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Since September 2022, the Company has implemented a systematic energy management system and established an “Energy Promotion Team” to review energy targets and responsibilities, plan and improve management measures, ensure timely execution and progress tracking of energy management initiatives, and ensure operations comply with energy management system requirements. The purpose of obtaining ISO 50001 certification is to manage and control energy according to the ISO 50001 management system, efficiently manage energy usage, reduce greenhouse gas emissions, and achieve energy-saving and carbon reduction goals.

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The Company designates June and December of each year as Environmental Awareness Months, promoting various energy-saving and carbon reduction policies to employees. Specific annual electricity-saving targets are set for each production site, with performance tracked and disclosed on the Company’s website. Greenhouse gas inventories are conducted in accordance with ISO 14064-1, with verification entrusted to the third-party organization BSI.

Our company has a policy on the management of hazardous substances to prevent them from being mixed into our products in order to protect the global environment.

The procurement strategy comprehensively considers factors such as supplier quality, price, delivery schedules, and cooperation to select suitable suppliers. Since these raw material suppliers are not exclusive and there are at least two suppliers available for the same materials, the supply sources are relatively sufficient, thus avoiding the risk of over-concentration in procurement. Since 2016, including both customer bulk purchases and the Company’s own procurement of raw materials and parts, the proportion of local procurement has gradually increased from below 50% to 80–90%. In recent years, due to global climate change potentially causing disasters such as typhoons, droughts, floods, and disruptions in transportation and communications, the Company requires major raw material suppliers to prepare contingency plans to minimize the impact of incidents that may disrupt the Company’s supply. Suppliers are also required to manage their own suppliers accordingly and to comply with the Company’s integrity policy.

The main raw materials of our products, coming from major steel factories in the world, include iron coils/iron plates, iron pipes/iron bars, aluminum ingots, etc. All steel suppliers are required to provide certification documents and to guarantee that any metal used for their products or packaging, such as tungsten, tin, tantalum, gold, are not from Democratic Republic of the Congo and its neighboring countries or any mines controlled by the juntas in these areas. By implementing source control with the primary steel suppliers, we can effectively identify and trace the origin of our raw materials, thereby eliminating the use of conflict minerals.

Regarding raw material risks, our company has established a Risk Management Committee to regularly assess raw material risks. Major risks for our company include significant fluctuations in steel prices and material scarcity. Our risk mitigation strategy involves maintaining low price levels, establishing appropriate safety stock, and being flexible in responding to production demands. When facing material shortages, we promptly procure and urge suppliers to deliver goods. We also negotiate with customers to consider alternative materials, thereby reducing risks associated with critical raw materials.

The Company values the protection of the environment and society. We also choose companies with the same integrity. In addition to regular factory visits to assess the suitability of our suppliers, we also conduct annual evaluations of our existing vendors. In addition, all our suppliers abide by our honesty policy of not accepting gifts or commission and prohibiting transactions with related parties. If a supplier violates the policy, the Group will cease business relation immediately; this is to ensure reasonable quotations, the best quality, and the best service so that the Company and our suppliers can jointly strive to enhance corporate social responsibility.

Pre-qualification: We ask the vendors to fill out the “Vendor Information Form” for the preliminary qualification review. The staff at purchasing department then make a preliminary assessment of the vendors according to the “Vendor Information Form,” including their turnovers, main customer and products, and processing type. If a vendor passes the preliminary review, a field survey would be conducted; if not, its qualification would be cancelled.

Field investigation: The staff from the purchasing department notify the staff from quality assurance, and together they conduct field survey and audit regarding the vendor’s capabilities for manufacturing and quality management capability. The purchasing department fills out the results of the field survey on the “Vendor Field Survey Form” and “New Supplier Audit Form” and submit these documents to the authorized supervisor for review. Once the audit is approved, a “Qualified Vendor List” will be established; if not, other potential vendors will be cultivated.

To effectively manage the quality, delivery schedules, and cooperation of our subcontracted suppliers—and to ensure compliance with various laws and regulations, enhance operational performance, and strengthen competitiveness—we aim to create win-win opportunities for both our suppliers and Fengxiang. The Company conducts new supplier development and existing supplier evaluations every year to provide customers with safe products. On November 19, 2021, the Company completed the revision of its supplier evaluation and audit procedures, adding audit items such as waste disposal and hazardous waste handling processes, human rights protection, child labor, forced labor, and employee compensation and benefits

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In response to global climate change and to reduce the negative impact on the environment, the Company evaluates suppliers’ Sustainable in three areas: quality and price, environmental protection, and labor and human rights.