Sustainable Supply Chain Management

Main raw materials pose significant environmental impacts. FENC gladly takes on the responsibility to manage and minimize such impact.

Main raw materials purchased by FENC are PX, PTA, MEG, Bio-MEG and cotton, including recycled cotton. The main raw materials constitute the largest expenditure category for FENC and a critical factor for ensuring product quality.

Procurement of Main Raw Materials

Unit: 1,000 metric tons

Main Raw Material	2020	2021	2022
PX	1,542	1,574	1,369
PTA	1,800	1,838	1,773
MEG and Bio-MEG	718	783	687
Cotton (Including Organic Cotton and Recycled Cotton)	39	40	25

Note: PTA procurement includes external procuremnet and internal transfer.

As a response to stakeholders’ concerns on the possible environmental impact of bulk materials, FENC has set standards that are above the industry norm. We adhere to internal procurement management procedure and regulations, choosing bulk material suppliers that comply with government regulations and ESG guidelines. Company audits are conducted by third-party audit firms.

1. PX, PTA and MEG: Compliance with REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) and Halal Certification are required.
2. Cotton: FENC follows the rules and usage of trade from the International Cotton Association (ICA). The Company aggressively procures certified cotton and seeks collaborations with recycled cotton suppliers that are reputable and in compliance with FENC’s ESG standards.

We support the use of renewable and environmental-friendly materials. Meanwhile, we are developing and using renewable and plastic materials that, such as Bio-MEG, Bio PTA, 100% Bio-PET and PLA.

Raw material shipping at APG Polytech is conducted through railway and marine transport. To ensure safety, APG Polytech must maintain close communication with material suppliers and transport carriers. Strict adherence to the rules and regulations must be ensured to prevent accidents and leakages. All suppliers of primary raw materials for the company are participants of American Chemistry Council’s Responsible Care Program. The program advocates the environment, health, safety and safeguarding (EHS&S) in the international chemical engineering industry. It also demonstrates the commitment to health and safety of the employees, local communities and the overall environment from the industry. When the suppliers become members of this program, they gain access to its resources, such as seminars, training and consultation to enhance operational safety and performance in EHS&S.

Risk and Response on Main Raw Material Procurement

Risk	Corresponding Strategies
Stockout Risk	Solicit diversified suppliers	The Company selects reputable suppliers of a certain scale with a mix of different manufacturing methods to incorporate diversity in the selection process and achieve the goal of stable supply.
Stockout Risk	Cultivate quality and strategic partnerships	FENC maintains long-term and mutually benefitting partnerships with domestic and international suppliers and exchanges market information regularly.
Quality Risk	Procure materials from smart farming	By controlling the cotton quality through technology, the strategy conserves natural resources, increases farming efficiency and reduces chemical consumption as well as crop damages during cotton growth.
Quality Risk	Request higher yield rates from suppliers	Raw materials must meet quality standards set by the plant to reduce waste of energy and resources due to defective products, reprocessing or scrappage.
Climate Change Risk	Increase recycled cotton usage	FENC is searching for suppliers with scrap processing capabilities to maximize resource recycling and reuse. The Company is also seeking suppliers of 100% recycled cotton with certification from the Global Recycle Standard (GRS).
Climate Change Risk	Enhance resource efficiency	Aiming to reduce overstocking, waste of resources and environmental burden, ongoing review of procurement plans is conducted to encourage continuous growth.
Price Risk	Utilize diversified procurement guidelines	The Company makes price forecast and responds to market changes with agility. We choose procurement timing and utilize both futures and spot price. We also control the stockpile of raw materials based on changes in market price to reduce the impacts of fluctuating price.
Credit Risk	Select suppliers with international qualifications	The Company chooses reputable suppliers that are members of ICA and comply with international standards to ensure that the raw materials provided satisfy Company standards as stipulated in the procurement contract.
Transportation Risk	Adopt multi-modal transport	Raw materials are fully insured during the shipping process. Detailed shipping information is requested to enable tracking and ensure the safety of raw materials and carriers. In cases of force majeure, the shipping model is modified immediately in order to maintain the pace.