The Company sees suppliers as our important partners. We are committed to building mutual trust and a stable sustainable supply chain, as well as flourishing businesses together with our suppliers. The Company assesses suppliers against the criteria, namely Quality, Cost, Delivery, Service, and Sustainable Risks, by using our business influence to demand that they disclose sustainability information and improve their sustainability performance.
Committed with our social responsibility, Phison has built a responsible supply chain in accordance with the four major principles of supply chain Management: Code Compliance, Risk Assessment, Auditing Programs, Continuous Improvement, and Implementation of Responsible Supply Chain Management.
In the purchase contract signed with the supplier, Phison Electronics clearly stipulates that the supplier must follow the "RBA Responsible Business Alliance Code of Conduct" and fulfill the management responsibilities of human rights, occupational safety, environmental protection, and integrity.
In 2021, Phison establishes a supply chain management platform. We put important policies such as Human Rights Policies and Supplier Codes of Conduct on the platform and encourage suppliers to click and read. At the same time, we require all new suppliers and existing suppliers to fill in the sustainability risk assessment questionnaire, which covers the five aspects of labor, occupational health and safety, environmental protection, supply chain management and sustainability & risk management. After the supplier's self-assessment, we will conduct a re-evaluation. The supplier's sustainability risk level will be divided according to their scores. Ultimately, we will adjust and optimize the supply chain in accordance with the suppliers' long-term sustainability performance.
In 2021, the Company identified a total of 28 critical suppliers; 100% of them have received and passed an RBA audit. However, there were still 103 deficiency items. The causes for such deficiencies include incomplete management regulations, obscure complaint procedures and anonymous reporting mechanism that hinder employee's understanding, overtime work, failure of mechanical safety safeguards, and a management system not implemented. The Company's audit representatives have communicated the audit findings and discussed possible improvement plans with each supplier. The Company did so because according to the management regulations if a deficiency is not considered material, the Company's audit representatives and the supplier may agree on a deadline for improvement completion. If the supplier fails to improve before the deadline, the Company will reduce or suspend the orders to be placed with it, or remove it from the List of Approved Suppliers.