Supply Chain Management
CAL has implemented sustainable supply chain management since 2014 and later established the Supply Chain Task Force to be in charge of sustainable supply chain management covering aviation supplies, jet fuel, in-flight catering, and service procurement as well as general affairs. In addition to setting the long-term sustainable development goals in accordance with the UN's Sustainable Development Goals (SDGs), CAL has formulated the "Sustainable Supply Chain Management policy statement and " Supplier code of conduct " in accordance with international standards, including the Global Reporting Initiative (GRI), ISO 26000, United Nations Global Compact (UNGC), and International Labour Organization (ILO). The sustainable supply chain management measures include risk review mechanisms, audits, and supplier conferences that facilitate negotiations with suppliers. These measures are reported to the Corporate Sustainability Committee for review every quarter.
CAL Value Chain
Compared with other industries, the aviation industry is unique in respect of safety concerns. As of the end of 2022, the CAL Group had established 29 joint ventures in business sectors including air transport, ground handling service, tourism, aerospace technology, air transport support, and logistics and warehousing. By integrating their strengths, the Group will optimize its overall quality of service, competitiveness and value chain.
CAL Value Chain
Sustainable Supply Chain Management
CAL has been promoting sustainable supply chain management since the beginning of 2014. Subsequently, we established a Joint Creation Value Team for important procurement categories, including “aviation materials, aviation fuel, in-flight meals, service procurement, and general business affairs”; formulated long-term sustainability goals based on the United Nations’ Sustainable Development Goals (SDGs); and established China Airlines’ Sustainable Supply Chain Management Policy Statement and Supplier Code of Conductwith reference to the Global Reporting Initiative (GRI), ISO 26000, United Nations Global Compact (UNGC), International Labour Organization (ILO), and other international standards. CAL has also established a risk investigation mechanism and performed audit operations. If a supplier violates the terms of the Supplier Code of Conduct, the Company may terminate the partnership. We also organize annual supplier conferences to improve suppliers’ sustainability risk awareness and regularly report the management results to the Corporate Sustainability Committee for follow-up inspection on a quarterly basis. The President is the highest-ranking decision maker of the Corporate Sustainability Committee.
Supply Chain Management Objectives and Plans
CAL's main business and supply chains are located in Taiwan, which has the highest rate in the world with 46% of suppliers and 35% of CAL's total procurements. It is followed by the Americas, Asia, Europe, and Oceania. In 2022, the outbreak of the Russo-Ukrainian War, respite from the COVID-19 pandemic, gradual opening of borders across the world, and reemergence of tourism have led to a labor shortage in airports of different countries. We continue to conduct risk assessments in each region to verify whether our suppliers' upstream operations involve Russia and whether our partner suppliers use illegal forced labor in terms of human rights issues. CAL shall prioritize the selection of suppliers with good ESG performance to ensure the stability of the supply chain. CAL also uses the SAQ for sustainability risk assessments each year to track the identified actual social impact in the supply chain and observe whether there is potential negative social impact and regional political and economic risks.
Regional Distribution of Tier-1 Suppliers
| Overview of Global Suppliers ( Number of Suppliers ) | ||
|---|---|---|
| Taiwan | 363 | 46% |
| Asia (Other Than Taiwan) |
117 | 15% |
| Americas | 206 | 26% |
| Europe | 99 | 13% |
| Oceania | 7 | 1% |
| Total | 792 | 100% |
Proportion of Procurement from Key Suppliers
| Number of Tier-1 Suppliers | Number of Critical Tier-1 Suppliers | Proportion of Total Procurement Amount from Critical Tier-1 Suppliers | |
|---|---|---|---|
| Aviation Parts | 601 | 22 | 80% |
| Aviation Fuel | 29 | 6 | 67% |
| In-Flight Catering | 24 | 7 | 96% |
| Ground Handling Service | 26 | 1 | 27% |
| General Products | 112 | 8 | 78% |
| Total | 792 | 44 | 68% |
Regional Distribution of the Procurement Amount from Tier-1 Suppliers
| Overview Of Global Suppliers ( Procurement Amount ) | |
|---|---|
| Taiwan | 35% |
| Asia (Other Than Taiwan) |
19% |
| Americas | 32% |
| Europe | 12% |
| Oceania | 2% |
| Total | 100% |
Risk Assessment of Supply Chain Sustainability
To strictly control supply chain sustainability risk, CAL has conducted a survey for supply chain sustainability risk and formulated our Sustainability Assessment Questionnaire (SAQ) since 2015 based on international initiatives and evaluations such as the GRI Standards, ILO, UNGC, Dow Jones Sustainability Index (DJSI), CDP, and the Universal Declaration of Human Rights. CAL also established a sustainable supply chain management system to improve the accuracy of the results of the SAQ in 2017, the functions of which include specifying the definition of critical suppliers, conducting the Sustainability Assessment Questionnaire (hereinafter SAQ), formulating regulations for review and designing relevant forms, setting different goals for short-term, mid-term, and long-term reviews, and improving the follow-up tracking mechanism. CAL continued to strengthen supply chain management in 2022 . CAL identified supplier risks at the beginning of the year, conducted due diligence in the middle of the year, and reviewed the improvements at the end of the year. Supplier training was also organized to fully control suppliers with high risks, and on- site audits were conducted further to reduce supply chain sustainability risks.
Procedure of Identifying Risk of Supply Chain Sustainability
Supply Chain Sustainability Risk Assessment Implementation Status
| Suppliers | 2021 | 2022 |
|---|---|---|
| Tier 1 Suppliers | 708 | 792 |
| Critical Tier 1 Suppliers (Share of Total Procurement Spent %) | 38(62%) | 44(68%) |
| Critical Non-tier 1 Suppliers | 3 | 3 |
| Risk Assessment of Supply Chain Sustainability | 2021 | 2022 |
| Tier 1 Suppliers Assessed Annually | 38 | 44 |
| Critical Non-tier 1 Suppliers Assessed Annually | 3 | 3 |
| Tier 1 Suppliers Assessed in the Last 3 Years (Percentage of Total Tier 1 Suppliers) | 162(22.88%) | 145(18.30%) |
| Critical Non-tier 1 Suppliers Assessed in the Last 3 YYears (Percentage of Total Critical Non-tier 1 Suppliers) | 5(100%) | 5(100%) |
| High-Risk Suppliers | 2021 | 2022 |
| Number of Tier 1 Suppliers Classified as High-risk | 0(0%) | 0(0%) |
| Number of Critical Non-tier 1 Suppliers Classified as High-risk | 0 | 0 |
2022 Risk Survey of Supply Chain Sustainability
Unit: Score
As for the SAQ, CAL conducted the SAQ with 44 suppliers in 2022, accounting for 68% of the total procurement amount of all critical tier-1 suppliers with a response rate of 75%. In addition, CAL also surveyed 3 critical tier-2 suppliers with a response rate of 66.67%. According to the results of the SAQ, the average score of the suppliers in 2022 was 92.00. The average scores in the four dimensions (please refer to the note) were between 86 and 97 points, showing that most of the suppliers have incorporated the concept of sustainability into these four dimensions. The scores in the four dimensions all improved compared to the previous year.
Note: “Governance” includes ethics and regulatory compliance. “Environment” refers to environmental protection. “Society” includes human rights and labor conditions, and occupational safety and health. “General” includes quality and safety and information security.
Overall Performance of Supply Chain Sustainability
In 2022, the score of supply chain sustainability risk assessment was 92.00 points.
- Governance : The score (97.28) was an increase compared to the previous year (94.87) and has been the highest score overall. It shows that critical suppliers generally have internal management mechanisms.
- Environmental : The score (86.48) was a significant improvement compared to the previous year (79.18) and it demonstrated the suppliers' increased resolve for responding to environmental issues. We will continue to ask suppliers to conduct environmental impact assessments and propose related environmental policies.
- Society : Although the score (89.64) was an improvement compared to the previous year (85.10), there remains room for improvement. This area will still be the focus of our support for suppliers.
- General : The score (94.60) was higher compared to the previous year (93.53), and the second highest score overall. We will continue our requirements and regularly review suppliers to ensure that they have set up quality management and information security systems.
Sustainable Supply Chain Assessment
According to the SAQ analysis results, there were no high-risk suppliers in 2022 but 1 critical tier-1 suppliers exhibited both high environmental and social risks, 3 critical tier-1 suppliers exhibited high environmental risks, and 1 critical tier-1 supplier exhibited high social risks. To learn more about the implementation status of sustainable practices of our supply chain partners, CAL has set up different audit plans for sustainable supply chain management. From 2020 to 2022, 52% of the critical tier-1 suppliers’ audit targets have been completed. CAL’s audits are conducted on-site, in written format, or by correspondence. The method is determined based on the supplier's location, characteristics, and border control measures in response to COVID-19. The audit survey in 2022 showed that suppliers require improvements such as the establishment of an environmental management system, classification and recycling for recyclable waste, monitoring suppliers' environmental performance, and providing regular training on environmental management and regulations for employees. After CAL requested follow-up and training, most of the critical tier-1 suppliers have made significant improvements in environmental management. No critical tier-1 suppliers have terminated the partnership in 2022. CAL will continue to enhance support, follow-up, and requests for improvements for these environmental and social issues.
Supply Chain Sustainability Assessment Implementation Status
| Suppliers (Critical Tier-1 and Non-tier-1) (Proportion of the Total Number of Critical Suppliers) |
2021 | 2022 |
|---|---|---|
| Suppliers Assessed via Desk Assessments or On-site Assessments | 32(78.04%) | 9(20.45%) |
| Assessed in the Past 3 Years | 21.96% | 79.55% |
| Overall Ratio | 100% | 100% |
| High-risk Suppliers (Proportion of the Total Number of High-risk Suppliers) | 2021 | 2022 |
| Assessed in the current year | 0% (No high-risk suppliers in the current year) | 0% (No high-risk suppliers in the current year) |
| Assessed At Least Once Every 3 Years | 0% | 0% |
| Overall Ratio | 100% | 100% |
| High-risk Suppliers with Corrective Measures and Completed Improvements | 0% (No high-risk suppliers in the current year) | 0% (No high-risk suppliers in the current year) |
Performance of Supply Chain Sustainability
Green Procurement
In 2022, CAL’s green procurement amount increased by 43% compared to 2021. CAL shall continue to promote green procurement. We use products with environmental protection label certification for paper products used on aircrafts (including paper towels and toilet paper) and A4 paper used in offices and continues to improve system operations to reduce the use of paper. CAL also encourages units to incorporate the environmental impact of the service / product life cycle during planning and design and take real actions to reduce the impact on the environment.
Green Procurement
Unit: TWD million
Note: Green procurement includes Category I, II, and III products prescribed in the Regulations for Priority Procurement of Eco-Products (dated January 15, 2001).
Local Procurement
Taiwan is a crucial hub of CAL. Except for certain aviation equipment, parts, and operations that are subject to international standards, CAL has managed to source parts from local suppliers (Taiwan, Penghu, Kinmen, and Matsu). We purchase high-quality agricultural products from Taiwan such as bananas, sugar apples, and pineapples. The welcome drink for business class passengers is made with local agricultural products from Taiwan and we also launched exclusive in-flight vegetarian dishes. Our partners support local produce and select the best ingredients, which are cooked with meticulously designed processes to reduce pollution in the environment and food waste, and thereby ensure sustainability with low-carbon and clean vegetables. The value of local procurement in 2022 rose by 54.04% compared to 2021 and the percentage of local suppliers remained 98%.
Unit: TWD million
Unit: Suppliers
Note 1: The statistics include the Administration Division and the maintenance park and exclude the independent procurement of the fleet, In-flight Supply Chain & Marketing Division, and the Ground Services Division.
Note 2: Aircraft parts are not included. They are subject to special certification.