All members of the CHC Group strictly abide by the Group’s procurement policies. Through supplier selection standards, risk identification and labeling, supplier management practices, supplier evaluations and the annual selection of excellent suppliers, the Group ask all the suppliers to follow ethics code of conduct and procurement policies, as well as to comply with relevant domestic and foreign regulations regarding environmental protection, occupational safety and health, and human rights and labor rights. Making use of CHC Group’s business influence, the Group works together with supply chain partners to promote sustainable development.
Supplier Screening and Assessment Mechanism
| | Supplier Database Entry | Supplier Qualification Screening | Supplier Assessment |
| • Supplier data record filing
• Actual contracted work over last 5 years
• Acknowledge and agree with CHC Group’s:
o Corporate culture declaration
o Ethics and business conduct
o OHS policy | • Record of contracted work
• Contract performance and credit ratings
• Interview with responsible person
• Financial status
• Actual site visit
• OHS policy
• Labels for risk assessment
• Comments from peers | • Initial assessment and reviews are conducted by construction units during construction period:
o A Grade – Dependable and outstanding supplier
o B Grade – Dependable supplier
o C Grade – Supplier that requires improvement and training
o D Grade – Refuse to do business and flagged as to be reexamined |
Implementation of Supplier Management
For those suppliers who do business with CHC Group, a qualification screening practice is followed and database entry is required for new suppliers; documentation record and the record of contracted work for the past five years are filed in the database. Procurement Unit examines the supplier data, and promote CHC’s corporate culture declaration, business conducts, and OHS policy at the same time. The supplier documentation will be filed in the database after initial examination with the results checked and sealed by that supplier. Suppliers performing duties are then reviewed by the head of construction units during construction period, and the director of the Project Management Department will conduct an overall assessment, sign off, and input final result into supplier database. For those suppliers who received grade D will be put on the watchlist; discussion of whether to be listed as dishonored supplier will be made between construction units and Procurement Department.
In order to enhance Group’s supply chain management, CHC Group is introducing sustainable procurement and/or tendering policy. Sustainability performance of suppliers, such as human rights, employee care, OHS practice, waste management, energy savings practice, business ethics, and anti-bribery policy, will be examined during assessment. Suppliers who receive higher score will get extra credit and boost their chance of winning the bid. Extra bonus will also be given out to suppliers to motivate their work for sustainable performance and management.
According to assessment result in 2021, dependable and outstanding (grade A) and dependable (grade B) summed to 1,590 suppliers and accounted for 88.9%, a slightly increase over last year. Supplier that requires improvement and training (grade C) and those refuse to do business and flagged as to be reexamined (grade D) accounted for 10.5% and 0.6% respectively. Suppliers who received grade C and D are put on watchlist and receive trainings for improvement. If one continues to receive low score for contract performance assessment or has unhealthy financial condition, that supplier will be listed as dishonored supplier. The dishonored supplier list is maintained and tracked quarterly. At the end of 2021, 10 suppliers are listed as dishonored. The supplier grading system also reduces supply chain risk for CHC Group.
2021 Assessment Result
| Grade | Grade A | Grade B | Grade C | Grade D |
| Number of Suppliers | 25 | 1,565 | 188 | 11 |
| Percentage | 1.4% | 87.5% | 10.5% | 0.6% |
Supply Chain with Integrity
In order to establish a business environment with integrity and to prevent immoral activities, CHC Group actively promote suppliers to sign declaration of business ethics and to conduct assessment for business ethics behavior. The business ethics clause is completed and added to supplier contract in 2021, which includes anti-bribery, recusal of conflict of interest, intellectual property rights, and protection of classified information duty. The business ethics declaration is mandatory in supplier assessment and management.
On the other hand, CHC Group has constructed a business ethics declaration and business ethics behavior survey for suppliers, with assessment topics include: whether business ethics policy is ruled out, unlawful or unethical lawsuits within internal parties, and whether conflict of interest exists between CHC Group. Beginning August 1st, 2021, all supplier contracts must sign the business ethics declaration and conduct business ethics survey. At the end of 2021, 704 supplier survey has been received, translating into a 81.2% recovery rate.
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. With efforts to revitalize the development of local industries, local procurements also reduces carbon emissions (scope 3). In 2021, CHC Group’s local procurement ratio was 94.58%; local procurement ratios for CEC, CDC, and HDEC were 99.78%, 93.89% and 75.57% respectively.
