Materiality Analysis and Sustainability Management
Communicate with stakeholders through various stakeholder channels, identify major issues from global trends and make questionnaires, actively conduct interviews with representative figures of various stakeholders, collect and update the degree of concern. Analyze the risk of transformation failure and dual material factors of sustainable actions and formulate internal management systems to ensure the achievement of goals. The materiality analysis is performed once every year.
Identify Material Topics from Mega Trends
To further satisfy the sustainable development, TECO starts from major world mega trends, develops risk and opportunities from them, and make corresponding mitigation plans. TECO defines 16 material issues that fits GRI topics and preform material analysis to rank priorities. In this report, TECO explains the approach of guiding companies to face and grow in new risks and opportunities. Education programs and key performance indicators (KPI) were given to employees. Finally, TECO defines 10 Material Topics and categorize into 3 major area “To Survive”, “To Operate” and “To Profit” as next step links with SDG goals and sustainability.
Global Economic Situation and Industrial Trend in 2024
The growth of the United States, China, the European Union and other countries has moderated, and the economy will continue to grow at a low rate this year in 2024. International organizations such as the IMF estimate global GDP to be 3.0% and 2.9% in 2023 and 2024, which is lower than the historical average of 3.8%. Inflation has slowed down, GDP growth in major economies has moderated, and the revenue outlook remains optimistic. Revenues in North America, Southeast Asia, Australia and China continue to grow.
Identify Materiality Topics from the Global Economic Trends
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Mega Trends |
Impact on Operations |
Materiality Topics |
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1 |
High interest rates lead to financial volatility and economic recession |
Overall strategic adjustment and financial risk hedging, and seeking new business opportunities |
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2 |
Green subsidies spark global trade war |
Strive for the advantages of green finance, reduce emissions in response to international carbon taxes and fees, and organize a cross-border multi-site ESG operation mechanism |
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3 |
U.S. presidential election changes foreign policy |
Establishing regional supply chains and complying with regulations such as international trade embargoes |
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4 |
Climate change disrupts global supply chains |
Shorten the transportation distance of raw materials and components, and choose production locations that has no impact on the environment. |
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5 |
AI undermines confidence in government |
Strengthen corporate digital environment and information protection capabilities. |
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6 |
China tightens domestic controls |
Pay attention to China's reform measures and control to secure the source of raw materials. |
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7 |
Enterprise transformation and adjustment |
Implement adaptation measures, commit to caring for people, enhance employee capabilities and optimize the work environment |
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8 |
War escalates global conflict |
Establishing regional supply chains to mitigate risks. |
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Conduct impact assessments on 16 major industry themes, including positive impacts and actual and potential impacts on the economy, environment, and people (including human rights), and list the impact content and management methods. In 2023, 261 questionnaires (52% from Taiwan, 46% from Mainland China, and 2% from other countries) and 16 related issues were analyzed to find 10 Material Topics with high impact. The analysis results show that "investment in talent cultivation" and "employee welfare system" are very high-profile projects in both Taiwan and mainland China. Mainland employees also have great expectations in "occupational safety maintenance" and "air and water pollution prevention and control". And the opinions are very concentrated. When conducting a stakeholder questionnaire survey, the ESG Office encourages filling in negative statements, collects them, and reports all to the chairman of the board.
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10 Material Topics |
Impact to Economy【$】 Environment【☆】 People【♀】 |
Change from 2022 |
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1 Investment in talent cultivation |
【$】Enterprises need to cultivate professional digital talents to seize new business opportunities. 【☆】Enterprises need to internalize new norms on climate change and ESG. 【♀】Good career development can create a win-win situation for both the company and its employees. |
New Topic |
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2 Climate and emission management |
【$】Effective emission reduction can directly reduce the carbon footprint of products, but companies must increase necessary capital investment. 【☆】Reaching net zero by 2050 is TECO’s ultimate goal, but 2050 is still far away. What matters is what we can do in the ten years we can see. 【♀】No significant impact. |
Rank up ▲ |
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3 Innovative business opportunities |
【$】Under the implementation of carbon tariffs, exports must declare the carbon footprint of products. Not only must the energy efficiency of the product be improved during use, but the carbon footprint of the product itself must also be reduced as well. 【☆】To prevent potentially negative greenwashing. 【♀】No significant impact. |
Rank same＝ |
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4 Renewable energy use |
【$】No significant impact. 【☆】Not only Taiwan, but overseas factories are also facing pressure to use green electricity. We must start allocating the power generation capacity of the entire group. 【♀】No significant impact. |
Rank up ▲ |
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5 Employee welfare system |
【$】Enterprises need to invest more in human resource costs. 【☆】No significant impact. 【♀】Employees generally look forward to improved salary and benefits. |
Rank up ▲ |
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6 Diversity and equality of employees |
【$】Eliminate the possibility of biased decision-making. 【☆】No significant impact. 【♀】Reduce the risk of human rights violations within the working environment. |
New Topic |
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7 Information security measures |
【$】More software and hardware costs need to be invested. 【☆】No significant impact. 【♀】Employees need to change their usage habits and receive system upgrade training. |
New Topic |
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8 Air and water pollution prevention and control |
【$】More monitoring and prevention costs need to be invested. 【☆】Get better protection. 【♀】Get better protection. |
New Topic |
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9 Occupational safety measures |
【$】Reduce disciplinary incidents and maintain company reputation. 【☆】No significant impact. 【♀】Promote work-related injury prevention measures and ensure employee safety. |
Rank down ▼ |
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10 Supply chain management measures |
【$】The deterioration of geopolitical relations has become an inevitable long-term trend, and it is necessary to accelerate the realization of short-chain production capabilities. 【☆】Carefully select production locations and supply chain manufacturers to prevent potential negative impacts. 【♀】Prevent potential negative impacts on operations caused by local culture and regulations. |
Rank same＝ |
Material Issues for Enterprise Value Creation
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Material Risk or Opportunity |
As the global economic situation changes, Taiwan's CPI rises, the United States has inflation, and China has deflation. New geopolitical changes have affected tariffs, trade embargoes, and supply disruptions, causing changes in supply chain models. In response to global economic policy challenges, TECO has established North American and Indo-Pacific supply chains to cope with cost changes. |
Extreme climate events lead to power shortages, which interrupt corporate operations. TECO uses renewable energy to reduce dependence on external power supply and reduce operational risks. |
In response to various countries' policy support for green energy, energy conservation and carbon reduction, TECO seizes innovative business opportunities and develops clean technology projects to increase its revenue sources. |
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Business Case |
As global economic and geopolitical changes, as well as the intensification of trade disputes, lead to the implementation of new tariffs and trade embargo policies, this will directly affect TECO's import and export business and the flow of raw materials and products. In addition, geopolitics affects the stability and predictability of various markets, affecting TECO's production efficiency and supply stability. Therefore, TECO needs to balance between different markets in supply chain management, and how to cooperate with the original production base has become a challenge for TECO supply chain management to ensure cost and supply stability.
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Power shortages caused by extreme climate events are a common problem around the world. As a multinational company, TECO has multiple global production bases, which has led to increasingly frequent interruptions in corporate operations. This not only disrupts production and delays orders, but also increases the risk of default on orders. TECO must have the ability to create and store electricity in order to respond to external changes in a timely manner.
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Nation’s policy requirements for green energy, energy conservation and carbon reduction, for example, the United States’ green electricity subsidies and Taiwan’s 2050 net-zero transformation plan promote the rapid development of the new energy market. TECO has moved from motor sales to energy transformation services. In addition to playing an important role in the IDC computer room engineering industry, TECO has recently experienced strong growth in offshore wind power, offshore onshore substations, and energy storage. The newly established power generation and storage division will integrate resources to pursue virtual power generation opportunities for power privatization, allowing TECO to provide more diversified and high value-added energy solutions, thereby increasing revenue sources.
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Business strategies |
In response to changes in geopolitical policies, TECO has invested more than NTD 800 million in emerging regions such as Vietnam, India, and Mexico to establish production bases and cultivate supply chains. In 2023, the production bases in Mexico and India have been completed, and short-chain production centers will continue to be built to cope with market growth and production capacity dispersion needs in various regions around the world. |
Through the creation of energy conservation and renewable energy (solar energy), we will achieve the RE30 phased goal in 2030 and continue to build solar energy in Europe/America/Australia/Asia. The total power generation capacity in 2023 has reached 10.58 million kWh, approximately 10% of global electricity consumption. In 2024, we will continue to plan and build 8.0MW power generation facilities, and it is expected to achieve 30% power generation capacity in 2030. |
TECO has formulated a "three-year 20 billion growth plan", which not only increases annual revenue by 20 billion, but also increases the dividend distribution rate to 80%, and the after-tax net income in 2023 will increase by 68.4% annually. TECO expects to seize new business opportunities in the medium to long term, develop new low-carbon products, and pursue and develop private and government energy storage projects. Integrate resources to seize virtual power plant and power market business opportunities arising from power privatization.
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Target/Metric |
The construction of the American short chain will be completed in 2025, with the expected delivery time shortened by 48% and finished product inventory reduced by 50% (American short chain vs. global long chain). |
Solar power generation facilities in Southeast Asia and Italy are completed in 2023. Together with the original power generation capacity, the total power generation capacity in 2023 has reached 10.58 million kilowatt-hours, accounting for approximately 10% of the total power consumption of the group (global locations). TECO will increase the proportion of the company's own power generation and storage capacity, reduce external risks, and ensure the achievement of emission reduction targets. The long-term goal is to complete 30% of renewable energy power generation capacity by 2030.
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TECO Project's mid-term target for clean technology projects is a 9% revenue growth, and a power generation and storage capacity target of 50MW in 2024. TECO has set long-term goals of growing revenue from clean technology projects by 34% in 2025, generating and storing 180MW of electricity, and launching a power aggregation management business. |
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Target Year |
2025 |
2030 |
2025 |
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Progress |
Production bases in Mexico and India have been completed in 2023. TECO sets short-chain construction KPI-related projects and implements them, and establishes an American supply chain mechanism in 2024 to achieve more than 50% localization |
TECO has completed solar power generation facilities in Southeast Asia and Italy in 2023. Together with the original power generation capacity, the total power generation in 2023 will be approximately 10.58 million kWh, accounting for approximately 10% of the total power consumption of the group (global locations). |
In order to transform into a virtual green power plant, TECO has newly established the "Creation and Storage Operation Division". Based on the construction of self-owned projects and EPC projects, including investment in solar power plants, EPC construction of energy storage projects and sales of related equipment, more than 300 power generation projects have been completed in 2023, with a total installed capacity of approximately 10 MW of power generation. ability. In 2023, the external power generation capacity is 6 million kWh
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Executive Compensation |
KPIs and weights: Establishing North American short chains and improving equipment availability (4%), supply chain material planning optimization (2%), etc. The completion of major KPIs in this topic will be linked to the variable salary of the business group heads.
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KPI and weight: Carbon emission reduction (2%), including internal emission reduction and supply chain emission reduction, Power generation and storage projects (10%), Power monitoring system development (2%), Power grid connection completion (to Investment case type execution), etc. The completion of major KPIs in this topic will be linked to the variable remuneration of TECO CEO.
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KPIs and weights: M&A/strategic investment (3%), government power grid strengthening plan (6%), ASEAN sales strategy (1%), high-efficiency products and production technology improvements (2%), etc. The completion of major KPIs in this topic will be linked to the variable remuneration of TESCO CEO.
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Material Issues for External Stakeholders
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Material Issue for External Stakeholders |
Government Greenhouse Gas Regulations limited to listed companies only, not SME. The number of SMEs is huge, accounting for 80% of the total employment and generating 30% of the total export value. SMEs need guidance and requirements from listed counter companies. |
TECO participates in the construction of public projects for renewable energy and resilient power grids in Taiwan, as well as the electrification of natural gas pipelines in the United States. The progress of the project will affect the environment or society. |
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Topic relevance on external stakeholders |
The external stakeholders affected by this issue are suppliers, and after assessment, they will have an impact on the environment and society.
Topic description: Currently, major countries and companies have set net-zero goals. Carbon emission reduction in the supply chain is an important key to achieving corporate scope 3 emission reduction. If suppliers cannot reduce carbon emissions, their survival will be affected.
Positive and negative impacts: A large proportion of TECO's suppliers are small and medium-sized enterprises (SMEs), which usually lack sufficient resources and knowledge to conduct greenhouse gas inventory and reduction. In order to meet the requirements of low carbon emissions, suppliers need to monitor their employees. Training, these activities all add to the burden of time and expense. at the same time. Although the upfront cost is high, suppliers will enhance their environmental awareness during the process of reducing carbon emissions, thereby bringing long-term environmental benefits and enhancing the company's trust in the minds of customers, thereby enhancing the company's competitiveness.
This topic is expected to help reduce carbon emissions in the overall supply chain and enhance the stability and risk resistance of the supply chain; at the same time, it will prevent potential negative operational impacts on small and medium-sized suppliers and reduce the potential negative environmental impacts they may have.
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The external stakeholders affected by this issue are terminal electricity users, and after assessment, they will have an impact on the environment.
Topic Description: As global regulations on greenhouse gas emission reduction gradually strengthen, the demand for green energy and renewable energy continues to increase. More and more companies are aware of the importance of using green electricity and hope to purchase green electricity. , reduce dependence on traditional energy and generate carbon reduction benefits.
Positive and negative impacts: The promotion of green energy and renewable energy has a great impact on the environment. For example, the land use, landscape impact, noise, etc. of wind farms and photovoltaic power plants may have certain negative impacts on the environment. In addition, there are uncertainties in the green electricity market and related policies, government subsidies may change, and users need to bear corresponding risks. However, TECO's participation in the public engineering construction of Taiwan's renewable energy and resilient power grids, as well as the electrification of natural gas pipelines in the United States, can directly reduce the carbon emissions of electricity users and indirectly promote the reduction of carbon emissions in the entire energy system. We need to comprehensively consider the potential positive and negative impacts to ensure the sustainable development and popularization of green energy.
This topic can help end users of electricity properly protect the environment, avoid significant negative environmental impacts, and bring more positive environmental benefits of renewable energy to end users.
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Output Metric |
Number of SMEs completing GHG inventories |
Green electricity volume delivered to end users |
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Impact Valuation |
Generated economy benefits for SMEs |
Increased environmental value by decreasing SCC from fossil fuel usage) |
| Impact Metric | 53 SME completed GHG inventory from TECO’s help. This action generates NTD 10.6M value for supply chain. | TECO provides 10M kWh green electricity to end users and this increased environmental value by decreasing NTD 7,709,625 SCC (Social cost of carbon) |