Climate Risk Management
SDGs:
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CLEAN WATER AND SANITATION
6
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RESPONSIBLE CONSUMPTION AND PRODUCTION
12
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CLIMATE ACTION
13
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PARTNERSHIPS FOR THE GOALS
17
Climate Risk Management
In recent years, extreme climate events have continued to have negative impacts on various countries, and climate change has become a challenge confronting our world. At the 2022 UN Climate Change Conference (COP 27), countries were urged to make more ambitious commitments to reducing GHG emissions. The Taiwanese government also passed amendments to the Climate Change Response Act in early 2023, committing to net zero GHG emissions across Taiwan by 2050. As such, in 2022, SKM identified and assessed related climate risks and opportunities. The process and results from the assessment can be found below. SKM will continue to pay attention to climate issues and strengthen our competency in climate risk management.
Results from Climate Risk Identification
SKM regularly identifies climate-related risks, including physical and transition risks. We also further classify risks into short-term (>2 years), mid-term (3-10 years), and long-term (>10 years). This year, the climate risk matrix identified includes seven physical risks and four transition risks. The short-term and mid-term risks both derive from transition risks such as policy changes and new technologies. Long-term risks are either long-term or extreme physical risks.
All
Physical Risk
Transition Risk
- Note. The size of each climate risk dot is directly proportional to the product of its "potential level of impact" and the "risk timeline."
Increase in Sustainability-related Requirements & Regulations - Water Conservation Charges
Increase in Sustainability-related Requirements & Regulations - Renewable Energy Terms & Carbon
Increase in Costs of GHG Emissions - Carbon Pricing Scheme
Failed Investments in New Technologies
Increase in Extreme Weather Events - Typhoon
Increase in Extreme Weather Events - Heavy Rain
Increase in Extreme Weather Events - Drought (2036-2065)
Increase in Extreme Weather Events - Drought (2071-2100)
Rising Temperatures (by 1.8°C)
Rising Temperatures (by 3.4°C)
Rising Sea Levels
Risk identification revealed that short-term risks are mainly derived from changes to domestic laws and policies, with transition risks such as GHG and renewable energy regulations having higher levels of impact. Long-term risks are mainly derived from physical risks brought on by climate change, with rising sea levels and rising temperatures having higher levels of impact.
In addition, as SKM operations engage with several value chains, we also assessed the potential climate change risks confronting the upstream, midstream, and downstream of our value chain.
SKM Value Chain
Upstream
Manufacturers, suppliers, counter vendors, service providers, contractors, third-party storage/logistics providers
Midstream
Downstream
Media, partner organizations, consumers, society, recycling/waste disposal vendors
Details on potential impacts on SKM and affected value chains are listed in the table below for climate risks with higher levels of impact, as indicated above.
| Risk Type | Climate Risk Event | Impact to SKM | Upstream | Midstream | Downstream |
|---|---|---|---|---|---|
| Transition Risk | Increase in Costs of GHG Emissions - Carbon Pricing Scheme | Competent authorities have progressively tightened regulatory control over GHG emissions every year. Potential carbon risks such as overall emission limits, carbon taxes, and carbon trading schemes may directly or indirectly impact the operational costs of businesses. | ✓ | ||
| Increase in Sustainability-related Requirements & Regulations - Renewable Energy Terms & Carbon | With regulations such as the Renewable Energy Development Act, product energy performance standards, carbon neutrality, and carbon footprint, the cost for SKM and suppliers to provide products and services may increase. | ✓ | ✓ | ||
| Physical Risk | Rising Sea Levels | Rising sea levels may flood SKM locations and lead to financial losses, such as the devaluation of real estate assets and interruptions to business operations. | ✓ | ✓ | ✓ |
| Rising Temperatures | Rising temperatures have an impact on human health and will affect the workforce and reduce the number of productive days, leading to impacts on company operations. SKM may face power outages, power rationing, or increased electricity costs that drive down revenue and drive up operating costs, thereby affecting overall profitability. Energy-intensive suppliers or locations facing power outages, power rationing, or rising electricity costs that drive up the cost of providing products and services may subsequently affect SKM's operating costs. | ✓ | ✓ | ✓ |