Sustainable supplier

Sustainable supplier

Unimicron includes the different aspects such as supply chain risks, continuous operations, finance, and conflict minerals among CSR supply chain management issues to promote the sustainable management of suppliers and establish a more resilient supply chain while jointly mitigating supply chain risks. We have established a cross-departmental Supply Chain Management Committee that assists suppliers to improve and upgrade their quality systems, environmental protection, green procurement, and plant safety through regular guidance and audits to establish supplier sustainability. In terms of Sustainable supplier advocacy, Unimicron integrates the management system with the procurement process and requests each raw material supplier to sign a Supplier Commitment Statement, which is based on the RBA Code of Conduct, the International Labour Conventions and Social Accountability International’s SA8000 Standard, covering aspects such as ethics and human rights, and environmental considerations.

In 2018, the signature rate (including the EICC Code of Conduct) from raw material suppliers of plants in Taiwan reached 100%. Since the EICC was renamed the Responsible Business Alliance (RBA) in 2018, suppliers have been asked to sign a new statement. As of February 2019, the completion rate is 79%. Suppliers who have not completed the signing will continue to be requested to sign the statement in 2019. The signature rate of Supplier Commitment Statements of Plants in Mainland China (Shenzhen/Kunshan/Huangshi/Suzhou/Unimicron-FPC Technology (Kunshan)) is 100%. The signature rate of suppliers of Qun Hong Technology is also 100%.

2018 Signature rate of Supplier Commitment Statement

Raw materials suppliers Plants in Taiwan Plants in Mainland China (Shenzhen/Kunshan/Suzhou/ Unimicron-FPC Technology (Kunshan)) Qun Hong Technology
Commitment Statement (EICC) 100% 100% 100%
Commitment Statement (RBA) 79% 100% 100%

Sustainable Supplier Risk Management Framework

In order to strengthen the management of supply chain sustainability risks and gradually strengthen the sustainable performance of the supply chain, Unimicron examines and improves the sustainability risks faced by the supply chain in four steps. First, we examine the risk factors that may exist in the procurement, analyze the results through risk assessment, and then conduct risk mitigation measures. Through the deployment of the risk mitigation measures, supplemented by the establishment of a standard operating procedure (SOP), we finally communicate and collaborate with suppliers to gradually minimize the sustainable risk to the supply chain through the implementation of a recovery plan.

Procurement Risk Management Procedure

We integrate supply chain risk management into daily procurement operations and construct a Procurement Risk Management Procedure under the supply chain risk management framework. Using the PDCA cycle process, we continuously review the risk status and compile the risk index through the results of quantitative risk analysis. At the same time, the risk heat map is drawn, and the risk occurrence frequency and the degree of impact are used as the evaluation basis to formulate the periodic review of the mitigation plan and to implement control of the supply chain’s sustainability risk.

Procurement risk assessment factors

Risk type Risk factor(Tier 1) Risk factor(Tier 2)
Internal risk Procurement behavior risk Integrity requirements
External risk Regulatory risk Supplier corporate social responsibility risk
Supplier infringement
Hazardous substances risk
Supply chain risk Continuous operations risk Supply disruption
Cost risk Raw material price
Supplier conflict minerals risk Management of conflict minerals
Financial risk Financial data monitoring

Supplier Sustainability Risk Assessment

In order to improve the sustainable development of the supply chain, Unimicron has set CSR evaluation criteria for new suppliers that meet the screening requirements, and requires new suppliers to complete the Unimicron Corporate Social Responsibility Assessment Form. For existing suppliers, we encourage the top 50 major suppliers that participate in self- evaluation. In the meantime, we also actively send out RBA SAQ to key suppliers, which are subsequently reviewed by the supply chain management team for the follow-up risk management control. The reply rate for self-evaluation questionnaires from the top 50 major suppliers in 2018 was 88%, and the ratio for suppliers that replied and complied with Unimicron’s requirements was 93%.

Supplier Operating Audit and Advocacy

In 2018, a total of 43 on-site audits were conducted for major suppliers, including 12 Taiwanese suppliers and 31 Mainland China suppliers. Although there were deficiencies, no suppliers were deemed to be high-risk. Suppliers in Taiwan and Mainland China mainly have audit deficiencies in aspects such as labor, health and safety, material supplier risk management, and general principles (employee and supplier education and training). Unimicron requires audited suppliers to complete or plan for improvements within a time limit. Unimicron plans to interview and provide assistance to those who have not completed the deficiency improvements or plan proposal in the second half of 2019. Unimicron shall continue to request suppliers to implement improvement on audit deficiencies and continue to guide suppliers to comply with the RBA Code of Conduct to reduce supply chain risks and drive supply chain growth. Two suppliers with best audit result performances in 2018 will be selected and honored with the Supplier Sustainability Award at the 2019 Supplier Conference as an example for other suppliers to learn from.

Supplier CSR Audit Process

Aspects of supplier audit

2018 List of Non-conforming Items of Taiwan Suppliers

Non-conforming Items Item Statistics Percentage
Labor 54 20%
Health and safety 82 31%
Environment 10 4%
Ethics 4 1%
Management system 23 9%
Material supply risk management 56 21%
General rules 38 14%
Total 267 100%

**In terms of supplier audit results on labor, there are no violations of child labor in Taiwan, but three suppliers may be involved in the risk of violating forced labor regulations. Deficiency contents include the application procedure for resignation and taking custody of passports of foreign migrants. Relevant suppliers have completed these improve ments and revised their operating procedures and management measures. The cases have been closed. There are no major deficiencies in the environmental aspect.
**Major deficiencies refer to the issues that are deemed as “Critical” in the audit standards and need to be improved within seven days)

2018 List of Non-conforming Items of Mainland China Suppliers

Non-conforming Items Item Statistics Percentage
Labor 30 33%
Health and safety 27 30%
Environment 12 13%
Ethics 3 3%
Management system 10 11%
Material supply risk management 5 7%
General rules 3 3%
Total 90 100%

**In terms of supplier audit results on labor, there are no violations of child labor or forced labor in Mainland China. There are no major deficiencies in the environmental aspect.
**Major deficiencies refer to the issues that are deemed as “Critical” in the audit standards and need to be improved within seven days)

2018 Supplier Audit Findings and Improvement Actions

Classification RBA classification Status of main findings Improvement action
Labor .Freedom to choose profession
.Salary and benefits
.No discrimination
?Keeping the passports of foreign employees and requiring employees to give their notice a certain amount of days before resigning does not comply with regulations
.Deducting salary as a means of punishment
.Items on the interview resume that involve discrimination
.Immediately return foreign employees’ passports and amend the number of days of notice before resigning to comply with regulations.
.Amend the penalty for deducting salary
.Revise the item on the resume that involves discrimination to comply with regulations.
Health and safety .Occupational safety
.Occupational health
.Health and safety communication
.Insufficient occupational safety and health staff; Insufficient emergency personnel
.Fire extinguishing facilities are abnormal
.Insufficient hazard labeling and GHS labeling
.Strengthen self-management and maintenance
.Hire more necessary occupational safety and health personnel (including emergency personnel)
Environment .Environmental pollution prevention and energy resource consumption .Temporary storage of waste does not comply with the management and regulation of clearing and transportation
.Rainwater discharge management has not been implemented
.No reduction plan and target for energy resource consumption management
.Make improvements according to regulations and implement waste management
.Implement rainwater discharge management and develop standardized procedures
.Set annual energy resource consumption targets and implement reduction plans
Ethics .Adhere strictly to fair trade, advertising and competition standards .There is a requirement to declare fair trade/competition (antitrust), but there is a lack of detailed instructional education .Advocate relevant regulations and recommend internal lecture records for at least two years (decree amendments)
Management system .Corporate commitments
.Management duties and responsibilities
.No CSR policies and organizations .Establish a contact point to let management know about CSR/RBA
.Formulate policy commitments, high-level executive signatures and announcements on the Bulletin Board
Material supply risk management Comply with Supplier RBA Code of Conduct and announce it to related supply chain .Suppliers still do not fully understand the RBA Code of Conduct
.List those who do not comply with the supply chain’s RBA Code of Conduct in the Supply Chain Management Procedures
.Issue questionnaires to receive feedback after Supplier Conferences
.Suppliers should establish supplier management procedures that require their supply chain to commit to and sign the RBA Code of Conduct
General rules CSR/RBA training CSR/RBA awareness is weak and there is no relevant education/ training for CSR/RBA Code of Conduct. Provide relevant training materials and request training records in return

Number of CSR audits in Taiwan suppliers over the years

Year Practices Implementation results
2011 Official on-site CSR audits 2 suppliers
2012 7 suppliers
2013 7 suppliers
2014 From 2014 to 2019, 114 copies of Unimicron’s CSR Assessment Forms were issued, and over 102 copies have been recovered, and on-site audits have been carried out over these years. 8 on-site audits
2015 8 on-site audits
2016 8 on-site audits
2017 12 on-site audits (6 re-audits and 6 initial audits)
2018 12 on-site audits (6 re-audits and 6 initial audits (including equipment suppliers))
2019 Goals: 12 on-site audits (6 re-audits and 6 initial audits (including equipment suppliers))

In 2019, based on the supplier audit plan, we expect to audit 12 key suppliers including re-audits of six suppliers to confirm the effectiveness of suppliers’ improvements and continuous implementation. We also selected six suppliers that have not received on-site audits for auditing operations in order to implement and advocate the supply chain’s compliance with the RBA Code of Conduct.

Construction of the supplier communication platform and capacity establishment

Unimicron follows international standards and regulations such as the RBA Code of Conduct, ISO 14001, ISO 45001, QC080000, and bans on conflict minerals. We have also established comprehensive supplier management systems and regulations and hosted regular Supplier Conferences based on environmental, human rights, safety, and health principles outlined in the above international standards to promote CSR. We launch campaigns on quality/green products, work safety, and CSR supplier management, and communicate with suppliers to create a win-win partnership. Plants in Taiwan held a Supplier Conference in July 2018, inviting 114 suppliers. A total of 83 suppliers and 100 people participated. Participation rate reached 73%. In addition to promoting quality, work safety, and environmental protection issues, the meeting also strengthened advocacy on green procurement, CSR supply chain management, CSR implementation results, and RBA guidelines. All information is placed on the supplier platform after the meeting for reference by suppliers. Unimicron’s plants in South and East China also held Supplier Conferences, in which a total of 104 manufacturers participated. Promotion was carried out by other plants in Eastern China using supplier commitment statements and e-mails. Plants in Mainland China will actively hold Supplier Conferences in 2019 to further implement sustainable supply chain management and the RBA Code of Conduct.

Local procurement

Unimicron adheres to the principle of sustainable corporate social responsibility and hopes to promote the sustainable development of the entire supply chain. Therefore, to promote operational activities and local economic development, Unimicron actively implements localization of materials, and supports the development of local suppliers, all to reduce unnecessary air and water freight costs, as well as the carbon footprint generated during material transportation. In 2018, the local procurement ratio of raw materials purchased by Unimicron in Taiwan was 68%. Qun Hong Technology had a local procurement ratio of 82%, and the plants in Mainland China had a local procurement ratio of 82%.

Local procurement ratio (%)

Year 2016 2017 2018
Plants in Taiwan 77 67 68
Qun Hong Technology 90 77 82
Plants in Mainland China 80 80 81

*Local area includes local suppliers and Taiwanese agents.
*The decline in the local procurement ratio in Taiwan is due to the improvement of the functions of terminal products and the need for higher technology, high reliability, and high-quality raw materials. In response to customer demand, raw materials must be purchased from abroad.

Meanwhile, we also recycle packaging materials. The trays used for carrier shipments are collected by Unimicron’s suppliers from the customers for reuse purposes. Unimicron gives priority to procurement of reused trays. The quantity of recycled trays purchased accounted for 40% of the total procurement of trays

Recycled trays

Year 2016 2017 2018
Recycled tray procurement ratio (%) 49 42 40
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