Corporate Governance
By enhancing transparency, accountability, and efficiency, strengthen the balance between management and shareholders, establish effective risk management and internal control mechanisms, to enhance long-term corporate value and promote sustainable operations.
Sustainable Supply Chain Management
Phihong regards suppliers as essential partners in value creation. While committed to delivering optimal solutions, the Company also actively works to reduce environmental and social risks, thereby advancing the development of a sustainable supply chain. Beyond product quality and on-time delivery, Phihong closely monitors supplier performance in environmental, social, and governance (ESG) aspects. Through regular evaluations and two-way communication, the Company continuously stays informed of suppliers’ operations and strengthens the sustainability capabilities of both parties.
New Supplier Assessment and Supplier Performance Evaluation
To ensure suppliers have stable supply capabilities and product quality, and to reduce operational risks, Phihong conducts a comprehensive review according to internal regulations before officially introducing new suppliers. This review mechanism evaluates compliance with relevant regulations and technical standards, supply reliability, and the implementation of corporate social responsibility practices, including management systems such as business ethics, environmental protection, and occupational health and safety. The scope and depth of the assessment are adjusted based on the complexity of the procurement item, whether it involves products, materials, services, or technology. Key assessment criteria include human resources, equipment capability, manufacturing and design development capability, financial status, cross-department decision-making capability, as well as overall execution performance in areas such as project management, change control, logistics, and customer service. In addition, Phihong reviews supplier compliance with environmental-related regulations (e.g., RoHS, REACH, halogen-free standards, etc.) and assesses their cooperation with in carbon emission disclosure and related surveys. These factors are incorporated into the qualification process to determine supplier eligibility. To strengthen supplier performance and overall management, Phihong semiannual evaluations of core suppliers. A structured scoring mechanism is in place to enhance supplier collaboration and performance. Evaluation results are used as a reference for future procurement strategies and partnership decisions, contributing to improved supply chain resilience and competitiveness.
Sustainability Criteria for New Supplier Introduction
Phihong regards ESG (Environmental, Social, Corporate Governance) as a core criterion in the evaluation and selection of suppliers. All new suppliers are required to sign the “Environmental and Social Commitment Letter” before cooperation begins. The content includes compliance with the five domains specified by the Responsible Business Alliance (RBA): labor, health and safety, environmental protection, business ethics, and management systems. We further evaluate suppliers based on the following three major sustainability dimensions:
Phihong conducts regular quality and environmental system audits, along with guidance evaluations, for newly developed and qualified suppliers to ensure that their product quality, environmental management systems, and corporate social responsibility practices meet Phihong’s requirements. As many of our suppliers are located in China, Phihong has delegated substantial supplier management responsibilities and authority to local SQM (Supplier Quality Management) units. This approach aims to integrate the “three realities” — actual site, actual situation, and actual condition — enabling timely and effective responses while reducing risks associated with quality, environmental compliance, and social responsibility. Phihong’s supply chain guidance team is composed of members from SQM, Technology, and Procurement departments, who jointly evaluate new suppliers during onboarding. The SQM unit conducts audits, guidance sessions, and evaluations as needed based on the supplier’s specific situation. In 2024, Phihong conducted a total of 44 Quality System Audits (QSA) for new suppliers and 105 Quality Process Audits (QPA) for existing suppliers. The audit results are presented below.
One of the most significant risks in the procurement process is the offering of gifts, money, or entertainment expenses by suppliers in exchange for preferential treatment during bidding for goods and services. Phihong’s Business Ethics and Conduct Guidelines clearly specifies anti-corruption and anti-bribery policies applicable to both procurement personnel and suppliers. In 2024, 90% of Phihong’s 180 core suppliers signed the Integrity Commitment Letter, representing a 2% increase compared to the previous year.
Phihong conducts on-site audits in accordance with the Responsible Business Alliance (RBA) standards for suppliers with transaction amounts exceeding NT$10 million and those with close cooperation. In 2024, 14 suppliers underwent RBA audit, and no supplier had cooperation terminated due to forced labor or child labor. A overview is provided in the table below. Overall, Phihong ensures that new suppliers are 100% compliant with environmental and social standards before engagement. Suppliers with potential concerns are not approved. The same scrutiny is applied to existing suppliers. In 2024, no suppliers were identified as having significant actual or potential negative impacts.
