Supply Chain
Supplier Sustainability Management Policy
Nan Pao valued sustainable supply chain management and responsible procurement, and incorporated requirements regarding environmental protection, social responsibility, labor rights, occupational safety and health, quality management, and corporate governance into the supplier selection, evaluation, cooperation, and improvement follow-up processes. Suppliers are required to comply with the "Nan Pao Supplier Code of Conduct" and meet the Company's requirements in terms of integrity management, labor rights, occupational safety and health, environmental protection, climate change, information security, privacy protection, and legal compliance.
To further strengthen sustainable supply chain governance, the Procurement Department completed the Nan Pao Resins Group Supplier Management Policy in 2026. The policy covers key areas including the sustainability vision and responsible procurement, tiered supplier management and risk identification, on-site audits and continuous improvement, as well as supply chain resilience and capability building. The policy was submitted to and approved by the Board of Directors in August 2026. Going forward, the Group will use this policy as the overarching framework for supplier management and progressively enhance the consistency and traceability of supplier management practices across its subsidiaries.
In supply chain risk management, Nan Pao implemented tiered management based on supplier type, procurement amount, product criticality, region, and industry risk. It also identified possible environmental, social, human rights, governance, and quality risks in the supply chain through Supplier Code of Conduct sign-offs, ESG risk self-assessment questionnaires, document reviews, human rights due diligence, quality audits, and, where necessary, on-site audits. For high-risk, material-deficiency, or core suppliers, the Company requires submission of corrective action plans to be completed within a specified timeframe; if corrective actions are ineffective or a serious violation of sustainability standards occurs, Nan Pao may adopt measures such as re-audits, suspension of cooperation, or termination of cooperation to maintain the compliance and stability of the supply chain.
Nan Pao regarded suppliers as long-term partners. Competitive quality, technology, delivery schedules, and cost were also essential conditions for suppliers. To achieve its target of sustainable supply chain development, the Company ensured that suppliers, in the process of providing products and services, complied with social and ethical standards, understood and followed the law, proactively addressed environmental protection and social issues, and courageously assumed corporate social responsibility while continuously improving and enhancing their performance. In response to evolving sustainable development requirements, the documents "Supplier Code of Ethical Conduct" and "Environmental Protection Requirement Commitment" were integrated into the "Nan Pao Supplier Code of Conduct," which stipulates that all suppliers are prohibited from using child labor and from employing young workers in hazardous work.
Supplier Management
Nan Pao was committed to establishing a stable, responsible, and resilient supply chain management mechanism. In addition to quality, price, delivery schedule, service, and technical capabilities, the Company also took into account suppliers' performance in areas such as environmental protection, labor rights, occupational health and safety, information security, privacy protection, integrity management, and legal compliance when considering cooperation. The Company also continued to promote the joint implementation of sustainable management by suppliers through the Supplier Code of Conduct, ESG risk assessment self-assessment questionnaires, quality audits, and on-site visits.
In 2025, Nan Pao continued to promote the Supplier Code of Conduct acknowledgment process. The acknowledgment rate for A-grade suppliers reached 96.3%, and the acknowledgment rate for B-grade suppliers reached 88.9%. The 2026 targets are to achieve a 100% return rate for A procurement suppliers and 90% for B procurement suppliers, in order to enhance suppliers' commitment to and cooperation with Nan Pao's sustainability requirements.
Since 2024, the Taiwan headquarters has managed supplier sustainability in accordance with the Supplier Management and Evaluation Procedures and the Supplier ESG Risk Assessment Guidelines under its ISO 9001 Quality Management System, while progressively incorporating supplier ESG risk assessment results into the procurement management process. In 2025, Nan Pao Resins expanded the assessment scope from raw material suppliers to include material suppliers. Suppliers aligned with the Company's carbon inventory supplier list were selected for ESG questionnaire assessments, covering suppliers representing 80% of raw material procurement value and 65% of material procurement volume. A total of 78 raw material and material suppliers completed the questionnaire.
Supplier ESG Management Plan
| Category | Description |
|---|---|
| Policies and Commitments | The Company has established the Nan Pao Resins Group Supplier Code of Conduct and, in 2026, completed the Nan Pao Resins Group Supplier Management Policy, which serves as the overarching policy for sustainable supplier management across the Group. |
| Board Oversight | The Supplier Management Policy was submitted to the Board of Directors for review in August 2026. Going forward, the implementation of supplier ESG management will be regularly monitored through the Board and the Company's sustainability governance framework. |
| Code of Conduct Review | Suppliers are required to comply with the Supplier Code of Conduct, which covers business integrity, labor and human rights, occupational health and safety, environmental protection, climate change, information security, privacy protection, and regulatory compliance. Procurement practices are reviewed to ensure consistency with the Code and to avoid potential conflicts with ESG requirements. |
| ESG Rating and Contract Termination Clauses | Risks were identified through suppliers' ESG self-assessments, document reviews, and on-site audits. For suppliers with material deficiencies, a corrective action plan was required; if improvement was
ineffective or the supplier seriously violated sustainability requirements, measures such as re-audits, suspension of cooperation, or termination of cooperation could be taken.
Supplier Termination Clauses:
|
| Supplier Selection | In addition to quality, price, delivery, and service, Nan Pao incorporates supplier ESG risks, legal compliance, labor safety, environmental management, and operational stability into supplier selection criteria to support long-term cooperation. Suppliers with stronger ESG performance are preferred in supplier selection and contract awarding. |
| Procurement Staff Training | Planned training for procurement personnel on supplier ESG management, responsible procurement, the Supplier Code of Conduct, risk identification, and improvement follow-up to enhance procurement personnel's capability to implement sustainable procurement. |
Supplier Screening Mechanism
Nan Pao conducted supplier screening and risk identification based on supplier business relevance and the dimensions of environment, society, and corporate governance. For new suppliers or key suppliers, the Company not only reviewed their products, services, delivery schedules, quality, and technical capabilities, but also gradually incorporated ESG risk criteria, including environmental management, pollution prevention, waste management, greenhouse gas emissions, occupational safety and health, labor rights, integrity management, information security, and legal compliance.
| Aspect | Description |
|---|---|
| Business Relevance | Suppliers that provide the major products or services procured by Nan Pao, have relatively high transaction amounts, have passed the commercial evaluation process, and maintain ongoing cooperative relationships with the Company. |
| Environment | Includes air pollution, wastewater, waste, hazardous chemical substance management, energy consumption, greenhouse gas emissions, environmental legal compliance, and the environmental management system. |
| Social | Includes labor and human rights, occupational safety and health, working hours and wages, prohibition of child labor and forced labor, employee health, and grievance mechanisms. |
| Corporate Governance | Includes integrity management, anti-corruption, legal compliance, information security, privacy protection, and business ethics. |
| Country | Assess the geopolitical risk and trade security conditions of the countries where suppliers are located, including the U.S. export control lists, the OFAC sanctions lists, and conflict mineral source regions. Nan Pao's major supplier manufacturing plants were located in Japan, Korea, China, Vietnam, and Europe and the United States, and it did not procure through high-risk regions. |
| Industry | For raw material suppliers in high-environmental-impact industries such as petroleum and petrochemicals, chemical raw materials, plastics and rubber, and coatings and dyes, a more in-depth environmental risk assessment was conducted, including wastewater discharge permits, VOC emission controls, and greenhouse gas reduction plans. |
| Product | Based on the item or raw material classification, parts or materials containing special controlled metals (such as conflict minerals 3TG) and hazardous substances (SVHC, phthalates, azo dyes, etc.) were identified, and suppliers were required to provide a non-toxicity declaration or third-party test report, and to comply with the ZDHC MRSL, REACH SVHC, and the customer brand's restricted substances list (RSL). |
Supplier Assessment
| Assessment Method | Description |
|---|---|
| Desktop Assessment | Suppliers representing the top 60% of transaction value are required to complete an ESG self-assessment questionnaire or provide the previous year's ESG report. Nan Pao reviews the supporting documents provided by the supplier to assess its ESG commitments, implementation status, and potential risks. The questionnaire content corresponds to the RBA SAQ domains: labor, health and safety, environment, ethics, and management systems. |
| On-Site Supplier Assessment | For high-risk, material-deficiency, or core suppliers, ESG on-site audits were conducted together with quality audits to verify the suppliers' actual implementation in such areas as environment, occupational health and safety, labor and human rights, governance, and legal compliance. |
| Improvement Tracking | If deficiencies or potential adverse impacts were identified, the supplier was required to propose corrective action plans and report improvement progress and supporting documentation within the specified timeframe. Document follow-up or on-site reinspection would be conducted as appropriate. |
In 2024, ESG on-site audits were conducted for certain suppliers, and in 2025, supplier improvement responses and supporting documentation were received. After completion of the questionnaire evaluation in 2025, it is expected that at least 2 suppliers will be selected in 2026 for on-site audits, and they will be required to complete and report corrective actions for any deficiencies during the subsequent period.
Supplier Training Mechanism
Nan Pao communicated the Company's requirements regarding environmental protection, occupational health and safety, labor rights, integrity management, climate change, and corporate governance to suppliers through mechanisms such as the Supplier ESG Program, the Supplier Code of Conduct, the ESG self-assessment questionnaire, and on-site audits. In the future, the Company will continue to strengthen supplier capability building, assist suppliers in understanding ESG assessment items, improvement requirements, and the preparation of relevant supporting documentation, and enhance their sustainable management capabilities.
| Category | Description |
|---|---|
| ESG Programs / Training | Provided suppliers with explanations regarding the supplier ESG management plan, Supplier Code of Conduct, and ESG self-assessment questionnaire to ensure that suppliers understood Nan Pao's requirements regarding environment, society, human rights, and governance. |
| Provision of ESG Benchmark Information | Regularly provided or communicated to suppliers ESG-related benchmark information, including issues such as legal compliance, environmental management, greenhouse gas inventory, occupational safety and health, labor rights, and information security. |
| Assistance with Improvement Measures | For deficiencies identified in the written assessment or on-site audit, Nan Pao will provide improvement recommendations and require the supplier to submit an improvement plan and, when necessary, conduct follow-up on improvements or re-audits. |
| Deep Support Program | For core suppliers or suppliers requiring improvement, Nan Pao will, through technical exchanges, resource sharing, training, or ESG improvement counseling, assist them in enhancing environmental, occupational health and safety, quality, and supply stability. |
Supplier Evaluation Results
In 2025, Nan Pao Resins continued to conduct supplier ESG risk assessments and expanded the scope from raw material suppliers to include material suppliers. To enhance consistency in ESG management practices, the Company prioritized suppliers that were aligned with its 2025 carbon inventory supplier list for assessment.
Based on the 2025 supplier ESG risk assessment results, Nan Pao will continue to track the risk distribution of suppliers in the areas of environment, society, human rights, and governance, and will plan subsequent improvement measures according to the risk level. In 2026, the Company will select at least 2 suppliers to conduct on-site ESG audits and will require the suppliers to report their improvement progress and supporting documentation within the specified deadline. For items that did not meet the requirements, a six-month corrective action period was provided to continuously enhance supply chain sustainability performance.
| ESG Risk Level | Description | Number of Suppliers |
|---|---|---|
| LEVEL 1 | Top suppliers with extremely low impact on company operations. | 29 |
| LEVEL 2 | Excellent suppliers with low impact on company operations. | 30 |
| LEVEL 3 | General suppliers with moderate impact on company operations; recommended to enhance sustainability performance. | 19 |
| LEVEL 4 | High-risk suppliers with significant impact on company operations; urgent improvements in sustainability performance required. | 0 |
| Total | 78 | |
Local Procurement
Nan Pao placed importance on local procurement and supply chain stability. By giving priority to collaborating with suppliers in the locations where it operated, it reduced the environmental impact caused by long-distance transportation and supported the development of the local economy. Because Nan Pao's products used chemical raw materials as the primary production inputs, certain special materials still had to rely on foreign suppliers to maintain product quality, supply stability, and customer specification requirements; therefore, the Company adopted a strategy of local procurement and multi-source supply in parallel, supporting the local supply chain while also ensuring the resilience of key raw material supply.
In 2025, Nan Pao classified procurement by nature into three major categories — raw materials, engineering and equipment, and labor services and maintenance — to conduct local procurement statistics. Among these, the labor and maintenance categories were primarily sourced through local procurement, with domestic procurement accounting for 99.9% of the amount; domestic procurement accounted for 84.9% of the amount in the engineering and equipment categories; and, for raw materials, domestic procurement accounted for 75.7% of the amount because certain key chemical raw materials had to be procured from overseas. Overall, in 2025, the total domestic procurement amount accounted for approximately 77.3%, and the number of domestic suppliers accounted for approximately 91.7%.
In the future, Nan Pao will continue to maintain a reasonable proportion of local procurement and will dynamically manage its operations based on factors such as supplier quality, delivery lead times, technical capabilities, ESG risks, and supply stability. For key raw materials, the Company will continue to promote a multi-source supply strategy to reduce the risk of supply disruptions; for engineering, equipment, labor, and maintenance services that can be provided by local suppliers, the Company will continue to prioritize the assessment of local partnership opportunities to strengthen supply chain resilience and connections with the local economy.
| Procurement Category | Number of Domestic Suppliers | Ratio of Domestic Procurement Amount | Description |
|---|---|---|---|
| Raw material | 468 | 75.7% | Some special chemical raw materials had to be procured from overseas to ensure quality and supply stability. |
| Engineering and equipment | 108 | 84.9% | Most engineering work and equipment could be supported by domestic suppliers. |
| Labor services and maintenance | 409 | 99.9% | Primarily focused on local service and maintenance support. |
| Total | 985 | 77.3% | Total domestic procurement amount as a percentage of the three major categories. |
Supply Chain Environmental Performance
Nan Pao designated the recycling and reuse of packaging and transportation materials in the supply chain as a key initiative for promoting the circular economy. In 2025, the Company expanded the scope of its statistics to 16 subsidiaries within the Group and systematically reviewed the use, recovery, and reuse of pallets, iron drums, plastic drums, and reusable packaging materials. The inventory review showed that large iron drums and large plastic drums had higher potential for recycling and reuse, and some subsidiaries have already achieved a 100% recycling rate; small containers remained a key area for subsequent improvement because a relatively high proportion were exported and used only once. In the future, Nan Pao will use the 2025 audit results as the base to gradually establish recycling targets for various materials, and will link container recycling, circular packaging materials, and supplier environmental management to continuously improve supply chain resource efficiency and environmental performance.
2025 Supply Chain Environmental Performance Summary
| Item | 2025 Usage | 2025 Recycling Volume | Recycling Rate | Reuse Volume / Results | Reuse Rate / Waste Reduction Benefits | Main Management Significance |
|---|---|---|---|---|---|---|
| Pallet | 132,821 | 37,093 | 27.9% | 17,588 | 47.4% | Used recycled pallets instead of newly manufactured pallets to reduce the use of wood resources and packaging waste. |
| Large steel drum (≥180 L) | 113,222 | 70,986 | 62.7% | 34,494 | 48.6% | Large containers had high recycling potential, and some subsidiaries had achieved 100% recycling. |
| Small steel drum (<180 L) | Approx. 1.62 million or more | 3,034 | 0.2% | — | — | Due to the relatively high proportions of exports and single-use applications, these were the focus of subsequent improvement efforts. |
| Iron drum total | 1,739,411 | 74,020 | 4.3% | — | The overall reuse rate was approximately 49.1%. | Large iron drums already had a recycling foundation, whereas a structural recycling plan needed to be developed for small iron drums. |
| Large plastic drum (≥25 L) | 122,752 | 21,410 | 17.4% | 15,694 | 73.3% | Large plastic drums had a high reuse rate and were worthy of broader promotion. |
| Small plastic drum (<25 L) | Approx. 1.89 million or more | 27,421 | 1.5% | — | — | High usage volume but a relatively low recovery rate; the recovery mechanism needs to be strengthened. |
| Plastic drum total | 2,013,775 | 48,831 | 2.4% | — | Large container reuse rate was 73.3%. | Large drums had already achieved results, and small drums were the focus of subsequent management. |
Note 1: The 2025 supply chain environmental performance statistics covered 16 subsidiaries. Pallets were counted by piece; iron drums were classified by capacity into large (≥180 L) and small (<180 L); plastic drums were classified by capacity into large (≥25 L) and small (<25 L). Recycling rate = quantity recycled / quantity used; reuse rate = quantity reused / quantity recycled.
Note 2: The 2024 data primarily disclosed partial results for Taiwan and certain plants. Beginning in 2025, the statistics were expanded to the group level; accordingly, absolute figures were not directly compared year over year, and the main focus was on recycling rate, reuse rate, and the extent to which the scope of management was expanded.
Value Chain Partner Collaboration and Carbon Reduction Contribution
Nan Pao actively participated in the "Leading Small Manufacturers to Low-carbon and Smart Transformation" program of the Industrial Development Administration, Ministry of Economic Affairs, and, as the leading company, assisted upstream and downstream value chain partners in jointly promoting the low-carbon transition. This project centered on low-carbon production technologies for specialty resins and adhesives, linking raw material suppliers, production processes, and downstream users to form a complete low-carbon industrial ecosystem.
This project covered three major carbon-reduction pathways: low-carbon product development (water-based coating resins and bio-based adhesives), process energy conservation (voltage-stabilization power supply systems), and solvent recovery, driving annual carbon-reduction benefits of more than 10,000 metric tons of CO₂e for the Company and its upstream and downstream value chain partners.
| Carbon Reduction Pathway | Approach Description | Major Beneficiary Partner | Carbon Reduction Benefits |
|---|---|---|---|
| Low-carbon-emission textile coating material (water-based) | Promoted the use of waterborne polyurethane to replace solvent-based coating products, thereby reducing the use of organic solvents. | Textile manufacturers | Triggered downstream carbon reduction of approximately 1,633 metric tons CO₂e/year (estimated). |
| Biobased polyurethane adhesives | Replace petrochemical feedstocks with bio-based polyols and promote their application in footwear materials, textiles, electronics, and automotive materials. | Low-carbon adhesive processors and upstream raw material suppliers | Promoted upstream and downstream carbon reductions of approximately 1,967 metric tons CO₂e/year (estimated). |
| Process stable voltage energy-saving system | Established automated voltage stabilization equipment to improve process energy efficiency. | The Company's manufacturing plant | Reduced in-plant process carbon emissions by 644 metric tons CO₂e. |
| Solvent recovery system | Recycled and reused organic solvents, reducing raw material purchases and transportation carbon emissions. | The Company's manufacturing plant | Recovered approximately 4,500 metric tons of solvent annually, reducing carbon emissions by approximately 7,920 metric tons CO₂e/year. |
The overall project, including the Company's process improvements, reduced carbon emissions by approximately 9,305 metric tons/year in total, and drove an approximate reduction of 1,149 metric tons among our partners.