Note: In 2024, water consumption was significantly reduced due to the closure of the cold forging plant and process changes at the Automobile Equipment Factory.

The company’s Sustainable Development Committee supervises various functional working groups under its Secretariat, which are responsible for the preliminary identification of risks and opportunities. Subsequently, the Corporate Governance Task Force evaluates each risk and opportunity based on the latest regulations, internal policies, and operational conditions to formulate corresponding response strategies and monitoring mechanisms. Through the effective integration of resources, the company enhances its forecasting and response capabilities, reduces climate-related impacts, and demonstrates organizational resilience. Each year, the company convenes a TCFD risk and opportunity identification meeting. Led by Vice President and Chief Sustainability Officer Shih Chin-Yi, the Secretariat’s functional teams conduct discussions and assessments of TCFD’s transition risks (policy and regulatory, technology, market, and reputation), physical risks (acute and chronic), and opportunities (resource efficiency, energy sources, products/services, markets, and resilience). Based on the identification results, relevant countermeasures are developed. Shihlin Electric evaluates potential scenarios and risk levels from multiple dimensions, including future business development strategies, green energy deployment, stakeholder expectations, and regulatory requirements. Each risk and opportunity is assessed for its likelihood, expected timeframe, and potential financial impact on the company. The risk scores are then used to determine the corresponding impact level.

Shihlin Electric, as a traditional manufacturing enterprise, faces multiple risks brought by climate change. Firstly, the increasing global demand for carbon reduction may lead to higher carbon-related costs, raising operating expenses. In addition, the growing frequency and intensity of extreme weather events may damage production facilities and disrupt supply chain stability. Meanwhile, the market demand for low-carbon products is rising. If companies fail to transform in time to adapt to these global market changes, they risk losing their competitive edge.

Implementation of Internal Carbon Pricing Mechanismx

      To address the risks of climate change, Shihlin Electric introduced an internal carbon pricing mechanism in 2023. This mechanism takes into account international carbon tax systems (such as those of the EU and the U.S.), carbon pricing models from benchmark companies, carbon trading market prices, and penalty standards in relevant regulations. Factoring in the domestic and international sales volumes of each business unit, the internal carbon price was set at NT$800 per metric ton. This is integrated into the management reports and tracked monthly to ensure proper execution. Under this system, each business unit is required to calculate its monthly emissions, and the emissions are priced at NT$800 per metric ton and recorded as non-operating expenses in the financial management reports. This connects emission volume with the business performance of each unit, encouraging the development of energy-saving products and the advancement of green energy engineering projects. In parallel, the company is promoting renewable energy adoption at all sites, implementing energy-saving measures, and reducing greenhouse gas emissions to meet its carbon reduction targets and enhance sustainability competitiveness.

Self-Use Solar Power Project

     Electricity usage is identified as Shihlin Electric’s main source of carbon emissions. Although the contracted capacities of the plants currently fall below the regulatory threshold, the company proactively launched a solar power system installation plan in 2022 in response to ESG expectations and the government's green energy policies. The initial planned capacity was 5.1 MW. With growing emphasis on climate strategy and the topping-out of the new T3 building at the Heavy Electric Factory in 2024, the solar installation target has been expanded to 6.2 MW, aiming to increase the proportion of renewable energy use to 15% by 2030.

• Green Energy Feasibility: The large rooftop areas at the Heavy Electric Factory, Automobile Equipment Factory, and Xin Feng Factory are highly suitable for solar installations.
• Installation Sites: 12 locations in total, to be implemented in three phases (2022–2030):

Phase 1 (2022–2024): 1,940 kW

Phase 2 (2025–2027): 2,720 kW

Phase 3 (2028–2030): 1,595 kW

• Total Capacity: 6,255 kW (covering 15% of the plants' annual electricity consumption). The total budget remains NT$260 million, as the original budget included flexibility for future risks and changes, allowing the expansion to proceed without additional investment.
• Solar Power Benefits (Phase 1):

1.Installed capacity: 4,660 kW; annual power generation: 5.1 million kWh

2.Estimated green energy revenue: NT$25.51 million per year (NT$5 x 5.1 million kWh)

3.Carbon reduction benefit: 2,521 metric tons per year