Four Major Principles of Supply Chain Management

Upholding the spirit of accountability, the Company has built a responsible supply chain in accordance with the four major principles of supply chain management, namely Code Compliance, Risk Assessment, Auditing Programs, Continuous Improvement, and Implementation of Responsible Supply Chain Management of all purchase contracts the Company have signed with suppliers, the Company stipulates thereon that suppliers comply with the "Code of Conduct- Responsible Business Alliance, RBA". We also demand that tier 1 suppliers who meet the criteria set forth by the Management Production Department and the Procure Department fill out the "Sustainable Risk Assessment Questionnaire", the contents of which covering five aspects, namely Labor, Occupational Health and Safety, Environmental Protection, Supply Chain Management, and Sustainability and Risk Management. The Company's personnel will review the questionnaire and grade the suppliers into different sustainability risk level according to their scores. The Company then performs supply chain management and optimization according to their long-term sustainability performance. New suppliers also need to pass basic corporate social responsibility assessment (the assessment content including human rights, occupational health and safety, and environmental management); only after they pass the assessment are they allowed to do business with the Company. Subsequently, they also need to fill out the "Sustainability Risk Assessment Questionnaire". 100% of the new suppliers are screened against environmental standards and social criteria.

The company considers factors such as purchase amount, delivery batch number and nature of supply, and selects first-tier suppliers who must cooperate in signing the "Supplier Code of Conduct".In order to continue to improve the sustainability awareness of the supply chain, the company revise the supplier code of conduct in 2023 and require qualified suppliers to resign the code of conduct (the code of conduct signing rate is 100%). In addition, the company held a supplier meeting in 2023, using RBA VAP version 7.1 as the basic teaching material, supplemented by Phison’s important sustainability policies, to communicate ESG principles and regulation with suppliers and contractors(the communication topics covering human rights, anti-discrimination/anti-harassment, health and safety, Pollution and greenhouse gas management, anti-corruption, grievance channels, privacy, management systems, material restrictions and responsible sourcing of minerals, etc).