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 2023, the CAL Group had established 28 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. Continuously reviewing China Airlines' procurement procedures and existing sustainable supply chain management mechanisms every year can ensure that suppliers comply with the China Airlines Supplier Code of Conduct to avoid suppliers from violating ESG requirements. 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 the management results to the Corporate Sustainability Committee for follow-up inspection on a quarterly basis. The President is the highest accountable decision-making body of the Corporate Sustainability Committee.
Supply Chain Management Objectives and Exit Mechanism
CAL’s primary operations and supply chain are based in Taiwan, where 49% of all suppliers are located, accounting for 39% of the total procurement amount, the highest proportion globally. This is followed by the Americas, Asia, Europe, Oceania, and Africa. Furthermore, CAL’s operational bases and suppliers have not violated workers’ rights to freedom of association or collective bargaining. CAL continues to monitor whether its partner suppliers engage in any illegal practices related to forces labor and other human rights issues. Additionally, it prioritizes collaboration with suppliers that demonstrate strong performance in Environmental, Social, and Governance (ESG) criteria 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. The contracts between CAL and suppliers include provisions that require the completion of improvement operations within a specified timeframe (e.g., 180 days) if there is a violation of the CAL Supplier Code of Conduct. Failure to meet the improvement requirements will lead to the termination of the partnership. Additionally, ongoing monitoring will be conducted to further enhance the overall sustainability performance of the supply chain.
Regional Distribution of Tier-1 Suppliers (Includes Critical Tier-1 Suppliers)
| Global Supplier Profile | ||
|---|---|---|
| Taiwan | 426 | 49% |
| Asia (Excluding Taiwan) |
127 | 15% |
| Americas | 203 | 23% |
| Europe | 103 | 12% |
| Africa | 1 | 0.12% |
| Oceania | 8 | 1% |
| Total | 868 | 100% |
Regional Distribution of the Procurement Amount from Tier-1 Suppliers
| Regional Distribution of the Procurement Amount from Tier-1 Suppliers Overview of Global | ||
|---|---|---|
| Taiwan | 426 | 49% |
| Asia (Excluding Taiwan) |
127 | 15% |
| Americas | 203 | 23% |
| Europe | 103 | 12% |
| Africa | 1 | 0.12% |
| Oceania | 8 | 1% |
| Total | 868 | 100% |
Proportion of Procurement from Critical Suppliers
| Proportion of Procurement from Critical Suppliers | |||
|---|---|---|---|
| Region | Critical Tier-1 Suppliers Purchase Amount | Total Purchase Amount | Proportion |
| Taiwan | 26,373,695,045 | 27,507915,154 | 96% |
| Asia (Excluding Taiwan) | 5,750,231,939 | 16,965,903,643 | 34% |
| America | 9,882,232,837 | 15,635,692,094 | 63% |
| Europe | 6,119,778,738 | 9,822,240,001 | 62% |
| Africa | - | 5,456,350 | 0% |
| Oceania | - | 649,110,443 | 0% |
| Total | 48,125,938,559 | 70,586,317,684 | 68% |
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, ensuring that CAL fully identifies high-risk suppliers and implements review procedures to mitigate sustainability risks in the supply chain.
Dimensions of Consideration and Risks in Supplier Screening
| Dimension / Risk | Explanation |
|---|---|
| Environmental (E) Criterion | Includes but is not limited to waste management, energy management, and biodiversity. |
| Society (S) Criterion | Includes but is not limited to human rights and labor rights. |
| Governance (G) Criterion | Includes but is not limited to anti-corruption and bribery. |
| Country-specific Risks | Relevant management mechanisms or monitoring measures (such as audits) to ensure that the company's procurement does not originate from countries with high corruption, instability, political conflicts, or weak regulatory capabilities. |
| Sector-specific Risks | Identify suppliers that are more likely to have negative environmental, social, and corporate governance risks based on the attributes of the procurement category and strengthen management. |
| Commodity-specific Risk | Includes but is not limited to accept regular oil product, operation or equipment inspection, pass the food safety control system, provide an airworthiness certificate or a certificate of conformity for each aviation material related transaction item. |
Procedure of Identifying Risk of Supply Chain Sustainability
Supply Chain Sustainability Risk Assessment Implementation Status
| Suppliers | 2023 | 2024 |
|---|---|---|
| Tier 1 Suppliers | 838 | 246 |
| Critical Tier 1 Suppliers (Share of Total Procurement Spent %) | 50(59%) | 49(68%) |
| Non-tier 1 Suppliers | 1 | 0 |
| Tier-1 Significant suppliers | 50 | 53 |
| Proportion of Procurement from Tier-1 Significant | 59% | 72% |
| Non-Tier-1 Significant Suppliers | 1 | 0 |
| Risk Assessment of Supply Chain Sustainability(Supplier Screening) | 2023 | 2024 |
| Tier 1 Suppliers Assessed Annually | 48 | 58 |
| Significant supplier Assessed Annually | 49 | 38 |
| High-Risk Suppliers | 2023 | 2024 |
| Tier-1 Suppliers Classified as High-risk (Share of Total Procurement Spent %) | 5(9%) | 4(4%) |
| Number of Non-Tier 1 Suppliers Classified as High-risk | 0 | 0 |
Note: The suppliers of concern include both key suppliers and high-risk suppliers. When calculating the quantity, if a supplier is classified as both a key supplier and a high-risk supplier, it will not be counted more than once.
2024 Risk Survey of Supply Chain Sustainability
Unit: Score
In the SAQ section, CAL conducted a survey of 49 critical tier-1 suppliers for 2024, achieving a response rate of 69%. Analysis of the survey results shows that the total number of valid questionnaires for 2024 reached 58, an increase of 10 compared to 2023. The average score was 94.38. Upon further examination of the four survey dimensions, the average scores ranged from 90 to 97, indicating that key suppliers possess a sustainable concept in all four areas.
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 2024, the score of supply chain sustainability risk assessment was 94.38 points.
- Governance Aspect: The score of 97.07 represents an improvement over last year's score of 95.28, indicating that suppliers have made progress in regulatory compliance and governance structures. However, ongoing attention and enhancement of governance mechanisms remain essential.
- Environmental Aspect: The score of 90.03 represents a decrease from last year's score of 98.93, indicating a decline in supplier performance concerning environmental issues. In response to this trend, we will revise our approach to enhance requirements for suppliers to focus on environmental considerations and propose relevant environmental policies.
- Society Aspect: The score has decreased to 91.18 from 95.29 last year, indicating that occupational safety and social responsibility within the supply chain continue to require ongoing attention. Our Company will continue to require suppliers to strengthen their management of occupational injuries, ensuring compliance with safety standards and reducing the incidence of workplace accidents.
- General Overview: The score of 97.59 shows a slight improvement compared to last year's score of 97.07, marking the best performance across all aspects. Moving forward, we will continue to monitor the implementation of privacy management and the overall operational standards upheld by our suppliers.
Sustainable Supply Chain Assessment
The results of the 2024 China Airlines Supply Chain SAQ analysis indicate that there are four high-risk suppliers for the year. Audit investigations have revealed that some suppliers still need to improve their performance in environmental and social aspects. In the areas of establishing an environmental management system, waste classification and recycling, and monitoring suppliers' environmental performance, some suppliers still need improvement. Additionally, the management of human rights and labor conditions has not met the standards.
To enhance supply chain management efficiency, CAL will continue to monitor and guide suppliers, requiring improvements to elevate their sustainability management capabilities. This year, we selected one high-risk supplier for in-depth analysis. Using a radar chart, we compared its scores with the category average to identify areas with significant gaps and provided benchmark cases and improvement suggestions.
To ensure the sustainable development management of supply chain partners, CAL continues to promote audit programs at various stages to monitor the actual implementation of environmental and social practices by its suppliers.
No critical tier-1 suppliers have terminated the partnership in 2024. In the future, CAL will enhance guidance and supervision for suppliers that have room for improvement in environmental and social aspects. The Company will also strengthen their awareness of and compliance with regulations to ensure that supply chain partners can achieve higher sustainability standards.
In 2024, the supplier identified through SAQ and audit analysis is Taiwan Airport Service Co., Ltd. (TASCO). Our Supply Chain Task Force Coordinating Division (TZ) and the KPMG consulting team visited TACT headquarters to provide training and capacity building based on the SAQ and audit results.
This training program marks CAL's inaugural sustainability education course tailored specifically for suppliers, with a particular emphasis on the group's subsidiaries, thereby enhancing its overall purpose. The headquarters of TASCO has demonstrated strong support for this event by actively participating in discussions and enthusiastically sharing their experiences and challenges. Through this guidance, the supplier has strengthened their understanding and practical application of sustainable management, laying a solid foundation for the sustainable development of future supply chain partners.
Supply Chain Sustainability Assessment Implementation Status
| Suppliers | 2022 | 2023 | 2024 |
|---|---|---|---|
| Critical Tier-1 Suppliers Assessed in the Current Year (Percentage of Total Critical Suppliers) | 9(20.45%) | 13(26%) | 22(45%) |
| Critical Tier-1 Suppliers Assessed in the Past 3 Years (Percentage of Total Critical Suppliers) | 79.55% | 90% | 98% |
| High-Risk Suppliers | 2022 | 2023 | 2024 |
| Assessed in the current year (Percentage of Total High-Risk Suppliers) | 0 / 0% (No high-risk suppliers in the current year) |
1 / 20% | 0 / 0% |
| Assessed At Least Once Every 3 Years (Percentage of Total High-Risk Suppliers) | 0% | 0% | 25% |
| High-risk Suppliers with Corrective Action Plans and Completed Improvements | 0% (No high-risk suppliers in the current year) |
0% The implementation of Corrective Action Plans is planned to begin in 2024 |
0% |
| Significant Suppliers | 2022 | 2023 | 2024 |
| Assessed in the current year (Percentage of Total Significant Suppliers) | Beginning in 2023, we conduct inventories of our significant suppliers | 25% | 42% |
| Sector-specific risk | 3 | 10 | |
| Desk Assessments | 10 | 59 |
Performance of Supply Chain Sustainability
Green Procurement
As CAL enhances its operations, it continues to implement its environmental policy of green procurement. In 2024, the amount spent on green procurement increased by 71% compared to 2023, earning recognition from the Taoyuan City Government as an outstanding enterprise in green procurement. In addition to selecting environmentally certified products for daily use, such as stationery and office equipment (including computers), and choosing top-tier energy-efficient air conditioning and household appliances, we also allocate budgets annually to promote the electrification of outdated vehicles and equipment, balancing operational efficiency with the benefits of reducing air pollution and carbon emissions. Furthermore, when selecting passenger service items, CAL considers sustainability certifications as an important factor. The company chooses products with FSC/PEFC certification, such as paper boarding passes, paper menus, paper napkins, luggage tags, and eco-friendly hand towels on board. This is to fulfill the company's commitment to forest and biodiversity conservation. Additionally, we continue to promote systematic, digital, and mobile operations to raise awareness of green consumption and reduce environmental impact at the source.
2021-2024 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.
Local Procurement
From 2020 through 2024, CAL has continuously optimized its procurement strategy to increase the proportion of local procurement and reduce its carbon footprint. In 2024, the proportion of local procurement rose by 1.13% compared to 2023, while the procurement amount experienced a substantial increase of 68% over the previous year. Furthermore, the proportion of local suppliers has increased by 0.34%, and the total number of local suppliers has risen by 6% compared to the previous year.
Between 2020 and 2024, CAL actively promoted local procurement (at locations where it has operational bases and transports via CAL flights), gradually increasing the amount of local procurement and the number of cooperating suppliers. By redefining and adjusting procurement strategies, China Airlines has strengthened the resilience of the local supply chain, balancing operational efficiency with environmental goals, demonstrating its commitment to corporate social responsibility.
Unit: TWD million
Unit: Suppliers
Note 1: The statistics include the Administration Division and the maintenance park.