Amorepacific Group provide loans to its suppliers at low interest rates using the KRW 15.9 billion Win-Win Partnership Fund, which provides direct assistance to suppliers. Amorepacific Group added KRW 3 billion to the existing KRW 5.1 billion of Mutual Growth Fund. The Group also runs a KRW 24 billion Mutual Growth Investment Fund to enhance the capacity of its suppliers. As of 2018, the Group is also operating KRW 600 million of Mutual Growth Investment Fund. As of 2019, the Group is providing 100% cash payment within 10 days of receiving invoices with more than 120 suppliers. In September 2019, the Group introduced a mutual growth payment system to more than 130 suppliers to enhance the primary suppliers, which resulted in the better payment process for secondary suppliers. As of November 2019, KRW 85 billion was paid through the mutual growth payment system.

In 2019, Amorepacific Group signed an MOU with the Korean Ministry of SMEs and Startups to participate in the Private and Public Joint R&D Project. As a result, the Group will provide a total of KRW 5.1 billion to support new technologies and products developed by middle and small-sized enterprises. In 2020, the Group will partake in joint R&D projects to develop eco-friendly packaging for reducing plastic waste and circulating resources and create devices for digital transformation. In 2019, the Group supported two suppliers for developing a manufacturing execution system for smart operations of supplier factories. As a result, suppliers enhanced performance by developing real-time manufacturing and operation systems, supply plans in sync with the Amorepacific’s system, and data-based inventory management.
Additionally, the Group provided consulting for 6 suppliers to improve issues with product impurities. As a result, the rate of returned products due to impurities has been improved by 42%. In 2019, a total of 29 research and development projects were done in collaboration with suppliers through various measures, including the sharing of research results, providing KRW 350 million to suppliers.

Since 2015, Amorepacific Group has provided its suppliers both manpower and financial support for participating in trade exhibitions held overseas. In 2019, the Group identified overseas trade exhibitions for packaging and raw material suppliers and supported 7 suppliers. Previously, suppliers that participated in Cosmoprof in Hong Kong between 2017 and 2018 signed ten new export contracts. Although HRD Consortium, an education program for employees of middle and small-sized suppliers, is discontinued as of the end of 2018, the Group is continuing to provide education programs for suppliers to enhance employee capabilities and stabilize human resources. In 2019, the Group launched 21 training courses on key professional tasks in the cosmetics industry and provided education to 1,145 employees of 163 suppliers.

Amorepacific Group designates and manages its key suppliers by strategic significance in response to the change of business environment, scale and importance of business transactions, and capacity of supply and development. As of the end of 2019, the Group categorized 52 suppliers as key suppliers out of its 450 suppliers. Among them, 22 supply packaging materials, 17 supply raw materials, and 13 provide ODM products. Amorepacific Group purchased a total of KRW 970 billion from the suppliers. To share the business performance with local communities, Amorepacific Group promotes purchasing products and materials from local businesses.

Amorepacific Group conducts business transactions only with those suppliers that satisfy the minimum sustainability requirements at the point of executing the business contract. The Group undertakes a sustainability assessment of all new suppliers reviewing compliance with legal requirements regarding quality, product safety, labor standards, safety and health, and environment, which is a standard by which the Group decides whether to enter into a contract. When signing contracts, Amorepacific Group requires all suppliers to comply with the Amorepacific Group Code of Ethics and Supplier Sustainability Guidelines.

Amorepacific Group has established, and requires all suppliers to comply with, the Supplier Sustainability Guidelines, which set out 34 items on human rights and labor, health and safety, environmental protection, ethical management, and other areas that need to be considered in order to fulfill their social responsibilities. The Group has also prepared a manual on how to translate the guidelines into actions, publishing it on Amorepacific Group website.
Amorepacific Group conducts annual sustainability assessment of key suppliers, reflecting the results in supplier assessment. Based on the results of supplier assessment, the Group offers incentives such as giving priority to receiving support for inclusive growth programs or in allocating the quantity of goods supplied. Over the past three years, 89 suppliers including all of the key suppliers and new suppliers have undergone sustainability assessment by an independent third party. Suppliers that have been found to have significant social or environmental risks are required to take actions to handle the risks and follow up with measures to confirm that such risks have been dealt with.

Through supplier sustainability assessment, Amorepacific Group identifies potential risks and requires suppliers to take corrective measures. Through the 2019 sustainability assessment, all suppliers found potential improvements. In cases where suppliers did not meet our standard or had critical violations, the Group applied follow-up measures such as reduction of business with suppliers that have been found to have significant violations or performance under a certain level, while providing support programs for those suppliers in need of building capacity of sustainability.