Climate Governance

LITEON works actively to strengthen governance in sustainable development and sustainable environment. LITEON established a Corporate Sustainability Committee (CSC) directly under the Board of Directors. The CSC is chaired by the board chairman (the Chief Sustainability Officer) and is composed of five independent directors. It is in charge of setting annual CSR targets in terms of the economic, environmental, and social aspects of the business. Progress is monitored regularly to ensure LITEON's continuing advancement toward sustainability and fulfillment of short-, medium-, and long-term goals. The CSC meets at least twice a year in accordance with LITEON's "Corporate Sustainability Committee Charter", and regularly reports implementation plans and results to the Board of Directors.Under the CSC, there are the Environmental Sustainability, Risk Management and Sustainable Product Design subcommittees to improve environmental management efficiency, develop low- carbon product and manage environmental risks and opportunities.

An Environmental Sustainability subcommittee which is led by the head of manufacturing, and is responsible for green operations at the plants, setting environmental targets, risk control, the environmental target achievement survey. The environmental targets include energy saving plan, GHG emission, water-saving, waste reduction etc. The subcommittee also analyze the risks and opportunities from customers, local government and law enforcement.

Sustainable Product Design subcommittee which is led by the head of Research and Design is responsible for low-carbon design and development.

The Risk Management subcommittee which is led by the head of the operation identifies environmental risks and opportunities as one of the eight cooperate risk management according to significance rule. The Subcommittee tracks risks and opportunities of identification, impact assessment, management indicator and reports to the CSC, Audit Committee and the board of directors. The Environmental Sustainability subcommittee which is led by the head of manufacturing, and is responsible for green operations at the plants, setting environmental targets, risk control, the environmental target achievement survey. The environmental targets include energy saving plan, GHG emission, water-saving, waste reduction etc. The subcommittee also analyze the risks and opportunities from customers, local government and law enforcement.

Climate Risk Management

Risks arising from climate change and natural disaster issues are included in LITEON's identified categories of sustainability risks. For the potential impact on business activities, LITEON has the climate change risk task force in place to handle identification of real and transformation risks and opportunities, assessment of possibilities, and analysis of the degree of impact. The task force is also responsible for devising appropriate countermeasures.

The company conducts climate risk assessment according to the "ISO 31000 risk management system and guidelines" and convert the PDCA cycle, converts relevant climate risks into financial figures, and considers projects that may cause an annual financial impact of more than NT$10 million as impactful risks and opportunities, which are prioritized according to likelihood and severity, and corresponding countermeasures are formulated. For risks with higher assessment results, a climate scenario analysis is additionally performed, and the current operational layout is considered to calculate its potential financial impact. Risk assessments are also submitted to the Sustainability Committee and the Audit Committee for supervision. The chairman of the Audit Committee regularly reports to the Board of Directors based on the risk management and assessment results.

LITEON identifies climate-related factors through ongoing improvement management practices. 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 management 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. With respect to challenges in climate and opportunities, LITEON actively performs 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 business operations.

Climate Strategy

Climate-Related Risks and Opportunities the Organization Has Identified Over the Short-, Medium-, and Long-term

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.

Climate Risk Identification

Climate Opportunity Identification

Climate Change Mitigation and Adaptation Measures

Enhanced renewable energy utilization

LITEON continues to improve the utilization rate of renewable energy. At this stage, it adopts two methods: rooftop solar power generation

system and procurement of International Renewable Energy Certificate (I-REC) to increase the utilization rate of renewable energy. In addition, LITEON is actively looking for relevant renewable energy companies and expects to sign a long-term green power purchase agreement (PPA) to replace grey power with green power, which can gradually reduce carbon emissions and move towards low-carbon production. In 2021, LITEON's renewable energy consumption using I-REC has reached 73,130 MWh, which is accounting for 19.79% of total electricity consumption. LITEON continues to improve the utilization rate of renewable energy. At this stage, it adopts two methods: rooftop solar power generation system and procurement of International Renewable Energy Certificate (I-REC) to increase the utilization rate of renewable energy. In addition, LITEON is actively looking for relevant renewable energy companies and expects to sign a long-term green power purchase agreement (PPA) to replace grey power with green power, which can gradually reduce carbon emissions and move towards low- carbon production. In 2021, LITEON's renewable energy consumption using I-REC has reached 73,130 MWh, which is accounting for 19.79% of total electricity consumption.

Energy management

LITEON continues to improve the efficiency of energy use, improves equipment and adopts different energy-conservation methods in energy use; it increases production output while saving energy, improving production efficiency. In 2021, a total of 4 production sites will continue to operate under the ISO 50001 energy management system. We expect to increase the number of ISO 50001 production sites in 2022 and to cooperate with energy-conservation plans to reduce electricity consumption for production and improve production efficiency. It established a demonstration site for the implementation of the process pilot plan, introduced power analysis tools, digitized the power consumption of intangible processes, generated a power model of the utility and process system and the power consumption analysis diagrams of production processes, find out the optimal control scheme for power consumption, and improve efficiency of energy use.

In 2021, a total of 76 energy-conservation plans were implemented, with a total energy savings of 8,665 MWh. Among them are primarily the air-compressors and air-conditioner/chiller and process equipment, accounting for 89.5% of the total energy savings.

Enforcing GHG emissions reduction

LITEON develops production optimization and plant operation improvement, and continues to reduce energy by promoting diversified energy-saving plans. The plans included updating air compressors, adopting high-efficiency equipment, improving and managing processed equipment technology and introducing management system and other energy-saving plans. energy saving and operational equipment efficiency improvement. Many sites implemented the pressure adjustment of air compressor equipment to reduce energy use. It is executed at LITE-ON Electronics (Dongguan), LITE-ON Technology (Vietnam), LITE-ON Electronics (Guangzhou) and other production sites. LITEON upgraded the air compressor Equipment efficiency by reducing the outlet pressure. For the energy-saving plans in 2021, 54 energy-saving plans have been executed. Additionally, LITEON planned to reduce electricity by 9.79 million kilowatt-hours in 2022.

Strengthened internal carbon pricing strategy

LITEON continues to actively adjust the governance aspects related to sustainable operations and sustainable environment. It has established an Environmental Sustainability subcommittee, which is chaired by the head of manufacturing. The subcommittee is responsible for promoting green operations to improve environmental management performance and environmental risk controls. In 2018, LITEON referred to relevant regulations on carbon trading in Taiwan and the market price of carbon trading in China, and adopted the shadow price method to set the carbon fee price as the decision-making for our energy-saving and carbon- reduction measures. In addition to the overall SBT carbon reduction target, LITEON also sets the SBT emission intensity target, and determines an internal carbon price to replace the shadow price every year starting from 2020. The carbon price in 2021 will be 1 USD/ton of carbon dioxide equivalent, and the business units was charged with internal carbon fees if they exceed the annual carbon emission quota. The method strengthens business units' decision-making on carbon reduction investment, and it expect to gradually increase the fee in the future as an investment in carbon reduction technology or to support renewable energy work to achieve LITEON's carbon reduction commitment.

Develop low carbon products

The LITEON CSR code of conduct is based on life cycle thinking. With the 3Rs rule adopted, the company engages in green product design and develops nontoxic, easy to assemble/disassemble, and environmentally friendly products. For example, the optimized circuit design improves the energy conversion efficiency of power products (power supplies for servers and 3C products etc.), reduces energy consumption, material consumption and carbon emissions. In LED and energy- saving street light products, energy consumption is reduced by improving energy efficiency and light extraction efficiency. Furthermore, by using low-carbon recycled materials, improving packaging technology, and extending product life, based on shipments in 2021, the overall reduction of carbon emissions in the product use phase is approximately 50,673.6 tons. The cumulative carbon reduction due to the green product design reached 407,783 tons of CO2e.

Environmental Sustainability ▸