Supply Chain

Supplier management

Supply chain management is a crucial part of our operations. We are committed to practicing the concept of sustainable development in supply chain management and building a sustainable supply chain. We practice responsible sourcing and reduce social and environmental risks in the entire industrial chain by empowering suppliers to integrate ESG risk concepts into supply chain management.

  2021 2020 2019 2018 2017
R&D cost ratio (as a percentage of revenue) 2.3% 2.5% 2.3% 2.5% 2.9%
Number of suppliers in China 357 698 Over 649 Over 645 Over 615
Numbers of suppliers in overseas countries 22 22 Over 20 Over 8 Over 8

During the financial year, the number of suppliers who obtained ISO 9001 quality assurance certification, ISO 14001 environmental management certification, ISO 45001 occupational health and safety management certification increased in comparison with that of 2020. Some suppliers have also adopted ISO 26000 social responsibility guidelines to enhance their understanding of social responsibility. Besides, we encourage our apparel suppliers to obtain the bluesign® certification to ensure that they are dealing with people, environment and resources in a responsible and sustainable manner, so as to ensure that the manufacturing process meets environmental, health and safety standards with harmful substances filtered out at the source of production. During the financial year, there were 45 apparel suppliers with the relevant certification.

Basic supplier evaluation criteria includes:
  • Performance and scores in three major areas: credibility, compliance and financial stability;
  • Requirement that the supplier has R&D capabilities, production management capabilities and a quality control system that meets industry standards, in each case from product type, price and company size perspectives;
  • Certification of China’s production and quality system, and expectation of certification by other international standards and certification systems;
  • Satisfaction of background check questionnaire requirements; and
  • Due diligence on all suppliers.

We encourage suppliers to improve their corporate social responsibility and ESG management. To this end, we plan to incorporate ESG performance, such as labor rights, human rights protection and green production, into our supply chain management system and going forward give preference to suppliers with excellent ESG management performance.

Furthermore, to enhance engagement and communication with suppliers, we organize seminars on a regular basis, and invite suppliers to participate in outdoor activities with us to build mutual trust and support, achieving win-win collaborations. During the financial year, our supplier management department hosted a supplier assessment seminar, and evaluated the capabilities and potential of each supplier.

Supplier Labor Management

To improve the labor management of suppliers, we require suppliers to adhere to ten basic requirements, including compliance with operational standards, respect for labor rights and interests, and protection of employees’ occupational safety, health and wellbeing. We encourage suppliers to improve supply chain efficiency and reduce labor risks through measures such as craftsmanship improvement or equipment upgrade.

Categories Basic principles
Personnel management system We require our suppliers to sign employment contracts with all their full-time employees, and sign service contracts with their interns and temporary employees, alongside the signing of confidentiality agreements.
Social responsibility management system Suppliers should have working hour and salary management system in place, and encourage their employees to actively obtain competency certification for career development.
Prohibition of child labor Suppliers should require their employees to provide proof of age prior to employment to ensure they meet local minimum working age requirements and to prevent the use of child labor.
Prohibition of forced labor We require our suppliers to closely monitor their employees’ working hours compliance, respect their rights to enter, depart and take leave freely; suppliers should be firmly against forced labor.
Anti-discrimination We require our suppliers to treat all employees equally, and offer consistent treatment in terms of employment, salary, other benefits and promotion opportunities irrespective of their social status, and protect the job opportunities of pregnant employees and care for working mothers.
Working hours We require our suppliers to record actual working hours of employees and provide them with corresponding salary.
Disciplinary measures We require our suppliers to establish and promote a labor code of conduct to prohibit and prevent violations of laws and regulations such as corporal punishment, coercion, exploitation, and sexual coercion.
Remuneration and benefits Suppliers should pay full salary to employees, ensure their salary is not lower than the local minimum standard, and guarantee that employees are entitled to statutory holidays and leaves. We require our suppliers to provide endowment insurance, medical insurance, unemployment insurance, work related injury insurance, maternity insurance and housing provident fund to their employees.
Health and safety We prohibit our suppliers from constructing three-in-one factories with work areas, warehouses and quarters; suppliers should ensure that different types of premises are equipped with proper temperature, light and ventilation; we require our suppliers to maintain the safety and hygiene of canteens, quarters and factories; suppliers should ensure that all operating premises are legally permitted; suppliers should formulate and request employees to strictly comply with safety rules and regulations as well as safety operation guidelines; we require our suppliers to equip their employees with the necessary safety supplies; we require our suppliers to regularly inspect their work environments and equipment safety; suppliers should organize safety training and emergency drills to ensure the health and safety of their employees.
Complaints and communication Suppliers should provide effective channels for employees’ complaints and feedback, and improve the whistleblowers protection mechanism and formulate whistleblowers protection measures against retaliation.