Governance Level

Roles and Responsibilities

Board of Directors

The Board of Directors is Nan Pao’s highest climate-governance body. It oversees climate strategy and targets, reviews progress and risk-management results, and approves major actions and investments.

Sustainability Committee

A Board-level committee responsible for sustainability-related risks, including climate. It formulates, reviews, and strengthens group-wide policies and action plans; tracks KPIs and effectiveness; and reports to the Board on sustainability and climate issues at least annually, ensuring climate is a standing agenda item.

Sustainability Task Force & Sustainability Office

Executive-level Sustainability Task Force led by the CEO, who also serves as the Chief Sustainability Officer (CSO), with the Group GM of Operations and all subsidiary GMs as members. The Task Force sets strategy and annual targets, approves major actions and resources, and conducts regular reviews of unit carbon-reduction plans, performance, and compliance; it also maintains the climate risk/opportunity register and directs response mechanisms. Under it, the Sustainability Office serves as the execution unit, operating environmental management systems, coordinating data collection and disclosures, driving implementation at plants and subsidiaries, and supporting corrective/preventive actions across functions.

Operational Units

Include energy management and EHS functions at plants and subsidiaries. Plant heads operate the environmental management systems, execute reduction projects, and manage significant climate-related risks and opportunities; execution teams support data collection, controls, and corrective actions.

Climate-related risks

Transition Risk: Meeting value chain decarbonization targets required by customers

Description of impacts

Currently customers of Nan Pao Resin Chemicals have set climate related goals, with these goals proposed by major customers including the setting of scope 3 reduction targets. These targets are therefore directly linked to Nan Pao‘s Scope 1 and Scope 2 emissions. Whilst Nan Pao Resin Chemicals has already established its Carbon Neutral Roadmap, we must assess our compliance with major customer carbon reduction requirements. Impact on Nan Pao Resin Chemicals: Based on Nan Pao Resin Chemicals Carbon Neutral Roadmap, we have met short-term goals of major customers; however, in the medium term the carbon reduction goals of major customers will increase significantly. From the perspective of our business units, those business units whose customers have set such carbon reduction targets may be impacted, especially if Nan Pao fails to meet these requirements, could result in these business units’ future revenue being affected.

Scope of impacts

Downstream value chain

Average estimated time frame for financial implications of this risk

Medium-term (2-6 years)

Anticipated financial effect figure in the medium-term

NT$ 7,367,010,000

Explanation of financial effect figure

Based on our Footwear Business Unit (FWBU), Adhesive and Specialty Business Unit (ASBU), and Coatings Business Unit (COBU), we have identified major customers which have publicly announced their emission reduction targets whether through initiatives such as SBTi, or through the customers publicly available resources such as company reports/ websites and assume these targets related to the supply chain are applicable to all suppliers within their value chain which includes Nan Pao Resin Chemicals. After the analysis of various targets of major customers of concern with Nan Pao Resin Chemicals current Carbon Neutrality Plan, in the medium term, the emission reduction requirements of customers will significantly increase. Nan Pao Resin Chemicals estimates the total expected revenues medium term from our business units by 2030. From this value we then estimate the % of revenue exposed to risk based on whether Nan Pao is able to meet the medium term requirement of customers. From this method, the total revenue exposed to risk if there is failure to meet the emissions reduction requirements of customers in the medium term will reach NT$ 7,367.01 million.

Cost of response to risk

NT$ 540,000,000

Explanation of response cost calculation

The value of Nan Pao Resin Chemicals risk response is directly related to our carbon reduction strategy to meet customer requirements of emission reduction which can be achieved by continued development of water-based green products. Furthermore, our increased efforts to developing products that use low-carbon materials is influenced by our emission reduction strategies and linked to our Carbon Neutrality plan. Therefore, Nan Pao Resin chemicals is actively developing these products through R&D and we expect that these will products will help us realize our own emission reduction initiatives while providing an appealing product to the customer.

Climate-related risks

Transition Risk: Paying carbon fees or purchasing certificates due to greenhouse gas emission controls

Description of impacts

Based on Taiwan's “Climate Change Response Act,” a carbon fee is expected to be imposed on high carbon emitters. Simultaneously in Vietnam, according to the revised "Law on Environment Protection," emitters may be able to purchase carbon credit certificates if they have exceeded a designated emission quota. Therefore, Nan Pao Resins will consider the carbon fee and carbon credit certificate price based on factory locations and evaluate their impact. Impact on Nan Pao Resin Chemicals: The emissions generated by Nan Pao Resin’s own operations will impact overall production costs if fees are paid according to local carbon fees or carbon credits rates. Similarly, Nan Pao resin’s upstream is also an emission-intensive industry which can also have an impact on procurement costs if some raw materials are affected by means of carbon fees transfer.

Scope of impacts

Direct operations

Average estimated time frame for financial implications of this risk

Medium-term (2-6 years)

Anticipated financial effect figure in the medium-term

NT$ 44,330,000 – 62,040,000

Explanation of financial effect figure

Nan Pao Resin Chemicals utilizes our Carbon Neutrality Pathway as the main basis for greenhouse gas emissions and has noted that under NZE scenario carbon fees/ carbon pricing in developing and developed countries rapidly increases as each country is progressing towards net zero emissions. From the analysis of emission reduction via NZE Scenario and a Business as Usual (BAU) baseline, there is a huge emission gap between both pathways. As for carbon pricing we referred to reputable reports such as IEA WEO and estimated future prices in both linear and non-linear manner. If the company fails to reduce emissions, these will incur operating costs from the domestic and foreign policies that in the medium term cumulatively will reach approximately NT$ 62.04 million, if we still follow carbon neutral map pathway, the financial impact can reduce NT$ 17.71 million.

Cost of response to risk

NT$ 21,792,197

Explanation of response cost calculation

With regards to the risk of carbon fees/carbon pricing implementation, Nan Pao Resin Chemicals has developed its Carbon Neutrality Pathway. With this pathway we have already established metrics and reduction targets such as reducing carbon emission intensity by 10% by 2025 and reaching Carbon Neutral by 2050. Alongside these set targets, we will also proceed with installation of renewable energy equipment. With all the energy saving project, Nan Pao Resin has invested in NT$ 21.8 million.

Climate-related opportunities

Opportunity: Developing the carbon fiber lightweight market

Description of impacts

The global wind power, electric vehicle and hydrogen energy markets are growing year by year, which is driving the lightweight carbon fiber market. In recent years, Nan pao Resin Chemicals has developed carbon fiber products and expect to enter to carbon fiber market. Impact on Nan Pao Resin Chemicals: Since under NZE Scenario, the carbon fiber market is growing as a result of energy transformation and production growth of electric vehicles, Nan Pao Resins Chemicals has developed carbon fiber products in recent years. Therefore, our company is able to enter wind power, electric vehicles, and hydrogen energy markets to increase our revenue opportunities.

Scope of impacts

Downstream value chain

Average estimated time frame for financial implications of this risk

Medium-term (2-6 years)

Anticipated financial effect figure in the medium-term

NT$ 114,600,000

Explanation of financial effect figure

Considering current market conditions, demand for carbon fiber is primarily driven by vehicle lightweighting applications. Based on our target market share and product positioning, Nan Pao Resins estimates potential revenue growth of approximately NT$114.6 million

Cost of response to risk

NT$ 580,000,000

Explanation of response cost calculation

To address growing demand for carbon-fiber applications in vehicle and UAV lightweighting, Nan Pao Resins plans to invest, by 2030, a total of NT$580 million in R&D and capacity expansion (capex).