We give priority to suppliers with excellent sustainable development performance in order to prevent or minimise potential environmental and social risks in the Group’s supply chain. In addition to complying with the requirements of the relevant laws and regulations, the Group’s suppliers are required to comply with the Group’s Code of Conduct for corporate social responsibilities (“CSR”) and convey our concept of sustainable development to upstream suppliers. To identify the environmental and social risks along the supply chain, the Company’s subsidiaries have established a complete organizational framework of supply chain management, responsible for resource development, supplier performance appraisal, supplier sustainable development ability evaluation, supplier qualification approval and other related work. In combination with QC 080000 hazardous substance management system standard and relevant requirements of customers, we have formulated a number of supplier management policies such as the Procedures for Management Control of Suppliers (《供应商管理控制程序》), the Code of Managing Suppliers (《供应商管理规范》) and the Control Procedures on Development and Appraisal of Suppliers (《供应商开发和评价控制程序》), etc., so as to establish comprehensive management regulations and operational processes such as supplier introduction, routine management, audit and evaluation, and removal.In addition,we encourage suppliers to participate in CDP ratings and release CSR or ESG reports.

 
To identify environmental and social risks along the supply chain, each subsidiary of the Group conducts a hierarchical management on suppliers according to the importance or the risk level of materials. We has formulated the supplier supervision plan according to the Rules for Annual Audit of Suppliers (《供应商年度审核规划》), and conducts annual audit on the suppliers providing direct components of the products. The audit covers the supplier’s whole production process, including the quality management system, RoHS management standards ,ESG management and other relevant contents. Purchasing practices towards suppliers are continuously reviewed to ensure alignment with the Social Responsibility Agreement and to avoid potential conflicts with ESG requirements;Suppliers are regularly monitored in accordance with the Supplier Monitoring Form; Requiring suppliers that failed to meet the provisions to complete the improvement workwithin three months according to the Supplier’s Deficiency Improvement Schedule (《供应商缺失改进计划表》). We also engage in in-depth cooperation with suppliers to help them address existing issues, enhance product quality, and improve ESG (Environmental, Social, and Governance) management performance.However, the Group has also established a supplier removal mechanism. A supplier will be removed if it has serious quality issues, uses materials that fail to meet the latest environmental protection requirements, has non-compliance in ESG (Environmental, Social, and Governance) management, or other such circumstances, and fails to make effective improvements.

The procedures for the management of suppliers of the Group are as follows:
1. Supplier Development and Screening：On the premise of strictly complying with relevant laws and regulations, the Group conducts a comprehensive assessment of preliminary suppliers from multiple dimensions, including credit status, business relevance, quality control capabilities, environmental and social risk response capabilities, and the integrity of governance systems.Among these, the assessment of Environmental, Social and Governance (ESG) covers the following aspects:The establishment and compliance of the supplier's ESG (Environmental, Social and Governance) standards;The completeness of the supplier's ESG-related work plans, implementation procedures and internal management requirements;The specific measures formulated by the supplier for ESG improvement objectives and the actual results of their implementation.
2. Supplier access: reviewed by relevant responsible person, include the supplier in the list of qualified suppliers or initiate one-year access inspections, and suppliers shall sign the Basic Procurement Agreement (《基本采购协议》), Quality Assurance Agreement (《质量保证协议》) ,Agreement on Social Responsibilities(社会责任协议) and other documents.Covering：Human Rights and Labor（Forced labor,Child labor,Working conditions,Occupational health and safety,Discrimination and harassment,Freedom of associations and collective bargaining）;Environment(Greenhouse gas emissions and energy consumption,Pollution prevention and waste management,Resource efficiency);Business Ethics(Anti-corruption and conflict of interest,Anti-competitiveness).
3.Supplier Evaluation：The Group formulates an annual evaluation plan combining online and on-site evaluations for the current year, based on the previous year's performance evaluation results of suppliers. The evaluation is conducted in strict accordance with the RBA (Responsible Business Alliance) guidelines, and a comprehensive assessment of suppliers is carried out on a monthly, quarterly, or annual basis from five dimensions: Quality, Cost, Delivery, Service, and Technology (referred to as QCDST).In response to the evaluation results, we will assist suppliers in formulating specific improvement plans, implementing continuous improvement measures, and continuously enhancing cooperation performance. The specific evaluation methods are as follows:(1) On-site evaluation: A joint evaluation team consisting of the Group's purchasing personnel and system auditors will conduct on-site inspections and evaluations at the supplier's production and operation sites.(2) Online evaluation: Suppliers are required to fill out evaluation questionnaires as required and submit relevant supporting materials such as qualification certificates and test reports simultaneously. Subsequently, the Group's purchasing personnel and system auditors will jointly review and evaluate the questionnaire content and supporting materials.