Our Focuses｜Climate Change Management｜Climate Risk Management

Climate Change Management

Winbond embraces the vision of being an "Be a hidden champion in providing sustainable semiconductors to enrich human life". In response to international guidelines and domestic policies geared towards green sustainability, Winbond has implemented the Task Force on Climate-related Financial Disclosures (TCFD) framework for the third year to assess the potential climate change risks and opportunities as the basis for promoting climate mitigation and adaptation actions, enhancing the company's operational resilience.

Read Chapter Report Contents

SDGs

Publish the first independent TCFD report in 2023

Establish twelve Climate-Related Management Metrics

Climate Governance

Climate Risk Management

Scenario Analysis

Mitigation and Adaptation Measures

Metrics and Targets

Climate Risk Management

Risk Management Framework

Winbond established the Risk Management Committee, under the Board of Directors to implement risk management, formulating a sound set of internal regulations and operating procedures through the Committee’s subdivisions or responsible units in accordance with their scope of operations.

For details, please refer to Risk Management under Corporate Governance.

Procedures for Identifying Climate Change Risks and Opportunities

In 2023, Winbond convened 15 department-level units and nearly 30 members to establish the TCFD project team. Members are divided int teams according to the nature of their job. Each team discusses climate change issues with relevance to their area of operations, utilizing Winbond TCFD platform in 2023, the team identified 7 major climate risks and 7 minor climate risks, as well as 5 major climate opportunities and 7 minor climate opportunities from 35 climate risks (including transition risks such as policy and regulations, technology, market, and reputation, and physical risks such as acute and chronic) and 18 climate opportunities (including resource efficiency, energy sources, products/services, markets, and resilience).

Climate Risk and Opportunity Matrix

Climate Risk Matrix

All

Short-term: 1~3 years

Medium-term: 3~5 years

Major Risks:

Changes in customer behavior

Low-carbon technology transformation *

Carbon tax/carbon fee

Demand for renewable energy

Environmental regulations*

International conventions or agreements *

Greenhouse gas emissions regulations and trading

Minor Risks:

Productivity and labeling regulations

Generate negative feedback

Lack of regulations and legality

Legal litigation

Changes in rainfall patterns and distribution

Uncertainty of physical risks

Changes in natural resource availability

* New risks or opportunities in 2023

Climate Opportunity Matrix

All

Short-term: 1~3years

Medium-term: 3~5 years

Long-term: more than 5 years

Major Opportunities:

Changes in customer behavior

Participation in renewable energy projects

Development of low-carbon products and services

Process optimization and R&D innovation

Obtain government incentives or collaboration *

Minor Opportunities:

Enhancement in energy efficiency

Development of new fund resources

Use of low-carbon energy

Water resource management

Energy-saving buildings

Exploration of alternative and diverse resources

Changes in transportation modes

*New risks or opportunities in 2023

Impacts of Major Climate Change and Responses

Major Climate Risks

(－) represents a negative impact, (＋) represents a positive impact

Cimate Risk	Time of Occurrence	Potential Financial or Operational Impacts	Response
Changes in customer behavior	Short-term	Decrease in sales of non-low-carbon products (-) Increased communication with customers, which also resulted in higher labor costs (-)	Continuously stay informed about the requirements and specifications for green products from clients. Compile this information into a database to facilitate the provision of low-carbon, carbon-reduction, and energy-efficient green products that meet demand. Promoting the introduction of new product designs (design in) to meet customer needs, increasing the portfolio of green or low-energy consumption products. Utilize carbon information platform to assess product carbon footprints and hotspots, and formulation of reduction pathways and optimization plans Participation in domestic and international sustainability evaluations to enhance transparency in terms of sustainability practices.
Low-carbon technology transformation	Short-term	Capital expenditure for new equipment (-) R&D cost increase (－) Reduction in carbon emissions leading to a decrease in carbon tax/fee expenditures (＋)	Devote efforts to process improvement to reduce greenhouse gas usage. This includes accelerating the replacement of energy-saving components at machine terminals and installing tail gas treatment equipment. Continuously execute energy-saving projects for production machinery and facility infrastructure. Incorporate renewable energy sources to decrease greenhouse gas emissions. Engage in ongoing discussions with outsourcing partners regarding low-carbon technologies and production planning.
Carbon tax / Carbon fee	Short-term	Increase in indirect costs (－) Suppliers pass on their carbon tax/fee expenditures, leading to increased procurement costs(－) Limited capacity expansion(－)	Company-wide target of net-zero emissions in 2050. Develop a carbon accounting system. Devote efforts to process improvement to reduce greenhouse gas usage. This includes accelerating the replacement of energy-saving components at machine terminals and installing tail gas treatment equipment. Continuously execute energy-saving projects for production machinery and facility infrastructure. Incorporate renewable energy sources to decrease greenhouse gas emissions. Encourage high-electricity-consuming suppliers to conduct greenhouse gas inventories. Monitor and collect information on suppliers listed by environmental agencies. Provide training courses on carbon costs and valuation to increase supplier awareness and motivation for carbon reduction. Maintain a resource usage investigation mechanism for sustainable supply chain management, adjusting survey questions based on annual results and regulatory trends. Join the Singapore Carbon Exchange (Climate Impact X, CIX) and the Taiwan Carbon Solution Exchange (TCX) to diversify carbon credit acquisition channels and stay informed about developments in carbon offset systems.
Requirement of renewable energy	Short-term	Higher green energy prices result in increased production costs (－) Reducing carbon emissions leads to a decrease in carbon tax/fees (＋) Suppliers pass on their renewable energy expenditures, leading to increased procurement costs (－) Limited production due to difficulty in acquiring renewable energy (－)	Establish a Customer Green Energy Demand Survey System to accurately understand our customers’ green energy demand. Communicate customer requirements for green energy to suppliers and discuss related plans with packaging and testing outsourcing partners based on Winbond’s resolution on renewable energy usage. Collect information on the impact of purchasing green energy on negotiation prices and devise corresponding strategies. In 2023, complete the first purchase of renewable energy electricity, with an expected annual supply of nearly 10 million kilowatt-hours of renewable energy. Continuously plan for additional renewable energy purchases. In 2023, participate in the establishment of Kai-HongEnergy Co., Ltd. and continue evaluating other renewable energy investments. The rooftop renewable energy generation system at the CTSP fab will be converted to self-use in 2024. Also, additional renewable energy generation are under continuous evaluation. Plan and implement an REC management system to systematically manage green energy demand and internal and external production planning.
Environmental regulations	Short-term	Compliance costs increase due to regulatory requirement(－) Penalties for non-compliance(－) Rising environmental fee as indirect costs(－)	Plan effective compliance management systems, including inventoryunit compliance execution methods and designing a compliance platform. Increase human resources for researching relevant regulations and actively participate in legislative discussions. Implement three measures for supply chain management: real-time information aggregation and dissemination, organizing ESG workshops for suppliers, and conduct regular surveys on the usage of supplier resources.
International conventions or agreements	Short-term	Indirect costs arising from post-agreement commitments(－) Capital expenditures resulting from post-agreement commitments (－) Reducing carbon emissions decreases carbon tax/fee expenses(＋)	In 2023, the Taiwan Semiconductor Industry Association declared a joint goal of achieving net-zero emissions: using 2020 greenhouse gas emissions as a baseline, aiming for an absolute reduction of 10% by 2030 (compared to BAU reduction of 40%). The goal is to achieve net-zero emissions by 2050. Commit to process improvements to reduce greenhouse gas usage: accelerate the replacement of energy-saving components in machinery, install exhaust treatment equipment, execute energy-saving projects for production machinery and facilities, and utilize renewable energy to lower emissions.
Greenhouse gas emissions regulations and trading	Mid-term	Penalties for excessive emissions increase indirect costs(－) Early replacement of existing equipment reduces asset value(－) Introducing renewable energy increases production costs(－) Capacity expansion constraints(－)	Increase human resources for researching relevant regulations and actively participate in legislative discussions. Continuously monitor voluntary greenhouse gas reduction projects and the management of incremental emissions offsets. Acquire carbon credits at advantageous prices to offset excess emissions and closely track carbon price trends.

Major Climate Opportunities

Climate Opportunity	Time of Occurrence	Potential Financial or Operational Impacts	Response
Changes in customer behavior	Short-term	Product portfolio changes that accelerate positive development across entire supply chain Obtaining orders and expanding revenue Increased order stability and reduced revenue fluctuations Improved company reputation	Continuously stay informed about the requirements and specifications for green products from clients. Compile this information into a database to facilitate the provision of low-carbon, carbon reduction, and energy-efficient green products that meet demand. Drive the design and integration of new products to meet customer needs, emphasizing green or low-energy consumption product combinations. Utilize carbon information platforms to assess product carbon footprints and identify carbon hotspots. Establish reduction pathways and optimization plans for product carbon emissions. Participate in sustainability evaluations both domestically and internationally to enhance sustainability transparency.
Participation in renewable energy projects	Short-term	Reduction in carbon emissions leading to a decrease in carbon tax/fee expenditures Diversified sources of electricity to mitigate risks Support for compliance with renewable energy regulations and achieving corporate goals	In 2023, complete the first round of renewable energy electricity procurement, aiming to provide nearly ten million kilowatt-hours of renewable energy annually. Plan for additional renewable energy electricity procurement. Invested in Jiawei Green Energy Co., Ltd. in 2022 and participated in the establishment of Kai-Hong Energy Co., Ltd. in 2023, evaluating other renewable energy investment opportunities. The rooftop renewable energy generation facility at the CTSP fab will transition to self-use in 2024, with ongoing assessments for additional renewable energy installations.
Process optimization and R&D innovation	Mid-term	Reduction in carbon emissions leading to a decrease in carbon tax/fee expenditures Reduction in water and resource consumption leading to lower production costs Obtain orders to expand revenue.	Invite suppliers to share energy-saving keys related to products and technical services, as well as how to utilize advanced electronic materials to stabilize specific process quality. Collaborate with outsourcing partners to explore advanced low-carbon packaging technologies.
Obtain government incentives or collaboration	Mid-term	Reduce capital expenditures by obtaining government subsidies. Lower indirect costs by obtaining government subsidies. Enhance the company’s reputation.	In 2023, collaborate with 13 suppliers to apply for the Ministry of Economic Affairs’ “Large Lead Small” low-carbon subsidy, receiving a full subsidy of NT$30 million. The total investment for this project exceeds NT$200 million, with an expected annual reduction of 5,886 tCO₂e from the project’s completion.
Development of low-carbon products or services	Long-term	Increased product prices Expansion in market share and increase in revenue	Understand customer needs and evaluate possibilities to customize low-carbon/green products From the supply chain perspective, we focus on specific products or services with low carbon potential based on raw material carbon emission factors and factory usage. Organize sustainable supply chain upgrade forums and advanced packaging technology forums to enhance supplier awareness of product carbon footprints and low-carbon technology development. Collaborate with outsourcing partners to explore advanced low-carbon packaging technologies. Participate in the Ministry of Economic Affairs’ “Large Lead Small” low-carbon subsidy program, conducting product carbon footprint assessments for suppliers with high carbon intensity at the CTSP fab. Specific suppliers are required to identify improvement areas during the assessment process and submit improvement reports.