Governance

Sustainability Development Committee
●Corresponding material issues

Compared with the results of the previous material issue identification, this year there is a significant increase in governance topics (economic performance, risk response measures, ethical standards, legal compliance); Product quality and safety is also a new material issue this year, which was included in the material issues in 2021; As for the previous green product development, green procurement, climate change, talent recruitment and retention, career development and training, and waste, they are not included in the material issues this year, but the existing management procedures will be maintained, and the business strategies will be optimized regularly according to the actual business situation and international trends.
Impact Management of Material Topics Sunon's board of directors is the highest decision-making and supervisory department for material issue management, assigning the Sustainable Development Committee to be responsible for sustainable material issue management items, including inventorying and reviewing material issue management guidelines, proposing optimization and improvement suggestions; Establishing diverse stakeholder communication channels, regularly integrating stakeholder suggestions, judging their opinion types and impact, formulating response measures or response guidelines, and reporting to the board of directors. The board of directors meets with the Sustainable Development Committee at least once a year to jointly discuss the material issue management situation and formulate the sustainable development direction and strategic objectives for the new year.

●Boundaries of Material issue Impact

Material issue	Impact		Main Management Guidelines	KPIs and Targets
	Positive Impact	Negative Impact		Short-term Goals	Mid-term Goals	Long-term Goals
				2025	2030	2050
Greenhouse Gas Emissions	-	●	Implement greenhouse gas inventory, find carbon reduction hotspots, establish internal carbon emission data management mechanism, disclose according to regulations, and regularly report to the board of directors	Establish group greenhouse gas inventory procedures, gradually increase the inventory scope of category 3, and accurately calculate the group's carbon emissions	Compared to the 2022 base year, reduce category 1 and category 2 carbon emissions by 50% by 2030	Net zero emissions by 2050
Energy Management	-	●	Energy saving, energy purchasing, energy creation - three arrows in the same direction	1.Increase the proportion of renewable energy use by 7.2% every year 2.Introduce EnMS energy management system 3.Continue to replace high energy-consuming equipment	1.Increase the proportion of renewable energy use by 7.2% every year 2.Circular energy planning 3.Continue to replace high energy-consuming equipment	1.Increase the proportion of renewable energy use by 7.2% every year 2.Purchase green electricity certificates 3.Grid-connected renewable energy (solar power)
Raw Material Management	▲	●	Promote suppliers to conduct greenhouse gas inventory, so that the carbon footprint of raw materials can be quantified and calculated	1.70% recycling rate of raw material supply packaging 2.First stage raw material carbon footprint data collectionRaw Material Carbon Footprint	1.80% recycling rate of raw material supply packaging 2.Second stage raw material carbon footprint data collection	1.85% recycling rate of raw material supply packaging 2.Third stage raw material carbon footprint data collection
Product Quality and Safety	▲	●	Committed to implementing quality policies and measures, aiming to provide customers with high service and high quality	Continue to improve customer satisfaction and develop a sound quality policy
Economic Performance	-	●	Achieve economic benefits in corporate operations while maximizing the promotion of social equity, environmental protection and corporate ethics	Set annual business and performance targets according to domestic and international trends, regularly confirm the expected target achievement, and make rolling adjustments and revisions when necessary.
Risk Response Measures	-	●	Complete internal risk issue identification and assessment according to the scope of risk management policies and procedures, and implement risk issue mitigation measures	Regularly review and revise risk issue mitigation measures to reduce losses caused by risk occurrence Annual report for shareholders
Ethical Standards	-	●	We stay the corporate culture spirit of "ethical management", with integrity, responsibility, fairness and transparency as the Company's highest guiding principles	Ensure that there are no significant risk or non-compliance incidents within the group
Legal Compliance	-	●	Comply with the laws and regulations of each operation location, taking compliance as the basic requirement	Ensure that there are no major violations within the group

 
Note 1: ● Represents actual impact (actual risk or opportunity), ▲ Represents potential impact (potential risk or opportunity).
Note 2: This management guidelines list only outlines key policies or strategies and management objectives. For detailed management guidelines, please refer to the description in each chapter.
Material Topic Identification The Company takes the Sustainable Development Committee as the highest organization for climate change management, with the Chairman serving as the chairman and the Vice President serving as the chief, periodically reviewing the Company's climate change strategies and targets, managing climate change risks and opportunities actions, and reviewing the implementation status and discussing future plans, leading the four executive teams to implement climate change-related management work, and reporting to the Board of Directors every year.


●Identification and Assessment of Climate Risks and Opportunities

TCFD Recommended Disclosure Items	Sunon's Response Measures
Short-, medium-, and long-term climate-related risks and opportunities identified by Sunon	Sunon has identified significant climate change risks and opportunities, including
	Short-term	Medium	Long-term
	Transition Risks: <Market>Energy price fluctuations, supply chain disruption <Technology>Energy transition (such as renewable energy investment)	‧Transition Risks: <Policy and Regulation>Greenhouse gas emissions control, greenhouse gas reduction targets <Technology>Energy transition (such as renewable energy investment), low-carbon technology development, carbon price fluctuations	Transition Risks: <Policy and Regulation>Increase in the price of greenhouse gas emissions (cap and trade/carbon tax/energy tax)
	Physical Risks: Increased severity of extreme weather events such as typhoons and floods		‧Physical Risks: Rising average temperatures
	Market Opportunities: Demand for low-carbon products and services, policy incentives		‧Market Opportunities: Supply chain low-carbon transition
The impact of climate-related risks or opportunities on Sunon's business, strategy and financial planning, and the management system for Sunon to respond to the impact	The major climate risks faced by Sunon mainly come from important stakeholders such as customers and investors' requirements for corporate greenhouse gas reduction and product energy efficiency standards; It also includes the inevitable geographical climate risks after the internationalization of production bases; Furthermore, the pressure of international carbon tariffs and the consequential demands for product carbon footprint, coupled with the requirements for upstream supply chain carbon reduction, may lead to green inflation, which is also a potential risk under climate change; The opportunities brought by climate change mainly appear in products and services. Under the trend of energy saving, environmental protection and low carbon, it will create more application product and market business opportunities.
	Main Transition Risks	Main Physical Risks:	Main Climate Opportunities
	Operational or financial impact: Work stoppages lead to decreased revenue, energy price fluctuations increase operating costs, and energy transition needs increase capital expenditures. Response strategy: 1. To reduce greenhouse gas emissions and prevent power shortage crises that may be caused during the energy transition of various countries, strategies to reduce carbon footprint and reduce other environmental impacts will be gradually introduced in each factory, such as energy efficiency improvement, establishment of green energy autonomy with solar panels, introduction of energy storage equipment, and increase of green electricity use to reduce energy loss. 2. Investing in carbon offset projects, purchasing carbon emission allowances, etc., to compensate for unavoidable carbon emissions and achieve the net zero emission target. 3. Actively applying for government-subsidized programs to invest in energy transition-related equipment, aiming to alleviate financial pressure.	Operational or financial impact: Increased operating costs or maintenance costs, and typhoons or floods may also affect factory operations, leading to production line stoppages and resulting in decreased revenue. Response strategy: Establish a climate risk management system and integrate it into the corporate risk management framework. Allocate budgets for climate risk responses to mitigate potential losses caused by natural disasters. Additionally, incorporate insurance costs into financial planning to offset the financial impact of natural disasters on the Company's operations.	Operational or financial impact: Increase the revenue share of green products and enhance product competitiveness, which may increase development costs. Response strategy: 1. Continue to develop high-efficiency and low-energy-consumption fan products/cooling modules and low-power-consumption ceiling fans that meet green building standards. 2. Long-term planning and cooperation with the supply chain to establish low-carbon/low-energy-consumption/recyclable and reusable product and service solutions, moving towards sustainable management and mutual benefit with customers. 3.Strengthen communication with the government and stakeholders, participate in the formulation and implementation of relevant policies, and seek government support and encouragement, such as providing tax incentives and subsidies, to promote low-carbon transition, and to reduce transition costs.
Sunon's resilience in strategy, considering different climate-related scenarios	Sunon joined the Science Based Targets initiative (SBTi) in 2023, setting reduction targets under the "limiting temperature rise to within 1.5°C" scenario. The company aims to achieve a 6.25% annual reduction in Scope 1 direct emissions and Scope 2 indirect emissions from energy use. Sunon is committed to reducing carbon emissions by 50% by 2030 and achieving net-zero carbon emissions by 2050. To reach net-zero emissions by 2050, Sunon has developed the following low-carbon transition plans: 1. Actively engaging in voluntary carbon reduction by continuously developing energy-saving processes and equipment to enhance energy productivity and efficiency. 2. Gradually increasing the use of renewable energy each year and encouraging supply chain partners to participate in and support energy transition efforts. 3. Investing in zero-emission technologies and participating in carbon offset programs to mitigate residual emissions that are currently unavoidable due to technological limitations. 4. Incorporating recycled and low-carbon materials while continuously investing in research and development to improve motor efficiency and energy-saving capabilities. As of 2024, Sunon has focused on replacing major energy-consuming equipment and increasing the use of renewable energy. Compared to the 2022 baseline, the company has already achieved a 37% reduction in carbon emissions, surpassing the reduction targets set by SBTi.