Sustainable Development

Short-, medium-, and long-term climate-related risks and opportunities identified by Sunon

Transition Risks:

<Market> Energy price fluctuations, supply chain disruption

<Technology> Energy transition (such as renewable energy investment)

Transition risk:

<Policy and Regulations> Greenhouse gas emissions control, greenhouse gas reduction targets

<Technology> Energy transition (such as renewable energy investment), low-carbon technology development, carbon price fluctuations

Transformation risk:

<Policy and Regulations> Increase in the price of greenhouse gas emissions (cap and trade/carbon tax/energy tax)

The major climate risks faced by Sunon mainly come from important stakeholders such as customers and investors' requirements for corporate greenhouse gas reduction and product energy efficiency standards; It also includes the inevitable geographical climate risks after the internationalization of production bases; Furthermore, the pressure of international carbon tariffs and the consequential demands for product carbon footprint, coupled with the requirements for upstream supply chain carbon reduction, may lead to green inflation, which is also a potential risk under climate change;

The opportunities brought by climate change mainly appear in products and services. Under the trend of energy saving, environmental protection and low carbon, it will create more application product and market business opportunities.

Operational or financial impact:

Work stoppages lead to decreased revenue, energy price fluctuations increase operating costs, and energy transition needs increase capital expenditures.

Response strategies:

1. To reduce greenhouse gas emissions and prevent power shortage crises that may be caused during the energy transition of various countries, strategies to reduce carbon footprint and reduce other environmental impacts will be gradually introduced in each factory, such as energy efficiency improvement, establishment of green energy autonomy with solar panels, introduction of energy storage equipment, and increase of green electricity use to reduce energy loss.
2. Investing in carbon offset projects, purchasing carbon emission allowances, etc., to compensate for unavoidable carbon emissions and achieve the net zero emission target.
3. Actively applying for government-subsidized programs to invest in energy transition-related equipment, aiming to alleviate financial pressure.

Operational or financial impact:

Increased operating costs or maintenance costs, and typhoons or floods may also affect factory operations, leading to production line stoppages and resulting in decreased revenue.

Response strategy:

Establish a climate risk management system and integrate it into the corporate risk management framework. Allocate budgets for climate risk responses to mitigate potential losses caused by natural disasters. Additionally, incorporate insurance costs into financial planning to offset the financial impact of natural disasters on the Company's operations.

Operational or financial impact:

Increase the revenue share of green products and enhance product competitiveness, which may increase development costs.

Response strategies:

1. Continue to develop high-efficiency and low-energy-consumption fan products/cooling modules and low-power-consumption ceiling fans that meet green building standards.
2. Long-term planning and cooperation with the supply chain to establish low-carbon/low-energy-consumption/recyclable and reusable product and service solutions, moving towards sustainable management and mutual benefit with customers.
3. Strengthen communication with the government and stakeholders, participate in the formulation and implementation of relevant policies, and seek government support and encouragement, such as providing tax incentives and subsidies, to promote low-carbon transition, and to reduce transition costs.

Sunon's resilience in strategy, considering different climate-related scenarios

JSunon joined the Science Based Targets initiative (SBTi) in 2023, setting reduction targets under the 1.5°C pathway. The company aims to achieve a 6.25% annual reduction in Scope 1 direct emissions and Scope 2 indirect emissions from energy use. Sunon is committed to reducing carbon emissions by 50% by 2030 and achieving net-zero carbon emissions by 2050.

To reach net-zero emissions by 2050, Sunon has developed the following low-carbon transition plans:

1. Actively engaging in voluntary carbon reduction by continuously developing energy-saving processes and equipment to enhance energy productivity and efficiency.
2. Gradually increasing the use of renewable energy each year and encouraging supply chain partners to participate in and support energy transition efforts.
3. Investing in zero-emission technologies and participating in carbon offset programs to mitigate residual emissions that are currently unavoidable due to technological limitations.
4. Incorporating recycled and low-carbon materials while continuously investing in research and development to improve motor efficiency and energy-saving capabilities.

As of 2024, Sunon has focused on replacing major energy-consuming equipment and increasing the use of renewable energy. Compared to the 2022 baseline, the company has already achieved a 37% reduction in carbon emissions, surpassing the reduction targets set by SBTi.