KYF
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Purpose of Risk Management
To enhance corporate governance, mitigate risks with potential impacts on our operations, and achieve business stability and sustainable development, we conduct risk management in four dimensions: quality, environment, food safety, and occupational health and safety. Risk management has the following goals:
01 / Guarantee of system target achievement and optimal policy outcomes
02 / Amplified positive effects (Opportunities)
03 / Mitigation of negative impacts (Risks)
04 / Ongoing improvements
| Dimension | Quality | Food safety | Environment | Occupational health and safety |
|---|---|---|---|---|
| Targets and policies | Quality, safety, and customer satisfaction first | Quality, safety, and customer satisfaction first | Energy conservation, environmental protection, and cherishing our planet | Care for employee physical and mental well-being |
Risk Management Process
Each unit conducts annual risk identification and assessment for each system and formulates contingency strategies and corrective measures based on stakeholder grievance (reporting)/feedback channels by Management Procedures for Data Analysis and Ongoing Improvements and Management Regulations for Hazard Identification and Risk Assessment.
| Management system | Quality | Food safety | Environment | Occupational Health and Safety |
|---|---|---|---|---|
| Procedures | Management Procedures for Data Analysis and Ongoing Improvements | Management Procedures for Data Analysis and Ongoing Improvements | Management Procedures for Data Analysis and Ongoing Improvements | Management Regulations for Hazard Identification and Risk Assessment |
| Risk assessment unit | All company departments | All company departments | All company departments | All company departments |
| Grievance mechanism/communication method | Feedback to business units or customer complaints Internal issuing of anomaly handling forms Real-time oral communication Convening of meetings | Feedback to business units or customer complaints Internal issuing of anomaly handling forms Real-time oral communication Convening of meetings | Internal issuing of anomaly handling forms Real-time oral communication | Feedback to the Health & Safety Department Real-time oral communication To convene the Occupational Health and Safety Committee |
Risk Management Policy
| Risk items | Risk scenarios | Risk management strategy (contingency measures) |
|---|---|---|
| Occupational accidents | Occurrence of work safety incidents caused by employee negligence |
|
| Food safety | Customer complaints and returns caused by the presence of foreign objects in products |
|
| Continued increase of GHG emissions | Customers request sustainable development for the supply chain
Projected implementation of EU Carbon Border Adjustment Mechanism (CBAM) in 2023 and Taiwan will impose a carbon fee in 2026 |
|
| Labor shortage | Recruitment difficulties because the overall environment is facing a labor shortage |
|
Audit Mechanism
To ensure the ongoing effectiveness of the Company’s management systems and facilitate the timely detection of issues and adoption of corrective measures, we have stipulated “Internal Audit Management Procedures” and scheduled regular internal and external audits. The ultimate goal is to maintain the effectiveness and ongoing improvements of controls based on the ISO 9001 Quality Management System, ISO 14001 Environmental Management System, ISO 22000 Food Safety Management System/Hazard Analysis and Critical Control Points (HACCP), ISO 45001 Occupational Health and Safety Management System, and BRCGS Packaging Materials Global Standard. No major deficiencies were detected in an external audit of these systems conducted by a third-party accreditation body in 2023. Ongoing validity of relevant certificates is ensured.
Internal audit process
Step. 1
Annual internal audit plan
Step. 2
Formation of an audit task force
Step. 3
Pre-audit meeting
Step. 4
Issuance of audit notice
Step. 5
Execution of audit operations
Step. 6
Issuance of a non-conformity report
Step. 7
Completion of the audit summary report
Step. 8
Management review meeting (quality/environment/food safety management system)
Occupational Health and Safety Committee Meeting (Occupational health and safety management system)
The Management and Adaptation of Climate Change Risks
The rising frequency of extreme weather events in recent years is a chilling harbinger of the imminent crisis associated with global warming. National and regional governments all over the world attach increasing importance to climate-related issues and induce enterprises to incorporate such issues into their corporate management practices through legal amendments and legal system reforms. In addition to the identification of operational risks arising from climate change, we incorporate the core elements (governance, strategy, risk management, and metrics and targets) of climate-related disclosures recommended by the Financial Stability Board (FSB) in its TCFD (Task Force on Climate-Related Financial Disclosures) Framework into our corporate management practices. We further disclose our governance performance in our sustainability reports to give stakeholders a clear understanding of the impact of climate change-related risks and opportunities and adopt countermeasures to mitigate such impacts on our operations.
01 Governance / Risk and opportunity governance
The General Manager serves as the Chairperson of the Climate-related Risk and Opportunity Governance Committee; the Sustainable Development Department initiates discussions, identifications, and assessments by the ESG Committee; the Board of Directions adopts resolutions on climate-related issues
02 Strategy / Business and financial strategy planning
(actual and potential)
- Consultation of the 2022 Short-, Medium-, and Long-term Climate Risk and Opportunity Table
- Consultation of climate-related impacts
- We have conducted discussions of the 2℃ (2DS) scenario in the context of Sustainability Committee meetings paired with assessments of other climate-related physical risk scenarios with the aid of tools provided by the Taiwan Climate Change Projection and Information Platform (TCCIP). We finally decided to adopt the 2DS/RCP2.6 as our climate change-related physical risk scenario. Descriptions of climate-related risks and opportunities with a focus on physical risks and legal transition risks are provided in the context of this scenario.
03 Risk Management / Climate-related risk management process
Risk identification, assessment, and management process (see flow chart)
04 Metrics and Target / Metrics and targets for climate-related risks
- rPET sales rate of 19% in 2023
- Annual power saving rate of 1%; total energy savings of 4,423,304 kWh (4.89%) exceed 1% of the total power consumption (904,692 kWh) in 2023
- Active promotion of improvements (energy conservation, waste reduction, manufacturing); optimization of the improvement proposal mechanism, a total of 74 improvement proposals were submitted, 30 energy conservation and 8 waste reduction initiatives in 2023
- Recycling and reuse rate of 07% for trimmings generated in production processes
- Successful completion of GHG inventories and third-party verifications in 2023
Scope 1 emissions: 1,071.1939 MT CO2e ;
Scope 2 emissions: 44,731.3155 MT CO2e ;
Scope 3 emissions: 135,051.5315 MT CO2e - Renewable energy usage rate of 15% in 2030
Governance
Climate change-related discussions and assessments are conducted by the ESG Committee. Relevant resolutions are adopted by the Board of Directors. The operations of seven task forces set up under the ESG Committee are coordinated by the Sustainable Development Department. TCFD-related climate governance practices are reported to the board level as a reference for the decision-making process on an annual basis.
Strategy
In response to the impact of climate-related risks and opportunities on strategy and financial planning, we adopt counterstrategies based on the results of quantitative and qualitative climate scenario analysis in the context of the TCFD framework. After conducting discussions of the 2℃ (2DS) scenario in the context of ESG Committee meetings paired with assessments of other climate-related physical risk scenarios with the aid of tools provided by the Taiwan Climate Change Projection and Information Platform (TCCIP), we finally decided to adopt the 2DS/RCP2.6 as our climate change-related physical risk scenario. Descriptions of climate-related risks and opportunities with a focus on physical risks and legal transition risks are provided in the context of this scenario. The following specific ranges were defined based on climate risks and opportunities within the operational scope of the Company concerning other TCFD reports of the manufacturing sector: one decade as the time frame for long-term operational development (short-, medium-, and long-term have been defined as periods of 1-3, 3-5, and 6-10 years, respectively).
Risk management
Our ESG Committee convened a TCFD Discussion Meeting on January 18, 2023. This meeting served as a platform for discussions of climate-related impacts on each department and identified opportunities by committee members and other participants based on the TCFD framework and recommendations. The meeting participants discussed and identified transition risks (policy and legal, technology, market, and reputation risks), physical risks (acute and chronic risks), and opportunities (resource efficiency, energy source, product and services, markets, and resilience).
TCFD Risk Management Process
Step. 1
Completion of climate and environmental data collection by the ESG Committee
Assessment of climate risks and operational scope
Step. 2
Compilation of a list of climate-related risks and opportunities
Design of an internal operational impact questionnaire
Step. 3
Analysis of climate-related risks and opportunities and operational impacts by the ESG Committee
Determination of material risks
Step. 4
Formulation of implementation strategies and goal-setting
Step. 5
Rolling annual reviews of the effects of implementation strategies and set goals by the ESG Committee
Climate-related risks and financial impacts
| Category | Risk | Description | Financial impact |
|---|---|---|---|
| Transition risks | Substitution of existing products and services with lower emissions options | Because the use, promotion, or development of low-carbon products is reflected directly in rising supply chain costs and raw material prices, these two dimensions are inextricably intertwined and mutually interrelated. | Rising low-carbon product costs |
| Increased cost of raw materials | Decreased demand for products and services | ||
| Physical risks | Increased severity of extreme weather events such as cyclones and floods | Smooth operations of the response mechanism are maintained through scrutiny of weather patterns and regular organization of emergency drills and training. Patrols are conducted and relevant reporting mechanisms are activated when special weather reports are received. | Impact on workforce management and planning Declining production capacities |
| Resource efficiency opportunities | Use of more efficient production and distribution processes | We have already adopted proposals for efficiency improvements and convene quarterly ESG Committee meetings to implement tracking and reduce energy consumption through the use of high-efficiency equipment. Use of self-generated renewable energy Scrutiny of freight forwarder conditions and selection of low-carbon transportation methods |
Increased production capacities and revenues, and reduced operating costs |
Metrics and targets
We have formulated the following metrics and targets based on the TCFD climate-related risks and opportunities:
- rPET sales rate of 17.19% in 2023
- Annual power saving rate of 1%; total energy savings of 4,423,304 kWh (4.89%) exceed 1% of the total power consumption (904,692 kWh) in 2023
- Active promotion of improvements (energy conservation, waste reduction, manufacturing); optimization of the improvement proposal mechanism, a total of 74 improvement proposals were submitted, 30 energy conservation and 8 waste reduction initiatives in 2023
- Recycling and reuse rate of 46.07% for trimmings generated in production processes
- Successful completion of GHG inventories and third-party verifications in 2023
Scope 1 emissions: 1,071.1939 MT CO2e ;
Scope 2 emissions: 44,731.3155 MT CO2e ;
Scope 3 emissions: 135,051.5315 MT CO2e - Renewable energy usage rate of 15% in 2030
KING YUAN FU PACKAGING CO.,LTD
