Supply Chain Management

CTCI's Value Chain

The operation core of CTCI is EPC turnkey engineering service. Its customers include high-tech, petroleum refining, petrochemical, chemical, natural gas, electricity, transportation, steel, environmental engineering and other industries. In the process of providing services, we need to understand the needs of customers, and at the same time have a high level of professionalism in all materials, equipment supplies, construction standards and specifications, etc., and meet the goals in terms of quality and construction progress, so that projects can be completed on schedule and in quality. We combine the needs of customers in the upstream of the value chain, the professional services of CTCI, and the third parties in the downstream of the value chain to form a complete value chain and provide customers with comprehensive services.

Suppliers Overview

The Company's customers are located all over the world, and the industry difference of customers is great, so the source of suppliers is relatively complicated. In order to efficiently oversee our extensive and intricate supply chain, we classify suppliers into the following six categories: service providers, equipment, instrumentation, piping, electrical, and others. An additional classification is established according to transaction amounts, whereby the tier 1 suppliers are defined as the top 95% by cumulative annual transaction amounts. Moreover, suppliers whose annual transaction volumes surpass $3 million USD or who are deemed high-riskNote1 are categorized as significant suppliers in tier 1, thereby requiring heightened managerial scrutiny. To mitigate risks in the overall supply chainNote2, we also manage suppliers who are not classified as significant suppliers in tier 1. We utilize the significant suppliers in tier 1 to autonomously manage the sustainability risks of their suppliers. If a high-risk is identified, we initiate on-site assessment for significant suppliers in non-tier 1.
　
Note1: Suppliers that have passed the Self-Assessment Questionnaire (SAQ) and identified one of the economic, environmental, or social risk factors and have not obtained the ISO 14001 and ISO 45001 system verification certificates.
Note2: Suppliers of significant suppliers in tier 1, among which are the top five suppliers by transaction amount.

Supply Chain Sustainable Development Policy

CTCI attaches great importance to the partnership with suppliers, and expects suppliers to gradually move towards sustainable development. Therefore, we have formulated a supply chain sustainable development policy as a direction for suppliers to follow, not only to cover basic construction safety, but also integrity management, employee rights, climate, and ecological actions, etc., and encourage the supply chain to move toward the goal of sustainability.

Sustainability Standards

In order for suppliers to align with the CTCI in the pursuit of sustainable development, the Group has established the " CTCI Vendor Code of Conduct " and the " Vendor’s Commitments to Corporate Sustainable Management and Net Zero " with reference to the international sustainability trends and related initiatives and requirements. The standards and the commitments apply to all suppliers (including new suppliers) and their subsidiaries, affiliates and contractors, as well as suppliers of goods or services to the CTCI, with respect to labor, environment, business ethics, safety and health, and management systems All aspects are regulated. Through the Code, we hope that our suppliers will be able to convey the relevant requirements of sustainability to their suppliers, keep track of their compliance status, and work together to promote the sustainable development of the industry chain. By the end of 2023, all suppliers of CTCI have signed the agreement. In 2022, in response to global climate issues, responding to biodiversity and achieving the net zero target, the "Corporate Sustainable Operation Commitment" was revised as the "Corporate Sustainability and Net Zero Commitment." Greenhouse gas emissions, and assess the impact on biodiversity to reduce related risks. By the end of 2023, 3,042 new suppliers have signed the commitment, with a signing rate of 100%.

Sustainability Risk Investigation

After all supplier registration information, we proactively review the basic information and assess the risk status, including business license, tax payment certificate, company profile, project performance, quality and safety, health and environmental certification, and sustainability factors (human rights, environment, and business governance, etc.) , we first visit factories in specific regions (such as China and India) based on the geographical location and procurement category to understand and grasp the potential risks of each supplier.
　
To assess the sustainability risk situation of suppliers and the implementation of their sustainability practices, CTCI has established a two-stage supplier risk assessment. By actively conducting investigations and distributing sustainability risk self-assessment questionnaires, CTCI identifies potential risks among suppliers. Further audits and guidance for improvement are then carried out to reduce supplier risks and enhance their ability to respond to risks.

Results of Supplier Assessment

Through SAQ surveys, suppliers with potential economic, environmental, or social risk factors who have not obtained ISO 14001 and ISO 45001 management system certifications are identified as high-risk suppliers. In 2023, a total of three high-risk suppliers were identified. On-site assessments and counseling were conducted for these high-risk suppliers during the current year to ensure that risks are effectively controlled and mitigated. For these high-risk suppliers, CTCI has proposed the following response measures to assist them in making improvements.

Reward and Elimination Mechanism

To ensure the stability and reliability of the supply chain, CTCI has established a reward mechanism, which includes preferential selection of suppliers, public recognition, and disclosure. During the bidding stage, when there are two or more suppliers with similar prices, we prioritize those with outstanding sustainability performance through discussions. Suppliers with excellent sustainability performance are also publicly recognized at supplier conferences as role models.
　
Regarding the elimination mechanism, we suspend suppliers who have engaged in bribery, abandoned bids, colluded, or made threats, and cease transactions with them. High-risk suppliers undergo on-site assessments and counseling to ensure that their risks are effectively controlled and reduced. If a supplier fails to rectify deficiencies and remains high-risk for two consecutive years, we reduce procurement amounts and suspend inquiries until they provide evidence of improvement. In 2023, no suppliers were eliminated.

Capacity Building

CTCI Supplier Meeting and Benchmark Suppliers Sharing

CTCI holds a supplier conference every two years and invites domestic and foreign suppliers to participate. The most recent one was held in March 2023 with a total of 125 participants from 8 countries and 76 suppliers (63 domestic and 13 foreign), which recognized 31 outstanding vendors based on their work types and category rankings. In response to CTCI's SBTi net zero goal, the theme of this year's supplier conference was "Net Zero cooperation, Win-win hand in hand". During the conference, the sustainable supply chain management policies were promoted and the "Supplier Alliance for Net Zero Emission" was established, suppliers are invited to join the alliance and sign the declaration to work together for the reduction target. By the end of 2023, 172 suppliers have responded.
　
The conference also invited benchmark suppliers to share their plans and experiences in sustainability and achieving net zero. Through the Supplier Meeting, we aim to expand ESG benefits and starting from 2024, we plan to categorize suppliers based on their scale and phase, requiring them to reduce greenhouse gas emissions. We hope to collaboratively create a brighter future of sustainable business operations.

Sustainable Engineering Forum and Environmental Action

By collaborating with the value chain to generate sustainable influence and address the sustainability trend, CTCI organized a Sustainable Engineering Forum in December 2023. The forum featured practical insights shared by Group Chairman John T. Yu, along with scholars and experts in engineering-related fields, covering topics such as COP 28 trends and ESG lectures. Breakout discussions were held on three subtopics: "Net Zero EPC, Resource Circularity, and Social Impact." Participants from CTCI, clients, and suppliers shared practical experiences and engaged in discussions to enhance communication and future cooperation. A total of 17 individuals from 12 suppliers were in attendance. In addition, the online live broadcast was accessible to a greater number of supply chain partners, enabling an approximate attendance of 400 individuals in the exchange.

CTCI uses self-assessment questionnaire to survey the potential economic, environmental, and social risks faced by our suppliers, and identify high-risk suppliers accordingly. For high-risk suppliers, we carry out on-site audits and provide consultational support the following year to ensure that their risks can be effectively controlled and reduced. According to the investigation results in 2022, there are a 2 suppliers with potential economic risks. The main risks are that they have no risk management unit, and no response plans and procedures in place to ensure sustainable operations. 14 suppliers have potential environmental risks, and the main risks are that they have a history of occupational incidents and fail to provide their safety performance, fail to have job security and hygiene rules in place, and fail to create ISO 14001 and ISO 45001-based mechanisms. 29 suppliers have potential social risks, and the main risks are that they have high percentage of contracted employees, forced labor, poor promotion of healthy and non-discriminative workplace, lack employees' freedom of association and the right to negotiate with their company collectively. CTCI takes the following measures to make sure that such high-risk suppliers understand the importance of the risks, as well as provide them with improvement suggestions.

Capacity building programs

To enhance suppliers' performance on ESG issues, we have engaged suppliers, invested resources and planned projects for more than six months to continuously improve the sustainability of suppliers; in addition to the domestic supply chain, CTCI's subsidiaries are required to promote the sustainability of the global supply chain in accordance with the Group's Supply Chain Sustainability Management policy, and then realize and expand the influence of the supply chain.

Local Procurement

CTCI is committed to contributing to the economic development of the regions where it operates and reducing carbon emissions from transportation, consequently, CTCI gives priority to local procurement in each project. The ratio of procurement as well as outsourcing fluctuates because CTCI's projects are carried out at different regions each year, and the procurement needs of each project vary at different stages. In 2023, CTCI's main projects were concentrated in Taiwan, India, and Malaysia, with procurement percentages of 79.4%, 18.8%, and 0.01%, respectively. Taiwan's local procurement proportion as high as 96.9% in 2023.