ON-SITE AUDITS

Acer’s suppliers must treat their staff in a respectful manner, using environmentally responsible manufacturing processes and providing safe working conditions. We have adopted the latest version of the RBA Code of Conduct, which covers the five major aspects of labor, health and safety, the environment, ethics, and management systems. This system is used in our on-site audits of suppliers with regard to both social and environmental responsibility. Through different auditing methods adopted based on the particular nature of the supplier’s operations and their implementation of the RBA Code of Conduct, we can verify any lapses we may find in the aforementioned five areas and require suppliers to take corrective steps by a given deadline. Thus we are able to continually improve the social and environmental responsibility of Acer’s supply chain.

2021 On-Site Audit Results

Acer uses risk assessment results as the basis for on-site audits and assessments. We examine the country risk, manufacturing processes, and products of each supplier, along with results of previous audits, as well as taking into account the concerns of stakeholders when setting out our annual audit plan.

In 2021, we conducted a total of 89 audits, 100% of which were on-site audits. These include new suppliers that began production of Acer products in 2021. The approach covers third-party audits (CMA or AMA), RBA Validated Audit Process (VAP), BSCI, SA-8000, accreditation, etc. We particularly encourage suppliers to undergo the Validated Audit Process (VAP) themselves, resulting in a broader scope of application of audit results that can help boost overall industry responsibility and compliance. In 2021, more than 220,000 direct supplier employees were audited, and 4,070 direct employees were interviewed, with more than 80% using the RBA Validity Audit Process (VAP). Settlements were audited within the two-year validity period, with an overall implementation rate of 91.8%.

For the 2020 RBA audits, ten companies with total scores of less than 120 (out of 200) were listed as higher risk and were to be reviewed again in 2021. The actual number of factory audits was 7, and there were three other manufacturers that applied for SA 8000 certification. The total audit rate was 100%. Per the above description, between 2008 and 2021, a cumulative total of 881 first-tier supplier audits have been carried out. In addition, to effectively improve implementation through the supply chain, Acer has required its first-tier suppliers to conduct pre-audit risk assessments of their next-tier suppliers of critical raw materials since 2017.

After aggregation, high-risk suppliers accounted for 6% of the total, with medium-risk suppliers at 21%. We continued to carry out auditing activities in 2021 along these lines, auditing a total of 949 second-tier factories. In 2021, we also further deepened our implementation across the supply chain, extending our auditing activities to third-tier suppliers, of whom we conducted 617 audits in the year. Considering that the third-tier supplier system is in the initial trial stage and has coincided with the COVID-19 pandemic, some of the audits have been conducted in the form of questionnaires in order to maximize the communication and implementation of Acer’s position on sustainability issues.

In 2022, despite the ongoing influence of COVID-19, we still plan to conduct on-site audits of 70 first-tier supplier manufacturing plants, covering 140,000 direct employees and interviewing 2,500 other employees. We have also set the following annual RBA Code of Conduct on-site audit conformance targets: labor: 87%, health and safety: 87%, environment: 95%, ethics: 95%, management systems: 95%. Likewise, we will continue to pursue auditing activities for second- and third-tier suppliers to actively improve the workforce and operating environment and deepen the long-term positive impact on the overall supply chain.

Important Issues and Tracking of Improvements in 2021

The main lapses in terms of labor rights were problems around working hours and pay. Other issues were related to lapses in the control of hazardous substances, potential hazard controls, and supplier audit management. The deficiencies regarding working hours were mainly problems around overtime, with a few personnel on duty for long days. In particular, with the continued spread of COVID-19 and a lack of labor mobility in some regions, the need for flexible manpower scheduling has become a new and challenging issue, compounded by the combined effects of raw materials shortages and shipping delays. It has become common for suppliers to recruit additional manpower to address short-term manpower shortages. In view of this serious challenge, some manufacturers have switched to rolling rosters or training multi-skilled workers to bolster scheduling flexibility. Some manufacturers are continuing to promote the replacement of some manpower with automation.

With regard to labor wages and benefits, the main problem is that the basis for calculating social insurance coverage needs to be adjusted and optimized. At the same time, it is also necessary to provide appropriate insurance-related education and training to employees to enhance their personal knowledge and to cooperate with the promotion of insurance operations. In terms of environmental safety and health deficiencies, these were mainly the omission of equipment guards and electrostatic equipment caused by new facilities and plant adjustments that need comprehensive inspection and boosted equipment to eliminate the potential for occupational hazards to the greatest extent possible. In terms of hazardous substance management, safety labeling (including labeling of hazardous chemicals with names, composition, emergency disposal methods, emergency contact information, and manufacturer-related information) is not complete enough on secondary packaging and should be improved. Also, chemical liquids were not properly set up in secondary containers when stored so as to prevent the risk of leaks. In terms of management systems, suppliers are more focused on the supply chain management of raw materials, often neglecting supporting service suppliers, such as the provision of temporary labor, canteen, cleaning, and security. With prompting and guidance, they can mostly be quickly incorporated into management and coaching.

Acer issues Corrective Action Reports (CAR) to higher-risk audited suppliers in response to any issues of non-compliance identified. Within 30 days of receiving such reports, suppliers must produce a written risk CAR of their own and submit it to Acer for approval by management personnel. These reports will be followed up on each month and verified against the on-site audit the following year. With regard to high-risk suppliers, as found in the audits, Acer will make the necessary adjustments to our purchasing strategy to manage the issue. As of the end of 2021, 222 deficiencies have been identified in higher-risk suppliers with VAP audit scores below 160 or priority non-conformance deficiencies, and as of December 31, 2021, 222 deficiencies have been tracked, and improvement measures have been implemented. A total of 21 deficiencies, including priority non-conformances, were listed, and all of them have been listed for corrective action. The other non-conformances have also been listed for corrective action.