Supply Chain Management

Central Retail Sustainable Supply Chain Management System

Central Retail has established a sustainable supply chain management framework to ensure that all stakeholders, particularly employees and suppliers, are aligning and complying with high sustainability requirements. Oversight of this framework is provided by the Supply Chain Sustainability Committee, which operates under the leadership of a Board member from the Corporate Governance and Sustainability Committee. The committee is further supported by the Supply Chain Director and representatives from merchandising and supply chain functions across all business units. To reinforce supplier accountability, Central Retail has embedded its Supplier Code of Conduct into standard contracts and trade term agreements. Central Retail also conducts ongoing reviews of internal merchandising practices to ensure alignment with the latest Supplier Code of Conduct requirements and consistency with ESG expectations.

Central Retail’s sustainable supply chain management system operates through a structured and comprehensive process. It begins with supplier screening, using tools such as the supplier screening matrix and the CRC ESG Watchlist to identify significant suppliers. These suppliers then undergo a detailed evaluation that combines both desk-based reviews and on-site assessments. Findings from these assessments inform the development of corrective action plans when improvements are required.

To strengthen internal expertise, Central Retail provides comprehensive ESG training for buyers, merchandisers, and other key stakeholders. Central Retail also drives ongoing supplier advancement through development programs and an ESG benchmarking system. This benchmarking enables suppliers to measure their sustainability performance against industry peers, fostering healthy competition and encouraging continuous improvement in ESG practices.

Central Retail has implemented structured supplier management measures, beginning with mandatory adherence to the Supplier Code of Conduct for all new and existing suppliers. Those unable to meet the minimum ESG requirements within a three-year period may face potential termination and removal from future contracting.

1. Supplier Selection

The supplier selection process is guided by two key evaluation dimensions:

• ESG Performance (15%) – Measured through a required Self-Assessment Questionnaire (SAQ) that reviews a supplier’s Environmental, Social, and Governance practices and their alignment with the Supplier Code of Conduct. Strong SAQ results enhance a supplier’s overall evaluation score and increase their competitiveness for contract opportunities.
• Business Performance (85%) – Assessed through factory checklists, performance reviews, and other standard business criteria.

All suppliers are required to complete the annual SAQ to demonstrate their ESG management systems and processes. Suppliers who meet the evaluation criteria are added to the Approved Vendor List (AVL) and become eligible for contract consideration. This assessment is conducted every year. After onboarding, suppliers are subject to more detailed ESG risk evaluations as part of ongoing supplier assessment procedures.

Once added to the AVL, suppliers undergo a screening process to identify “significant suppliers.” Central Retail defines significant suppliers as those with high business relevance to Central Retail and potentially elevated ESG risks - whether related to country, sector, or commodity factors.

2. Supplier Screening

Central Retail has developed screening processes for both Tier 1 and Non-Tier 1 suppliers using two primary tools: the supplier screening matrix and the CRC ESG Watchlist. The supplier screening matrix serves as an evaluation framework that assesses suppliers across two key dimensions:

1. 2.1 Business Criteria – Identifying suppliers that are critical to Central Retail’s operations based on factors such as:

   • Total procurement spend
   • Component criticality
   • Supplier substitutability
   • Own Brand/Private label dependency

2. 2.2 Supply Chain ESG Risk Criteria – Evaluating general information, as follow:

   • Country-specific risks: Potential negative ESG impacts arising from political, social, economic, environmental, or regulatory conditions in each country.
   • Sector-specific risks: Potential negative ESG risks associated with sector characteristics, including labor conditions, resource use, energy consumption, and pollution potential.
   • Commodity-specific risks: Potential negative risks related to the supply chain structure of raw materials or products, covering issues such as labor practices, land and resource use, energy use, pollution, and material toxicity.

To further strengthen the screening process, Central Retail incorporates external data analysis through social listening. This approach helps detect potential complaints, compliance issues, and any signs of non-adherence to the Supplier Code of Conduct or relevant regulations. By combining business relevance, ESG risk insights, and social listening results, Central Retail can more accurately identify significant suppliers.

3. Supplier Assessment

Following the screening process, all significant suppliers must undergo a supplier desk assessment, during which they are required to provide detailed documentation and evidence for Central Retail’s review. This assessment applies the Supplier Code of Conduct and the SMETA audit methodology, evaluating suppliers across four key areas: labor standards, health and safety, environmental management, and business ethics. Suppliers must submit supporting materials such as policies, procedures, reports, records, and certifications to demonstrate their ESG performance. Through this structured process, Central Retail classifies significant suppliers into high, medium, or low risk categories. Suppliers identified as medium or low risk are considered to have passed the assessment.

Business Significant Suppliers and suppliers categorized as high risk are required to undergo a more comprehensive on-site assessment conducted by Central Retail’s cross-functional teams—such as supply chain, merchandising, compliance, and audit—or by qualified third parties. On-site evaluations provide deeper insights into actual operating conditions and help identify root causes of risk issues. Suppliers that fail to resolve these issues and reduce their risk rating to medium or low within three years will be removed from the Approved Vendor List (AVL) and excluded from future contracting.

4. Corrective Action Plan

Insights gathered from on-site assessments, including primary data and root causes of identified risks, are used to develop corrective action plans for high-risk significant suppliers. These plans outline clear actions, assigned responsibilities, and timelines to guide remediation, mitigation, and the prevention of actual or potential ESG risks.

Once Central Retail and the supplier agree on the corrective action plan, the supplier is required to address all outstanding issues within a 3-year timeframe before undergoing a follow-up assessment. If the reassessment confirms that the supplier’s risk level has improved from high to medium or low, the supplier can be included in AVL. Suppliers that fail to complete the corrective actions or do not meet the minimum ESG requirements within the designated period will be excluded from future contracting.