Supplier Evaluation

Through supplier screening, regular evaluation and coaching mechanisms, YFY maintains continuous visibility into supply chain quality, delivery, cost and ESG-related risks. In addition to identifying significant suppliers by transaction importance, the Company incorporates environmental, social, governance and external risks into its management approach, so that supplier evaluation serves not only as a procurement performance management tool but also as an important mechanism for strengthening supply chain resilience and sustainability management capability.

Supplier Screening and Risk Tiering

YFY assesses suppliers on the basis of business relevance and material criticality and the potential impacts they may have on the environment, society and internal governance, while also incorporating external specific risks by country (geopolitics, regulation, infrastructure, economy), sector (industry structure, business cycle, technology, labor, energy or pollution) and commodity (supply, price, quality, raw material sourcing, deforestation and biodiversity), in order to determine each supplier’s importance and risk level on an overall basis.

In 2025 the Company had approximately 2,000 transacting suppliers; of these, 42 were identified as significant suppliers, accounting for more than 62% of annual procurement. The 42 significant suppliers comprised 29 significant Tier-1 suppliers and 13 significant non Tier-1 suppliers; procurement spend on significant Tier-1 suppliers represented 38.6% of the total. For significant suppliers, YFY maintains visibility into supply risk and enhances partner management capability through business strategy exchanges, sharing of ESG knowledge and practical experience, periodic audits and, where necessary, quarterly business reviews (QBR).

Regular Supplier Evaluation

YFY has established a Regular Supplier Evaluation Procedure, under which evaluations are conducted in principle once in the first half and once in the second half of each year. Depending on the procurement category and the nature of the cooperation, the evaluation reviews each supplier’s overall performance in fulfilling its obligations and in management, covering the following dimensions:

• Product and Service Quality: reviewing product quality, service levels and conformity with procurement and usage requirements.
• Delivery Timing and Quantity: assessing on-time delivery, quantity accuracy and supply stability.
• Cost Management Capability: assessing cost control and transactional competitiveness.
• Supplier Responsibility: incorporating supplier-responsibility and related management topics as a basis for assessing risk and the quality of cooperation.

Evaluation results are used not only to determine supplier performance but also as an important basis for identifying potential supply risks and improvement opportunities and for subsequent procurement decisions.

2025 Supplier Evaluation Results

In 2025, YFY completed 1,018 supplier evaluations, covering approximately 50% of all suppliers. Suppliers are classified into Grades A, B and C according to their evaluation scores:

No supplier was rated as requiring immediate improvement in 2025.

Improvement and Exit Mechanism

For suppliers whose evaluation results fall short of requirements, YFY's procurement department issues a Supplier Coaching Improvement Form, requiring the supplier to propose corrective actions, and uses a coaching mechanism to help clarify the root causes of the issues, set quantified improvement measures and track improvement results. If a supplier still fails to meet the qualifying standard after improvement, the Company may revoke its approved-supplier status based on the evaluation results and the risk of continued cooperation, forming a closed loop of evaluation → improvement → tracking → reassessment / exit in supplier management.

Supplier Sustainability Assessment and Development

YFY integrates supplier sustainability performance into its supply chain management. In addition to regular supplier evaluations, YFY uses sustainability questionnaires, supporting-document reviews, human rights risk identification and corrective-action support to assess potential negative environmental and social impacts arising from suppliers’ operations. These measures help suppliers strengthen their management capabilities, reduce operational, regulatory and reputational risks across the supply chain, and establish resilient and responsible business relationships.

Based on its Supplier Corporate Social Responsibility Code of Conduct and Due Diligence Statement, YFY references the Responsible Business Alliance (RBA) Code of Conduct and relevant sustainability assessment indicators to translate requirements concerning labor and human rights, health and safety, environmental protection, and business ethics into supplier assessment criteria. The assessment framework also incorporates sustainable procurement, information security, personal data protection, and nature-related considerations to address the characteristics and management needs of YFY’s supply chain.

1. Supplier Review and Assessment Scope

YFY’s Procurement Department and ESG Office jointly implement supplier sustainability assessments. The Procurement Department manages supplier communications, questionnaire distribution and collection, and integration with procurement management. The ESG Office supports the development of assessment criteria, reviews suppliers’ explanations and supporting evidence, and consolidates sustainability and human rights risk information.

Assessments prioritize significant Tier-1 and non-Tier-1 suppliers and are implemented in phases to progressively expand coverage. The updated Supplier Code of Conduct has been incorporated into the supplier management system for new suppliers to sign and has been communicated to existing suppliers, providing a common basis for communicating requirements and conducting subsequent assessments.

2. Sustainability Questionnaire and Evidence Review

YFY has developed a supplier sustainability self-assessment questionnaire comprising 40 questions across four areas. Each area includes fields for supplier responses, explanations and supporting evidence, as well as YFY’s review responses, scores and remarks, linking supplier self-assessment with company review.

Suppliers must respond based on their actual practices and provide explanations and supporting evidence, such as current practices, policy or procedure names, certificate numbers, document titles, or corrective measures. Through desk assessments, YFY reviews responses and supporting documentation against assessment requirements and records its findings and any matters requiring clarification. The assessment therefore combines supplier declarations with YFY’s verification of supporting evidence.

YFY also combines document reviews and on-site assessments through its subsidiaries’ supplier audit mechanisms to examine suppliers’ management practices. Its subsidiary, YFY Consumer Products, conducts periodic supplier audits through its Quality Assurance and Procurement departments, using document reviews and on-site assessments. The audit scope covers environmental protection, occupational health and safety, labor and human rights, and information security and privacy protection. These second-party assessments, conducted by company personnel, examine whether suppliers’ actual practices meet management requirements. Joint reviews involving relevant functions and suppliers, together with corrective-action support and ongoing follow-up, help suppliers strengthen their management capabilities.

3. Assessment Scoring and Classification

Each questionnaire response is scored as follows: “Yes” receives one point, “No” receives zero points, and “N/A” is excluded from the denominator for the relevant assessment area. Each area’s score is calculated as the percentage of applicable items receiving a “Yes” response. The four areas each account for 25% of the total score. The questionnaire uses the following self-assessment ratings as an initial basis for identifying management gaps and improvement needs:

YFY separately records review scores and remarks based on the evidence submitted by suppliers and considers findings in each assessment area, legal compliance and human rights risk information when determining subsequent improvement needs. Overall scores and individual material issues are reviewed separately to ensure that strong performance in other areas does not obscure specific environmental, health and safety, or human rights risks.

4. Human Rights Risk Identification

In addition to the sustainability self-assessment, YFY uses a separate labor and human rights risk identification form covering six topics: forced labor, working hours, wages and benefits, young workers, occupational health and safety, and freedom of association and collective bargaining.

Suppliers assess impact severity and likelihood on a scale of one to five. The two scores are multiplied to determine the risk score. Scores of 16 or above are classified as high risk, scores of nine to 15 as medium risk, and scores of eight or below as low risk. This assessment is separate from the overall sustainability self-assessment score and is used to identify potential human rights risks and inform further review and discussions on improvement measures.

5. Corrective-Action Support and Follow-Up

YFY links assessment findings with its existing supplier improvement support mechanism. Where evaluation results are unsatisfactory or individual items require improvement, the Procurement Department and relevant functions communicate management requirements to suppliers and require corrective, preventive or improvement measures. Improvement deadlines and follow-up arrangements are determined according to the nature of the issue.

Support focuses on helping suppliers clarify issues and their root causes, develop actionable and measurable improvement measures, and provide evidence demonstrating completion. Based on suppliers’ responses and follow-up results, YFY evaluates their management capabilities and suitability for continued cooperation. Where necessary, YFY takes action concerning approved-supplier status or business relationships in accordance with its supplier management procedures.

6. Supplier Development and Capacity Building

Through its Supplier Code of Conduct, explanations of sustainability requirements, ESG knowledge sharing and corrective-action support, YFY helps suppliers understand assessment procedures, evidence requirements and key management expectations, promoting the integration of sustainability requirements into daily operations.

Supplier development includes information provision and support for implementing improvements. Based on management gaps identified through assessments, YFY helps suppliers strengthen their capabilities in environmental protection, labor and human rights, health and safety, and business ethics. By combining assessment, communication and follow-up, YFY encourages suppliers to progress from meeting basic requirements to improving their sustainability performance.

To strengthen suppliers’ technical capabilities, YFY’s subsidiary, Chung Hwa Pulp Corporation (CHP), supports its suppliers Tecom and Shin Foong through an upstream digitalization support program, helping them establish predictive equipment maintenance and strengthen automation controls. This collaboration extends supplier development to equipment maintenance and process control capabilities. By providing digital technology support, CHP helps suppliers strengthen operational management and lays the foundation for further improvements in resource efficiency and sustainability performance.

7. Implementation Results and Performance Monitoring

YFY monitors assessment and development results using unique supplier counts. A supplier receiving multiple assessments or support activities is counted only once under each indicator. Based on the consolidated results for 2025, YFY identified 42 significant suppliers, of which 10 completed desk assessments, representing an assessment coverage rate of 23.8%. All 42 significant suppliers received support through supplier development measures.

Note: Assessment coverage is calculated by dividing the number of significant suppliers assessed by the total number of significant suppliers. Findings concerning substantial negative impacts apply only to suppliers assessed during the reporting year and do not indicate that all suppliers are free of risk. Regular supplier evaluation, human rights risk identification, and sustainability desk assessments are monitored separately according to their respective scopes.

YFY will continue to expand assessment coverage among significant suppliers, strengthen evidence review, risk identification and improvement follow-up, and enhance supply chain sustainability management capabilities and resilience through supplier development measures.

Continuing to Strengthen Supply Chain Risk Management

YFY will continue to enhance supply chain transparency and risk-identification capability through supplier tiering, regular evaluation, coaching for improvement, significant-supplier management and ESG risk assessment. By establishing long-term cooperation and continuous improvement mechanisms with suppliers, quality, supply stability, environmental responsibility and human-rights management are jointly incorporated into procurement decisions, reducing the risk of operational interruption and value chain risk.

Raw Material Procurement

YFY relies primarily on fiber-based raw materials such as wood chips, pulp and recovered paper as its main production resources. Raw-material sourcing affects not only product quality and supply stability but also forest resources, biodiversity, carbon management and supply chain resilience. The Company therefore continues to advance responsible and green procurement, giving priority to raw materials whose sources are traceable and which carry third-party certification or meet sustainability management requirements, while reducing the environmental and operational risks of raw-material sourcing through recovered fiber, local procurement and supplier collaboration.

Responsible Raw Materials and Renewable Materials

In 2025, renewable materials accounted for 96.5% of the raw materials used for the products and packaging of YFY's three business groups, consisting mainly of wood chips and timber, pulp, base paper, cartons, paperboard, recovered paper and starch; recovered paper accounted for approximately 36.2% of raw material use. More than 90% of the raw materials used by the Containerboard and Packaging Group for pulp production came from recovered paper, continuing to reduce demand for virgin resources through the use of recycled fiber. Principal raw-material procurement volumes in 2025 included approximately 920,000 metric tons of wood chips, 303,000 metric tons of pulp, 1.649 million metric tons of recovered paper, and 1.183 million metric tons of base paper, cartons and paperboard. Through dual-track management of virgin and recovered fiber, YFY continues to improve the efficiency of circular raw-material use while maintaining product quality and supply stability.

Forest Certification and Raw Material Traceability

To reduce the risks of illegal logging, forest degradation and biodiversity loss that may arise in the wood and pulp supply chain, YFY gives priority to procuring forest raw materials carrying third-party certification such as FSC or PEFC, and continues to improve raw-material traceability. In 2025, 95% of raw materials procured by YFY Procurement were FSC/PEFC certified; of these, 95.71% of wood chips purchased by Chung Hwa Pulp Corporation in Taiwan were FSC/PEFC certified, and 100% of externally purchased imported pulp was certified. The Company continues to strengthen management of forest raw-material sources through Chain of Custody certification and supplier documentation management. YFY also continues to monitor international trends in forest and supply chain regulation, strengthening its capacity to respond to forest risks and international market requirements through certified raw materials, source traceability and supplier management.

Recovered Fiber and Circular Procurement

Recovered fiber is an important raw-material source for YFY's circular economy. The Company works with licensed resource recycling operators to establish source-management mechanisms for recovered paper, and keeps paper fiber circulating throughout the product life cycle through recovery, reprocessing and reuse. In 2025, recovered paper procurement totaled approximately 1.649 million metric tons, continuing to serve as an important raw-material source for industrial paper and related products. Increasing the proportion of recovered fiber used not only reduces the consumption of virgin resources but also lowers the need for final disposal of waste paper, returning paper fiber to the production cycle.

Green Procurement

YFY continues to incorporate environmental criteria into procurement decisions, giving priority to raw materials and products that are environmentally certified, renewable or recyclable. In 2025, green procurement of raw materials reached NT$10.3 billion, representing approximately 55% of raw-material procurement. The Company will continue to raise the green procurement ratio for wood chips, pulp and other principal raw materials, and to reduce forest and environmental risks through third-party certification and supplier collaboration. In 2025, the green procurement ratio for wood chips exceeded 92%, while the green procurement ratio for pulp was maintained at 100%.

Local Procurement

In addition to international raw-material sources, YFY continues to explore local procurement opportunities in order to shorten supply chain distances, strengthen supply stability and support economic development in the regions where it operates. In 2025, local procurement accounted for approximately 52% of procurement spending, and local suppliers accounted for more than 93% of suppliers by number. The Company will continue to increase opportunities to work with local suppliers, while giving due regard to quality, cost, supply capability and sustainability conditions.

Raw Material Risk Management

In response to external risks including geopolitics, natural disasters, war, logistics disruption and raw-material price volatility, YFY continues to strengthen raw-material supply management, including:

• Monitoring international market conditions and raw-material supply and demand trends;
• Consolidating Group procurement of key raw materials to improve bargaining position and supply stability;
• Using the supply chain management platform to track demand forecasts and inventory status;
• Working with licensed resource recycling operators to manage recovered-fiber sources;
• Deepening strategic collaboration with key international suppliers;
• Strengthening logistics, warehousing and supply chain information management;
• Continuing to digitalize procurement processes to improve the timeliness and accuracy of information.

Through responsible procurement, third-party certification, the use of recycled raw materials and risk management, YFY continues to build a circular management model spanning raw-material sourcing – procurement – production – recovery and reuse, so that raw-material management addresses forest conservation, resource efficiency, supply stability and long-term competitiveness at the same time.

Product Responsibility

YFY regards product quality, product safety and the customer experience as an important part of a responsible supply chain, and continues to reduce the potential environmental and social impacts of its products across raw-material selection, product design, manufacturing, product information and safe use, customer service and life-cycle management.

As an investment holding company, YFY does not sell products directly to end customers. Its Forest, Pulp & Paper Group, Containerboard and Packaging Group and Consumer Products Group each establish customer communication, satisfaction survey, complaint-handling and product/service improvement mechanisms according to product characteristics, customer type and market conditions, with results consolidated and tracked by YFY.

Product Safety and Quality Management

YFY incorporates product safety and environmental considerations into its product development and manufacturing processes, managing raw-material composition, production processes, logistics, product use and end-of-life, and continuing to increase the use of renewable raw materials, resource efficiency and circular value.

In terms of product safety, YFY documents in detail the composition and physicochemical properties of its raw materials and products, tests for restricted substances and applies legally required product labeling and third-party testing. Depending on product characteristics, this management covers domestic and international requirements including the EU Restriction of Hazardous Substances Directive (RoHS), the EU Substances of Very High Concern (SVHC) list, food-grade requirements (FDA and TFDA), the Toxics in Packaging Clearinghouse (TPCH) and non-fluorescence testing; YFY paper products also pass government Eco-label certification. Suppliers are also required to provide raw-material test reports, and plants conduct regular sampling inspections to strengthen product safety management. In 2025, there were no complaints or warnings relating to the health and safety of products, services and customers, product labeling or marketing communications.

Customer Communication and Service

YFY's customer-relationship management principles are rapid response, transparent handling and continuous improvement, providing diverse and traceable communication channels according to the needs of different customers and consumers. Through customer service hotlines, online real-time and intelligent customer service, email, online contact forms, business visits, customer meetings, product briefings and other on-site exchanges, each business group receives questions and suggestions relating to products, purchasing, use and service, allowing customers to select the channel appropriate to their needs and the urgency of the matter. Customer-service and sales records also serve as the basis for case tracking and subsequent product and service improvement.

Customer Service and Complaint Handling Process

YFY has established mechanisms for the intake, analysis, improvement, response and tracking of complaint cases. After a customer raises an issue, customer service or the sales unit confirms the issue and the customer’s requirements and records the case, which is then assigned according to its nature to quality assurance or the relevant responsible unit for cause analysis and the development of improvement and preventive measures. YFY Consumer Products has also established Customer Complaint Handling and Consultation Service Procedures, providing immediate consultation and a complete grievance process to protect consumer rights and continuously optimize the customer product experience.

On handling timelines, the receiving unit communicates the expected schedule by case type: general inquiries are answered immediately or within one working day by customer service or sales, while for complaints the quality-assurance or responsible unit provides a progress update after preliminary analysis, ensuring the handling process is transparent to the customer.

Handling results are explained to the customer by customer service or the sales unit, covering the cause, improvement measures and subsequent handling, and the case is closed only after customer confirmation. Each business group follows its quality-management and complaint-handling systems, with reference to ISO 10002 guidance on customer satisfaction and complaint handling. When production-site quality-management systems undergo third-party verification against standards such as ISO 9001, customer satisfaction, complaint handling and corrective and preventive measures are also included in the audit scope.

Service Improvement for Customers with Disabilities and Elderly Customers

For consumer products and other products that may reach end users, YFY provides diverse and accessible customer-service channels to reduce communication barriers for persons with disabilities, older customers and people unfamiliar with digital tools. Telephone hotlines, email, online contact forms, online real-time customer service, and business and on-site service contacts allow customers and consumers who cannot conveniently use a single channel to select an appropriate method to obtain product and service information and to provide feedback on their experience and views.

Customer Satisfaction Management

In line with their differing operating and market characteristics, the business groups regularly collect the product and service experience of customers and primary brand purchasers using paper questionnaires, electronic questionnaires and online surveys. Surveys are conducted annually, semiannually, quarterly or monthly according to each business group’s needs, serving as an important basis for assessing the quality of products, services and customer relationships.

In 2025, the three business groups returned a combined 3,218 valid questionnaires, of which 3,033 met the satisfaction standard defined by each business group, for overall customer satisfaction of 94.3%, with operating-site coverage of the survey data reaching 100%. Overall customer satisfaction has remained above 90% for the past four years and above 94% in both 2024 and 2025.

Turning Customer Feedback into Product Improvement

Customer feedback is not only the end point of handling a service case but also the starting point for continuous product and service improvement. Each business group periodically consolidates customer satisfaction surveys, customer-service records, business visits, complaint cases and market feedback as the basis for improvements in product quality, delivery, packaging design, service processes and product development.