Supplier Screening Mechanism
Implementation of Supplier Management
For those suppliers currently doing business with, CHC Group regularly conducts supplier evaluations. Initial evaluations are carried out by the top supervisor of the Construction Department regarding suppliers’ performance in different aspects. The evaluation results are then reviewed and signed off by the director of the Project Management Department. All evaluation results are simultaneously logged into the Group’s supplier management system to serve as a reference for future business transactions. In addition, the Group implements regular supply chain risk assessment as well as supplier risk management control mechanisms to identify those suppliers with higher risks to actively manage, train, and assist suppliers in improving their performance, which in turn, reduces risks in the Group’s supply chain.
The Group regularly and occasionally organizes educational training and advocacy activities, as well as assists suppliers in improving their sustainability performance through observation and learning, expert consultations, and holding continuous dialog and communication with suppliers and their employees. In 2020, a total of 20 sessions of Taiwan Occupational Safety and Health Card training courses and 8 sessions of oral cancer screenings were conducted, and these benefits have expanded to cover the Group’s suppliers, which effectively enhances the sustainability of the Group’s supply chain management.
In order to encourage suppliers to stay proactive, the annual selection of excellent suppliers is held during the fourth quarter of each year, and are evaluated in different aspects, such as occupational safety, environmental management, project quality, and project schedule management. In 2020, 27 excellent suppliers passed the evaluation and received the award. Those who received the award can enjoy rewards such as 50% retention amount cut in the following year, loosed conditions for performance bond/security, and Right of First Refusal (ROFR), which specifically encourages suppliers to continue to improve their performance. On the other hand, the Group added an external Health and Safety award in 2020 to encourage construction site contractors to pay attention to occupational safety and health as well as take actions for safety maintenance.
In order to strengthen the sustainability of the Group’s supply chain, ESG principles will be introduced into the Group’s procurement decisions in the future, implementing the “Fulfillment of ESG” selection mechanism and disseminating supplier with business ethics and integrity. Supplier’s ESG performances such as human rights, employee care, occupational safety measures, waste management, energy-saving measures, integrity management, and anti-corruption specifications are used as evaluation standards. Suppliers with exceptional performance will receive extra points to increase their chances of being selected, and thus encourage suppliers to improve their ESG performance in the form of rewards. In terms of business ethics and integrity management, integrity, honesty, and responsibility terms will be added to the contract. Suppliers will be asked to conduct a self-assessment every year. The assessment results will be incorporated into the risk- management control mechanisms, and corresponding measures are planned accordingly.
Local Procurement
Supporting local procurement is one way of fulfilling corporate social responsibility. Other than Environmental Project Development Business where the water treatment equipment are mostly supplied by foreign manufacturers and thus needs to be purchased from abroad, the rest of the Group member implement local procurements. In addition to revitalizing the development of local industries, it also reduces carbon emissions generated within supply chain. In 2020, the CHC Group’s local procurement ratio was 98.3%, of which 100% of CEC’s procurements are sourced domestically. The local procurement ratios of CDC and HDEC were 96.2% and 92%, respectively, which was a significant increase from 2019.
