ESG Report 2022

Pharmaceutical Intermediates Bulk Medicines Finished Products Users Raw Materials This production and operation model helps the of potential problems, continue to explore room for Group to reduce the external demand for major raw improvement, and enhance the sustainability of the materials used in the production process, lower the supply chain. In addition, as a raw material supplier risk of unstable supply and market price for many antibiotic companies, the Group has been fluctuations on the supply chain, so that we can giving the highest priority to quality that the effectively control production costs and ensure pharmaceutical intermediates and bulk medicine product quality. In addition, full control of the supply produced by the Group have passed many chain also helps the Group to retroactively manage authoritative certifications such as Chinese GMP, the production process, so as to find the root cause EU CEP, and US FDA. 6.5.2 Supplier Management We regularly monitor and evaluate suppliers’ CSR submission of supplier CSR self-assessment and performance according to their risks exposure. CSR audit. Suppliers are classified into three risk levels including low, medium and high, based on a set of We are also actively researching the establishment criteria including procurement amount, industries of a supply chain risk management organization with high risks of labour issues and environmental and joining pharmaceutical supply chain pollution, the locations of operations, as well as organizations such as the Pharmaceutical Supply third-party certifications of relevant CSR Chain Initiative (PSCI), to establish recognised management systems. All suppliers are required to cooperative relationships with other companies in sign the Supplier CSR Agreement, pledging to the industry. Together, we will conduct risk analysis comply with our Supplier Code of Conduct and of the supply chain and contractors, and develop Conflict Minerals Policy. Such obligation is also risk reduction plans. All procedures are laid out in stated in our standard purchasing agreement. the Supplier CSR Risk Assessment Manual, in Various measures are also implemented to mitigate which our procurement teams assess the risk level the supplier’s risks depending on our risk level of suppliers and closely monitor their performance assessment of the relevant suppliers, including periodically. Environmental, Social and Governance Report 2022 The United Laboratories International Holdings Limited 37 Suppplier Risk Evaluation and Mitigation When we identify any substandard performances, rectified, and the deductible amount depends on the related suppliers are flagged as “high risk” and the severity of individual cases. The subsequent monthly on-site training are given as quality rectification measures will be followed by the assurance measures to ensure that the situation is Group. After the January-February supplier improved to reach our standards.. assessment in 2023, over 96 . 85% of all suppliers achieved a perfect score and all The Group reserves the right to terminate business supplies passed, demonstrating the high standards relationship with suppliers with major non- that the Group has always demanded from its compliances with the Code that are not remedied suppliers. within a timeframe. We believe that we can achieve a sustainable supply chain by building a long-term relationship Reporting channel is also in place to encourage our with our suppliers based on mutual trust. We have stakeholders to report any suspected violations of developed a comprehensive supplier management the practices and conditions covered by the code. programme to assist suppliers to meet our CSR The Group also focuses on the integrity of suppliers requirements, including adopting a supplier and require all cooperating suppliers to sign the scorecard system to assessing their performance. "United Laboratories Anti-Corruption Cooperation We work closely with our suppliers to further Agreement”, clearly stating the requirements for improve the manufacturing energy efficiency and integrity of the United Laboratories to ensure the social aspect of our upstream suppliers. Trainings integrity of all cooperating suppliers. are provided to all suppliers as a continuous i mp r o v eme n t p r o c e s s t o f a c i l i t a t e t h e i r The Group also has a supplier grading and rating implementation of any optimization measures , s y s t em i n p l a c e a n d c o n d u c t s mo n t h l y with the training content including anti - assessments on our suppliers in terms of quality, corruption , professional ethics , quality price, delivery capability, financial strength and management , and work safety . service capability. The rating system is set to have a full points of 100 points, where points will be deducted if there are problems that need to be Supplier Training