CDF continues to strengthen internal controls in procurement operations and supplier management. Having the "Enforcement Rules of Corporate Social Responsibility for Suppliers" in place, we continue to enhance measures for supplier management. Through pre-screening, performance management, on-site inspections, annual supplier evaluation and self-evaluation, unscheduled supplier CSR awareness promotion, and annual supplier commendation, we have selected and classified suppliers based on their professionalism, technical certifications, track record of performance and environmental friendliness, and awareness of human rights and climate-related issues. On selection, suppliers have to agree to comply with the statutory requirements for labor rights and human rights (including prohibition of using child labor), labor health and workplace safety and health, environmental protection, and ethical corporate management to create a balance in sustainable development of the economy, environment, and society by signing the "Supplier CSR Commitment Letter.

Suppliers are supervised and managed as per contract to prevent material adverse impacts, environmentally and socially, and to fulfill CSR. In case of failure to make suitable improvement in the given time frame on violations of CSR commitment which have significant impact on the environment, society, or labor rights, CDF may terminate, suspend and revoke the contract, impose penalties, and possibly disqualify under exceptional circumstance. In 2020, no supplier was penalized or disqualified by CDF; however, one supplier was found in the supplier evaluation to give false quotations and was therefore graded E and excluded from subsequent transactions.

As of 2020, 975 suppliers had signed the Supplier CSR Commitment Letter, representing an annual increase of 45.3%. From 2017 to 2020, 100% of our local major suppliers (Note) signed the Supplier CSR Commitment Letter. From 2018 to 2020, 100% of our new suppliers signed the Supplier CSR Commitment Letter.