Climate Strategy
Nan Pao integrates climate-related insights into its governance framework by following the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Through iterative scenario analysis referencing the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), the Company evaluates potential short-, medium-, and long-term impacts of climate change across the supply chain, R&D, and operations, incorporating material risks into its overall risk management framework.
The Company's assessment process for climate-related risks and opportunities follows four steps: identification based on TCFD guidelines and international reports; risk assessment using likelihood and potential impact criteria; materiality identification against defined thresholds; and risk response measures developed by relevant departments and business units, with regular follow-up monitoring.
| Value Chain | Selected Scenario | Analysis Scope |
|---|---|---|
| Raw Material Suppliers | IEA-STEPS / SSP5-8.5 | Taiwan / Global |
| Government | IEA-STEPS & NZE | Taiwan / Vietnam / Indonesia / China |
| Nan Pao | IEA-NZE / SSP5-8.5, RCP8.5, GWL2°C | Taiwan / Vietnam / Indonesia / China |
| Customers | IEA-NZE | Global |
Following identification, each risk and opportunity is scored by multiplying likelihood, level of impact, and departmental weighting, and classified into five materiality tiers — Very High, High, Medium, Low, and Very Low — to prioritize management focus. Physical risks are further categorized asAcute (event-driven) or Chronic (longer-term shifts in climate patterns).
Transition & Physical Risks — Ranked by Materiality
| Code | Type | Risk Issue | Timing | Materiality |
|---|---|---|---|---|
| T6 | Market | Rising demand for substitute materials pushed up prices and costs. | Long-term | High |
| T5 | Market | Increased costs resulting from the pass-through of carbon charges on petroleum-based raw materials. | Medium-term | High |
| T7 | Market | The increase in the proportion of renewable energy at each plant resulted in higher costs. | Medium-term | High |
| T2 | Policy & Regulation | Higher selling and administrative expenses incurred to meet ESPR information requirements. | Medium-term | Medium |
| T3 | Technology | In response to rising low-carbon requirements, R&D as well as manufacturing costs increased. | Medium-term | Medium |
| T8 | Market | Failure to comply with customers' emissions reduction standards affected competitiveness and orders. | Long-term | Medium |
| T4 | Technology | Scope 1 carbon reduction measures increased capital expenditures. | Long-term | Medium |
| T1 | Policy & Regulation | Each plant is subject to carbon costs imposed by the respective local regulatory authorities. | Long-term | Medium |
| P1 | Physical – Acute | The increased severity of extreme weather events, such as typhoons and floods, affected production. | Medium-term | Medium |
| P2 | Physical – Acute | Extreme weather events caused vessel schedule delays and affected production scheduling. | Long-term | Medium |
| P3 | Physical – Chronic | Production was affected by power restrictions caused by extreme heat. | Long-term | Medium |
| P4 | Physical – Chronic | Changes in precipitation patterns affected production water supplies. | Long-term | Medium |
| T9 | Reputation | Investors'/financial institutions' willingness to provide the Company with financing and investment. | Long-term | Very Low |
Opportunities — Ranked by Materiality
| Code | Type | Opportunity Issue | Timing | Materiality |
|---|---|---|---|---|
| O6 | Market | Growth in automotive carbon fiber applications drove revenue. | Short-term | Very High |
| O3 | Products & Services | Developed low-carbon adhesive product applications to expand the customer base. | Medium-term | High |
| O4 | Products & Services | Demand for near-zero-carbon buildings is driving growth in the high-performance building materials market. | Medium-term | Medium |
| O5 | Market | The renewal of water supply pipe networks has driven business opportunities for specialty coatings. | Medium-term | Medium |
| O1 | Resource Efficiency | Intelligentization and energy-saving and water-saving measures reduced operating costs. | Short-term | Low |
| O2 | Resource Efficiency | Improved solvent recycling to reduce waste and lower costs. | Short-term | Low |
To strengthen sustainability performance and climate risk governance, Nan Pao has established a comprehensive environmental management and climate governance structure. Responsibilities are delegated according to organizational levels of authority, ensuring accountability in achieving environmental management performance.
| Governance Level | Roles and Responsibilities |
|---|---|
| Board of Directors | Serves as Nan Pao Resins' highest climate governance body, regularly overseeing the Company's overall sustainability strategy, target achievement, risk management outcomes, and the implementation performance of climate action plans, and providing appropriate recommendations. Climate-related issues are included on the Board's agenda at least annually. |
| Sustainability Development Committee | A Board-level committee responsible for formulating the Company's sustainability and climate-related governance strategy, conducting rolling reviews of internal sustainability promotion strategies and policies, and reporting sustainability and climate-related matters to the Board at least annually. |
| Risk Management Task Force | Manages material sustainability and climate-related risks compiled by the Sustainability Development Office. The Task Force comprises the heads of relevant functional units and presents the Company's risk landscape, key risk management priorities, risk assessments, and response measures at regular risk management meetings. |
| Sustainability Development Office | The Chief Sustainability Officer (CSO) serves as the highest-level management position responsible for sustainability and climate-related matters. Supported by the Sustainability Development Office, the CSO oversees the identification of climate-related risks and opportunities, promotes the environmental management system, evaluates environmental regulations and standards, and regularly reports work plans and outcomes to the Sustainability Development Committee. |
Nan Pao integrates KPIs into performance evaluations and links them directly to monetary incentives at different organizational levels. The CEO is assessed on progress in carbon reduction targets, renewable energy consumption, reductions in key environmental indicators such as energy, water, and waste, and the implementation of green procurement, with results tied to annual bonus schemes. Business Unit Managers are evaluated on improvements in product carbon intensity, with performance tied to variable pay components. All employees are encouraged to participate in environmental and operational improvements, with valuable contributions acknowledged through cash rewards, contributing to Nan Pao's net-zero and sustainability transition..
Nan Pao is committed to achieving net-zero emissions by 2050. The Company aims to reduce Scope 1 and Scope 2 greenhouse gas emissions by 90% from the 2022 base year while continuing to advance decarbonization across its Scope 3 value chain, aligned with the Paris Agreement goal of limiting global temperature rise to 1.5°C.
| Scope | Carbon Reduction-Related Actions |
|---|---|
| Scope 1 | Actively reducing direct greenhouse gas emissions by transitioning diesel-powered equipment to electric models, and implementing systems to recover waste heat from boilers and reintegrate it into production processes, reducing natural gas use. |
| Scope 2 | Addressing indirect emissions from purchased electricity by upgrading plant equipment to energy-saving models and installing solar power generation systems on-site. |
| Scope 3 | Scope 3 emissions account for approximately 90% of Nan Pao's total greenhouse gas emissions. The Company prioritizes bio-based or low-carbon materials to replace high-carbon-emission alternatives, and continuously develops environmentally friendly, low-carbon, high-performance products and building solutions. |
For residual emissions, Nan Pao will adopt diverse neutralization and offset measures, including the purchase of carbon credits and investment in permanent carbon removal technologies, to ensure full realization of its 2050 net-zero commitment.
Nan Pao engages value chain partners, industry associations, and public-sector organizations to gather input, exchange technical knowledge, and support implementation of its transition plan. Through collaboration with the Industrial Development Administration's low-carbon and smart transformation program, upstream suppliers, and downstream customers on low-carbon products, energy-efficient production, and solvent recovery initiatives, these efforts are expected to deliver annual emission reductions of more than 10,000 metric tons of CO₂e across Nan Pao and participating value chain partners. Nan Pao also participates in the bluesign® SYSTEM PARTNER network, the ZDHC Foundation, the Yushan ESG Sustainability Initiative, SATRA Technology, the Taiwan Synthetic Resins and Adhesives Industrial Association, and the Taiwan Biomass and Textile Materials Industry Association.
Nan Pao assesses the potential social implications of its transition plan, including employees' need to acquire new environmental and energy-management skills, and potential compliance, cost, and technical-capability challenges faced by suppliers. The Company provides employees with regular training on energy efficiency, waste reduction, water resource management, and environmental regulations, and supports suppliers through ESG training, regulatory information, technical exchanges, and improvement guidance.
To implement its climate transition plan, Nan Pao will allocate resources based on its decarbonization pathway, with renewable energy integration, green power procurement, and solvent recovery as key investment areas. The Company expects to invest over NT$30.61 million over the next 5 years (2026–2030), annually reviewing capital allocation, project execution progress, and carbon reduction effectiveness each year to ensure that investment planning aligns with transition targets.