ESG Report 2024

8.1.4 Supplier Chain Stability The Group is committed to building a stable, reliable, and flexible supply chain to meet customer demands and ensure product quality and delivery reliability. To ensure the stability of the supply chain, The Group has formulated the "Group Procurement Process Management Document", which clearly indicates that there should be at least three suppliers for core materials, with a preference for direct procurement from manufacturers. This approach aims to avoid the additional impacts on price or quality caused by intermediaries and to reduce reliance on a single supplier, thereby enhancing the flexibility of the supply chain. For materials with a relatively limited number of manufacturers, we allow a supplier range to be one or two, in order to ensure the stability and reliability of the supply chain. The Group will continue to closely monitor the operation of the supply chain and make corresponding adjustments based on market changes and demand fluctuations. We strive to establish strong cooperative relationships with suppliers, ensuring timely communication and information sharing to effectively address any potential supply risks. Meanwhile, we will actively explore new suppliers and technologies, continuously expanding and optimising the supply chain to ensure a stable supply of products and consistent quality. 8.2 Supplier Risk Assessment and Management 8.2.1 Supplier Risk Management We regularly monitor and evaluate suppliers’ corporate social responsibility (CSR) performance according to their risks exposure. Suppliers are classified into three risk levels, namely low, medium and high, based on a set of criteria including procurement amount, industries with high risks of labour issues and environmental pollution, the locations of operations, as well as third-party certifications of relevant CSR management systems. All suppliers are required to sign the Supplier CSR Agreement, pledging to comply with our Supplier Code of Conduct and Conflict Minerals Policy. Such obligation is also stated in our standard purchasing agreement. Various measures are also implemented to mitigate the supplier’s risks depending on our risk level assessment of the relevant suppliers, including submission of supplier CSR self- assessment and CSR audit. To further enhance the sustainability of the supply chain, we are also actively researching the establishment of a supply chain risk management organisation and joining pharmaceutical supply chain organisations such as the Pharmaceutical Supply Chain Initiative (PSCI), to establish recognised cooperative relationships with other companies in the industry. Together, we will evaluate supply chain and contractors risks, and undertake risk mitigation programs. All procedures are laid out in the Supplier CSR Risk Assessment Manual, in which our procurement teams assess the risk level of suppliers and closely monitor their performance regularly. To enhance the effective governance of supplier behavior, Inner Mongolia Company has developed and implemented the "Supplier Code of Conduct" at its Inner Mongolia . This code primarily outlines the social responsibility and environmental management requirements for suppliers, providing clear guidance on compliance with national and local laws and regulations, relevant international standards such as SA8000 for corporate social responsibility, and International Labour Organisation conventions. Suppliers are also expected to extend these requirements to their own supply chains and fulfill their social responsibilities accordingly. Company 48 Environmental, Social and Governance Report 2024 The United Laboratories International Holdings Limited