- Social
- Sustainable Supply Chain
Strategy
LX Semicon has established a Supplier Code of Conduct on the basis of the code of conduct of the Responsible Business Alliance (RBA), aiming at responsible supply chain management. We disclose the Supplier Code of Conduct on our website as well as our supplier purchasing portal so that partner companies can comply with it. Going forward, we will continue to work with our partner companies to manage supply chain risks.
-
- Chapter 1
- Overview of Code of Conduct
-
- Chapter 2
- Subject to Application
-
- Chapter 3
- Working Conditions and Human Rights
-
- Chapter 4
- Safe Workplace
-
- Chapter 5
- Environment
-
- Chapter 6
- Ethics
-
- Chapter 7
- Conflict Mineral Management
-
- Chapter 8
- Management System
To systematically manage our partner companies, we established the Supplier Management Regulations and defined clear evaluation standards that we use to assess the competitiveness of suppliers. We perform corporate credit evaluation annually to identify financial risks and competency evaluation biannually to measure business capabilities and ESG levels of business partners. In the competency evaluation, we added ‘ESG management’ as a fifth criterion (along with technology, quality, cost, and delivery) to strengthen non-financial risk management of our partner companies.
In response to the ESG risk management expectations of various stakeholders amid business growth and changes in relevant domestic and international regulations, we have established a system to inspect and manage risks in the supply chain operation. For this purpose, we categorize risks by type that may arise in the semiconductor industry and apply appropriate risk management measures for partner companies.
| Criteria | Classification |
|---|---|
| Finance | Risks of bankruptcy of others based on information such as profitability, debt, and cash flow |
| Operation | Risks of supply and demand disruptions and quality defects associated with technology, manufacturing, logistics, quality, etc. |
| Commercial | Risk management regarding contracts, payment, etc. |
| ESG | Compliance risks related to environment, labor, safety and health, and ethics |
| Geopolitics | Risks of supply chain issues and supply disruption due to disputes |
We have operated an online ESG evaluation system to enable our partner companies to participate in ESG risk management. The ESG evaluation comprises four categories (environment, human rights / labor, ethics / governance, product / service responsibility). In 2022, we conducted ESG evaluation of 20 major suppliers. The results showed that 16 companies received A rating and 4 received B rating. We shared relevant information with our partner companies and suggested improvement for the areas that have potential risks.
| Category | Details |
|---|---|
| Environment | Environmental management system, GHG, water / effluent, waste, air quality |
| Humanrights/Labor | Humanrights/laborstandardsandpractices,workplacesafety andhealth, human rights / labor within supply chain |
| Ethics / governance | Ethical management, ESG management / information disclosure, corporate governance |
| Product / service responsibility | Responsible management of chemical and hazardous substance, raw material sourcing, use of renewable energy, etc. |
LX Semicon has joined the international community in its efforts to avoid negative issues such as human rights abuses and environmental damage that arise from mineral extraction in major overseas conflict zones. For this purpose, we have set up a management system and process to ensure that our supply chain does not use conflict minerals that may finance armed groups in conflict areas.
We are committed to safeguarding the human rights of all stakeholders in the global supply chain and to sourcing minerals responsibly in an ethical and sustainable manner. Based on our conflict minerals management policy, we manage and monitor our partner companies to ensure that minerals produced in conflict areas do not enter the company’s supply chain. We also require partner companies to submit the questionnaire about the use of minerals in the conflict areas and Pledge Against Conflict in a written format.
| Category | Description |
|---|---|
| Responsible Mineral Sourcing Policy | Participation in the international community’s efforts to stop using conflict minerals and disclosure of management policies |
| Conflict Minerals Management Policy |
❶ Supplier management / monitoring in order to prevent the inflow of conflict minerals into the company’s supply chain ❷ Inspection of the use of conflict minerals by each partner company and request for the submission of a confirmation of non-use of conflict minerals |
| SupplierCode of Conduct (Article 6) |
❶ Establishment of a policy to prevent the use of raw materials procured through illegal, negative environmental impact or unethical methods ❷ Conflict minerals provisions should be included in the supply chain policy, and establishment of a system to ensure that the minerals used in raw materials, parts, and products supplied to LXSemicon(tantalum,tin,tungsten,gold:hereinafter3TG)donotdirectlyorindirectlyprovide financial resources or benefits to armed forces that seriously violate human rights in the Democratic Republic of the Congo or neighboring countries ❸ Efforts to check the origin and supply chain of 3TG minerals in raw materials, parts, and products supplied to LX Semicon ❹ Cooperate in providing relevant data such as the origin of 3TG minerals, information on smelters and refiners, and others upon request from LX Semicon and LX Semicon clients |