Assessment of Nature-Related Risks and Opportunities (TNFD)

Nature-Related Risks

Nature-Related Opportunities

Assessment Aspect

Risk Category

Risk Name

Risk Relevance Rating

Risk Description

Opportunity Description

Supply Chain

Physical Risks

Water shortages

M*

Water shortages may lead to disruptions in the supply chain production, affecting the water demand for manufacturing processed and plant cooling systems of components, circuit boards, and chip suppliers. This situation may lead to increased procurement costs for Compal and prompt the search for alternative suppliers.

*Resource efficiency: Suppliers promote process optimization and various water-saving actions of plants to improve water resource efficiency. By implementing water recycling and reuse technologies, they reduce reliance on water resources, thereby mitigating the potential impact of water shortages on cooling system operations and production output. This enhances the stability of Compal’s supply chain.
 *Products and services: Suppliers improve water consumption efficiency and request their suppliers to reduce the water footprint of products, thereby increase the sustainability of the raw materials procured by Compal.

Physical Risks

Extremely high temperature

H

Suppliers’ utilization of natural resources can impact surrounding ecosystem services, leading to a decline in ecosystem regulation capabilities. During extreme high temperatures, increased use of cooling air conditioning to maintain indoor temperatures can escalate energy consumption. This can potentially lead to equipment overheating, causing production interruptions, and even affecting the health and safety of outdoor field workers. Supply chain disruptions and increased energy consumption lead to higher production costs for suppliers, which in turn increases Compal's procurement costs.

*Ecosystem protection, restoration, and regeneration: Implement incentive measures and encourage suppliers to invest in green infrastructure around their plants, such as landscaping, rooftop greening, and urban forests. These initiatives not only help reduce the ambient temperature around the plant but also promote habitat restoration and regeneration, enhancing suppliers’ resilience to extreme heat.
*Capital flow and financing: If suppliers utilize green industry project financing to secure lower-cost investments in renewable energy or significant energy-saving equipment, they can reduce dependence on traditional energy sources. This would lower GHG emissions within the supply chain and promote a shift towards low-carbon production, thereby decreasing the likelihood of extreme heat events.

Physical Risks

Tropical cyclone

VH

Suppliers’ utilization of natural resources can impact surrounding ecosystem services, leading to a decline in ecosystem regulation capabilities.
 This can exacerbate the impact of tropical cyclones, increasing the likelihood of plant damage, equipment loss, and production disruptions. Supply chain disruptions and transportation difficulties may also affect the supply of raw materials and product delivery, potentially resulting in casualties and increased safety risks for employees.

*Ecosystem protection, restoration, and regeneration: Encourage suppliers to participate in or initiate ecological restoration projects, such as planting trees and protecting coastal mangroves, which can not only help regulate regional climates and reduce the impact of tropical cyclones on industrial areas, but also strengthen ecosystem regulation capabilities.

Physical Risks

Pollution

VH

The wastewater, air pollution emissions, and solid waste generated during the supplier's production and operations may lead to environmental degradation in the surrounding area and water quality deterioration. This can impact ecosystems and ecosystem services. This could potentially lead to public health concerns, legal liabilities, lawsuits, and reputational damage risks.

*Resource efficiency : Call on suppliers to invest in R&D, as well as adopting best available control technologies, can help reduce emissions of harmful pollutants. This proactive approach can mitigate risks associated with fines, lawsuits, and reputational damage.
 *Reputation : Encourage suppliers to strengthen their engagement with local communities and stakeholders, particularly in areas of environmental protection, habitat restoration, and community involvement, can enhance their corporate reputation. This proactive approach helps alleviate negative perceptions within local communities towards suppliers and aligns with stakeholder expectations, benefiting Compal’s response to stakeholder expectations.

Systemic risk

Labor/Human rights

H

Suppliers’ utilization of natural resources can impact ecosystem regulation capabilities. Inadequate human rights management measures by suppliers may increase workplace hazards, posing risks to employee health and safety, reducing quality of life. This can lead to risks like social equity, food security, and ecological disasters, facing legal penalties and suspension risks, promoting Compal to seek alternative suppliers and increase procurement costs.

*Reputation: Suppliers are required to formulate and implement comprehensive policies and procedures for the protection of labor rights and interests. This includes providing excellent working conditions, robust workplace health and safety management measures, and establishing mechanisms for employee complaints and feedback. These efforts aim to prevent, mitigate, or eliminate negative impacts on employees’ physical and mental health, thereby enhancing corporate reputation and regulatory compliance within the supply chain. This approach contributes to maintaining long-term partnerships and supply chain stability for Compal.

Transition risk

Media supervision

H

If suppliers ignore environmental damage, it can attract media attention and result in negative news coverage, damaging corporate image and reputation. This loss of public trust may lead to legal challenges, tarnishing Compal’s reputation and potentially necessitating the search of alternative suppliers.

*Reputation: Strengthen suppliers' compliance with environmental and social regulations involves using transparent and responsible communication methods to respond positively to media reports. This ensures that external messaging fully reflects the Company’s commitment and actions towards environmental and social responsibility. Proactively disclosing management performance in environmental and social compliance further enhances stability and reputation within Compal’s supply chain.

Self-operation

Physical Risks

Water shortages

M*

Compal is not a high water-consuming industry, and water resources are only used for general domestic water, not in manufacturing processes. If there is a water shortage issue, it could affect the operation of the plant’s cooling and air conditioning systems, as well as employees’ domestic water usage. This might necessitate seeking alternative water sources, leading to increased costs.

*Resource efficiency: Compal adopts various strategies to improve water resource efficiency, aiming to mitigate the potential impact of water shortages on cooling and air conditioning systems, as well as on employees’ domestic water usage. These efforts help reduce the additional costs associated with seeking alternative water sources.

Physical Risks

Extremely high temperature

H

Compal’s operations require the use of natural resources, which can impact surrounding ecosystem services and lead to a decline in ecosystem regulation capabilities. During extreme high temperatures, increased use of cooling and air conditioning to maintain indoor temperatures can escalate energy consumption and lead to higher energy costs.

*Ecosystem protection, restoration, and regeneration: Invest in green infrastructure around Compal’s operational sites, such as green vegetation, green roofs, urban forests, or converting existing plants into green facilities, can help reduce ambient temperatures around the sites. Additionally, these efforts promote the restoration and regeneration of natural habitats.
*Capital flow and financing: Through green industry project financing at lower interest rates, Compal can obtain funds to invest in renewable energy or significant energy-saving equipment. This strategy not only reduces Compal’s GHG emissions but also enhances trust with brand customers and creates more business opportunities.

Physical Risks

Tropical cyclone

H

Compal’s operations require use of natural resources, which can impact surrounding ecosystem services and lead to a decline in ecosystem regulation capabilities. This can exacerbate the impact of tropical cyclones, increasing the likelihood of plant damage, equipment loss, and production disruptions. Additionally, it may pose risks such as casualties and increased safety hazards for employees. If there are production interruption and transportation difficulties, it can also affect Compal’s product deliveries, leading to increased maintenance costs and a decline in revenue.

*Ecosystem protection, restoration, and regeneration: Participate in or initiate ecological restoration projects, such as planting trees and protecting coastal mangroves, to help regulate regional climate, reduce the impact of tropical cyclones on industrial areas, and contribute positively to biodiversity.

Physical Risks

Pollution

H

Compal does not belong to industries with high pollution emissions. However, the wastewater, air pollution emissions, and solid waste generated during its operations can still contribute to environmental degradation in the surrounding area and deterioration of water quality. This may impact ecosystems, potentially leading to public health concerns or legal liabilities. Consequently, we face risks such as fines, lawsuits, and reputational damage.

* Resource efficiency: Compal invests in the best available technologies for the prevention and control of various environmental pollution, aiming to maximize reduction or elimination of negative environmental impacts.
 *Sustainable use of natural resources: Work with downstream customers to develop a circular economy business model, aiming to reduce waste generation and minimize the use of natural resources.
* Reputation: Strengthen the engagement between Compal’s various facilities and local stakeholders, especially in environmental protection, habitat restoration, and community involvement, to improve corporate reputation and dispel any negative perceptions within local communities. This approach serves as a competitive advantage, attracting more sustainable-minded business partners and consumers.

Downstream

Physical Risks

Water shortages

M*

When facing water shortages, brand owners may experience increased operational costs. If they neglect water shortage issues, it can impact their corporate image and raise public concerns about their environmental policies. This pressure may force them to strengthen water resource management requirements across their supply chains. As a result, Compal may need to comply with brand requirements to reduce product water footprints, which can increase costs related to water-saving measures and procurement.

*Resource efficiency: Compal adopts various strategies to improve water resource efficiency and implements supplier water management policies to reduce the water footprint of products. This approach aims to capitalize on business opportunities by meeting brand requirements for water conservation, thereby establishing long-term partnerships.

Physical Risks

Extremely high temperature

H

Value chain's utilization of natural resources can impacts global ecosystem services, leading to a decline in ecosystem regulation capabilities. Brand owners facing extreme high temperature risks may experience increased energy consumption for air conditioning to maintain indoor temperatures. To address this risk, brand owners may further strengthen sustainable supply chain management, requiring Compal to improve energy efficiency and align with their energy-saving goals. Failure to comply may result in losing additional business opportunities.

*Resource efficiency: If Compal invests in improving plant energy efficiency through upgrading existing equipment and optimizing production processes to reduce energy consumption during operations, it will be well-positioned to gain customer trust by surpassing industry standards when brand owners require energy-saving specifications in the future.

Physical Risks

 Tropical cyclone

H

Value chain’s utilization of natural resources impacts global ecosystem services, leading to an increased frequency of extreme weather events and a decline in ecosystem regulation capabilities. The operation of brand owners or the transportation within their supply chain can be disrupted by tropical cyclones, affecting product delivery. To mitigate this risk, brands may further require Compal to enhance its disaster prevention capabilities.

*Ecosystem protection, restoration, and regeneration: Participate in or initiate ecological restoration projects, such as planting trees and protecting coastal mangroves, helps regulate local climates, reduce the impact of typhoons on brand owners’ operational sites or supply chain transport, and contributes positively to biodiversity.

Physical Risks

Pollution

H

Environmental pollution caused by electronic product waste may cause brand owners to face public and regulatory pressure. This may compel brands to enhance sustainability of their product designs, expand the use of recycled materials, or implement product recycling mechanisms. Consequently, they might require Compal to align with these goals to mitigate the environmental impact and pollution of products at the disposal stage.

*Resource efficiency: If Compal collaborates proactively with brand owners to enhance sustainable product design, expand the use of recycled materials, or jointly implement product recycling mechanisms, it will not only reduce the negative environmental impact of electronic waste across the value chain but also strengthen Compal’s competitiveness and enhance trust among brand customers. This could lead to opportunities for revenue growth.