Climate Change and Energy Management

Climate Change Policy

Climate Change and Energy Management is one of the material topics and key risks in LITEON's sustainable development. Therefore, this company monitors and analyzes developments in these areas on an ongoing basis and works on adaptation and mitigation to greenhouse gases. For climate change mitigation, we continue to follow the SBT approach for carbon reduction and analyze and manage internal energy consumption. Meanwhile, we rely on green design, green factory, energy management, and energy creation, conservation, and conversion products and solutions to meet aggressive GHG emission reduction targets. For climate change adaptation, we observe the 2 degrees Celsius scenario released by the International Energy Agency, and identify potential short-, medium-, and long-term risks arising from climate change based on international research, industry trends, and results of internal and external studies as well as our own decisions and judgments. We also construct countermeasures against potential risks in order to reduce the potential impact of climate risks.

Overall Impact and Challenges of Climate Change

Risks arising from climate change and natural disaster issues are one of LITEON's eight categories of sustainability risks. For the potential impact on business activities, LITEON has the internal climate change risk task force to handle the identification of physical and transition risks and opportunities, assessment of possibilities, and analysis of the influence. The task force is also responsible for devising appropriate countermeasures. In terms of climate risk issues, most major climate risks identified by LITEON came from the requirements of clients, investors, and other important stakeholders for GHG reduction and compliance with product energy efficiency standards. The main climate opportunities are found in the wide range of green products and services that echo sustainability trends.
In 2020, LITEON assessed risks by probability and impact severity, then, identified that the company might be impacted by net-zero emissions commitments made by EU and Chinese economies and key clients. These commitments may prompt them to impose low carbon or even zero carbon emissions requirements on the company's operation and push up production costs. LITEON pays a lot of the attention to the potential financial implications of climate change risks. The company follows a risk management process and the PDCA cycle to monitor climate risks. Measurements are formulated to convert climate risks into financial data, and countermeasures are devised to reduce the probability and severity of these risks. The operation and results will be submitted to the risk management team to be reported to the Corporate Sustainability Committee and the Audit Committee.
The chairman of the Audit Committee will in turn present a report to the board of directors. LITEON adopts a positive attitude to challenges in climate risks and opportunities. The company will perform climate scenario analysis specifically targeting higher climate risk factors and calculate potential financial impacts on an ongoing basis. The practice makes climate risk management part of the business operations.
LITEON strives to improve corporate governance mechanisms in the company for a better sustainable environment. Chaired by the head of manufacturing, the Environmental Sustainability Sub-committee is created to responsible for green operations to improve environmental management performance and environmental risk management. In addition, the internal carbon tax policy was approved in 2020. Under the policy, all business units that exceed their emission caps will have to pay an internal carbon tax every year. The policy is intended to strengthen the business units' decision-making in carbon reduction measures and to meet clients' and other stakeholders' expectations.

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Climate Change Mitigation and Adaptation Measures

In terms of its climate change response strategy, LITEON continues to follow energy creation, conservation, and conversion as the means for mitigation, and focuses on renewable energies, energy management systems, process optimization, and plant operation improvement as key strategies.
LITEON also adjusts the internal carbon pricing strategy and strengthens the carbon reduction investment decisions to fulfill LITEON's SBT commitments. Regarding climate change adaptation, LITEON starts by identifying climate risks and opportunities, and develops low carbon products and automated energy-saving technologies on an ongoing basis to stay alert to climate opportunities arising from global low carbon trends.

Renewable Energy Development

LITEON strengthens renewable energy and energy management on an ongoing basis to enhance energy utilization efficiency. In 2020, production facilities at LITEON (Dongguan) and LITEON Power Technology (Dongguan) received ISO 50001 energy management system certification, giving LITEON a total of six ISO 50001 certified production facilities. Regarding renewable energy, LITEON keeps raising the volume and percentage of renewable energy consumption every year by our rooftop solar panel systems and International Renewable Energy Certificate purchased. Furthrmore, as part of the effort to achieve low carbon manufacturing, the company seeks suitable renewable energy suppliers, and enters into green power purchase agreements or promotes public providers of renewable energy. In 2020, consumption of self-generated renewable energy and those purchased by the International Renewable Energy Certificate reached 57,097MWh, or 16.53% of total electricity consumption.

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Enforcing GHG Emissions Reduction

As part of process optimization and plant operation improvement, LITEON achieves energy-saving and improved efficiency of the office and the plant through ongoing upgrade and improved management of the lighting system, improvement of production equipment, upgrade of air conditioning units, refinement of management systems and other energy-saving measures. In particular, the Burn-In ERS Saving Energy Program introduces energy recycling systems (ERS) into LITEON (Dongguan), LITEON (Guangzhou), and LITEON (Changzhou). The systems recycle and reuse power consumed by burnin processing. The saving in power consumption is estimated to be 5.8 GWh per year, which is the equivalent of reducing 4,853 tonnes of carbon emissions per year1. Furthermore, a payback period policy for investment in new energy-efficient measures was approved at LITEON in 2020. The policy is intended to step up the execution of medium- and long-term energy-efficient measures. It is expected that 75 energy-efficient measures will be installed in 2021 to allow the company to reach the electricity saving target of 16.83 GWh per year compared to 2020.

Strengthening Internal Carbon Pricing Strategies

Taking into account the carbon trading regulations in Taiwan and the market prices in Mainland China, LITEON adopted the shadow carbon pricing methodology to determine internal carbon prices for key offices in Taiwan and Mainland China in 2018. The internal carbon price was set at USD 50/tonnes CO2e and USD 8/tonnes CO2e for key Taiwan and Mainland China offices, respectively. To reinforce the energy efficiency and carbon reduction measures and policies in the company, LITEON sets the business unit's specific SBT emissions targets to align with the overall carbon reduction SBT target. The internal carbon pricing policy was approved in 2020. Under the policy, the company starts to charge the internal carbon tax at USD 1/tonnes CO2e from business units this year that exceed their annual emission cap to reinforce carbon reduction investment decisions made by individual business units. LITEON also expects to raise the rate gradually in the future and invest the funds in carbon reduction technologies or renewable energies.

Develop Low Carbon Products

The LITEON CSR code of conduct is based on life cycle thinking. With the 3Rs rule added to the product development process, the company engages in green product design, and develops nontoxic, easy to assemble/disassemble, and environmentally friendly products. In particular, AC metering IC integration technology is used in server power products to reduce the use of resistors, multilayer ceramic capacitors, metal-oxide-semiconductor field-effect transistors and other active/passive components. The technology also reduces power consumption by 0.034W while metering IC is working, and reduces 53.68 tonnes of carbon emissions during the acquisition of raw materials and the use of products.

Development Of Automated Energy-Saving Technologies

LITEON reconstructs quality manufacturing through automation and digital transformation. In 2015, the company was the first Taiwanese manufacturer to introduce the first unmanned LED lighting production line. In 2017, it started implementing big data and IoT remote monitoring, and installed a large number of smart manufacturing systems. The shift toward the use of family materials, family molds, and family jigs in production also helps to reduce the energy and resource input per unit product. To accelerate the development of production equipment and recyclability and reusability of key machine parts, LITEON has established standards for equipment design and data collection, including structuration of standard modules, standardization of machine testing procedures, and automated switching. Moreover, LITEON is capable of simultaneous operation with products, processes and equipment installed on the same platform in terms of automated production. The structure is equipped with difficult, high precision automatic assembly, testing, and visual/mechanical inspection for complete control and data collection. The company has developed the capability to create differentiated design and production processes for manufacturing facilities as part of the progress towards high-speed unmanned operations.

Greenhouse Gas Inventory (GHG Scope 1 and Scope 2)

In 2020, LITEON removed the previously transferred Solid-State Drive Business Unit, and added the Vietnam plant to the ISO 14064-1:2006 GHG verification before recalibrating the base year emissions. LITEON's Scope 1 and Scope 2 GHG emissions were 225,739.15 tonnes CO2e (market-based). The CO2 emission reduction was 10,864.81 tonnes CO2e (4.59%) compared to 2019 or 61,216.12 tonnes CO2e (21.33%) compared to 2014 (base year). The carbon intensity was 1.61 tonnes CO2e /NTD million of revenue, 2.60% lower than in 2019 and 21.07% lower than the base year 2014. The emission aligned with the SBT reduction target pathway at 20.6% for 2020.

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Greenhouse Gas Value Chain Inventory (GHG Scope 3)

To maximize the value of the LITEON value chain and to identify key factors to mitigating climate change, LITEON not only takes inventories of emissions from its own business activities, but has started performing full inventory-taking, verification, and disclosure of emissions from 15 categories in Scope 3 every year since 2018. The practice allows LITEON to follow emission hot spots along the value chain and extend carbon management to business partners on the value chain. In terms of Scope 3 emissions, LITEON sets 2018 as the base year, and aims to reduce cumulative value chain emissions (Scope 3) by 2 million tonnes by 2030. Meanwhile, the company continues to deploy green product design and other strategies and work with value chain partners to develop low carbon products and combat climate change and global warming together.

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Direct and Indirect Energy Consumption

95% or more of the total energy consumption at LITEON was indirect energy consumption that was primarily provided by purchased electricity and followed by steam. Fossil fuels under direct energy consumption include diesel, petrol, natural gas, LPG, acetylene, and alcohol liquids that were used mainly in emergency power generators, forklifts, company cars, restaurants, and boilers in dormitories. In 2020, LITEON consumed a total of 1,298,532 GJ in energy. It was up by 60,005 GJ compared to 2019. The consumption intensity was 9.28 GJ/NTD million of revenue, up by 12.75% compared to 2019. The increase was mainly attributed to the implementation of automated production.

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