Response to Climate Change and Global Warming

It is increasingly apparent that greenhouse gases are causing global climate change, and have become one of the environmental issues of most concern to governments around the world and to LITE-ON as well. Having identified climate change as one of our key risks, we pay close attention to the ways global climates are changing and to how the world is reacting to this phenomenon. These issues are analyzed and reviewed by the executive management on a regular basis, and are escalated to the board of directors if they require special attention.

LITE-ON sees climate change as a major risk for which the company needs to prepare properly and reduce the effects that climate change has on business. LITE-ON is affected by the climate change mainly in two ways: the need to comply with more stringent laws and the impact of such change on the overall environment. It is necessary for LITE-ON to understand the risks and implications of government policies before being able to implement responsive measures:

Legal Risks Management

The Environmental Protection Administration (Taiwan) announced the Greenhouse Gas Reduction and Management Act, identifying six greenhouse gases, namely CO2, CH4, N2O, HFCs, PFCs and SF6, as air pollutants effective on June 15, 2015, and earlier "Regulations on Reporting of Greenhouse Gas Emissions" was announced in December, 2012. The new regulations outline the frequency and deadlines by which greenhouse gas emissions need to be reported, inspected and verified, as well as the government's examination principles, authority and penalties in this matter. The new regulations also require companies to "announce stationary sources of air pollution," according to which LITE-ON has reported greenhouse gas emissions from April 2013 onwards. Meanwhile, many countries are exploring the possibilities of introducing a carbon tax or energy tax, which would increase the cost of raw materials and energy sources, and ultimately impact on our production costs in these countries.

Overall Impact of Climate

Some of the climate changes we have seen so far include rising temperatures, changes in rainfall patterns, extreme weather conditions (in terms of both frequency and severity), and rising sea levels. These changes may affect us in the form of drought, heat waves, excessive rain, storms, landslides, typhoons, changes in ecosystems, changes in land-use and surface, land subsidence, coastal floods, air degradation and water quality.

Change Impact and Chanllenges to Each Related Domains

• Disasters

Disasters caused by climate change may include floods, slope-land disasters, and droughts. Taiwan's distinct geographical characteristics make it much more vulnerable to climate change than other countries. The most significant impact of all is perhaps the escalation of recurring disasters such as flood, landslide, drought etc to a devastating level.

• Damage to Critical Infrastructure

Rising temperatures are starting to pose concerns as to whether buildings, oil refineries, power generating facilities and other energy-related infrastructure will be able to withstand the increased strain. Extreme rainfall may cause floods that threaten the safety of existing infrastructure, whereas rising temperatures may strain concrete structures beyond their original design tolerances, and cause severe floods if they are breached. Following each extreme rainfall, soil is washed down into reservoirs as silt, reducing future water supply capacity. Water supply systems may not be able to distribute water at consistent pressure or at all as water usage increases beyond available resources given rising temperatures. Irrigation systems are also at risk given increasing water flows, water levels, silt and driftwood that put additional pressure on dikes, pumps and gates. Damage to these facilities may escalate the severity of floods. As for impact on transport systems, typhoons bring bigger waves that threaten the structure of port facilities, whereas excessive rainfall is capable of washing off soil from under roads to cause disruption to railroads or public road systems.

• Water Resources

Rainfall volume, runoff and evapotranspiration are expected to increase in the future, with the latter two increasing faster than rainfall. As a result, less water will be absorbed by the ground. There will also be more drastic changes in river flows; water level is likely to rise even higher during periods of high flow (summer), and lessen during periods of low flow (winter and spring). This diversity impacts the ability of dams to supply water and mitigate floods, and reduces the capacity of our water supply system. Changes in temperature and rainfall also affect irrigation and agriculture. During periods of drought, pollutants that have been released into rivers cannot be diluted or purified because of the low flow of the rivers. This causes pollution to become more concentrated, degrading the water quality. River’s capacity to self-purify has degraded. During the wet season, the high-flow of rivers causes them to collect more pollutants from the soil. Heavy rains can further hasten basin and sediment erosion, landslides, and erosion of the riverbed in addition to increasing the concentration of pollutants. This not only affects river ecology but also deteriorates the water supply.

• Land Use

A lack of water resources forces people to extract groundwater, causing subsidence and salinization. Rising sea levels pose concerns regarding coastal floods at low-rise areas should typhoons occur. Because of the urban heat island effect, temperature differences between urban and suburban areas may be as high as 10℃.

• Coastal Areas

Rising sea levels will result in the erosion of coastal lands, retreat of coastlines, loss of coastal habitats, and changes to the coastal ecosystem. In addition, rising sea levels will also increase the likelihood of coastal floods during typhoon season as well as inland floods because water cannot drain into the ocean. The greenhouse effect has been estimated to pose a threat of extinction to as many as 30% of species around the world. Rising temperatures and CO2 content in the ocean also changes calcium carbonate levels, slowing down the growth of coral reefs, or even causing them to disappear with severe impact on marine life.

• Energy supply

Climate change may increase the likelihood of droughts, during which manufacturers and water companies are both compelled to incur substantial expenses in changing production procedures, transferring orders, making deliveries, purchasing water, or from the cost of catch up schedules. Floods cause damage to plants, machinery, raw materials and finished goods, which manufacturers will need to restore and rebuild at additional costs. Due to the urban heat island effect, companies are required to make additional investments in new air conditioners, energy-saving solutions, and incur costs to operate them. Prolonged periods of heat will cause a significant hike in power usage during summer, putting a strain on the nation's power supply.

• Biodiversity

Global warming may cause coniferous forests to retreat to higher altitudes, covering lesser areas of land. In addition, increasing frequency and extent of extreme weather conditions disturbs river life and the role it plays in ecosystems. In addition, impact on marine life includes: rising temperatures - which poses challenges to the adaptability of various species, increasing acidity of seawater - which changes the physical and chemical characteristics of the sea, change in rainfall patterns - which affects the level of salt and oxygen in seawater, changes in the direction and strength of currents, changes in the distribution of nutrients and salt etc. Rising temperatures, droughts, floods, typhoons, wild fire and other extreme weather conditions and disasters bring threats such as pests and foreign species. It will be increasingly challenging to maintain our existing nature reserves.

• Health

Rising temperatures cause insect-borne diseases (e.g. Dengue fever, Tsutsugamushi disease, Japanese encephalitis etc) to spread over a longer period and wider area particularly in summer. Meanwhile, agents of other infectious diseases (e.g. malaria, Chikungunya fever) may enter Southeast Asia and localize the disease. Extreme rainfall patterns also increase the likelihood of droughts and floods, while lack of access to clean water or increasing contact with dirty water heightens the risk of skin infection, water poisoning, hepatitis A, bacillary dysentery, leptospirosis, Melioidosis etc.

Science-Based Carbon Reduction Targets

1. According to the Fifth Assessment Report released by the Intergovernmental Panel on Climate Change (IPCC) this year, given the same pattern of economic activities, the world's carbon budget will be exhausted by the end of 2045, and the global average temperature will increase by 3.7 to 4.8 degrees Celsius in 2100 as a result. The global average temperature has already risen by 0.8 degrees Celsius so far and extreme weather events are already threatening human life, and the weather conditions in the future will be twice as severe as they are today. IPCC also warns that humans must start taking action to reduce greenhouse emissions immediately to prevent global average temperature from rising by more than 2 degrees Celsius.

2. We at LITE-ON support the "Mind the Science, Mind the Gap" initiative, and have developed a methodology for setting reduction targets to help LITE-ON select the most appropriate approach within the scope of its capacity and establish credible, scientifically sound reduction targets. The project will engage the Carbon Disclosure Project (CDP), the World Resources Institute (WRI), and the World Wildlife Foundation (WWF) on target setting related issues. The project will also start tracking actual results.

LITE-ON's Low Carbon Strategy after Paris Climate Change Conference

We at LITE-ON is acutely aware of the impact of the Paris Agreement on corporate operations. It is necessary for the company to identify potential opportunities and threats and develop effective sustainable response strategies in order to take advantage of prevailing trends in sustainability and make the company more competitive. In addition, LITE-ON will comply with the demands of the We Mean Business campaign forged at the Paris Climate Change Conference, which include: (1) strengthening carbon reduction commitments every five years; (2) enacting meaningful carbon pricing; and (3) enhancing transparency and accountability to promote effective low carbon competition.

Greenhouse Gas Policy

LITE-ON has developed inventory and documenting of greenhouse gases systematically in line with ISO requirements. In addition, the company has also developed an internal document system supported by verification procedures to provide a foundation for its future reduction efforts, and its vision of a low-carbon society.

Greenhouse Gas Inventory

In compliance with ISO 14064-1 standard, since 2007 LITE-ON has been performing regularly annual greenhouse gas emission inventory, and initiating greenhouse gas reports to disclose the summary of greenhouse gas emissions for the reporting year. LITE-ON released a total annual volume of greenhouse gas emission of 383,005 tons in 2016, and earned the ISO14064-1 (Greenhouse Gas) Verification Statement from SGS Taiwan in April 2017.

Note 1: Direct emission of greenhouse gases (Scope 1) includes: fuel combustion in fixed equipment, production activities, fuel combustion in transportation equipment, and diffusion (e.g. fire extinguishers and refrigerants). Direct emissions totaled 19,493 tons CO2e/year, which accounted for approximately 5.1% of total emissions.

Note 2: Indirect emission of greenhouse gases (Scope 2) includes: purchased electricity and steam. Indirect emissions totaled 363,512 tons CO2e/year, which accounted for approximately 94.9% of total emissions.

Note 3: For other sources of indirect greenhouse gas emissions (Scope 3) in 2016, identified items include fuels and energy-related activities, overseas business trips taken by employees, waste, and employee commuting. The indirect emissions totaled 21,013 tons CO2e/year after verified by the 3rd party.

The total greenhouse gas emission is 383,005 tons CO2e in year 2016; however, in the term of emission intensity, the averag 1.81 tons CO2e/million NTD in 2016 is 8.2% lower than year 2015 (1.97 tons CO2e/million NTD in ).

2014-2016 Greenhouse gas emission and intensity

Note:Density calculations are in accordance with the revenue including in organizational boundaries.

Obtaining International Renewable Energy Certificates 

LITE-ON is the first domestic enterprise in Taiwan to obtain an international renewable energy certificate from the International REC Standard (I-REC ), signaling the beginning of the high technology industry's shift toward green businesses. The 14,725 units of I-REC purchased in 2017 have been recognized by CDP according to the GHG Protocol Scope 2 Guidance. These units are also listed in the CDP questionnaire in 2016. LITE-ON intends to apply these units to deduct Scope 2 emission and enhance the competitiveness of the company. By obtaining I-REC, LITE-ON expects to reduce the company's greenhouse emission, provide a paradigm for other members of Taiwan's electronics industry, and establish a model of strategy implementation.

2014-2016 Greenhouse Gas Emission:

Note: Density calculations are in accordance with the revenue including in organizational boundaries.

Energy-saving Measures and Performances

LITE-ON has included CSER courses as part of its orientation training for new employees, and has made CSER Awareness Training available on its e-Learning platform. CSER awareness campaigns are additionally held to promote employees' understanding of environmental protection and energy conservation. Below are the environmentally-friendly practices that LITE-ON has adopted:

• Air conditioning temperatures set at 27-28°C

• Turn off lights when not in use

• Turn off and unplug your computer not in use

• Bring your own handkerchief, chopsticks and tea cup

• Avoid wearing a tie

• Some elevators may not be used during off-peak hours

• Standardize routine approval processes, implement shared document templates for internal use and adopt the electronic version of the workplace bulletin

  Energy-saving Promotion of LITE-ON's Plants and Offices
  

LITE-ON continually upgrades its office and plant equipment to achieve higher energy efficiency. Below is a list of the many energy-saving measures and solutions that the company implemented in 2016 in all plant locations. They saved 13,513,316 kilowatt-hours of electricity in total, and the following is a detailed breakdown of electricity saved:

Adaptation Strategies

With the increasing severity in climate change, it has become one of most concerned topics on energy-saving and carbon reduction from electronic industry and global customers. LLITE-ON responses to this change on which fewer and fewer global resources, we strive to improve products to significantly reduce energy consumption and reduce environmental impacts to get better satisfaction from customers.

In addition, LITE-ON actively stipulates and implements our climate adaptation strategy with the considerations mainly on the aspects relevant to product, equipment and management illustrated below. In the near future, it would be involved in the supply chain management.

1. Innovate environmentally energy-saving products is our primary adaptation strategy such as the development of high-efficiency power supply systems, LED element/lighting and other energy-saving products, etc.
2. Develop energy-saving technologies in automation and clean energy innovation.
3. Expand the resource recovery and introduce green power.