Supplier Management System

ZTE integrates sustainable development requirements into supply chain management and requires suppliers, including subsuppliers, to follow the same requirements, including:

• Legal compliance: Comply with all applicable laws, regulations, and standards in the countries or regions where we operate, including applicable laws and regulations on anti-corruption, anti-bribery, anti-fraud and anti-money laundering, and unfair competition. Suppliers are strictly prohibited from engaging in bribery, corruption, fraud, money laundering, unfair competition, or supporting illegal armed force.

• Environmental protection: Reduce the impacts on the environment and implement green and low-carbon transformation. ZTE continues to increase the scope and proportion of green procurement, avoid using harmful substances, and promote the application of low-carbon, recyclable materials and packaging. Meanwhile, we provide suppliers with the methodology of carbon peaking and carbon neutrality, and require them to set emissions reduction targets, formulate emissions reduction measures, and disclose them to the public, so as to reduce GHG emissions along the supply chain together.

• Human rights and labor: Respect all internationally-recognized human rights, including human rights and labor requirements stipulated in the Ten Principles of the United Nations Global Compact, the Universal Declaration of Human Rights, and the ILO Declaration on Fundamental Principles and Rights at Work. Any forms of child labor or forced labor are prohibited. We shall maintain an open and inclusive working environment without discrimination, harassment, and abuse, so as to protect the physical and mental health of employees.

• Diversity and inclusion: Respect and promote diversity, provide more opportunities for women, ethnic minorities, and people with disabilities and companies owned by them, support their capability development, and share benefits together.

Management System, Policy, and Mechanism

The company's COO acts as the Global Process Owner (GPO) of the company's procurement management. The general managers of the Procurement Dept. and the Engineering Outsourcing Dept. take charge of supplier management (including supplier CSR management) and the implementation of sustainable procurement strategies.

To build a win-win ecosystem, we have established a comprehensive "Full Lifecycle Supplier CSR Governance System", covering such fields as labor rights, health and safety, environmental protection, business ethics, control of harmful substances in products, requirements for carbon peaking and neutrality, information security, and conflict mineral management. Through the digital and intelligent platform, CSR management requirements and actions are embedded into each key point of the supplier's end-to-end business processes, so that CSR management can be integrated in business activities and continuous improvements can be made.

Supplier Approval and Risk Assessment

ZTE has developed the Supplier CSR Risk Assessment Form to analyze environmental and social risks during the supplier introduction phase. Risk assessment includes relevant CSR certification, labor agreement signing, and identification of environmental violations and penalties. Based on the assessment results, different levels of controls are conducted on suppliers. Suppliers who pass the assessment will then be required to:

• Sign the Supplier CSR Agreement (including the Supplier CSR Code of Conduct), which specifies the company's CSR requirements. Suppliers who refuse to sign will be vetoed;

• Fill in the Supplier CSR Self-Evaluation Form to provide information about the compliance with CSR requirements;

• Receive the company's onsite audits for CSR performance evaluation.

Supplier Audit and Supervision

For suppliers in partnership with the company, ZTE conducts onsite CSR audits in three forms:

• Integrated audit. ZTE assesses suppliers' CSR performance with Structural Onsite Audit Evaluation Form during other reviews such as qualification and quality audits. In 2023, ZTE conducted integrated CSR audits on 79 new suppliers and 179 existing suppliers. The results showed 90% of the audited suppliers obtained ISO14001 or ISO45001 certification.

• Special audit. ZTE carries out the special CSR audit using the Supplier CSR Audit Report or JAC CSR Parameters for a comprehensive and systematic assessment of suppliers' CSR performance. In 2023, the company conducted special audits on five existing suppliers.

• External audit. According to the demands of external customers and our judgment on the risks involved with suppliers, a professional third party is selected to implement the special CSR audit under the CSR standards recognized by the customers, to gain a comprehensive understanding of the suppliers' CSR performance. In 2023, external audits were carried out on nine existing suppliers.

In supplier evaluation and audits, to ensure effective CSR management of subsuppliers, ZTE reviews the suppliers' management of the subsuppliers' CSR performance (such as procurement policies, signing of CSR agreements, and whether the subsuppliers are evaluated and audited).

Supplier Appraisals and Incentives

ZTE has formulated the Regulations on the Management of Material Supplier Performance Appraisal. In accordance with the regulations, the company conducts monthly performance appraisals on suppliers. The appraisal results are used for supplier grading, bidding and procurement, and as a reference for selecting outstanding suppliers.

For outstanding suppliers, the company will commend their performance and give priority to long-term collaboration and strategic partnerships with them. For suppliers whose performance are consistently poor, ZTE will conduct an internal review to determine whether to suspend collaboration or cancel their qualifications based on the review results.

Social responsibility is included in the item E (sustainable development) of performance appraisal of suppliers, accounting for 5% of the total appraisal scores. The winners of the company's "Best Overall Performance Award" and "Global Best Partner Award" in 2023 were selected based on the evaluation results of suppliers.

Supplier Communication and Complaint

During audits on suppliers, the company conducts surveys or interviews with the suppliers' employees to learn more about suppliers' CSR performance and their employees' awareness of CSR. In addition, ZTE has established the following channels to receive complaints about supplier CSR performance. Any organization or individual who finds any suspected CSR violations by our suppliers can report them to ZTE through the channels, and we will respond to, investigate, verify, and handle the cases in a timely manner. During the handling process, whistleblowers' information is kept strictly confidential in accordance with the Regulations on Protection and Rewarding of Real-Name Whistleblowers.

• Reporting channels for internal control and audit: +86-0755-26771199, audit@zte.com.cn.
• Reporting channels for procurement inspection: https://supply.zte.com.cn, +86-0755-26771520, pma@zte.com.cn.