Our Focuses｜Climate Change Management｜Climate Risk Management

Climate Change Management

The World Economic Forum (WEF) recently released “Global Risks Report 2023”, which indicates that the cost of living will dominate global risks in the short term. The energy crisis, food shortages, and inflation resulting from the war in Russia-Ukraine and the Covid-19 pandemic have become urgent global issues. Climate change continues to be the biggest long-term risk. Greenhouse gas emissions produced by humans since the dawn of the industrial revolution and capitalism have led to global warming. The high costs resulting from extreme weather events have increased the awareness of governments, international organizations, and civil society throughout the world. Industries are confronting pressure from economic stagnation, the challenges of energy transformation, and the risk of geopolitical instability at the same time they have to face up to the urgent and worsening climate issues that have been accumulating for over a century. This is not an easy task, but it is only through being more proactive in combating climate change and increasing the resilience of our Company that we can move towards sustainability.

As a provider of electronic technology, Winbond is deeply aware that our actions affect the global economy, and in fact function as a key factor in shaping the landscape of society. To comply with international standards and domestic policies related to environmental sustainability, we adopted the framework of the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures (TCFD) and published Winbond’s first TCFD report in 2022, which was the company’s 35th anniversary. Through this report, we hope to convey our social commitment to our stakeholders.

Chairman and CEO, Arthur Yu-Cheng Chiao

Read Chapter Report Contents

SDGs

Publish the first independent TCFD report in 2023

Establish five 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 is a manufacturer of semi-conductors. Natural disasters, accidents, man-made disasters, changes in the international political and economic situation, the introduction of new technologies by competitors, and changes in policies and regulations can potentially result in severe impacts on operations and finance. In light of this fact, Winbond established the Risk Management Committee under the Board of Directors to implement risk management through the Committee’s subdivisions or responsible units in accordance with their scope of operations. Aside from formulating a sound set of internal regulations and operating procedures, the Committee is also responsible for developing comprehensive plans and procedures for preliminary assessments, hedging, and loss prevention and crisis management, and regularly reporting to its oversight and governing bodies.

Risk Identification

Identify significant risk items, assessment methods, and risk appetite for the annual operational plans and goals of each unit, and obtain approval from the supervisor for the annual budget.

Risk Analysis

Calculate the risk value for identified significant risks, and in addition to the annual estimation, conduct quarterly revisions of the risk value. Any significant changes should be reported in the quarterly reports.

Risk Assessment

Each unit assesses significant risk items according to the appropriate operational frequency and compares them with the approved risk appetite, reporting to the management unit as needed.

Risk Response

When the actual situation exceeds the approved risk appetite, each unit immediately proposes risk response recommendations. Upon approval, the appropriate responses are implemented in accordance with risk management policies, procedures, and hierarchical responsibility criteria.

Supervision and Review

Risk management-related requirements are incorporated into the audit system in accordance with risk management policies and procedures for tracking, enabling the establishment of control points, self-assessment, and audit verification operations.

Winbond has incorporated climate change risks into its long-term operations management. To understand the impacts of climate change risks on the environment and operations, Winbond has introduced the TCFD, conducts annual evaluations, discloses climate risks and opportunities as well as their financial impacts (both qualitative and quantitative), and proposes review and management strategies based on international regulatory trends and market development observations since 2021. Winbond will continue to monitor risks and impacts resulting from climate change, strengthen its operational capabilities, promote carbon reduction projects, increase energy efficiency, and firmly step towards sustainable development.

Procedures for Identifying Climate Change Risks and Opportunities

In 2022, Winbond established the TCFD with 40-plus members, over 60% of whom are at the department executive level. Members are divided into teams according to the nature of their job. Each team discusses climate change issues with relevance to their area of operations. Over the course of four workshops and educational training, the TCFD has identified four major climate risks and seven minor climate risks, as well as five major climate opportunities and four minor climate opportunities.

Climate Risk and Opportunity Matrix

Climate Risk Matrix

All

Short-term: 1~3 years

Medium-term: 3~5 years

Long-term: more than 5 years

Major Risks:

Demand for renewable energy

Carbon tax/carbon fee

Unstable electricity supply

Extreme rainfall and drought

Minor Risks:

Changes in customer behavior

Greenhouse gas emissions regulations

Changes in rainfall patterns and distribution

Demand for low-carbon products and services

Changes in natural resource availability

Signing of Voluntary agreements

Fuel tax/energy tax

Climate Opportunity Matrix

All

Short-term: 1~3years

Medium-term: 3~5 years

Major Opportunities:

Changes in customer behavior

Participation in renewable energy projects

Process optimization and R&D innovation

Development of low-carbon products and services

Improvements in energy efficiency

Minor Opportunities:

Water resource management

Use of recycled materials

Exploration of alternative and diverse resources

Participation in carbon credit markets

Impacts of Major Climate Change and Responses

Major Climate Risks

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

Type	Cimate Risk	Time of Occurrence	Potential Financial or Operational Impacts	Response Measures
Transition Risks	Demand for renewable energy	Medium-term	Higher green electricity 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 (-).	90% green energy target for CTSP Fab in 2030. Plan to procure renewable energy electricity and evaluation of the purchase of T-RECs. CTSP Fab has installed a 499kW rooftop renewable energy generation system and continues to assess the feasibility of installing additional renewable energy generation systems. Investment in Chia-ho Green Energy Corporation in 2022, with ongoing evaluation of other renewable energy projects. Plan to establish a Customer Green Energy Demand Survey System to accurately understand our customers’ green energy demand. Annual environmental surveys on key suppliers to identify carbon emissions sources, reduction plans, and management, with continuous monitoring
	Carbon tax/ carbon fee	Medium-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 Development of carbon emissions information platform for ongoing management and tracking, with plans to develop a carbon accounting system Plan to procure renewable energy electricity and evaluation of the purchase of T-RECs. Joining Singapore CIX platform to participate in carbon credit market and continuous monitoring of carbon offset mechanisms. Implementation of ISO 50001 energy management system with 21 energy-saving measures completed in 2022, resulting in a savings of 35.9 million kWh of electricity and a reduction of 16,485 tons of greenhouse gas emissions Hold focused ESG exchanges to communicate supply chain decarbonization goals and encourage suppliers to reduce their carbon emissions
	Unstable electricity supply	Long-term	Production impacts lead to reduced revenue (-). Supplier supply disruptions affect Winbond's production (-).	Planning for diversified power sources to mitigate the risks associated with electricity procurement and usage Installation of emergency power generator systems and uninterruptible power supply systems to establish backup power sources for at least 80% of the fab's electricity consumption Communicating electricity management measures to suppliers, including the need to establish emergency power distribution equipment and progressively increase the proportion of green energy
Physical Risks	Extreme rainfall and drought	Medium-term	Production impact leading to reduced revenue (-). Continuous operation of automated production lines with increased labor costs due to overtime payments in compliance with regulations (-). Supplier supply disruption affecting Winbond's production (-). Increased cost of natural disaster insurance (-).	Promoting water conservation measures and installing water storage equipment. Adopting automation in production processes to reduce the need for manual operations. Utilizing digital tools to enhance efficiency in remote work. Communicating relevant response measures to suppliers, such as strengthening facility infrastructure and drainage systems, conducting regular flood response drills, increasing water recycling rates, and preparing alternative water sources.

Major Climate Opportunities

Climate Opportunity	Time Frame	Potential Financial or Operational Impacts	Response Measures
Changes in customer behavior	Medium-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	Promoting the introduction of new product designs (design in) to meet customer needs Increasing the portfolio of green or low-energy consumption products Establishment of carbon information platform to assess product carbon footprints and hotspots, and formulation of reduction pathways and optimization plans Evaluating and responding to customer requests for energy efficiency and carbon reductions, as well as requirements for renewable energy use Participation in domestic and international sustainability evaluations to enhance transparency and reputation in terms of sustainability practices
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	Plan to procure renewable energy electricity and evaluation of the purchase of T-RECs. Investment in Chia-ho Green Energy Corporation in 2022, with ongoing evaluation of other renewable energy projects. CTSP Fab installed a 499kW rooftop renewable energy generation system and continues to assess the feasibility of installing additional renewable energy generation systems.
Process optimization and R&D innovation	Short-term	Reduction in carbon emissions leading to a decrease in carbon tax/fee expenditures (+). Reduction in water consumption leading to lower production costs Obtaining orders and expanding revenue	Continuing investment in process development to reduce carbon emissions and water consumption Supporting packaging suppliers in innovating and optimizing their processes to reduce product carbon footprint, thereby enhancing Winbond's product competitiveness
Development of low-carbon products and services	Short-term	Increased product prices Expansion in market share and increase in revenue.	Investment in the design of green or low-energy consumption products, continuing research and development of innovations based on product carbon footprint analysis and verification Acceleration of process evolution to increase the portfolio of green or low-energy consumption products Understanding customer needs and evaluating the possibility of customization to provide low-carbon/green products
Improvements in energy efficiency	Short-term	Reduced production and operational costs.	In 2022, a focus on energy-saving initiatives in four major areas: new technology adoption, usage management, component replacement, and equipment upgrades Planning of multiple energy-saving projects for 2023, including the continuing replacement of natural gas boilers with electric boilers, replacement of rotating equipment, and implementation of energy-saving measures in the MAU water-washing system. Implementation of ongoing energy-saving measures in office areas, such as adjusting the operating hours of air conditioning and exhaust systems and adjusting air conditioning according to space usage.