Economic Sustainability
- Risk items and management
- Sustainability & Climate Related Financial Disclosure （IFRS S1 & S2）
- Information security risk
Faced with global warming, extreme weather, environmental protection and energy conservation, safety and health, and the rising awareness of conservation, Tung Ho Steel pays close attention to the trend of global climate change and the direction of international response, incorporates climate change into the material topics and one of the critical major risks for corporate sustainable development, and continues to make analysis and control, being dedicated to the adaptation and mitigation of GHG.
In response to the global trend of financialization of financial information, the Company refers to the sustainability disclosure standards IFRS S1- General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures issued by the International Sustainability Standards Board (ISSB) under IFRS Foundation as a guide for optimizing disclosure of sustainability information. Based on the relevance of climate risk and opportunity management and the compliance with the IFRS S2 Climate-related Disclosures, six domestic and overseas facilities have been included in this Chapter. In addition, in accordance with the Regulations Governing Information to be Published in Annual Reports of Public Companies, and by referring to the IFRS Sustainability Disclosure Standards recognized by the Financial Supervisory Commission (FSC), the Industry-Based Implementation Guidance for Steel Producers and SASB standards for the Iron & Steel Producers Industry to identify the sustainability and climate-related risks and opportunities of the Group for the disclosure of material information. The Company has started the preparatory work to align with the standards and has been progressively reviewing and adjusting its practice to enhance the completeness and quality of the disclosures. In the 13th session of the 25th Board of Directors dated on December 24, 2024, the IFRS Sustainability Disclosure Standard Alignment Plan and Risk and Opportunity Identification Results were approved, while in the 14th session of the 25th Board of directors dated on February 25, 2025, the BOD approved the disclosure report prepared in accordance with IFRS S1 and S2 Standards. In the 16th session of 25th Board of Directors dated on May 20, 2025, the Board of Directors approved the issuance of the 2025 Tung Ho Steel Sustainability and Climate-related Financial Disclosures (IFRS S1 & S2) Report.
The reporting entities in this Chapter are the same as those in the Group’s consolidated financial statements, which include the followings.
Climate Change-Related Governance
● The Board of Directors is in Charge of Governance of Climate Change Issues
The board of directors is in charge of reviewing and guiding climate change strategies, action plans and annual targets, and it regularly monitors the implementation status of the GHG reduction goals and attainment rate every year.
The board of directors has set up the Sustainable Development Committee（functional committee） composed of three members, and more than 50% of the members are independent directors appointed in accordance with the resolution of the board, with the chairman of the board serving as the convener（chair）, responsible for climate change related issues, including the setting, supervision and review of the environmental sustainability system and goals. Sustainable Development Committee is convened twice a year, and relevant contents concerning climate change are regularly reported in the board meeting every year, and discussions on GHG inventory and reports on the schedules and planning are conducted in the board of directors on a quarterly basis. The board of directors also actively participates in discussions between the government and the industry to face the challenges for sustainability development brought by climate change in a pragmatic and forward-looking attitude.
The Company invites external lecturers to provide education and training for climate change-related issues in 2021 and 2025. The trainees were all board members and senior executives, and the courses provided were on corporate climate governance and practices, with a total of 287 training hours.
● Representatives of Climate Change Issues at BOD level
The Environmental Sustainability Group is established under the BOD’s Sustainable Development Committee （functional committee）, which is composed of responsible personnel assigned by relevant departments. The chair of the Environmental Sustainability Group is the Executive Vice President, who is in charge of the evaluation and management of climate-related risks and opportunities and the setting of strategies and goals. The Environmental Sustainability Group will regularly report the implementation status to the Sustainable Development Committee.
Climate Change-Related Risks and Opportunity Management
● Risk and Opportunity Management Process
The Sustainable Development Committee is under the board of directors of the Company, and there are Environmental Sustainability Group, and Corporate Governance Group in the committee. Among them, the Environmental Sustainability Group is a dedicated unit for climate change management, in charge of the establishment, supervision, and review of environmental sustainability (climate change management, water resources management) systems and goals. The Corporate Governance Group is in charge of the establishment, supervision and review of relevant policies in relation to corporate governance, integrity management, and risk management, and the management mechanisms. It is in charge of the coordination of relevant departments for the risk identification, assessment, control and supervision, reports to the Sustainable Development Council the implementation status, and the Sustainable Development Committee shall report to the board of directors the overall risk management implementation status at least once a year. The relevant departments assess the possibility of occurrence of various risk factors (including climate change management) and the degree of impact in accordance with the content of job responsibilities, and necessary measures shall be formulated for implementation to properly manage various risks. The Company has understanding of various international initiative activities/ content of organization in relation to sustainability and climate change and include the concerns and evaluation criteria of the international initiatives into the Company’s considerations when establishing environmental and GHG policies, so as to comply with the international development trends and improve the Company’s ability to respond to climate change.
● Identification of Climate Change-Related Risks and Opportunities
The Environmental Sustainability Group members convened a climate change risks and opportunities identification meeting in accordance with the Climate-Related Financial Disclosures recommended assessment framework. (The level of impact x likelihood of occurrence, and the score of 8 points or more is classified as material). A total of 5 significant climate change-related risks and 2 significant climate-related opportunities were identified, and the financial impact (year) is defined as the average value in short-term (2025), mid-term (2026~2030) and long-term (2031~2050).
In 2025, the Climate Risk and Opportunity Assessment Strategy Scenario use the 1.5°C scenario, Taiwan’s Pathway to Net-Zero Emissions in 2050, IPCC AR6’s SSP5-8.5 scenario, and the 2030 INDC (Intended Nationally Determined Contribution) targets. Compared with 2024, the climate-related material risk items in 2025 remain consistent, while the number of climate-related material opportunity items reduced by one in 2025, namely “Transition to decentralized energy”.
The matrix of identified climate change-related risks and opportunities is as follows.
● Description of Climate Change-Related Risks
The climate change-related risks identified by the Company include Low-carbon technology transition, Changes in consumer behavior, Tropical cyclone, Changes in average rainfall and water management, and Changes in extreme temperature.
| Rsk | Item | Description |
|---|---|---|
| Low-carbon technology transition (Transition risk) | Impact Boundary |
The upstream, the Group, and the downstream of the value chain will be impacted. The impacted scope within the Group include: Taiwan：Tung Ho Steel Enterprise Corp., Tung Kang Steel Structure Corporation, Tung Kang Engineering and Construction Corp., Tung Kang Wind Power Corp., Katec Creative Resources Corp. Vietnam：THSVC、Duc Hoa International J.S.C. |
| Time Period | Short-term, Medium term, Long term | |
| Impact | The expected short-term carbon fee rate is NT$ 300/ton CO2e, the mid-term carbon fee rate is adjusted to NT$ 1,000/ton CO2e in 2030, and the long-term carbon fee rate is adjusted to NT$ 1,500/ton CO2e in 2040. There are also requirements in the "Renewable Energy Development Act", and the Vietnamese government also implements GHG emission quotas. | |
| Strategies | Strategies such as updating high-efficiency electric furnaces, investing in renewable energy power generation, purchasing electricity with renewable energy certificates (RECs), transforming low-carbon steelmaking processes, improving equipment energy efficiency, applying for voluntary reduction plans and applying carbon capture, utilization and storage (CCUS) technology can mitigate the impact of climate regulations and transform them into financial opportunities for future company operations. | |
| Financial Impact | Financial impact: The cash outflow of capital expenditures over the medium to long term will be paid by the Company’s internal funds and external bank financing. We anticipate no risk to cash flow, and expect no material impact on financing availability or cost of capital. | |
| Changes in consumer behavior (Transition risk) | Impact Boundary |
The Group and the downstream of the value chain will be impacted. The impacted scope within the Group include: Taiwan：Tung Ho Steel Enterprise Corp., Tung Kang Steel Structure Corporation, Tung Kang Engineering and Construction Corp., Katec Creative Resources Corp. Vietnam：THSVC |
| Time Period | Medium term, Long term | |
| Impact | In the short term, government procurement units will require the supply chain to provide product carbon footprint certification to comply with the net zero emission policy. In the medium and long term, government procurement and private enterprises may further require suppliers to provide low-carbon products. | |
| Strategies | The Group has complete carbon management capabilities and has promoted carbon management capabilities such as carbon inventory, carbon footprint, EPD and carbon reduction declaration to each subsidiary. In addition to the steel industry, the subsidiary Katec Corp. is a circular economy industry and Tung Kang Wind Power is a renewable energy power generation industry, which can support the response strategy in response to customers' requirements for carbon reduction products. | |
| Financial Impact | The application for third-party verification of carbon management requires manpower and verification costs, but it may also bring opportunities for business growth. In the future, we will actively respond to customers' requirements for carbon footprint certification and low-carbon products. There is no cash outflow for capital expenditure in the short, medium and long term, and no cash flow risk is expected. In the medium term, it will have a positive impact on financing availability and capital costs. | |
| Tropical cyclone (Immediate Physical Risk) | Impact Boundary |
The upstream of the value chain and the Company will be impacted. The impacted scope within the Group include: Taiwan：Tung Ho Steel Enterprise Corp., Tung Kang Steel Structure Corporation, Tung Kang Engineering and Construction Corp., Tung Kang Wind Power Corp., Katec Creative Resources Corp. Vietnam：THSVC、Duc Hoa International J.S.C. |
| Time Period | Short-term, Medium term, Long term | |
| Impact | The Group assumes that short- to medium-term extreme weather events of typhoon/flood occur once a year, and long-term extreme weather events of typhoon/flood occur twice a year, which will cause financial impacts in the form of property losses and shutdowns at all production plants. | |
| Strategies | The Group's operating locations all have basic planning and strength for typhoon and flood prevention, and the typhoon-related contingency measures have been in place to effectively reduce the impact of typhoons. All operating locations have been insured for natural disasters to reduce the financial impact caused by property losses. | |
| Financial Impact | In the face of the financial impact of future strong typhoons, the Group will purchase relevant insurance to transfer this risk and reduce the financial impact of the company. There is no cash outflow from capital expenditure in the short, medium and long term, and no cash flow risk is expected, which has no significant impact on the availability of financing and capital costs of the Group. | |
| Changes in average rainfall and water management (Long-term Physical Risks) | Impact Boundary |
The Group and the downstream of the value chain will be impacted. The impacted scope within the Group include: Taiwan：Tung Ho Steel Enterprise Corp., Tung Kang Engineering and Construction Corp., Katec Creative Resources Corp. Vietnam：THSVC |
| Time Period | Long term | |
| Impact | The Group assumes that the water supply to the factory is cut off for 7 days, resulting in a financial impact of reduced revenue and increased costs. On the other hand, the government's regulations on water discharge will become increasingly stringent, and failure to meet water discharge standards may result in fines or even orders to suspend operations. | |
| Strategies | The Group's various operating locations have strengthened water resource recycling and implemented zero-discharge water policies, including the installation of water storage tanks, cooling water recycling systems and rainwater recycling systems, which can effectively improve the efficiency of water resource recycling and reuse. Some factories have groundwater well resources. When the water company stops water supply, they can take advantage of the backup water source and continue to promote related policies. If there is a long-term drought and water outage, water trucks will be used to carry water to maintain factory operations. Although this will increase the cost of water trucks, it can reduce the financial impact of the company's reduced revenue and increased costs. | |
| Financial Impact | Cash outflows for short-, medium- and long-term capital expenditures will be paid from the company’s own funds. No cash flow risk is expected, and there will be no significant impact on the Group’s financing availability and cost of funds. | |
| Changes in extreme temperature (Long-term Physical Risk) | Impact Boundary |
The upstream of the value chain and the Company will be impacted. The impacted scope within the Group include: Taiwan：Tung Ho Steel Enterprise Corp., Tung Kang Steel Structure Corporation, Katec Creative Resources Corp. Vietnam：THSVC、Duc Hoa International J.S.C. |
| Time Period | Short-term, Medium term, Long term | |
| Impact | The Group assumes that power rationing in Taiwan and Vietnam due to extreme high temperatures will result in a short-term shutdown of 5 days, a medium-term shutdown of 10 days, and a long-term shutdown of 20 days, which will cause a financial impact of reduced revenue and increased costs for the Company. | |
| Strategies | Tung Kang Wind Power Corp. is a renewable energy power generation company the Group invested in. With the renting of diesel generators, it can partially meet the electricity demands. On the other hand, the flexible manpower adjustment system can reduce labor cost losses during anticipated shutdowns. In response to power rationing or outages caused by extreme high temperatures, Tung Kang Steel Structure and Duc Hoa International J.S.C. of the Group will rent diesel generators to supply their own electricity needs; Tung Ho Steel, Katec Creative Resources and THSVC will use flexible manpower adjustment as a response strategy to reduce labor cost losses. | |
| Financial Impact | Cash outflows for short-, medium- and long-term capital expenditures will be paid from the company’s own funds. No cash flow risk is expected, and there will be no significant impact on the Group’s financing availability and cost of funds. |
● Description of Climate Change-Related Opportunities
The climate change-related opportunities identified by the Company include Recycle and reuse and Incentives from financial institutions. Descriptions of the opportunities are detailed as follows.
| opportunities | Item | Description |
|---|---|---|
| Recycle and reuse | Impact Boundary | Tung Ho Steel Enterprise Corp., |
| Time Period | Short-term, Medium term, Long term | |
| Impact | The waste recycling strategies of the circular economy will become more and more important, and the recycling business can also obtain considerable financial opportunities. | |
| Strategies | The Group is committed to developing waste recycling policies in our works and investing in related waste recycling businesses, which will be beneficial to the company's future sustainable management strategy planning. The Group has invested in Taiwan Steel Union and Katec Creative Resources, the recycling and reuse businesses, to obtain financial opportunities with stable income. | |
| Financial Impact | It is expected that the implementation of the strategy will benefit the availability and cost of financing in the short, medium and long term. | |
| Incentives from financial institutions | Impact Boundary |
The upstream of the value chain and the Company will be impacted. The impacted scope within the Group include: Taiwan： Tung Ho Steel Enterprise Corp. Vietnam：THSVC |
| Time Period | Short-term, Medium term, Long term | |
| Impact | The credit and investment of financial institutions will be linked to the company’s ESG and climate change management performance. Companies with good performance will have the financial opportunity to reduce loan interest costs. Companies with poor performance in sustainability may face the impact of financing availability and capital costs. | |
| Strategies | Continued investment in climate change management and assessment, and establishment of the Group’s net zero path and carbon reduction targets are expected to increase the Company’s access to financial market credit, low-interest loans, financing and other financial opportunities, bringing positive benefits to the Group’s financing availability and funding costs | |
| Financial Impact | It is expected that the implementation of the strategy will benefit the availability and cost of financing in the short, medium and long term |
Climate Change-Related Strategies
● Climate-Related Scenario Analysis
Sustainability and climate-related risks and opportunities affect the Group’s strategies and financial planning. Therefore, the Group uses the three risk types, the transition risk type, regulation risk type and physical risk type as well as the Worst-case Scenario for sustainability and climate opportunities to analyze and access the resilience of sustainability and climate strategies.
| Type of climate-related risks and opportunities | Scenarios of the evaluation strategy of the Company | Content of scenario |
|---|---|---|
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As the world moves towards net-zero carbon emissions by 2050, Taiwan released the "2050 Net-Zero Emissions Pathway and Strategy Overview" in March 2022 to conduct high controls of GHG emissions through four major transitions, namely "energy transition", "industrial transition", "life transition", and "social transition", as well as two governance foundations, namely "technology research and development" and "climate legislation". The National Development Council also announced the phased goals and key strategies for the 2050 net-zero transformation in December, 2022. The Ministry of Environment announced at the end of 2024 that the country's net GHG emissions in 2030 should be reduced to "28±2% of the 2005 base year emissions", an increase of 5% from the National Determined Contribution (NDC) target of "24%±1%" announced by the National Development Council in 2022. |
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Under the extremely high GHG emission scenario （SSP5-8.5）, climate change causes drastic changes in future average temperature, extreme high temperature, annual total rainfall, annual maximum one-day rainstorm intensity, annual maximum consecutive days without rainfall, and the proportion of strong typhoons. These scenarios will not have impact on the operation of the Group and its value chain. |
● Climate Change Strategies
The GHG emissions at Tung Ho Steel are mainly indirect emissions (Scope 2 / Category 2) caused by electricity use. Therefore, the 1.5°C low-carbon transition plan is currently working on the planning of carbon reduction pathway targeting at the electricity using items. Please refer to "2025 Tung Ho Steel Sustainability and Climate-related Financial Disclosures (IFRS S1 & S2) Report" for other climate change-related strategies.
Climate Change-Related Indicators and Targets
● GHG Reduction Targets and Renewable Energy Targets
Tung Ho Steel referred to the Science Based Targets initiative （SBTi） as the basis for the climate change-related indicators and target evaluation. Monthly target meeting is also convened, and the president will track the difference between the actual performance of GHG emission intensity of all plants and the targets for discussions and establishment of necessary measures. To respond to the global trend and the national net zero emissions target by 2050, the Company incorporated climate change into the material topic for sustainable development and passed the 2030 phased goal of net zero emission by 2050 in the 25th session of the 24th term of board of directors.
Note:
1. In the Taiwan's 2050 Net Zero Emission Pathway and Strategy Statement, the carbon reduction pathway from 2025 to 2050 estimated that the carbon reduction in 2030 will account for 30% of the carbon reduction of 2005.
2. GHG emissions are the sum of those in Scope 1/ Category1 and Scope 2/ Category2.
3. In 2023, Kaohsiung Works -Daye, Taoyuan Fabrication Center, Taichung Harbor Logistic Office was added in the scope of GHG inventory, and the GHG emissions of Scope 1 and Scope 2 amounted to 50,697 MtCO2e.
● Target of Renewable Energy Use
About 73% of our total Scopes 1 and 2 GHG emissions are generated by electricity use. To realize our goal for sustainable development, purchasing renewable energy certificates (RECs) is one of the important measures for THS to achieve this goal. Additionally, fulfilling our environmental commitment, lowering fossil fuel dependency, reducing energy costs, and meeting the national requirements for renewables are also the realization of our social responsibility and mission.
However, in terms of Taiwan’s existing generation capacity of renewables, it will be impractical for all manufacturers with high carbon emissions join RE100. After assessing from a practical point of view, we believe that RE30 is an achievable target through continuous efforts. In 2024 we already purchased REC (Bundled REC System) of up to 36,509,776kWh from Tung Kang Wind Power Corporation, equivalent to about 3.08% of the 2024 electricity consumption.
In response to the global trend and Taiwan’s Net Zero 2050 target, we have included climate change as a material issue of sustainable development. At the 25th meeting of the 24th term Board, we further passed the use of 30% of renewables in total electricity consumption as the stage target for RE30: 2030 of our “Net Zero 2050” policy.
● Description of the Targets for Using Low-carbon Materials
In the traditional steel production processes, milling iron is an indispensable raw material. However, the GHG emissions during the mining and refining stages of raw material- iron ore are much more than that of scrap steel. Therefore, it is an important option for the steel industry to produce low-carbon steel by investing in the R&D of production technology that does not use milling iron. On the basis that steelmaking technology can overcome the completely non-use of milling iron, the Company will look for other alternative types of scrap steel and will no longer purchase milling iron from 2023. The inventory is expected to be used up in 2026. Starting from 2027, milling iron will no longer be the raw material for electric arc furnace steelmaking. By innovating production technologies that does not use milling iron, the steel industry makes a move toward a more environmentally friendly and sustainable future.
● Internal Carbon Pricing and Appropriation of Emissions Reduction Fund
To promote climate change adaptation and mitigation activities, we have been active in managing carbon risks and establishing operating procedures and regulations concerning climate-related financial disclosures and internal carbon pricing. For internal carbon pricing, we have adopted the price of the national carbon fee to help achieve the set targets of greenhouse gas reduction and promote clean energy transition.
To implement climate change adaptation and mitigation activities, in the 20th meeting in August 2022, the 24th term Board passed the establishment of the “Regulations for Appropriation and Utilization of Special Reserve for Climate Change Adaptation and Mitigation” and temporarily set the fund at NT$200/tCO2e to appropriate the special reserve for addressing climate change adaptation and mitigation in respect of the total Scope 1 and 2 GHG emissions recorded in the annual internal inventory. The special reserve will be spent on projects and programs for climate change adaptation and mitigation, such as energy-efficient equipment, equipment performance improvement and replacement, the R&D of energy conservation technology, and the development of technology for low-emission products. The total expenditure in 2024 was approximately NT$ 94.08 million. In 2024, the special surplus reserve amounted was approximately NT$ 156.04 million, which can only be utilized after approval by the board of directors and recognition at the shareholders’ meeting. The available amount was approximately NT$ 270.84 million.
● Investment in Clean Energy in Response to Climate Change Tung Kang Wind Power Corp.
In 2024, Tung Kang Wind Power generated 23,253,736 kWh of electricity from wind turbines and 18,176,180 kWh of electricity from solar power, and transferred 36,509,776 kWh to Tung Ho Steel, accounting for about 88% of the total electricity generation. In 2025, Tung Kang Wind Power plans to add a 6,000 kwp solar photovoltaic power plant at Tung Ho Steel's Taoyuan Fabrication Center and Kaohsiung Works-Daye. In the future, it will continue to invest in clean energy with RE30 as its goal.
● Tung Sugar Energy Service Co., Ltd.
Tung Sugar Energy Service Co., Ltd. is an energy service company focusing on producing energy from biomass. It provides safe and reliable processing sites for various types of degradable biomass and waste disposal solutions for food factories. After processed by anaerobic fermentation technology, three major products can be produced: biogas, biogas residue, and biogas slurry. Biogas can be converted into electricity through the biogas generator; biogas residues can be used as organic fertilizers after proper treatment, and biogas slurry can be provided as liquid fertilizer. The factory is now fully operational, effectively reducing business waste in the food (processing) industry and converting it into renewable energy, which meets the circular economy policy and the strategic goal of sustainable management. As of the end of 2024, Tung Sugar Energy Service has invested NT$300 million in capital expenditures and generated 637,779 kWh of electricity.
