The company referred to the Task Force on Climate-related Financial Disclosures (TCFD) released by the Financial Stability Board (FSB) in 2017, to establish a climate change risk management structure, based on “Governance”, “Strategy”, “Risk Management”, and “Metrics and Targets”, which are presented in this Sustainability Report, so that stakeholders can better understand GMTC's actions in the face of climate change risks.
Board’s Oversight of Climate-related Risks and Opportunities
According to GMTC’s Corporate Sustainable Development Best Practice Principles, the Corporate Sustainability Committee should assess the potential risks and opportunities of climate change on the enterprise now and in the future, adopt relevant countermeasures, report to the Board of Directors on the proposal and implementation of sustainable development policies, systems or related management guidelines and specific promotion plans at selected times every year.
Management’s Role in Assessing and Managing Climate-related Risks and Opportunities
In terms of the operational level, GMTC's "Corporate Sustainability Committee" discusses and manages risks and opportunities related to climate change, while the "Risk Management Team" identifies and assesses the impacts of climate-related risks and opportunities, which are reported to the Board of Directors and the Audit Committee every year. Based on the annual risk evaluation results, the "Sustainable Environment Team" collaborates with relevant internal units to summarize measures, including green energy, energy management, and GHG inventories. An "Energy Saving and Carbon Reduction Team" has also been established within the Company, with the President chairing meetings. Together with the executive vice presidents, vice presidents, and relevant supervisors, the meeting regularly discuss carbon reduction pathways, carbon reduction from processes and equipment, carbon inventory, and responses to important laws and regulations such as the EU CBAM and domestic carbon pricing.
Consider Different Climate-related Scenarios
At least two climate change scenarios are referred to in accordance with the TCFD guidelines to identify climate-related risks and opportunities. In the future, we will continue to refine the assessment of major financial impacts of transition risks and physical risks under different scenarios.
Climate-related Risks and Opportunities the Organization has Identified over the Short, Medium, and Long Term
Taking Taiwan’s operating base as the scope for review, through reviewing laws and regulations, researching research reports, and reviewing peer and market information, we have summarized 6 transition risks, 4 physical risks, and 6 opportunity issues. The time horizon is divided into: short-term (0-2 years), medium-term (3-7 years), and long-term (more than 7 years). After completing the identification of climate risks and opportunities, risks were identified based on "probability" and "impact"; 4 high-risk factors were identified. Opportunities were analyzed based on "development" and “executability”; 5 high-opportunity factors were identified. The major climate risks identified include emerging domestic and international regulations on the pricing of GHG emissions related to products or factories, such as carbon fees, CBAM, CCA, renewable energy regulations, increased costs of raw materials, and changing customer behavior. Opportunities to come are mainly in the use of more efficient production, use of recycling, shift in consumer preferences, access to new markets, and use of lower-emission sources of energy.
Climate-related Risk Identification
Climate-related Opportunities Identification
Impact of Climate-related Risks and Opportunities on the Organization's Businesses, Strategy, and Financial Planning
The following table shows the impact of major climate risks and opportunities on business, strategy and financial planning
Financial Impacts of Extreme Weather Events
The Company uses the shared socioeconomic pathway SSP5-8.5 very high emission scenario of the United Nations Intergovernmental Panel on Climate Change (IPCC) Sixth Scientific Report (AR6) as a reference scenario, supplemented by the use of Taiwan’s climate change estimation information and adaptation knowledge platform (TCCIP) and the National Disaster Prevention Technology Platform’s 3D disaster potential map estimation information to consider risk changes in operating locations.
According to the TCCIP 2041-2060 average temperature forecast for Tainan City, the average temperature rise is 1.6°C, and the maximum is 2.2°C. Under a temperature rise of 3°C, the maximum one-day rainfall in Tainan increases by 12.1% and the maximum is 53.2%, or 260-355 cm (the base period was 231.88 mm). Neither the Xinying Plant nor Liuying Plant are directly located in the potential flood area; the longest annual number of days without rainfall in Tainan increases by 4.7 days on average (58.9 days in the base period), with the minimum and maximum consecutive days without rainfall ranging from 50-75, with an average of 63.6 days, which may become a risk factor that affects production capacity. Going forward, the Company will continue to refine the physical risk scenario analysis to strengthen the Company's climate adaptation management and strategies.
Financial Impacts of Transformation Actions
Given the transition risk, the transition to a low-carbon economy may be subject to extensive changes in policies, regulations, technology and markets. Within the analyzed time horizon, emerging domestic and international regulations on the pricing of GHG emissions related to products or factories, such as carbon fees, CBAM, CCA, renewable energy regulations, increased costs of raw materials acquisition, and changes in customer behavior may increase supply and operating costs or reduce sales volume.
The Company responds to the transformation risk by introducing energy saving and carbon reduction measures, such as eliminating fuel Oil, replacing old equipment, simplifying manufacturing processes to reduce waste, maintaining a high percentage of scrap steel utilization, and investing in renewable energy devices to reduce carbon intensity; steel is a critical component of the industry. In addition, the Company also strengthens R&D, grasps the trend of steel consumption in the transformation of the market, and launches new products to meet the needs of customers' changing procurement behavior. Relevant energy saving projects may increase operating costs.
Organization’s processes for identifying and assessing climate-related risks
Through the TCFD framework, we analyze policies and regulations, technology, market, corporate reputation, as well as acute and chronic climate risks; discuss the impacts of risks and opportunities on the Company; perform climate-related risk and opportunity identification from time to time to ensure the identification results; and develop response plans based on the results of climate risk and opportunity identification.
Issues under consideration include domestic climate change laws and regulations related to energy management, the implementation schedule of the EU CBAM carbon border adjustment mechanism, domestic net zero technology evolution estimation based on the National Development Council's 2050 net zero emissions roadmap, the IEA's impact on net zero scenarios, technology, market impact, etc., and adoption of shadow prices as internal carbon pricing to estimate future cost impacts. Issues considered include the carbon fee collection under domestic climate change law and the implementation schedule of the EU CBAM carbon border adjustment mechanism. The domestic carbon fee is based on a trial calculation of NT$320 per metric ton of carbon or more, and the CBAM is based on EU ETS transactions. The price is used as the basis for trial calculation. The physical risk refers to IPCC AR6. The estimation data of TCCIP and the National Disaster Prevention Center is used as the basis for preliminary consideration.
Organization’s processes for managing climate-related risks.
The risk management team of the Corporate Sustainability Committee identifies major risks, conducts subjective assessments based on the incidence rate and impact intensity of risk events, discusses and confirms major risks and corresponding countermeasures in the Corporate Sustainability Committee, and reports the assessment results to the Audit Committee and the Board of Directors.
Processes for Identifying, Assessing, and Managing Climate-related Risks are Integrated into the Organization's Overall Risk Management
The risk management team of the Corporate Sustainability Committee continues to track the risks and opportunities related to climate change, and collaborates with the Energy Conservation and Carbon Reduction team and Sustainable Environment Team on the implementation of relevant programs and performance tracking. The responsible units/teams are responsible for the major risks that can be dealt with presently. Projects are planned, improved, and controlled. Medium- and long-term risks are regularly monitored, and timely responses are made. Every year, the Corporate Sustainability Committee submits implementation results and plans to the Board of Directors, while the Risk Management Team submits risk reports to the Audit Committee and the Board of Directors.
In order to reduce the unit carbon emissions of products and environmental impact, GMTC continues to develop methods to reduce energy and resource consumption. The reduction of direct emissions from operating activities (Scope 1) and indirect emissions from energy use (Scope 2) is carried out separately, and we also set goals for electricity saving, water saving, etc. to ensure that greenhouse gas emissions intensity meets expectations. The implementation includes
Greenhouse gas emissions and related risks：Refer to Greenhouse Gas Management
Risk Management Metrics, Targets and Performance
Others
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