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Sustainability Commitment

Identify Material Topics from Mega Trends

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International Relations Deteriorate, Democracy Camp Forms Short Supply Chains

Geopolitics has led to the transformation of the global supply chain, enterprises loss the position to pursue the lowest manufacturing cost under globalization. The communist camp launched a countermeasure to pursue independence and control by increasing domanstic demand and expanding public expenditure.

Impact on operations

TECO’s Material Topics

The United States and China are competing for global influence. Countries, led by the United States, jointly put pressure on China and Russia. Markets and companies are forced to choose sides.

Long-chains increase the carbon footprint of transportation, and the short-chains lose the scale of economies advantages.
  • 【Worldwide Supply Chain Configurations】The deterioration of Sino-US-Russian relations is already a long-term inevitable trend, and it is necessary to accelerate the realization of short-chain production capabilities
  • 【Digital Marketing and Logistics】The epidemic and geopolitical changes have caused freight delays and freight rates to fluctuate. TECO should maintain more flexibility by service remotely to maintain customer satisfaction.
  • 【Material Risk Mitigation】Raw material prices fluctuate, TECO needs to be more focused in controlling of raw material inventory.
  • 【Product Decarbonization】 Under the implementation of CBAM, carbon footprint will has to be disclosed. Not only must the energy efficiency of the products be improved, but the product carbon footprint must also be reduced as well.
  • 【Carbon Specification Development】Just like food has nutrition labels, future products will also have carbon labels. customers will be expecting to purchase zero-carbon products.

 

The global economy is conservative, and society has higher expectations to ESG

The monetary easing policy under the epidemic in the past three years, coupled with the effect of the Ukrainian-Russian War, has planted the inevitable result of an economic recession in 2023. At the same time, under the rising tide of ESG, enterprises must find a growth strategy under the goal of zero emission.

Impact on operations

TECO’s Material Topics

The economic market, on the one hand, controls the inflation by increasing interests, and on the other hand, raises the threshold for sustainable investment. Enterprises must pay attention to engage with investors and commitment to sustainable development.
  • 【Internalize the New Norm】 There are more and more environmental data that need to be tracked, and the market access and tariffs are becoming more and more complicated. We must ensure that TECO people do the right thing.
  • 【50% Emission Reduction in 2030】Reaching carbon neutrality by 2050 is the ultimate goal, but 2050 is still far away, what matters is what we do in this decade.
  • 【Employee Life and Safety】Transparency of internal epidemic situation, work injury information to eliminate employee anxiety. Support flexible working environment and employees’ family life.
  • 【Diversified Environment】Woman's and diversified communities can speak out. TECO takes care of diversified needs.
  • 【Biodiversity】 The world has begun to pay attention to the protection of biodiversity. TECO should use deforestation paper and wood and should also assist in the conservation of living species to support earth ecology.

 

 

Electricity costs continue to rise and power generation structure changes.

Power plants will be transformed, new technologies will be put into commercial use, the government encourages the growth of new power industries, and a large number of decentralized microgrids will be built. Fossil fuel is being replacing by electricity power, which causes a decrease in GHG emission scope 1 and an increase in scope 2.

 

Impact on operations

TECO’s Material Topics

Italy’s electricity price has quadrupled since the Ukrainian-Russian war broke out, China’s mainland requires daytime production to be shift to night time, and Taiwan’s 2023 average electricity price has risen by 11%.

Demand for electricity increases but electricity costs continue to rise. Enterprises must have independent electricity supply to face future challenges.
  • 【Solar Power Generation】Not only Taiwan, but factories in China and Southeast Asia are also facing pressure to use green electricity. We need to start deploying the power generation capacity for the entire group.
  • 【Supply Chain Decarbonization】The government requires listed companies to conduct greenhouse gas inventory inspections, and TECO has to assist SME supply chain partners in this action and help them to reduce emission.
  • 【Clean Technology Engineering】 Demand for public infrastructure soared, TECO has to made every effort to build a greener Taiwan and to maintain a leading position in the market
  • 【Low Emission Factory Solution】 Motor is the source of industrial power and consumes 37% of total electricity. TECO should invest more in research and development of emission reduction and help customers reduce carbon in operations.

 

Materiality Analysis and Sustainability Management

The materiality analysis is performed once every year. From the world mega trends, TECO identify and communicate major risks and material issues with stakeholders. In year 2023, we issue 275 questionnaires to shareholders, employee, industry thought leaders and consultants to collect feedback openly for materiality analysis as following:

Data collection

Step1

Understand the organization’s context

Based on the industry standards of the GRI Standards, identify risks and issues from world's major trends. Refer to reports from third-parties (including the World Bank, DJSI, CDP, MSCI, EcoVadis.., etc.) Identify TECO’s ESG Material topics.

Step2

Identify actual and potential impacts

Conduct impact assessment on 14 major industrial issues including the economy, environment, and people. List the impact content and management approach.

Step3

Assess the significance of the impacts

The "ESG Office" confirms the content of each topic, analyzes its financial and ESG-oriented impacts. Identity their input and output metrics to measure the impact.

Step4

Prioritize the most significant impacts for reporting

Conduct interviews with key stakeholders, including industry leaders and employees. Consolidate opinions from 275 questionnaires, and classify major issues into three major sustainability actions, which are “to exist”, “to operate”and “to profit”.

Strategy Development

Step5

Risk mitigation and goal setting

Based on the sustainable goals and their target years, find potential transformation risks and mitigation plan. Design KPI and training programs to make sure all employees have necessary capabilities.

Step6

Disclosure

The "ESG Office" compares the impact of each issue, propose TECO's corresponding actions and communication points to stakeholders. Refer to the GRI/TCFD/SASB standards and formulates the disclosure contents.

Action

Step7

Approval and management

Establish annual strategy and action plans.  Report to the "Corporate Governance and Sustainability Committee" under the Board of Directors. Adopt the "internal carbon pricing" to balance financial and ESG indicators for each business groups.

 

 

Top 10 Material Topics

 

 

10 Material Topics

Impact to Economy【$】 Environment 【☆】 People【♀】

Change from 2021

1 

Product Decarbonization

【$】Under the implementation of carbon tariffs, not only must the energy efficiency of the products be improved, but the carbon footprint must also be reduced.

【☆】Potential negative green washing behaviors should be prevented.

【♀】none.

Rank up ▲

2

Low Emission Factory Solution

【$】Motor is the source of industrial power and consumes 37% of total electricity. TECO should invest more in R&D of emission reduction and help customers reduce carbon in operations.

【☆】Solve the actual negative pressure on old machine recycling

【♀】none.

Rank up ▲

3

50% Emission Reduction in 2030

【$】Effective emission reduction can directly reduce the carbon footprint of products, but companies must increase the necessary capital investment.

【☆】Reaching carbon neutrality by 2050 is the ultimate goal, but 2050 is still far away, what matters is what we do in this decade.

【♀】none.

New Topic New

4

Clean Technology Engineering

【$】Demand for public infrastructure soared, TECO has to made every effort to build a greener Taiwan and to maintain a leading position in the market

【☆】The project needs to be carried out while preventing potential negative environmental impact.

【♀】If the environment is properly protected, there will be no significant impact to people.

Rank up ▲

5

Internalize the New Norm

【$】Mitigate potential negative business risks.

【☆】here are more and more environmental data that need to be tracked, and the market access and tariffs are becoming more and more complicated. We must ensure that TECO people do the right thing.

【♀】None.

New Topic New

6

Employee Life and Safety

【$】None.

【☆】None.

【♀】Transparency of internal epidemic situation, work injury information to eliminate employee anxiety. Support flexible working environment and employees’ family life.

Rank up ▲

7

Supply Chain Decarbonization

【$】The government requires listed companies to conduct greenhouse gas inventory inspections, and TECO has to assist SME supply chain partners in this action and help them to reduce emission.

【☆】 Prevent potential negative operational risk to SMEs

【♀】 Prevent the impact of education and training needed on SMEs.

New Topic New

8

Material Risk Mitigation

【$】Raw material prices fluctuate, TECO needs to be more focused in controlling of raw material inventory.

【☆】None.

【♀】None.

New Topic New

9

Solar Power Generation

【$】None.

【☆】Not only Taiwan, but factories in China and Southeast Asia are also facing pressure to use green electricity. We need to start deploying the power generation capacity for the entire group.

【♀】None.

Rank down ▼

10

Worldwide Supply Chain Configurations

【$】The deterioration of Sino-US-Russian relations is already a long-term inevitable trend, and it is necessary to accelerate the realization of short-chain production capabilities.

【☆】Carefully select production locations and supply chain manufacturers

【♀】Prevent potential negative impacts on operations caused by local culture and regulations

Rank down ▼

 

Identify actual and potential impacts to ESG

Conduct impact assessments on 14 major industrial issues on the economy, environment, and people (including their human rights) and list the content of impacts and Control method.

In 2022, from 275 questionnaires and 14 topics, TECO identify 10 material topics of high concern. ESG Office enriched and assessed ESG impacts and presented in Materiality Matrix.

 

Material Topic

Positive (＋) and Negative (－) impacts

 

Economy

(＋)  (－)   

Environment

(＋)  (－)

People

(＋)  (－)

1

Internalize the New Norm

(＋) Improve corporate culture

(－) Cause irregular business conduct

 

○

 

◎

 

 

2

50% Emission Reduction in 2030

(＋) Reduce transformation risk

(－) none

 

○

●

 

 

 

3

Employee Life and Safety

(＋) Improve employee health

(－) none

 

 

 

 

◎

 

4

Diversified Environment

(＋) Reduce risk of strategic bias

(－) none

 

 

 

 

○

 

5

Biodiversity

(＋) Improve environmental health

(－) none

 

 

○

 

 

 

6

Worldwide Supply Chain Configurations

(＋) Reduce operational risk

(－) Increased management complexity, adaptation to local humanities regulations

◎

 

 

○

 

○

7

Digital Marketing and Logistics

(＋) Improve service quality

(－) none

○

 

 

 

 

 

8

Material Risk Mitigation

(＋) Reduce operational risk

(－) none

○

 

 

 

 

 

9

Product Decarbonization

(＋) Reduce transformation risk

(－) Easy to form green washing behavior (note)

◎

◎

 

●

 

 

10

Carbon Specification Development

(＋) Control product carbon cost

(－) none

○

 

 

 

 

 

11

Solar Power Generation

(＋) Enhancing Power Resilience

(－) none

 

 

◎

 

 

 

12

Supply Chain Decarbonization

(＋) Reduce transformation risk

(－) Impact on SMEs (note)

○

●

 

○

 

◎

13

Clean Technology Engineering

(＋) Win new business opportunities

(－) The engineer project has high potential to cause environment impact (note)

●

 

◎

●

 

◎

14

Low Emission Factory Solution

(＋) Win new business opportunities

(－) Create a burden on the old machine recycling system

◎

○

○

◎

 

 

 

【Actual Impact】    ● High   ◎ Medium   ○ Low

【Potential Impact】 ● High   ◎ Medium   ○ Low

 

【Note】 The impact and control metric are disclosed in following table for 3 topics with major concerns: Product Decarbonization, Supply Chain Decarbonization, and Clean Technology Engineering.

 

 

Product Decarbonization

Supply Chain Decarbonization

Clean Technology Engineering

ESG Impact

Higher Efficient products may use raw materials with a higher carbon footprint

Government Greenhouse Gas Regulations limited to listed companies only, not SME

Environmental impact caused by public infrastructure emgineering

Why it impacts

In order to improve product efficiency, it is necessary to use higher gladed raw materials, such as silicon steel sheets,

The government requires all listed companies to complete GHG inventory by 2027. However, there is no clear control method for SMEs.

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.

Affecting scope

For the overall environment, companies must consider the overall emissions and carbon footprint of the life cycle when switching to raw materials.

The number of SMEs is huge, accounting for 80% of the total employment and generate 30% of the total export value. SMEs need guidance and requirements from listed counter companies.

The progress of the project will affect the environment or society.

How to evaluate

Collect and evaluate the carbon footprint of materials, calculate the increase or decrease of upstream carbon footprint, and the impact of downstream product use emissions

At this stage, TECO is providing guidance to SME suppliers, and assisting in the establishment of inventory knowledge and tools.

TECO should accept and comply with the relevant construction requirements of "Environmental Impact Assessment" and conduct inspections when undertaking the project site.

Management metrics
  • Tracking of direct and indirect greenhouse gas emissions
  • The number of assisting provided to SMEs
  • Completion rate of GHG inventory
  • The number of social disputes
  • The number of violations and penalties

Positive ESG impacts if manage well
  • Ensure the overall emission reduction pathway is followed.

 

In year 2022, the sales volume ratio for (IE3+IE4+IE5) is 49.01%, higher than world-wide average of 27 %. Total power savings is about 840M kWh equivalent to reducing emissions by 425k ton/CO2e
  • GHG inventory coverage.
  • Accelerate energy-saving and low carbon transformation

 

The cost of GHG inventory is about NTD 200k for each SME. In this topic TECO generate NTD 1,600k economy benefit for suppliers.
  • Increase the proportion of renewable energy usage.
  • Reduce the demand for fossil fuels

 

According to the national plan, Taiwan's 2022 offshore wind power generation target is 2.6 billion kWh, and TECO's onshore substations account for 35%. TECO transferred 910 million kWh of offshore wind power to grid in 2022, which is equivalent to reducing emissions by 460 million kg/CO2e

 

 

 

Contact window: ESG Office/ Jay LC Huang, csr@teco.com.tw