CSRC's suppliers are mainly divided into three types: upstream suppliers, downstream suppliers, and other suppliers. Upstream suppliers include raw materials, equipment spare parts, and packaging materials. Downstream suppliers include raw material transportation, finished product transportation, and waste transportation. Other suppliers include contractors for construction and turnkey projects.

CSRC adheres to the philosophy that "ESG is a corporate responsibility, not a cost to the enterprise." To ensure that all risks faced by workers and employees (including contract workers) in the supply chain are adequately understood and managed, CSRC completed the signing of the Supplier Corporate Social Responsibility Code of Conduct and the Integrity Clause with all suppliers in Greater China in 2023. The Group will gradually require all suppliers worldwide to achieve 100% signing by 2030. According to the 2023 Global Sustainable Supply Chain Management Report released by the Carbon Disclosure Project (CDP) and the Science Based Targets initiative (SBTi), increased transparency, reduction of Scope 3 emissions, and deepening of supply chain partnerships are significant trends. CSRC has established a comprehensive data management system, tracking every step from raw materials to finished products, and has applied for the EcoVadis international sustainability supply chain assessment. The goal is to create sustainable value and a foundation of trust for upstream and downstream suppliers, the environment, and its own operations.

CSRC Supplier Corporate Social Responsibility Code of Conduct

CSRC Supplier Corporate Social Responsibility Commitment

For the sustainable operation of the enterprise, the supplier shall undertake to comply with the following terms:

1. Continuously pay attention to environmental protection, energy saving and carbon reduction, prioritize local procurement, improve energy resource use efficiency, comply with environmental protection laws and regulations, and create a sustainable environment together
2. Comply with relevant waste, waste gas and wastewater management standards. Regarding disposal and treatment of any waste, pollutants and other environmental hazards, all should comply with statutory or international convention requirements
3. Do not employ child labor and protect basic human rights when hiring employees (including but not limited to labor rights, freedom of association, International Labour Organization conventions, etc.). Give reasonable remuneration and provide legal working conditions
4. Uphold business ethics and comply with anti-money laundering and anti-monopoly as well as non-disruptive business competition when running a business
5. Should develop a sustainable procurement policy for its suppliers, and the content of the policy should at least cover the supplier policy issued by the Group

CSRC selects high-quality suppliers through a supplier selection mechanism. Before selection, a supplier will first be required to complete a self-assessment report that includes items such as a company profile, Ministry of Economic Affairs company business registration information, environmental photos of the company's factory, equipment list, R&D technology quality assurance environment, proof of performance (purchase orders, input invoices), and entity finances (balance sheet, income statement). Afterwards, we conduct on-site investigations and visits to the vendors selected based on the self-assessment reports. We assess financial soundness and incorporate social and environmental performance into the criteria for selecting new suppliers. If there are any bad records or major violations related to social or environmental issues (e.g., violations of environmental and social regulations, corporate governance issues such as corruption), we will not cooperate with the supplier. This ensures the effectiveness of our sustainable supplier management. Only suppliers who pass the audit can be listed as qualified suppliers. In 2023, CSRC had 389 new suppliers (143 in Greater China, 246 in India; data for the U.S. region is not yet compiled). Among them, 100% of new suppliers in Greater China met social and environmental selection criteria; social and environmental selection criteria are expected to be introduced for nonGreater China regions in the future.

Diversity Policy

CSRC is committed to creating an environment that actively embraces Diversity, Equity, and Inclusion (DEI). In the U.S. region, the Group has already advocated for supplier diversity through the establishment of diversity policies, aiming to promote economic growth in all communities, cultivate a more innovative supplier base, and reflect the diverse markets we serve. DEI is prioritized and integrated into our procurement practices, with a focus on enterprises owned by women, minorities, and disadvantaged groups. In other regions, such as the Anshan plant in Greater China, 15.45% of supplier leadership positions were held by women in 2023.

Number of new suppliers and screening ratio for 2023

CSRC implements a graded audit once a year for suppliers with transactions to establish sustainable supply chain management. Suppliers are classified into four levels (A, B, C, and D) based on the evaluation score. If a supplier is rated as C-level for two consecutive years, we will conduct a field visit or ask the supplier to visit our facilities for interviews to create written records and assist in improving nonconforming items. Suppliers rated as D-level will be identified for elimination and lose bidding rights.

Starting from 2021, CSRC has conducted on-site audits of the top ten suppliers with the largest purchase amounts on a quarterly basis. The audit includes whether they have signed our supplier code of conduct, obtained relevant certification systems, and practiced environmental or social corporate responsibility. Additionally, from the second half of 2021, the performance appraisal of purchasers has included whether new suppliers have signed ESG clauses. If they do not complete this requirement, the related research report cannot be finalized, and the corresponding performance score cannot be obtained. In 2023, the re-signing rate for ESG clauses among new suppliers in Greater China reached 100%

Audit evaluation items and score leve

A-grade and B-grade suppliers in the Greater China region accounted for 96.96% in 2023, attributable to strengthened supplier management systems in 2023, which will continue to be strictly enforced. CSRC encourages ongoing improvements among suppliers. The proportion of C-grade and D-grade suppliers was 3.04%. For C-grade suppliers, CSRC will request improvement plans and conduct on-site audits with demand units. Cooperation with D-grade suppliers has already ceased. Non-Greater China regions (such as the CCET plant in India, CCIPL plant in India, CCC Ponca plant in the USA, CCC Sunray plant in the USA) did not collect supplier evaluation data in 2023. CSRC plans to gradually assist plants without supplier evaluations to implement them and formulate improvement plans based on evaluation results.

On-site audits of major suppliers

CSRC is committed to sustainable supply chain management. We ensure compliance with ESG standards through rigorous on-site audits of major suppliers. The audit covers environmental management, social responsibility and corporate governance, with the goal of improving the sustainability performance of suppliers, reducing the risk of ESG violations in the supply chain, and promoting transparency in cooperation. The audit process includes planning and preparation, on-site inspections, data analysis, audit reports, and follow-up on improvements. This process enhances supply chain transparency and stability, strengthens market competitiveness, and meets customer and investor expectations for CSRC's sustainable development.

◆ Occupational Safety and Health Management Measures for Contractors

To ensure the safety of contractors or suppliers' work, all project contracts have clearly defined occupational safety regulations. They adhere to the labor safety and health regulations of the country where the plant is located, while also minimizing personnel injuries and fatalities during construction or operations. During the construction process, factory auditors will randomly check the contents of the operation from time to time. If a violation of industrial safety regulations is found, the contractor can be directly requested to stop work. The construction task can be continued after the relevant situation improves.

◆ Environmental Management Measures for Contractors

CSRC and contractors have reached agreement on issues related to environmental pollution. We require contractors to comply with our environmental policy, enhancing environmental cleaning and mobile washing of vehicle tires during engineering or work construction, adhering to environmental protection regulations to avoid any environmental pollution behavior. CSRC will also dispatch supervisors to inspect whether contractors are indeed complying with the regulations. In 2023, no substandard cases were found during the contractor's construction period in any region. In addition, when the contractor generates general industrial waste, hazardous industrial waste, and resource waste during construction, the supervisor of the project or work organizing department must be contacted to fill out the relevant storage and removal forms. Afterward, the contractor must go to the storage management department that manages various types of waste to handle storage or removal operations; it cannot be thrown away at will.

◆ Contractor education and training

We regularly hold contractor education and training to ensure that the contractor can understand the construction specifications and safety protections. Training content includes the contractor’s entry process description, limited space operation specifications, hot work specification, hanging work specification, information on waste disposal, on-site code violations, information on workplace accidents, etc. For subcontractor education and training, please refer to Chapter 7 on Occupational Health and Safety.