Overview of Climate Change Adaptation
In the core business of TSC, agriculture and livestock business both belong to biological industries. The company’s main niche, “land,” belongs to an immovable resource. High temperatures, droughts, and floods caused by climate change will directly impact TSC’s biological and land assets. Meanwhile, the threat of extreme weather also facilitated the consensus between the public and the governments. In order to alleviate global warming, relevant laws and regulations have been established, and this change also directly brings risks or opportunities to enterprises.
To work in line with the government’s energy transformation policy of Net Zero by 2050, TSC initiated a research project entitled Strategic Evaluation and Suggestions on the Net-Zero Transformation of Taiwan Sugar Corporation. TSC has taken the inventories of its resources of net-zero emission pathway from the perspectives of policies, regulations, and technological feasibility. In addition, we also referred to the Task Force on Climate-Related Financial Disclosures (TCFD) announced by Financial Stability Board (FSB) and the four core elements of information disclosure, namely Governance, Strategy, Risk Management, and Metrics and Targets, for the establishment of the climate change governance framework, identification of material risks and opportunities that may be caused to operations, proposals for relevant corresponding strategies, and establishment of climate-related metrics and targets that can be continuously managed.
In August 2023, TSC responded to the TCFD initiative by signing up as TCFD Supporters. At same year, we completed our first "TSC Climate-Related Financial Disclosure Report" for internal reference, as part of our commitment to taking action to mitigate global warming.
Governance Structure and Capacity for Climate Change Issues
TSC has established the "Corporate Sustainable Development Committee" and the "Net Zero Working Group" to oversee and promote climate change and carbon reduction net zero related initiatives.
The “TSC Corporate Sustainable Development Committee” has been set up to establish relevant procedural documents, with the president serving as the chairperson and the chairman as the steering member attending committee meetings on behalf of the board of directors. The committee is composed of first-level supervisors, under which establishes the Environmental Sustainability and Net Zero Task Force, whose main tasks include handling the environmental protection policy, GHG control and carbon footprint certification and the promotion and revision of relevant businesses; establishing the environmental accounting system and environmental policies of the Company and be responsible for the revision of the ESG performance indicators; assisting all district offices with the promotion of biodiversity management; assisting all units with the GHG inventory, GHG reduction and carbon footprint certification businesses; assisting all units with the setting of work plans for energy conservation, water conservation and renewable energy utilization; handling the Company’s comprehensive educational training in terms of environmental sustainability, energy conservation, renewable energy utilization, and carbon reduction; setting the Company’s schedule for net-zero, assisting all units (including district offices) with the formulation of work plans for carbon reduction and carbon sequestration offset, and implementing various execution plans.
"Net Zero Working Group" is a cross-departmental task force, with the president serving as the convener to promote the net zero emission business of the Company, and conducts autonomous carbon inventory and inspection, along with ISO 14064-1 greenhouse gas verification, and sets carbon reduction targets and strategies in accordance with the inventory results.
The assessment of climate-related risks and opportunities and the setting of corresponding strategies discussed among all units in the Corporate Sustainable Development Committee and Net-Zero Task Force are merged into the future business strategy in the future, and will be submitted to the board meeting for review every November.
Identification and Management of Climate-Related Risks and Opportunities
TSC officially imported the framework of Task Force on Climate-related Financial Disclosures (TCFD) in 2021. In accordance with the four major aspects of governance, strategy, risk management, and indicators and goals, and with reference to the existing risk management measurement standards, the climate-related risk and opportunity assessment scale has been defined, and climate-related risk identification and assessment as well as the climate change response structure have been established.
The Department of Planning, the organizer of Business Development Promotion Group under the Corporate Sustainability Committee is responsible for convening meetings for the identification and assessment of climate-related risks and opportunities. Guidelines for Risk Assessment was referred to for the identification and assessment of the climate-related risk matrix to define risk levels. The annual results are submitted to the Corporate Sustainability Committee and the progress is reported at the meeting of the Net-Zero Tast Force.
Climate-related Scenario
The Company used the transition and physical risks and climate opportunities recommended by TCFD for the scenario setting. Due to the fact that climate-related risks and opportunities will affect the future strategies and financial planning, TSC adopted the Worst-case Scenario to analyze and evaluate its climate strategy resilience.
List of Usage Scenarios of TSC’s Climate-Related Risk Assessment
| Types of climate-related risks and opportunities | The scenario for the Company to assess risks and strategies | Scenarios |
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| Under the global trend of stepping toward net-zero emissions by 2050, Taiwan government also released the Taiwan’s Pathway to Net-Zero Emissions in 2050 in March, 2022. This 2050 net-zero emissions pathway is based on the four major transition strategies of “Energy Transition,” “Industrial Transition,” “Lifestyle Transition,” and “Social Transition,” as well as the two governance foundations of “Technology R&D” and “Climate Legislation” to highly control the GHG emissions. The National Development Council announced the stage targets and key strategies for 2050 Net-Zero transition in December, 2022, proposing the nationally determined contributions (NDCs) of the reduction target of 24% in 2030, which may have possible operational impact on the Company and its value chain. |
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| The assessment scenario adopted by our company aligns with the worst-case global warming scenario outlined in the IPCC AR6. Under the scenario of extremely high GHG emissions (SSP5-8.5), climate change would lead to intensified changes in future average temperature, extremely high impact on the Company and its value chain. |
Results of climate change risks and opportunities identification
According to the TCFD recommendations, 16 climate risk issues (including 7 physical risks and 9 transition risks) and 12 opportunity issues the business divisions of TSC have to identify were formulated. After assessing the occurrence probability and level of impact of each topic, a 5-point scale of risk and opportunity matrix was used, and a total of 5 major climate-related risks and 2 major climate-related opportunities were identified.
Description and Financial Assessment of Climate-Related Risks Response Strategies
Risk 1: 【Transition Risks－Regulatory and Policy】The Government Imposes Corporate Carbon Fees
| Timing of Occurrence | Likelihood | Impact | Description of Risks and Strategies |
| Medium-term | Extremely High | Moderate | To respond to the increasing stringent carbon fees on enterprises in accordance with the Climate Change Response Act, TSC will adopt strategies such as improvement of the boiler equipment in Xiaogang Refinery of the Sugar Business Division, expansion of the cogeneration scale in Shanhua Sugar Factory and Huwei Sugar Factory, change of the cultivation method (ratooning), renew boiler equipment in the Agriculture Business Division, the renewal of energy conservation equipment in the Leisure Business Division,The Livestock Business Division leases the roofs for solar energy equipment installation, purchase of electric vehicles for the replacement of fuel ones in the Secretariat, the improvement of boilers and renewal of energy conservation equipment in the Biotechnology Business Division, etc. to reduce the financial risks brought by carbon fees. |
Risk 2: 【Transition Risks－Market】Changes in Customer Behavior
| Timing of Occurrence | Likelihood | Impact | Description of Risks and Strategies |
| Long -term | Extremely High | Extremely Severe | The trend of the global vehicle market will change from traditional fuel vehicles to electric vehicles. Coupled with the plan to ban the sale of fuel vehicles in Taiwan’s 2050 Net-zero Emission Strategy, the gasoline market will be significantly changed. The demand for gasoline in the overall market will gradually decrease in the future, leading to decreased annual gasoline consumption, causing decrease in annual gross margin. The Petroleum Business Division will outsource the installation of charging stations in its short- and medium-term plans and install self-operated charging stations and hydrogen refueling stations in the long-term plan as the coping strategies to reduce financial impacts this trend may bring. |
Risk 3+Risk 4: 【Physical Risks－Acute】 Typhoon【Physical Risks－Acute】
| Timing of Occurrence | Likelihood | Impact | Description of Risks and Strategies |
| Short-term | Extremely High (Typhoon) High (Extreme rainfall causes floods) | Severe | According to IPCC AR6, Taiwan may encounter larger scale typhoons or more frequent extreme rainfall, which may result in financial losses of the Company. The Department of Agribusiness Management has adopted the corresponding strategies of planting other crops whose growth periods do not overlap the period when tropical cyclones occur often and the implementation of the dredging projects for the irrigation and drainage facilities and the ditches. The Petroleum Business Division, on the other hand, makes use of insurance to transfer the risks to lower the financial losses. |
Risk 5: 【Physical Risks－Acute】 Extreme Rainfall Causes Drought
| Timing of Occurrence | Likelihood | Impact | Description of Risks and Strategies |
| Short -term | High | Extremely Severe | Due to climate change, in the future, the distribution of rainfall may be extreme, and the uneven distribution of rainfall could greatly increase the likelihood of drought, and when Taiwan Water Corporation stops water supply, it could cause disruption of operation of TSC facilities. The Leisure Business Division purchases water resources externally in the face of the risk of water supply suspension to reduce the property losses caused by operational disruption. |
Description and Financial Assessment of Climate-Related Opportunities Response Strategies
Opp 1: 【Energy Source】Use and Develop Low-carbon Energy
| Timing of Occurrence | Likelihood | Impact | Description of Opportunities and Strategies |
| Short -term | High | Extremely High | To respond to the renewable energy strategies of the country’s 2050 Net Zero Emission goal, TSC’s land and assets cooperate with the development of the solar power generation system and obtain financial opportunities from rents and profit sharing. |
Opp 2: 【Resource Efficiency】Changed to use Buildings with Higher Efficiency
| Timing of Occurrence | Likelihood | Impact | Description of Opportunities and Strategies |
| Medium-term | Extremely High | Moderate | To respond to the energy-saving and low-carbon building strategy of the country’s 2050 Net Zero Emissions goal, TSC will adopt low-carbon buildings in the future or obtain buildings with green building labels for higher rental returns and lower energy use costs. |
