In 2022, the 64 main suppliers of materials for Xinying Factory and Hsinchu Factory were all Taiwanese companies mostly located in central and southern Taiwan. Raw materials necessary for steel structure projects include steel plates, H beams, flat steel, and welding materials, among which steel plates and H beams are the main raw materials for steel structures. In Taiwan, the primary steel plate manufacturer is China Steel, and the largest beam makers are Tung Ho Steel and Dragon Steel. From 2020 to 2022, the Company's total purchase amount from China Steel and Dragon Steel accounted for 87.4%, 83.1% and 79.34% of the net purchase of steel structure raw materials, respectively, showing that China Steel and Dragon Steel are our main suppliers. The Company carries out regular steel supplier evaluations as well as annual supplier evaluations of price, quality, delivery and service.

The Kaohsiung Factory's material procurement is mainly for container repair and forklift maintenance. In 2022, the 51 main material suppliers were all located within Taiwan. Container repair materials are corrugated steel sheets, angle bars, channel bars, stainless steel plates, container fittings, and plywood flooring. Procurements from 2020 to 2022 were entirely made within Taiwan. The purchase amount of container steel products from our main suppliers accounted for 24.01%, 27.5% and 42.74% of the net purchase amount of container materials respectively. The purchase amount of plywood board from our main suppliers accounted for 44.07%, 34.7% and 28.2% of the net purchase amount of container materials respectively.

Evergreen Steel values quality, delivery time, and price of the supplied products and established the Supplier Corporate Social Responsibility Management Guidelines for the steel industry, incorporating CSR into supplier and contractor contracts, who are required to sign a Supplier/Contractor's Corporate Social Responsibility Commitment or issue an ESG report on CSR fulfillment. In 2022, 98% of main suppliers and 100% of main contractors signed the Commitment for a total 87 signatories.

The Company conducts supplier evaluation with the Procurement Department as the organizer, which is in responsible for the collection, statistical analysis, and compilation and reporting of all evaluation data, and Quality Control Section and Material Management Section as the co-organizers that are in charge of providing records on quality or delivery deficiencies. Evaluation is held at least once a year and as needed. Evaluation samples must cover at least three months, and results are rated in 4 levels:

Supplier /Contractor Evaluation and Management

Supplier Evaluation and Management

The Company stipulates the Procurement Management Procedure and carries out regular steel supplier evaluations of quality, delivery time, and price by responsible units every half an year. Those suppliers who make the grade will be downed for the Approved Vendor List and be the reference of the procurement and outsourcing.

Evergreen Steel conducts the annual evaluations for steel suppliers, including China Steel, Dragon Steel, other steel materials, welding materials and hardware suppliers, to ensure every supplier meets the quality requirements. The selection criteria are as below:

1. The quality of the raw materials should conform to the CNS standards or equivalent.
2. The supplier should have strong reputation and stabled quality.
3. The supplier should deliver on time and have good cooperation.

The Xinying Factory and Hsinchu Factory perform evaluations every six months per ISO 9001:2015 Contractor Management Procedure. 64 suppliers in both the first and second half of year passed the evaluation in 2022. The Kaohsiung Factory's material procurement is mainly for container repair and forklift maintenance. In order to have long-term stable partnerships with suppliers to ensure supply stability, the Taiwan material suppliers would be the preference. Responsible units conduct annual contractor evaluation based on the Contractor Evaluation Guidelines, and the results serve as a key factor in contract renewal to create fair competition. All three major contractors passed the evaluation in 2022.

Contractor Evaluation and Management

The steel structure industry is labor-intensive. As orders increased in recent years, steel structure production at the Xinying Factory and Hsinchu Factory were mostly contracted out to professional Taiwanese manufacturers. We also encourage our workers to become contractors and work locally in the factory area to quickly integrate into our corporate culture. In addition to meeting the evaluation requirements, contractors are prioritized if they are located near our factories for effective and flexible management as demanded by project schedules and needs.

Contractor selection involves evaluation on quality, delivery time, staffing, and manufacturing experience. Qualified contractors are assigned a registration code in our system and will be flagged when eligible for our projects.

The Company has formulated a Contractor Safety and Health Management and Quality Penalties, which lists the requirements and standards for safety and health. We regularly hold Contractor Agreement Meetings and participate in Occupational Safety and Health Meetings as well as technical discussions to improve energy efficiency and reduce resource consumption for better product quality. In 2022, 12 Contractor Agreement Meetings and 12 Occupational Safety and Health Meetings were held to fully coordinate with contractors and implement occupational safety and health regulations. Implementation is central to contract fulfillment; serious infractions that affect the environment and society may result in suspension or termination of contract.

The Xinying Factory and Hsinchu Factory perform evaluations every six months per ISO 9001:2015 Contractor Management Procedure. The 2022 results are as below:

Kaohsiung Factory has Contractor Evaluation Guidelines that stipulate annual contractor evaluation, and its results serve as a key factor in contract renewal to create fair competition. All five major contractors passed the evaluation in 2022.

The company requires all suppliers and contractors to conform to the CSR implementing the human rights, environment, health, safety, management system, risk management, and business continuity. It doesn’t have risk supplier causing impact on the environment and society. If any supplier violated or caused impacts on the environment, party A may terminate or suspend the contract and demand compensation for damages. All suppliers are qualified for the Approved Vendor without violating the human rights or integrity management in 2022.