Water Resources
To systematically identify water-related risks across all global facilities, the Company adopted the World Resources Institute (WRI) Aqueduct 3.0 water risk assessment tool and used a 40% Baseline Water Stress threshold to identify medium-to-high risk sites. Screening covered 14 direct operating sites in Taiwan, China, Vietnam, Indonesia, and Thailand across physical, regulatory, and market risk categories.
Plants located in water-stressed areas include Kunshan Nan Pao (China), the Vietnam operations (Vietnam Nan Pao, Nan Pao Advanced Materials Vietnam, Nan Pao Materials Viet Nam, and NNV), Thailand Nan Pao, and Nan Pao Indonesia. In 2025, total water consumption in these water-stressed areas was 53,921 cubic meters. Facilities in these areas have established ISO 46001 Water Efficiency Management System-based assessment mechanisms covering wastewater reuse, water quality, rainwater harvesting, and cooling-water recycling.
| Site | Major Water Resource Risks | Adaptation Measures |
|---|---|---|
| Taiwan | Southern seasonal drought may affect industrial water supply. | Municipal water as primary source with short-term storage buffer; production priority management and usage measurement during constrained supply. |
| China | Some industrial clusters located in areas of high water stress. | Municipal and legally permitted groundwater use; early-warning communication with local authorities; strengthened discharge compliance and water quality monitoring. |
| Vietnam | Water shortages during the dry season are more pronounced. | Service agreement with the park public utility provider; strengthened equipment inspections during the dry season; internal production priorities for critical processes. |
| Thailand | Severe water shortages during the dry season. | Municipal water plus local early-warning mechanism; seasonal equipment inspections; water conservation outreach and usage records. |
| Indonesia | Prolonged dry season with limited surface water in some areas. | Permitted groundwater use per local law; continuous water quality monitoring; on-site storage facilities and adjusted scheduling under extreme conditions. |
Nan Pao has identified drought and water stress as key physical climate risks and has established context-specific adaptation measures for each operating location. The assessment and adaptation plans cover100% of existing operations, with relevant measures implemented or scheduled for implementation within five years and reviewed annually. Physical climate risk assessments and preventive measures are also incorporated into the planning and design of100% of new projects and facilities.
The Group uses 2023 as the base year for its water resource management target. In 2025, total water withdrawal was 292.575 million liters, up 2.9% from the 2023 base year, but down from 314.059 million liters in 2024 — indicating overall withdrawal has receded over the past year.
Although the established reduction target has not yet been fully met, the Group will continue to use 2023 as the base year through 2026 and progressively strengthen water reduction, recycling, and reuse measures to improve water efficiency per unit of operating activity.
Water sources at Nan Pao's operating sites mainly include municipal water, groundwater, industrial water, and rainwater recycling, allocated and managed according to local regulations, water resource policies, and process needs.
| Water Source | Primary Use | 2025 Group Share |
|---|---|---|
| Municipal Water | Process operations, cooling, cleaning, domestic use, and general operations. | ~93.7% |
| Groundwater | Supplementary water source for some plants, managed per water intake permits. | ~5.1% |
| Rainwater Collection | Landscape irrigation, cleaning, wastewater system supplementation, non-contact use. | ~1.2% |
Nan Pao has expanded its wastewater approach from "end-of-pipe treatment" to "source reduction, process recycling, and reuse." In 2025, the Group's major effluent quality indicators all complied with local regulatory discharge standards, and no material water pollution penalties or excessive discharge incidents occurred.
| Management Aspect | Main Approach |
|---|---|
| Legal Compliance | After treatment, wastewater complies with local effluent standards and is discharged into a water body approved by the competent authorities. |
| Routine Monitoring | Internal environmental protection laboratories conduct daily COD testing, supplemented by outsourced testing per regulations. |
| Stakeholder Requirements | Complies with inspection requirements of customers and brands such as bluesign®. |
| Ecological Conservation | Tests heavy metals, fish egg toxicity, and other items to reduce impact on the aquatic ecosystem. |
| Recycle and Reuse | Full recycling of effluent, zero discharge of wastewater, recycling of condensate, rainwater, and reuse of treated sewage. |
Nan Pao regularly assesses its dependence on water resources and the potential impacts of its water withdrawal and discharge activities. The assessment covers Nan Pao's directly operated sites, with priority given to sites located in areas with higher water stress or relatively high water consumption.
| Assessment Aspect | Assessment and Management Approach |
|---|---|
| Water Dependency and Impact Assessment | Nan Pao assesses each operating site's dependence on water sources, including municipal water, groundwater, industrial water, rainwater, and recycled water. The assessment considers water withdrawal volumes, supply reliability, source water quality, drought and extreme weather conditions, and the potential operational impacts of water supply disruptions. Nan Pao also assesses the potential impacts of its water withdrawal and discharge activities on local water resources, surrounding aquatic environments, and community water use, and incorporates the needs of nearby residents and other local water users into its water resource planning. |
| Future Water Availability | Nan Pao uses the WRI Aqueduct Water Risk Atlas to regularly assess baseline water stress, drought, and flood risks in the areas where its operating sites are located. It also considers historical water withdrawal and consumption data, production requirements, local water sources, and seasonal supply conditions to identify potential future risks related to water shortages, water-use restrictions, and unstable water supplies. At sites exposed to higher water stress or with relatively high water consumption, Nan Pao prioritizes process water optimization, water recycling and reuse, equipment upgrades, and the assessment of alternative water sources to strengthen operational water resilience. |
| Future Water Quality-Related Risks | Based on local water conditions, regulatory requirements, and production needs, each site regularly reviews its incoming water conditions and monitors effluent quality. Key effluent indicators include chemical oxygen demand (COD), biochemical oxygen demand (BOD), suspended solids (SS), ammonia nitrogen, and phenolic compounds. Nan Pao also reviews historical water quality results, changes in production processes and raw materials, local water conditions, and trends in water quality and discharge standards to identify potential risks, including deteriorating incoming water quality, increased wastewater treatment loads, and the inability of effluent to meet future requirements. Based on the results, Nan Pao reviews the capacity of its wastewater treatment facilities and the frequency of water quality monitoring. |
| Impacts on Local Stakeholders | Nan Pao assesses the potential impacts of its water withdrawal and wastewater discharge activities on neighboring communities, other local water users, and the surrounding water environment. These include the possibility that water withdrawal could increase pressure on local water supplies during periods of water scarcity and that effluent discharge could affect receiving water bodies. Each site continuously monitors effluent quality to ensure compliance with local regulations and, where applicable, customer or industry requirements such as bluesign® standards. Sites located in areas with higher water stress also incorporate water-related issues into site-level environmental risk assessments. Water-related concerns received through existing community communication or grievance channels are reviewed and addressed through the relevant environmental management processes. |
| Potential Future Regulatory Changes | Each site regularly monitors policy and regulatory developments related to water withdrawal permits, groundwater use, industrial water-use quotas, water restrictions, excess water-use charges, wastewater discharge standards, and water pollution control. For example, sites in China monitor the potential tightening of local industrial water-use quotas, planned water-use requirements, and discharge controls, while sites in Vietnam monitor changes in water withdrawal and environmental permits, groundwater use, water-use monitoring, and wastewater discharge requirements. Where potential regulatory changes may materially affect water availability, production arrangements, permit conditions, or operating costs, Nan Pao reviews regulatory compliance, permitting requirements, treatment capacity, and monitoring frequency in advance and, where necessary, adjusts its management measures, upgrades relevant equipment, or plans related capital expenditure. Sites in China also maintain communication with local water authorities, while sites in Vietnam maintain relevant service arrangements with utility providers in their industrial parks to stay informed of changes in local requirements and water supply conditions. |