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Modern Dairy Supplier Code of Conduct

As a leading dairy cattle farming operator and raw milk producer, Modern Dairy is committed to providing high-quality fresh milk and dairy products, while establishing long-term, mutually beneficial, and sustainable partnerships with our suppliers. We recognize the important role that suppliers play in our business success, and therefore we have formulated the “Modern Dairy Supplier Code of Conduct” (hereinafter referred to as “this Code”), and expect suppliers to comply with the ethical, social and environmental standards stipulated in this Code.

1. Requirements for Suppliers

To achieve our cooperation goals, we require suppliers to:

1.1 Labor Standards

1.1.1 Prohibition of Forced Labor

We require suppliers to strive to avoid any form of forced or compulsory labor, such as all work must be done voluntarily, and all workers must be allowed to freely terminate their employment relationship with reasonable notice. We require suppliers not to use any form of threats, violence, restrictions, detention, or other means to force workers to continue working or deprive them of their freedom. Suppliers shall not restrict workers’ movement or communication in any way, or illegally confiscate workers’ identity documents, passports or other important documents.

1.1.2 Child Labor and Minor Workers

Suppliers shall comply with all applicable laws and regulations regarding the minimum working age and ensure that their business activities do not use any form of child labor. Suppliers shall verify the age of their employees when hiring them and shall not arrange for minors under the age of 18 to engage in any work that may harm their health or safety. Suppliers shall ensure that the working hours and rest time of minor workers comply with local laws and the International Labor Organization (ILO) regulations, and do not affect their opportunities to participate in education and training.

1.1.3 Working Hours

We require suppliers to comply with all applicable laws and regulations related to working hours, rest, wages, and benefits, and ensure that no employee exceeds the maximum working hours stipulated by law or contract, whichever is lower, and respect the right of employees to enjoy paid annual leave and public holidays. Suppliers shall arrange overtime work reasonably according to the actual situation and the wishes of the employees and ensure that overtime does not exceed the scope permitted by local laws or industry norms.

1.1.4 Wages and Benefits

We require suppliers to comply with applicable laws and regulations related to overtime payment and minimum wage and ensure that all employees receive fair and timely remuneration. Suppliers shall strictly implement the labor quota standards and shall not force or coerce workers to work overtime. Employers who arrange overtime work shall pay remuneration to workers in accordance with relevant national regulations. Suppliers shall pay employees reasonable and sufficient wages on time, which can at least meet their basic living needs and some disposable income. Suppliers shall clearly explain to employees their wage structure and calculation method and provide relevant records and evidence. Suppliers shall not deduct or delay the payment of employees’ wages for any reason. Suppliers shall also provide relevant benefits and insurance for employees according to local laws and industry norms.

1.1.5 Humane Treatment

We require suppliers to provide a safe, healthy, and non-violent working environment, and not tolerate any form of harassment, abuse, or punishment, including but not limited to physical, sexual, verbal, or psychological aspects. We require suppliers not to conduct any form of illegal or cross-gender searches, nor threaten to do so. Suppliers shall establish effective complaint and appeal mechanisms, and ensure that employees can freely, safely, and confidentially reflect their problems and opinions, and receive timely and fair treatment.

1.1.6 Anti-Discrimination

We require suppliers to adhere to the principles of equality and non-discrimination in their business activities, and not to discriminate based on race, color, religion, gender, age, disability, nationality, sexual orientation, political views, or any other legally protected characteristics in any business activity. Suppliers shall ensure that all employees have equal opportunities and treatment in recruitment, training, promotion, remuneration, benefits, and other aspects, and are evaluated and rewarded according to their abilities and performance. Suppliers shall respect the diversity and inclusiveness of employees and provide them with a non-discriminatory and unbiased working environment.

1.1.7 Freedom of Association

We require suppliers to respect the legal rights of employees to freely associate, join unions, seek representation and collective bargaining. Do not interfere with or retaliate against employees who exercise their rights to freedom of association and collective bargaining. Suppliers shall establish good communication and cooperation with unions or other organizations that represent the interests of employees and respect their legitimate rights and interests in labor relations.

1.2 Health and Safety

1.2.1 Workplace Environment

We require suppliers to provide a safe, healthy, and non-violent working environment, comply with all applicable health and safety laws and regulations, and prevent accidents and injuries. Suppliers shall ensure that their workplaces comply with safety standards in fire, electrical, construction and other aspects, and are equipped with sufficient safety facilities and equipment, such as fire extinguishers, first aid kits, safety exits, etc. Suppliers shall regularly conduct safety inspections and risk assessments of their workplaces, and timely eliminate any factors that may cause danger or harm. Suppliers shall also ensure that their workplaces have good hygiene and ventilation conditions, and provide appropriate facilities such as drinking water, toilets, etc.

1.2.2 Product Quality and Safety

We require suppliers to strictly comply with all laws and regulations related to product safety and quality, as well as meet our quality requirements. Suppliers shall establish and maintain effective quality management systems to ensure the quality and safety of products and services. Suppliers shall also timely deal with any problems or complaints related to product or service quality or safety and take appropriate corrective and preventive measures to avoid recurrence.

1.3 Environmental Protection and Social Responsibility

1.3.1 Environmental Protection

We require suppliers to take measures to reduce the negative impact on the environment, comply with all applicable environmental laws and regulations, improve resource utilization efficiency, reduce waste emissions, and reduce greenhouse gas emissions.

1.3.2 Building a “Zero Forest Destruction” Supply Chain

We require raw material suppliers to conduct special management of the procurement behavior of feed raw and auxiliary materials such as dairy cattle and other breeding animals and soybean meal that have forest destruction risks, and strive to build a “zero forest destruction” supply chain. The raw material production areas of suppliers shall not cause forest cutting and other harms due to the expansion of agricultural land or planting land. Suppliers shall comply with the applicable forest protection laws and regulations of the countries and regions where they operate and shall prohibit the purchase of products produced from the destruction of High Carbon Stock Forests, High Conservation Value Forests, and peatlands, wetlands and tropical rainforests and other ecosystems.

1.3.3 Protecting Biodiversity

We require suppliers to respect and protect the biodiversity and natural landscape of our region and avoid any adverse impact on protected or endangered species and habitats. When conducting our business activities, we shall minimize the consumption and pollution of natural resources such as land, water resources, air quality, etc., and adopt environmentally friendly technologies and methods.

1.4 Business Ethics and Information Protection

1.4.1 Integrity and Honesty

We require suppliers to comply with relevant laws and regulations of the countries and regions where they operate and respect the rights and interests of local communities and stakeholders. Conduct business activities honestly, fairly, and transparently, and do not engage in any form of bribery, corruption, fraud or unfair competition. Do not provide or accept any gifts or entertainment that may affect business decisions or damage our reputation.

1.4.2 Information Protection

We require suppliers to protect personal information and privacy and comply with all applicable data protection laws and regulations. Protect the confidential assets and information of customers, and do not disclose, misuse, or abuse these assets and information.

2. Supplier Admission

The company implements admission management for suppliers and incorporates the environmental and social performance of suppliers into the important indicators of the supplier admission scorecard, including environmental protection, labor management, health and safety, social responsibility, business ethics and other aspects. Before entering the warehouse, suppliers must sign a commitment letter for this Code, namely the “Sustainable Procurement Management Code Commitment Letter”, and require the admission rate of suppliers entering the warehouse to reach 100%. In addition, for bulk material suppliers, a review team composed of the bidding office, quality assurance department and demand unit will conduct admission review on the quality management performance of new bulk material suppliers according to the “Supplier Quality Grading Management Scheme”.

3. Supplier Cooperation

We select suitable suppliers from the suppliers in the warehouse to cooperate with the company and determine that the suppliers cooperating with the company need to sign the “Sunshine Agreement” and the “Sustainable Procurement Management Agreement”. The “Sunshine Agreement” aims to create a legal, honest, and transparent cooperation atmosphere. The terms of the “Sustainable Procurement Management Agreement” cover the specific requirements of this Code.

4. Supplier Audit

We conduct regular or irregular audits of Tier 1, Tier 2 and Tier 3 suppliers through document audit, on-site inspection, spot check and other methods, and achieve 100% coverage of Tier 1 supplier audit, and conduct ESG risk assessment on suppliers according to the “Supplier Comprehensive Evaluation Scorecard”, and divide them into low, medium, and high ESG risk levels.

We evaluate and score the performance of supplier employees’ labor management in the “Supplier Comprehensive Evaluation Scorecard”. For suppliers with close comprehensive performance, we preferentially select them as our suppliers with superior performance in labor management. Excellent performance in labor management means that suppliers ensure that their employees enjoy reasonable rights and benefits, such as fair and reasonable remuneration, safe and equal working environment, appropriate rest time, etc., and no suppliers are found to use child labor or forced labor, and ensure that their employees have relevant professional qualifications, such as driver’s license for transportation contractors, etc., to avoid the occurrence of supplier employee labor problems.

In addition to preferring suppliers with superior performance in labor management, we also consider rewarding and recognizing suppliers who comply with this Code and have excellent ESG management performance through the following ways, including but not limited to:

  • Give priority to choosing them as our preferred partners.
  • Award them certificates or badges of honor.
  • Provide them with more opportunities for cooperation and innovation.
  • Provide them with more favorable payment terms and conditions.

In response to the problems found in the audit, we consider taking the following actions, including but not limited to:

  • We require suppliers with potential high ESG risks submitting an improvement action plan, complete the improvement measures within the deadline, reduce and eliminate their ESG risks, and report their implementation and progress to us regularly. We will verify their implementation status according to the improvement action plan.
  • Terminate the contract and stop the business relationship.
  • Report the violations to the relevant departments and stakeholders.

We believe that by complying with this Code, we will jointly enhance our reputation, competitiveness, and social responsibility in the dairy industry, and create value for both parties.