2: Supplier Risk Assessment

The company categorizes suppliers based on their risk profile, business criticality, and ESG performance, and conducts regular risk assessments to identify potential environmental, social, governance, and business continuity risks.

Mitigation Measures

• Diversified and multi-sourcing supplier base to reduce the risk of supply chain disruptions
• Leverage geographic proximity through near, national, and local sourcing
• Geographic diversification to expand global sourcing

3: Conflict Minerals Policy and Due Diligence

We are committed to responsible sourcing and have a strict conflict minerals policy in place to avoid sourcing or purchasing parts or components from conflict-affected and high-risk areas. To ensure compliance with our policy, we require all Tier-1 suppliers to provide undertakings that they will track and avoid conflict minerals throughout the supply chain, in accordance with the Conflict Minerals Reporting Template(CMRT) developed by the Responsible Business Alliance(RBA). This tool enables us to accurately identify and disclose the origin of conflict minerals in our products and ensures compliance with regulations such as the U.S. Dodd-Frank Act.

We have also implemented the International Material Database System (IMDS) as a screening tool to verify the origin of all parts and components.

We aim to streamline supply chain due diligence and bolster supplier engagement to better identify mineral-related risks. Consequently, we are creating a comprehensive strategy featuring monitoring and mitigation to manage these risks effectively.

In FY26, none of our products contained minerals from conflict-affected and high-risk areas. Should we discover a supplier has sourced minerals from a conflict-affected region, we are committed to seeking alternative, non-conflict-affected, or low-risk sources for those minerals.

4: Supplier Assessment and Development

HMCL monitors 130 ESG parameters based on SEBI's BRSR requirements. Significant partners are expected to contribute to the following organizational milestones.

4.1: Supplier Assessment and Verification: Our robust framework encompasses a multi-tiered approach, leveraging both remote and on-site methodologies to ensure comprehensive coverage and accuracy.

• Desk Assessments: Systematic verification of evidence using a Digital Tool for evidence collection.
• On-Site Assessments (2nd Party): Conducted by purchasing company employees or contracted consultants.
• On-Site Assessments (3rd Party): Performed by an independent, accredited auditing body.
• Standardized Methodology: All assessments (desk or on-site) utilize standards and methodologies from recognized industry or multi-stakeholder initiatives, such as country-specific methodologies and SEBI's Business Responsibility and Sustainability Reporting (BRSR) reporting requirements.

4.2: Capacity Building and Improvement: The program drives  continuous improvement  to build long-term ESG capacity within our supplier network.

• Corrective Action Plans: Development and implementation of supplier corrective action and improvement plans.
• Training and Information: Our procurement team underwent specialized training and certification in sustainability assessment, ensuring that we have third-party certified sustainability assessors on board.
• Benchmarking: Granting suppliers access to ESG benchmarks for peer comparison.
• Implementation Support: Offering remote or on-site support to suppliers for implementing corrective and improvement actions.
• Technical Programs: Providing in-depth technical support programs to enhance supplier capacity and improve ESG performance.

5: On-Site Audit & Safety Framework

Existing suppliers undergo regular third-party audits to ensure ongoing compliance.

The Safety Audit Cycle

• Selection: Identifying critical suppliers based on purchase value and risk profile.
• Conduct Site Audit: Comprehensive review of Fire, Occupational Health, and Electrical safety.
• Management Briefing: Presenting the final audit report to the supplier's top management.
• Verification: Re-auditing after improvement plans are implemented, typically every three years.