Our thousands of suppliers around the world are Delta's business partners, and they are essential to our efforts in addressing environment-related substances in products, climate change, labor safety & health, human rights as well as issues such as conflict minerals / metals and water footprint. Through the activities of our "Green Product and Supply Chain Management Committee", Delta is committed to using our influence to promote the relevant concepts or practices throughout our upstream supply chain.

Honesty and integrity are the most important criteria when Delta chooses suppliers. Delta thinks of our suppliers as long-term partners. For the partnership to endure, our suppliers must have a similar corporate culture. For suppliers or contractors delivering or providing services to Delta plants in Taiwan, China and Thailand, they are required to sign a "Declaration of Ethics". The declaration not only requires vendors to carry out all transactions in good faith to avoid damage to Delta's interests or image, but it also insists that vendors must not allow Delta employees or their relatives to receive improper benefits, or provide them with any non-business related loans, rentals or investments. The declaration includes a Delta hotline and mailing address where vendors can report Delta employees that violate purchasing rules. This ensures that vendors' rights and interests are protected as well.

To ensure high quality and low risk in our suppliers, we traditionally place a strong emphasis on "critical suppliers" and "critical parts" in our supplier management framework. Apart from evaluating the price, quality, technology, delivery performance and services of the supplier, we also focus on managing the supply and demand of critical parts by connecting to end customers, system integrators and suppliers through an information platform. The comprehensive information flow management and logistics management helps us reduce risk by providing us with up-to-date change information as well as a mechanism for long-term inventories and production planning. Generally, local suppliers to Delta production lines enjoy an advantage in delivery time and cooperation but must meet our standards for technology and quality. For China where the majority of our production sites are located, around 70% of our suppliers have plants in China.

The floods in Thailand as well as Japan's earthquake and nuclear disaster in 2011 led to a massive loss of life and property. Many factories in the disaster areas were also badly affected, leading to difficulties in supply and transportation. Delta conducted an indepth analysis of our suppliers' operations after the global financial crisis several years ago. This time, we reviewed our supply chain diversification as well as the geographic distribution of our suppliers' production lines to reduce the risk of parts shortages caused by extreme climate conditions or major disasters in the future.

The environment-related substances (or restricted hazardous substances) issue is one of the key responsibilities of Delta's Green Product and Supply Chain Management Committee. The committee is made up of employees from the materials department of each business unit and meets with the "Environment-related Substance Management Working Group" from each plant to review the process for materials acceptance. Particular emphasis is given to the standard authority on non-conformity management and responses to establish a consistent management system and management standards between plants.

The scope of environment-related substances is getting broader. Delta not only sets up the QC080000 hazardous substance management system at our own production sites but also encourages our suppliers to introduce the system to ensure the proper control of environment-related substances, which is in addition to their existing ISO9001 quality management system. Through our Guarantee Letter Regarding Environment-Related Substances, we clearly notify suppliers of Delta's related documents such as10000- 0162, 10000-0222, and 10000-2003, all downloadable from Delta's GPM system. The letter and documents ask suppliers to guarantee they will restrain environment-related substances contained in accessories, packaging, and others from delivery to Delta and its subsidiaries or affiliated companies directly or via any third party. At the same time, we provide training courses and training materials, and also note Delta's environmenta technical requirements on the purchase orders as a reminder to suppliers.

Besides requesting documents like test reports, we implement incoming material control based on suppliers' risk levels. When non-compliance occurs, the actions that follow are regulated in Delta's "Supplier Management Procedure", including an increase of sampling frequency, on-site audits, and more. We consider assisting suppliers improve as a priority, and their risk level is adjusted based on how they actually improve. If the suppliers are not cooperative, we have procedures for disqualifying suppliers.

In addition to environment-related substances standards, in Delta's purchase agreement there are articles that ask suppliers to comply with relevant environmental laws, regulations, and technical standards, such as pollution prevention, waste disposal, and others. If a supplier does not comply, Delta's procurement department will deal with the situation based on severity.

As previously noted, the cooperation and participation of the entire supply chain is needed to achieve optimum results for CSR issues. Delta not only conforms to the Electronics Industry Code of Conduct (EICC) but we are also committed to making the most of our influence by promoting the EICC throughout our supply chain. The Delta supplier management procedure explicitly requires suppliers to sign a declaration of conformity for the EICC. Suppliers are also expected to follow the relevant guidelines in practice. Suppliers' cooperation and performance on environmental/social issues such as environment-related substances and EICC are now a part of our Quarterly Business Review (QBR) for suppliers. Delta is using our buying power to require suppliers to follow the environmental and social standards expected by Delta. Around 52% of our main suppliers have now signed our EICC declaration.

The CDP Supply Chain Program surveys suppliers on greenhouse gas emissions and controls to determine the potential impact on the enterprise itself. In 2011, Delta and several corporate members of the Taiwan Corporate Sustainability Forum helped around 50 Taiwanese suppliers complete their Greenhouse Gas (GHG) inventory ⁸. The assistance helped the suppliers set up their own independent self-inventory capability for future carbon footprint calculations and carbon emission reductions.

Delta has also adopted a conflict metal free policy that restricts the use of conflict metals mined from the DRC and its adjoining countries. Delta requires suppliers to sign the "Metal Source Survey" and "Declaration on Non-use of Conflict Metals" as part of our supplier management procedure. Around 52% of our main suppliers have now signed our declaration on the non-use of conflict metals.

As for contractors, we mainly arrange training courses and promote Delta's environmental and safety & health codes to ensure that any negative safety and environmental issues are avoided during their onsite operations.