Sustainable Supply Chain

MERRY has established a Supplier Code of Conduct, referencing the RBA Code of Conduct, which includes regulations on labor, health and safety, environment, and business ethics. Suppliers are required not only to comply with these standards but also to adhere to the laws and regulations of the countries and regions where they operate. MERRY also encourages suppliers to require their upstream suppliers to adopt this code of conduct.

MERRY declares and commits to not accepting metals sourced from conflict zones. Suppliers are required to sign the "Conflict-Free Minerals Declaration" and conduct CMRT investigations through the GPMS system. Each year, suppliers must accurately and fully disclose whether the metals in their product materials are sourced from certified conflict-free zones. In 2023, MERRY completed investigations of 142 suppliers whose products contain gold (Au), tantalum (Ta), tin (Sn), and tungsten (W), ensuring that 100% of these materials can be traced back to certified conflict-free smelters.

When selecting new suppliers, an evaluation team consisting of procurement, quality, R&D, and engineering units is formed. The review items include company basic information, quality systems, intellectual property rights, chemical substances management systems, and social and environmental responsibilities. After evaluation and confirmation of the review results, suppliers are included in the qualified suppliers list. To fulfill the commitment to social and environmental protection responsibilities, MERRY promotes the "Supplier Operational and Environmental Sustainability Commitment." This commitment covers three aspects: labor conditions, ethical standards, and environmental protection. Suppliers are required to adhere to related social responsibility standards and prioritize environmental protection (energy management, water resource management, etc.), working together with MERRY to promote a green supply chain.

Regular performance monitoring and evaluation of suppliers are conducted through a system of price, quality, delivery, and service assessments. The performance ratings are categorized into three levels: A, B, and C. Suppliers who receive an overall failing score or whose incoming materials are found to contain non-compliant hazardous substances are subjected to an improvement plan, and their progress and effectiveness are tracked accordingly.
Additionally, MERRY conducts annual supplier CSR audits and revisions based on the latest RBA standards. Suppliers rated as grade C must undergo guidance and improvement before being integrated, while those rated as grade D are deemed non-compliant and terminated from the partnership.
As of 2023, a cumulative total of 233 suppliers have undergone CSR audits, accounting for 78% of the total supplier procurement value. Among the suppliers identified as having negative social or environmental impacts, only one (less than 1%) required improvement, which has been completed, resulting in a 100% improvement agreement rate.
In 2023, MERRY identified a total of 44 key suppliers based on criteria such as procurement amount and high-risk materials. Excluding 10 suppliers who scored above 80 points in the 2022 audit, the remaining 34 suppliers underwent 100% on-site/online audits, with a 100% pass rate (all rated B or above), and an average score of 84.4 points. These 44 key suppliers accounted for 22% of the Group’s self-controlled (excluding customer-designated) supplier procurement amount.

1.Key Supplier Selection Criteria： I.Key Suppliers: Manufacturers (excluding traders and agents) who supplied over 500 batches and had transaction amounts exceeding 2 million in the previous year. II.High-Risk Material Suppliers: Producers of battery cells, PCBs, metal surface treatments, color boxes, leather goods, cables, plastic/rubber with printed coatings, hazardous chemicals, etc. 2.Material suppliers with an on-site audit score above 80 points and whose audit deficiencies have been closed in the previous year are exempt from the current year’s audit. 3.Audit ratings are divided into four levels: A to D, with scores as follows: A ≧ 90, B ≧ 70, C ≧ 60, D < 60.

To ensure that suppliers provide materials in compliance with green product regulations, MERRY has implemented the GPMS (Green Product Management System) for many years. This systematic approach requires suppliers to obtain material approvals and commit to prohibiting the use of metals sourced from conflict mineral areas in their raw materials.

In 2023, supply met customer demands with no abnormalities reported.

In 2023, 23 suppliers were selected and all passed based on comprehensive risk assessment results.

The company's Information Security Promotion Team sets evaluation standards based on five major axes (information security policies, network architecture, access management, virus and vulnerability protection, and basic security protection) according to ISO 27001 specifications. In 2023, assessments were conducted for risks related to access to organizational assets, and 18 suppliers showed no abnormalities.

MERRY continues to develop and enhance local procurement and supply chain diversity to increase flexibility. To accelerate the flow of materials and communication efficiency and reduce carbon emissions from transporting raw materials, priority is given to suppliers located near production sites. This approach also helps suppliers improve their supply quality, thereby strengthening their core capabilities. Additionally, MERRY continuously monitors whether suppliers' regions are likely to be affected by climate change or unforeseen natural disasters, ensuring stable supply through short-chain supply/local services. In 2023, MERRY adopted a risk diversification strategy, with production support not only from China but also from plants in Thailand and Vietnam. The local procurement amount for China plants was 44%, with non-electronic components reaching 98%. For non-China plants, the local procurement amount was about 7%, and non-electronic components were 14% (major electronic materials are procured from well-known manufacturers as designated by customers, such as semiconductor components)

During the product project development phase, MERRY collaborates with R&D units, procurement units, customers, and suppliers to discuss issues and share technologies, addressing bottlenecks at each stage and assisting suppliers in optimizing their processes and quality
Additionally, to jointly promote sustainability issues, MERRY engages in two-way communication and interaction with supplier partners through supplier conferences, green management training sessions, and the SCM supplier platform. This enhances mutual cooperation and consensus, continuously advancing towards sustainable development.