Responsible Sourcing

Supplier Assessment and Evaluation

Step 1：Desk Assessment (Scope: All of Tier-1 Suppliers)

We distribute assessment questionnaire to all of our tier-1 suppliers, requiring them to conduct a self-assessment on risks and provide supporting documents when needed.
The response rate for the questionnaire was 100% with a total number of 848 Tier-1 suppliers in 2024.

Step 2: Physical Assessment (CSR audit)- Significant supplier

We identify significant and high-risk suppliers based on our survey results and their business relationship with Yum China. We then conduct physical assessments and provide guidance to help our suppliers reduce risk levels.
In 2024, we conducted on-site corporate social responsibility audits for 428 suppliers through independent third-party service providers that partner with amfori.

Yum China Supplier CSR Audit

We require that all suppliers should acknowledge and sign the Yum China Supplier Code of Conduct before working with us to ensure that they are legally compliant with all applicable laws and regulations, and to fulfill their corporate social and environmental responsibilities. In 2023, we updated our Supplier Code of Conduct, raising our expectations for suppliers' environmental impact, freedom of association and collective bargaining, and anti-competitive behavior.

Since 2017, Yum China has been promoting supplier Corporate Social Responsibility (CSR) audit, outlining social and environmental compliance requirements for suppliers to address risks across the supply chain. We also engage professional third-party auditing firms to conduct CSR audits annually.

Yum China supplier CSR audit framework and evaluation criteria are developed with reference to applicable national laws and regulations and international standards. It covers areas such as child / minor labor, forced labor, working hours, wages and benefits, health and safety, security, and environmental management. The framework and evaluation criteria are reviewed and updated regularly as appropriate.

We also take ESG performance into consideration when selecting suppliers and signing contracts in order to give priority to suppliers with better ESG performance.

Yum China Supplier Code of Conduct

Yum China Supplier Code of Conduct—ESG

CSR Audit Compliance Training

We offer training prior to audits to help our suppliers fully understand compliance requirements. Suppliers would be audited by a third-party auditing firm according to CSR audit framework and evaluation criteria annually. After receiving a rating based on non-compliance issues identified during the audit, suppliers are required to submit detailed corrective and prevention action (CAPA) plan for continuous improvement. In 2022, 100% of suppliers submitted CAPA plan after audits. Suppliers' CSR and Business Continuity Management (BCM) are also key priorities in our supply chain management, together with other KPIs such as innovation, cost optimization, quality, and safety, which are also regularly evaluated and summarized in our business review. In 2024, 428 suppliers are subject to CSR audits, an increase of 10% from last year, covering 100% of the key suppliers, with a 97% initial audit pass rate.

Online training participation rate was 100%

Submission rate of corrective and preventive actions plan following audits was 100%

CSR Ratings: A-grade

Score ≥ 90/100 AND without any critical issue
Valid for 24 months

CSR Ratings: B-grade

80/100 ≤ Score < 90/100 AND without any critical issue
Valid for 12 months

CSR Ratings: C-grade

Score < 80/100 OR with any critical issue
Requires immediate remediation and a re-audit. If the supplier is still graded C in the follow-up audit within three months, it is considered high risk, and Yum China carefully reviews the partnership.
Potential ESG risk impacts in high – risk supplier：
a) Environmental: such as hazardous substance management
b) Social: such as forced labor, child labor
c) Governance: such as bribery, corruption

Local Sourcing

As a leader in the restaurant industry, Yum China leverages its advanced management experience and abundant resources to actively promote the joint development of upstream and downstream companies, striving to lead the industry's evolution and build a mutually beneficial supply chain ecosystem. We actively engage in collaborations with local Chinese suppliers. By the end of 2024, over 99% of our suppliers are local suppliers from China, bringing positive impact to local economic growth and employment. Apart from providing business opportunities, we also share resources and expertise in management approaches, technical support and marketing promotion with our suppliers. Meanwhile, suppliers reciprocate with high-quality products, thereby forming a mutually beneficial partnership.