Climate Change Risks and Opportunities

Climate change is one of the major risks facing business operations! There are two main types of mitigation and adaptation in the international response to climate change. Mitigation is to reduce the emission of artificial greenhouse gases into the climate cycle, and adaptation is to adjust the natural world or human systems to respond to climate change Impact, reduce damage.  Innolux follows the "National Climate Change Adaptation Policy Program", cooperates with the government department's greenhouse gas reduction plan, and operates the CSR committee to grasp climate change related information and the risks and opportunities it brings, and formulates a management plan every year To improve the ability and planning of adaptation measures to reduce the external environment and business risks, but also to enhance the company's operating competitiveness.
Impact of Climate Change

Impact of Climate Change
 
I. Disasters
Risk
Temperature and rainfall pattern changes result in increased sedimentation in reservoirs in Taiwan, leading to decreases in effective water storage. The security of water resources deteriorates as a result of the increasing difference in wet and dry season rainfall volume. Moreover, floods and droughts caused by weather anomalies also jack up corporate management risks.
Opportunity
● Reinforce water resource management; develop alternative water resources by improving water quality control, recycling water, and strengthening water supply system management.
● Conduct strategic dispersion of procurement risks by creating a “business continuity management” organization to analyze the impacts of natural disasters on managing the Company, and plan and exercise emergency response measures to increase customer confidence.
● Hold regular meetings with science park administrations, waterworks, and irrigation associations to discuss changes in the water supply and emergency response measures; we have signed a letter of intent in response to the “Plan for the Use of Regeneration Water” established by the Tainan City Government and the Southern Taiwan Science Park Bureau to stabilize water supply.

II. International Conventions and Domestic Laws and Regulations
Risk
The Taiwan EPA has announced the “Greenhouse Gas Emission Source of the Best Available Techniques" to specify the best available techniques required from the target for future GHG total emissions control after a total emissions change reaching a specific scale/threshold or for the new energy-using facilities or their energy-saving specifications.
Opportunity
Inventory the emission volume at each site and include all sites, except for module plants, in the total emission volume control; adopt feasible measures in the future to reduce emission volumes in compliance with related laws and regulations.
 
Risk
The Taiwan EPA has amended the “Greenhouse Gases Offset Projects Regulations” to specify the application for carbon credit reward for performance in voluntary GHG reduction before the implementation of the regulations for total volume control.
Opportunity
Fab B and F and T2 have made plans for GHG reduction and applied for GHG offset registration to the EPA in 2019 and will acquire credit incentives to set off the future total volume control or engage in carbon exchange in the future.
 
Risk
The Renewable Energy Development Act was amended to request energy users with a contract capacity over 5,000kW to install 10% renewable energy (within five years after the promulgation of by-laws). This will increase operating cost by NT$50 million to NT$230 million each year.
Opportunity
Endeavor to finish this within three years to meet the “early-bird” requirement with a discount of 2% installation capacity. Such move could save operation cost and achieve a balance among eco-friendliness, stable electricity supply and company development.
 
III. Company Reputation and Changes in Consumer Behavior
Risk
Carbon emissions labels have been adopted to set an international trade threshold to promote closer upstream-downstream cooperation in supply chains for carbon reductions to help supply chains comply with the carbon emissions requirements set out in the Paris Agreement. And customer's RAB requirements that supply chains disclose carbon emissions volumes and energy data and enhance carbon management and energy management planning.
Opportunity
● Innolux releases the CSR report annually and participates in the Carbon Disclosure Project (CDP) to for stakeholders to understand its climate change management achievements.  In 2019 we were rated “B” in carbon management (climate change) and in water resource management under the CDP.
● By promoting low-carbon logistics through improvements in transportation and management, we reduced carbon emissions by 1,362,987 tCO2e in 2019. And We also implemented supplier GHG inventory, which shows a contribution of 138,750 tCO2e, exceeding the target of 138,000 tCO2e in 2019.
Climate Change Mitigation Management

Greenhouse Gas Inventory
Innolux greenhouse gas inventory in accordance with the ISO14064-1 and is verified by a third party. With operational control as the organizational boundary, we inventoried seven major greenhouse gases including CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3.
 
Statistical Analysis of Greenhouse Gas Inventory
Annual Emissions
((Unit: million tCO2e)
Y2015 Y2016 Y2017 Y2018 Y2019
Scope 1 Taiwan site 0.428 0.440 0.425 0.365 0.349
China site 0.011 0.015 0.011 0.004 0.001
Total 0.439 0.455 0.436 0.369 0.350
Scope 2 Taiwan site 2.388 2.277 2.690 2.879 2.787
China site 0.416 0.338 0.344 0.354 0.383
Total 2.804 2.615 3.034 3.233 3.170
 
Greenhouse Gas Emissions Reductions

Innolux has always been facing a greenhouse gas issue with a positive attitude, focusing on voluntary greenhouse gas reduction, actively implementing various energy-saving measures in the factory, setting energy-saving targets and improving electricity efficiency, and purchasing and adding high-efficiency local exhaust Destruction of equipment (Local Scrubber) to deal with PFCs; another active process improvement technology development, raw materials, energy use reduction assessment, in order to reduce greenhouse gas emissions and impact on the environment; more emphasis on international integration, in response to international carbon disclosure (CDP). And set a long-term goal to reduce the emission intensity of FCs per unit area of ​​TFT process by 30% by 2025 (vs. 2016).

FCs Emissions
Item Y2015 Y2016 Y2017 Y2018 Y2019
TFT-LCD process emissions of FCs
(Unit: MMTCE)
0.1039 0.1103 0.0965 0.838 0.793

FCs Reduction
Item Y2015 Y2016 Y2017 Y2018 Y2019
FCs Removal Capacity of Local Scrubber
(Unit: MMTCE)
2.14 2.10 3.06 2.86 2.75

Carbon reduction of packaging materials
Item Y2015 Y2016 Y2017 Y2018 Y2019
Reducing carbon by recycling
(Unit: tCO2e)
9,907 13,338 8,350 5,459 2,229
Reduce carbon by design changes
(Unit: tCO2e)
15,192 10,363 17,935 19,554 14,904

Low-carbon Logistics
Item Y2015 Y2016 Y2017 Y2018 Y2019
Effectiveness of green logistics
(Unit: tCO2e)
235,157 256,379 461,920 955,054 1,362,987
The Carbon Disclosure Project

Since the Carbon Disclosure Project (CDP) launched the Climate Change Program in 2003, thousands of businesses worldwide have been invited to disclose data, risks, and opportunities associated with their carbon management. At the invitation of investors and customers, we answered the CDP’s questionnaires on climate change management and water management. In 2019, we were rated “B” in both categories.
Following the increasing concern among industries about the climate change management and water management, the CDP has extended the evaluation focus from management data disclosure to the disclosure of scientific strategic targets and integrated reports. In the future, we will move toward direction to keep up with the global trend.