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 2021, the CAL Group had established 31 affiliated companies 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 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). CAL also established risk review mechanisms to perform audits, held the supplier conferences for facilitating negotiations, and reported the results to the Corporate Sustainability Committee for review every quarter.
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 longterm reviews, and improving the follow-up tracking mechanism. CAL continued to strengthen supply chain management in 2021. 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 | 2020 | 2021 |
|---|---|---|
| Tier 1 Suppliers | 904 | 708 |
| Critical Tier 1 Suppliers (Share of Total Procurement Spent %) | 63(66%) | 38(62%) |
| Critical Non-tier 1 Suppliers | 2 | 3 |
| Risk Assessment of Supply Chain Sustainability | 2020 | 2021 |
| Tier 1 Suppliers Assessed Annually | 63 | 38 |
| Critical Non-tier 1 Suppliers Assessed Annually | 2 | 3 |
| Tier 1 Suppliers Assessed in the Last 3 Years (Percentage of Total Tier 1 Suppliers) | 103(11.39%) | 162(22.88%) |
| Critical Non-tier 1 Suppliers Assessed in the Last 3 YYears (Percentage of Total Critical Non-tier 1 Suppliers) | 2(100%) | 3(100%) |
| Suppliers with High Sustainability Risk | 2020 | 2021 |
| Number of Tier 1 Suppliers Classified as High-risk | 2(0.22%) | 0(0%) |
| Number of Critical Non-tier 1 Suppliers Classified as High-risk | 0 | 0 |
2021 Risk Survey of Supply Chain Sustainability
Unit: Score
As for the SAQ, China Airlines surveyed a total of 38 critical tier 1 suppliers in 2021, which accounted for 61.78% of the total purchase amount of the tier 1 suppliers, and the questionnaire response rate was 71.05%. In addition, China Airlines also investigated 3 critical tier 2 suppliers. The recovery rate was 66.67%. According to the results of the SAQ, the average score of the suppliers in 2021 was 88.17. The average scores in the four dimensions (please refer to the note) were between 79 and 94 points, showing that most of the suppliers have incorporated the concept of sustainability into these four dimensions. Due to the impact of the pandemic from 2020 to 2021, the environmental score fell and CAL will continue to promote environmental sustainability practices and concepts in the annual supplier conference.
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 2021, the score of supply chain sustainability risk assessment was 88.17 points.
- Governance : The score (94.87) was an increase compared to the previous year (93.92) and has been the highest score overall. It shows that critical suppliers generally have internal management mechanisms.
- Environmental : The score (79.18) was a decrease compared to the previous year (84.91). CAL will continue to work hard on advocacy for the environment and follow up on the performance of suppliers in terms of environmental protection.
- Society : Although the score (85.10) was an improvement compared to the previous year (84.06), there remains room for improvement. This area will still be the focus of our support for suppliers.
- General : The score (93.53) was higher compared to the previous year (91.46), 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 Audit
According to the SAQ analysis results, there were no overall high-risk suppliers in 2021 but 3 critical tier 1 suppliers exhibited high environmental and social risks, 1 critical tier 1 supplier exhibited high governance risks, 3 critical tier 1 suppliers exhibited high environmental risks, and 1 critical tier 1 supplier exhibited high social risks. According to CAL’s follow-up audits of the SAQ analysis for 2022, there were no suppliers with overall high 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. As of 2021, we have completed audits for 62% of critical tier 1 suppliers. 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 2021 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, half of the critical tier 1 suppliers have made significant improvements in environmental management. No critical tier 1 suppliers have terminated the partnership in 2021. CAL will continue to enhance support, follow-up, and requests for improvements for these environmental and social issues.
Supply Chain Sustainability Audit Implementation Status
| Critical Suppliers (Tier 1 and Non-tier 1) Assessed (Percentage of Total Critical Suppliers) |
2020 | 2021 |
|---|---|---|
| Annually | 26.15% | 78.04% |
| At Least Once Every 3 Years | 44.62% | 21.96% |
| Total | 70.77% | 100% |
| Suppliers with High Sustainability Risk Assessed (Percentage of Total Suppliers with High Sustainability Risk) |
2020 | 2021 |
| Annually | 100% | 0%(No high-risk suppliers this year) |
| At Least Once Every 3 Years | 0% | 0% |
| Total | 100% | 0% |
| High Sustainability Risk Suppliers with Identified Gaps with Corrective Action Plans That Have Improved Their ESG Performance | 100% | 0%(No high-risk suppliers this year) |
Performance of Supply Chain Sustainability
Green Procurement
CAL continues to purchase new energy-efficient passenger and cargo aircrafts including 777F and A321neo, use new light-weight baggage cabinets, and reduce the weight of cabin and service items. We also gradually increase the purchase of low-carbon/electric vehicles, prioritize the purchase of hybrid vehicles for company vehicles, and replace traditional ground service vehicles to reduce fuel consumption and carbon emissions. We use energy-efficient lighting equipment, install variable frequency equipment, and replace equipment with high energy consumption. In addition, CAL also prioritizes the use of local ingredients to reduce the carbon footprint of food ingredients during transport. The value of CAL’s green procurement in 2021 was affected by the COVID-19 pandemic, reduced number of flights, and a lower demand for hybrid vehicles compared to previous years, and the amount fell by 36.71% compared to 2020. However, CAL remains committed to promoting green procurement and will 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
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) to support the local economy. For instance, we use local agricultural products from Taiwan for the welcome drink for business class passengers. it reduces the carbon footprint and also helps protect the environment. The value of local procurement in 2021 rose by 53.37% compared to 2020 and the percentage of local suppliers remained 98%. CAL has remained committed to local procurement despite the impact of the pandemic.
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.