In the face of external expectations, carbon footprint and GHG inventories must be carried out in accordance with norms and regulations.
ISO14067 Carbon Footprint and ISO14064 GHG Inventories and acquisition of third-party certifications, which is associated with increasing internal and external expenses
Risks associated with suspension of operations due to natural disasters and fines and litigation due to environmental audits
Fines or stagnating sales due to litigation affecting revenue planes
Taian Technology (Wuxi): Increased frequency of environmental monitoring is projected to increase costs by RMB$ 150,000
Customer or regulatory requirements to achieve zero emission or collection of "Carbon Border Tax" for international trading and transaction
If TECO does not deploy plans early, the Company may lose its competitiveness in international trade due to carbon tax. For instance, the 150 HP motor (equivalent to an output power of 115kW, capable of providing the power for an electric four-wheel vehicle), generates total carbon emissions of 375kgCO 2 e during the manufacturing process. Sales in the European and US markets account for 20% of TECO’s total sales volume. If carbon prices in these two markets rise in accordance with the IEA 2DS scenario, TECO’s operating costs are bound to rise with each passing year.
International competitors have consecutively declared their commitment to achieve zero carbon emissions by 2030 - 2050
It is mandatory to formulate carbon removal strategies and plan concrete implementation methods to minimize financial pressure caused by the purchase of carbon credits.
Singapore is committed to reducing emissions intensity by 36 percent from 2005 levels by 2030, and stabilising emissions with the aim of peaking around 2030
It is mandatory to implement emission reduction planning and target management in all overseas offices, branches, and sales locations and prepare budgets for environmental investments and management.
China will adopt more energetic policies and measures with the goal of achieving its peak value in the field of CO2 emissions in 2030 and realizing carbon neutrality prior to 2060.
It is mandatory to adopt technical modifications in the field of energy conservation and carbon reduction and actively promote high-efficiency motors (however, the cost of IE3 motors is 20% higher than that of IE2 motors; rising procurement costs at the customer end could result in loss of customers to competitors)
Transformation of technologies
Introduction of emission reduction needs to adapt to the new manufacturing processes and environments
Increase of automated production and demand for intelligent manpower. With a view to preventing SF6 (GHG) leakage, manpower has been replaced with robotic arms for the welding and assembly of pole switch boxes.
TECO product conformity to relevant regulations and failed development of new products
Capital expenditures in technologies and development of substitutes increase. Investments in motor-related energy consumption design software and product certification expenses rise. R&D expenditures account for around 4.87% of the total revenues.
Automation causes the plant site’s demand for energy to increase but the energy efficiency indicator become more rigorous.
Solar plates for parking lots/rooftops are adopted, use of renewable energy sources is increased, and budgets for environmental investments and management are prepared.
Taian Technology (Wuxi): It has been estimated that the use of rooftops on the company premises for the installation of renewable energy (solar power) facilities will result in an installed capacity with a photovoltaic power generation of 0.98 MW. The design has a projected service life of 25 years and is expected to require total investments of RMB$ 4 million. Cumulative power savings over 25 years are projected to amount to RMB 2.13 million.
Technical support must be maintained for household appliances
TECO has made an ongoing commitment to the development of energy conservation and environmental protection technologies. RAC has already completed the deployment of R32 and DC variable-frequency technologies which have been adopted all the way to light commercial models of 5HP. However, CAC products of 5HP and above still require the search for substitute refrigerants that conform to GWP standards. Application of existing stand-alone 10HP DC variable-frequency technologies has been extended to stand-alone 20HP drive control technology.
Customers or investors expect to increase the renewable energy use ratio
Corporations must plan the emission reduction road map in order to gradually achieve zero emissions. TECO invests in the plant site solar power generation station and performs the cast waste heat recovery assessment. In addition to relevant equipment for the construction of solar power, the renovation of the facility roof is also constructed at the same time, and the investment cost per MW power generation is NTD 40~60 million.
Transformation of markets
Society expects the companies to provide commitment to a circular economy
Increase of ESG training hours and integration in work tasks, incorporation of friendly work environment criteria in supplier evaluations
Extension of employees’ retirement age, and insufficient young group of talents. Increased ratio of migrant workers, changes in industrial labor structure
The market demand for high efficiency motors increases, and the fill-in ratio of the copper wires inside a high efficiency motor manufactured must reach above 85%, and the manual wiring must reach 75% or more, which is difficult when quality requirements need to be satisfied at the same time. TECO needs to introduce automatic production in order to overcome the double problems of technology and manpower
Progress of development of competitor products and differentiation from competitor products
Progress of forward-looking products lagging behind competitors, loss of business opportunities, and shifting customer demands result in dropping demand for products and services.
Increase of power expenses, employee living expenses, and salary
Rising electricity bills: For the region of Taiwan, the electricity tariff increase is expected to reach 38% by 2030, and the price per kWh of electricity (contract capacity) will increase from NTD 1.97 to NTD 2.72. Motor housing is a cast part and the main power source for cast production is electricity, accounting for approximately 13% of the cost. Consequently, an increase in the electricity tariff will affect the production cost directly. Energy consumption of factories increases; energy as a fixed production cost accounts for around 1.55% of the total costs of large motors; employee salaries constitute 9.7% of the total cost.
Capital withdrawn from the industries of petrochemical and mineral industries
TECO’s original business volume in the Oil & Gas industry in Texas, USA, is expected to contract.
Transformation of reputation
General public requests the disclosure of non-financial information and greater CSR evaluation, investor and shareholders expect the company to propose plans for climate change
TECO foreign investment ratio is approximately 25%, and the international ESG investment trend affects the stock price. To meet the expectation of investors, the Company needs to establish a sustainability risk control mechanism and to disclose relevant content, and major event reporting management mechanism
Automation speed of representative enterprises
The Vietnam Plant is ahead of many enterprises in its level of automation. The continued expansion of the scope of electrical engineering automation decreases the demand for manpower and manual operations, which is consistent with future market demands and expectations.
New products don’t conform to legal requirements and brand reputation decreases in international markets.
Dropping demand for products/services and missing out on new market opportunities
Transformation of physical risks
Natural disasters and air pollution causing suspension of factory operation
Suspension of operations in the Chungli Plant result in daily production capacity losses of NT$ 11.26 million
Suspension of operations in the Hukou Plant result in daily production capacity losses of NT$ 1.6 million
In China, the government may request factories to suspend its operation partially or completely according to the air pollution warning on that day, and suspension of operations by the factory causes daily production capacity losses of approximately NT$ 15 million.
Suspension of operations in the Taian Technology (Wuxi) Plant result in daily production capacity losses of RMB$ 480,000
Suspension of operations in the Jiangxi Plant result in daily production capacity losses of RMB$ 140,000
Extreme weather conditions such as heat waves and torrential rains result in high employee absence rates and traffic hazards.
TECO employees in Vietnam commute to work by scooter. Torrential rains therefore result in tardiness and high absence rates, which in turn affects production capacities.
The 2020 summer in Australia was mild and short, which resulted in AC sales going down by AUD 500K.
Production demands of factory buildings have been activated. Production lines have been moved up and offices have been moved down to minimize the impact of natural disasters.
Typhoons result in production standstill, while flooding results in damage to production equipment and shipping delays. Flood boards have therefore been installed in the entrance and exit areas to prevent flood damage.
Anti-flooding materials, water storage facilities, and cooling equipment will be added in the Taian Technology (Wuxi) plant, which will increase investments by RMB$ 300,000.
Brief spells of extremely low temperatures result in suspension of operations and hardship for employees.
The Westinghouse Plant in Texas, USA, had to suspend operations for one week due to low temperatures and power outages.
Early coping with risk factors, PSI management, and increased inventories
Advance determination of funding sources and available credit to ensure funding needs are met
Capital withdrawn from the industries of petrochemical and mineral industries, causing deficiency of raw materials and increase in costs
TECO’s motors use steel materials of high specification, and the annual purchase volume is approximately 60,000 tons. The fluctuation of steel cost becomes one of the major risks of force majeure.
Increase of average temperature
Temperature rise can directly cause the interior temperature to increase in the facility, and the plant site needs to make greater investment in ventilation and cooling facilities. For the past two years, the Company has invested NTD 2.5 million in the improvement, and a budget of approximately NTD 1 million is planned annually for continuous improvement of equipment at the plant site in order to protect the health of employees.
Southern Vietnam is hot and muggy all year round. Rising air temperatures directly result in rising indoor temperatures in manufacturing plants, which in turn leads to recruitment problems and lack of energy and initiative on the part of employees. The plant is therefore forced to increase its investments in ventilation and cooling equipment.
High energy-efficient key components are out of stock
High energy-efficient AC models must be paired with high energy-efficient compressors. Future manufacturing and supply sources for such compressors cannot be controlled yet, which poses a certain risk of unavailability.
Oppurtunity Management and Impacts
Invest in smart electrical engineering production lines and increase of overall efficiency
TECO has introduced the smart electrical engineering production mode. As a result, the production quantity has increased from 10 units per person per day to 34 units, and the production first pass yield has dropped from 400 minutes to 20 minutes
Promotion of automated offices and decreased use of paper-based, traditional office modes
Reduced use of office consumables, increased investments in automated office systems, and full implementation of office digitization to enhance office efficiency.
Promotion of digital marketing, e-commerce, digital transformation, and a global collaboration information platform
Execution of the marketing &sales digitalization plan to streamline transaction procedures, enhance transaction efficiency, and increase of revenues Expansion and optimization of various high performance information platforms at the marketing and sales end, and gradual establishment of a sound business intelligence system (BI) in order to increase the precision of market sales and thereby generate sales growth.
Promulgation of more rigorous energy efficiency laws and regulations by the government
Taiwan will convene a conference on enhancement of energy efficiency. It is planned to further raise one of the most rigorous standards in the world by 10% and stipulate a refrigerant whose impact according to the global warming coefficient is even lower (GWP of less than 500). Promulgation and enforcement is planned for 2023 and 2025, respectively.
Pursuit of high energy-efficient models
Energy efficiency standards and laws are constantly tightened to cope with energy conservation and carbon reduction issues. Conformity to these new energy efficiency standards and regulations will increase costs by 10%~15%. However, Class 1 Energy Efficiency, variable-frequency products have turned into a benchmark for consumer purchases. It is therefore planned to implement variable-frequency and Class 1 Energy Efficiency features for all product series at an early date to maintain the Company’s competitive edge.
Construction of plant site renewable energy facilities according to the plan, and change from the electricity sale model to plant site self-use whenever necessary
TECO has installed a 5.3MW power generation capacity at Guanyin, and in 2020, the Company has further installed a 1.7MW power generation capacity in Chungli. After reaching the full capacity of grid connection, these facilities are expected to generate 8 million kWh and a sales income of approximately NT$ 40 million annually.
Impact of a temperature increase by 2 degrees on power expenses.
Temperatures in the vicinity of teeming furnaces and blower furnaces are higher than in other areas, which results in lower energy consumption required for heating.
With regard to rising power expenses for air conditioning systems, we can adopt systems with a higher energy efficiency ratio. (EER>3.5, SEER>5)
Improvement of heat supply equipment in plants
Wuxi TECO has a peak monthly AC power consumption of 165000KWh during the winter months. Adoption of Smoke exhaust TES (thermal energy storage) can generate monthly power savings amounting to a maximum of around RMB$ 10,000.
Products and services
Increasing demand ratio of variable-frequency AC solutions
The conversion to variable-frequency modular and screw appliances is projected to generate revenues of 2.6 million with gradually rising revenues in the future.
Natural disasters and air pollution causing market demand
Australian forest fires have resulted in serious air pollution and rising demand for air purifiers. Consequently, the overall sales volume of these devices rose last year.
Provision of solutions such as energy conservation and emission reduction through integration of motors and inverters to minimize climate impacts.
Contributions to climate change adaptation and rising revenues through new solutions
Vietnam is one of the few countries in the world that hasn’t yet mandated use of IE3 high-efficiency motors. Against the backdrop of a worsening greenhouse effect, the conversion to such motors is bound to reshuffle and restructure the market. It is mandatory to make early preparations for these expected market demand changes.
Increasing demand for light-duty motors will result in rising demand for copper and rare earth
The Australian non-coal mining industry continues to prosper
Increase of R&D investments (from 4% to 6%) to expand the company’s markets from industrial motors to other powertrain products such as e-vehicles, spacecraft, and low earth orbit satellites
Investment in energy storage, energy conservation engineering capability and development of low-carbon product modules
Google has added 6-8 Internet data centers for total investments of 70 billion
Warehousing automation is projected to generate an output value of US$ 270 billion in 2025
The epidemic has resulted in an increasing demand for online services
The usage ratio of the online transaction system has been increased and a digitized sales environment has been realized
Optimization of teaching environments in response to rising temperatures
Installation of AC systems by primary and secondary schools is expected to generate a demand of 100,000 units.
Renewable energy accounted for 20% of the energy supply in Taiwan in 2025; optimal utilization of incentive measures of the public and private sector
Creation of revenue in line with policy incentives
Solar energy of a scope of 20GW exceeds NT$ 3 trillion
Grid-connected offshore wind power of 5.5GW generates an output value of NT$ 900 billion
Taipower energy storage demands amount to 600MW requiring engineering equipment of a value of NT$ 18 billion
The latest standard GB 18613-2020 in China which will take effect in June 2021 stipulates a minimum energy efficiency of IE3 (GB2) for motors.
The new GB standard in China, which will take effect in June 2021, prescribes a minimum energy efficiency of IE3. The total power consumption of small motors sold in China each year is 450MW. Once IE2 is raised to IE3, the average efficiency is projected to increase from 89.5% to 91%. Based on an assumed operation time of 3000 hours per year, the sale of IE3 motors in 2021 is expected to generate total power savings of around 12 GW. IE3 sales ratio has increased from 25% to 70% (2021 H2)
The government promotes a policy of localized/domestic production of electric buses
Product diversity and international competitiveness have been increased as a result of this beneficial domestic production and localization policy and technical cooperation with international manufacturers The electric bus industry in Taiwan has reached NT$ 90 billion
Increase of OEM opportunities for other brands
Household appliance manufacturers that are capable of developing and manufacturing high energy-efficient models are eligible to strive for OEM opportunities in domestic and overseas industries
Adoption of regional R&D and production models, increase of localized production ratios and shortened delivery times
Upon successful development of core technologies in line with market demands, the R&D center will shift its focus to the strengthening of production technology capabilities in manufacturing bases
Establishment of manufacturing bases with comprehensive production lines to be allocated based on external environments and the global political and economic situation
SDK parts, machine assembly, shipping and packaging cost savings Modularization and flexible deployment of manufacturing bases in line with the changing global situation (e.g., Sino-American Trade War, protective tariff restrictions)
Countermeasures for increasing average temperatures
In view of current average temperatures of 29.5 degrees with occasional peaks of 40.2 degrees during the summer months in Taiwan, it doesn’t seem warranted to add cooling equipment (average of 29.5+2=31.5 degrees) Most countries stipulate suspension of operations if temperatures exceed 40 degrees A large number of companies in Europe utilize concentrated vacation periods to avoid summer heat waves and excessive investments in non-manufacturing auxiliary equipment.
Creation of new short-chain regional supply chains for our four major production centers
Encouragement of suppliers to set up plants in Vietnam and India with the goal of creating new supply chains for the TECO group
Contact window: CSR Task Force/Jay LC Huang, Special Assistant, email@example.com