Environment
Climate Change
Climate-Related Risks and Opportunities for the Company and Measures Taken
Governance — Climate Oversight and Governance Structure
In 2024 Nextronics established a Sustainable Development Committee under the Board of Directors, responsible for formulating sustainability strategy and advancing ESG work. The Sustainability Working Group conducts an annual assessment of climate risks and opportunities under the TCFD framework. For the risks and opportunities identified, the Chief Sustainability Officer reports progress to the Board at least once a year, and the Board oversees implementation.
Following the guidance and approved direction given by the Board, the Sustainable Development Group under the Sustainable Development Committee coordinates the relevant departments in conducting operational risk assessments in line with the Paris Agreement, the 2050 net-zero emissions target and the competent authority's Climate Change Response Act.
Strategy — Process for Identifying and Assessing Climate-Related Risks and Opportunities
The Company analyzes its climate change risks and opportunities in accordance with IFRS S2 "Climate-related Disclosures" and the four core TCFD pillars, and has engaged an external organization to deliver training explaining global risk trends and climate change — including the state of TCFD development, the TCFD-recommended framework for assessing climate risks and opportunities, and climate scenario setting and the risks and opportunities arising from it — to raise colleagues' awareness of global risk trends and climate change.
Each year, departments gather the climate change risks and opportunities encountered in operations within their core functional areas and score them by likelihood and magnitude of impact using a risk and opportunity assessment scale. The Sustainable Development Committee reviews these and identifies material issues, which are passed to the Sustainability Working Group for cross-functional organizational communication. Using physical risk, transition risk and opportunity indicators, the impact of climate events on the Company's operations and value chain activities is assessed in both immediate and long-term modes, and the risks, hazards and opportunities faced in different regions are examined, in order to identify the financial impact and applicability of each risk and opportunity to the Company.
The following sets out the climate risks and opportunities identified by the Company, and the impact of each item or transition action on our business, strategy and finances:
▌Transition Risk
Risk Management — The following sets out the climate risks and opportunities identified by the Company, and the impact of each item or transition action on our business, strategy and finances:
| Time Horizon | Transition Risk | Impact | Response Measures |
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Short term （1-3 years） |
Rising raw material costs | The use of low-carbon materials raises finished product costs, reducing gross margin and weakening competitiveness relative to peers. | Increase the proportion of shared components, use design tools to introduce optimized product structures that reduce process losses, and use information systems to make material use as economical as possible. |
| Higher costs of transitioning to low-carbon technology | Replacing energy-intensive machinery with lower-carbon technology raises upstream supply chain costs and technology costs, increasing overall production costs and reducing gross margin. |
Design equipment that meets energy-efficiency standards and work with a green supply chain to build high-efficiency, energy-saving equipment that replaces energy-intensive machinery and raises efficiency.
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Greenhouse gas cap and emissions trading
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The general rise in temperatures caused by climate change indirectly increases the load on the Company's air-conditioning equipment.
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During company-wide maintenance, replacement needs are reviewed at the same time and the replacement of older equipment is planned in advance, to address rising carbon emissions and declining equipment efficiency.
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Changes in customer behavior
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The impacts of climate change affect customers, leading in turn to credit defaults.
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Customer receivables are reviewed monthly for irregularities; where an irregularity is found, sales staff contact the customer directly at the end of that month to resolve it.
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Medium to long term (3–10 years) |
Low-carbon products substituting for some of the Company’s products and services
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Low-carbon product materials cost more, and large-scale replacement of existing products and services requires labor, materials and other costs, with time costs also rising, thereby affecting the Company's profit. | Increase automated production. |
| Changes in customer preferences | Production costs rise and product chain costs increase accordingly; consumers begin to choose greener products while older products sell less, raising inventory costs. | Plan product substitution, continuing to replace high-carbon production lines, products and services and reducing production inventory. | |
| Growing stakeholder attention and negative feedback | The Company's brand and reputation are affected, reducing consumer and public trust in the business and in turn affecting product sales and market share. | Strengthen communication and transparency with stakeholders, respond promptly to their concerns and feedback, and build good relationships. Improve business practices and social responsibility, strengthen risk management, and protect the Company's reputation and long-term development. |
▌Physical Risk
| Time Horizon | Physical Risk | Impact | Response Measures |
|---|---|---|---|
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Immediate |
Extreme weather events such as typhoons, earthquakes and flooding | Damage to infrastructure and equipment, affecting the working environment and commuting safety of workers, leading to absence, reduced capacity and supply chain disruption | Proactively develop emergency plans and risk management strategies, including regular inspection and maintenance of infrastructure and information systems and the establishment of rapid recovery and repair mechanisms. |
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Long term |
Sea level rise | Inundation and damage to coastal cities, ports and communities, with economic activity and infrastructure directly threatened; the Company would need to adjust its operating model, increasing compliance costs and management burden. | Diversify production sites globally and strengthen local production and supply chain resilience, reducing threats arising from regional infrastructure being affected. |
| Rising average temperatures | High temperatures accelerate the ageing of electronic components, directly affecting equipment performance. | The Company's R&D department assesses the need to account for high-temperature environments in product design and develops effective heat dissipation designs and temperature control technologies to improve products' heat resistance and long-term stability. | |
| Extreme changes in rainfall and climate patterns | Affects the operation of the Company's offices, or suppliers' ability to deliver on schedule. | The Company adopts proactive response strategies, strengthening flood defense equipment and risk management measures to reduce losses, protect assets and ensure long-term business stability and sustainable development. |
▌Climate Opportunities
| Time Horizon | Opportunity | Impact | Response Measures |
|---|---|---|---|
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Short term （1-3 years） |
Innovation and R&D of new products and services. | Increased product R&D costs, meeting investor expectations and raising operating revenue. | Invest in R&D of highly heat-resistant, low-energy products to ensure stable performance under extreme climate conditions. |
| Production equipment upgrades. | Replacing equipment with energy-efficient or automated equipment increases the Company's operating costs. | When replacing equipment, make use of government energy-saving subsidy programs and continue to implement the ISO 50001 energy management system for more efficient energy management. | |
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Medium to long term （3-10 years） |
Development of low-carbon products and services. | Low-carbon product development directly meets customer and investor needs. | Continue developing and researching low-carbon products and increase green products in the upstream supply chain, sustaining the industry's transition to sustainable operations. |
▌Potential Financial Impacts of Risks and Opportunities, and Response Measures
| Climate Change Issue | Issue Category | Description of Risk / Opportunity | Potential Financial Impact | Company Strategy and Response |
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Carbon fee |
Policy and Legal | In December 2023 the Ministry of Environment released the draft Carbon Fee Collection Regulations, under which a carbon fee is expected to be levied from 2025 on major emitters with annual emissions exceeding 25,000 tonnes. |
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High temperatures |
Physical Risk | High temperatures affect production processes and the cooling capacity of air-conditioning equipment, increasing the frequency of use of air-conditioning and cooling equipment and raising electricity consumption and water demand. | Increased operating costs (budget of NT$800,000 for replacing refrigeration equipment) |
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