Sustainability
Think Local Act Global

Supply chain linkages

CH Biotech regards suppliers as important partners. To effectively ensure that the impact of the production process on safety, health, environment and quality is minimized, we aim to ensure that suppliers act in accordance with ethical standards in a responsible manner as well as protect human rights and the environment through a sound management mechanism, while seeking long-term partnership based on trust and collaboration.

Upstream: Providing raw materials, which affects the midstream and downstream product manufacturing and sales stability
The upstream section of the agrochemical industry includes the mining and the chemical raw material sectors:

(A) The mining sector mines and extracts phosphate and potash minerals, petroleum, and trace element minerals and provides raw materials, such as phosphate, potash, and nitrogen fertilizers and trace elements.

(B) The chemical raw material sector develops processes and produces active ingredients for the midstream businesses to manufacture products.

 

Upstream supply and price fluctuations will affect the manufacturing cost and sustainability of the agrochemical industry. Therefore, ensuring the supply stability of raw materials and energy is one of the factors for the healthy development of the midstream and downstream businesses in the agrochemical industry. The midstream production layout should be mainly based on areas where upstream manufacturing can be conducted within reasonable costs and supply is stable.

Midstream: Product R&D and manufacturing, which connects supply and demand of upstream and downstream businesses
The midstream businesses are agrochemical and agricultural biotech companies. They are formula R&D and finished product manufacturers and engage in formulation design, efficacy testing, dosage form improvement, field trials, product registration, and production. The midstream businesses purchase active ingredients from upstream ones, and they produce finished products after R&D and processing.

 

The use and selection of raw materials by the midstream businesses affect the operating income of the upstream businesses, and the attributes and efficacy of products affect downstream distributors’ market layout and farmers’ income. The design and formulation of the dosage forms of agrochemical products play a critical role in their efficacy. As the applicability of the formulations and the control of the compounding process have a significant impact on the efficacy of the chemicals, advanced technological capabilities are required to best apply the active ingredients.

Downstream: The sales and use of products, which affect the development direction of midstream products

Downstream entities include sales channels and consumers:
(A) Sales channels are divided into distributors, intermediate wholesalers, retailers, and supply and marketing cooperatives formed by farmers.
(B) Consumers are growers (farmers), who are the end users of agrochemical products.

There are many agrochemical brands on the market with complex formulations. Farmers purchase such products based on distributors’ efficacy description and word-of-mouth recommendations by other farmers. Based on downstream distributors ‘ sales and farmers’ use of such products, midstream businesses can be informed of the problems faced by farmers in farming immediately, and this indirectly determines the midstream businesses’ production scale, technological innovation, and product development direction.

Supplier management and policy

Sustainable procurement policy

CH Biotech promises to effectively manage the impact of products and procurement on society and the environment. To integrate corporate social responsibility into the Company’ s long-term development goals, we plan to formulate a QHSE questionnaire in 2022, with the aim of urging suppliers to fulfill their social responsibility commitments and ensure their compliance with regulations on labor rights and human rights, labor health and safety, environmental protection and ethical management through the questionnaire.

 

This policy will be first implemented to the key raw material suppliers and then gradually to all suppliers, in order to achieve the following goals:
1. Work with suppliers to adhere to ethical standards and responsible conduct and seek long-term collaborative partnerships based on trust and collaboration.
2. Select appropriate suppliers to reduce the potential adverse impacts of production activities on the environment and society, such as reducing the wastewater and waste and conserving water, energy and electricity.
3. Keep in touch with suppliers through emails and messaging software to ensure suppliers’ protection of personnel’s health and safety and specific groups’ human rights (women, minorities, indigenous peoples and people with disabilities) and adopt a zero-tolerance policy for child labor.

Supplier Corporate Social Responsibility Statement

Suppliers of CH Biotech, in order to fulfill their corporate social responsibilities and jointly promote economic, environmental, and social progress, agree to abide by the provisions below.

We give priority to suppliers who have signed the Supplier Corporate Social Responsibility Statement and regularly audit the suppliers. We plan to implement the QHSE policy in 2022, covering four major aspects of quality, safety, health, and environment and include the QSHE items in the supplier evaluation in 2023. We review the content of the questionnaire and the scoring criteria every year to ensure that the evaluation items and results will be more precise and accurate.

Supplier evaluation and communication

In alignment with the production philosophy of CH Biotech’s environmental safety, health and quality management policy of “friendly citizen, eco-friendly environment, lean production, energy conservation and carbon reduction, quality assurance”, we regard suppliers as our important partners and expect them to comply with relevant laws and regulations, to grow and develop and operate sustainably together. We carry out the annual supplier evaluation at the end of each year to evaluate factors, such as quality, delivery time, price, and cooperation. We stop working with those who fail to pass the evaluation and resume the partnership after they pass the re-evaluation.

Supplier annual evaluation

CH Biotech evaluates suppliers for the quality (30%), price (20%), cooperation (15%), professionalism (10%), communication, supply efficiency, and delivery time (10%), and after-sales service (15%) every year (Note).

In 2021, the number of raw material suppliers evaluated and audited was 45, accounting for 100% of all suppliers. After the rigorous evaluation, the 45 raw material suppliers have all passed the evaluation and continue to be CH Biotech’s qualified suppliers. There are 18 (40%) Class A suppliers, 16 Class B suppliers (36%), and 11 Class C suppliers (24%), and no suppliers are unqualified.

The supplier evaluations conducted by CH Biotech over the past three years are shown in the table below:

Supplier procurement policy

Procurement strategy and planning

In terms of raw material procurement strategies and plans, we implement the policy below:

Distribution of suppliers

The total procurement amount of CH Biotech’s raw materials in 2021 was around NT$190 million, an increase of about NT$120 million compared with 2020. Because the global COVID-19 pandemic slowed down in 2021, the production demand increased, so the procurement amount of raw materials increased. In 2022, affected by shipping, port congestion, and shortage of raw materials, we will actively seek new raw material suppliers to stabilize the supply of goods to ensure a stable supply of raw materials in 2022.

 

In terms of the distribution of raw material suppliers, we work with 45 raw material suppliers, mainly from the local community. CH Biotech’s production site is in the U.S. After products are produced, we then ship and sell them. There are 38 major raw material suppliers in the U.S. (84.4%), and the suppliers are mainly located in China and Taiwan outside the production area. There are 6 suppliers in China (13.3%) and 1 supplier in Taiwan (2.3%).