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Climate Change Response

 

 

 

In order to cope with the business risks brought by climate change to the industry, the ESG Committee is responsible for calling on the relevant units to identify potential climate change risks and opportunities, with reference to the "Task Force on Climate-related Financial Disclosures (TCFD)" framework, and through the four core elements, including "Governance," "Strategy," "Risk Management," and "Metrics and Targets" to identify potential climate change risks and opportunities, address the impacts and influences of climate change on Tyntek's operations, and formulate relevant strategies and measures in advance to prevent the risks and damages caused by climate change.

 

 

TCFD four core elements

 

Core Elements Action Plans
Governance
● Based on various risks, inventory, and confirmation of the potential impacts of each risk issue on the internal and external aspects of the organization, including the identification and assessment of climate change risks, response to climate impacts, possible hazards caused by the risks, each relevant unit shall put forward improvement proposals and measures to adjust and mitigate the financial risks of climate change, and to identify the corresponding financial opportunities of climate change. The ESG Committee is responsible for compiling and presenting the results annually to senior management for review and discussion, the result of which is then sent back to the ESG Committee for approval.
● The ESG Committee reports quarterly to the Board of Directors on the results of the implementation of sustainable development, the work plan, and the related issues and countermeasures, including climate change related issues, and the identification of short-, medium-, and long-term goals.
Strategy
The Company takes the potential impacts of climate change into account in its overall operations, assesses the probability of risks and the extent of their impacts, identifies physical and transition risks and opportunities based on business types, risk strategies, financial planning, etc., and proactively promotes green energy and environmental protection policies, and invests in the development of sustainable technologies and products. In order to cope with the impact of global climate change and greenhouse effect on the environment, and in addition to setting up energy conservation and carbon reduction measures, promoting the implementation of energy conservation management in offices and public areas, waste reduction, and green procurement, we also purchase products with international or national energy preservation and environmental protection labels or environmentally friendly labeled products, and follow the requirements of governmental rules and regulations to ensure that energy conservation and carbon reduction are achieved.
For the major risks and opportunities of the Company, please refer to "Financial impacts of climate-related risks and opportunities".
In the future, the Company will continue to understand and plan and evaluate the types of climate scenarios and the setting of related indicators, the financial impact assessment methodology, and gradually improve the Company's climate change response management procedures and climate scenario simulations, in order to plan forward-looking and proactive climate action, develop risk response and mitigation measures plans and crisis management mechanisms.
Risk management
In order to identify and assess material impacts or risks associated with its operations, the Company conducts an organizational risk assessment that includes climate change scenarios through the operational mechanisms of the ESG Committee in 2022 to understand the specific potential financial impacts as a basis for policy development and targets, and to adopt relevant response strategies. Please refer to the "Risk Identification and Assessment Flowchart" for the process.
In addition, Tyntek expects to establish a more comprehensive risk management program including identification, assessment, management, recovery, and adaptation steps for climate change risk management in 2023, and to continuously monitor the program.
▼ The Company's Risk Identification and Assessment Flowchart
Metrics and targets
In order to reduce the impacts and risks caused by climate change and to achieve the green energy and carbon reduction goals, Tyntek has formulated various environmental protection measures and indicators, including power conservation, water conservation, waste reduction, GHG emission intensity reduction, etc. For details, please refer to "Chapter 4 Environmental Protection" for the corresponding chapter
Energy and Electricity Consumption:
  ● Continue to promote and invest in energy conservation measures and establish baseline data on electricity consumption per unit of production capacity in the plants.
  ● The long-term target is to reduce electricity consumption per unit of capacity by 5% by 2027, and to evaluate self-built or green power purchases.
Water Resources:
  ● Continue to promote and invest in water conservation measures and establish baseline data on water withdrawal per unit of production capacity in the plants.
  ● The long-term target is to reduce water withdrawal per unit of production capacity by 7% by 2027.
Waste:
  ● Implement a product waste reduction policy and track the total weight of waste annually.
  ● The target is to reduce the Ren'ai Plant's waste by 10% in 2025 compared to the base year of 2022.
GHG:
  ● Advocate for international GHG and global warming issues through the regular measurement and management of GHG emissions in Scope 1, 2, and 3 (Categories 1 to 6) in order to establish and plan energy conservation strategies and actions.
  ● In 2027, the greenhouse gas emissions (Scope 1 and Scope 2) of Tyntek’s parent entity per NT$ million sales will be reduced by 30% compared to the base year(2022).

 

Financial impacts of climate-related risks and opportunities

 

▼Climate-Related Risks and Financial Impacts

 

Type Climate-related Risks Potential Financial Impacts Response Actions and Management Objectives
Transition risks Policy and legal
1. In response to Taiwan's GHG reduction and management regulations, it is necessary to improve the energy efficiency of locations of operations, increase the capacity of renewable energy installations, and construct and subscribe to green power certificates, among other costs.
2. Potential carbon tax, carbon trading system, procurement of raw materials and components in compliance with regulations, etc. , may increase operating costs.
3. Fines and judgments, policy changes lead to increased costs or decreased demand for products and services.
● Continue to pay attention to relevant policies and regulations to ensure that the Company can comply with new regulatory requirements in a timely manner.
● Continue to implement energy conservation and carbon reduction actions and evaluate the purchase of renewable energy certificates.
● Implement the energy conservation performance guarantee improvement program for the replacement of high energy-consuming plant facilities, and endeavor to enhance energy efficiency.
● In 2023, the total cost of investment in energy saving facilities was NTD 12.03 million.
● In 2023, based on the water consumption fee collection regulations of the Water Resources Agency, MOEA, an additional NT$166,000 in water consumption fees was collected.
Technology
1. Investing in the development of third-generation compound semiconductor technology to enable end-users to achieve carbon reduction requires significant capital and labor, and carries the risk of loss.
2. Replacing existing customers' applications with new technologies will accelerate the elimination of technologically outdated customers, but will also reduce order demand.
● In 2023, we have invested in two key mass production equipment for the development of third-generation compound semiconductors. In the future, we will build up production capacity according to customers' needs. At the same time, we have also invested in product development manpower, so as to cooperate with our customers for trial production step by step.
Market
1. Increased awareness of sustainability may affect customers' intention to purchase products, and failure to respond in a timely manner may result in a decline in sales.
2. Relevant regulations have not yet been standardized consistently and information uncertainty is high, resulting in an increase in the overall operating costs of the industry.
● Changes in climate-related policies may affect customers' needs and preferences. We continue to monitor market trends and adjust our product portfolio to meet customers' needs for environmentally friendly and sustainability-oriented products.
Reputation
1. Relevant disclosure and management performance are poor, it may increase the concern of stakeholders and affect the Company's image.
2. The extent of the Company's commitment to climate change issues may affect investor decisions.
● The Company shall disclose its climate change issues management approach and the implementation of its objectives in the annual report and sustainability report issued by the Company each year. An additional expenditure of about NTD 1 million is required per year to prepare and verify the sustainability report.
Physical risks Acute risk
1. Climate factors may result in reduced production capacity and revenue (e.g., supply chain disruption due to unavailability of transportation, plant damage resulting in line stoppages).
2. Damage to plant and machinery in locations of operations may occur due to climate hazards.
3. Employees are unavailable for work and productivity is affected, resulting in lower revenues and higher occupational safety and health costs.
● Plant affairs units clean roof drainage holes and secure equipment prior to stormy and rainy seasons. During the period, additional manpower is stationed at the plants to carry out disaster prevention operations .
● Waterproof gates and pumping equipment are installed for underground floors.
● Have at least one standby machine for important equipment.
● Allow flexible adjustment for employees' attendance, while there should be adequate personnel for key roles.
Chronic risk
1. Increase in average temperature leads to increase in locations of operations energy usage, resulting in year-on-year increase in energy costs.
2. Maintenance and repair costs of low-lying buildings may increase due to flooding from rainstorms or typhoons.
● Continue to evaluate various energy-saving measures.
● Evaluate energy-efficient models for future equipment purchases.
● Improve product yields to reduce production costs.
● Install pumps in low-lying areas.
● Arrange building inspection once every 2 years
● Transfer key production lines (equipment) to high floors or other high level plant.

 

 

▼Climate-Related Opportunities and Financial Impacts

 

Type Climate-related Opportunities Potential Financial Impacts Response Actions and Management Objectives
Resource efficiency
1. Paper, waste recycling, and reuse.
2. Switch to more efficient electrical equipment.
3. Reduce water usage and consumption.
1. Reduce the purchase amount of consumables
2. Reduce electricity consumption and carbon emissions.
3. Reduce water usage costs.
● Implement resource sorting and recycling, promote water and electricity conservation.
● In 2023, Kejung Plant applied for energy conservation subsidies from the Energy Bureau of the Ministry of Economic Affairs, were qualified, and completed the improvements by January 2023. The overall electricity-saving measures of the Ren'ai Plant and Kejung Plant saves about 868,000 kWh per year.
● Completed the establishment of the baseline data of water withdrawal per unit of production capacity in the plants in 2023.
Energy sources Solar power generators are installed on the roofs of the plants. The solar panels installed on the roofs of the plant buildings, which can self-generate power for self-consumption, increase the usage of renewable energy and lower GHG emissions; or the electricity can be wholesaled to Taipower, increasing the Company's income.
● The Kejung Plant utilized the roof space to build a 223.65 kW solar energy system and currently wholesales the electricity to Taipower, which can increase the Company's income by approximately $1.6 million per year.
Products and services Develop third-generation compound semiconductor components technology to reduce energy consumption and carbon emissions in end-use applications. The third-generation compound semiconductors require a large amount of capital and equipment development, which will have a certain impact on the Company's revenue and costs in the short term. However, according to the long-term assessment, the development of the components can enable customers to achieve a certain degree of carbon reduction, and at the same time, can also create a new core valuable product for the Company.
● Actual sales of third-generation compound semiconductors in 2023 were $370,000, and customers are expected to contribute approximately $10 million in 2024 due to delays in product certification.
Markets
1. Develop potential business opportunities
2. Receive public sector incentives
1. In response to the new global energy conservation policy, new market demand has opened up, and there is an opportunity to develop potential business opportunities to increase revenue.
2. Apply for funding subsidies in response to public sector policies on energy conservation and carbon reduction.
● Continue to develop low energy consuming products in response to changing market demands.
Resilience Improve the Company's ability to respond to climate change by integrating climate change risks and handling methods. Enhance enterprise resilience to minimize losses from climate change and reduce losses in the supply chain.
● Each year, each relevant unit conducts an assessment of climate change risks and opportunities in accordance with their respective areas of responsibility, and develops adaptation and mitigation strategies; the compiled assessment results are submitted to the ESG Committee for approval.