Sustainable Supply Chain Management
HIWIN’s Supply Chain
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 resource management efficiency, we focus on raw material suppliers which has regular collaboration with us. Those with a certain annual purchase amount or above and have continuous transactions with us will be regarded as first-tier suppliers. Afterwards, we manage the supplier’s environmental, social, and governance performance according to the industry and business attributes. To effectively control supply chain risk, we list suppliers with annual procurement amounts reaching a certain threshold and suppliers involved in significant incidents or legal violations as suppliers requiring a key focus, enhancing guidance and control.
HIWIN has expanded sustainable risk management beyond Tier-1 suppliers to mitigate the supply chain’s overall risks continuously. In 2023, we obtained information on seven non-Tier-1 suppliers and conducted preliminary risk assessments based on their geographical locations, the types of materials they supply, incident records, and potential negative impacts. HIWIN will continue to monitor these suppliers’ status and implement more proactive risk control measures.
Sustainable Supply Chain Management
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. This is to provide our customers with continuous, responsible, and quality services. For relevant information, please refer to ESG Committee Structure and “Supplier Management Policy.”
② Supplier code of conduct
HIWIN is committed to enhancing the sustainable development of the precision machinery industry by integrating ESG issues into its sustainability management. We aim to reduce environmental impacts, external costs and risks, and we actively advocate for suppliers’waste and carbon reduction targets to mitigate the overall industry’s impact on climate change and resource depletion. In 2023, we continued to use the two strategies, “enhancing sustainable risk management” and “promoting green and low-carbon supply chain,” as our guidelines for supply chain management. We have revised the “HIWIN Supplier Code of Conduct” and will continue to require suppliers to comply with this Code. Suppliers must also convey the Code to lower-tier suppliers and monitor compliance. This approach aims to foster safe working environments, ensure dignity in labor relations, ethical operations, and comprehensive environmental protection measures, heading towards continuous reduction of operational disruption risks. In 2023, over 94% of key suppliers signed and returned the “ Supplier Code of Conduct,” totaling 149 suppliers. We plan to achieve a 100% signature and return rate from tier-1 suppliers by 2024.
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.
• Audit process
• Supplier screening criteria
• Audit results
(1) 2023 Key-focus suppliers at HIWIN Headquarters.
(2) We refer to significant incident records to determine risks. In 2023, we evaluated the environmental and social impact of 157 key-focus suppliers. Among them, 3 suppliers had violations in the Environmental aspects and 1 in the Social aspect. We will continue to follow up and audit these suppliers, requiring them to submit corrective plans and conducting on-site audits to ensure improvement. We plan to establish an elimination mechanism in 2024.
⑤ Sustainable supply chain seed training
To raise awareness and enhance procurement personnel’s sustainability capability, we conduct systematic training that conveys our annual targets and critical projects to suppliers, ensuring that procurement personnel are able to effectively communicate supply chain policies and strategies in their routine procurement activities. Through training and interactive activities, we built a platform for procurement personnel and suppliers, which fosters a corporate culture of sustainable development. In 2023, we held 24 training sessions for procurement personnel, totaling 48 hours, with 16 participants. The training topics included the circular economy, Code of Conduct policies, conflict minerals policies, and the implementation outcomes of sustainable management goals.
⑥ Sustainable supply chain training program
HIWIN believes that enhancing suppliers’ sustainability awareness and capabilities is critical to ensuring the sustainable development of the supply chain. By disseminating sustainability concepts, securing government resources, implementing capability-building projects, organizing ESG workshops, and providing systematic training, we provide suppliers with relevant resources and information that strengthen our partnership. We can enhance our capabilities in responding to risks with the suppliers. In 2023, HIWIN proactively organized sustainability training with a total of 134 suppliers and 232 participants.
Reducing Environmental Impacts
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 2023 was 100%.
② Sustainability capacity building plan
HIWIN assesses the product attributes and supplier capabilities during the supplier screening process. In 2022, HIWIN collaborated with 7 suppliers of raw plastic raw and steel factories to develop a recycling program, which turns scrap materials into raw materials again to achieve a PIR circular economy. We aim to reduce overall Scope 3 emissions and lower relevant costs, achieving circularity and emission reduction.
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 2023, 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 set targets for energy conservation, water conservation, waste reduction, and carbon reduction and has counseled suppliers to take these efforts seriously. In 2023, we audited the suppliers’ energy-saving efforts, introduced energy-saving equipment to 4 suppliers, evaluated the installation of solar panels at 5 suppliers, and conducted carbon audits for 4 suppliers.
⑤ Conflict minerals procurement management policy
HIWIN supports the procurement of conflict-free materials and requires suppliers to procure non-conflict materials. In 2023, HIWIN required suppliers of products containing tantalum, tin, gold, and tungsten to follow the responsible mineral procurement policy and sign the responsible minerals declaration. More than 85% of the Tier-1 keyfocus suppliers, totaling 135 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 CO2emissions in manufacturing and transportation, HIWIN is committed to building a green supply chain through the implementation of a local procurement strategy.
⑦ 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.
⑧ 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 2023, the percentage of low-carbon materials procurement was 15.4%, with an achievement rate of 83.2%.