The company focuses on improving product quality and constructs a full process quality management system that covers research and development quality, supply chain quality, process quality, and customer quality based on various system standards. Committed to shaping a quality culture that is deeply rooted in people's hearts and does it right at once, we conducted research on demand for ability improvement, planned quality internal and external training suitable for all employees and the entire process, and regularly updated them. During the reporting period, we completed a total of 178 quality management courses, with 3847 training sessions and a total duration of 6165 hours.

The company has established the "Supplier Relationship Management System," conducting an annual screening of existing suppliers to categorize them into strategic, bottleneck, leverage, and general suppliers. Key factors in supplier screening include procurement scale, level of homogenization, delivery risk, and customer attention. The company has formulated the "Procurement Risk Management Procedure," where it categorizes procurement risks into social risks, and natural and environmental risks. The company then applies these risk criteria into screening of significant suppliers.

Social risks include Systematic internal risks  and Social and macro risks. Systematic internal risks include Sole supplier dependency, data transmission risks, and partnership risks. Social and macro risks include Political, economic, cultural, exchange rate, market demand, and industry policy risks. Natural and environmental risks include floods, tsunamis, earthquakes, lightning, thunderstorms, and landslides. Additionally, the company conducts due diligence on potential or existing suppliers across various dimensions, including but not limited to business operations risks, financial status, management background, market risks, management risks, and regulatory and compliance risks.

Sungrow has incorporated sustainability into the whole process of purchasing business, including supplier entry management (supplier screening, supplier selection, and supplier verification), and supplier development management (supplier performance appraisal management, and supplier exit management, etc.).

For supplier entry, the company follows the Responsible Business Alliance (RBA) Code of Conduct, ISO 14001, ISO 45001, SA8000, and relevant environmental and social laws and regulations to assess whether suppliers meet the required qualifications. Due diligence is also conducted on suppliers. Additionally, suppliers are required to sign agreements including the "Integrity Agreement" and "Supplier Code of Conduct." Manufacturers must also sign the "Supply Chain Origin Information Declaration."

The supplier development management process incorporates an appraisal mechanism to ensure a fair and scientific sourcing. Before the appraisal, based on the Supplier ESG Assessment Report, the company evaluates the supplier's ESG performance against dimensions such as environmental protection, labor management, business ethics, and management of critical minerals, the evaluating results will serve as one of the basis for the appraisal. For existing suppliers, Sungrow entrusted independent accredited auditing bodies to conduct annual ESG assessment to enhance transparency.

Regarding the control of hazardous substances in the supply chain, Sungrow manages the introduction process of hazardous substances from both the supplier and material dimensions. The control methods include agreements, on-site audits, material testing, performance evaluation, etc. In response to the requirements of the EU Battery Regulation released in 2023, the company has revised the Environmental Commitment Letter and formulated a new supplementary agreement to the environmental commitment Letter, and requires all relevant suppliers to sign and confirm.

The company has established the "Supplier Audit Management Regulations" to conduct remote assessment and on-site assessment (including 2nd party and 3rd party assessments) of suppliers. These audits aim to identify suppliers' best practices, areas for improvement, and non-compliance issues, along with the corresponding supporting evidence.

For non-compliance issues, the company requires suppliers to implement a Corrective Action Plan (CAP). The company then follows up on the suppliers' CAP to ensure that non-compliance issues are addressed and to continuously improve the cooperative relationship.

For zero-tolerance items identified during ESG assessment, follow-up, monitoring, and acceptance are carried out through the "Procurement Risk Management" process until closure.

The Company provides support and capacity building programs to suppliers to ensure implementation CAPs. These include supplier ESG training on sharing best ESG practices from top suppliers, discussions on sustainable supply chain trends, as well as specialized training on carbon management. In 2023, total training hours amounted to 398 hours.

The company conducts specialized training on sustainability (ESG) among buyers and related employees, and invites recognized third-party organization to lead the training. The main topics of the training include: conflict mineral, supplier ESG management policies, relevant standards and guidelines on identifying and assessing supplier ESG risks, work process regarding supplier ESG assessment and remedial measures required for non-compliance issues identified.