Sustainable Supply Chain Management Framework
The supply chain is one of CEC’s most important strategic partners. The Company delivers high-value products and services to its customers while also emphasizing Environmental, Social, and Governance (ESG) initiatives. In alignment with the Company's internal supply chain management system, we collaboratively create sustainable supply chain management.
CEC is a leading global manufacturer of electronic components, committed to meeting customer requirements and integrating the upstream and downstream supply chain to deliver competitive products.
Chicony Value Chain
Organizational Structure
Chicony's Board of Directors serves as the top overseeing unit for sustainable supply chain promotion. Day-to-day operations are jointly managed by the Central Procurement Division of each Business Unit, the Quality Assurance Center, and the ESG Sustainability Office, while implementation is carried out by site-level teams or task-based units (SER Teams) to collaboratively promote a sustainable supply chain. Progress and performance are reported annually to the Corporate Sustainable Development Committee and subsequently to the Board of Directors.
Sustainable Supply Chain Management
When receiving procurement requests from BU, if the supplier is an existing one, the Unified Purchasing Center of the BU is responsible for supplier sourcing and procurement price negotiation. The procurement team then places the order with the supplier. For miscellaneous items, sourcing and price negotiation are handled directly by the individual factory. To mitigate the risk of material shortages or supply chain disruptions, each type of raw material is sourced from at least 2 suppliers. We also prioritizes long-term strategic partnerships with various suppliers to ensure stable and reliable relationships.
Supply Chain Management Process
In 2024H2, to effectively promote sustainable supplier management, the ESG Sustainability Office will integrate relevant documents from various units and factories, updating existing documents including: "Supplier ESG Agreement," "Supplier Code of Conduct," "Conflict Minerals Policy," "Integrity Declaration and Undertaking," "Human Rights Policy," and "Supplier ESG Risk Assessment Questionnaire." These documents will serve as the foundation for promoting sustainable supply chain management in 2025. The progress for 2024 and the measures to be promoted starting in 2025 are described as follows.
1. Supplier Document Management Requirements
(1) New Suppliers
When onboarding new suppliers, information such as company size and financial status is required. An integrity risk assessment is also conducted by reviewing public records and official government websites, covering operational status, risk profiles, legal disputes, and other relevant matters.
- Documents to be signed: "Supplier ESG Agreement," "Supplier Code of Conduct," "Chicony Electronics Corporation Conflict Minerals Policy," "Integrity Declaration and Undertaking," and "Supplier ESG Risk Assessment Questionnaire." Starting in 2025, new raw material suppliers will only be required to respond to the "Supplier ESG Risk Assessment Questionnaire".
- In 2024, 100% of new suppliers are required to complete the signing and return of the aforementioned old version documents, with an actual achievement rate of 99%.
(2) Current Suppliers
The retention of current suppliers supports the Company's continuous operations; however, associated supplier risks must also be carefully managed to minimize potential supply chain disruptions.
To address this, we implement a four-tier supplier management approach.
Note: Major Suppliers: Key suppliers are defined based on all current raw material suppliers, totaling 997 vendors. After excluding transactions with related parties, suppliers are ranked by total procurement value in 2024. The final list of key suppliers is jointly determined through meetings held by the Unified Purchasing Center, Quality Assurance Center, and ESG Sustainability Office. For 2025, a total of 55 key suppliers were identified, representing 29% of the total procurement value-demonstrating significant representativeness. To ensure stable supply from key suppliers, this methodology will be applied annually, using the previous year’s procurement data to define the key suppliers for the following year.2. Supplier Risk Assessment Mechanism
(2) Quality Control Center
Regarding quality, the Quality Control Center and the on-site Quality Control Unit will jointly conduct relevant evaluations, performing either written audits or on-site audits based on the circumstances of the raw material suppliers. On-site audit results are categorized into three rating tiers: 0-64, 65-79, and 80-100. Suppliers receiving the lowest tier (0-64) will be disqualified. For suppliers in the other two tiers, follow-up actions are taken on identified deficiencies to ensure compliance with the Company's raw material quality standards. If suppliers have any concerns regarding the routine management or audit results conducted by the Quality Control Unit, they may raise the issue with the designated factory personnel, the management department, or through the direct reporting mailbox.
2024 Quality Issues Audit Results
| BU A | BU B | BU C | BU D | ||
|---|---|---|---|---|---|
|
Number of Written Audits |
202 | 66 | 20 | 5 | |
| On-site Audit | Number | 156 | 112 | 20 | 47 |
|
80-100 points |
171 | 112 | 18 | 46 | |
| 65-79 points | 10 | 0 | 2 | 0 | |
| 0-64 points | 4 | 0 | 0 | 1 | |
| Meet Standards | 98% | 100% | 100% | 98% | |
| Overview of Major Deficiencies | Insufficient 5S management on-site has led to the cancellation of supplier qualifications, primarily due to significant discrepancies in the quality management system and standards. | ||||
Note: Business Unit A conducted on-site audits at 156 supplier facilities. An additional 29 suppliers were audited remotely due to distance constraints; however, the same evaluation criteria as on-site audits were applied. As a result, discrepancies may exist in the reported figures.
(3) ESG Sustainability Office
The Company has established Social, Environment and Responsible Teams (SER Teams) at each factory. These teams were previously managed by the Human Resources Department at HQ. Since the establishment of the ESG Sustainability Office in 2024, overall coordination has been transferred to the ESG Sustainability Office.
The SER Teams assist each factory in managing supplier-related issues concerning RBA compliance, BCP planning, and customer requirements. They also conduct both documentation reviews and on-site audits of suppliers. Since 2022, to strengthen the basis for audits, suppliers have been required to complete the "Chicony Electronics Corporation Supplier ESG Questionnaire" to self-assess. Based on the results and with reference to the RBA process, on-site or remote audits are conducted to verify the current status of suppliers. If specifically requested by customers, third-party audits may also be arranged, thereby promoting sustainable transition throughout the supply chain.
2024 Audit Methodology
| Provide RBA Report | Written Audit | On-site Audit | |
|---|---|---|---|
| Number of Suppliers | 9 | 65 | 56 |
2024 Audit Results
| Significant Deficiencies | Major Deficiencies | Minor Deficiencies | ||||
|---|---|---|---|---|---|---|
| Deficiency Status | Closed | Unresolved | Closed | Unresolved | Closed | Unresolved |
| Missing Items | 24 | 27 | 230 | 161 | 122 | 22 |
| Case Closure Rate | 47% | 59% | 85% | |||
| Total Missing Items | 586 | |||||
| Total Case Closed Rate | 64% | |||||
| Overview of Major Deficiencies | Labor rights, occupational health protection, safety in the workplace environment, establishment of environmental management systems, and waste management. | |||||
In 2024, dramatic shifts in the global political and economic landscape had a significant impact on the global electronics supply chain. In early 2024, due to poor operations, a supplier began experiencing delivery delays. CEC immediately initiated the transition to alternative suppliers. Subsequently, the supplier experienced delayed payroll issues due to cash flow problems, which led to employee protests. This situation impacted both CEC and its customers. The Company has since suspended transactions with the supplier.
In this case, CEC identified insufficient cross-departmental communication and a lack of cross-verification within audit systems across functional units, resulting in delayed information exchange. Consequently, we immediately planned to establish a cross-departmental notification platform and optimize the supplier risk assessment system as remedial measures. We also implemented an abnormal supplier tracking mechanism and case-based training to strengthen early warning and prevention capabilities, enhancing our emergency response readiness for the global supply chain.
Amendment of the Supplier ESG Risk Assessment Questionnaire
The "Chicony Electronics Corporation Supplier ESG Risk Assessment Questionnaire" was amended in the second half of 2024 and is applicable starting in 2025. In 2024, a social and environmental impact assessment will be conducted in accordance with the "Chicony Electronics Corporation Supplier ESG Questionnaire," with no significant impacts identified for the suppliers.
| Old Version | New Version | |
|---|---|---|
| Applicable Year | 2022-2024 | After 2025 |
| Applicable Supplier Categories | New Suppliers | New Raw Material Supplier Current Raw Material Supplier |
| Survey Items |
Three Major Categories
|
Three Major Categories
|
| Key Discrepancies |
|
|
RBA Factory of Choice
Chicony Electronics has been actively establishing a comprehensive corporate social responsibility management system. In 2011, the company joined the Electronic Industry Citizenship Coalition (EICC) in support of the core values of the Electronic Industry Citizenship Declaration. CEC is committed to establishing a work environment that respects workers' human rights, promotes labor rights, protects the environment, and values business ethics. With the advancement of global sustainability trends, the EICC was rebrandedin 2017 as the Responsible Business Alliance (RBA), marking a more comprehensive phase in the industry's commitment to corporate social responsibility.
To demonstrate our commitment and determination toward sustainable corporate governance, CEC launched the "RBA Factory of Choice (RBA FOC)" certification project in 2021. Through a systematic assessment and improvement process, the Company aims to comprehensively enhance its corporate social responsibility management standards. Through continuous efforts, all five major production sites obtained RBA FOC certification in 2023, highlighting the Company's outstanding performance in responsible business practices.
At the end of 2024, we will once again initiate the FOC (Factory of Choice) project, with plans to complete this project by 2025. Through systematic management mechanisms and the adoption of international standards, CEC continues to strengthen its ESG competitiveness, respond to global sustainability trends, and realize its corporate vision of "responsible operations and value co-creation."
Low-Carbon Supply Chain
To achieve CEC's short-term 2030 target set under the Science Based Targets initiative (SBTi) and its self-defined long-term 2050 carbon reduction goal, managing Scope 3 procurement emissions remains the most challenging task. In response, CEC launched the "Chicony Green Octagon" project in 2023, within which the "Green Procurement" initiative focuses on reducing upstream raw material emissions. This initiative centers on three primary objectives: green procurement, local sourcing, and green suppliers.
1. Green Procurement
The Company has no relevant regulations regarding green procurement at its various factory locations. Therefore, in 2023, we referred to Taiwan's Green Procurement System for Private Enterprises and Organizations and required the Company's procurement department to implement green procurement and conduct the initial inventory. In 2024, due to the transfer of certain production lines from various business units to Thailand, the selectivity of green procurement has decreased, resulting in a decline in both the overall amount and the number of green procurement transactions.
Contribution of Green Procurement Amount and Suppliers
Notes:
-
Internal transfers were excluded when calculating the above percentages
-
Definition of green procurement: The procurement of PCR, PIR materials / packaging materials, PIR materials, water - based paints, environmental - protection - related consultations, renting instead of buying, renewable energy, LED tube lights, bicycles (including electric bicycles), electric vehicles, and various eco-labels.
-
% of green procurement amount = Total green procurement amount ÷ Total procurement amount x 100%
-
% of green procurement suppliers = Number of green procurement suppliers ÷ Total number of suppliers x 100%
2. Local Procurement
To reduce carbon emissions from upstream transportation and relevant delivery costs, promote local development, and efficiently obtain after-sales service, the Company is active in promoting its local procurement policy by deploying most of its suppliers in factories' neighboring areas.
Due to continuous product transformation and innovation in recent years, demand for the Company's eSports series and multifunctional video/imaging products has been growing, and the use of precision electronic materials has been increasing year by year. However, the impact of the pandemic and regional wars throughout the world has led to a shortage of metal components, resulting in constant price increases for electronic materials. Therefore, the Company will continue to search for partner suppliers to reduce relevant costs. Furthermore, in 2024, the transfer of production lines to Thailand by various business units has resulted in a decline in both the procurement amount and the number of suppliers locally, as some raw materials do not yet have suitable suppliers in Thailand.
% of Local Procurement Amount and Suppliers
| % of Local Procurement Amount | % of Local Procurement Suppliers | |||
|---|---|---|---|---|
| 2023 | 2024 | 2023 | 2024 | |
| BU A | 80% | 81% | 90% | 83% |
| BU B | 90% | 87% | 92% | 90% |
| BU C | 9% | 6% | 28% | 30% |
| BU D | 32% | 35% | 76% | 37% |
| Total | 58% | 49% | 72% | 61% |
Note:
- Internal transfers were excluded when calculating the above percentages
- Local: Taiwan for Taiwan, Mainland China for Mainland China, and Thailand for Thailand.
- % of local procurement amount = Total local procurement amount ÷ Total procurement amount x 100%
- % of local procurement suppliers = Number of local procurement suppliers ÷ Total number of suppliers x 100%
To achieve effective sustainable supply chain promotion, in the first stage, the Company focuses on its critical suppliers as the scope of promotion. Green supplier identification has been conducted, and the selected suppliers will be encouraged to make continuous efforts in developing "green" (eco-friendly) products.
To this end, CEC continuously holds both in-person and virtual supplier conferences at its various factories to communicate the Company's organizational vision, the CEC Human Rights Policy, and the CEC Whistleblowing Mailbox Policy, enabling suppliers to gain a deeper understanding of CEC. During these conferences, supplier expectations are also clearly communicated, including the implementation of the Responsible Business Alliance Code of Conduct (RBA COC) and due diligence under the Responsible Minerals Initiative (RMI). These efforts aim to engage suppliers in supporting and addressing various sustainability issues, thereby advancing the shared vision of a sustainable supply chain. In 2024, CEC held a total of 2 virtual supplier conferences and 20 in-person supplier conferences, with a cumulative attendance of 1,345 participants.
Over a thousand participants joined CEC's virtual supplier conference - Shine together, Co-create the future.
In 2024, CEC held its first-ever online "supplier conferences," with a total of 2 sessions and 905 participants.
The supplier conference was jointly held by the Taipei ESG Sustainability Office and the business unit procurement team. During the meeting, CEC's current ESG initiatives were presented, including the ESG promotion strategy, various environmental sustainability goals, as well as the plans and timelines for advancing a sustainable supply chain. At the same time, we also conducted case study sharing, hoping to inspire suppliers' imagination toward a low-carbon future through diverse examples.
During the conference, suppliers raised various ideas, suggestions, and questions, all of which CEC responded to individually. A summary of questions and answers from each session was shared with all suppliers, allowing those unable to attend to stay informed about CEC's future directions. We look forward to promoting a sustainable supply chain and creating a green, low-carbon future through this kind of ongoing dialogue.
