1.     Has the company performed risk assessments on environmental, social, and corporate issues in relation to the Company’s operations according to material principles (Note 2), and formulated relevant risk management policies or strategies?

V

The Company has established the “Measures of Environmental Risk Evaluation,” on May 10, 2018.  All departments analysis issues and relevant stakeholders’ requirements according to the Company’s internal and external material environmental issues. The Company’s environmental management representative then makes sure and identifies material environmental issues and the environmental management review committee review the execution progress and results of risk response measures.

The Company will plan and formulate risk management policies of relevant social issues and corporate governance issues according to requirements.

2.    Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?

V

Not yet been established.

The Company will plan the same, if necessary.

3.     Environmental Issues

(1)  Does the company establish proper environmental management systems based on the characteristics of their industries?

(2) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment?

(3)  Has the company assessed the potential risks and opportunities for business operations now and the future regarding climate change and will it adopt response measures relating to climate issues?

(4)  Has the company calculated the GHG emissions, water consumption, and total weight of waste in the past 2 years, and formulated policies on energy conservation and carbon reduction, GHG reduction, water consumption, or other waste management?

V

V

V

V

 (1)  The Company has obtained ISO-14001 certifications for its factories since July 3, 2007, and the most recent certification was obtained in July 3, 2019, and is valid until July 2, 2022.

(2)  For water resource, the Company installed the equipment engaged in recycling water. Treated wastewater would be used to water plants and flush in the toilet to diversify the purpose of water and make use of resources smartly. The scraps generated in the process of production were recycled or reused in various manners by attributes to raise the life cycle of resources. The Company has launched the recycling program with the Japanese Company Total Care System. The program is to replace the old treatment method of burning and burying diapers in order to make an effort to the environment.

(3)  After evaluation, the Company’s potential risks are floods, fires, earthquakes, unstable supply of water and electricity and the Company’s image impact. For potential risks, opportunities and response measures, please refer to “Note 3.”

(4)  

A. The Company adheres to the guideline of “Renewable Resources and Unlimited Carbon Reduction” for sustainable environment. The environmental improvement plan was announced annually by the Department of General Affairs, and is regarded as the basis. The Company’s environmental improvement plan for 2019 was setting the goal of reducing waste by 5%. By properly reclassifying waste generated from production activities, the waste can be reused or produced as renewable resources, reducing the impact to the environment. This year, the Company has reduced waste by 10.98% compared to the previous year, with an achievement rate of 119.6%.

B. The 2020 environmental improvement plan aims to reduce waste by 3% for consumer goods plant, nonwoven plant and Kou Liao Plant, and the Company plans to provide waste recycling programs by actively seeking external manufacturers, in order to reduce waste that cannot be recycled at this stage, in the hope to reduce environmental impact, activate resources, and achieve a circular economy.

C. Compared to the previous year, the Company has reduced 5.78% of GHG emissions (including water, electricity, liquefied petroleum gas, and fuel oil), the amount of water consumption increased by 3.65% and the total weight of waste decreased by 10.98%. The related calculation data is as follows:

(A) GHG Reduction:
                                         Unit: KG/Year

(B) Water Consumption:
                                      Unit: Tons/Year

(C) Total weight of waste:
                                      Unit: Tons/Year

No significant difference

No significant difference

No significant difference

No significant difference

4.     Social Issues

(1)  Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?

 (2)  Has the Company established and implemented reasonable measures for employee benefits (including: remuneration, holidays and other benefits), and appropriately reflect the business performance or achievements in the employee remuneration?

(3)  Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?

(4)   Does the company provide its employees with career development and training sessions?

(5)   Does the company follow the relevant laws and regulations, as well as international standards and formulate relevant policy and complaint procedures to protect consumers in terms of customer health and safety, customer privacy, marketing, and labeling?

(6)  Has the company established supplier management policies demanding compliance with relevant regulations and their execution status regarding issues such as environmental, occupational safety, and health, or labor rights?

V

V

V

V

V

V

 (1)  The Company adheres to the principles promulgated by the “UN Universal Declaration of Human Rights”, the “UN Guiding Principles on Business and Human Rights”, the “UN Global Compact” and the “UN International Labor Organization”, and respects internationally recognized basic human rights, including freedom of association, caring for vulnerable groups [disabled employees: 7 people, indigenous: 3 people], banned child labor [number of child workers: 0 people, controlled according to check-in data], eliminating all forms of forced labor, and eliminating discriminations in employment [incidents violating the Labor Act in 2019: 0 incidents]. In addition, the Company abides by the labor-related regulations of its business location, respecting and maintaining dignity for current employee contract and temporary personnel, interns, etc. The information is disclosed in the Company’s official website (human resources/human rights policy), and is also specified in the Company’s management rules and regulations (for example, principle 4.1 of the Employee Recruitment and Management Practices).

(2)  

A. Remuneration System:

(A) According to the provisions of Paragraph 3, Article 27 of the Company’s Articles of Incorporation, after the total profit in the current year make up for loss, no less than 1% of the total amount shall be allocated as compensation to employees. The Company's board of directors has resolved and passed the 1.5% as the distribution ratio of 2019’s employees’ remuneration on January 15, 2020. The remuneration is expected to be issued in 2020.

(B) The Company authorizes the salary standards based on the employees’ educational background/working experience, expertise, years of experience, and personal performance. The employees’ basic pay will not vary based on their gender, race, religion, political affiliation, marital status and labor union/society.

B. Leave System:

  The Company’s Leave System has been established as required by the Labor Standards Act and Labor Standards Act. “Major injury leave,” “birthday leave,” “public welfare leave,” and “maternal leave,” have been newly added to the System in 2019, which is better than the leave category of the law.

C. Other benefits:

    For a detailed description, please refer to annual report page 83.

(3)  The Company performs periodical inspections on the workplace environment (a total amount of NT$264,300 spent in 2019); the Company has special doctors and nurses in the plant for the health of employees (a total amount of NT$171,600 spent in 2019); to continue to follow up the health of employees, the Company regularly holds health check-ups (a total of 636 employees took part in 2019, with NT$300,000 spent); the Company regular conducts safety and health education and training programs (a total of 632 employees took part in 2019, with a total of 745 hours); for the safety and health promotion of employees, aside from the “Safety and Health Rules” established by the plant, the Company also sends relevant information (such as: Dengue Fever prevention) by emails, or posts the information on the Company’s internal website and bulletin boards.

(4)  The Company has standardized provisions for each unit and position (please refer to the job description and departmental training manual), and implements educational training in accordance with the approved annual education and training program.

(5)  

A. In terms of products and the service of customers’ health and safety, customer privacy, marketing and labeling, the Company complies with the laws and regulations of the place of sale and international rules or specific requirements of customers.

B. The Company has established the “Regulations Governing Customer Service,” and set up the consumer service hotline at 0800-213168 via which dedicated personnel would be assigned to process customers’ complaints, and the QA Center would be required to verify the cause and reply with a complete investigation report within ten (10) days. Furthermore, all products have been insured under product liability insurance.

C. The Company established the standard operating procedures for marketing of products and recycling of waste to maintain the quality stability and consumers’ trust. Meetings with major customers are arranged each year.

(6)  The Company conducts a supplier evaluation based on the “Supplier Management Measures.” The supplier’s impact degree and importance on products will be categorized (1-6) as well as the evaluation level (4 levels). The transaction may begin after the audit and certification carried out by the quality assurance unit. In addition, the “Supplier Survey Form” must be provided with the first transaction and an on-site audit is required. Audit content includes: items regarding envriomental, safety and health such as plant design, health management and laboratory control. The “Supplier Evaluation Audit Form” should be filled in by the quality assurance unit in order to conduct quality performance evaluation to suppliers. The Company carried out a total of 10 field audits to suppliers in 2019. The Company has also established the “Code of Conduct for Suppliers,” which requests suppliers to follow all applicable environmental laws in order to provide a safe and health workplace for employees. The Company avoids discrimination against labors and prohibits child labor and should further value the rights and benefits of labors. As of the end of December in 2019, 380 suppliers have signed to comply with the Code of Conduct.

 No significant difference

No significant difference

No significant difference

No significant difference

No significant difference

No significant difference

5.    Has the company taken reference from the internationally accepted reporting standards or guidance when compiling CSR reports to disclose non-financial information?  Have the reports mentioned previously obtained the assurance of third party verification?

V

Although the Company does not compile CSR reports, it discloses relevant information on CSR in shareholders’ annual reports and on its website. The Company also upholds the spirit of “giving back to the society” as a means to strengthen CSR according to the spirit of the “Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies.”

The Company will plan the same, if necessary.

6.    If the Company has established the corporate social responsibility principles based on the “Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies,” please describe any discrepancy between the Principles and their implementation:

      The Company has been managing its business in Tainan for more than 50 years with its original intention of “giving back to the local society.” During the unfortunate period of regardless of SARS or bird flue, the Company was the first to donate face masks to medical personnel and prevention units. With the ongoing coronavirus pandemic , the Company has supplied medical-grade face masks or raw materials for face masks for Taiwan, making a contribution in combating the virus. Also, the Company has newly added “public welfare leave” in 2019 to encourage employees to take part in external public welfare services and events. Furthermore, the Company supports disadvantaged groups using donations of money or materials as well as folk religions, allowing the maintenance of cultural assets and further drives the economic activities of the local tourism. A brief introduction of various items regarding the Company's implementation of CSR is as follows:

(1)   Donated items:

       The Company has cooperated with the “United Way of Taiwan” since 2008, and obtained the demand for maternal and child health products from various social welfare units through the association. It directly transports maternal and child health products to social welfare units in need, which thereby assisted many social welfare organizations. The recipients in 2019, such as the Social Affairs Bureau, Tainan City Government and the Garden of Hope Foundation, with a total of 20 donations that amounted to NTD 1.41 million.

(2)  The promotion of local tourism development with the combination of industry, government, and academic resources:

      By upholding the philosophy of innovative breakthroughs, industrial knowledge inheritance, talent cultivation and social feedback, the Company constructed the first nonwoven tourist factory “KNH Creative Nonwoven Kingdom (the Kingdom)” in Taiwan in 2013. The Company has carefully planned the themes in the Kingdom including the “Manufacturing Process,” “Knowledge for Women and Children,” and the “Nonwoven Kingdom” as a means to pass down the knowledge in terms of the industry and women and children. We have also established digital multimedia and interactive facilities so that tourists are able to further understand the nonwoven industry through the method of the combination of industry, government and academic resource such as the Exhibition Room, DIY Classroom, and the “5-Senses Experience.” In order to achieve the corporate spirit of giving back to the local community, the Kingdom has been open to the public free of charge. According to statistics, a total number of 7,300 people visited the Kingdom in 2019, up 4% compared to the previous year. We hope that, by combining traditional industry and tourism industry, more people will be able to know more about the nonwoven industry through concepts of knowledge, education, passing on the legacy, and industrial sustainability. In addition, in response to departments including the Tainan City Government Economic Development Bureau and the Industrial Development & Investment Promotion Committee of Tainan City, the Company organized the “2019 Jiangjung Autumn Carnival” jogging event on November 16, 2019 to promote the importance of physical health and mental health as well as the development of local tourism.

(3)  High quality and development of green energy products:

      The Company has a strong sense of social responsibility, and apart from the moving toward low price and high quality, the products are oriented to enhance socially beneficial products as the spirit of R&D. For example, the “Carnation Cool Cotton Sanitary Pad” won the Taiwan Excellence Awards in 2019 and “Lalune 3D Wet Wipes” won the 2019 Dai Shu Report Platinum Award.  In terms of green energy products, the has invested in the development of eco-friendly magnesium solid-state batteries and biodegradable and eco-friendly nonwoven R&D plans in order to make a contribution to the environment.

7.    Other important information to facilitate better understanding of the company’s corporate social responsibility practices: None.

Flood

Production affected, resulting in a financial loss, decreased income.

Enhance natural disaster resilience

1. Set up Business Continuity Planning (BCP), as well as an emergency response team to improve emergency response capabilities and minimize disasters.

2. Organize annual fire drills and earthquake drills.

3. Use fireproof materials for buildings, and regularly assign people to detect fire detection system.

4. Ensure that building constructions comply with the earthquake and wind resistance specifications required by the Ministry of the Interior.

Wind disasters

Earthquakes

Unstable water and electricity supply

Production is affected, increasing operating costs.

1. Construct eco-friendly buildings

2. Improve the efficiency of water resources

1. Construct eco-friendly buildings that are energy-efficient.

2. The discharged water and miscellaneous drainage of buildings after treatment are recycled and reused to improve the efficiency of water resources.

Impact to the Company’s image

When stakeholders’ expectations are not met, the Company’s reputation or image is damaged.

Enhance investors’ willingness to long-term investments

1. Strength innovate and high quality products (such as obtaining international certification ISO9001 and Taiwan Excellence Awards).

2. Leaning towards developing more products that are produced using green energy (such as research and develop eco-friendly solid magnesium batteries, decomposable and eco-friendly reused nonwoven).

1.    Establishment of ethical corporate management policies and programs

(1)  Has the company established an ethical management policy that has been passed by its Board of Directors, and clearly specified in its rules and external documents the ethical corporate management policies and the commitment by the Board of Directors and senior management on rigorous and thorough implementation of such policies and methods?

(2)  Has the company established a risk assessment mechanism against unethical behavior, analyzed and assessed business activities within their business scope on a regular basis which are at a higher risk of being involved in unethical behavior, and established prevention programs at least covering the preventive measures specified in Paragraph 2, Article 7 of “Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed Companies”?

(3)  Does the company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, penalty for violation, rules of appeal, and the commitment to implement the policies?

V

V

V

(1)  The Company’s board of directors has passed the “Ethical Corporate Management Best Practice Principles” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct” as the Company’s policies for ethical corporate management. Aside from disclosing the policies on the Company’s website, they will also be publicly announced at the internal HR management rules. As a means to enforce ethical corporate management, all employees of the Company will receive education and training courses. In 2019, the topic for the external education and training course was “Ethical Corporate Management Best Practice Principles.” A total number of 621 people participated with a total of 1,207 hours.

(2)  The Company has formulated the “Ethical Corporate Management Best Practice Principles” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct” and the related requirements have been specified. The Company has also formulated plans to prevent unethical conducts covering the preventive measures specified in Paragraph 2, Article 7 of “Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed Companies.”

(3)  The Company formulated the “Ethical Corporate Management Best Practice Principles” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct” on November 13, 2014 with clear statements regarding operational procedures, relevant procedures, guidelines of conduct, penalty for violation, rules of appeal. The Company amends the above rules and measures on a regular basis in compliance with the law.

No significant difference

No significant difference

No significant difference

2.    Fulfill operations integrity policy

(1)  Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts?

(2)  Has the company set up a dedicated responsible unit to promote corporate ethical management under the Board of Directors, and has such unit reported its execution in terms of ethical management policy and preventive programs against unethical behaviors and the supervision status to the Board of Directors on a regular basis (at least once a year)?

(3)  Has the Company defined any policy against conflict of interest, provides adequate channel thereof, and fulfills the same precisely?

(4)  Has the company established an effective accounting system and internal control system in order to implement ethical management, and propose relevant audit plans according to the assessment results of the risks of unethical behaviors, and review the compliance status of the prevention of unethical behaviors, or entrust an account to carry out the review?

(5)  Does the company regularly hold internal and external educational trainings on operational integrity?

V

V

V

V

V

(1)  The Company would evaluate the trading counterpart’s ethical management record at first, and expressly state the ethical management clauses in the trading contract.

(2)  The Company has appointed the HR office as the concurrent unit to promote corporate ethical management. The unit is responsible for amendments and monitoring of ethical management policies and preventive measures of unethical conducts, and must report to the board of directors at least once a year. The status of implementation for 2019 was reported to the board of directors on December 31, 2019.

(3)  Policies to prevent conflicts of interest have been formulated in the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct.” Aside from regular promotion and implementation, the Company also provides appropriate reporting channels.

(4)  The Company regulated the employees’ conduct by the accounting system, establishment of internal control system and various management regulations, and had the internal audit officer conduct audit from time to time to verify the implementation thereof.

(5)  The Company holds internal education and training for the “Ethical Corporate Management Best Practice Principle” for new employees, and annually conducts recurrent training.  In 2019, the topic for the external education and training course was “Ethical Corporate Management Best Practice Principles.” A total number of 621 people participated with a total of 1,207 hours.

No significant difference

No significant difference

No significant difference

No significant difference

No significant difference

3.     Operation of the integrity channel

(1)  Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up?

(2)  Has the company implemented any standard procedures and/or subsequent measures after carrying out an investigation or confidentiality measures for handling reported misconduct?

(3)  Has the Company adopted any measures to prevent the complainants from being abused after filing complaints?

V

V

V

(1)  The Company discloses the “Regulations Governing Procedure for Whistle-Blowing” on Company’s website with a clear whistle-blowing system, reward system and whistle-blowing channels have been formulated. The audit division has been designated to be the acceptance unit in terms of reporting objects. A report was received in 2019 and an investigation report was completed and subsequent improvements have been carried out by a related unit.

(2)  The Company has formulated the standard operating procedures and related non-disclosure mechanism with respect to the investigation on complaints in the “Regulations Governing Procedure for Whistle-Blowing” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct.”

(3)  The Company has defined the protective measures in its “Regulations Governing Procedure for Whistle-Blowing” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct.”

No significant difference

No significant difference

No significant difference

4.    Enhancing Information Disclosure

      Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?

V

The Company discloses the “Ethical Corporate Management Best Practice Principles” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct” and the “Regulations Governing Procedure for Whistle-Blowing” at the Corporate Governance section on its website.

No significant difference

5.    Where the company may have establish its own business integrity best-practice principles in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed Companies,” and shall elaborate the practice of business integrity and the variations from the aforementioned regulations:

       The Company has formulated the “Ethical Corporate Management Best Practice Principles” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct” and has been committed to the execution of ethical corporate management. There is therefore no major deviation to the Principles.

6.    Other important information to facilitate a better understanding of the company’s ethical corporate management policies:

      The Company’s board of directors has passed the amendments to the “Ethical Corporate Management Best Practice Principles” and the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct” on December 31, 2019 in compliance with the spirit of the latest Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed Companies. The Company has upheld the sustainable management philosophy for many years. All of the Company’s directors, supervisors and high-rank management also performed their obligation to manage and supervise with due diligence to prevent insider trading or avoid benefiting themselves or others. The Company complies with the laws and regulations prescribed by the competent authority. Meanwhile, it set up the consumer service hotline and email box to provide the communication and complaining channels to consumers.