Sustainability

Supplier Management

 

We value our relationship with suppliers for offering quality products and services to consumers. Chunghwa Telecom’s suppliers can be divided into three categories: property, labor and engineering. We make enormous purchases from an extensive number of suppliers, from networking equipment, data equipment, cables, marketing design, to waste disposal services.

This means that we possess great influence to convince suppliers into supporting our social responsibilities. Chunghwa Telecom utilizes four approaches, namely: contractual terms, questionnaire surveys, Supplier CSR Interchange Meeting, and on-site audits, to raise suppliers’ awareness and understanding towards CSR, as well as the commitments we have made in supply chain management. For suppliers that have just begun to familiarize with the CSR concept, we choose to encourage their participation while at the same time provide them with the proper education and assistance; over time, we hope to engage all suppliers in a win-win relationship.

“Code of Corporate Social Responsibility for Suppliers of Chunghwa Telecom Co., Ltd.” clearly outlines the Company’s expectations in terms of "Business, Ethics, Labor, Environment, Safety and Health.”

The guidelines apply to all suppliers that provide products or services to Chunghwa Telecom or its subsidiaries or joint ventures, and extends to other participants of the supply chain that the supplier is directly or indirectly related to. We hope that suppliers may commit to our values and take more proactive steps toward maintaining a sustainable business relationship.

Supply Chain Spend Analysis

Chunghwa Telecom conducts supplier-oriented expenditure analyses annually, for those procurements’ amount over NT$100,000 in total annually. Analyses criteria include: procurement type, regions and top 10 major procurement categories. Procurements are then processed and bottom prices assigned. In 2016, our procurement amount over TWD$ 49,080 million. We worked with over 6,000 suppliers, which provide considerable contributions towards economic growth and employment stability. 97.92% of total procurements are subjected to expenditure analyses. Among them:

 68.9% are material suppliers, 14.2% are labor suppliers and 16.9% are engineering suppliers.

  Domestic procurements account for 50.6% of total procurements, and will continue to grow gradually in the future.

Critical Suppliers

According to the “Procurement Management Regulations”, volume of procurement over NTD $50 million is a major procurement case that need to be proposed to and evaluated by the Head Office. Suppliers for major procurement cases are those that our company defines as critical suppliers. There were 34 critical suppliers in 2016.

 

 

Creating Win-Win Cooperative Relationships

Over the years, we have continued to jointly growth with our suppliers. We provide incentives for them to work in research and development. Rights to our patented technologies are transferred fairly. In terms of hardware and software, we continue to support telecommunications facilities and testing environments. We provide expansion and open cooperative platforms to achieve profit sharing.

We provide financing through an open platform and assist suppliers to develop.

1. Digital Cloud Rainforest: By our comprehensive cloud service creation environment, a high- capacity cloud platform, we encourage software developers to participate with incentives to establish their results in the applications market. Hence, software developers can focus on the research and development of innovative services and enter market quickly.

2. The Firefly Project: Partnered with the Small and Medium Enterprise Credit Guarantee Fund of Taiwan to establish the “Chunghwa Telecom Firefly (counter guarantee) Project Credit Guarantee.” All first-rate corporations recommended by us can apply for credit guarantee. In the end of 2015, a total of 20 companies had been recommended, and the project was instrumental in obtaining NT$ 278 million.

 

Building Ability

We share resources with suppliers to enhance their R & D capabilities. To mastering future technologies, we also committed to the advance of a friendly environment.

For example, we provide independent verification and validation (IV&V) of products and services to ensure the security and performance of the IT system and services: The testing center of the Chunghwa Telecom Laboratories centralizes and builds testing manpower, platform and equipment, and establishes objective third-party and IV&V procedures. Apart from providing comprehensive IV&V services for major services, the center conducts tests on products from cloud partners, including the TDP (Cloud Modular Green Energy Data Center Development Project) and ACP Cloud Appliance in collaboration with Inventec, Wcloud of Wiwynn, and the Cloud OS (RC5 and SP2) of the Industrial Technology Research Institute.

In addition, we hold the "Sustainable Environment Tour” and visit the Muzha Refuse Incineration Plant, with a total of 31 suppliers (49 supplier representatives).

 

Supplier CSR Status Survey and Audit

Engineering suppliers and suppliers with high sustainable risk would be the top priority for us to audit. In 2016 audits were conducted on 58 route-engineering suppliers, total 100 times, and 10 companies were conducted “third-party audit for suppliers”. Management and employees were interviewed to monitor production quality through onsite audits (announced and unannounced). From 2012, suppliers with procurement of NT$ 5 million or more must agree to abide by the “Chunghwa Telecom Supplier CSR Guidelines” and “Operating Guidelines for Promoting Supplier Implementation of CSR,” and implement supplier CSR surveys to facilitate our supervision of the sustainability risks of suppliers, 197 survey received in 2016. Our definition of high sustainability risk is as follows:

● Economic: Occurrence of business ethics violations due to supplier not having formulated a code of conduct

● Environmental: Supplier has yet to formulate a written environmental policy and has not formally requested that suppliers comply with environmental regulations.

● Social: Company has yet to formulate a written labor policy or health safety policy.

According to our preliminary supplier sustainability assessment plan, suppliers in the equipment and labor category will also be gradually included in the scope of audits to further integrate ESG (environment, social, governance) factors and supplier selection criteria.

ESG Integration

The top five priorities of Chunghwa Telecom's general supply chain management strategy:

  1. Suppliers need to follow labor legislations;
  2. Suppliers need to follow environmental legislations;
  3. Suppliers need to follow safety and health legislations
  4. Suppliers need to execute contract on time and on good quality;
  5. Suppliers need to guarantee compliance with “Social Responsibility Principles for Suppliers” & Execution of “Principles of Corporate Social Responsibility for Suppliers of Chunghwa Telecom”

Chunghwa Telecom realizes the influence of big enterprise on suppliers, and we think it’s also important to let our suppliers understand how they can change the world step by step, that's one of our supply chain strategy: to lead our suppliers and even the industry to grow. Labor and EHS management standard is another important factor of our supply chain strategy, since we think not only Chunghwa Telecom but also our suppliers should treat employees in a good way, and provide them a safe and well working environment. Employee is a key point for sustainable development as you may find this spirit in “Code of CSR for Suppliers of Chunghwa Telecom.”

KPIs and Targets

l   Code of Corporate Social Responsibility for SuppliersCode of Corporate Social Responsibility for Suppliers of Chunghwa Telecom.pdf

l   Directions for the Promotion of the Suppliers’ CSR Implementation: Directions for the Promotion of the Suppliers’ CSR Implementation.pdf

 

We value our relationship with suppliers for offering quality products and services to consumers. Chunghwa Telecom’s suppliers can be divided into three categories: property, labor and engineering. We make enormous purchases from an extensive number of suppliers, from networking equipment, data equipment, cables, marketing design, to waste disposal services.

This means that we possess great influence to convince suppliers into supporting our social responsibilities. Chunghwa Telecom utilizes four approaches, namely: contractual terms, questionnaire surveys, Supplier CSR Interchange Meeting, and on-site audits, to raise suppliers’ awareness and understanding towards CSR, as well as the commitments we have made in supply chain management. For suppliers that have just begun to familiarize with the CSR concept, we choose to encourage their participation while at the same time provide them with the proper education and assistance; over time, we hope to engage all suppliers in a win-win relationship.

“Code of Corporate Social Responsibility for Suppliers of Chunghwa Telecom Co., Ltd.” clearly outlines the Company’s expectations in terms of "Business, Ethics, Labor, Environment, Safety and Health.”

The guidelines apply to all suppliers that provide products or services to Chunghwa Telecom or its subsidiaries or joint ventures, and extends to other participants of the supply chain that the supplier is directly or indirectly related to. We hope that suppliers may commit to our values and take more proactive steps toward maintaining a sustainable business relationship.

Supply Chain Spend Analysis

Chunghwa Telecom conducts supplier-oriented expenditure analyses annually, for those procurements’ amount over NT$100,000 in total annually. Analyses criteria include: procurement type, regions and top 10 major procurement categories. Procurements are then processed and bottom prices assigned. In 2016, our procurement amount over TWD$ 49,080 million. We worked with over 6,000 suppliers, which provide considerable contributions towards economic growth and employment stability. 97.92% of total procurements are subjected to expenditure analyses. Among them:

 68.9% are material suppliers, 14.2% are labor suppliers and 16.9% are engineering suppliers.

  Domestic procurements account for 50.6% of total procurements, and will continue to grow gradually in the future.

Critical Suppliers

According to the “Procurement Management Regulations”, volume of procurement over NTD $50 million is a major procurement case that need to be proposed to and evaluated by the Head Office. Suppliers for major procurement cases are those that our company defines as critical suppliers. There were 34 critical suppliers in 2016.

 

 

Creating Win-Win Cooperative Relationships

Over the years, we have continued to jointly growth with our suppliers. We provide incentives for them to work in research and development. Rights to our patented technologies are transferred fairly. In terms of hardware and software, we continue to support telecommunications facilities and testing environments. We provide expansion and open cooperative platforms to achieve profit sharing.

We provide financing through an open platform and assist suppliers to develop.

1. Digital Cloud Rainforest: By our comprehensive cloud service creation environment, a high- capacity cloud platform, we encourage software developers to participate with incentives to establish their results in the applications market. Hence, software developers can focus on the research and development of innovative services and enter market quickly.

2. The Firefly Project: Partnered with the Small and Medium Enterprise Credit Guarantee Fund of Taiwan to establish the “Chunghwa Telecom Firefly (counter guarantee) Project Credit Guarantee.” All first-rate corporations recommended by us can apply for credit guarantee. In the end of 2015, a total of 20 companies had been recommended, and the project was instrumental in obtaining NT$ 278 million.

 

Building Ability

We share resources with suppliers to enhance their R & D capabilities. To mastering future technologies, we also committed to the advance of a friendly environment.

For example, we provide independent verification and validation (IV&V) of products and services to ensure the security and performance of the IT system and services: The testing center of the Chunghwa Telecom Laboratories centralizes and builds testing manpower, platform and equipment, and establishes objective third-party and IV&V procedures. Apart from providing comprehensive IV&V services for major services, the center conducts tests on products from cloud partners, including the TDP (Cloud Modular Green Energy Data Center Development Project) and ACP Cloud Appliance in collaboration with Inventec, Wcloud of Wiwynn, and the Cloud OS (RC5 and SP2) of the Industrial Technology Research Institute.

In addition, we hold the "Sustainable Environment Tour” and visit the Muzha Refuse Incineration Plant, with a total of 31 suppliers (49 supplier representatives).

 

Supplier CSR Status Survey and Audit

Engineering suppliers and suppliers with high sustainable risk would be the top priority for us to audit. In 2016 audits were conducted on 58 route-engineering suppliers, total 100 times, and 10 companies were conducted “third-party audit for suppliers”. Management and employees were interviewed to monitor production quality through onsite audits (announced and unannounced). From 2012, suppliers with procurement of NT$ 5 million or more must agree to abide by the “Chunghwa Telecom Supplier CSR Guidelines” and “Operating Guidelines for Promoting Supplier Implementation of CSR,” and implement supplier CSR surveys to facilitate our supervision of the sustainability risks of suppliers, 197 survey received in 2016. Our definition of high sustainability risk is as follows:

● Economic: Occurrence of business ethics violations due to supplier not having formulated a code of conduct

● Environmental: Supplier has yet to formulate a written environmental policy and has not formally requested that suppliers comply with environmental regulations.

● Social: Company has yet to formulate a written labor policy or health safety policy.

According to our preliminary supplier sustainability assessment plan, suppliers in the equipment and labor category will also be gradually included in the scope of audits to further integrate ESG (environment, social, governance) factors and supplier selection criteria.

ESG Integration

The top five priorities of Chunghwa Telecom's general supply chain management strategy:

  1. Suppliers need to follow labor legislations;
  2. Suppliers need to follow environmental legislations;
  3. Suppliers need to follow safety and health legislations
  4. Suppliers need to execute contract on time and on good quality;
  5. Suppliers need to guarantee compliance with “Social Responsibility Principles for Suppliers” & Execution of “Principles of Corporate Social Responsibility for Suppliers of Chunghwa Telecom”

Chunghwa Telecom realizes the influence of big enterprise on suppliers, and we think it’s also important to let our suppliers understand how they can change the world step by step, that's one of our supply chain strategy: to lead our suppliers and even the industry to grow. Labor and EHS management standard is another important factor of our supply chain strategy, since we think not only Chunghwa Telecom but also our suppliers should treat employees in a good way, and provide them a safe and well working environment. Employee is a key point for sustainable development as you may find this spirit in “Code of CSR for Suppliers of Chunghwa Telecom.”

KPIs and Targets

l   Code of Corporate Social Responsibility for SuppliersCode of Corporate Social Responsibility for Suppliers of Chunghwa Telecom.pdf

l   Directions for the Promotion of the Suppliers’ CSR Implementation: Directions for the Promotion of the Suppliers’ CSR Implementation.pdf