Nextron

Environment

Climate Change Response and Management

Nextron’s Sustainability Development Committee is responsible for formulating sustainability strategies and promoting ESG-related initiatives. The committee regularly conducts climate risk and opportunity assessments under the TCFD framework. Identified risks and opportunities are reported to the Board of Directors, which oversees progress and ensures execution. The Board also coordinates with relevant departments to carry out operational risk assessments in alignment with the requirements of the Paris Agreement, the 2050 net-zero emissions target, and the Climate Change Response Act set by regulatory authorities.

The identified climate risks and opportunities are categorized into immediate, short-term, medium- to long-term, and long-term impacts, as detailed in the table below. For each item, the company provides an explanation of its potential effects on business, strategy, and finances, along with corresponding response measures. A portion of the results is summarized below, with full details available in Chapter 7, Section 1 of the Sustainability Report.

Communication Mechanisms and Key Focus Areas

Physical Risks

Period	Risk	Impact	Response Measures
Short-term (1-3 years)	Rising raw material costs	The use of low-carbon raw materials has led to increased product costs, reduced gross profit margins, and relatively weaker competitiveness within the industry.	Enhance shared material categories by utilizing design tools to optimize product structures, reduce process waste, and leverage information systems to maximize material cost efficiency.
	Increased costs for low-carbon technology transitions	Transitioning from high-energy-consuming machinery to low-carbon emission technology machinery has increased upstream supply chain costs and technical expenses, leading to higher overall production costs and a decrease in gross profit margins.	Design energy-efficient machinery that aligns with sustainability goals, collaborate with green supply chains to develop high-efficiency and energy-saving equipment, replacing high-energy-consuming equipment to improve efficiency.
	Greenhouse gas cap-and-trade regulations	Climate change-induced rising temperatures have indirectly increased the load on the company's air conditioning systems.	During company-wide maintenance, assess equipment replacement needs and plan ahead for phasing out outdated equipment to address increasing carbon emissions and performance degradation.
	Changes in customer behavior	The impact of climate change on customers has caused disruptions, potentially resulting in subsequent credit defaults.	Review customer accounts monthly for anomalies, and if any are identified, have sales directly contact the customer to address the issue by the end of the same month.
Mid- to Long-term (3-10 years)	Low-carbon products replacing some of the company's existing products and services	The higher cost of raw materials for low-carbon products, coupled with the extensive replacement of existing products and services, requires significant investments in manpower, resources, and time. This increased time cost ultimately affects the company's profitability.	Increase the implementation of automated production mechanisms.
	Changes in customer preferences	Rising production costs and higher supply chain expenses are driving consumers to favor environmentally friendly products, resulting in reduced sales of older products and increased inventory costs.	Plan for product replacements by continually phasing out high-carbon-emission production lines, products, and services, thereby reducing production inventory levels.
	Increasing attention and negative feedback from stakeholders	The company's brand and reputation are negatively impacted, leading to diminished consumer and public trust, which in turn affects product sales and market share.	Strengthen communication and transparency with stakeholders, promptly addressing their concerns and feedback to build positive relationships. Enhance the company's operational practices and social responsibility, reinforce risk management, and maintain the company’s reputation and sustainable development.
Immediate	Typhoons, earthquakes, flooding, and other extreme weather events	Damage to infrastructure and equipment impacts workers’ working conditions and commuting safety, leading to absenteeism, decreased productivity, and supply chain disruptions.	Proactively develop emergency response plans and risk management strategies, including regular inspections and maintenance of infrastructure and information systems, as well as establishing rapid recovery and repair mechanisms.
Long-term	Rising sea levels	Coastal cities, ports, and communities face flooding and damage, directly threatening economic activities and infrastructure. The company may need to adjust its operations, leading to increased compliance costs and management burdens.	Diversify global production sites to mitigate risks and enhance the resilience of local production and supply chains, reducing threats posed by disruptions to regional infrastructure.
	Increasing average temperatures	High temperatures accelerate the aging process of electronic components, directly affecting the efficiency of equipment.	The company’s R&D department evaluates product designs to address the impact of high-temperature environments, developing effective thermal management designs and temperature control technologies to improve product heat resistance and long-term stability.
	Extreme changes in rainfall patterns and climate models	Disruptions to the company's office operations or delays in supplier deliveries may occur.	The company adopts proactive strategies, reinforcing flood prevention infrastructure and implementing risk management measures to minimize losses, protect assets, and ensure long-term business stability and sustainable development.

Opportunities

Period	Opportunities	Impact	Response Measures
Short-term (1-3 years)	Innovation and research in developing new products and services.	Increasing product development costs to meet investor demands and boost operating revenue.	Invest in the research and development of high heat-resistant and energy-efficient products to ensure stable performance under extreme climate conditions.
Short-term (1-3 years)	Upgrading production equipment.	Replacing energy-efficient or automated equipment will increase operational costs.	Replace equipment in alignment with government energy-saving subsidy policies while continuing to implement the ISO 50001 Energy Management System for more efficient energy management.
Mid- to Long-term (3-10 years)	Developing low-carbon products and services.	Developing low-carbon products directly aligns with customer and investor needs.	Continuously develop and research low-carbon products, increase the availability of green products in the upstream supply chain, and sustain the industry's path toward sustainable operations.

Potential Financial Impacts and Response Measures for Risks and Opportunities

Climate Change Issues	Issue Categories	Description of Risks and Opportunities	Potential Financial Impacts	Company Strategies and Response Measures
Carbon Fees	Policies and Regulations	In December 2023, the Ministry of Environment announced the draft "Carbon Fee Collection Regulations," which are expected to impose carbon fees starting in 2025 on major carbon emitters with annual emissions exceeding 25,000 tons.	High initial investment costs result in lower carbon emissions in the later stages, reducing operational costs. As the company is not a major carbon emitter, future regulatory changes may pose risks of increased operational costs.	Evaluate the use of internal carbon pricing as a shadow price, incorporating carbon costs into investment assessments to enhance the feasibility of carbon reduction projects. Replace outdated equipment and continuously improve production processes to increase energy efficiency.
High Temperatures	Physical Risks	High temperatures impact production processes and the cooling capacity of air conditioning systems, increasing the frequency of air conditioning and cooling equipment usage, leading to higher electricity consumption and greater water demand.	Increased operational costs (budget for replacing outdated cooling equipment is estimated at 800,000 TWD).	Replace old, energy-intensive cooling equipment with high-efficiency, energy-saving models. Promote factory compliance with ISO 50001 energy management system certification, with the Taiwan facility achieving certification in 2021.