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

To de-risk our supply chain, we implemented a comprehensive strategy that includes supplier segmentation, risk assessment and engagement, as well as monitoring and auditing, capacity building, incentivization, diversification, contingency planning, stakeholder engagement, and continuous improvement.

3: Conflict Minerals Policy and Due Diligence

Adherence to our Conflict Minerals Policy is mandatory for all suppliers. We have established a formalized process and operating procedure to track minerals throughout our supply chain and to identify and assess risks associated with sourcing minerals from conflict-affected and high-risk areas.

To facilitate our risk identification and management process, we utilize 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.

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 for supplier assessment and verification is designed to systematically evaluate and confirm our suppliers' adherence to Environmental, Social, and Governance (ESG) standards. This process 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:Assessment is merely the first step; our program is fundamentally focused on driving continuous improvement and building long-term ESG capacity within our supplier network.

• Corrective Action Plans: Development and implementation of supplier corrective action and improvement plans.
• Training and Information: Providing information and training sessions on the company's supplier ESG program, processes, and requirements.
• 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.