Challenges (GRI 103-1)

Supply chain management is a key factor for sustainable business operation. CKPower recognizes that good supplier management results from efficient economic, social, and environmental management.
As such good supplier management not only demonstrates the Company’s social and environmental responsibility, but also strengthens relationships and creates value for all companies in the supply chain. In addition, supplier risk reduction presents a challenge for the Company as it has to manage its supply chains efficiently in order to minimize impact on the business and promote mutual growth for itself and its suppliers across the supply chain.

Execution (GRI 103-2)

Supplier Code of Conduct
CKPower has established the Supplier Code of Conduct to promote commitment to sustainable business practices that take into account the environment, society, and governance as well as to serve as guidelines for suppliers on compliance with laws, regulations, requirements, and international standards. The code of conduct also encompasses business ethics, labor and human rights, occupational safety and health, work environment management, as well as responsibility towards communities and society.
Supplier Code of Conduct
Business Ethics Human Rights and Labor Safety and Occupational Health Environment Social Responsibility
  • Corporate governance
  • Equitable and fair treatment
  • Intellectual property
  • Disclosure and confidentiality
  • Delivery and quality of products or services
  • Legal compliance
  • Non-discrimination
  • Labor protection
  • No use of forced labor
  • Remuneration, benefits, and work hours
  • Workplace safety and environment
  • Personal protective gear
  • Emergency preparedness

Furthermore, CKPower has formulated supply chain management strategies that encompass every facet, from the selection of potential suppliers to supplier risk and performance assessment. The Company also actively encourages its suppliers to conduct business with transparency, respect to human rights, and fair labor treatment in accordance with occupational safety, health, and environment standards.

Sustainability Practices for Suppliers

In 2018, CKPower began working on supplier sustainability assessment by creating questionnaires, formulating guidelines, and defining its assessment guidelines and procedure. In 2020, the Company began conducting supplier sustainability assessment as well as prescribed an additional goal of conducting on-site audits to ensure that suppliers operated in compliance with the supplier code of conduct. CKPower also strives to continuously improve the supplier sustainability assessment to ensure its consistency with its sustainability policy.

Supplier Performance Assessment

CKPower has assigned the procurement division or the job owner to be responsible for assessing suppliers’ performance after the delivery of products or services on a yearly basis based on its supplier code of conduct. The performance is rated on a four-point scale from satisfactory to extremely unsatisfactory.

Satisfaction score:

A = Satisfactory
B = Fair
C = Unsatisfactory
D = Extremely unsatisfactory

Supplier Performance Assessment

In 2020, CKPower conducted supplier evaluation, using environmental, social, and governance (ESG) factors as well as safety as the criteria applicable to both existing and new suppliers, with the goal of encouraging suppliers across the supply chain to adopt sustainable business practices in their business activities. CKPower required its suppliers to pass three types of supplier performance assessment, as detailed below.

Types of Supplier Performance Assessment
Annual supplier assessment Mid-operation assessment On-site assessment
  • Vendor Self-Assessment on ESG
  • Evaluation on operational efficiency, product quality, and sustainability
  • occupational safety, health, and environment
  • Social responsibility
  • Environmental protection
  • Evaluation of manufacturing processes for suppliers with low annual evaluation results
  • Collaboratively seeking solutions and formulating potential enhancement plans

In 2020, CKPower evaluated a total of 218 suppliers, 190 of whom were rated “satisfactory,” accounting for 87 percent of all the suppliers assessed. No supplier was rated “extremely unsatisfactory.” Starting in 2021, CKPower aims for 80% of all its suppliers to achieve the rating of “satisfactory” every year.

Results of Supplier Performance Assessment

A = 190 suppliers (87%)
B = 23 suppliers (11%)
C = 5 suppliers (2%)
D - F = 0 suppliers (0%)

In 2020, CKPower assessed potential impact from supplier performance assessment and provided the following guidelines for suppliers in each rank so as to enable them to maintain their efficiency.

Rating Impact on CKPower Action
A Low Suppliers are notified of the assessment results and informed to maintain their operational standards and compliance with CKPower’s supplier code of conduct.
B Moderate Suppliers are notified of the assessment results and informed of areas that require improvement.
C High Suppliers are notified of the assessment results and informed of areas that that they need to improve on within one month. Once the improvement is complete, they are required to inform the Company and undergo another assessment. If they fail the assessment, they will receive two more months to address such areas again. Suppliers who fail to improve on such areas within two months will be removed from the Approved Vendor List.
D - F Very high Remarks:
Suppliers with ratings of D-F are notified of the assessment results and required to immediately remedy their shortcomings within one month.
CKPower will conduct an on-site audit, using the on-site audit checklist. Suppliers who still fail to rectify their shortcomings will be removed from the Approved Vendor List.

(GRI 102-9) In addition, CKPower has developed criteria for categorizing suppliers to enable systematic analysis and formulation of procurement strategies as well as to inform supplier risk assessment for optimum efficiency. The criteria are as follows:

1) Critical suppliers

Are suppliers with high-value contracts or high spending and suppliers of hard-to-replace products and of components or devices vital to the manufacturing process. Critical suppliers present very high or high risks. These suppliers are required be evaluated annually through vendor assessment forms and on-site audits as well as through audits on occupational safety, health, and environment, and sustainability assessment.

2) Non-critical suppliers

Are suppliers with moderate- or low-value contracts and present moderate or low risks. These suppliers are required to be evaluated annually through vendor evaluation forms, vendor self-assessment, as well as related assessment by relevant divisions, such as an operational safety assessment by the insurance and safety division and an environmental assessment by the environmental engineering division.

Supplier Assessment (GRI 103-3)

Suppliers are required to undergo supplier performance assessment after registration on the approved vendor list and complete vendor self-assessment upon being notified, so that CKPower can collect data related to their capabilities, including those related to ESG. Each type of assessment is detailed below.

  1. Yearly performance evaluation: An assigned individual is responsible for performing an assessment on previous works on operational performance, product quality, and ESG factors, using the vendor evaluation form, the annual vendor assessment on occupational safety, health, and environment and social responsibility policies.
  2. Mid-operation assessment on occupational safety, health, and environment and social responsibility policies: A job controller is responsible for performing a mid-operation assessment on the supplier’s performance regarding occupational safety, health, and environment and social responsibility policies, using the mid-operation assessment form.
  3. On-site audit: An on-site audit is conducted to gauge compliance with CKPower’s supplier code of conduct and focuses on suppliers who are vital to the Company’s production and suppliers rated D-F in an annual assessment in order to assist them in solving their issues, provide recommendations, and plan supplier competency development with relevant divisions and the suppliers themselves before the subsequent assessment. Suppliers who fail to meet the standards will be suspended temporarily or removed from the Approved Vendor List. The site audit checklist is used in conducting an on-site audit.
Assessment forms
  1. Vendor evaluation form
  2. Annual assessment form on occupational safety, health, and environment and social responsibility policies
  3. Site audit checklist
  4. Mid-operation supplier assessment form
  5. Vendor self-assessment form
Supplier Risk Assessment (GRI 308-1) (GRI 308-2) (GRI 414-1) (GRI 414-2)

CKPower has introduced supplier risk assessment so as to prioritize potential risks on its business according to its defined criteria, which cover three sustainability aspects, namely the economy, society, and the environment. Both qualitative and quantitative criteria can be selected as a basis for risk assessment. Likelihood of risk and impact severity can be categorized into four levels as shown.

Likelihood of Risk and Impact Severity
Likelihood/impact Description Level
Very high One instance per month or more/over THB 10 million 4
High One instance per 1-6 months but no more than five instances/THB 5-9 million 3
Moderate One instance per 1-3 years/THB 1-4 million 2
Low One instance per 4-5 years/under THB 1 million 1

In 2020, a total of 160 suppliers were assessed on sustainability risk, and none was affected by environmental and social impacts. CKPower has analyzed risk factors and approaches for managing risks and impacts as follows:

Examples of Supplier Risk Management and Control
Risk Factors Risk Management and Control
Economy
Financial status and stability of suppliers
  • Collateral
  • Reviewing past financial statements
Suppliers with high spending
  • Examining fulfilment of terms and delivery
  • Setting payment terms as installment payment based on project progress
Society
Child labor, illegal foreign labor, and human rights violation
  • Defining criteria for supplier qualification assessment
  • Conducting site visits
Safety and occupational health
  • Assessing safety risks before carrying out operations
  • Making necessary safety equipment a requirement
Environment
Environmental protection and waste management
  • Defining contract terms and monitor compliance.
  • Checking factory permits (Ror Ngor 4) according to the category issued by the Department of Industry

Furthermore, CKPower has introduced new vendor evaluation, which is conducted with the designated form, in order to select new suppliers who meet sustainability requirements covering economic, social, and environmental dimensions, such as product and service warranty, product delivery, environmental policies and social responsibility, compliance with labor laws, and safety standards. At the same time, the Company also actively and continuously promotes and communicate its supplier code of conduct to all suppliers through an acknowledgment form and various activities for suppliers, with the goal of fostering the level of awareness and understanding of the code of conduct that enables them to apply it to their business activities and achieve sustainable growth. In 2020, 151% of new suppliers were selected, based on the criteria that incorporated sustainability considerations.

Trade Credit

To manage risks related to payments from its customers, CKPower offers a credit term of no more than 30 days for its suppliers as it has deemed that credit risk will rise significantly if the payment is made after 30 days as specified in contract terms. In 2020, the average actual credit term was 25 days, which was consistent with the Company’s policy.

Strengthening Supplier Relationships (GRI 204-1)

CKPower seeks to strengthen its relationships with suppliers through a diverse range of training programs, seminars, and activities through which it can communicate its business approaches, policies, and practices to its suppliers for their acknowledgment, such as Safety Week 2020.

Safety Week 2020

Safety Week 2020 was a training session on electrical safety and providing aid to victims in electrical accidents. The session also included training on occupational safety, health, and environment for the Company’s suppliers to educate them on operational safety in power plants, foster awareness of safety and environmental audits, and build suppliers’ confidence in the sustainable business practices of the Company.

Safety Training Activities for Suppliers

Nam Ngum 2 Power Company Limited has conducted a training program under the topic “Workplace Safety Training for Nam Ngum 2 Dam Suppliers” for 23 suppliers, most of whom are non-critical suppliers, in order to educate them on power plant work safety, rules, and regulations, instill safety awareness, and provide information on environmental measurement as well as ensure that the suppliers are aware of the Company’s business guidelines, policies, and practices.

Furthermore, Xayaburi Power Company Limited has also administered training on “Workplace Safety Training for Xayaburi Dam Suppliers” to 12 suppliers, most of whom are non-critical suppliers, with the same goals as detailed above for Nam Ngum 2 Power Company.


Green Procurement Program

Placing importance on environmental conservation, companies under CKPower Public Company Limited have instituted a green procurement policy that encourages eco-friendly procurement practices and promotes the use of products made from renewable resources and non-polluting products, such as those certified with the Green Label, in an effort to protect the environment, use resources sustainably, reduce risks to employees and the Company from exposure to hazardous materials, instill green consumerism within the organization and society at large, and reduce costs through sustainable and cost-effective consumption. To this end, in the year 2020, the Company procured 500,890.04 baht worth of office supplies certified with environmental labels, or 7.22% of the total purchase of office supplies for the year.

Supply Chain Management Performance in 2020 (GRI 103-3)

3.35% of the expenses for products and services came from within the communities in the vicinity of CKPower’s power plants.