Framework for Sustainable Supply Chain Management

Framework for Sustainable Supply Chain Management

First, we explicitly notify the suppliers about the sustainability specifications and require them to ensure compliance with relevant requirements. Second, we assess sustainability risks in different aspects through the sustainability risk assessment system for suppliers, and review the risks that the supply chain faces. Finally, we address and rectify the identified issues. In addition to enhancing important strategies for the future development of Qisda and the industry, we give guidance to supply chain to build capacity with relevant information, hoping that we can progress alongside the suppliers and move forward towards a sustainable future.

Governance Structure

Qisda continues to focus on the development and management of the supply chain. Not only do we report the daily management performance in the quarterly ESG Committee meeting, but the Chief Sustainability Officer also reports the implementation results and performance of the sustainable supply chain to the Board of Directors annually. At the same time, the Board of Directors guide and make decisions for the development of the sustainable supply chain to make sure that the management of the sustainable supply chain complies with the Company’s overall sustainability strategy.

Sustainability Risk Assessment Questionnaire (Paper-based Audit)

To continuously monitor sustainability risks within the supply chain, Qisda continued in 2025 to issue the “Supplier Sustainability Risk Assessment Questionnaire” (SAQ) to first-tier suppliers, requiring them to complete the questionnaire and submit relevant supporting documentation to conduct a self-assessment of risks. Through the SAQ and the collection of related written materials, the Company identifies potential high-risk suppliers and implements corresponding management measures. In addition to basic supplier information, the SAQ covers four major areas, namely “sustainability practices,” “labor,” “health and safety,” and “environment,” comprising a total of 129 questions. In the labor-related aspect, in addition to verifying whether supplier wage levels comply with the minimum wages mandated by local government regulations, Qisda also assesses the status of supplier policies regarding the maintenance of a living wage for workers. For non-first-tier suppliers, Qisda requires and guides first-tier suppliers to conduct assessments and audits of their own non-first-tier suppliers. The first-tier suppliers are also required to submit audit results and corrective action records for Qisda's review, enabling the Company to monitor sustainability risks within non-first-tier suppliers. In 2025, a total of 391 questionnaires were distributed to significant suppliers (including Tier 1 and non-Tier 1 suppliers), and 391 questionnaires were responded to with a 100% response rate.

On-site Audit

To confirm the status of supplier risks, we plan to confirm the risks with four methods: paper-based audits, on-site second-party audits, on-site third-party audits, and assessments based on industry-relevant standards to further control suppliers' sustainability risks. In 2025, the Company primarily adopted documentary audits, on-site second-party audits, and industry standards (such as RBA VAP) to verify supplier sustainability.

In 2025, a total of 365 “Supplier Sustainability Risk Assessment Questionnaires” were conducted, covering 259 first-tier key suppliers (including 32 high-risk suppliers). Among the 365 suppliers surveyed, 39 suppliers had already undergone the RBA VAP on-site third-party audit.  Based on the audit results of first-tier high-risk suppliers,¹ non-conformities were categorized across four dimensions―sustainability practices, labor, health and safety, and environment ― and further classified into major nonconformities (Major Non-Conformance) and minor non-conformities (Minor Non-Conformance). No major non-conformities were identified among first-tier high-risk suppliers during the audit process. As for minor non-conformities, the highest proportion was found in the sustainability practices dimension, accounting for 32.4% of total findings, followed by health and safety at 31.1%, labor at 25.7%, and environment at 10.8%. In the labor-related aspect of Qisda’s Supplier Sustainability Audit Form, the audit covers wage-related criteria, such as whether wage levels meet the statutory minimum wage mandated by local government regulations, whether wages are paid on time, the existence of a living wage policy, the calculation of living wage figures for each operational site, and whether wage levels align with the living wage required by local economic conditions. Based on Qisda’s sustainability audit results for high-risk suppliers in 2025, the wage levels of all audited suppliers complied with the statutory minimum wage set by local government regulations. Regarding living wage criteria, instances where requirements were not fully met were classified as "observations," and Qisda continues to encourage suppliers to establish living wage policies and refine their related systems.

1. Qisda completed sustainability audits for these 32 first-tier high-risk suppliers.