Coway maintains strong cooperative relationships with its suppliers in order to fulfill its environmental and social responsibilities and contribute to creating a better world through its innovations. We responsibly implement a supply chain sustainability management system and require our suppliers to fulfill their responsibilities in keeping with our standards.

Coway created and launched the “Coway Supplier ESG Management Improvement Support Program” in 2022 to continue our joint efforts with our suppliers to create a healthy and sustainable industry ecosystem that ensures not only the sustainability of our own operations but also that of the entire supply chain.

Coway has revised the “Coway Supplier Code of Conduct 2022” to reflect the UN Universal Declaration of Human Rights, the UN Guiding Principles on Business and Human Rights, other global guidelines such as those from the Electronic Industry Citizenship Coalition (EICC) and the Responsible Business Alliance (RBA), and the Labor Standards Act.

Aiming to promote corporate social responsibility and upgrade corporate ethics, the Code of Conduct contains basic principles regarding respect for labor and human rights, environmental responsibility and ethics with which Coway subcontractors must comply as partners. We also require our suppliers to sign a Code of Conduct to commit to sustainability and to prevent violations of the Code through self-assessments.

Supplier Code of Conduct

Coway manages risks through an annual ESG assessment of the ESG status of our key suppliers. We require all suppliers to comply with our Supplier Code of Conduct, and we conduct ESG diagnostics on key suppliers to identify potential ESG risks in the supply chain and ensure that improvements are made by suppliers that do not meet certain standards.

Coway selects its key suppliers with comprehensive consideration of transaction size, non-replaceability, and ownership of core technologies. In 2022, the total number of Coway suppliers was 112, of which 71 were managed as key suppliers.

Coway conducted the 2022 Supply Chain ESG Assessment, an independent assessment by a third-party expert organization (QESG), for its major suppliers. The ESG survey and assessment were divided into four areas, namely Environment, Human Rights and Labor, Ethics and Governance, and Product and Service Responsibility, according to global standards*. In addition, industry-specific assessment indicators were applied to evaluate ESG risk factors according to company characteristics. The survey and assessment were conducted through documentation and site visits for approximately two months, from August 26 to October 19, 2022.

The average overall ESG risk assessment score of Coway's suppliers was 53.8, which is a relatively high ESG level compared to the benchmark group.

Based on a total score of 100 points, the average score (= requirement fulfillment rate) of the 10 participating companies was 53.8 points, with a standard deviation of 12.3 points, which is 8.9 points higher than the average score of the benchmark* group evaluated in FY 2021.

The basic ESG risks in the categories of human rights, labor, environment, ethics and governance were well managed, but the assessment results were relatively weak for product and service responsibility, which is ESG in an industry context. The 10 companies included in Coway's ESG supply chain assessment consist of companies with higher sales volumes than the main benchmark companies and their ESG management was stable as expected, but there is room for improvement in social and environmental responsibility activities.

On human rights and labor, the 10 companies reviewed in Coway's supply chain ESG assessment exposed the need to expand the scope of human rights and labor management throughout the supply chain. On the environment, we identified a need to set and reduce medium- and long-term emissions targets and on ethics and governance, the need to expand disclosure. There was also a need to identify ESG opportunities related to product and service stewardship.

Coway's ESG Supply Chain Assessment 2022 was a pilot risk assessment project designed to identify the current level of ESG management among our suppliers and provide support.

Henceforth, Coway will expand the scope of the assessment to identify and manage risks across the supply chain in order to improve the quality of ESG supply chain management and operate a healthy supply chain.

Coway comprehensively assesses supply chain conditions, performance, and management stability and assigns extra points to suppliers with excellent innovation activities and communication. Based on the evaluation results, we categorize suppliers into grades A to D. Excellent suppliers in grades A to B are granted increased order volumes and membership in the council executive team. On the other hand, we impose penalties such as development restrictions and logistics reductions on weak suppliers in grades C to D, and we suspend business with suppliers who have earned a D grade for two consecutive years.

To identify non-financial risks, we also conduct an annual ESG assessment of our key suppliers. The ESG assessment includes five topics, namely labor, health and safety, environment, ethics, and conflict minerals, and each area is linked to Coway's Supplier Code of Conduct.

In April 2022, Coway conducted ESG diagnoses for a total of 73 suppliers. The results demonstrated that Coway's suppliers met an average of 66.8% of the diagnostic criteria, an increase of approximately 5 percentage points from last year.

We provide ESG evaluation indicators suitable for small and medium-sized enterprises to help suppliers introduce ESG management into their supply chains. Through supply chain ESG consulting, we measure the ESG management levels of Coway's suppliers compared to their peers and help them identify risks in advance to systematically respond to risks and strengthen competitiveness.

Coway reviews the results of supply chain ESG self-checks and ESG consulting to recommend corrective action plans to suppliers that need improvement, and encourages them to improve ESG risk factors based on the assessment results.

We restrict the use of conflict minerals obtained through illegal mining in conflict areas (posing risks of human rights abuses, exploitation of child labor, sexual assault, etc.) to ensure sustainable consumption and production that prioritizes human dignity. We strive to use legal minerals to ensure that restrictions on the use of conflict minerals do not cause economic harm to conflict areas.

To this end, we are in the process of continuously investigating the use of conflict minerals in raw materials/materials/components supplied to Coway and enhancing our management processes. In 2022, Coway signed the Compliance Agreement for the Non-Use of Conflict Minerals and conducted awareness-raising efforts targeting some of its major supply chains.

In 2023, our plan is to complete the signing of the Compliance Agreement for the Non-Use of Conflict Minerals across the entire Coway supply chain. We shall further strengthen the conflict minerals management process that connects Coway and its supply chain to continuously manage conflict minerals issues in the global supply chain.

The management of conflict minerals is overseen by the executive in charge of purchasing, who has the right to make purchasing decisions on raw materials/materials/components incoming to Coway. In addition, we include conflict minerals as an evaluation item in our supply chain ESG management and evaluation. Issues related to conflict minerals discovered in this process are reported to the ESG Consultative Group, and decisions are made through the ESG Committee agenda.

Coway considered the management of conflict minerals in its supply chain when establishing the existing chemical management system and completed preparations to effectively respond to regulations through processes such as registration, digitization, and approval of conflict and responsible minerals. From the second half of 2023, we plan to re-allow access to the conflict minerals management process in the chemical management system and continue to operate and upgrade the conflict minerals management process.