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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.

2020 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 the results of previous audits, as well as taking into account the concerns of stakeholders when setting out our annual audit plan.

In 2020, we conducted a total of 93 audits. 87 of these were on-site audits, while the remaining six were conducted remotely through videoconferencing and documentary reviews. Among these audits, one had relocated to a new plant and six had newly launched plants for Acer products. 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 2020, more than 190,000 direct employees of suppliers were audited, 3,617 of whom were interviewed. More than 80% of audits were conducted using the RBA Validated Audit Process (VAP).

Per the above description, between 2008 and 2020, a cumulative total of 792 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 12% of the total, with the medium-risk suppliers at 23%. We continued to carry out auditing activities in 2020 along these lines, auditing a total of 827 second-tier factories. In 2020, we also further deepened our implementation across the supply chain, extending our auditing activities to third-tier suppliers, of whom we conducted 520 audits in the year.

In 2021, we plan to conduct on-site audits of 70 first-tier supplier manufacturing plants, covering 140,000 direct employees and interviewing 2,500 other employees.

Number of Supplier Audited

Cumulative Total Audits

Direct Employees (10 thousand employees)

Cumulative Direct Employees (10 thousand employees)

Employees Interviewed

Cumulative Employees Interviewed

2020 Audit Results Analysis

From on-site audit results, we see that the greatest proportion of non-compliance occurred in labor issues, followed by, in decreasing order, health & safety, management systems, environmental issues, and ethics.

Distribution of Non-Compliance Found in 2020 Audits


RBA Code of Conduct Conformance

Labor

Conformance: 89%
Priority Non-Conformance: 1%
Major Non-Conformance: 9%
Minor Non-Conformance: 1%

Health and Safety

Conformance: 92%
Priority Non-Conformance: 0%
Major Non-Conformance: 6%
Minor Non-Conformance: 2%

Environment

Conformance: 95%
Priority Non-Conformance: 0%
Major Non-Conformance: 4%
Minor Non-Conformance: 1%

Ethics

Conformance: 98%
Priority Non-Conformance: 0%
Major Non-Conformance: 1%
Minor Non-Conformance: 1%

Management

Conformance: 95%
Priority Non-Conformance: 0%
Major Non-Conformance: 3%
Minor Non-Conformance: 2%

UNANNOUNCED AUDITS

Suppliers found to have concerns regarding child labor, falsification of records, discrimination issues, high levels of Priority Non-Conformance, or low audit scores will be listed as potential subjects of unannounced audits. Suppliers are notified of an upcoming unannounced audit 12 hours prior to the audit taking place and are not notified of the content of said audit. In 2019, one supplier with a lower audit score and higher risk in the previous year was subject to unannounced audits, with Acer more strenuously demanding they review practical action and take stronger measures to carry out their social and environmental management responsibilities.

In addition to unannounced audits, Acer also consults inspection results and conducts on-site technical seminars for suppliers that are struggling, sharing with them industry trends and offering guidance on improvements. Through continual monitoring of improvement progress over more than two years, the results have shone through.

IMPORTANT ISSUES AND TRACKING OF IMPROVEMENTS IN 2020

The main lapses in terms of labor rights were some problems around working hours and pay. The others are mainly related to hazardous substance control, emergency preparedness, and occupational safety, and gaps in potential hazard control implementation.
During the pandemic, it has made labor recruitment and deployment even more complicated and challenging due to the scarcity and lack of mobility of labor in many regions. Suppliers have generally used retention and newcomer referral bonuses to address short-term workforce shortages. In addition, some manufacturers have changed to a single-shift rostering method to boost flexibility of deployment to cope with the impact of urgent order demand. Some manufacturers are actively developing and introducing automated equipment to replace some labor. Acer also continues to implement bi-monthly attendance tracking and control for its OEMs to remotely monitor the effectiveness of the supplier attendance management mechanism.

Regarding the issue of labor remuneration, the main problem is the lack of current settlement of shortfall pay for departing employees. After much advocacy in recent years, this situation has been significantly improved. However, we found that a few companies had the same problems as those mentioned above. Based on previous experience, we shared our approach and called for immediate improvement.
In terms of environmental safety and health deficiencies, emergency response facilities, and hazardous substance management are the main areas of deficiency. As for the emergency response facilities, some manufacturers failed to consider fire escape routes when adjusting or changing the layout of factory equipment, resulting in a failure to update labeling or meet standards for emergency exits and the width of escape routes. Since there is a high potential safety risk for this type of deficiency, these manufacturers are required to take immediate corrective measures to rectify the situation. Regarding the management of hazardous substances, these lapses are mainly attributable to the fact that only the product name is marked on the vial container when it is re-packed and given to the production department, but the relevant composition information and emergency disposal instructions are not clearly marked. Having been corrected, the manufacturer has completed the labeling of the containers (including labeling of hazardous chemicals, names, composition, emergency disposal methods, emergency contact information, and manufacturer) to protect the health and safety of workers on site.

Acer issues Corrective Action Reports (CAR) to audited suppliers in response to any issues of non-compliance identified. Within 30 days of receiving such reports, suppliers must produce a written CAR of their own and submit it to Acer for approval by management. 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. In 2020, 126 deficiencies were identified in Acer’s document reviews and staff audits, and as of December 31, 2020, all suppliers had responded with action plans for improvement.

In 2021, 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%.
 

Labor

RBA Code of Conduct
A3.1 & A3.2 Working Hours

Main Issue:
Workweek exceeded 60 hours; workers were not allowed at least one day off in every seven

Corrective Action Verification:
.Move toward process automation and reduce dependence on manual labor
.Set up dedicated rework lines to minimize production disruptions
.Introduce multiple shifts and break roster mechanism
.Introduce a referral and retention bonus system to boost workforce stability
.Develop a “Work Hour Reduction Plan Progress Chart” and follow up on improvements with HR
.Flexibly deploy workforce support to each plant according to business needs
.Increase overtime control, strictly implement systems of “one day off in seven,” “advance holiday sign-in,” and “advance overtime” systems

RBA Code of Conduct
A4.4 Wages and Benefits

Main Issue:
Correctly calculate payroll deductions or submit them to the government in lieu of deductions

Corrective Action Verification:
.Promote the meaning and importance of social insurance payments during the onboarding of new employees
.Encourage current employees to participate in social insurance in accordance with the law to ensure that all employees are insured per the law
.Adjust payment basis promptly and in strict accordance with local regulations
.Increase commercial insurance to supplement employees’ insurance coverage for work-related injuries or accidents



RBA Code of Conduct
A4.2 Wages and Benefits

Main Issue:
Provide workers with a payroll they can understand and adequate information in a timely manner for verification of compensation accuracy

Corrective Action Verification:
.Amend payroll regulations to ensure that departing employees are paid on the same day per regulations
.Monitoring and managing the payroll and execution records of temp agencies









Health and Safety

RBA Code of Conduct:
B1.1 Occupational Safety

Main Issue:
Ensure occupational safety permits, licenses, and test reports are available and up-to-date.

Corrective Action Verification:
.When new plant structure approval process is behind schedule, monitor progress to completion
.Chemical warehouses need additional lightning protection facilities
.Loss of special work personnel requires expanded training of qualified reserves
.Insulation inspection for high-voltage operating facilities to be included in the regular inventory list.
.

RBA Code of Conduct:
B2.4 Emergency Preparedness

Main Issue:
Adequate, accessible, and properly maintained emergency routes, exits, and venues

Corrective Action Verification:
.Management procedures are supplemented with the following controls: After the re-layout of plants, safety routes and facilities should be reviewed during the acceptance process
.Should security door materials not meet the fire rating, they must be replaced in accordance with regulations
.Safety facilities and routes should have marked clearance zones to reduce human error

Environmental

RBA Code of Conduct:
C3.1 Hazardous Substances

Main Issue:
Use qualified suppliers for proper sorting, labeling, handling, storage, transportation, and disposal of hazardous substances/waste.

Corrective Action Verification:
.All hazardous substances are to be stored in secondary containers to prevent leakage
.Bottles must always be labeled with: Hazard chemical labeling, names, composition, emergency disposal methods, emergency contact information, and manufacturer
.Strengthen management procedures, with all empty hazardous chemicals drums centrally stored, labeled, and disposed of in a timely manner