An Innovator for Industrial Transformation

Sustainable Supply Chain Management

HIWIN is a professional manufacturer in global motion control and system technology product. In terms of procurement practices, HIWIN classifies raw material suppliers, which have the most significant impact on daily operations and production, into two categories based on supplier attributes: direct materials (materials directly related to production) and auxiliary materials (materials not directly related to production or packaging materials). Depending on their level of operational importance, different degrees of requirements and management systems are established to enhance supply chain resilience.

To maximize the efficiency of management resources, HIWIN focuses on regular raw material suppliers whose annual procurement value reaches a certain threshold and who maintain continuous transactions. These suppliers are defined as Tier-1 Suppliers ^{Note 1} and are subject to further environmental, social, and governance (ESG) management according to their industry and business characteristics. To effectively control supply chain risks, Tier-1 Suppliers whose annual procurement value exceeds a specified threshold or who are involved in major incidents or legal violations are designated as Key Suppliers ^{Note 2}. These suppliers receive enhanced guidance and stricter monitoring.

To further reduce overall supply chain risks, HIWIN continues to strengthen sustainable risk management for the upstream raw material suppliers of Key Suppliers Note 3. In 2024, HIWIN gathered information on more than 181 upstream raw material suppliers of Key Suppliers and conducted preliminary risk assessments based on their geographic locations and material categories. The Company will continue tracking their status and implementing more proactive risk control measures.

① Supplier management policy

To communicate the management requirements of the supply chain and ensure the achievement of sustainable targets, HIWIN formulated sustainable supply chain management strategies and mid- to long-term targets, which were implemented after senior management decided on supply chain-related plans and were disclosed on HIWIN’s website. We aim to exert a positive influence on the supply chain of the precision machinery industry, advocate for building a sustainable supply chain with our suppliers, and commit to responsible procurement and developing the supply chain’s technical capabilities. To continuously provide responsible and high-quality services to our customers, please refer to Chapter 3.3 Organizational Management Structure and the “Supplier Management Policy”for more information.

② Supplier code of conduct

HIWIN is committed to promoting the sustainable development of the precision machinery industry by integrating ESG issues into its sustainability management practices. The Company aims to reduce environmental impact, external costs, and operational risks by actively encouraging suppliers to establish waste and carbon reduction targets, thereby mitigating the industry’s impact on climate change and resource depletion.

In 2024, HIWIN continued to adopt two core strategies—enhancing sustainability risk management and promoting a green, low-carbon supply chain—as the guiding principles of its supply chain management. The “HIWIN Supplier Code of Conduct” was revised accordingly.

Suppliers are also required to communicate the Code to their sub-tier suppliers and to monitor their compliance. This approach aims to foster safe working environments, respectful labor relations, ethical operations, and sound environmental protection practices, while continuously reducing the risk of operational disruptions. In 2024, no supplier relationships were terminated due to the use of child labor or forced labor.

HIWIN is committed to green manufacturing and aims to reduce environmental impacts across the supply chain. To do so, we mapped a path toward achieving net zero emissions and urged the supply chain to implement ESG practices. We also seek to provide suppliers with relevant resources to take scientific, data-driven, and empirical approaches to reduce carbon and mitigate climate change’s impact on society. This anchors the supply chain’s sustainable development and demonstrates multiple added values.

③ Supplier sustainable management framework

④ Four major implementation guidelines of sustainable supply chain management

HIWIN maintains close cooperation with its suppliers by adhering to four key implementation guidelines: compliance, risk assessment, audit activities, and continuous improvement. These guidelines aim to support suppliers in making ongoing improvements and commitments, as well as proactively initiating sustainability actions with their own upstream suppliers. To foster the growth of our global supplier partners, HIWIN has established “SCM Platform,” a supply chain management system. This platform consolidates supplier communication channels, facilitates information exchange and feedback, and enables us to monitor the sustainable development concept and progress of our supply chain.

To instill sustainability awareness among our supply partners, HIWIN has planned its first “HIWIN ESG Partner Conference,” to be held at the corporate headquarters in March 2025. The purpose of this event is to help suppliers understand HIWIN’s commitment to net-zero and carbon reduction issues, while encouraging them to embrace ESG principles. Approximately 50 suppliers—around 75 participants—will be invited to join the event, during which 8 outstanding suppliers will be recognized: 6 suppliers for their exceptional ESG performance, and 2 exemplary suppliers as industry benchmarks. By showcasing these role models, HIWIN aims to strengthen ties with supply partners, promote ongoing ESG initiatives, expand circular economy opportunities, and enhance carbon reduction capabilities—jointly building a greener future.

Moving forward, HIWIN will continue to host this partner conference, further expanding supplier engagement. We will highlight unique, high-impact, and quantifiably beneficial sustainability projects, and recognize suppliers with strong sustainability performance. Through a variety of incentive mechanisms, we aim to encourage broader supplier participation in sustainability initiatives and inspire more innovative collaboration models.

• Audit process

• Supplier Evaluation Dimensions

• Audit results

In 2024, HIWIN conducted audits on 50 suppliers (26 on-site and 24 remote). Based on risk assessments, 30 suppliers were identified as having potential ESG risks. Audit findings and improvement recommendations were submitted to senior management for review, followed by corrective action verification or a second audit to mitigate risks.

Suppliers with significant incident records are assessed for risk, and those failing to meet requirements for two consecutive years will have transactions suspended until corrective actions are completed within a specified timeframe, after which their qualification for cooperation will be re-evaluated.

For the 2023 Key Suppliers, environmental and social impact assessments revealed 3 suppliers with environmental violations and 1 supplier with social violations. By 2024, corrective actions for 3 of these suppliers were completed, resolving all violations. The remaining supplier had labor hour violations against legal regulations and has submitted a corrective action plan, which will be followed up through ongoing audits.

⑤ Sustainable supply chain seed training

To enhance procurement personnel’s awareness and capabilities in sustainability, HIWIN conducts systematic training programs covering topics such as the circular economy, Supplier Code of Conduct policies, conflict minerals policy, and the implementation outcomes of sustainability management objectives. The training also communicates the Company’s annual supplier management goals and key projects, cultivating procurement staff’s ability to effectively convey supply chain development policies and management strategies. Through training sessions and interactive models, HIWIN establishes a platform for communication between procurement teams and suppliers, fostering a corporate culture of sustainable development.

⑥ Sustainable supply chain training program

HIWIN strengthens supplier collaboration by promoting sustainability concepts, securing government resources, implementing multi-faceted sustainability capability-building projects, utilizing the SCM management platform, hosting thematic ESG workshops, and conducting systematic training. In 2024, HIWIN proactively organized sustainability training sessions with suppliers, providing resources, information, and phased guidance to enhance mutual cooperation and improve collective risk management capabilities.

Through effective leadership and precise requirements, HIWIN collaborates with suppliers to build a workplace environment where “labor is dignified, and business is ethical.” We encourage suppliers to develop materials and processes that reduce environmental impacts, conserve energy, and reduce carbon emissions in their manufacturing process. We aim to optimize the manufacturing processes, improve quality, and pay more attention to environmental issues, including climate change and biodiversity. We conduct comprehensive partnerships by engaging closely with suppliers to establish an continuous green supply chain.

① New suppliers evaluation mechanism

HIWIN promotes a virtuous cycle in the industry and supply chain by establishing supplier management procedures and conducting Environmental and Social investigations on new suppliers. The completion rate in 2024 was 100%.

② Sustainability capacity building program

During the supplier selection process, HIWIN evaluates both product attributes and supplier capabilities. Since 2022, HIWIN has collaborated with seven plastic raw material and consumable suppliers to jointly develop recycling and reuse projects―successfully converting production scraps back into raw materials and reusing consumables. In addition, one steel manufacturer has continued to advance recycling initiatives, contributing to a reduction in overall Scope 3 carbon emissions and related costs, while achieving results aligned with circularity, emission reduction, and waste minimization objectives.

③ Manufacturing process quality guidance

• To pursue stable product quality, HIWIN reviews supplier quality monthly, provides guidance and corrective measures to the top 10 suppliers with the highest defect rates, and if the defect rate occurs 4 times in 6 months, reduces or suspends orders. Partnership can be resumed based on the effectiveness of improvements through cross-departmental collaboration.

• In 2024, we counseled 38 suppliers, 5 among which had their orders reduced or temporarily suspended, and 1 was re-evaluated and met quality requirements. The remaining 4 are still under counseling and will be reevaluated based on their progress in improvement.

④ Continuously reducing environmental impacts

HIWIN has established targets for energy saving, water conservation, waste reduction, and carbon reduction, and continues to guide suppliers in recognizing and addressing these environmental impacts. As of 2024, supplier performance in energy conservation has been assessed: 26 suppliers have adopted energy-efficient equipment, 10 have installed solar panels, and 18 have conducted carbon footprint assessments―certified under ISO 14064 and ISO 14067 standards.

⑤ Conflict minerals procurement management policy

HIWIN supports the procurement of conflict-free materials and requires suppliers to procure non-conflict materials. In 2024, HIWIN required suppliers of products containing tantalum, tin, gold, and tungsten to follow the responsible mineral procurement policy and sign the responsible minerals declaration. All Tier-1 key-focus suppliers, totaling 157 companies, have completed this requirement.

⑥ Promote local supply chain

HIWIN classifies its suppliers into three main categories: production-related direct raw materials, non-productionrelated indirect materials, and labor, and other categories. To foster strong relationships with local partners, promote local socio-economic development, and minimize CO₂ emissions in manufacturing and transportation, HIWIN is committed to building a green supply chain through the implementation of a local procurement strategy.

⑦ Promoting e-invoicing for sustainability

To further advance its Environmental, Social, and Governance (ESG) goals, HIWIN proactively collaborated with the National Taxation Bureau to assist suppliers in adopting electronic invoicing (e-invoices). As of 2024, 90.1% of HIWIN’s suppliers have successfully implemented e-invoicing, significantly reducing paper consumption and supporting sustainable development and corporate social responsibility (CSR) practices.

Additionally, e-invoicing enhances tax fairness by ensuring that businesses comply with tax regulations and protect consumer rights. This not only increases government tax revenues but also contributes to national development and social welfare, ultimately fostering a better living environment for society as a whole.

⑧ Green procurement

HIWIN is dedicated to integrating the ESG concept into our management philosophy. Our objective is to advance green procurement and foster the notion of resource value and environmental sustainability.

⑨ Promotion method of low carbon supply chain

We formulated a roadmap to net zero, urged the supply chain to implement ESG, and sought relevant resources for suppliers. Supported by diverse material sourcing plans, in 2024, the percentage of low-carbon materials procurement was 15.6%, with an achievement rate of 84.3%.