Mitigation and Adaptation Strategies

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Mitigation and Adaptation Strategies

Mitigation and Adaptation Strategies

Mitigation and Adaptation Strategies

The climate related risks and opportunities are identified by the related departments in the various Wistron plants around the world. The management costs and financial impacts are estimated for the risks and opportunities. The departments responsible for the material risks and opportunities appointed by the Taipei head offices will hold joint meetings to identify the risks with material impacts on the Company’s finances.

This year, physical impact analyses of climate change for the operating locations in Taiwan were conducted according to the “Taiwan Climate Change Projection Information and Adaptation Knowledge Platform” (TCCIP) information. Scenario analyses related to major disasters, such as high temperatures, droughts, and flooding, which are of interest to stakeholders, are conducted to facilitate the formulation of impact adjustment plans for the future.

For Wistron, disasters with physical impact are the biggest source of climate risks in operations and directly affect the production capacity. On the other hand, opportunities appear as customers' demand for preventive products increases.

As such, Wistron actively assesses investments and R&D for products with increased demand as a result of climate change. They include various medical devices, online video conference systems, analog conference phones, and cloud storage and servers. Climate change risks in the form of potential natural disasters such as floods, typhoons, and damage to agriculture may affect the timeliness of deliveries in the upstream supply chain. Wistron therefore requires suppliers to deploy flexible delivery capabilities and provide multiple shipment points for selection.

Climate Risk Scenario Analysis
Transition
Physical
Scenario Name Timeline Assumed Parameters Analysis Results
Upstream (supply chain) Wistron Downstream (customers)
SBTi 1.5℃ 2021~2030 Annual carbon reductions reached 4.2% (Scopes 1+2). Wistron will achieve 100% green energy by 2030 The needs of industry transformations will drive low carbon investments, which will in turn increase operating costs. Companies who are unable to adopt low carbon transformations will loss their competitive advantage. According to international low carbon transformation trends and statutory and policy pressures, Wistron has stipulated the 80% green energy target for 2025 and 100% for 2030. Assuming the annual energy usage growth is 5% due to operational growth, the energy usage of the Group will increase by 1.5 times by 2030 compared to 2021. Therefore, the investments will be increased to accelerate energy transformations and increase green energy usage. In response to sustainable tranformations, customers will place more importance on green manufacturing for their products. More renewable energy requirements will be placed on upstream suppliers.
IEA 2°C 2021~2030 Carbon price: 80-100 USD/ton CO2e High carbon emission and high energy usage suppliers will continue to face stricter laws and regulations. Operating expenses are expected to increase and they may be passed to downstream customers. In response to the continued expansion of operations and sales growth in recent years, we are considering the impacts of energy conservation, innovation, and other factors. Assuming the Group’s annual carbon emission growth rate is 5%, carbon emissions will increase by 1.5 times by 2030 compared to 2021. Therefore, the Company is actively introducing carbon reduction projects and innovative technologies in order to reduce carbon risks. As the international community begins to introduce carbon taxes, the market share of low carbon/green products will gradually increase. We expect to have more opportunities to work with upstream suppliers to develop green products and services.
IEA below 2°C 2021~2030 Carbon price: 90-120 USD/ton CO2e
IEA Net Zero Emissions by 2050 2040~2050 Carbon price: 160-200 USD/ton CO2e
Scenario Name Timeline Assumed Parameters Analysis Results
Upstream (supply chain) Wistron Downstream (customers)
RCP 6.0 2075~2099 Average annual temperature change is +0.95℃ to +3.45℃ High temperature environments will increase work safety risks. The work environments of suppliers will become a key audit item to ensure the human rights of laborers. Days of extreme heat have increased to over 90 days in Taiwan, which may cause production interruptions and revenue loss (around one quarter) Extreme temperatures will increase energy consumption and lead to increased carbon emissions.
RCP 2.6/ RCP 8.5 Middle of the century (2046 to 2065) and end of the centure (2081 to 2100) Longest consecutive rainless days in a year:
The base period of Taipei City is (1986 to 2005) 28 days. The base period of Hsinchu County is (1986 -2005) 39.5 days
More frequent seasonal droughts will impact suppliers whose processes are water-consuming and may case supply delays or suspensions. The fluctuation rate of Taipei City is 3.1%. The fluctuation rate of Hsinchu County is 5.6%. The drought problem in Hsinchu County will become more serious. Supply chain disruptions caused by severe droughts will impact the delivery schedule for downstream customers, thereby affecting the product revenue.
RCP 8.5 Middle of the century (2039 to 2065) For the 95th percentile of highest accumulated rainfall during extreme rains (region average), the level during the regional base period (1979 to 2008) in the Hsinchu Plant is 385mm. It is expected to rise to 444mm by the middle of the century. Flooding caused by short-term, extreme rainfall will impact the science park in the Hsinchu area. The Hsinchu Science Park is an important manufacturing site for the electronics industry in Taiwan. Therefore, the flooding may cause delayed deliveries and risk of contract breaches in the supply chain. The flooding occurrence probability analysis for global warming shows the changes to the probability of flooding above 0.5m. The changes between the base period to the middle of the century show significant increase. Severe flooding will cause transportation disruptions and problems with logistics. It may cause delayed deliveries by customers, leading to expected revenue from products and services being impacted.
Adaptation Plan to Physical Risks
High temperatures
Drought
Floods

Current Situation

The average temperature of the Hsinchu Plant area in Taiwan was 22.39℃ in 2018

Changes to the return period

Changes to the 10 year return period:

  • The temperature increased to 23.3℃ (RCP8.5)
  • The temperature increased to 23.62℃ (RCP2.6)

Overall Adaptation Plan for the Group

The yearly average temperature is expected to continue to rise. With the extreme heat, outdoor operations will be suspended when necessary, or related laws and regulations will be complied with to implement necessary handling. The indoor temperature is regulated by the air conditioning system and green building designs have been actively introduced to maximize efficiency.

Current Situation

Longest consecutive rainless days in a year during the base period is 39.5 for the Hsinchu Plant in Taiwan.

Changes to the return period

Average change (%):

Middle of the century End of the century
RCP 2.6 RCP 8.5 RCP 2.6 RCP 8.5
95% 14.7 18.1 14.8 29.6
75% 6.1 13.5 7.9 22.6
50% 2.2 5.6 2.4 14.8
25% -0.3 0.6 -1.2 4.7
5% -5.9 -8 -6.9 -7.4

Overall Adaptation Plan for the Group

The impacts of seasonal droughts are expected to become more severe with the continued effects of climate change. The main production processes of Wistron are heavily dependent on water use. In order to fulfill our corporate social responsibilities, we will continue to improve our water usage efficiency. We have established rainwater recycling systems in new plants and have included short-, mid-, and long-term targets in the routine performance evaluations, in order to reduce the operational water usage of each unit.

Current Situation

According to the base period (1979 to 2003) data, Hsinan Plant in Hsinchu Science Park, the major production location in Taiwan, is situated in a level 4 (level 5 is the highest level of risk) vulnerability area for flooding (combined evaluation of danger, vulnerability, and exposure).

Changes to the return period

Rainstorm changes in the next 5 days:

RCP 4.5 RCP 8.5
5 years 25 years 5 years 25 years
95% 51 85 57 84
75% 45 51 47 49
50% 29 41 29 38
25% 9 12 11 19
5% 1 -5 -11 -5

Overall Adaptation Plan for the Group

Flood prevention facilities and designs have been reinforced in every operating location. Alarm and reporting mechanisms have been established to protect employee safety and reduce asset loss.

Adjustment plans for specific assets or plants:
Regarding the newly constructed operating locations, the 24 hour rainfall flooding potential for the local 100 year return period is used for analysis. Appropriate drainage and flood prevention facilities are reviewed and emergency response plans (including typhoon flooding protection plant) are formulated for the various disasters (including typhoons and flooding), in order to reduce the negative impact of potential flooding in the next hundred years. In terms of design, 1. Install plant trenches, water permeable surfaces, and other low water impact facilities to reduce water flow during rain storms. 2. Reasonable rain drainage pipe diameters and drainage gradients are installed according to the calculations of the 24 hour rain water flooding potential during the 100 year return period, in order to prevent ground flooding at the foundation. 3. Increase the height of the foundation and the first floor of buildings to prevent flood water filling the foundation.

Regarding the emergency response measures:
(1) Planned to install rainwater collection systems and rainwater recycling: pools, in order to manage and reuse rainwater.
(2) Installed flood gates (panels) to prevent flood water entering the underground spaces.
(3) Stipulated the water pumping plan. The water pumping equipment is sufficient to drain flood water during continuous rain storms.

Identification of Climate Risks and Opportunities

The Company has adopted the ISO 31000 risk management and risk assessment framework and procedures and uses a risk map to evaluate the possibility of the occurrence of various potential risks and emerging risks and the extent of damage after they occur. The Company evaluates the level of potential threat that each short, medium and long-term risks and opportunities to its future operations on the timeline from 2021 to the end of the century based on factors such as asset durability, potential climate risk and the industry sector and region of operation, and defines the priorities of risks and opportunities based on risks and opportunities level ratings.

Analyzing the probability of occurrence and the level of impact is used to make judgements regarding risks and opportunities. The results are classified into low-, medium-, and high-risk ratings. Five levels of impact are determined by the amount of monetary losses (extremely minor, minor, moderate, severe, and extremely severe). Risks classified as high or moderate are listed as main risks for which preventive measures and improvement plans must be established.

Risk Map
Risks
Opportunities

Transition Risks

Psysical Risks

Climate Change Opportunities

Climate Change Financial Impact Analysis
Risks
Opportunities
Climate Change Risks Financial Impacts Response Measures
Renewable energy and climate risk regulation development Increases in operating costs (such as higher legal compliance cost or increase in management fees). The Company is expected to reach the target of 100% renewable energy use in 2030. Green energy certificate fees are expected to increase annual cost by 300 to 600 million NTD. The annual carbon fees and costs due to legal requirements are:
  1. 40 to 50 million USD in 2030 (IEA 2°C scenario)
  2. 50 to 60 million USD in 2030 (IEA below 2°C scenario)
  3. 240 to 310 million USD in 2050 (IEA NZE scenario)
The Company purchased over 200 million kWh of Renewable Energy Certificates in 2021 and will increase the use of renewable energy each year to 100%. We are actively establishing partnerships with renewable energy companies around the world (including direct purchase of renewable energy PPA and renewable energy project development), in order to strengthen the sustainable resilience of global operations.
Demand for low-carbon products and services Reduce operating costs Help customers obtain various environmental protection labels such as Energy Star, EPEAT, TCO, Taiwan Green Mark, and China Environmental Labelling. The revenue from products with environmental protection labels account for 91% of hardware revenue.
Mandatory filing Increase operating costs The Company established a comprehensive greenhouse gas inventory for all manufacturing sites across the world. We implement greenhouse gas inventory every year and obtain third-party verification from an impartial third party.
Investment in new technology Increase in operating costs (e.g., higher R&D cost or increase in patent licensing expenses) Wistron will continue to increase the ratio of R&D personnel per total employees. The percentage reached 8.5% in 2021. Wistron obtained 401 patents in 2021, with green products accounting for 15 patents
Drought Manufacturing is impacted, causing operating revenue loss. For the production capacity that has not been transferred, the operating losses due production stoppages caused by severe droughts were 180 million to 3 billion NTD (RCP 8.5). The rainwater recycling system plans are improved for new plants. The existing plants work with local water suppliers to implement special water supply mechanisms during droughts, in order to maintain plant operations. Continue to increase the water recycling rate and stipulate short-, mid-, and long-term targets for the annual performance evaluations, in order to improve overall operating resilience.
Typhoons Impact on production and loss of operating revenue In the event of a typhoon, the Company monitors alerts and related information on whether employees should work or suspend work. If work is not suspended, the Company provides vehicles, transportation subsidies, or other necessary assistance.
Floods Impact on production and loss of operating revenue The foundation heights have been increased and drainage facilities have been improved for existing plants during construction, in order to prevent losses caused by disasters. Include “natural disaster assessment” items in the location selection process for new sites. Plan related flood prevention facilities to improve the disaster resilience of operating locations
Uncertainty of physical risks Increase operating costs and impact operating revenue Six major energy saving and carbon reduction measures are introduced each year by the air conditioning system, air compressor system, green lighting, management, production, and others, and annual performance targets are set for tracking and assessment. As of the end of 2021, a total of 16,422.77 tons of carbon emissions will be reduced, continuing to mitigate the negative impact of the operation on climate change.
Rise in average temperature Increase operating costs (e.g., increase in water and electricity charges) The Company complies with the SBT 1.5˚C carbon emissions reduction methodology by setting annual targets for absolute greenhouse gas reduction starting from 2020, in order to achieve carbon neutrality.
Climate Change Risks Financial Impacts Response Measures
Seek new business opportunities Increase revenue from energy-saving products Incorporate green design concepts in product development to reduce the energy consumption during product manufacturing. The sales from products with environmental protection labels account for 91% of hardware revenue. Develop green resources businesses and provide recycling and processing services to maximize benefits in the circular economy. The total shipped volume of post-consumer-recycled (PCR) environmentally friendly materials was 26,288 tons.
Energy-saving buildings Reduce operating costs Develop plant energy management information system and optimize settings with artificial intelligence technologies. We are evaluating the installation of solar panels and new generation energy-saving equipment at all our plants and operational sites to reduce the demand for purchased electricity and carbon emissions.
Low carbon manufacturing Increase the use of low-carbon renewable energy to avoid carbon taxes The Company purchased over 200 million kWh of Renewable Energy Certificates in 2021. Combined with the active expansion of solar power generation in plants, the percentage of renewable energy use has exceeded 50% of total energy usage, and the percentage will be increased year over year to reach 100%.
Increase revenue Continuing to increase the proportion of production lines using renewable energy by 100% through the procurement of green certificates and direct purchase of green power in our global operations to meet market demand for low carbon manufacturing.
Energy efficiency improvement Reduce energy costs The Company has established an energy project team which regularly inspects energy management conditions in plants and the results of energy conservation projects and shares the experience. By the end of 2021, more than 21 million kWh of electricity have been saved.

Climate Goals

Wistron decided to take proactive actions starting from 2020 in support of carbon reduction targets in the IPCC's "Special Report on Global Warming of 1.5° C ". The Company follows the recommendations of the "Science-based targets initiative (SBTi)”, used 2016 as the baseline year and set a short-term goal of achieving an absolute greenhouse gas reduction of 21% by 2021. The medium-term goal is to reduce absolute greenhouse gas emissions by 37.8% by 2025 and the long-term goal is to achieve carbon neutrality by 2030. These goals were set to demonstrate Wistron's resolve for mitigating and adapting to climate change.