Sustainable Supply Chain Management

HIWIN considers enhancing the sustainability of the precision motion technology industry to be a crucial aspect of ESG. To minimize environmental impact and external costs, HIWIN encourages suppliers to establish targets for waste and carbon reduction, as well as mitigate the industry’s impact on climate change and resource depletion.

A sustainable supply chain helps reduce the risk of operational disruptions. Based on the ” HIWIN Supplier Code of Conduct, ” suppliers are obligated and supported in improving labor rights, safety and health, environmental protection, business ethics, and management system performance to enhance core management capabilities.

HIWIN is dedicated to creating an environmentally and socially responsible business model, aiming to make a sustainable impact as a leader in the precision motion technology industry. In 2022, in response to the growing trend of supply chain sustainability and previous management experience, HIWIN has reorganized and consolidated the sustainable management guidelines for suppliers into two strategic directions: “ enhancing sustainable risk management ” and ” promoting a green and low-carbon supply chain. ” We have developed the ” HIWIN Supplier Code of Conduct, ” which will continue to serve as the foundation for supplier actions, promoting a safe working environment, dignified labor relations, ethical operations, environmental protection measures, and ongoing risk reduction.

Furthermore, in alignment with our mission of green manufacturing, HIWIN aims to reduce the environmental impact of the supply chain. We have established HIWIN’s net zero roadmap and advocate for the implementation of ESG practices throughout the supply chain. We will provide relevant resources to suppliers to support their carbon reduction efforts with scientific data, alleviate the social impacts of climate change, and serve as an anchor for the sustainable development of the supply chain.

Supplier Sustainable Management Framework

Enhance Sustainable Risk Management

(1) Refine Sustainability Management Actions

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 the ” 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.

Four Major Implementation Guidelines of Sustainable Supply Chain Management

Three-stage Supply Chain Risk Assessment

Responsible Minerals Procurement

HIWIN supports the procurement of conflict-free raw materials to uphold social and ethical standards of humanism and human dignity. Suppliers are obligated to procure conflict-free raw materials. In 2022, HIWIN mandated that suppliers whose products contain tantalum, tin, gold, and tungsten adhere to the responsible minerals procurement policy and sign the corresponding statement. A total of 73 suppliers were required to sign, and 66 suppliers, representing a signing rate of 90.4%, complied with this requirement.

Critical High Risk Supplier Evaluation Process

HIWIN Supplier Matrix and Hierarchical Management Measures

Strengthening Supply Chain Resilience
Through effective leadership and clear expectations, HIWIN collaborates with its suppliers to achieve ongoing improvement. Together, we strive to create a workplace environment that values dignity and ethical practices. Additionally, we offer guidance to our suppliers in expanding production capacity, enhancing manufacturing processes and quality, implementing occupational safety and health management, and establishing a reliable supply chain. We achieve this through various audit and counseling methods, ensuring rapid, close, and comprehensive cooperation.

Enhancement in Supply Chain Environmental Safety and Health Capabilities

In 2022, HIWIN successfully implemented sustainable management of environmental safety and health in the supply chain by following a four-step process. This process included establishing standards and systems, conducting audits and tracking improvements, providing counseling and training, and re-counseling suppliers. A total of 127 suppliers completed self-assessment questionnaires, achieving a commendable rate of 94.1%.

Four Steps of Sustainable Environmental Safety and Health Management in the Supply Chain

Process Quality Guidance

HIWIN strives for excellent and consistent product quality to enhance the value customers gain from using our products and maintain our leading position in the market. To achieve this, we place significant emphasis on the quality standards of our suppliers. We conduct monthly evaluations of our suppliers’ quality performance, requesting them to present improvement strategies and offering guidance tailored to their specific circumstances. Starting in 2023, we will provide on-site counseling to three suppliers each month, aiming to enhance the quality of their products.

Promote Green and Low Carbon Supply Chain

(1) Continuously Minimize Environmental Impact

HIWIN is dedicated to addressing the effects of climate change and resource depletion. We are actively reviewing our own carbon emissions and establishing goals for conserving electricity and water, reducing waste, and lowering carbon emissions. Additionally, we are providing guidance to our suppliers to help them address these issues. Going forward, we will closely monitor the progress of our suppliers in meeting these targets. We anticipate having comprehensive data on the effectiveness of electricity and water conservation measures implemented by our suppliers by Q4 2023.

(2) Physical Risks

To realize our vision of sustainable development, HIWIN has proactively embraced corporate social responsibility by voluntarily adopting the Task Force on Climate-related Financial Disclosures (TCFD) framework in 2021. In 2022, we have taken further steps by conducting a comprehensive analysis of climate-related physical risks. This analysis has allowed us to identify the potential risks to our own operations and assess their financial implications through monetization analysis. Additionally, we have also evaluated the physical risks faced by our critical suppliers. Based on these findings, we have developed risk adjustment guidelines for our own operations and enhanced the climate resilience of our critical suppliers.

(3) Critical Supplier Physical Risk Identification

According to the UN Intergovernmental Panel on Climate Change’s Sixth Assessment Report (AR6), climate change has resulted in an increase in the frequency of extreme weather events. The changing intensity and pattern of rainfall in future warming scenarios will pose challenges in the form of both droughts and floods. To address the risk of operational disruptions caused by climate change, HIWIN has developed a climate physical risk analysis model that integrates meteorological observations and climate scenario simulation data. This model identifies two physical risk factors: flooding and drought. As a demonstration, HIWIN has applied this model to the top 10 critical suppliers in terms of procurement amount in 2022. This allows for the identification of physical risks and enables the Company to effectively manage the potential risks associated with extreme rainfall in the short, medium, and long term.

Climate Physical Risk Analysis Model

HIWIN selects climate scenarios for analysis, using the IPCC-AR6 low greenhouse gas emissions (SSP1-2.6) as the ideal mitigation scenario, and the high emissions (SSP5-8.5) as the extreme scenario. To assess the likelihood and impact of flooding and drought disasters, HIWIN refers to definitions provided by domestic and foreign organizations. A risk matrix is then used to determine if a site falls within a high-risk area during different periods or circumstances. This matrix serves as the basis for prioritizing the development of adaptation strategies.

Regarding flooding risks, the identification results indicate that most critical suppliers are located in low flood risk areas. Only one critical supplier is situated in a high-risk area under the long-term SSP5-8.5 scenario. HIWIN can review and enhance flood prevention measures for individual suppliers to minimize the risk of equipment damage or operational disruptions, while also helping suppliers build their climate adaptation capacity.

In Taiwan, the duration of drought periods and the severity of scenarios directly impact the level of drought risk. The southwestern part of Taiwan, where half of the suppliers are located, faces a high risk of drought under the long-term SSP5-8.5 scenario. HIWIN will reassess our supply chain management strategy to avoid concentrating water-intensive critical supply chains in high-risk drought areas. Additionally, we will provide guidance to suppliers on implementing water stewardship measures.

(4) Promote Local Supply Chain

HIWIN classifies its suppliers into three main categories: production-related raw materials, non-production-related 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.

(5) 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. In 2022, the overall outcomes of our green procurement efforts reached US$9.79 million, representing 3.7% of the total annual procurement amount.

(6) Promotion Method of Low Carbon Supply Chain

HIWIN has developed a roadmap to achieve net zero emissions. We have also encouraged our supply chain to adopt the ESG concept. In addition, we have secured resources for our suppliers, including applying for participation in a seminar on the carbon footprint practices of suppliers’ products with the Industrial Development Bureau, MOEA. This will help facilitate the calculation of our suppliers’ carbon footprint inventory.

Our diversified sourcing program for raw materials has achieved success in Q4 2022 by developing low-carbon materials. We estimate that the percentage of low-carbon raw materials introduced will reach 18.5% in 2023.