Climate Risks, Opportunities and TCFD | ACER ESG
Climate Risks, Opportunities and TCFD
Since 2020, Acer has officially implemented the Recommendations of the Task Force on Climate-related Financial Disclosures issued by the Financial Stability Board of the United Nations to analyze the current status of climate-change-related financial disclosures, identify and quantify climate risks, and publicly disclose the potential financial impact of climate change on Acer and its future response strategies.
Optimized the TCFD management
In 2022, Acer optimized the TCFD management procedures and integrathttps://www.acer-group.com/userfiles/Acer_2022_CDP_Climate_Change.pdfed climate change-related risks into Acer’s risk management policies and risk management operating procedures. The Risk Management Committee will approve/declare the environmental risk, risk management priorities, assessment results and related responses measures and report to the Audit Committee and the Board of Directors at least once a year. For detail, please see our CDP Climate Change Questionnaire , and Acer TCFD report.
Governance
The Board of Directors/Audit Committee are the highest authorities responsible for the Company's risk management which promotes and implements the Company'soverall risk management policy in accordance with the overall operating strategy and business environment to ensure effective risk management.
The Risk Management Committee under Acer's Board of Directors/Audit Committee approves/declares the environmental risk, risk management priorities, assessment results and related response measures, and supervises the continuous improvement of risk management and performance. The management committee is composed of the top executives of each business unit/functional organization at the headquarters with the top of the auditing department as an observer to supervisor, managing risks including strategic risk, operational risk, financial risk, disaster risk, and climate change, and reporting to the Audit Committee and Board of Directors at least once a year.
For the implementation, the risk management team of the Risk Management Committee is the unit responsible for introducing the TCFD climate risk assessment framework and to conduct climate risk identification, climate scenario and operational impact assessment, formulate climate risk prevention and mitigation measures based on the assessment and report to the Risk Management Committee. In addition, the Risk Management Committee, in collaboration with the Corporate Sustainability Committee under the Acer Board/Audit Committee, is supported by the Working Groups on Corporate Governance, Innovation and Product Life Cycle, Environmental Management, and Supply Chain Management for ESG-related projects such as TCFD.
In 2023 June, the Risk Management was approved by board resolution in accordance with the Company's Articles of Incorporation. It becomes the functional committee under the Board.
Strategy
Acer's risk management team takes the potential impact of climate change into overall operational considerations, evaluates the probability of risk occurrence and impact, and formulates climate risk prevention and mitigation measures. For climate change scenarios, Acer referred to relevant international carbon management trends, TCFD recommendations, and reports and information released by other relevant domestic and global institutions and introduced physical and transition risk scenarios such as RCP 2.6, RCP 8.5, IEA NZE 2050, and NDCs (Taiwan). Acer identified short-, medium- and long-term climate change risks with considerations in its business characteristics and evaluated the potential impact of each business unit when transition risks and physical risks occur based on the concept of materiality.
When it comes to opportunities brought about by climate change, Acer held climate-related identification workshops and distributed climate risk prioritization by materiality surveys for relevant units’ assessment and identified developing and/or increasing low-carbon goods and services. With R&D and innovation, Acer can develop new products and services and other related opportunities, and continuously improve the product energy efficiency, build solar power stations to increase the share of renewables electricity usage, provide professional knowledge and experience in the ICT industry, and ensure the society and various departments of Acer can achieve the energy conservation and carbon reduction goals or carry out corresponding transformation and adjustment methods to expand the Group's business and implement the daily management of climate issues.
Major Cimate Risk Matrix (identified in 2020)
Climate Risks, Opportunities and Our Response Measures
Risk Name / Explanation of Impact
Regulation and Policy
Increased Costs of Greenhouse Gas Emissions / Medium-term Risk
Medium-term Risk
Risk Name / Explanation of Impact
With the passage of laws and regulations relating to carbon emissions, fees will be levied if greenhouse gas emissions exceed allowances. With emission allowance controls potentially able to increase year by year, related fines may significantly increase operating costs. In addition, there are significant costs associated with carbon emission reduction.
Response Measures/Identified Opportunities
- Commit to setting SBTs in line with the 1.5°C carbon reduction pathway and achieve a 50% reduction in carbon emissions compared to 2019 by 2030
- Continue to optimize the energy efficiency of each operating location and adopt green power, aiming to use 100% renewable energy by 2035
Increased Demand for and Regulations Related to Sustainability / Short-term Risk
Short-term Risk
Risk Name / Explanation of Impact
Should Taiwan establish and implement regulations around sustainability and renewable energy development, Acer will need to invest more in constructing renewable energy devices and purchasing Renewable Energy Certificates (RECs).
Response Measures/Identified Opportunities
- Announced participation in the global RE100 initiative, committing to 100% renewable energy by 2035
- Constructing solar power generation facilities in a series of operating locations, generating approximately 3.8 million kWh of green electricity in 2022
Market
Increased Raw Materials Costs / Medium-term Risk
Medium-term Risk
Risk Name / Explanation of Impact
Changes in the cost of raw materials needed in the production process (e.g., rare metals or packaging materials) caused by climate change create a risk of increased production costs:
- When suppliers’ raw material costs increase, contracted amounts with Acer will also increase, resulting in higher production costs and affecting profitability.
- Product prices rise, possibly leading to impacts on revenues.
Response Measures/Identified Opportunities
- Launched the Earthion initiative to harness the strength of our staff and supply chain partners to strengthen cooperation in green innovation design, management of chemical substances used in production process, green energy use, low-carbon logistics, packaging materials and design, and product recycling, and resource reuse.
Technological
Costs of Low Carbon Technology Transition / Medium-term Risk
Medium-term Risk
Risk Name / Explanation of Impact
As more low-carbon products, services, and technologies appear and replace their existing Acer equivalents, this may have a significant impact on the company’s revenues.
Response Measures/Identified Opportunities
- Expand the scope of application of product life cycle considerations and evaluate appropriate solutions to reduce carbon emissions and environmental impact throughout the life cycle, with post-consumer recycled plastics (PCRs) used in more than 30 million units from 2020-2022, reducing the use of virgin plastics. In addition, we are also focused on the problem of ocean waste plastic pollution, introducing OceanGlass touchpads made of ocean-bound plastics (OBP) in Chrome and Swift series computer products to reduce product impact as much as possible and provide products that are both environmentally and commercially competitive products.
Low Carbon Alternatives to Existing Products and Services / Medium-term Risk
Medium-term Risk
Risk Name / Explanation of Impact
As more low-carbon products, services, and technologies appear and replace their existing Acer equivalents, this may have a significant impact on the company’s revenues.
Response Measures/Identified Opportunities
- Expand the scope of application of product life cycle considerations and evaluate appropriate solutions to reduce carbon emissions and environmental impact throughout the life cycle, with post-consumer recycled plastics (PCRs) used in more than 30 million units from 2020-2022, reducing the use of virgin plastics. In addition, we are also focused on the problem of ocean waste plastic pollution, introducing OceanGlass touchpads made of ocean-bound plastics (OBP) in Chrome and Swift series computer products to reduce product impact as much as possible and provide products that are both environmentally and commercially competitive products.
Failed Investments in New Technologies / Long-term Risk
Long-term Risk
Risk Name / Explanation of Impact
If Acer invests in new technologies (such as IoT and AI) that have high carbon emissions and are replaced by other low-carbon technologies, or if partners switch to low-carbon technologies, this could result in the failure of the original investment in new technologies and in Acer suffering financial losses.
Response Measures/Identified Opportunities
- Through ongoing innovative product design and R&D, we have launched products and services including a smart roadside parking management system, home smart energy storage system, smart rainfall and flood control water storage system, and smart water meters to promote smart and low-carbon transformation of cities and improve their ability adapt to climate change.
Reputation
Increased Negative Feedback from Stakeholders / Short-term Risk
Short-term Risk
Risk Name / Explanation of Impact
If Acer is unable to successfully implement climate change mitigation measures and thus generate negative feedback from government, investors, and customers, the company will lose its current position as a market leader in sustainability, resulting in damage to its reputation and potential financial losses.
Response Measures/Identified Opportunities
- Continue to communicate with stakeholders through Acer’s sustainability website, sustainability reports, etc., and participate in organizations related to sustainability issues such as the Responsible Business Alliance (RBA) and the Carbon Disclosure Project (CDP) Supply Chain Program, doing our part to translate the opinions of stakeholders into action. In 2021, we joined the RE100 initiative and were part of launching the Taiwan Climate Alliance to decarbonize our operations and supply chains and reduce climate risk. Furthermore, in 2023, we shoulder the mission of being a leading brand and promise to achieve net zero emissions by 2050.
Physical Risk
Extreme
Increased Extreme Weather Events— Heavy Rainfall / Short-term Risk
Short-term Risk
Risk Name / Explanation of Impact
An increase in the occurrence of heavy rainfall and the amount of that rainfall may result in:
- Acer’s office buildings and cloud server rooms potentially flooding, resulting in significant asset losses and subsequent recovery costs
- Acer’s supply chain potentially being unable able to supply products as scheduled due to the loss of its own equipment as a result of extreme heavy rainfall, resulting in supply chain disruptions
- Damage to Acer’s warehouse inventory, resulting in asset loss
Response Measures/Identified Opportunities
- Conduct risk assessment for operating and storage locations and suppliers located in areas at high risk of flooding or susceptible to typhoons, and reduce the potential impact of disasters through prudent insurance planning and distributed procurement strategies
- The smart water meter and smart rainfall and flood control water storage system launched by subsidiary Acer Being Communication can help effectively address water resource problems, reduce the impact of heavy rain and typhoon on cities, and improve cities’ climate resilience.
- For infrastructure service interruptions and other operation-related risks with a high probability of occurrence, similar to the impact of the Texas snowstorm, Acer started to develop a basic emergency response/business continuity management plan (IR/BCP) for global warehousing locations in 2021. It started with a pilot project at the Taiwan headquarters (the project was completed in January 2022 and the on-site exercise and validation were completed at Acer's Taoyuan warehouse)
Increased Extreme Weather Events— Typhoons / Short-term Risk
Short-term Risk
Risk Name / Explanation of Impact
The increasing frequency and severity of typhoons may have the following impacts on Acer:
- Our own operating sites and data centers may be exposed to strong winds, causing damage to equipment and resulting in increased asset losses and maintenance expenses
- Typhoons may damage power systems and cause local power outages, resulting in disruptions to Acer’s operations or services
- Typhoons may disrupt Acer’s supply chain, resulting in disruptions in the delivery of products and services or a decline in quality
Response Measures/Identified Opportunities
- Conduct risk assessment for operating and storage locations and suppliers located in areas at high risk of flooding or susceptible to typhoons, and reduce the potential impact of disasters through prudent insurance planning and distributed procurement strategies
- The smart water meter and smart rainfall and flood control water storage system launched by subsidiary Acer Being Communication can help effectively address water resource problems, reduce the impact of heavy rain and typhoon on cities, and improve cities’ climate resilience.
- For infrastructure service interruptions and other operation-related risks with a high probability of occurrence, similar to the impact of the Texas snowstorm, Acer started to develop a basic emergency response/business continuity management plan (IR/BCP) for global warehousing locations in 2021. It started with a pilot project at the Taiwan headquarters (the project was completed in January 2022 and the on-site exercise and validation were completed at Acer's Taoyuan warehouse)
Increased Extreme Weather Events— Extreme Low Temperatures / Short-term Risk
Short-term Risk
Risk Name / Explanation of Impact
As the low-pressure zone from the Arctic sends cold air into the middle latitudes, this causes a rapid drop in temperature and can even lead to blizzards and other such weather conditions. When the temperature does drop sharply or blizzards strike, this can cause:
- Interruption to Acer Supply Chain
- Acer products may not be able to withstand severe temperature changes and thus suffer damage, resulting in additional costs, including labor and maintenance expenses
Response Measures/Identified Opportunities
- Monitor supplier locations, warehousing locations, and logistics routes that may be subject to extreme low temperatures to facilitate preparation and rapid response in the event of rapid temperature drops
- The supply-chain management department assesses the potential low-temperature variation during the shipment period for a specific shipment route and, depending on the type and characteristics of the product, consults with the insurance industry/risk management consultant to discuss and cooperate with the shipping company to take feasible and cost-effective damage prevention measures.
Long-term
Increased Average Temperature / Long-term Risk
Long-term Risk
Risk Name / Explanation of Impact
The average temperature rise will lead to a significant increase in air conditioning system power consumption at Acer's cloud server rooms, offices, and supply chain product assembly sites, not only consuming more power, but also leading to increased carbon emissions. In addition, Acer's product assembly plants may be affected by higher demand, unstable electricity infrastructure, insufficient backup capacity, local government power limiting measures, or large-scale power outages, resulting in adverse impacts on product shipment and finances.
Response Measures/Identified Opportunities
- We continue to implement the energy efficiency program including (1) implementing energy-saving projects, (2) Setting the RE100 goal by 2035, (3) Establishing our solar PV power generators, and (4) Investing in renewable energy development, and exploring the feasibility of new power-saving measures.
- For the risk adaptation of our existing offices, we focus on indoor temperature management. We take measures, such as the use of thermal insulation materials, the use of natural ventilation, and sunshade facilities. In addition, we make internal temperature-setting guidelines, which will be launched in 2023, for all our offices worldwide. In this guideline, we ask all our offices to follow and take climate adaptation measures, such as evaluating the thermal comfort, humidity, temperature, and ventilation of the office, and encouraging employees to wear clothing made of breathable and comfortable materials, etc. As for the new operations, we will take our due diligence and start a process to examine the related risk. After that, we will consider an overall plan to adapt to potential physical and transition climate risks.
- We brought together our employees and supply chain partners to expand the reach of sustainability efforts by launching the Earthion initiative, with the goal bringing everyone together to create a better future and achieve our ambitious goal of a clean planet.
Sea Level Rise / Long-term Risk
Long-term Risk
Risk Name / Explanation of Impact
Sea level rise may lead to the flooding of Acer’s own operating sites or those of its suppliers, leading to financial losses.
Response Measures/Identified Opportunities
For locations that may be at risk of sea-level rise, adjust the storage location of inventory according to the risk level or move the entire location
Climate-Related Opportunities
Profile | Opportunity Item and Impact Description | Response Measures and Action Plans |
|---|---|---|
Development and/or Addition of Low-Carbon Goods and Services | Medium-term
Facing global low-carbon transitions and trends, developing or enhancing the application value of low-carbon products or related low-carbon services, can help boost business revenue | Acer employs the concept of circular economies and strives to reduce the impact of our products on the environment throughout their life cycles. We are committed to working with stakeholders such as governments, consumers, channels, and retailers to share responsibility for e-waste management and recycling.
In 2022, in addition to our Vero series being made with post-consumer recycled plastics (PCRs), we also introduced the eKinekt BD 3 Bike Desk, which converts kinetic energy into electricity; electric scooters for easy mobility; and other applications of green energy and circular economies such as AI electric assist bikes that meet the diverse needs of riders. |
Use of Low-Carbon Energy | Medium-term
By switching to low-carbon emission energy to replace coal-fired electricity and reducing energy consumption in production and delivery, we can reduce carbon emissions and bolster our resilience to climate change and related regulations | The use of low-carbon energy not only meets the expectations of institutional investors and stakeholders regarding carbon reduction trends, but also strengthens our resiliece against climate change and regulations and enhances corporate ESG image and brand value. In 2021, we announced that we had joined the RE100 initiative to achieve our goal of 100% renewable electricity use in our operations by 2035. We look forward to expanding our investment in green energy and energy storage systems through our supply chain partnerships and to launching related energy storage products.
To further reduce carbon emissions in shipping, Acer trialed biofuels in transportation in Q4 of 2022 and collaborated with logistics supplier Kuehne+Nagel to transport 50 standard shipping containers from China to Europe, reducing a total of 40 tons of carbon emissions. |
Changes in Consumer Preferences |
Short-Medium-term
As low-carbon transition has risen as a trend, customer demand for energy efficient products and corporate climate resilience has increased. A prompt focus on high-efficiency product development and marketing can enable us to gain a competitive advantage, thus increasing revenues | As net zero emissions have become a major issue driving international policy and industrial development, corporate customers tend to look for products and services with less environmental impact, as well as suppliers with the same awareness, and continue to incorporate green procurement practices into their assessment criteria for orders. Preference for green products is also gradually increasing, and this is reflected in product purchases.
As such, we continue to strengthen communication and disclosure around the environmental performance of our products. At the product design end, in addition to complying with legal and regulatory requirements for product sales in all regions, Acer continues to improve product energy efficiency, reduce the use of hazardous chemicals, facilitate recycling, and extend product life, all of which demonstrate our commitment to optimization of product design. |
※Risk and opportunities impact period definition: short-term: 0-3 years, medium-term: 3-8 years, long-term: 8-28 years
Climate-related Scenario
In order to assess the financial impact of climate impact, Acer sought external cooperation to develop financial quantitative and situational analysis, to carry out an assessment of the potential financial impact of Acer's climate-related transformation risks, physical risks, and climate opportunities to accurately measure the amount and distribution of resources to be invested.
Acer's climate scenarios make reference to climate scenarios published by international organizations, including RCP 2.6 from the Intergovernmental Panel on Climate Change (IPCC), RCP 8.5, NZE 2050 by International Energy Agency (IEA), and Taiwan’s Nationally Determined Contributions (NDCs Taiwan).
Physical Climate-related Scenario
Scenario Used: RCP 2.6 & RCP 8.5
Coverage: Company-wide
Parameters, assumptions, analytical choices
We identified the risk caused by changes in physical climate parameters which include an increase in extreme weather events—heavy rainfall and an increase in average temperature. The risk of an increase in extreme weather events is based on the IPCC 1.5DC report in 2018, under the 2°C scenario, in the future, there will be 1.2 Category 4 typhoons (wind speed over 58m/s, Category 17 gust) and 1.2 Category 5 typhoons (wind speed above 70m/s, 17-level gust) every year in the world. As for the risk of an increase in average temperature, based on the data from the Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP), under the RCP2.6 scenario, the annual average daily temperature in Taiwan may increase by 0.64~1.64°C from 2021 to 2040; under the RCP8.5 scenario, in 2036~2065, the annual average daily temperature in Taiwan (headquarters) may increase by 0.64~1.64℃ and 1.5~2℃.
Focal questions and the results
We focus on the risk of the increase in the global average temperature because it will lead to a significant increase in air conditioning system power consumption at Acer's cloud server rooms, offices, and supply chain product assembly sites. We identify it as the main risk is because it almost certain to happen, and will increase not only the amount of electricity consumption but also carbon emissions that lead to a higher cost of the operational fee. In addition, Acer's product assembly plants may be affected by higher demand, unstable electricity infrastructure, insufficient backup capacity, local government power limiting measures, or large-scale power outages, resulting in adverse impacts on product shipment and finances. For detail of the financial impact, please see our CDP Climate Change Questionnaire.
Transition Climate-related Scenario
Scenario Used: IEA NZE 2050 & NDC (Taiwan)
Coverage: Company-wide
Parameters, assumptions, analytical choices
We identified the risk caused by changes in transition climate parameters and focus on the two risks of increased sustainability-related demand and regulations and increased costs of greenhouse gas emissions. As for renewable energy, under the International Energy Agency (IEA)NZE 2050 scenario, renewable energy will become the main energy source. By 2050, nearly 90% of power generation will come from renewable energy. These governments may drive companies to use renewable energy through regulations, such as the Renewable Energy Development Regulations in Taiwan, or increase the non-renewable energy fee. In addition, global carbon tax, such as Carbon Border Adjustment Mechanism (CBAM), will be the requirement for product export to the EU. Countries such as the USA, Japan, and Taiwan will introduce their internal carbon trading scheme to control the total emission under the national target. According to the IEA NZE scenario, the prices of the developed economies with net-zero commitments such as the EU and the US, and the carbon price is expected to be US$140 per ton in 2030. The emerging markets with net-zero commitments such as China, and the carbon price is expected to be US$90 per ton in 2030.
Focal questions and the results
We focus on the risk of emerging carbon emission-related regulations because of the increasing demand for and regulations (e.g. carbon taxes, carbon fees) on greenhouse gas emissions after the Paris Agreement may lead to a large cost on the product and a greater impact on our business. For example, the European Union Carbon Border Adjustment Mechanism (CBAM) is set to enter a test period from October 2023 and be officially implemented in 2026. The US Clean Competition Act and Taiwan's Climate Change Response Act are expected to impose carbon fees in the near future. Greenhouse gas emissions exceeding the core quota will incur greenhouse gas emissions costs, and may cause suppliers to pass on these costs and adjust pricing, affecting product competitiveness. For detail of the financial impact, please see our CDP Climate Change Questionnaire,
Risk Management
Acer incorporates climate risk identification and assessment into the enterprise risk management (ERM) process, through the three lines of defense of the risk management organization, self-assessment and process improvement of each business unit, procedural guidance and legal compliance of each support department, and the audit management procedures of internal audit unit. We integrate the ERM implementation with the daily operating procedures of each department/unit and the Company's business targets, and integrate the ESG and climate factors into the decision-making process. Through the PDCA cycle, we conduct regular reviews on the effectiveness of the risk management plan and the improvement possibility during the working group meeting for continuous adjustment/improvement.
Climate Change Risk Identification Procedure
To improve the mechanisms for the management of risks and opportunities related to climate change, Acer has established climate-related risk management procedures in accordance with the TCFD guidelines. The management process consists of four steps: (1) completing a climate risk inventory, (2) ordering by risk materiality, (3) results and reporting, and (4) response strategies and external disclosure.
Metrics and Targets
Acer shoulders the mission of being a leading brand and promises to achieve net zero emissions by 2050, increase the share of renewables in energy consumption to 100% by 2035 and set Science Based Targets (SBT) aligned with the 1.5°C carbon reduction pathway. By 2030, Acer aims to reduce carbon emissions by 50% in organizational operations compared to 2019, and reduce the value chain emissions by 35% compared to 2020. In addition, by 2025, the Acer personal computer product average energy consumption will be reduced by 45% compared to 2016 and the computer and displays product will reach to 20-30% post-consumer recycled plastic material content.
