Quanta is a research and manufacturing company for electronic products. Based on customer demands, products are designed or assembled into finished goods and then delivered to designated areas for sale.
The main supply chain consists of electronic or mechanical component suppliers for major products such as notebooks, servers and automobiles. The supply chain is largely composed of domestic and foreign suppliers with advantages in these types of goods. The estimated number of raw material suppliers exceeds 2,000 companies, primarily located in Taiwan, the United States, Japan, South Korea, China, Thailand, Mexico and Europe. Supplier types include original manufacturers, authorized agents, and distributors. Specific industry characteristics of the supply chain include capitalintensive, technology-intensive, and labor-intensive aspects.
Supply chain strategies are primarily based on competitiveness, including price, research and development capabilities, manufacturing capabilities, quality advantages, shipment process management, on-site service, etc. Changes in supplier relationships during the reporting period are normal operational aspects of strategic nature, without any other significant changes due to specific factors.
Management Strategies and Goals
Business transactions involve assessing whether suppliers have a record of impacting the environment and society. If suppliers are found to be involved in policy violations and have a significant impact on the environment and society in the source region, it may be necessary to terminate or dissolve the contract terms.
Alert Policies and Practices
By establishing a composite supply chain and conducting periodic factory visits and audits, timely audits of relevant suppliers are carried out when major occupational safety accidents and environmental issues occur in specific regions or industries. Simultaneously, key suppliers are also required to undergo audits based on the relevant behavior guidelines of the RBA to assess whether their performance on various corporate social responsibility issues may pose risks to the company's operations.
Quality Selection System
Suppliers are important business partners and quality-related stakeholders for Quanta. Their compliance and conformity with environmental practices, labor practices, human rights, social impacts, and local legal and regulatory aspects will directly or indirectly impact Quanta's operational stability, product quality, delivery time, and corporate reputation. Therefore, we have implemented a rigorous set of supplier management guidelines for screening and audit management. The selection of new suppliers emphasizes the importance of environmental compliance, ethical regulations, and green product management, which are indispensable criteria in the evaluation.
Evaluation Categories for Supplier Approval at Quanta
| SECTION | Self Actual % | Quanta Actual % | |
|---|---|---|---|
| A. Generic Quality System (GQS) | 1. Quality System | N/A | N/A |
| 2. Customer Requirement Review | N/A | N/A | |
| 3. Design Control | N/A | N/A | |
| 4. Document Control | N/A | N/A | |
| 5. Sub-Supplier Quality Mgmt | N/A | N/A | |
| 6. Inspection & Testing | N/A | N/A | |
| 7. Calibration | N/A | N/A | |
| 8. Nonconforming Product Control | N/A | N/A | |
| 9. Quality Matrices | N/A | N/A | |
| 10. Environmental and Ethics | N/A | N/A | |
| Average(%) | 0.0% | 0.0% | |
| B. PC | 11. Process Control | 0.0% | 0.0% |
| C. GPM | 12. Green Product Management | 0.0% | 0.0% |
| D. APM | 13. Automotive Product Management | 0.0% | 0.0% |
| Criteria: | |
|---|---|
| Qualified: | GQS ¨R 70, and GPM ¨R 85 & PC ¨R 75 |
| Conditional Qualified | 60 ¨Q GQS < 70, and GPM ¨R 85 & PC ¨R 75 |
| Unacceptable | GQS < 60 or GPM < 85 or PC < 75 or Section Score < 60 |
| Automotive Product Management Criteria: | |
|---|---|
| Qualified | GQS ¨R 70, and GPM ¨R 85 & PC ¨R 75, and APM ¨R 80 |
| Conditional Qualified | 60 ¨Q GQS < 70, and GPM ¨R 85 & PC ¨R 75, and 60 ¨Q APM ¨Q 80 |
| Unacceptable | GQS < 60 or GPM < 85 or PC < 75 or ARM < 60 or Section Score < 60 |
Approval Standards
| Criteria: | |
|---|---|
| Qualified: | GQS ¨R 70, and GPM ¨R 85 & PC ¨R 75 |
| Conditional Qualified | 60 ¨Q GQS < 70, and GPM ¨R 85 & PC ¨R 75 |
| Unacceptable | GQS < 60 or GPM < 85 or PC < 75 or Section Score < 60 |
| Automotive Product Management Criteria: | |
|---|---|
| Qualified | GQS ¨R 70, and GPM ¨R 85 & PC ¨R 75, and APM ¨R 85 |
| Conditional Qualified | 60 ¨Q GQS < 70, and GPM ¨R 85 & PC ¨R 75, and 60 ¨Q APM ¨Q 80 |
| Unacceptable | GQS < 60 or GPM < 85 or PC < 75 or ARM < 60 or Section Score < 60 |
Guidelines and Impact of Evaluation Results Management
The evaluation results are communicated through direct audits, reviews, and indirect two-way participation. Once an audit report is issued with an SCAR (Supplier Corrective Action Report), the supplier is required to respond with relevant improvement plans or outcomes within the specified deadline. If there are evaluations that involve longer time frames for assessing improvements, such as charter modifications or equipment purchases, they will be discussed separately. Actions for overdue responses may include returning items or terminating the cooperative relationship.
Additionally, if a supplier does not pass the approval standards in the audit, the purchasing system will be incapable of placing orders. Through the evaluations, it has been determined that no suppliers employ child labor or engage underage workers in hazardous or high-risk work. No suppliers with forced or compulsory labor risks have been identified. However, if during the audit process a supplier is found to be in violation of labor rights and ethical standards and is unable to improve within the given time frame, they will be rejected and cannot become an approved supplier of Quanta.
Supplier Sustainability Code of Conduct
Quanta firmly believes that the supply chain is also a crucial factor in achieving sustainable goals. Quanta considers it their responsibility to coexist and thrive with their suppliers, excluding those who violate sustainable regulations. Quanta is dedicated to promoting favorable working conditions, upholding human rights, and taking environmental responsibility throughout the supply chain. Quanta aims to collaborate with its partners to contribute to sustainable development.
The Company has 'build up Supplier Sustainability Code of Conduct by referencing international standards such as Quanta's ESG Commitment and Policy, SASB Sustainability Disclosure Standards, Responsible Business Alliance (RBA) Code of Conduct, United Nations Guiding Principles on Business and Human Rights (UNGPs), United Nations Global Compact (UNGC) Ten Principles, and the Universal Declaration of Human Rights (UDHR). Furthermore, regularly assess and audit direct suppliers for risks. If necessary, also assess and audit indirect suppliers for risks. For detailed supplier sustainability guidelines, please visit the official Quanta ESG website.
Proportion of On-site Audits for New Suppliers
Quanta conducts on-site audits for general new suppliers based on environmental, labor rights, ethical standards, and social impact criteria, as well as engaging in two-way participation investigations for other suppliers. As of the end of 2023, the proportion of new suppliers that have undergone on-site audits and two-way participation investigations is 100%. In 2023, the compliance rate of new suppliers undergoing on-site audits under the supplier management guidelines was 100%.
Annual CSR Management
Quanta requires suppliers to fully comply with RBA guidelines and sign a declaration of RBA compliance. To understand the CSR performance of key suppliers, 91 CSR questionnaires were distributed to them. Through their responses, the execution, and potential risks of suppliers in terms of corporate responsibility were confirmed and further tracked.
RBA audit
Quanta conducts CSR risk identification and classification based on its suppliers' geographical location, industry characteristics, and procurement methods annually, according to the decision of the Corporate Governance and Ethical Norms Subcommittee under the Sustainability Development Guideline Committee. As a member of the RBA Responsible Business Alliance, Quanta also uses RBA regulations as a basis for managing suppliers and conducts annual CSR audits of important suppliers.
In 2023, a total of 50 supplier audits were completed, and 31 service providers were audited, with the main shortcomings being working hours, no forced labor, wages, and benefits. Improvement plans have been requested from suppliers, and their progress is being tracked.
Overall, in 2023, the audit results of higher risk suppliers did not reveal the use of child labor or other significant human rights violations.
Forced Labor
During audits and inspections of its suppliers, Quanta continues to pay attention to working hours and the absence of forced labor. Quanta maintains communication with its suppliers and expects them to adhere to its code of conduct. It also conveys that if there are serious human rights violations that cannot be improved, Quanta will stop doing business with those suppliers.
The risk of forced labor often comes from labor dispatch companies and foreign labor intermediaries. To further manage these companies and ensure that dispatched workers receive the same protections as regular employees, each factory signs a "Labor Dispatch Related Agreement" with the labor dispatch company. This agreement outlines the responsibilities and obligations of both parties and ensures that dispatched workers receive the same pay, social welfare benefits, and job environment and safety protections as regular employees. To address problems found during audits of labor dispatch companies and contractors, Quanta continues to investigate the employment and social insurance contributions of employees upon the entry and departure of each employee. Quanta also reduces potential risks by paying salaries and benefits directly to employees.
Furthermore, since foreign migrant workers are hired in plants in Taiwan, as far as recruitment fees paid by migrant workers are concerned, besides stipulating the ¡°Zero Charge Policy¡±, the Company has also devised comprehensive due diligence procedures to ensure that migrant workers coming to Taiwan do not pay any recruitment-related expenses.
Quanta's management measures include on-site inspections at the supplier plant, employee interviews, and written investigations. In addition to monitoring the implementation of non-discrimination and non-forced labor policies, the China factories also require labor dispatch companies to post anti-discrimination posters, and the CSR department collaborates with the trusted group to conduct anti-discrimination investigations on new employees. Through employee interviews, training, and other measures, Quanta ensures that all employees, whether hired directly or through labor dispatch companies, are not discriminated against for reasons unrelated to their work and do not have to pay any recruitment fees.
Supplier Human Rights Due Diligence
Considering the EU "Directive on corporate sustainability due diligence" and the increasing global demand for supply chain human rights management, Quanta plans to revise its original investigation items and establish a due diligence mechanism. This mechanism will be based on the concept of the "Uyghur Forced Labor Prevention Act", allowing for a comprehensive investigation of the human rights management within the supply chain and with suppliers. We regularly conduct due diligence to ensure that our suppliers' operations align with our human rights standards and values. This commitment not only reflects our own values but also aims to minimize the occurrence of human rights violations in our supply chain.
Overview of international trends and customer requirements
For the Democratic Republic of the Congo and its neighboring countries, nongovernmental military groups control the mining, transportation, and trading of minerals such as gold (Au), tantalum (Ta), tungsten (W), tin (Sn), cobalt (Co), mica, and other minerals. These activities have led to social, environmental, and human rights issues in conflict-affected and high-risk areas. The international legislative trend, the investigation of the mineral source by brand customers, and the reporting requirements of smelters are also increasing, including efforts to require suppliers to achieve 100% investigation and for smelters and refiners to be 100% certified through independent third-party auditing.
From the perspective of international industry trends, RMI and customers have clear requirements for due diligence and risk management for two minerals in the supply chain: cobalt and mica.
Responsible Mineral Procurement Policy of Quanta
- Our company recognizes that mining, trading, processing, and exporting gold (Au), tantalum (Ta), tungsten (W), tin (Sn), cobalt (Co), mica, and other minerals in conflict-affected and high-risk areas may pose significant negative impacts and that companies have a duty to respect human rights and not contribute to conflicts. Our company adopts and widely promotes a responsible mineral procurement policy for conflict-affected and high-risk areas and commits to refraining from providing financial support for any activity that could cause social, environmental, and human rights deterioration.
- As a member of RBA/RMI, our company performs due diligence investigations on responsible mineral procurement in accordance with the OECD Due Diligence Guidance for Minerals, RMI frameworks, and customer requirements. We also regularly monitor the RCOI mineral origin information published by RMI to assess related risks in the Democratic Republic of Congo and neighboring countries and/ or other high-risk areas. Our company requires smelters/refiners in the upstream supply chain to actively participate in independent third-party certification programs (RMI/LBMA) and requires suppliers to engage in responsible procurement from smelters/refiners that comply with RMI/LBMA certification. At the same time, we support the continued use of conflict minerals from the Democratic Republic of the Congo and its neighboring countries and/or other high-risk areas that have been certified by independent third-party certification programs so as not to affect or reduce responsible mining operations in these areas.
- Our company continues to support the OECD Due Diligence Guidance for Minerals and RMI strategies and practices for responsible mineral due diligence investigations, using RMI's due diligence investigation report templates and supporting management tools, and designating responsible units to establish effective management programs. We consistently communicate our responsible mineral procurement policies to suppliers, provide responsible mineral procurement training to suppliers, and investigate the implementation of our company's policies by suppliers, taking relevant measures to reduce and/or eliminate risks.
Overview of Quanta's 2023 Due Diligence Investigation
Preparatory Stage
- The company has a large group of suppliers, and to make its responsible mineral sourcing due diligence more efficient, the company has done a lot of preparatory work in the early stages of the investigation, including: identifying the target of the investigation, verifying the contact information of the investigation targets, identifying the internal procurement responsible persons corresponding to the investigated suppliers, and upgrading and optimizing the responsible mineral procurement management system.
- Based on the identification survey conducted by our company from 2021 to 2022, we will identify and supplement new material suppliers that may utilize cobalt and mica in 2023.
Investigation Stage
- The CAMP system sends due diligence investigation system links to suppliers and notifies corresponding internal procurement managers to follow up on investigation progress more efficiently. Suppliers use the latest version of the CMRT published on the RMI website to disclose information on the supply chain of gold (Au), tantalum (Ta), tungsten (W), and tin (Sn) minerals. The group's responsible departments verify and confirm the information disclosed by suppliers based on the company's responsible mineral policy and customer requirements. When risks are identified, they continue to communicate with the suppliers to control and remove the relevant risks, in order to comply with the company's responsible mineral procurement policy and customer requirements. The investigation results are then saved in the CAMP system for at least 5 years.
- In addition to CMRT, our company also uses the CAMP system to send due diligence investigation system links to suppliers for EMRT investigations. At the same time, we notify the corresponding internal procurement responsible person to follow up on the investigation's progress more efficiently. We require suppliers to disclose information on cobalt (Co) and mica minerals using the latest version of the EMRT published on the RMI website. We also save the investigation results in the CAMP system for at least 5 years.
- The CSR department conducts regular checks on the RMI and LBMA official websites to confirm compliant smelters and updates the latest results to the responsible mineral procurement management system for effective management of compliant smelters. Additionally, every quarter, they use the CAMP system to investigate and notify suppliers who are non-compliant or have not responded to CMRT requests.
Supplier Report Summary Tracking Stage
The responsible department reports the actual investigation status according to the customer's request. This year, our company not only completed the due diligence investigation task, but also further upgraded and optimized the responsible mineral procurement management system, including upgrading the supplier cobalt metal (CRT) management module to the Extended Mineral Report (EMRT) management module, adding quarterly updates notifications for CMRT and EMRT, CMRT non-compliant/ qualified notification function, supplier-provided CMRT effective date overdue and not updated vendor code lock reminder function, to provide effective information for suppliers in a better and continuous manner, maintain smooth communication with them, and provide timely support and guidance to suppliers, with the expectation of achieving a more comprehensive and improved risk control effect.
Supplier report analysis and processing
- The responsible mineral procurement management system can analyze the due diligence reports submitted by suppliers and generate summary reports, including the overall response status of suppliers and the due diligence information disclosed by suppliers. The company's responsible units analyze potential problems based on the reports and promote improvement. Subsequently, according to customer requirements, combined summary reports are provided for CMRT and EMRT due diligence reports.
- Quanta will continue to improve the responsible mineral procurement management system, promote social, environmental, and human rights issues, and fulfill its responsibility as a member of the supply chain!
Quanta's 2023 Responsible Mineral Procurement Annual Results
- For the CMRT part, 99.9% of the targeted active suppliers submitted/updated CMRT as required by our company.
- For the EMRT part, 96.5% of the targeted active suppliers submitted or updated EMRT as required by our company.
- Based on the responsible mineral procurement supplier online training launched in 2022, our company conducted one annual update online training in 2023, and the attendance rate of suppliers reached 60% (counted by the registered online training username).