
CGPC	Qualified rate	100%	100%	100%

4. Supply chain management mechanism

Work environment safety for workers: CGPC has passed the requirements of ISO 45001 Occupational Safety and Health Management System. For the safety of contract workers in factory areas, the Company has established construction operation safety regulations and supervises them according to the strictest standards to effectively manage the safety of various operations. The Company eliminates or reduces the risk of accidents, and treats the safety and health of all workers in the factory with the strictest attitude.

Support local procurement

CGPC prioritizes supporting the local suppliers in Taiwan. This is due to that it is easier to communicate with local vendors to know their status. Purchasing from foreign vendors is considered only when the materials cannot be supplied locally. In 2023, the raw materials Vinyl Chloride Monomer (VCM) of CGPC and CGPCP are supplied by TVCM, and the purchase amount accounted for approximately 74.87% and 25.2%, respectively, of the total local source. The source of the raw materials ethylene and dichloroethane of TVCM is downstream products of the oil industry. Due to the limited supply in Taiwan and cost considerations, it must be imported to maintain the stability of the supply chain.

Green procurement program

CGPC began to actively implement the green procurement program in 2019, and has planned to cooperate with the Taipei City Government to carry out an online green procurement declaration project, mainly purchasing green machinery and equipment. The amount of government-approved green products purchased was NT$71.45 million in 2023, a decrease of NT$17.49 million compared to last year as shown in the table below. We will continue to purchase green products in the future.

Vinyl Chain amount of green procurement declared in the last three years

(Unit: in NT$10 thousand)

Year
2021
2022
2023

CGPC
3,257
7,731
4,852

TVCM
320
1,163
1,391

CGPCP
-
-
902

Total
3,577
8,894
7,145

CGPC was invited by the Environmental Protection Bureau of the Taipei City Government to participate in the "2023-Year Green Procurement Plan" and received a certificate of appreciation

Note:

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On May 15, 2024, the Company was awarded a certificate of appreciation for the “2023 Green Procurement Program by Private Enterprises and Organizations” by Director Hsu, Shih-Hsun of the Department of Environmental Protection to the recipient CGPC representative (represented by Manager Kenny Chen of the CGPC President's Office).

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The data of self-assessment is from before 2022 for TVCM and CGPCP, and began to be applied for green procurement operations in 2023.

Supplier Social Responsibility Commitment

In 2021, all suppliers/contractors signed the Social Responsibility Commitment to promote compliance, on-site audits, and suppliers' participation in social activities.

Promotion of the Supplier Code of Conduct (Supplier Social Responsibility Commitment) and Prevention of Potential Supplier Risks as a domestic benchmark enterprise, CGPC has the responsibility to call on our suppliers to shoulder corporate social responsibility together. Therefore, we have prepared the Supplier CSR Commitment (hereinafter referred to as the “Letter of Commitment”), requesting suppliers to make commitments regarding human rights, industrial safety, health, environmental protection, and non-conflict minerals. The implementation status is as follows:

(I) Required Items

• Labor and human rights
Including no forced labor, prohibition of child labor, provision of due wages and benefits, guarantee of working hours and breaks, elimination of workplace sexual harassment, bullying and discrimination, and non-use of conflict minerals.

• Health and Safety
Including the provision of necessary measures for occupational safety, emergency response, industrial hygiene, machine protection, public health, food and accommodation, and health and safety information.

• Environment
Including environmental operation permits, pollution prevention and resource conservation, hazardous substances, sewage, non-hazardous solid waste, noise, exhaust emissions, product and service restrictions, energy/resource consumption, and greenhouse gas emissions.

• Code of Ethics
Including ethical management, respect for intellectual property rights, compliance with relevant non-disclosure agreements, protection of privacy, and avoidance of conflicts of interests.

(II) Implementation status

(1)

Existing suppliers：

All suppliers with a transaction record within the past year have signed the Supplier Social Responsibility Commitment, achieving a 100% fulfillment rate. They have been included in the internal standard operating procedures to require additional suppliers to sign.

(2)

New suppliers：

Beginning in 2019, new suppliers need to sign a letter of commitment and submit it together with supplier information.

(3)

visit audits：

In 2023, 4 suppliers were given on-site audits, which is expected to increase to 12 suppliers by 2025. The supplier code of conduct and self-evaluation form for quality requirements are included in the factory visit audit items.

(4) The above supplier code of conduct and quality requirement self-assessment form cover five major aspects: labor and human rights, health and safety, environment and resources, ethics, and management and quality system.

(III) Potential risk prevention and impact response measures of suppliers

(1) Proactive measures：
Procurement personnel conduct supply chain sustainability education and training and contractor ESH education and training. To ensure the safety of workers, the Company proactively checks the equipment or parts according to the importance and safety on a regular or irregular basis. Establish a database through maintenance and management for effective inventory, inspection, and replacement. The Group Procurement Department searches for qualified suppliers for procurement based on the procurement application of each unit, depending on the amount, project award amount, or project importance. To keep in line with international standards, the Company aims to achieve sustainable procurement management, promote green procurement, reduce environmental impact, implement factory visit audits, and establish a risk assessment mechanism based on the results.

(2) Passive measures：
For large suppliers, check the Transparent Footprint website from time to time to understand whether there are any major violations by suppliers, and assess whether their influence has potential impact on CGPC, adjust the supply ratio, replenishment, and deployment of suppliers. The industrial safety unit immediately convened personnel safety, equipment damage, and environmental impact investigations. The results are compiled and handed over to the relevant unit for improvements.