VALUE SHARING

Supplier Sustainability Management

FET periodically conducts supplier evaluation and ESG on-site audits annually based on the contents of the self-declaration statement. The results of FET´s annual supplier evaluation are announced on the procurement system's external website and at the annual Supplier Conference. Moreover, outstanding suppliers are recognized and invited to share their experiences at regular procurement meetings.
In order to further improve the supplier auditing mechanism, FET introduced third-party ESG audits for 10 first-tier critical suppliers and conducted a survey based on the “Supplier Sustainability Management Evaluation Framework". The result of this year found that some of the audited companies need to improve their management on "Energy Utilization" and "Waste Management" and promote their "Supplier's communication and performance management" capabilities. Third-party auditors also propose substantial improvement proposals in light of the current situation. FET will regularly track and observe suppliers' improvement situation. All third-party audits of critical suppliers are expected to be completed in 2020 and positive improvement and counseling will be determined according to the results, and supply chain ESG management will be carried out.
Supplier Self-Declaration
FET requires all suppliers to sign the Integrity Management Agreement and the Corporate Social Responsibility Self Declaration within a designated period of time. In 2020, all new 314 suppliers have signed the aforementioned documents. In terms of FET‘s top 200 suppliers, 184 of whom have signed the Corporate Social Responsibility Self Declaration, reaching a response rate of 92%, exceeding the annual objective of 90%, and accounting for 96.8% of the annual total procurements..
Supplier Sustainability Risk Assessment
FET assessed ESG risk among all new suppliers, and a total of 313 suppliers are assessed in 2020 with 32 disqualified suppliers. In this group, 8 suppliers have completed their improvements, with an improvement rate of 33%, while suppliers have been suspended due to inability to improve. FET adopts the sustainability surveys to conduct supplier sustainability risk assessment. Scope of the said assessment includes 19 indicators from five aspects, ranging from sustainable governance, supplier management, environmental management, labor rights, and social impacts. Once the suppliers have completed the survey, FET would verify the authenticity of suppliers‘ data through document review. A total of 302 assessments were completed in 2020 which accounted for 94% of the annual purchases. 10 high-risk suppliers have been identified this year. Risks are mostly centered around confidentiality agreement and protection of intellectual property rights, 4 sales suppliers, 4 customer equipment suppliers, and 2 facilities suppliers were classified high-risk supplers. FET has established relevant improvement plans and continues to track relevant improvement progress for the high risk suppliers. As of January 2021, 9 suppliers have presented their improvements, which have been confirmed by FET to have met their designated progress. The improvement rate is 90%, and suppliers failed to improve have been suspended until implementing relevant measures. The boundaries of ESG risk assessment will be expanded in 2021, and FET is projected to assess more than 330 suppliers. FET Telecom implemented ESG risk assessment into procurement system for bidding vendors, which apply to the tenders above 15 million. In 2020, 144 tenders were filtered by the new system, which accounted for 86.2% of annual procurement expenditure. It will fully implement for all types of suppliers in 2021, and build tracking table to strengthen monthly management.
Supplier Assessment Result
FET conducts routine supplier assessment and audit in each year. ESG assessment results will comprise of 25% weight toward all suppliers that rank among top 30% of their category in terms of procurement expenditure. Suppliers that score 5% lower than that of the previous year, and less than 70 points on the annual assessment, will be listed as requiring priority guidance. They need to carry out an improvement plan and require a second assessment. In 2020, 184 suppliers were assessed, accounting for 95% of total procurement expenditure. The assessment results were published at the external procurement system website and Supplier general meeting.
Supplier ESG Onsite Audit
Besides the routine annual inspections, since the beginning of 2016, FET also arranges ESG onsite audit to ensure that suppliers are fulfilling their commitments to sustainable development during day-to-day operations. The method of such audits includes FET‘s in-house audit and audits from third-party experts. The number of suppliers subjected to in-house audit and third-party audits in 2020 were 39 and 30 suppliers respectively, accounting for 70% of all first-tier critical suppliers. In terms of in-house audits, FET has completed onsite audits for 39 suppliers in 2020, and 16 of which scored 90 points or more, 19 scored between 70 to 89 points, and 1 suppliers with scores between 60 to 69 points. 3 suppliers with scores under 60 have been requested to improve the management about laber rights and environmental policies.