Supply Chain Sustainability Management

Wistron supplier code of conduct

Sustainability risk assessment for suppliers

In order to understand the risk related to sustainability in the supply chain, Wistron distributed the Self-Assessment Questionnaire (SAQ) to all our tier 1 suppliers and non-tier 1 suppliers. The suppliers must describe their implementation of the 5 major sustainability issues (sustainability and operational risk management, supply chain and operation continuation, environmental protection, human rights and labor security, and occupational safety and health) in the questionnaire, and provide related evidence, such as management system certification or related documents. The supplier self-assessment result will be used as reference for future sustainability risk management. The response rate for the SAQ among tier 1 suppliers was 100% in 2021. The response rate among critical non-tier 1 suppliers was also 100%.

2021 Self-Assessment Questionnaire

Through the analysis of the SAQ results, we defined suppliers which scored less than 80 points as high risk suppliers, and identified the potential risks within the supply chain. In 2021, we identified 50 high risk suppliers (including 14 critical suppliers). We later conducted onsite audits of the high risk suppliers, in order to confirm and understand the risks of the suppliers.

2021 high sustainability risk factors for suppliers

2021 Self-Assessment Questionnaire results

Supplier audit

In order to implement supplier sustainability risk management, Wistron has stipulated audit procedures for supplier sustainability and onsite audits will be conducted for critical suppliers and high risk suppliers. If the supplier has a score of lower than 80 points in the audit results, the Company will ask the supplier to propose improvement measures for discrepancies found in the audit. The supplier is required to complete the improvements for the discrepancies, report back, and file a re-audit application within two months. If the supplier still can't pass the re-audit, it may not file another application within six months. Where the issues discovered affect the quality of materials supplied, the materials/supplier will be replaced with an alternative.

Deficiencies in the audit and the percentage of related ESG items

Critical suppliers (331 suppliers) and high risk suppliers (50 suppliers) were audited according to the audit procedures above. 45 non-compliant reports were found, including 16 cases of sustainability and operational risk management, 1 case of supply chain sustainability management, 21 cases of environmental protection, 3 cases of human rights and labor security, and 4 cases of occupational health and safety. The discrepancies found in the audit shall be improved with the stipulated improvement measures and continuous follow up, in order to ensure effective improvement actions and reduction of risk.

Supplier audit deficiency improvement actions

Sustainable supply chain strategy

Wistron places great value on our partnerships and growth with our suppliers. We hope to use our partnerships to support each other and grow together. Our strategy is based on sustainable procurement. We have responded to customer demands and established the Sustainable Supply Chain Strategy, which includes, quality performance and implementation, technical manufacturing capabilities, cost/operation management, local supply chain prioritization, and sustainability. We hope to strengthen our partnerships to create new opportunities.

Wistron has established a global procurement unit and supplier quality management unit to conduct supplier management. The units manage the standards and procedures for supplier selection based on partnerships with suppliers. They conduct risk/performance evaluations, audit guidance, education and training, and organize supplier conferences, in order to implement the sustainability requirements in the daily management of supply chains.

Supplier sustainability evaluation

Wistron has stipulated ESG standards for suppliers (including new and existing suppliers). In order to become a Wistron supplier, suppliers must sign the Code of Conduct and are required to pass ISO 90001, ISO 14001, IECQ QC 080000, and ISO 45001 certification.

Furthermore, we have included the supplier’s ESG performance in the selection criteria. Regarding the evaluation of new suppliers, the product quality assurance evaluation form of partner suppliers will be used for evaluation. The ESG factors account for 13.33% of the score, and include:

1. Established appropriate and effective documents and procedures related to the RBA Code of Conduct (2.22%)
2. Complies with labor standards (2.22%)
3. Complies with health and safety standards (2.22%)
4. Complies with environmental standards (2.22%)
5. Complies with ethical business standards (2.22%)
6. Complies with management systems (2.22%)

The ESG performance of existing suppliers is regulated by the supplier performance evaluation. The regulated items include quality, reliability, compliance, supply capabilities, price, and sustainability. Among these factors, sustainability accounts for 10% and includes:

1. Whether operational risk management and disaster prevention plans have been established (e.g. for human rights issues and management risks, etc.) (5%)
2. Whether the supplier complies with the hazardous material regulations (5%)

Supplier selection mechanism

In order to implement sustainability and performance management for suppliers, Wistron has implemented the supplier performance evaluation system. The scores, from high to low, go from A to E (A is over 85 points and E is lower than 46 points). The evaluation is the basis for supplier selection and the selection mechanisms are as follows. In 2021, one supplier was rated as E in the supplier performance evaluation and no suppliers were eliminated.

1. Suppliers who scored lower than an E in the quarterly evaluation are required to propose improvement measures. Wistron will discuss adjustments to the supplier’s strategy and the cancellation of the supplier’s current projects and qualifications for new projects according to the improvements implemented by the supplier.
2. If a supplier is given an E rating for 3 consecutive quarters, the suspension of the supplier’s qualifications to join new projects will be discussed in the quarterly meetings.

Supplier partnership projects

Through communication and cooperation with the suppliers, Wistron continues to identify their needs while they improve on sustainability. We maximize the impacts of the investments and improve the sustainability awareness and capabilities of suppliers, in order to face the ever-changing sustainability standards and trends.

Supplier Conference

Every year, the Wistron team invites with suppliers to achieve friendly, mutually beneficial, and common growth for sustainability. In the 2022 Supplier Conference, the main focus will remain on global climate change. The Wistron Group Partner Conference is hosted to honor the suppliers with outstanding performance in sustainability and greenhouse gas inventory reports. During the 2021 sustainability/GHG Supplier Conference, consultant companies were invited to provide education and training to suppliers. In addition, we also explained Wistron's management policies for sustainability to suppliers, with the aim of promoting Scope 3 of the GHG inventory and the importance of water resource management.

Critical performance indicators for sustainable supply chains