CSR-Supply Chain and Customer

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Supply Chain Sustainability

There are 5 major procurement units at FENC. They are Raw Material Team, FEG Purchasing Department, Purchasing Department of OPTC, Shanghai Purchasing Unit and Suzhou Purchasing Unit. Raw Material Team is in charge of market analysis, strategic planning and procurement of main raw materials such as PX, PTA, MEG and cotton. The remaining 4 units are responsible for the procurement of non-main raw materials, equipment and contracting. Minor procurement is processed by each production and business site.

Supplier Management Policy

To accomplish the goal of sustainable development of suppliers, FENC ensures that while providing goods and services, suppliers comply with social and ethical standards, understand and meet legal requirements, actively respond to issues concerning environmental protection and social issues, and take the initiative of assuming corporate social responsibility with ongoing improvements. Starting from November 2016, the Company started requesting that suppliers sign "Supplier Corporate Social Responsibility Commitment Statement." This is also one of the criteria for supplier selection.

Supplier Corporate Social Responsibility Commitment Statement

To encourage more suppliers to sign the "Supplier Corporate Social Responsibility Commitment Statement", the CSR team reviewed suppliers' feedbacks with the procurement units and devised measures of improvements in 2018. The CSR team met with the procurement units 4 times. After the meetings, staff conducted in-depth discussion with the suppliers, trying to win their support toward the "Supplier Corporate Social Responsibility Commitment Statement". As of the end of 2018, 2,302 suppliers, which account for 50%, have signed the document. This is a 52% increase comparing to 2017, and these suppliers account for 68% of the total purchase. Suppliers responsible for major procurement projects have mostly finished signing. In 2019, we will continue to communicate with the suppliers. Together, we will work toward improving corporate sustainable development.

►The Number and Percentage of Suppliers Signing "Supplier Corporate Social Responsibility Commitment Statement, and Percentage of Purchase Amount"

  2016 2017 2018
Number of
Supplier
Percentage
of Total
Suppliers
Number of
Supplier
Percentage
of Total
Suppliers
Number of
Supplier
Percentage
of Total
Suppliers

Percentage
of Purchase
Amount

Taiwan 186 28% 731 33% 1,220 52% 60%
China 116 15% 494 25% 1,082 47% 77%
Total 302 21% 1,225 29% 2,302 50% 68%

Note:

  1. The precentage of suppliers signing "Supplier Corporate Social Responsibility Commitment Statement" = the number of suppliers signing "Supplier Corporate Social Responsibility Commitment Statement" ÷ total number of suppliers x 100%.
  2. The precentage of purchase from suppliers signing "Supplier Corporate Social Responsibility Commitment Statement" = the purchase amount from suppliers signing "Supplier Corporate Social Responsibility Commitment Statement" ÷ total purchase amount x 100%.
  3. The total number of suppliers varies from year to year.
  4. 2018 is the first year in which the Company started calculating the percentage of purchase amount from suppliers signing "Supplier Corporate Social Responsibility Commitment Statement".

FENC's production sites are located in Taiwan, China and Vietnam. Local regulations at each site vary and therefore, the procurement units set additional criteria to reflect differences in local regulations and project types. Applicable clauses are included in the contract to make sure that suppliers are in compliance.

Procurement Unit Selection Criteria and Management Approach
FEG Purchasing Department and Raw Material Team
  • The goal is to have all suppliers sign "Supplier Corporate Social Responsibility Commitment Statement" to ensure all suppliers are governed by the statement. 
  • To meet customers' needs, Raw Material Team works with international suppliers, introduces organic cotton, BCI cotton and Bio-MEG and makes regular annual visits to suppliers. 
Purchasing Department of OPTC
  • Conduct evaluation on all new suppliers and request the signing of "Supplier Corporate Social Responsibility Commitment Statement". 
  • Evaluation and request targeting specific suppliers include the following:
    Suppliers of microchemicals and industrial gases should submit environmental impact assessment, including quality certifications such as ISO 9000 and ISO 14001; establishment of environmental management system; environmental impact assessment of products or activities from suppliers; labor practice evaluation on suppliers of construction equipment.
Shanghai Purchasing Unit
  • Conduct document or on-site evaluation on new suppliers in accordance with Procurement Regulations and Regulations Governing Supplier Evaluation, and require that suppliers sign "Supplier Corporate Social Responsibility Commitment Statement" to select qualified suppliers.
  • Promote Regulations Governing Supplier Evaluation. In the beginning of each year, conduct review on suppliers from the previous year and select qualified suppliers based on the ratings of A, B and C. Starting from 2019, additional reviews are conducted on key suppliers followed by on-site inspection. 
Suzhou Purchasing Unit
  • Suppliers with long-term contract, which is 1-year and above, and suppliers of large-quantity procurement must undergo evaluation and sign "Supplier Corporate Social Responsibility Commitment Statement". The goal is to have 99% of the suppliers finish signing by the end of 2019. 
  • On January 1st, 2018, Suzhou Purchasing Unit established Supplier Management Task Force to conduct supplier review, on-site audit and contract management in order to regulate supplier management, reduce procurement costs and improve efficiency.
  • Key material suppliers and contractors are evaluated on four aspects – quality, delivery, service and guarantee. Suppliers that obtained ISO 14001 and OHSAS 18001 receive priority consideration. In 2018, 98% of the suppliers are rated as quality suppliers. Orders for non-quality suppliers will be reduced or terminated.  
  • In 2018, on-site audit was conducted on 42 suppliers of key raw materials. All suppliers scored higher than 85.

 

 Selecting Suppliers of Toxin-free Dyeing Agent and Reaching ZDHC Prior to 2020

Zero Discharge of Hazardous Chemicals (ZDHC) established the year 2020 as the target year for companies to adopt toxin-free dyeing agent and avoid environmental pollution resulting from wastewater discharge. Since 2012, Kuanyin Dyeing and Finishing Plant started transitioning to toxin-free dyeing agent and asked suppliers to provide toxin-free dyeing agent with bluesign® standard certification. As of June 2018, all dyeing agents used in this plant are certified with bluesign®. Each year, the plant undergoes 2 third-party on-site audits, and has completed the ZDHC goal in advance.

 

 
  Receiving the Green Enterprise Recognition  

 

 

Since 2007, the Environmental Protection Administration of Executive Yuan started awarding recognition to private entities with outstanding practice in promoting green procurement. Between 2016 and 2018, the Executive Yuan presented FEG Purchasing Department with the third consecutive Certificate of Appreciation for Green Procurement to acknowledge the Company's achievements in green procurement. In 2017 and 2018, Department of Environmental Protection of Taipei City Government awarded the Company with the title, Benchmark Unit of Private Enterprise and Organization Green Procurement Plan.

 

 
   

Giving Priority to Local Suppliers

Procurement from local suppliers does not only boost local economy, it is also a better option for obtaining after-sales service. Therefore, we give priority consideration to local suppliers. In 2018, 55% of the procurement was made with local suppliers. However, some major raw materials cannot be obtained locally. After deducting these materials, the percentage of local procurement rises to 81%.

Note:

  1. "Local" is defined as Taiwan for the business sites in Taiwan, and provinces where the Company is located in China.
  2. Procurement for production sites in Vietnam made by Suzhou Purchasing Unit is excluded.
  3. Percentage of purchase from local suppliers = Purchase amount from local suppliers ÷ total purchase amount x 100%.

Supplier Engagement

FENC values communication with the suppliers. Through various channels, the Company monitors and gain details on the suppliers' operation. Each month, FEG Purchasing Department collects information on the suppliers and contractors for the production sites in Taiwan, and conducts supplier meeting when necessary. The company website also provides email accounts to suppliers to reflect their opinions. OPTC conducts monthly communication meetings with business partners, and quarterly work meetings with the carriers. Suzhou Purchasing Unit conducts supplier meetings every 6 months and invites suppliers to exchange technological insights from time to time. Please refer to "4.5.2 Contractor Safety and Health Management" for details on training available for suppliers and performance.

 Annual Supplier Meeting

Suzhou Purchasing Unit invited suppliers of packaging materials for OTIZ to attend the 2 supplier meetings on July 13th, 2018 and January 15th, 2019. A total of 55 suppliers were in attendance. OTIZ produces a wide variety of products, and product packaging is crucial to product quality. Hence, the 2 meetings target suppliers of packaging materials to explore alternatives for improving the quality of packaging materials. For instance, improving the quality of paper tubes may reduce shrinking or bursting when reusing them and increase the reuse of packaging materials

 

 On-site Supplier Audit

Suzhou Purchasing Unit conducts on-site audit of key raw materials suppliers each year. In April 2018, the unit conducted on-site audit on the supplier of a key material when the supplier relocated the production site. Prior to the site visit, a meeting was held to confirm the personnel and review process. On-site audit includes the review of warehousing procedure, visit to the warehouse, warehouse management, review of plant management and response to irregularities. The audit also covers the warehouse for finished products and the production line to ensure quality control.

Although the supplier relocated the production base, the person in charge has been refining management procedure and factory design. After receiving improvement suggestions from Suzhou Purchasing Unit, the supplier responded with improvement report in May 2018, which brought everything to compliance. The supplier also obtained ISO 9001 certification for quality assurance. On-site audit with suppliers may help detect quality issues in advance, identify environmental, social and labor risks and assist suppliers with improvements, which benefit toward maintaining harmonious and stable partnership with the supply chain.

 

 Establishing Supplier Management Team to Enhance Supplier Management

In order to effectively evaluate product quality of the suppliers, the Company regularly conducts comprehensive evaluation over the suppliers' capability in order to encourage them to improve on quality, technology, delivery and service.  The evaluation also ensures that quality issues or irregularities are addressed to prevent reoccurrence in the future. Hsinpu Chemical Fiber Plant modeled after the Fiber SBU and launched supplier audit in 2015. In 2017, the plant established Supplier Management Regulations and formed Supplier Management Task Force with the various SBUs under Hsinpu Chemical Fiber Plant. In addition to implementing supplier audit systematically, the plant also evaluates new suppliers, conducts regular supplier evaluation and manages irregularities in product quality to enhance supplier management. 

Each year, the Supplier Management Task Force conducts document review over suppliers of key raw materials, and conducts on-site audit with FEG Purchasing Department and the Audit Department. The task force notifies the suppliers to make improvements and take preventive measures. The task force also prepares responses and follows up until the case is closed. In addition, each unit at Hsinpu Chemical Fiber Plant evaluates the product quality and delivery service of each supplier every December. The content includes pass rate for material feed, quality assurance, delivery schedule and willingness to cooperate. Results of the evaluation are forwarded to Supplier Management Task Force for compilation and to be served as a reference for the supplier audit plan in the following year. The outcome of supplier audit and evaluation for the current year are also reported to the management review meeting of each SBU and Division. 

In 2018, Hsinpu Chemical Fiber Plant finished evaluating suppliers of 145 materials and audited 50 suppliers. In 2019, the plant plans to audit 67 suppliers, and make 16 on-site audits. The plant will also evaluate suppliers regularly and manage irregularities in product quality.

 

 

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