ESG Report 2023

8.1.4 Supply Chain Stability The United Laboratories is committed to building a stable, reliable, and flexible supply chain to meet customer demands and ensure product quality and delivery reliability. To ensure the stability of the supply chain, The United Laboratories has developed the "Group Procurement Process Management Document". For core materials, we require a minimum of three suppliers and prioritize direct sourcing from manufacturers to avoid additional impacts on price or quality caused by intermediate links. This reduces reliance on a single supplier and increases the flexibility of the supply chain. However, for materials with a relatively limited number of manufacturers, we allow a supplier range of one to two, striving to ensure the stability and reliability of the supply chain. The United Laboratories will continue to closely monitor the operation of the supply chain and make corresponding adjustments based on market changes and demand fluctuations. We will establish good cooperative relationships with suppliers, ensuring timely communication and information sharing to address any potential supply risks. Additionally, we will proactively explore new suppliers and technologies to continuously enrich and expand our supply chain, ensuring the continuous supply of products and stable quality. 8.2 Supplier Risk Assessment and Management 8.2.1 Supplier Risk Management We regularly monitor and evaluate suppliers’ CSR performance according to their risks exposure. Suppliers are classified into three risk levels, namely low, medium and high, based on a set of criteria including procurement amount, industries with high risks of labour issues and environmental pollution, the locations of operations, as well as third-party certifications of relevant CSR management systems. All suppliers are required to sign the Supplier CSR Agreement, pledging to comply with our Supplier Code of Conduct and Conflict Minerals Policy. Such obligation is also stated in our standard purchasing agreement. Various measures are also implemented to mitigate the supplier’s risks depending on our risk level assessment of the relevant suppliers, including submission of supplier CSR self-assessment and CSR audit. We are also actively researching the establishment of a supply chain risk management organization and joining pharmaceutical supply chain organizations such as the Pharmaceutical Supply Chain Initiative (PSCI), to establish recognised cooperative relationships with other companies in the industry. Together, we will conduct risk analysis of the supply chain and contractors, and develop risk reduction plans. All procedures are laid out in the Supplier CSR Risk Assessment Manual, in which our procurement teams assess the risk level of suppliers and closely monitor their performance periodically. To enhance the effective governance of supplier behavior, Inner Mongolia Company has developed and implemented the "Supplier Code of Conduct" at its Inner Mongolia subsidiary. This code primarily outlines the social responsibility and environmental management requirements for suppliers, providing clear guidance on compliance with national and local laws and regulations, relevant international standards such as SA8000 for corporate social responsibility, and International Labour Organization conventions. Suppliers are also expected to extend these requirements to their own supply chains and fulfill their social responsibilities accordingly. 52 Environmental, Social and Governance Report 2023 The United Laboratories International Holdings Limited