Sustainable Supply Chain

Supplier Selection Mechanism

Issue Date：2023/06/29

Supplier Selection Mechanism

Chunghwa Telecom is the first telecom operator in Taiwan to promote “sustainable supply chain management” and attaches great importance to suppliers’ sustainability implementation and relevant risks. In the selection of qualified suppliers, we have instituted a systematic selection process. Aside from the conventional considerations such as quality, price, and services, we also refer to the Responsible Business Alliance Code of Conduct (RBA CoC) to consider the performance of suppliers in terms of ESG (Environmental, Social, and Governance). Besides, business relevance as well as country-, industry-, and product-specific risks are taken into account as a whole for the selection of qualified suppliers.

Aspects and Risks in Consideration for CHT Supplier Selection Mechanism

Aspect/Risk	Description
Business Relevance Principle	Annual transaction amount totaled NT$50 million or more Irreplaceable products or services Possessing technological leadership or holding critical parts or components
Environmental Principle	Including but not limited to air pollution, wastewater, wastes, toxic substance management, energy use, and greenhouse gas emissions
Social Principle	Including but not limited to human rights and labor rights
Governance Principle	Including but not limited to anti-corruption and bribery
Country-specific Risk	As an operator of international critical infrastructure, CHT bans completely the procurement of ICT products from countries and enterprises with high information security risks on the ground of information security.
Industry-specific Risk	On the basis of the attributes of procurement categories, the risks with suppliers prone to rendering negative environmental, social, and corporate governance impacts are identified, over which the management is enhanced.
Product-specific Risk	In line with the supply chain structures of different commodities, the potential negative risks of suppliers are identified for enhanced management, including but not limited to negative risks like use of conflict minerals/raw materials and forced labor.

CHT Suppliers Table

Category	Description		Number of Suppliers	Ratio in Total Procurement Amount (%)
Tier-1 supplier	Enterprise that directly supplies products or services to Chunghwa Telecom with an annual procurement amount > NT$100,000		1,915	98.98
Significant Tier-1 supplier	Quantitative Criteria	Enterprise that directly supplies products or services to Chunghwa Telecom with an annual procurement amount ≥ NT$50 million	192	82
Significant Tier-1 supplier	Qualitative Criteria	Limited qualification, or specific and exclusive equipment binding as the criteria A “Critical Component Supplier” is the “upstream” supplier to a Critical Supplier that impacts the Critical Supplier’s delivery of products/services to Chunghwa Telecom if it is unable to ship normally. Irreplaceability: (1).Exclusive right owner, manufacturer, or supplier (2).Original supplier designated out of the concern of compatibility or interoperability for the following maintenance, provision of parts/components, replacement, or expansion of equipment (3).Supplier of research, experiment, or development of subject matter that is a prototype, made or supplied for the first time (4).Brand or supplier of commercial resale, lease or designated by proprietor out of business needs Relevant ESG Risks: (1).Suppliers, who have violated regulatory compliance, pose potential ESG risks. (2).Suppliers with specific risk factors related to national, industry, or product-specific risks.	192	82
Significant non Tier-1 supplier	Qualitative Criteria	The upstream/downstream supplier for a Critical Tier-1 Supplier that supplies product/service to CHT tracked to determine if the products/services it directly supply are specific, exclusive, limited in qualification, or important equipment binding	23	-
Total number of significant suppliers (Tier-1 & non Tier-1)			215	82

Note：significant supplier：1. Significant business relevance to the company and 2. having substantial risks of negative ESG impacts are employed as the criteria for determination at Chunghwa Telecom.123

Chunghwa Telecom Guidelines for Facilitating Suppliers’ Implementation of Sustainable Development.pdf