CHINA PETROCHEMICAL DEVELOPMENT CORPORATION
2020 Corporate Social Responsibility Report
Table of Contents About This Report ...... 3 Chairman's Letter ...... 4 From The President ...... 6 Stakeholder and Material Issues Analysis ...... 8 Chapter 1 Value Creation ...... 18 1.1 Company Overview...... 18 1.1.1 CPDC Profile ...... 18 1.1.2 Company Vision ...... 22 1.1.3 Business Model and Six Capitals ...... 25 1.1.4 True Value Assessment ...... 28 1.2 Sustainable Development Overview ...... 28 1.2.1 Framework of Sustainable Governance ...... 28 1.2.2 Sustainable Development Strategies and Objectives ...... 32 1.2.3 Key ESG Performance ...... 34 1.3 Operating Environment Analysis ...... 34 1.3.1 COVID-19 Impacts and Responses ...... 34 1.3.2 External Environment Analysis ...... 37 1.3.3 Market Overview ...... 38 Chapter 2 Forward-Looking Governance ...... 42 2.1 Corporate Governance ...... 42 2.1.1 Framework of Governance ...... 42 2.1.2 Risk Management ...... 50 2.2 Business Performances ...... 54 2.2.1 Business Performance and Distribution ...... 54 2.2.2 Tax Management ...... 58 2.3 Business Integrity ...... 59 2.3.1 Business Integrity Regulations ...... 59 2.3.2 Response to Major Regulatory Compliance Incidents ...... 62 Chapter 3 Smart Production Note ...... 65 3.1 Product Development Strategies ...... 65 3.1.1 Smart Production ...... 65 3.1.2 Green Innovation and Development ...... 65 3.1.3 Use of Raw Materials ...... 68 3.2 Climate Change Response ...... 68 3.2.1 Climate Change Mitigation ...... 69 3.2.2 Climate Change Adaptation ...... 72 3.3 Production Environmental Footprint ...... 78 3.3.1 Environmental Policy and Environmental Protection Expenditures ...... 79 1 3.3.2 Energy Management and Emissions ...... 80 3.3.3 Air Pollutant Management ...... 82 3.3.4 Water Resources Management ...... 83 3.3.5 Waste Disposal Management ...... 87 3.3.6 Prevention of Environmental Pollution ...... 90 3.3.7 Chemical Management ...... 91 Chapter 4 Communication and Dialogue ...... 94 4.1 Sustainable Supply Chain Management ...... 94 4.1.1 Profile of Supply Chain Management ...... 94 4.1.2 Supply Chain Sustainability Risk Evaluation ...... 99 4.2 Customer Relationships Management ...... 100 4.2.1 Customer Communication ...... 100 4.2.2 Product Quality Management ...... 101 4.3 Social Communications ...... 102 4.3.1 Community Communication ...... 102 4.3.2 Remediation and Development of Anshun Site ...... 104 Chapter 5 Corporate Care ...... 112 5.1 Talent Development...... 112 5.1.1 Human Resources Structure ...... 112 5.1.2 Education and Training ...... 115 5.2 Happy Workplace ...... 117 5.2.1 CPDC Human Rights Policy ...... 117 5.2.2 Labor-Management Relations ...... 120 5.2.3 Employee Benefits ...... 123 5.2.4 Occupational Health and Safety ...... 125 5.3 Social Charity Participation ...... 135 5.3.1 Social Charity Approach ...... 135 5.3.2 Petrochemical Education ...... 137 5.3.3 Local Engagement ...... 137 GRI Standards - Content Index ...... 140 Appendix ...... 146
2 About This Report The” CPDC 2020 Corporate Social Responsibility Report” is the seventh CSR Report and third Integrated Reporting report of CPDC. The Report combines both key financial and non-financial policies, performance, and future outlook. In addition to this report, the Company's corporate website section on corporate sustainability and investor relations also discloses relevant information, serving as a main platform for stakeholder communications and response. The structure of this report follows the sustainable development core values of CPDC, consisting of forward looking governance, smart production, communications and dialogue, and corporate care. The chapter on value creation presents the CPDC business model, operational strategy, and six areas of capital utilization, fully demonstrating CPDC's corporate social responsibility and vision towards a green petrochemical industry. The contents of this report were provided and compiled by each individual unit. All contents were reviewed by each team under the CPDC CSR Committee and Chairman to ensure accuracy and satisfaction of stakeholders' expectations before release.
Report Boundary, Scope, and Period The boundary selection of this report consists of 84.1% of the consolidated revenues of CPDC and its subsidiaries. This report boundary consists mainly of CPDC, with operational locations including the Taipei office, as well as the” three CPDC plants” at Toufen, Hsiaokang, and Dashe (headquarters). The information and data provided in the report covers the 2020 fiscal year (Jan 1 ~ Dec 31), consisting of metrics in economic, environmental, and social performance indicators. To illustrate multi-year trends, selected information extends to before 2020. Also, in an effort to maintain consistency with the annual report, selected financial information boundary includes re-invested companies. Lastly, this report also discloses the Tainan Anshun site remediation progress.
Report Basis and External Verification This Report is based on the GRI Sustainability Reporting guidelines (GRI Standards) core options of the Global Reporting Initiative (GRI) and the International IR Framework published by the International Integrated Reporting Council. External Verification was conducted by the British Standards Institute. The contents of this report satisfy the Core requirements of the GRI Standards, and Type-II High-Level assurance of AA1000 Accountability Standards v3. The assurance statement is provided in the appendix. Financial data on business performance was obtained from the audited CPDC financial reports. GHG emission data was based on statements issued by a third-party verification agency.
Reporting Cycle CPDC publishes the CSR report for the preceding year at the end of June each year. This edition was published in June 2021 and the previous version published in June 2020.
Contact Window Please direct all inquiries regarding this Report to the following contact window. China Petrochemical Development Corporation CSR Secretariat Office Address: 8~11F., No. 12 Dongxing Road, Songshan District, Taipei City Telephone: +886-2-8787-8461 E-mail: [email protected]
3 Chairman's Letter
Climate action failure and infectious disease caused serious setbacks to global economy; strengthening corporate resilience is becoming a challenge. According to the World Economic Forum's (WEF) Global Risks Report 2021, "failure to respond to climate change" and "infectious disease" are the top two emerging risks in terms of likelihood of incidence and magnitude of impact. The impact of COVID-19 on the global economy in 2020 was profound and widespread, with significant price fluctuations in raw materials that affected both our revenue and profitability. Under the severe challenge, we leveraged on our production, supply, and sales platforms to maintain a stable inventory for optimal production, formulated relevant policies to strengthen our financial base, and improved our financial health. With the concerted efforts of our colleagues to elevate operational performance, we have improved our revenue and turned loss into profit in 2021. The continuation of the pandemic has brought the world into different degrees of isolation, making corporate governance more difficult and indirectly exposing the environment to greater impact. How enterprises across various industries to implement pandemic prevention and fulfill social responsibility has become crucial issues. In addition, in the first half of 2021, Taiwan faced the worst drought in 56 years, and the government has announced the second stage of water restriction with a five-day supply and two-day cutoff policy. We have responded to the situation by working with the government to develop strategies to conserve water and improve water efficiency to minimize the impact on our operations. The impact of climate change will become more frequent in the future, and the impact of infectious disease is unlikely to ease in a short period of time. How to take this opportunity to reflect on and strengthen CPDC's resilience in responding to risks, to minimize the impact of these risks, and to identify more opportunities therefrom is a major challenge for CPDC’s path towards sustainable transformation.
Committed to achieving green petrochemical industry and reducing environmental footprint In the face of the increasingly challenging business environment, CPDC has continued to build a green petrochemical foundation, with the corporate vision of pursuing green ecology and creating a symbiotic living environment with the earth, environment, and society. The petrochemical industry has long been perceived as high energy and water consumption. CPDC has improved its production processes by enhancing efficiency and making good use of technology, to improve water efficiency and reduce costs through water conservation and recycling of process water in response to challenges brought by water shortage. CPDC places great importance on high-risk operations management and utilizes intelligent monitoring systems to monitor various data, not only to comply with regulatory requirements, but also to protect the health and safety of employees. Moreover, in line with the government's policy to promote high-value petrochemical products, we are gradually moving towards fine chemicals, product diversification, and high-value development. In addition to developing new products with market potential and continuously optimizing existing products, we are progressively entering high-end applications such as optics, electronics, and semiconductors. Furthermore, we have observed that many countries and enterprises have made net-zero carbon emission commitments in recent years. In this regard, CPDC has been promoting carbon reduction commitments that are in line with national policies and is working on more proactive carbon reduction objectives in response to
4 international energy saving and emission reduction initiatives. We are also committed to completing the remediation of the Anshun site within three years. The Anshun site is one of the few cases in the world where the site is contaminated with both dioxin and mercury. Although the contamination at the site is a historical consequence, as a member of the global village, we have taken concrete measures, including the addition of new treatment facilities, to improve the efficiency of the remediation. In the future, we hope through the sharing of experience in remediating the contaminated site will help the world to achieve more fruitful remediation results, which will bring beneficial and positive impacts on the environment of Taiwan and the world.
Overall improvement in ESG performance to attract sustainable funds With the changing environment, it has become an irreversible trend for enterprises to focus on environmental, social, and corporate governance (ESG), and ESG has also become an indicator of whether an enterprise has the prospects for growth. The emphasis on responsible investment by institutional investors reflects that enterprises' ESG performances will directly affect the ease or the cost of financing. Due to the petrochemical industry's high consumption of energy and water, ESG has come to be an important issue. Therefore, in addition to the gradual transformation to low carbon, CPDC will strive to make better corporate decisions to minimize operational risks. CPDC also requires all employees to be more prudent in evaluating investment risks, to fully assess the effectiveness of investments through budget control and procurement improvement measures, to continuously improve the effectiveness of corporate governance, and thereby attracting green and sustainable capital funding. In addition, we also communicate with stakeholders through various channels and demonstrate the results of our continued efforts to contribute to the promotion of social harmony and balanced development. We understand that only when all personnel understand the true meaning of ESG then everyone in the Company can work together towards this goal. Therefore, CPDC is committed to carry on enhancing our ESG performance and responding the United Nations Sustainable Development Goals to advancing to a sustainable enterprise.
Chairman
5 From The President
Petrochemical business will continue to develop circular economy products CPDC is a manufacturer of caprolactam (CPL) and acrylonitrile (AN) , as well as a global leader in the production and operation technology. CPL is used to manufacture PA6 and develop high value- added PA6 products. In addition to assisting Taiwan's downstream industry in developing new diversified, special purpose, and high-value nylon products, the Company is also developing markets in the United States, Japan, and Europe. In the medium term, we aim to establish an integrated production base in China, introduce the application of AI technology, and build an intelligent management system. The petrochemical industry is characterized by high energy and water consumption. In order to development sustainably, we have long been investing in in-house research and development capability, introducing advanced technologies, and integrating heating and cooling energy uses to significantly reduce energy consumption and increase our competitiveness. We have started investing in the development of biomass plastics raw materials, biodegradable plastics, and recycled plastics to reduce the impact on the environment and society, and to improve the well-being of human life.
Land development business will strengthen the link to sustainable development CPDC's business philosophy is to maintain sustainable ecology and co-prosperity of the local community. We conduct thorough assessments and devise comprehensive plans for the urban area, traffic, and population impacts before any land development. The main building is planned as a green building to comply with the policy of green energy and urban development plan. In the design of the building, we also require designers to use natural ventilation and lighting along with the use of AIoT design. The smooth flow of internal traffic can reduce the energy use and environmental pollution. In the future, we will require partners to provide carbon footprints, obtain green building, and the smart building certifications to improve energy efficiency and align with international practices.
Reducing the impact of COVID-19 outbreak and bringing new opportunities to the Company In 2020, the world suffered from the outbreak of the pandemic, and CPDC was also greatly affected. In the early stage of the outbreak, the Company held pandemic emergency meetings to draw up strategies to maintain normal operation of production plants and to protect the health and safety of employees. In addition to the measures implemented at the head office, such as split team arrangements by floors and work from home, a second control room was set up at the each of the plants. The "COVID-19 Contingency Measures" were formulated to address the three stages of responses, the general pandemic prevention and protection, community infection in the area of operation, and confirmed cases in the plant. We also developed relevant measures for different target groups and situations, such as plant entry and exit management, plant health control, and contractor management, to avoid the risk of plant shutdown due to the spread of the pandemic. We also strengthen our information security protection and regularly promote information security on our internal websites. On the other hand, CPDC's main raw materials are part of textile products. With the advent of the post-pandemic era, we have developed products with characteristics such as bactericidal, anti- bacteria fiber, and filter material, gradually developing into specialized products to make positive contributions to the national pandemic prevention. In 2020, we have also started industry-academia
6 cooperation programs to continue to develop raw materials with anti-bacteria and bactericidal functions.
Continue moving towards a sustainable business CPDC continues to optimize its operations to respond to the United Nations Sustainable Development Goals (SDGs) and to explore potential business opportunities in niche SDGs. For example, in order to achieve the goal of the circular economy and reduce the impact of climate change, we build a high gravity system (HG) at our plants to collect elements from wastewater and recycle them into processed raw materials with the aim of reducing raw material costs. The generated water can be used to replenish the wash towers in other areas of the plants, reducing the amount of pure water used and the amount of wastewater treated. Meanwhile, the remediation of the polluted legacy site followed by the mandatory merge in the state-owned business era is integrated with the Company's public welfare activities to implement multi-faceted communication with the stakeholders. CPDC continues to optimize ESG performance and strives for recognition in capital markets. We proactively responded to the CDP climate change questionnaire and achieved a B- management grade in 2020. We also voluntarily participated in the S&P Global Corporate Sustainability Assessment and ranked 12th in the global chemical industry (PR 90) in 2020, with a total score of 77. CPDC was selected as a member of the 2021 S&P Global Sustainability Yearbook, the only chemical company in Taiwan to be included, and was also awarded the “Industry Mover” distinction in the global chemical industry. All of these are the result of the concerted efforts of our colleagues. Looking ahead, CPDC will keep implementing the four pillars of sustainable development strategies: Clever – smart-driven circular transformation, Prescience - planning for the future with sustainability governance, Dialogue – enhancement in the resilience of the value chain through communication, and Care – creation of social co-prosperity through care, and expand the eight major areas to deepen ESG performance in operational development and move towards sustainable enterprise.
President
7 Stakeholder and Material Issues Analysis
CPDC key stakeholders CPDC strives to become a leader in the green petrochemical industry, existing in harmony with the environment and society. We listen intently to all our stakeholders, value their feedback, and respond to their needs. CPDC uses the AA1000 Stakeholder Engagement Standard to identify our stakeholders based on the five aspects of dependency, influence, attention, responsibility, and diverse perspectives. The seven key stakeholders were identified as investors, customers, employees, suppliers/contractors, community residents, regulatory authorities, and lobby groups. Through communication with different stakeholders, we are able to ensure the business direction meets the expectations of the stakeholders.
Results of Stakeholder Communications Communication 2020 Communication Stakeholder Importance Material Topic Channel/Frequency Results Investors Due to the long- 1. Business 1. Regular 1. Convened 1 term support Performance publication of general from 2. Land annual reports, shareholders shareholders Development financial meeting and investors, 3. R&D and reports, and 2. Issued 41 major CPDC Innovation in monthly announcements continues to High Value revenue to the Market obtain sufficient Products 2. Host Annual Observation Post resources for 4. Climate Change Shareholders' System future Mitigation and Meeting and 3. Responded 37 developments Adaptation institutional inbound calls and 5. Risk investor from improvements. Management conferences shareholder 6. Corporate 3. Ad-hoc inquiries Governance and announcement 4. Hosted 3 Business of material institutional Integrity information investors visits 7. Chemical Safety 4. Establish for 6 institutional Management Corporate investor Relations representatives division, and set up stakeholder's section on the official website to focus on stakeholder communications Regulatory The 1. Remediation of 1. Cooperation Ad-hoc Agency petrochemical Polluted Site with central and participation industry both in 2. Monitoring and local authorities with central and its products as Management of on education, local authorities well as during Environmental information on education and the production Pollution sessions, information process may 3. Energy reviews, and sessions, as cause harm to Management inspections necessary the human body
8 Communication 2020 Communication Stakeholder Importance Material Topic Channel/Frequency Results and the 4. Water Resources 2. Participate in environment, Management relevant thus, CPDC 5. Waste Disposal meetings of the must strictly Management Petrochemical adhere to the 6. Air Pollution Industry regulatory Control Association authority and its 7. Corporate 3. Communication policies and Governance and by mail and achieve its goals Business telephone through public- Integrity 4. Environmental private 8. Chemical Safety reporting as per collaboration. Management regulatory 9. Circular agencies in Economy accordance with 10. Ecological the laws and Conservation disclosure on and Biodiversity the official website Supplier / Upstream 1. Sustainable 1. Regular Strengthen Contractor Suppliers are Supply Chain business sustainable important Management meetings and supply chain sustainability 2. R&D and supplier visits management. partners for Innovation in 2. Training of the Conducted CPDC High Value electronic sampling of Products tendering supply chain risk 3. Human Rights system, assessment on Assessment construction NTD 15 million tender seminars annual purchase 3. Industrial safety amount or education and irreplaceable raw training for materials / project equipment contractor suppliers 4. Communication by mail, telephone, or meetings Employee Enterprise 1. Labor- 1. Mountain 1. A total of 1 Performance Management hiking activities labor dispute would not be Communications 2. Ball sports occurred in possible without 2. Occupational 3. Company trip 2020 human capital. Health and 4. Internal 2. Employee We provide a Safety publication of a training totaled safe, fair, and 3. Human Rights "1314 63,432 hours continuous Assessment Lifestyle" Bi- 3. Convened 4 growth 4. Information weekly company-level environment for Security and publication labor- quality staff Digital 5. Establish management with similar Transformation channels for meetings attitudes. It is employee 4. 3 ball sports the CPDC's communications activities responsibility to and grievances provide such a 6. Organize platform for employee health
9 Communication 2020 Communication Stakeholder Importance Material Topic Channel/Frequency Results employee seminars and growth. health check up 7. Regular subsidies for in- service continuing education by employees 8. Employee share ownership trust Community Take from 1. Social Care and 1. Participation in 1. The Taipei office Residents society, give Engagement related and three CPDC back to society. 2. Remediation of community plants hosted 152 CPDC believes Polluted Site events and charity events in giving back 3. Ecological information that cost a total to the Conservation sessions of NTD 15.722 community and and Biodiversity 2. Sponsored art & million and continues to cultural, involved 425 plant good academic, and CPDC seeds of charity environmental volunteers. A and positive activities in the total of 2,487 energy back to community persons benefited society. 3. Organization of from the events Charity Events 2. The Hsiaokang 4. Adoption and Plant donated to maintenance of the line of duty wetlands and death of the fire public facilities chief of 5. Provide a Fengxiang regular channel Branch and the for local maintenance fee resident for Kaohsiung grievances Municipal Social Educational Center 3. The Dashe Plant conducted community relations activities, providing event sponsorship and school scholarships at all levels 4. The Toufen Plant adopted the Tunghsing Wetland in Jhonggang River, provided scholarships for nearby elementary and
10 Communication 2020 Communication Stakeholder Importance Material Topic Channel/Frequency Results middle schools, and rebated for cogeneration 5. Ad-hoc charity donations Customers Customers 1. Sustainable 1. Regular 1. Average orders are the Supply Chain business Customer main source of Management meetings and Satisfaction revenue for 2. Emergency customer visits Scores in 2020 CPDC. Response and 2. Organization of were as follows: Satisfying the Management inter-company (1) CPL：92 needs of 3. Client social ball customers, Relationship sports events (2) AN：94.83 becoming an Management 3. Active (3) PA6：92 irreplaceable 4. Information participation in partner for Security and major customer business Digital activities development, is Transformation 4. Provide regular the value channel for creation that customer CPDC aims to grievances achieve 5. Annual customer satisfaction survey by sales unit at each plant Lobby The 1. Monitoring and 1. Routing and ad- 1. 5 engineering Groups Petrochemical Management of hoc review inspection Industry is a Environmental meetings, onsite meetings, 2 polluting, Pollution inspection, community carbon emission 2. Corporate progress information generating Governance and meetings, sessions, 2 city industry. As Business remediation government such, the need Integrity supervision, and meetings to have regular 3. Remediation of community care 2. Due to the communication Polluted Site project team pandemic, many with meetings and visiting groups environmental performance were declined in NGOs, validation 2020 due to the academics, and meetings pandemic. transparent 2. Annual budget Fortunately, communications for "CPDC there was no on remediation Anshun site outbreak progress and Community 3. Provided Anshun data on Relations Fund" site (formerly emissions. By 3. Hosting, Taiwan Alkali sharing energy- sponsorship, Corporation) saving, carbon- and Community reducing, and participation in Relations Fund Dioxin community with NT$1.5216 remediation relations million, and technologies, activities sponsored external parties NT$21,000 for
11 Communication 2020 Communication Stakeholder Importance Material Topic Channel/Frequency Results can better 4. Accept community understand the applications activities efforts that from external CPDC is groups for undergoing in visits, study its mission of tours, and environmental technical protection. discussions on an ad-hoc basis
Material Issues Analysis The CPDC CSR Report was compiled in accordance with the GRI sustainability reporting guidelines. The content of the report and level of disclosure were determined by its materiality. The higher the materiality level, the higher the risk. If mis-manages these risks, this may impact company operations, stakeholder decision-making, and seriously impact the environment or society. This year's list of potential material issues was based on the previous year's assessment results, taking into account the issues of concern for institutional investors' sustainability ratings, major global sustainability trends and issues, and material topics of benchmarking enterprises. After deciding on the list of issues, the materiality analysis was based on three aspects, "importance to company operations", "influencing factors and degrees on stakeholder evaluation and decision-making", and "external economic, environmental, and social impacts". Each topic was adjusted and considered in the materiality matrix. The result was then submitted to the Chairman for confirmation. The analytical process is set out below:
CPDC Procedures for Material Analysis for 2020 Process Description Based on the previous year's material topics, the list of issues was reviewed to determine whether adjustment is needed, taking into account the issues of concern for institutional investors' sustainability ratings, major global sustainability trends and issues, and material topics of benchmarking Decide on a list of material topics enterprises After reviewing the list, a new topic "information security and digital transformation" was added, and consolidated the highly relevant topics into "risk management", "land development" and "occupational health and safety" to simplify the list of topics Taking into account KPMG's professional advice, the relative positions of "human rights management", "biodiversity" and "sustainable supply chain management" were adjusted upward in the materiality matrix, and decided on the position of the new issue "information security and digital transformation" Adjustment of the order and relative The repositioning of "biodiversity" and "sustainable supply position of each topic chain management" and the addition of "information security and digital transformation" as material topics are mainly due to the outbreak of the COVID-19 pandemic in 2020, which has caused enterprises to rethink the correlation between the loss of biodiversity and new infectious disease, as well as the possible disruption of the global supply chain of the chemical industry 12 Process Description caused by the pandemic. It has also driven enterprises to accelerate their digital transformation The repositioning of "human rights assessment" is mainly related to the increasing attention of institutional investors on human rights issues in enterprises The results were reviewed by the CSR Committee and a consensus was reached before submitting for approval by the Approval and confirmation Chairman In 2020, CPDC identified a total of 20 material topics, including 7 for governance, 9 for environment, and 4 for social aspects
Material Matrix
Boundary of Material Topics External Economic, Environmental, and Social Impacts Matrix Location High (Large Bubble) Mid (Medium Bubble) Low (Small Bubble) ５ v v v ４ v v Non-Material Topic ３ v v Non-Material Topic ２ v Non-Material Topic Non-Material Topic １ Non-Material Topic Non-Material Topic Non-Material Topic
13 Material Topics for CPDC in 2020 Category Material Topic Meaning/Implications for CPDC Implement corporate governance system and comply with Corporate Governance relevant laws and regulations to reduce operational risks and and Business Integrity prevent operational deficiencies Disclose operational efficiency and results of operations to Business Performance respond to the trust of shareholders and stakeholders Disclose CPDC's systemic risk and response process to Risk Management reduce the impact on operations in the event of a risk event Create a stable and mutually beneficial partnership with Sustainable Supply Chain suppliers and customers during the course of operation to Management enhance operational performance while reducing the impact 7 Topics for on the environment Governance Develop unique and high-value fine chemicals through core (G) R&D and Innovation in technology development and new energy introduction so as High Value Products to enhance competitive advantage Comply with the EPA's principles of "documentation, Chemical Safety reporting, prevention, labeling, and notification" to protect Management employees from chemical hazards and avoid environmental contamination through leakage The pandemic has accelerated the digital transformation of Information Security and enterprises. Through digitalized and effective analysis of Digital Transformation data, we can reduce manufacturing costs and increase production output CPDC has taken up the responsibility of remediating the contaminated Anshun Site (formerly Taiwan Alkali Remediation of Corporation) and is doing its best to provide nearby residents Contaminated Site with a livable environment, and to share the results of the remediation with the rest of the world CPDC has adopted green petrochemicals as its vision and Climate Change followed the mainstream in developing climate change Mitigation and Adaptation mitigation and adaptation strategies to effectively meet challenges and capture business opportunities Conduct energy usage statistics for each CPDC plant and Energy Management work with our partners in the industrial area to integrate energy use in the region and improve energy efficiency Calculate the air pollutant emissions of each CPDC plant, and continuously reduce the air pollutant emissions during Air Pollution Control 9 Topics for the production process through process optimization and Environment equipment upgrading (E) Reduce the negative impact of production process on the Monitoring and environment and monitor the condition of each plant and Management of perimeter to exceed regulations and minimize the impact on Environmental Pollution the environment Develop new processes, such as phenol process, etc., to Waste Disposal reduce by-products and waste generation, and improve Management process recovery rate to reduce waste at source CPDC is located in a high-risk water resource area and is highly dependent on water resources. We aim to reduce our Water Resources environmental footprint and costs through water Management conservation strategies and aim for "zero wastewater discharge" The outbreak of the pandemic has led to a rethinking of the Ecological Conservation importance of biodiversity, with fears of new infectious and Biodiversity diseases arising from land changes, species, etc.
14 Category Material Topic Meaning/Implications for CPDC Reuse available resources through the circular economy to Circular Economy reduce waste emissions and lower production costs CPDC has established an occupational safety and health Occupational Health and management system to maintain, improve and promote the Safety working environment and health of employees Invest extensive resources to provide employees with a variety of education and training. The training provides HR Development and employees with the basic skills they need for their work and Management builds up a pool of expertise for future development and promotion 4 Topics for Establish the CPDC Human Rights Policy as a reference for Social (S) Human Rights human rights for the Company and its affiliated companies, Assessment to protect the basic human rights of employees and to create a respectful, equal, safe, and friendly working environment Based on the core of our business locations, we uphold the original intention of "taking from society and giving back to Social Care and society", and implement "community engagement for Engagement symbiotic growth" in response to the United Nations Sustainable Development Goals
The GRI Topics and Boundaries in the Value Chain Corresponding to the Material Topic Economic, Environmental, and Social Impacts Direct Business Relationship Indirect Relationship Corresponding GRI Corresponding Relationship Material Topic with CPDC with CPDC Topic SDG Topic with CPDC Supplier / Downstream Regulatory CPDC Investors Contractor Customers Agency 205 Anti- SDG 16 Peace, Corruption Justice, and Strong 206 Anti- Institutions Corporate Competitive Governance Behavior V and Business 307 Environmental Integrity Compliance 415 Public Policy 419 Socioeconomic Compliance 201 Economic SDG 8 Decent Business Performances Work and V Performance 203 Indirect Economic Growth Economic Impacts Risk Other Material SDG 13 Climate V Management Topics Action 204 Procurement SDG 8 Decent Practices Work and Sustainable 308 Supplier Economic Growth Supply Chain Environmental SDG 12 V V Management Assessment Responsible 414 Supplier Social Consumption and Assessment Production R&D and SDG 12 Innovation in Other Material Responsible V High Value Topics Consumption and Products Production Chemical SDG 3 Good 403 Occupational Safety Health and Well- V V V Safety and Health Management Being
15 Economic, Environmental, and Social Impacts Direct Business Relationship Indirect Relationship Corresponding GRI Corresponding Relationship Material Topic with CPDC with CPDC Topic SDG Topic with CPDC Supplier / Downstream Regulatory CPDC Investors Contractor Customers Agency 416 Customer SDG 12 Health and Safety Responsible Consumption and Production Information Security and 418 Customer V Digital Privacy Transformation SDG 3 Good Remediation of 203 Indirect Health and Well- V V Polluted Site Economic Impacts Being Climate 201 Economic Change SDG 13 Climate Performances V V V Mitigation and Action 305 Emissions Adaptation SDG7 Affordable and Clean Energy Energy SDG12 302 Energy V V V Management Responsible Consumption and Production SDG12 Air Pollution Responsible 305 Emissions V V Control Consumption and Production Monitoring and SDG12 Management 306 Effluents and Responsible V V of Waste Consumption and Environmental Production Pollution SDG12 Waste 306 Effluents and Responsible Disposal V V Waste Consumption and Management Production SDG6 Clean Water and Sanitation Water 303 Water SDG12 Resources 306 Effluents and V V Responsible Management Waste Consumption and Production Ecological SDG15 Conservation Maintenance of 304 Biodiversity V and Biodiversity Biodiversity SDG9 Industry, Innovation, and Infrastructure Circular 301 Materials SDG12 V V Economy Responsible Consumption and Production Occupational SDG3 Good 403 Occupational Health and Health and Well- V V Safety and Health Safety Being
16 Economic, Environmental, and Social Impacts Direct Business Relationship Indirect Relationship Corresponding GRI Corresponding Relationship Material Topic with CPDC with CPDC Topic SDG Topic with CPDC Supplier / Downstream Regulatory CPDC Investors Contractor Customers Agency SDG12 Responsible Consumption and Production SDG4 Quality 202 Market Education Position SDG5 Gender HR 401 Employment Equality Development 404 Training and SDG8 Decent V and Education Work and Management 405 Employee Economic Growth Diversity and Equal SDG10 Reduce Opportunity Inequalities 406 Non- Discrimination SDG8 Decent 407 Freedom of Work and Human Rights Association and Economic Growth V V V Assessment Collective SDG10 Reduce Bargaining Inequalities 409 Forced or Compulsory Labor SDG1 No Poverty 203 Indirect Social Care SDG2 Zero Economic Impacts and Hunger V 413 Local Engagement SDG14 Life Below Communities Water
17 Chapter 1 Value Creation 1.1 Company Overview 1.1.1 CPDC Profile China Petrochemical Development Corporation, CPDC), was established in April 24, 1969. In the past, CPDC was a State-owned Enterprise. On July 12, 1991, the shares were listed on the Taiwan Stock Exchange, and on June 20, 1994, formally transitioned to a private enterprise.
CPDC Basic Information Industry Plastic Materials Industry Chairman Ruey-Long Chen Caprolactam Capital Main 32,848,501,300 Acrylonitrile （ ） Products NTD Nylon Chips Ticker Operating 1314 Taiwan Code Region Employees 1,344 Website www.cpdc.com.tw (Persons) (Not including contractors)
CPDC's Main Products Product Type Product Name Downstream Applications General Textile Fiber Stockings, clothing fabric, umbrella fabric, parachute fabric, air bags, curtains, carpets Caprolactam Engineering Plastics Automotive parts, gears, packaging film, high- （ ） CPL pressure piping Thin Film Food Packaging, pharmaceutical packaging, electronic products ABS/AS Plastics Computer casing, automotive (dashboards, wheel hubs, mirror housing) Chemical Fiber Products Home appliance casing, high-powered tools (hairdryers, mixers, lawnmowers) Polyacrylonitrile Fiber Clothing fabric, blankets, curtains, woolen Acrylonitrile yarn, woolen jumpers, plush toys （AN） NBR Rubber Electrical wiring sheathing, oil-resistant rubber components for automotive and mechanical industries (e.g. oil seals, coils), foam insulation Acrylamide (AM) Water treatment agent, soil retention agent, improvement agent, pulp toughener Engineering Plastic Nylon Chips Automotive parts, gears, high-pressure piping Nylon Chips Fiber Nylon Chips Nylon Products Stockings, clothing fabric/ umbrella fabric, （ ） PA6 parachute fabric, air bags, curtains, carpets, tire flaps, conveyor belts, ropes, fishing nets, fishing lines
18 Product Type Product Name Downstream Applications Thin Film Food packaging, pharmaceutical packaging, electronic products Plant Nitrogen Base fertilizer or top dressing (highly soluble Chemical fertilizer Ammonium Sulfate in water) products （AS） Ammonium Sulfate + Phosphorus Potassium Composite Fertilizer / Urea Sterilization preservatives and Other Sterilization preservatives, new pharmaceutical intermediate, dyeing vector Ortho-Phenylphenol High Level Optical Materials （OPP） High reflectivity materials, new polymers and monomers Electronic Materials Flame-Resistant Materials Furniture Specialty Chemical PA6 Engineering Machine Components Products Plastics Electronic Components （PA6） Sporting Goods Automotive Industry Rubber UV Curing Acrylic Adhesive Monomer Coating Chemical Paper making （UV） Water Treatment Agent Cross-linked Polymer Note: 1. PA6 Engineering Plastics is the main product of the Qiaotou Plant and has begun mass production. 2. UV Curing Acrylic Monomer has not yet started mass production.
Key CPDC Business Sites and Production Output Dashe Plant Taipei Office Toufen Plant Hsiaokang Plant (Headquarters) CPL CPL Main Nylon Chips AN Nylon Chips Products AS AS OPP Telephone 02-87878187 037-623381 07-3513521 07-8711160 No. 12 No. 217 Sec.2 Ziqiang No. 34 Zhonglin Dongxing Road, No. 1 Jingjian Road, Road, Tou-Fen Road, Hsiaokang Address Songshan Dashe district, township, Miaoli District, District, Taipei Kaohsiung City County Kaohsiung City City
Domestic and Export Sales in the Last Three Years Item CPL / Nylon Chips Year 2018 2019 2020 Domestic Export Domestic Export Domestic Export Sales Type sales sales sales sales sales sales Sales (tons) 341,369 14,311 287,161 10,091 153,257 14,999 Percentage (%) 96 4 96.6 3.4 91.1 8.9 19 Item AN Year 2018 2019 2020 Domestic Export Domestic Export Domestic Export Sales Type sales sales sales sales sales sales Sales (tons) 115,229 100,582 115,189 98,881 132,828 134,933 Percentage (%) 53.4 46.6 53.8 46.2 49.6 50.4 Item OPP Year 2018 2019 2020 Domestic Export Domestic Export Domestic Export Sales Type sales sales sales sales sales sales Sales (tons) 293.5 916.6 359 1,539 43 1,905 Percentage (%) 24.3 75.7 18.9 81.1 2.2 97.8
STRUCTURE OF AFFILIATED ENTERPRISES
20 CPDC
40% 100% 100% 100% 100% 100% 100% Kaohsiung Tsou Seen Unichem CPDC Green Ding-Yue BES Twin Monomer Co., Chemical Development CPDC Energy Development Development Ltd. Industries Technology Limited Investment Co., Ltd. Co., Ltd. (Note2) Corporation Corporation (BVI) Co., Ltd.
100% 100% Frontier Fortune Da Yin Investment Pte. 91.10% Construction Ltd. Taivex Engineering Co., Therapeutics Ltd. Corporation
99.99% 100% 99.01% 100% Gemini Star Core Pacific Core Pacific Thanh Phong (India) Twin Star Twin Star Construction 4.02% Private (Myanmar) (Vietnam) Investment Co., Ltd. Limited Investment Investment Co., Ltd. Co., Ltd. 44.52% 55.48% 95.98% 100% 99.63% 0.37% Weiqiang Weihua Changzhou Weiming 80% International (Rudong) Trade Weicai New (Jiabgsu) Core Pacific Trade Material Science Petrochemical Co., Ltd. Pioneer (Shanghai) Co., & Technology Company (Myanmar) Ltd. Co., Ltd. Co., Ltd. 100%
Weiming (Rudong) Engineering Company 21 Note: 1. Data last updated: December 31, 2020 2. A controlling and subordinate relationship as defined by Article 369-2 of the Compact Act exists in substance. 3. Weiming (Rudong) Engineering Company has been established in October 2020. 4. The following companies have been canceled: Rich Equities Ltd. in July 2020, Kunshan Weiqin Management Consulting Co., Ltd. in July 2020, Weida (Zhangzhou) Consultant Service Co., Ltd. in December 2020, Zhangzhou Weida Petrochemical Co., Ltd. in January 2021.
1.1.2 Company Vision The global low-carbon era has arrived. Enterprises are urged to transform themselves in order to co-prosper with their stakeholders and to respond to the risks and opportunities arising from climate change. Combined with the development of new businesses and the trend of international sustainability, CPDC strives towards a vision of two core business lines in an era of fast-paced change, and move towards sustainable enterprise.
Business Vision Development Strategy Chapter Ecological Innovative R&D Towards a vision of 3.1 New Product Development Green Petrochemical Improve Manufacturing Production Industry, to become a Efficiency Petrochemical CPL, AN, and other 3.1 Lower production energy usage and Business derivative high-value pollutant emissions product material Circular Economy 3.1 supplier and global Integrated upstream-downstream leader. 1.3 petrochemical production site Overseas land asset management and Respect the ecological application 1.1 environment, combine Land Create local employment and economic 2.2 construction, arts, Development developments humanities, charity, Business Remediation of the Anshun Site creation, and co-living 4.3 (formerly Taiwan Alkali Corporation) environment. Local Community Participation 5.3
CPDC'S Core Values and Business Philosophy CPDC operates its business with integrity through four major business philosophies of pursuit excellence, innovation, effective use of talents, and market orientation. In addition to realizing its core values, CPDC also seeks to maximize the value of its stakeholders, such as creating customer value through superior quality and efficiency, creating shareholder value through innovative processes and products, creating partner value by respecting diverse cultures and differences, creating resident value by caring for neighbors, and creating global value by coexisting with the environment.
Pursuit of Construct an Intelligent Management System Excellence Continue to achieve breakthroughs with a forward-looking perspective Integrate resources and develop smart production Business Innovation Grasp technological trends and develop new technologies and products Philosophy Expand global horizons and develop the two core businesses Effective Create maximum value Use of Deploy expertise, take responsibility, and focus on teamwork Talents Spare all efforts to achieve our vision and goals
22 Market Provide the optimal products and services Orientation Create customer value
Global Outlook - Develop the Two Core Businesses of Petrochemical and Land Development. Expand into Overseas and the China Markets to Create New Engines for Growth CPDC is now aggressively expanding our two core businesses of Petrochemical and Land Development. The expansion of our overseas portfolio in China, Southeast Asia, and other regions will strengthen our long-term profitability and overall competitiveness. Core Petrochemical Business CPDC is Taiwan's sole CPL producer, and one of the top 5 producers in the world. We are also one of the only two AN producers in Taiwan and are ranked among the global top 10. CPDC is very competitive in our core petrochemical business with production and operational expertise among the best in the world. At present, the petrochemical business aims to optimize the competitiveness of existing products and create a diversified market for new high-value products in the short term and establish an overseas integrated production base, introduce the application of AI technology, and build a smart management system in the long term. In addition, we are also actively promoting the strategy of extending the scope and depth of our petrochemical business to make it more sustainable and strengthen our competitiveness in the market: 1. Expansion of breadth: In recent years, the traditional petrochemical industry has been transforming, and CPDC has kept abreast with the trend to develop specialty chemicals and move towards higher-value products. In addition to the development of CPL derivative OPP by our own R&D team, CPDC has also mastered the catalyst and key technology, enabling CPDC the only OPP producer in Taiwan and the third largest producer in the world. In 2020, we continued to develop new products with special potential for OPP derivatives and optimize the OPP process. We also expanded our downstream operations, proactively created a greater range of high-value ester and special products, as well as continued to create value-added nylon products. We also cooperated across sectors to invest in green petrochemical raw materials research and actively built the foundation for green transformation. 2. Expansion of Depth: CPDC actively expands its petrochemical portfolio, developing the petrochemical project at Rudong in Jiangsu, China in 3 phases. In the first phase, the construction of the cyclohexanone plant and the PA6 plant have been completed and are expected to commence production in 2021. In the second phase, the CPL plant and the OPP plant have started their pre- construction operations. Future construction plans remain on track, with the aim to complete an integrated petrochemical base for CPL to improving our cost competitiveness. Also, we plan to continue to develop advanced production processes, lower the frequency of maintenances to improve production capacity. In addition to developing raw material and product shore tanks to increase production output and faster production flows, we are also progressively introducing AI technology, developing factory automation, moving towards realizing an unmanned factory. Concurrently, the command center is developing AI application technology and planning company's intelligent management systems, strengthening management performance, and establishing a base for smart petrochemical production. Core Land Development Business
23 The main actions of the land development business are to proactively plan and revitalize domestic land assets, and concurrently pursue opportunities in overseas markets. The relevant measures are described as follows: 1. Develop the existing land assets in Taiwan and promote related development projects in phases and regions CPDC holds lands in the 5th A special area and the 6th special area of the Kaohsiung Multifunctional Commerce and Trade Park. The Company will deploy related development plans in accordance with the Kaohsiung City Government’s promotion of the “Asia New Bay Area” and the relocation of the 205th arsenal. Prior to this, we will continue with land revitalization. For the land in the Xiande Section of the Cianjhen District of Kaohsiung City, which has been built for residential housing, the construction plan has been completed and the Kaohsiung City Council has agreed with the construction. It is expected to become a new target for Kaohsiung City’s next-generation residential housing1. 2. Development of overseas properties In response to new business opportunities arising from China's Belt and Road strategy and the rise of emerging markets in Southeast Asia, CPDC has set up subsidiaries in Myanmar, Vietnam, and India to actively explore large land areas with development potential, either by acquiring land for development or through strategic cooperation with existing but undeveloped projects. In Vietnam, Myanmar, or other Southeast Asian regions, CPDC will integrate organic farming to obtain petrochemical raw materials and establish petrochemical production bases (including agricultural and industrial areas) to drive residential and commercial development, with the ultimate goal of a sustainable, productive, living, and ecological smart city. 3. Sustainability considerations for land development In response to the government's policy of greening and energy conservation and urban development, we will not only enhance the development of large areas of land, but also uphold the concept of sustainable development and co-prosperity of the local community, with the goals of developing appropriate, safe, and smart building products through green buildings, carbon-absorbing civilization, and the integration of AIoT technology. In line with the international trend, we will also require partners to provide carbon footprint information, to attain green building and smart building certification, in an attempt to improve energy efficiency and to keep abreast with the international practices.
1 The Company announced in first half of 2021 to put out two land lots including the Xiande Section lot in this area to tender, which marks an important milestone and our first move in asset revitalization. 24 1.1.3 Business Model and Six Capitals Four Pillars of Planning for the future with Energizing the value chain through Strengthening social identity through Sustainable Smart green production sustainability governance communication caring Development Eight Aspects in Sustainability Risk Circular Green Value Chain Stakeholder Employee Community Sustainability Governance Management Production Transformation Cooperation Engagement Development Relations Development 1. Participating 1. Compliance 1. Renewal and 1. Anshun Site 1. Cooperation 1. Organization of 1. Employee 1. Quarterly in Domestic with IMO Improvement Contaminated with Plastic External Education and Large-Scale and 2020 of the Air Soil Center for Sea Communication Training, such Charity Event International Sulphur Pollution Remediation Waste Meetings such as Professional Project Sustainability Emission Monitoring 2. R&D Projects Recycling as Regular and Functions, 2. Donate Evaluation Limits for and Prevention regarding the Project Irregular Licenses, and Scholarships 2. Organizational Ships Equipment in High-Value 2. Development Review Learning after and After- True Value 2. Information Each Factory Production of Potential Meetings getting off school Care Assessment Security 2. Renewal and Process Suppliers and 2. Anshun work Funds to the Risk Improvement Technology Manage Community 2. Conduct Elementary Management of GHG 3. Projects Existing Engagement Production Schools near 3. Phase I and Emission regarding the Suppliers Plan Process Safety, the Anshun 2020 Main Phase II Reduction and Circular 3. Key Suppliers 3. NTU Chemical Hazard and Plant Action Projects Expansion Energy Economy at Visit Engineering Emergency 3. Summer Projects of Efficiency Each Plant Evaluation and Camp Response Internship for the Weiming Equipment at Annual Drills and Petrochemical Rudong Headquarters Evaluation of Other Training Class of Plant and Each Plant Transportation 3. Set up Unpaid Renwu High 3. Water Suppliers Parental Leave School Conservation Regulations and Water and Improve Efficiency Family Care Improvement Measures Projects in Each Plant
25 Market Orientation Pursuit of Green Excellence Business Effective Use of Talents Innovation
Care Excellence Core Values Business Model
Respect Innovation
Petrochemical Business Land Development Business CPL / Nylon Chips AN OPP Domestic Overseas Annual output Annual 203,423 203,797 2,151 (metric ton) Development 4 1 Projects (# of Market Share (%) 43 35 50 Projects) Revenue Mix (%) 38.5 41.8 1.7
1. S&P Global 1. Reduced the 1. Annual SOx 1. 26,056 1. Will be sold 1. 5 Engineering 1. 22,593 total 1. We hosted CSA score of impact of emissions metric tons on a inspection number of 152 charity 77, meet the shipping on reduction of 5 of vegetation fundraising meetings, 2 training events that minimum the metric tons carbon sink website, community participants cost a total of threshold for environment 2. Annual VOC 2. 69,751 which is information with average NTD 15.722 2020 Key the chemical and prevent emissions metric tons expected to be sessions, 2 city training hours million and Results and industry to ships from reduction of of completed in government of 199.81 involved 425 Performance enter the being 24 metric tons contaminated the second meetings were (hours/person) CPDC Dow Jones declared 3. Annual TSP soil half of 2021 conducted at 2. Formulated volunteers. A Sustainability unseaworthy emission treatment 2. Established 46 the Anshun and revised 8 total of 2,487 Index 2. Invested reduction of 3. Reduction of new suppliers Site safety and persons NTD 2.745 10 metric tons contaminated benefited 26 2. Achieved a million to 4. GHG area by 3. Saved NTD 2. The Anshun health related from the management renew and emissions 14.81 92.37 million Site procedures events grade of B- upgrade reduction of hectares with in total community 3. Over 230 2. “1314 in CDP information 7,399 tCO2 a reduction purchase engagement emergency Anshun questionnaire security 5. Non- ratio of 40% amount plans and drills were Neighborhood 3. Received the system renewable 4. Development 4. In 2020, we sponsorship conducted at Scholarship” Top 50 equipment energy source of optical conducted a activities three CPDC subsidized the Sustainable 3. Issue reduction of application total of 19 on- totaled NTD plants after-school Enterprise overseas 3,036,330,860 units site audits of 1.543 million 4. A total of 2 care classes of Award and depository MJ 5. 208.9 KLOE transportation 3. A total of 113 people Siangong and the Gold receipts 6. GHG of low suppliers and high school applied for Jhenhai Award for (GDR) to emission pressure communicated and college unpaid Elementary Corporate raise capital intensity of steam power with the rest students parental leave, Schools, with Sustainability of NTD 11.11 generation by phone and participated in and the a total Report in the 3.632 billion tCO2/ton per (waste heat mail the National reinstatement investment of TCSA unit of reuse) 5. Identified a Taiwan rate and NTD 320,000 product 6. Reduction of total of 179 University retention rate for the whole 7. Wastewater GHG risky suppliers Chemical were 100% year treatment emissions by with a total Engineering 3. Provided 4 plant 7,399 tCO2 purchase Camp summer treatment amount of internship volume NTD 2 billion positions for 1,191,050MT college 8. 8.Condensate students recovery graduating accounted for from the 14% of water Petrochemical consumption Class of of the entire Renwu High plants School Financial Intellectual Financial Capital Capital Capital Natural Capital Key Capital Intellectual Talent Capital Intellectual Manufacturing Natural Capital Intellectual Social Capital Talent Capital Impact Capital Social Capital Capital Capital Capital Social Capital Social Capital Social Capital
27 1.1.4 True Value Assessment Following the True Value Assessment of 2019, CPDC calculated the True Value in 2020 through 11 indicators based on the KPMG True Value methodology. According to the result, in 2020 CPDC integrated P&L was NTD 3,362,443 thousand, 2.90 times higher than EBITDA. This demonstrates our operational efforts in providing a positive impact on the overall environment and society at large. Comparing the Integrated P&L for the past two years, and looking at each item’s result of externality, the integrated P&L decreased in 2020 compared to the previous year mainly due to a drop in production and revenue as a result of the impact of the COVID-19 pandemic, as well as a reduction in overseas purchase amount of raw materials. However, this also resulted in a significant reduction in negative environmental factors such as GHG emissions, air pollution emissions, and water resources usage, and demonstrated our positive environmental management performance. (For the scope, description, and rate of change of each item, please refer to the True Value Assessment's Appendix)
1.2 Sustainable Development Overview 1.2.1 Framework of Sustainable Governance As a citizen of planet Earth, we embrace our corporate social responsibility and corporate resilience towards major risk as key goals in the transformation of CPDC into a green sustainable petrochemical enterprise. To imbue all CPDC employees with a common CSR DNA through the internalization of CSR and corporate sustainability factors, the CSR Committee was established in September 2013. The Chairman of CPDC serves as the chair of the CSR Committee while the President serves as the Secretary General. “Business Governance,” “Social Relations” and “Environmental Sustainability” were defined as the three key axes. The CSR Committee itself spans 22 departments and divisions. The Workplace Safety and Health Center together with the Corporate Relations Office of the Finance Division serve as the executive secretary for the promoting and running of Committee projects. The CPDC Board of Directors also successively formulates the Code of Corporate Social Responsibility and amends the CPDC Board of Directors Charter to elevate CSR promotion an explicit part of the Board's responsibilities. In addition, the CSR Committee is required to report to the Board at the end of each year on the results of the current year's implementation and to submit an
28 implementation plan for the following year. In order to normalize the operation of the CSR Committee and clarify the duties and responsibilities, and assessment methods, a draft of the CPDC Sustainable Development Committee Charter has been formulated in accordance with the Code, which will serve as a guideline for the future operation of the Committee and incorporate the Committee structure into the corporate philosophy.
CPDC Board of Directors Charter
CPDC Corporate Social Responsibility Best Practice Principles
29 CPDC CSR Committee Structure
Board of Directors Periodic reports Suggested feedback
CSR Committee Chair: Chairman Chen
Committee Secretariat Secretary-General: President Yu
Executive Secretary Occupational Safety and Environmental Protection Center／ Corporate Relations Office
Corporate Governance Environmental Sustainability Community Relations Group Group Group
Sustainable Development Giving back to the Energy and Climate Change Vision and Strategy community／Public Welfare Activities
Operations／Financial Risk Labor Rights／Code of Product Quality／Innovation and Performance Ethics
Purchasing and Supply Regulatory Compliance／ Green Process and Products Chain Management Information Disclosure
Labor Safety & Health／ Market and Customer Stakeholder Engagement Pollution Prevention and Analysis Survey Control
Environment and Community Engagement
Composition of the CPDC CSR Committee Corporate Community Relations Environmental Sustainability Others Governance Group Group Group Secretariat of Petrochemical Production Accounting Office Sales Office Board of Department Directors President’s Information Division Toufen Plant Toufen Plant Office R&D Center Dashe Plant Dashe Plant － Engineering Division Hsiaokang Plant Hsiaokang Plant － Financial Resources Human Resources Office Anshun Site － Office Joint Procurement Legal Counsel R&D Center － Office
30 Corporate Community Relations Environmental Sustainability Others Governance Group Group Group Raw Materials Corporate Relations Environmental Protection and － Procurement Office Pollution Prevention Center Investment Workplace Safety and － － Management Office Health Center Corporate Strategy － － － Planning Office Resource Development － － － Integration Office Land Development － － － Department
CPDC CSR Committee Accomplishments in 2020 CPDC CSR Committee Accomplishments in 2020 Environment Dimension (E) Submitted the CDP Climate Change questionnaire for three consecutive years. Review the performance of carbon management measures, and received the Management Grade (B-) Completed the 2020 CSR report, which is prepared in accordance with the GRI Standards and the Integrated Reporting (IR) Framework and verified by a third party Toufen Plant's CPL and Nylon received the ISO 14046:2014 Water Footprint Certification Statement The Dashe Plant and Hsiaokang Plant were awarded the Excellent Enterprise Award of the “Cleaning and Maintenance of Air Quality Purification Zone” in 2019 Hsiaokang Plant's CPL obtained ISO 14046: 2014 Water Footprint Certification Statement and ISO14067: 2018 Carbon Footprint Verification Statement The administration building of Hsiaokang Plant was awarded Green Building Certification - Bronze, and the environmental office and control building were awarded Green Building - Qualified Hsiaokang Plant obtained the Occupational Safety and Health Excellence Award issued by the Ministry of Labor
Social Dimension (S) CPDC received the iSport corporate certification from the Sports Administration, Ministry of Education Hold many public welfare activities, with a total of 425 CPDC employees participated and a total number of 2,487 people serviced, continued to build CPDC's volunteer culture
Governance Dimension (G) Voluntarily participated in the S&P Global Corporate Sustainability Assessment (CSA) for two consecutive years, obtained 77 scores and ranking 12th in the global chemical industry (PR 90), which is the lowest threshold for chemical industry players to be included in the DJSI World Selected as an S&P Global Sustainability Yearbook Member for 2021 and awarded Industry Mover, the only chemical company in Taiwan to receive this honor Participated in the 13th Taiwan Corporate Sustainability Awards (TCSA) held by the Taiwan Institute for Sustainable Energy, and won the Taiwan Top 50 Sustainability Award and Corporate Sustainability Report Award-Gold Award Extend the sustainable development strategy of CPDC, and establish the 2025 corporate sustainable development roadmap Annual green purchase amount: NT$14 million 2021 Corporate Social Responsibility Work Plan Promote the Company-wide sustainable performance KPI system by Roadmap of Corporate Development, strengthen the connection of department performance and sustainable development, and raise up the ESG performance of CPDC Implemented internal CSR training and organizational corporate true value assessment Perform context analysis and impact quantification for high-risk climate factors based on the TCFD
31 climate risk identification results Comply with FSC regulations and disclose information in accordance with Sustainability Accounting Standards Board (SASB) chemical industry standards Continue to participate in various domestic and international ESG assessments, such as DJSI, CDP, TCSA, etc. Continue to hold CSR activities, internalize the issues of environmental education, such as chemical engineering, environmental mutualism, energy saving and emission reduction
1.2.2 Sustainable Development Strategies and Objectives Following the passage of the Paris Agreement and the establishment of the United Nations Sustainable Development Goals in 2015, corporate values and responsibilities have expanded from a simple focus on the economic performance to the harmonization of the economic, social, and environmental aspects. The pursuit of economic performance by businesses is only meaningful if the environment and society are also sustainable and not starved for resources. With the rise of sustainability and climate risks, CPDC is also responding to the trend. In 2020, CPDC comprehensively updated its sustainable development strategy with the vision of "striving for green and ecological development, coexisting with the environment and society", proposing the “2025 Sustainable Development Goals” and the “2030 Sustainable Development Vision”. The “Four Pillars of Sustainable Development and Eight Aspects in Sustainability Development of CPDC” incorporating the 7 UN SDGs were also formulated to serve as the guidelines for our sustainable corporate development. In 2021, we will extend specific goals and action plans based on our sustainability strategy to achieve our sustainability goals and visions.
32 CPDC Sustainable Development Strategies 2030 Sustainable Striving for green and ecological development, coexisting with the environment and society Development Vision 2025 Sustainable Establish the foundations of green petrochemistry, greater interaction and cooperation with stakeholders Development Goals Four Pillars of Planning for the future in sustainability Enhancement in the resilience of the value Creation of social co-prosperity through Smart-driven circular transformation Sustainable governance chain through communication care Clever Development Prescience Dialogue Care Eight Aspects in Sustainability Inclusive Co-prosperous Sustainability Smart Production Circular Transformation Risk Management Value Chain Initiatives and Collaboration Governance Workplace Society Development Suppliers: understand supply Implement Continuously chain sustainability Implement positive effective improve corporate risks, actively Customers: communication and Promote smart Petrochemical business: integrated governance advocate to Continuously interaction with the production to Develop towards fine management of mechanisms based suppliers to improve customer Create a diverse, residents of the maximize the chemicals, promote the operational and on international improve their ESG satisfaction and inclusive, and plants/sites, and efficiency of use of circular/alternative emerging risks, best practices, performance and maintain long-term friendly integrate the industry, energy, water, raw materials, and including, achieving excellent enhance the relationships workplace government, and Connotation and raw material implement product environment, results in key resilience of the environment for academia to drive utilization and responsibility safety and health, sustainability petrochemical employees and sustainable minimize the Land Development: environment, competitions and industry the Company to development of the negative impact Revitalize land assets to business integrity, becoming a global Suppliers/Customers: Joint innovation and grow together petrochemical on the build a green, resilient, information benchmark for R&D in raw materials/products/processes industry and the environment and circular city security, financial, sustainable to maximize the efficiency of raw common good of and other governance materials/products/processes to enhance society emerging risks the circular economy of the petrochemical industry Scope Corporate Governance / Environmental Corporate Governance Corporate Governance / Community Community Relations Sustainability Relations SDG 6 SDG 7 SDG 3 SDG 8 SDG 5 Corresponding SDG 9 SDG 5 SDG 9 SDG 8 SDGs SDG 12 SDG 13 SDG 12 SDG 15 SDG 13 SDG 15
33 1.2.3 Key ESG Performance Category Item 2018 2019 2020 Total assets (NTD in Thousands) 89,704,954 96,468,490 104,909,990 Shareholder equity (NTD in 66,896,890 67,116,769 70,812,642 Thousands) Earnings per share (NTD) 1.59 0.61 0.21 Operating income (NTD in Governance 38,503,121 29,624,094 17,583,092 Thousands) Operating profit (NTD in Thousands) 3,075,082 (409,020) (1,812,878) Patents granted 7 9 9 Corporate Governance Evaluation ％ ％ ～ ～ (grade) 6 ~20 6% 20% 21% 35%
Actual Carbon Reduction (tone-CO2e) 24,479 35,173 16,405 Number of energy conservation and 37 43 39 carbon reduction projects Actual energy savings (GJ) 346,891 454,700 227,002
GHG emissions (tone-CO2e) 2,116,467.2 1,916,028 1,448,025 Energy consumption (KLOE) 200,666 205,906 117,719 Environment Water consumption (cubic meter) 11,640,432 10,663,005 7,338,770 Water discharge (ML) 1,337 1,315 1,163 General waste generation (metric 64,663.94 58,432.94 31,667 tons) NOx emissions (metric tons) 599 410 241 SOx emissions (metric tons) 169 156 56 VOC emissions (metric tons) 1,323 364 216 Volunteering(times) 331 208 425 Local engagement and funding 29,551,773 18,185,575 13,775,042 (NTD) Delivery of charitable services 10,183 4,802 1,947 (persons) People cultivated through industry Society 101 345 4 academia cooperation (persons) Funding of employee benefits (NTD) 47,885,037 38,327,694 34,552,926 Employee turnover rate (%) 11.68 19.13 15.26 Average hours of training per 56.9 51.5 47.2 employee (hour)
1.3 Operating Environment Analysis 1.3.1 COVID-19 Impacts and Responses In 2020, the outbreak of the COVID-19 pandemic caused the world a serious setback and also a test on how enterprises could minimize the impact brought by such an outbreak. The key to minimizing the damage lies on how to respond quickly and formulate relevant measures. CPDC has reviewed the Company's response strategies and measures to the impact of COVID-19 based on five aspects, including stakeholders communication, risk management, operation and resource allocation, governance, and business model, to ensure a more effective response to the risk and minimize the damage when a new infectious disease occurs in the future. The following are the three impact areas 34 of human resources, operations and business model, and supply chain that explain the risks CPDC faced in this pandemic, and the corresponding measures taken.
35 COVID-19 Impacts and Responses CPDC's Risks Response Measures Taken 1. Implemented preemptive deployment of pandemic prevention. In addition to the immediate implementation of split team arrangements and working from home, CPDC also prohibited employees from going abroad to reduce the Company's operational risk; we cooperated with the government's pandemic prevention policy, sent relevant pandemic prevention notice when 1. Potential risk of cluster infection in the plants necessary and activity reporting to ensure proper pandemic prevention measures 2. Overseas travel is restricted due to isolation and Human Resources 2. All manufacturing plants have formulated "COVID-19 Contingency Measures", focusing on pandemic prevention considerations, or an increase the three stages of "regular pandemic prevention", "community infection in the area" and in travel cost "confirmed cases in the plant". We have formulated relevant control measures for entry and exit management, health control in the plants, contractor management, environmental management, administrative operation management, etc., as well as assign staff to "work from home" so as to avoid or mitigate the spread of the pandemic that may cause shutdowns 1. Continue to deepen the real-time and comprehensive functions of the smart decision-making platform, enabling quick horizontal responses and assistance from the Group in response to the impact of the pandemic changes to improve the overall efficiency 2. Adjusted production plans and arranged for annual maintenance during production halt; at the 1. The overseas operations are affected by the same time, flexibly adjusted shipments to supply bulk customers and extended terms with pandemic and the staff must be evacuated contracted customers 2. Orders decrease from overseas customers or non- 3. Strengthened information security management such as carried out a comprehensive Operation and fulfillment of contracts, resulting in production vulnerability scan for all servers every six months and provided information security reports Business Model reductions, shutdown and increase in product and analysis inventories 4. Reduced non-essential investments and postponed or stopped proposals with long payback 3. Delays in plant construction or development projects periods to increase financial stability 4. Increase in information security risks 5. Urged the front-line units to keep an eye on market trends to invest in the production of melt- blown fabrics and the evaluation of NBR Latex (medical glove material) in a timely manner to increase profitability 6. Continue to develop high-margin products, such as optical components (OPP derivatives), multifunctional nylon materials, 5G materials, solvents for semiconductors, etc. 1. Delay in importing raw materials, which increases 1. The procurement of major raw materials should incorporate the risk consideration of late the cost of acquisition and causes the plants to arrival and adjust the procurement strategy reduce production or even stop production due to 2. Established safety stock for key materials and high-risk materials, and sign long-term Supply chain lack of materials, as well as delay in delivery contracts 2. The quality of products is filled with inferior 3. Increased the proportion of supply to domestic manufacturers and actively expanded the products due to the shutdown of overseas factories capacity of raw material storage tanks to diversify supply chain risks
36 1.3.2 External Environment Analysis 2020 External Impact Analysis Factor Event Impact Response 1.Increased uncertainty in Actively move towards the goal the industry. of consistent production of 2.The price of crude oil petrochemical upstream and US China Trade War fluctuates. The downstream downstream, in order to reduce market demand decreases, the impacts of supply and demand and the willingness to imbalance and decrease purchase goods decreases. production costs at the same time. 1.Taiwan has not 1.Continue to lay out the participated in the regional development of the real estate economic integration and market in Vietnam. RCEP signing, subject to 2.Accelerate the investment and the impact on construction of Jiangsu Rudong petrochemical industry Petrochemical Base to avoid Tariff Trade Barriers trade or tariff inequality. export tariffs. Economic 2.It will be hard for CPDC Factor to export products to China and beat the cost advantages of peers’ products. International institutional 1.Demonstrate CPDC's emphasis investors will refuse to on enterprise sustainability by invest in companies with participating in international poor ESG performance. In corporate sustainability Emergence of addition to the possibility assessment (DJSI and CDP). Principles for of deepening their negative 2.Actively follow and grasp Responsible image, such companies will international sustainable trends, Investment not be able to obtain strengthen relevant internal investment from policies, processes and actions, international investment and deepen ESG cognition across institutions. all departments. Kaohsiung Petrochemical Industry General Union established a self-help association If equipment cannot be on December 14, 2020 to Dashe Industrial Area updated, it is inevitable that continuously communicate with is downgraded to the plant will be closed, the government to downgrade to Class B Industrial affecting the Company's class A industrial area. At the Area operations, employees, and same time, we have requested the their family livelihoods government to formulate a sunset clause, so that manufacturers can Political respond to and relocate the Factor factory in a timely manner 1.In response to the government's circular economy concept, we Consumer preferences are reuse energy resources and reduce gradually turning to green waste generation by improving Government and recyclable products, the production process. promoting circular which will affect the R&D 2.Actively participate in crossover economy of chemical fiber customers cooperation in biomass plastics and the requirements for research and development, hoping CPDC products. to replace petrochemical plastics in the future.
37 Factor Event Impact Response 1.Actively promote high-value products and land development Will cause oversupply in business, and gradually reduce the Overseas peers the market, and obvious proportion of CPL, AN, PA6 competing to expand pressure will add on business production capacity product prices. 2.Weekly research to grasp the latest market prices and changes Industrial in industry capacity Factor The Information Office provided Implementation of alternative methods for remote measures such as work The outbreak of work, such as SSL and VPN, and from home and split team Covid-19 affected the network traffic was monitored arrangements resulted in an employees’ mobility by the network management increase in information team, so that services were not security risks interrupted 1.Climate change will 1.Continue to promote energy increase the probability of saving and carbon reduction extreme weather and projects. financial shocks. 2.Formulate CPDC's short-, Climate change 2.The implementation of medium- and long-term carbon driving the control on carbon emissions trading reduction goals. GHG emissions system according to the 3.Identify the transition risks and GHG Reduction and physical risks arising from Management Act will most climate change, and conduct likely cause an increase in financial shock assessments. operating costs. 1. Adjusted the Toufen Plant to Environmental one production line to balance Factor the supply and demand of As there was no typhoon in water for production and tap the summer of 2020, the water Water Resources Agency 2. Used the existing water had implemented a five-day The most severe storage facilities in the plant supply and two-day cutoff drought in 56 years and strengthened water policy in Miaoli since April conservation in each 6, 2021, and had to achieve production process and daily 15% of water saving at the lives, and activated anti- same time drought wells, as well as dispatched water trucks to carry water when necessary 1.3.3 Market Overview Currently, the major products of CPDC include AN, CPL, nylon chips and OPP. Other products include electricity, cyanate, ammonium sulfate, industrial sulfuric acid, and refined sulfuric acid.
Main Products and There Share of Sales in the Last 3 Years Product 2018 2019 2020 AN and by-products 31.20% 34.63% 41.80% CPL and by-products 60.14% 51.17% 38.50% Other sectors 8.66% 14.2% 19.70% Note: 1.Data Source: Consolidated financial report 2. Revenue of other sectors originates from subsidiaries
38 Current Industry Situation and Competition Raw materials and sources Propene (CPC Taiwan) Ammonia anhydrous (100% imported) Current Industry Situation In Taiwan, there are only two AN suppliers: CPDC and Formosa Plastics Corporation (Formosa Plastics). The Company has already expanded production capacity in 2010, 2011 and 2019, and the production capacity this year was 230,000 metric tons. Although the production capacity of Formosa Plastics was 280,000 metric tons, for the most part of its AN output is for internal use to produce ABS and AF products. In 2020, the total AN demand in Taiwan was about 460,000 metric tons/year, which was close to that in 2019. Unfavorable market conditions 1.AF: 2021 Annual AF Demand estimates are flat or slightly increased due to the recovery AN of the global economy. However, Polyester (polyester fiber) continues to be replaced by a small portion, which will slightly affect AN production and price stability. 2.China continues to expand its new capacity, causing the balance of supply and demand in AN industry and the impact on prices. 3.Continental conservation policy (such as tariff protection, or the inclusion of AN as a processing ban) has also had an impact on the operations of AN Asian producer, and China- US trade conflicts have also affected the mainland's demand. 4.China has reduced VAT to 13% since April 2019, and there are no tariff barriers to the export of competing factories in the future, and competition for export has intensified.
CPDC response Develop NBR (Latex) and AM markets which enjoy higher demand growth rates and explore other regional sales area such as south India and the Middle East to reduce the dependence on the Chinese market. These efforts are starting to show positive effects.
Raw materials and sources Benzene (CPC Taiwan, partially imported) Phenol (Domestic purchase and foreign imports) Cyclohexanone (100% imported) Ammonia anhydrous (100% imported) Current Industry Situation The Company is the only CPL supplier in Taiwan. The CPL capacity in 2020 was 400,000 metric tons, and production volume in 2020 of 173,000 metric tons, full supply to Taiwan without export, with domestic market share of 43%. In 2020, with downstream production CPL of textiles and polymerization capacity increased in China and the COVID-19 causing the demand decline around the globe, it is a difficult competitive environment for Taiwanese suppliers. In Taiwan, CPL consumption during 2020 decreased by 22% versus 2019, with apparent demand at about 350,000 metric tons/year. As the growth in the supply of CPL in mainland China decreased in 2020, the production of the CPL industry increased. In 2021, it is estimated that CPL demand in Asia will rebound as the pandemic is under control, but there still will be a large amount of active investment in new CPL production capacity. Due to the absence of a significant increase in demand in the Asia CPL market, the CPL business will continue facing the stringent challenge.
39 Unfavorable market conditions 1.CPL capability in China expanded extensively, and supply was higher than demand in 2013. As CPL suppliers were competing for market share, price competition and profit reduction has occurred. 2.After PTA capability expansion in Asia in recent years, excessive polyester has substituted for nylon thread at a lower price point and higher market share. This affects the development of nylon thread in the general textile market. CPDC response 1.Focus on the top-down supply chain environment and changes in the market situation, acquired the Douliu nylon chips plant that can produce 80,000 tons/year, increase downstream customers and differentiation, flexibly adjust sales strategies and support downstream industries to increase operational performance, and face competition together. 2. Reinforce cultivation of engineering plastics and film markets to reduce the risk of selling products to a single market - nylon textile market. Increase the flexibility of sales adjustments with the company's development and production of functional nylon chips.
Raw materials and sources Phenol (Domestic purchase and foreign imports) Ammonia anhydrous (100% imported) Current Industry Situation Nylon chip production in Taiwan decreased in 2016~2020, due to COVID-19 and decreasing sales in China caused by oversupply in China Nylon chip production. As supply capacity remains higher than demand, the amount of export is large. With the increasing self-sufficiency of China’s production capacity, Taiwan’s exports to China have been gradually reducing; sales in other regions increased year by year, gradually shifting its dependence on the China market. The Company produces nylon chips with CPL through vertical integration for downstream suppliers to produce nylon threads, engineering plastics, and nylon films. By producing and selling nylon chips, the Company maintains a link to the nylon market. To cope with segmentation and heterogeneous growth of PA6 downstream nylon products, we continuously adjust the structure of our downstream customers.
Unfavorable market conditions Nearly 55% of the downstream industries of nylon chips in Taiwan concentrate in clothing fibers with the export market focusing on China. Therefore, the concentration effect of a single industry and a single market is significant. CPDC response After the acquisition and capacity expansion of polymerization equipment, most Taiwan suppliers avoided price-driven competition with China, increased export to niche high- quality markets in Asia, Southeast Asia, and India. The Company also emphasizes material supply contracts with domestic Taiwanese customers to strengthen sales and is committed to the development of the engineering plastics, film, and fishing net wire market, which is a success.
Raw materials and sources OPP Cyclohexanone (internal production with a part supplied by Taiwan Prosperity Chemical Corp)
40 Current Industry Situation The Company in 2016 completed a pilot plant, and is the only supplier of OPP domestically, and is the 3rd largest producer in the world. This product is a vertically integrated, specialty product line, and uses Cyclohexanone as its main raw material. The R&D center developed catalytic converters, production design, and completed the plant construction. The main end product for this product line is flame retardant, optical materials, and antiseptic/sterilization purposes. Through the production and sales of OPP, we intend to further develop our operations in specialty chemicals, expanding OPP derivative products for different end markets. Through the differentiation of downstream products and growth potential, we continue to adjust our client mix, and further develop CPDC's entry into the specialty chemical market.
Unfavorable market conditions The main competitor has a market share of over 50% and enjoys preferential tax rates in major demand markets, which is unfavorable for Taiwan's special chemical products. CPDC response To avoid price-driven competition with China, the CPDC will develop OPP derivatives to enhance the market share for the Asia region and create new business market areas and customers, for example the Europe and the United States.
41 Chapter 2 Forward-Looking Governance 2.1 Corporate Governance Steady corporate governance is the foundation of sustainable business management. The implementation of the corporate governance system strengthens the role of the Board of Directors and boosts the effectiveness of the functional committees. The Company strives to enhance the transparency of information disclosure, protect the rights and interests of stakeholders and fulfill our corporate social responsibility. Every effort is made to prevent corruption and inefficiency by ensuring that business risks can be properly addressed and reduced through our internal control and audit systems. CPDC responds to the trust of shareholders and stakeholders through the above measures. In 2020, CPDC received a ranking of 21% to 35% in the Corporate Governance Assessment. In addition, CPDC also actively participates in and responds to the S&P Global Corporate Sustainability Assessment (CSA). Through governance-related questionnaires, the international governance trends and the expectations of institutional investors are taken as the direction of improving corporate governance.
Corporate Governance Best Practice Principles
Responsibilities and Performances of Corporate Governance
2.1.1 Framework of Governance Role of the Board of Directors CPDC formulated the "Rules for Election of Directors" to set out the nomination and voting process for directors. The rules ensure that the process for the selection of directors is open and transparent. Moreover, in response to the international trend, CPDC established “CPDC Corporate Governance Best Practice Principles” in which “CPDC Implementation of the Diversity Policy for Board of Directors” explicitly called for greater diversity in the composition of the Board of Directors by taking gender, age, nationality, cultural background, professional background, professional skill and industry knowledge into account.
42 Shareholders' Meeting
Audit Committee Secretariat Remuneration Board of Directors Audit Office Committee Shareholder
Services Office
CSR Committee
Chairman's Office Chairman
Project Control CEO Group Operational Management Group President's Office Audio/Visual President Command Center
R&D Administrative Business Land Petrochemical Production New Venture Center Resources Finance Department Trading Development Department Department Department Department Department
Center and Health WorkplaceSafety and Hea Pollution & Protection Environmental Counsel Legal Plant Qiaotou Office Procurement Joint Office Data Application Office Information Resources Human Office Office Corporate Relations Office Management Investment Office Accounting Resources Financial Office Overseas Production DajiaPlant Plant Toufen DashePlant Plant Hsiaokang Office Technology Engineering OverseasOffice Business SalesOffice Office Raw Materials Procurement Office Overseas Development Office Management Rules and Development, OperationOffice Project Office O Office Integration ResourceDevelopment Office Planning Corporate Strategy
verseas New Products verseas New Products
lth Center lth
Office
43 Rules for Election of Directors
CPDC Implementation of the Diversity Policy for Board of Directors
In January 2020, former chairman, Ko-Ming Lin, retired due to personal health factors. The Board of Directors elected Ruey-Long Chen, who has been CPDC’s independent director since June 2012, as the new chairman. Chairman Chen took over the office with effect from January 31, 2020. The Board of Directors is currently composed of 8 directors, including 3 independent directors. At present, the average term of the current directors is 9.9 years, and the age distribution is all over 50 years old. All directors have diverse academic experiences, among which director Jiun-Huei Guo, and three independent directors, Song-Nian Ye, Yun-Peng Chu and Wen-Yen Pan, have experience in chemical materials and land development related industries. Due to the characteristics of the petrochemical industry and its operating dynamics, the current composition of the board members are all male. In the future, CPDC aims to increase female directors and actively cultivate and find suitable talents and candidate for the next election term. Each director of CPDC has a three-year term of office. The directors' main functions and powers are to make decisions and approve material matters such as the Company's business plans and policies, investment and reinvestment decisions, review the budget, and appoint and discharge managers, etc.
2020 Board of Directors Profiles Professional Expected Actual Delegated Attendance Legal Title Name Gender (Academic) Attendance Attendance Attendance Rate representative Background Times Times Times Education: Bachelor's Degree in Applied The Core Ruey- Economics, National Chairman Pacific Co., Long male Chung-Hsing 13 13 0 100 Ltd. Chen University Experience: Minister of Economic Affairs Education: Bachelor's Degree in International Business, National The Core Ko- Chengchi University Chairman Pacific Co., Ming male Experience: Director 1 1 0 100 Ltd. Lin and President of Core Pacific - Yamaichi International (H.K.) Limited Education: Master's The Core Hwa- Degree in Water Director Pacific Co., Yeang male Resources Engineering, 7 7 0 100 Ltd. Shen Asian Institute of Technology
44 Professional Expected Actual Delegated Attendance Legal Title Name Gender (Academic) Attendance Attendance Attendance Rate representative Background Times Times Times Experience: Chairman of BES Engineering Inc. Education: Ph.D. in Law, Chinese Culture Director & BES Jiun- University Vice Machinery Nan male Experience: Vice 13 11 2 84.6 Chairman Co., Ltd. Bai Chairman of BES Engineering Corporation Education: Bachelor's Degree in Accounting, Jen Huei Jiun- Soochow University Director Enterprise Huei male 13 13 0 100 Experience: President, Co., Ltd. Guo Taiwan Power Company Education: Department of Electronic Machinery Sheen Chuen- and Information Chi Cultural Hui- Management, Lehigh Director and Ting male 7 7 0 100 University Educational Shen Experience: Supervisor Foundation of CINEMARK-CORE PACIFIC, LTD. Education: Master's Degree of Graduate Institute of China Sheen Chuen- Studies, Tamkang Chi Cultural Lian- University Director and Sheng male 6 5 1 83.3 Experience: Director- Educational Tsai General, Intellectual Foundation Property Office, Ministry of Economic Affairs, R.O.C. Education: Bachelor's Sheen Chuen- Degree in Electrical Chi Cultural Kuen- Engineering, National Director and Ming male Taiwan University 13 13 0 100 Educational Lin Experience: Chairman Foundation of Taiwan Venture Capital Association Education: Army Infantry Training Command Officer Song- Independent Reserve School - Nian male 7 6 1 85.7 Director Graduate Ye Experience: Director and Chairman of Unionwide Co., Ltd. Education: Ph.D. in Economics, University Yun- Independent of Maryland, U.S.A. - Peng male 13 13 0 100 Director Experience: Minister Chu with Portfolio, Executive Yuan, R.O.C. Education: Ph.D. in Wen- Independent Chemical Engineering, - Yen male 13 13 0 100 Director University of Wyoming, Pan USA 45 Professional Expected Actual Delegated Attendance Legal Title Name Gender (Academic) Attendance Attendance Attendance Rate representative Background Times Times Times Experience: Chairman, CPC Corporation Note: 1. The data is up to December 31, 2020. 2. Chairman Mr. Ko-Ming Lin retired, and Mr. Ruey-Long Chen was appointed as the new chairman on January 31, 2020. 3. Director Hwa-Yeang Shen resigned on June 23, 2020. 4. Director Mr. Lian-Sheng Tsai resigned, and Mr. Hui-Ting Shen was reassigned as the new director on May 25, 2020. 5. Independent director Song-Nian Ye took office through the by-election on May 28, 2020.
The Board of Directors regularly discusses major business decisions, company development strategies and ESG-related proposals, including business performance, market overview, major investments, occupational safety and health, energy conservation and carbon reduction, stakeholder communication, social welfare, etc. Besides, to continuously improve the directors' knowledge and ability on ESG and to connect with the international sustainable development trend, the Secretariat of the Board of Directors arranges directors to conduct relevant courses and encourages directors to participate in training and forums of external institutions every year. In principle, the Board of Directors holds at least one meeting every month. In 2020, the Board of Directors held a total of 13 meetings. In 2020, each director has participated in training for more than six hours (inclusive), which corresponds to the Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies. Courses related to ESG include "The Impact of the COVID-19 on the Economy and Industry and the Future Outlook", "Trends and Risk Management of the Digital Technology and AI", "Trends and Risk Management of the Digital Technology and AI", "Sustainability (including CSR) Report on the Latest Development Trends and Related Corporate Governance Practice Analysis", etc.
2020 Board Meeting Minutes
ESG Proposals Discussed at CPDC Board Meetings in 2020 Date Aspect Proposal Construction project of a leisure center for employees of the Company Social Adjustment of living and learning allowances for appointed managers stationed in Mainland China January 31 Investment project for the "construction of CHDM pilot plant" of the Environmental Company Amendments to the "Articles of Incorporation", "Rules for Election of Governance Directors" and "Rules of Shareholders' Meeting Procedures" By-election of an independent director of the 21st session of the Board February Governance Appointment of independent director Wen-Yen Pan as a member of the 4th 26 session of the Remuneration Committee March 27 Governance Distribution of earnings for 2019
46 Date Aspect Proposal Proposed appointment of the Chairman Mr. Ruey-Long Chen as the CEO of the Company Social Distribution of employee compensation for 2019 Investment plan of the “Construction Project of Fine Chemical Plant - Environmental May 13 Phase 1 Construction Project” Social Additional budget for the Anshun remediation project July 24 Governance Formulation of the "Procedures for Repurchase of Treasury Stock" Planning on the adjustment of the Company's organization in accordance September with Article 7 of the Articles of Incorporation, and amendment to the Governance 14 Articles of Incorporation Amendment to the "Remuneration System Management Guidelines" 2021 Internal Control Audit Plan Amendments to certain provisions of the "Organizational Procedures of the Audit Committee" and internal control procedures of the "Management of Audit Committee Operations" Amendments to certain provisions of the "Rules Governing the Scope of December Responsibilities of Independent Directors", "Regulations of Performance Governance 30 Evaluation for Directors", "Rules of Board Meeting Procedures" and internal control procedures of the "Management of Board Meeting Operations” Amendments to certain provisions of the "Organizational Procedures of the Remuneration Committee" and the internal control procedures of the "Management of the Remuneration Committee Operations"
Performance Evaluation and Recusal of Board of Directors Individual performance and contribution to the Company are also considered so that reasonable compensation can be provided. Performance evaluations and the reasonableness of compensation are all reviewed by the Remuneration Committee and the Board of Directors. The remuneration system is reviewed against actual business conditions and related regulations when necessary to achieve a balance between sustainable development and risk management. According to the " CPDC Regulations of Performance Evaluation for Board of Directors", internal board performance evaluation shall be conducted once a year. In the first quarter, the directors' self-evaluation and peer evaluation shall be regularly conducted, and the evaluation results shall be regularly reviewed. The Company's board performance evaluation shall be conducted by an external independent professional institution or a panel of external experts and scholars at least once every three years. The most recent external evaluation was carried out by the Taiwan Corporate Governance Association at the end of 2018. For the evaluation results, please refer to the 2018 instructions of internal and external performance evaluation for the Board of Directors. Internal and external board performance evaluations shall be completed before the end of the first quarter of the following year. Through regular assessments, board members keep pushing themselves and improve their effectiveness. The results of the internal evaluation in 2020 were all good.
2018 Instructions of Internal and External Performance Evaluation for Board of Directors
47 2020 Board of Directors Performance Evaluation Indicators for Self-Evaluation Questions Points Results 1.Participation in the operation of the Company. 2.Improvement of the quality of the Board of Board of Directors’ decision making. 3.Composition and structure of the Board 45 93 Good Directors of Directors. 4.Election and continuing education of the directors. 1. 5.Internal Control. 1.Alignment of the goals and missions of the Company. 2.Awareness of the duties of a director. 3.Participation in the operation of the Company. Board Members 4.Management of internal relationships 23 93 Good and communication. 5.The director’s professionalism and continuing education. 1. 6.Internal Control. 1.Participation in the operation of the Company. 2.Awareness of the duties of the Audit Audit Committee. 3.Improvement of quality of decisions 22 99 Good Committee made by the Audit Committee. 4.Makeup of the Audit Committee and election of its members. 1. 5.Internal Control. 1.Participation in the operation of the Company. 2.Awareness of the duties of the Remuneration Committee. Remuneration 3.Improvement of quality of decisions 18 98 Good Committee made by the Remuneration Committee. 1. 4.Makeup of the Remuneration Committee and election of its members.
The Rules of Procedure for CPDC Board of Directors Meetings explicitly require directors to maintain a high level of self-discipline. If there is a conflict of interest between a proposal before the Board and a director or the legal entity they represent, they should summarize the conflict of interest to the Board at the same meeting. If the conflict of interest may not be in the Company's interests, then they may provide their opinion and answer any questions but not take part in the discussion or voting. The director should also excuse him/herself during the discussion and voting and may not cast proxy votes for other directors. (Please refer to the 2020 Annual Report for more details on the recusal of directors when they have a conflict of interest with a proposal) The performance assessment range for the Board members and appointed managers is January 1 to December 31 each year, with performance evaluations conducted in the first half and the second half of the year. The performance evaluation of the chairman is based on the following-year business plan submitted by various departments at the end of each year. Relevant performance indicators include revenue, operating profit, product sales, project progress, talent cultivation, AI promotion, etc. The remuneration of the Chairman (full-time), Vice Chairman (full-time) and directors of CPDC is determined with reference to the remuneration, travel expenses and attendance fees of the domestic and overseas industries, and taking into account performance and risks, and in accordance with Article 28 of the CPDC Articles of Incorporation. According to Article 32 of the CPDC Articles of
48 Incorporation, the Company shall set aside no more than 2% of its annual profits as remuneration to directors. The remuneration of directors and employees shall be sanctioned by more than half of the attended board members, in which the number of attended committee members must be more than two-thirds of that of the total board members, and shall be reported to the shareholders' meeting.
CPDC Annual Report
Functional Committees The Remuneration Committee and Audit Committee were established by CPDC in 2011 and 2013 respectively to improve the efficiency of the Board of Directors, protect shareholder rights, and improve the transparency of corporate governance. The committees provide a check and balance mechanism by strengthening the role and function of the independent directors. In this way, the committees can make decisions in an independent and objective manner. The roles and activities of the functional committees in 2020 are summarized below:
Remuneration Committee Role Operation To regularly review the organizational The Committee is made up of 3 members. procedures of the remuneration committee and Current members are Yun-Peng Chu make recommendations for amendments (convener), Sung-Yong Chen, and Wen-Yen To set and regularly review the performance Pan. The original convener, Ruey-Long Chen, evaluation criteria, annual and long-term was relieved of his duties on January 31, performance objectives for directors and 2020. The proportion of independent directors managers, and the policies, systems, standards entering the committee exceeds 1/2 and structure of payroll compensation, and to The Remuneration Committee should be disclose the performance evaluation criteria in convened at least two times each year and was the annual report convened a total of 6 times in 2020 To regularly assess the completion of Amendments to certain provisions of the performance targets by the Company's "Organizational Procedures of the directors and managers, measure their Remuneration Committee" and the internal performance against the performance control procedures of the "Management of the evaluation criteria, and determine the details Remuneration Committee Operations" at the of their individual remuneration Board meeting on December 30, 2020 Audit Committee Role Operation To supervise the execution of Company Made up of 3 members. The Committee business consists of Yun-Peng Chu (convener), Wen- To investigate the Company's business and Yen Pan and Song-Nian Ye financial situation The Audit Committee must be convened once To audit books and ledgers every quarter and can also be convened as To audit the books and ledgers prepared by the necessary. A total of 12 meetings were Board of Directors for the Shareholders' convened in 2020 Meeting and report their conclusions to the Amendments to certain provisions of the Shareholders' Meeting "Organizational Procedures of the Audit Other duties and obligations required by law Committee" and the internal control and assigned by the Shareholders' Meeting procedures of the "Management of Audit
49 Committee Operations" at the Board meeting on December 30, 2020
2.1.2 Risk Management Operating Mechanism of Risk Management CPDC faces risks that are more diversified, more complex than before along with globalization and climate change. It has become a key issue to comprehensively capture and manage the risks that have a significant impact on the operation and profitability of the Company in a systematic manner. CPDC's Board of Directors is fully responsible for overseeing the Company's risk management structure, controlling the Company's risk management policies and reporting its operations on a regular basis. To reduce the impact of risk events on the Company's operation, CPDC established a systematic risk response policy and process through a PDCA process in accordance with the materiality principle and ISO 31000 Enterprise Risk Management framework by the end of 2019. CPDC identified a total of 26 risk issues in 5 major aspects, and invited all department heads to discuss risk response and management actions. In addition, we integrated the risk management plans of each department in 2020 and moved toward the goal of establishing a risk management system. In the future, we hope to establish a dedicated "Risk Management Committee" to comprehensively evaluate and manage material risks that impact the Company's operations and profitability with a systematic approach to risk. In addition, CPDC pays more attention to climate risk. Following the four major disclosure frameworks of Task Force on Climate-related Financial Disclosures (TCFD), the Company identified and managed climate change transition risks and physical risks, and conducted financial impact assessments for high-risk factors. In order to protect the privacy of customers, CPDC also implements the provisions of the Personal Information Protection Act, which stipulates that all information related to business information, transaction details and other information that involves the privacy of customers shall be compiled and filed by dedicated personnel, and that access to such information shall be approved and authorized in an attempt to implement the management of customers' personal information and strive to reduce the risk of data leakage to comply with the most basic legal requirements. (Please refer to Chapter 3 of the report for the climate risk)
CPDC Risk Identification Climate Change Strategic Risks Financial Risks Operational Risks Regulatory Risks Risks Restrictions from Credit Risks Centralized Legal disputes and Rising Energy Industry Procurement Risks litigation Prices Developments Raw Material Liquidity Risks Centralized Sales Stricter Carbon Tax / Price volatility Risks Environmental Energy Tax Regulations Investment Risks Market Risks Major Labor Costs of Air Lack of Water Safety Incidents Pollution Resources Mitigation - - Raw Material and Carbon Emission Product Restrictions and Storms and Floods Transportation Regulations Risks Risks - - Unethical conduct - Climate Change by staff and Impact to up and 50 Climate Change Strategic Risks Financial Risks Operational Risks Regulatory Risks Risks employees that downstream impacts company reputation - - Cybersecurity - Low carbon Risks technology transformation and increased costs - - Reputational Risks - Consumer Behavior Changes - - Infectious diseases - - and its operational impacts - - Talent Recruitment - - and Turnover Risk
CPDC Risk Main Topics Identification Procedures Phase Description Convening meetings with upper level management from all department to identify internal Consensus and external risks of the Company and to jointly establish awareness and declare Building determination to promote risk management mechanism After inventorying internal and external issues of the Company, the issues were divided into Risk five categories: strategic risk, financial risk, operational risk, regulatory risk, and climate Identification change risk, totaling 26 items of risk issues identified Risk Through expert evaluation, we surveyed ’management’s perceptions of the severity and Analysis and probability of risk impacts on Company operations, and identify five high-risk issues: Weighting industry development constraints, raw material price fluctuations, talent recruitment and turnover risks, tightening environmental regulations, and rising energy prices Targeting the five high-risk items, we reviewed response strategies regarding procurement, Risk HR, production, R&D, environmental protection, occupational safety and health and each Feedback unit of the three CPDC plants to develop a program for CPDC risk feedback and management actions
High-Risk Management Status Report Main Risk Importance and Main Topic Response Strategy Chapter Items Impact Response Expand” Petrochemical Core Domestic policy is Business” and” Land Development” not favorable for dual business line strategy. The further Ch1.1.2 Petrochemical Core Business, development, and Company through development of high-value emerging countries High Value Vision Restrictions products and further intelligent and China Products R&D Ch2.2.1 from Industry automation, establish a Petrochemical and Business Developments technological competitive industry is emerging Innovation Performance advantage. For land development, and adding capacity, and plan and revitalize existing land increasing Distribution assets, and proactively develop operational potential areas in overseas markets challenges for development In response to Continued attention to raw material Ch3.1 Raw Material China-US trade war, price movements, and establish new Circular Product Price oil price volatility, raw materials, increase raw material Economy Development Volatility and other market self-sufficiency. Through upstream Strategies uncertainty factors, and downstream integration, 51 Main Risk Importance and Main Topic Response Strategy Chapter Items Impact Response which impacts develop strategies to lessen the procurement costs impact from raw material price and profitability volatility Coordinating with new product In response to high development and innovation, value development, Talent strengthen talent recruitment and and the need for new HR Recruitment training. Through academia- Ch5.1 talent, recruitment, Development and industry cooperation, management Talent and risks from a and Movement associate trainings, continue to seek Development talent gap, which in Management Risk and find talents, while also building turn may impact our staff consensus towards business competitiveness transformation In response to Air Pollution sustainability related Establish a dedicated unit Control regulations, CPDC responsible for emerging Environmental may have to face environmental protection topics, Pollution increased capital planning, and pollution prevention Monitoring Ch3.3 Stricter expenditures for and performance monitoring. Each and Production Environmental environmental plant in accordance to our Management Environmental Regulations mitigation items or environment management system, Footprint increases in shall implement different Wastes manufacturing costs environment mitigation, Management to meet regulatory monitoring, and improvement tasks requirements In addition to inventory of energy Climate Ch3.2 usage status, establish a cross plant Change Energy use Climate energy saving and carbon mitigation Mitigation and transformation and Change team, establish annual goals for Adaptation Rising Energy rising prices is a Response energy saving, and aggressively Prices trend, which will Ch3.3.2 pursue energy saving projects. impact the cost of Energy Energy Through new technology production Management Management developments and manufacturing and Emissions upgrades, improve energy efficiency
Emerging Risk Management and Response In addition to the high-risk topics, CPDC is also aware of new emerging risk items, such as Intellectual property protection, infectious diseases and their operational impact, supply chain risks, climate change and information security risks. Below are explanations for these risks.
Emerging Risk Response and Management Management Direction and Emerging Risks Importance and Impact Response CPDC adopts advance deployment. CPDC is located in the middle and upper We provide sufficient anti-epidemic stream of the industrial chain. The epidemic supplies, implement personnel of diseases will cause economic recession segregation and working from home and weak downstream demand. Thus, systems, promote maintaining social Infectious purchasing demand will decrease and distance, and regularly investigate Diseases CPDC's revenue will be affected employees’ contact and travel Strong infectious power of diseases will history. In addition, we actively cause mass infection in CPDC’s plants. If promote digitalization, so that when many employees are infected, production the epidemic is severe, the meeting and operation will be forced to suspend can still proceed smoothly. 52 Management Direction and Emerging Risks Importance and Impact Response As for CPDC’s purchase amount, the raw materials and equipment costs account for 89.54% of the operating cost. The stable supply of petrochemical raw materials is the key factor for CPDC's sustainable operation According to the results of supply chain risk Supply Chain Refer to Ch4.1 Sustainable Supply assessment, more than 70% of suppliers Risks Chain Management lack environmental protection actions and sustainable governance and disclosure. Suppliers' lack of ESG awareness and establishment of relevant response actions will make CPDC expose in the risk of supply chain disruption CPDC is classified as a high carbon emission and high water consumption industry, and climate change exposes CPDC to transformation and physical risks. Based on the assessment of potential impact, potential vulnerability, and risk likelihood, the top three climate risks for CPDC are identified as "increasing GHG emissions", "drought due to changes in rainfall patterns", and "green product substitution", and the financial impact assessment is conducted under the assumption of "temperature rise not exceeding 2℃". “Increasing GHG emissions" may require CPDC to purchase additional carbon credits Refer to Ch3.2 Climate Change Climate Change or actively invest in low-carbon technology Response transformation (accounting for 60% of the total investment in low-carbon technology transformation), both of which increase operating costs. “Drought due to changes in rainfall patterns" may cause CPDC to face 3 major drought events, and face 4 weeks of level 2 water restrictions (20% reduction in supply) and 10 weeks of level 3 water restrictions (supply 5 days, no water for 2 days). This would result in a 45% reduction at the Toufen plant, a 50% reduction at the Dashe plant and a 25% reduction at the Hsiaokang Plant, with the Toufen plant accounting for 43% of the total revenue loss. CPDC has purchased a cloud A continuous increase in the number and sandbox information security frequency of cyber attacks, the substantial protection system to protect Information growth in ransomware viruses and important information hosts and Security Risk continuous involvement in attack data, and to ensure uninterrupted techniques lead to a drastic increase in the operations of the information risk of information security. backbone.
53 Information Security Risk CPDC has set up an Information Office under the Administrative Resources Department, which is divided into information system and network equipment management groups, and established an internal information security management strategy. It regularly provides employees with information security information on the Company's internal website, such as common email scams, etc. In 2020, when CPC, Formosa Plastics Group and other industry peers encountered cyber attacks, we also immediately announced relevant cautions and called on colleagues to change their passwords regularly and to contact the Information Office as soon as possible if there are concerns regarding suspected information security incidents. In recent years, due to the rapid development of digital automation technology and AI technology, continuous increase in the number and frequency of cyberattacks, substantial growth in ransomware viruses and continuous involvement in attack techniques, in order to protect the Company's important information service operations from being affected, CPDC has purchased a cloud sandbox information security protection system to protect important information hosts and data, and to ensure uninterrupted operations of information backbone. In view of the continuous development of network technology, SDWAN technology has become mature, and network equipment manufacturers have launched new architecture network equipment in line with the software-defined network. CPDC will continue to introduce the latest network equipment and management models in order to strengthen its network management capabilities, reduce network dedicated line costs, and flexibly utilize network equipment to build network services for flexible applications. In response to the outbreak of COVID-19 in 2020 that affected employees' mobility and communication, CPDC implemented split working at the beginning of the outbreak, with some employees working from home and isolated from home when traveling abroad and returning home. The SSLVPN license and the new video conferencing system have been added to the existing information architecture to meet the needs of remote-working colleagues.
2.2 Business Performances 2.2.1 Business Performance and Distribution Financial Performance The financial performance of CPDC over the last three years is outlined in the table below. For more information about the financial performance of CPDC in 2020 please refer to "Chapter 6 Financial Overview" in the 2020 Annual Report.
Financial Performance Over the Past 3 Years Year 2018 2019 2020 Operating Revenue 38,503,121 29,624,094 17,583,092 Gross Profit 5,176,159 1,627,580 38,228 Operating Profit (Loss) 3,075,082 (409,020) (1,812,878) Non-Operating Profit/Loss 1,601,868 2,272,492 1,916,654 Pre-Tax Profit (Loss) 4,676,950 1,863,472 103,776 Net Profit (Loss) 4,280,995 1,733,635 674,660 EPS 1.59 0.61 0.21
54 Year 2018 2019 2020 Economic value distributed to stakeholders Employee salaries and benefits 2,091,066 1,778,057 1,575,762 Income tax paid 253,419 395,955 38,574 Dividend 1 0.3 0 Community investment (contributions to the local 19,002 19,454 13,249 community) Note: 1. Currency Unit: NTD thousand 2. Community investment costs come from the parent-only financial report. Other financial disclosures encompass investment subsidiaries listed in the CPDC consolidated financial report
Remuneration CPDC's Chief Executive Officer (CEO) is concurrently served by the Chairman of the Board of Directors. The remuneration of the Chairman is evaluated by the Board of Directors considering both internal and external factors, while the CEO position is not remunerated. The remuneration (including salaries, allowances, and bonuses) of the President and Vice President of the Company is determined in accordance with Article 29 of the Company Act with reference to market conditions, qualifications, responsibilities, experience and risks, etc. We established a Remuneration Committee in September 2011. The procedures for determining remuneration are based on the overall operating performance of the Company, the future operating risks and development trends of the industry, as well as the individual's performance achievement rate and contribution to the Company's performance in order to provide reasonable compensation. The relevant performance evaluation and the reasonableness of the remuneration are reviewed by the Remuneration Committee and the Board of Directors. The remuneration system is reviewed from time to time in accordance with the actual operating conditions and relevant laws and regulations to strike a balance between sustainable operation and risk control of the Company. According to the Company's Rules for Distributing Bonus and Rewards and taking into account the performance of each business unit and individual, after being approved by the responsible supervisor, reasonable compensation will be given to the employees. The Company regularly participates in international salary surveys to calibrate salary levels and provide competitive salaries, and makes salary adjustments based on the Company's operations, price indices, economic growth rates, and individual performance. According to the “Working Guidelines for Distribution of Employee’s Compensation”, if an appointed manager (CEO, President, Vice President, Assistant Vice President, factory chief, manager) is involved in corruption, waste or intending profit for others, and such situation is deemed serious and drastically impacts the Company's interests, he/she shall not receive any employee compensation. Moreover, his/her bonuses issued in the past shall be recovered. In recent years, CPDC provides immediate rewards to outstanding colleagues. We mainly adopt cash payment as our incentive method and emphasize a quick and highly rewarding compensation system. Therefore, there is no deferred payment, and no stock has been used as a reward in recent years.
Major Investment Investment is a key element of sustainable corporate development. Environmental changes in the petrochemical industry led to CPDC recognizing that precise investment, research and
55 development form the cornerstones for business performance and sustainability. As the CPDC vision suggests, we value investment performance but also care and respect for humans and the environment. Both domestic and overseas major investments strictly abide by local laws and regulations related to labor, human rights and environmental protection, so as to avoid illegal risks and implement social responsibilities to the residents. If collaborative suppliers and contractors in investment cases need to sign a contract, they shall sign the Supplier CSR Commitment Letter and commit to abide by the United Nations Guiding Principles on Business and Human Rights and other international standards. We expect and require all of our suppliers to accept , implement and support a set of ESG standards in the hope that that our partners value ESG together with us. There was no child labor, forced labor, or violation of international conventions on human rights from any major investments made by CPDC in 2020. Our investments also delivered a range of benefits such as creating local employment opportunities, attracted new inhabitants, stimulated the local business economy and consumption, and boosted government tax revenues.
The Management and Domestic Land Assets CPDC owns land with significant commercial development potential located in the Kaohsiung Multifunctional Commerce and Trade Park, including 3.9 hectares of land zoned for commercial/residential use in Special Zone 6, and 12 hectares of land zoned for commercial use in Special Zone 5A. Land development has gradually grown into CPDC's second core business in recent years. Our Land Development Department is responsible for land acquisition, planning and development, the management of the commercial real estate, property management, as well as the construction and sale of residential developments. Revitalization strategy of land assets are also developed. CPDC's production and business (Plant) sites in Kaohsiung are managed by the Dashe Plant and the Hsiaokang Plant. The non-business sites are developed in the direction of construction and tender. The Land Development Department is responsible for the management of these land assets and for cooperating with the Kaohsiung City Government on the rezoning process. The business land in Toufen City, Miaoli County is managed by the Toufen Plant, while the non-business land is managed by the Land Development Department. The demolition is in progress and is expected to be completed by Q1 2021, and will be developed by way of joint construction and separate sale project. As for all the land in Tainan City, all of it will be handed over to Anshun Site for management, and the overall planning will be presented in accordance with the pollution remediation process and the Company's development vision. For related development processes and planning, please refer to 4.3.2 Remediation and Development of Anshun Site.
CPDC's Development and Management of Domestic Land Land Project Current status and future planning The old site between Zhongshan 3rd Rd. and Zhonghua 5th Rd. in Qianzheng Special Trade District, Kaohsiung City, covers around 20 hectares. The land has now been Zone 5A rezoned as “Special Zone 5A” of Kaohsiung Multifunctional Commerce and (4 to 4-9 lot Trade Park. The zoning is for mixed residential and commercial use. number, 8th sub- The urban land consolidation of the rezoned land was completed and the land was sections, transferred on December 1, 2019. commerce and CPDC completed the tendering process for part of the site on March 22, 2019. trade section) Approximately 4,000 ping of the rezoned land will be leased to Yikung Construction Co., Ltd. Such land has started constructing Decathlon flagship store
56 Land Project Current status and future planning on April 6, 2020, which is expected to open in Q2 2021. The remainder of the land is leased out at a later date in accordance with the Company's tendering plan. The site between Yixing 1st Rd. and 205th Arsenal in Qianzheng District, Special Trade Kaohsiung City covers approximately 7 hectares. The site has now been rezoned Zone 6 as "Special Zone 6" of Kaohsiung Multifunctional Commerce and Trade Park and (1, 2 and 7 lot is zoned for residential use. number, 5th sub- The urban land consolidation of the rezoned land was completed and the land was sections, transferred on April 22, 2020. commerce and After completion of the rezoning, the construction of commercial buildings or trade section) other revitalization methods will be evaluated depending on market conditions. The Company announced to put out Lot No. 7 to tender on April 15, 2021. Market research was conducted on the land asset of the total area of 0.15 hectares in the Xiande Section of Qianzheng District, Kaohsiung City. The development will be based on the progress of the neighboring 70th city rezoning project to maximize return. On July 30, 2018, the Board of Directors agreed to contract building development, planning and sales to Tao Zhu Construction Co., Ltd. (now renamed "Dingyue Development Co., Ltd."). A company announcement was also issued to Land of Xiande this effect. Section Building Bulk Ratio Bonus due to MRT Underground Passing was obtained in May 2019 and incorporated into the urban planning review. The building permit for the project was approved in September 2019, and the project was approved to commence in December of the same year. On April 15, 2021, the Company announced the termination of developing the Commercial Zone 4 real estate in Kaohsiung City, and planned to use the land for other purposes The Company's 100%-owned subsidiary, Ding Yue Development Co., Ltd., obtained the "International Sale of Permanent Ownership of Land of Core Pacific City" on September 25, 2019, and signed the contract in October 2019. Such contract was effective in November. The demolition has begun in March 2020 and is expected to be completed next Living Mall year. The construction of a smart green-building commercial building park is Development expected to begin after the Company acquires full land ownership and construction Project permit, with the estimated completion before 2027, and rental and operation will begin. After the construction of this park is completed, it is expected to set a new standard for business parks that emphasizes both intelligence and environmental protection. It will also make positive impact on the entire commercial building market.
Overseas Land Development In addition to the management and development of domestic land assets, CPDC is also actively looking for regions with investment potential overseas to build a new generation of industrial parks and create new carbon-absorbing townships. At present, CPDC has formally entered the land development business in a number of Southeast Asia countries. In addition to the completion of the Myanmar investment project, we established subsidiaries in Vietnam and India in 2018. While evaluating to invest in chemical factories and land development projects, we are now actively looking for large-area agricultural lands for growing biofuel crops, intending to accelerate the development of biomass plastics.
57 CPDC'S Development and Management of Overseas Land Land Project Current status and future planning The land is located in Yan Kin District, Yangon City, and a 12.5-story mixed-use building will be constructed in a joint construction with the landlord. On August 2, 2018, the selection of the construction company for the first phase Myanmar project was completed, and the construction started at the end of the same month. In Investment the future, after landowners get their parts back, the land will be partly sold and Project – Core leased. Pacific Parami The project progressed in accordance with the schedule and was completed on June Condominium 8, 2020. The certificate of occupancy (i.e., use permit) was obtained on December 8 of the same year. Interior decoration work is underway and the planning of the sample house has been completed.
2.2.2 Tax Management In order to respond to the international trend of tax governance, act honestly and fulfill the social responsibility of honestly paying taxes, we specially adopted the “Tax Governance Policy” for personnel and affiliated business to comply. CPDC’s main operating area is Taiwan. For the consolidated revenue in the past two years, the proportion from Taiwan is 71% and 86%, respectively, and the proportion of income tax paid in Taiwan is 100%.
CPDC Tax Overview Year 2019 2020 Region Taiwan Others Taiwan China Vietnam Myanmar Others Revenue 20,945,478 8,678,616 15,034,767 2,548,32 0 0 0 Proportion 71% 29% 86% 14% 0% 0% 0% Pre-Tax Profit 2,092,961 (229,489) 181,256 (133,143) 55,569 (2,472) 2,566 Income tax 395,955 0 33,542 0 5,032 0 0 paid Effective tax 7% 0% rate Cash effective 21% 37% tax rate Note: 1. Currency Unit：NTD Thousand 2. Since the taxable income in 2019 and 2020 are both negative, the effective tax rate was 7% due to the basic income tax payment in 2019; the effective tax rate was 0% in 2020 because of the income tax benefit.
Tax Governance Policy
Summary of Government Subsidies in 2020 Subsidy Type Frequency (NTD Thousand) Investment subsidy, R&D subsidy, and other types of subsidies 17 21,001 Financial incentives 4 42,576 Total 21 63,577 Total 21 63,577 Note: 1. Government subsidies include CPDC’s reinvestment companies. 58 2.3 Business Integrity 2.3.1 Business Integrity Regulations CPDC upholds the business principle of "integrity operation and management”. We adhere strictly to all regulations relating to the Company Act, Securities and Exchange Act, Business Entity Accounting Act, Political Donation Act, Anti-Corruption Act, Public Procurement Act, Act on Recusal of Public Servants Due to Conflicts of Interest, public listing or other business activities. CPDC established the “Company Business Integrity Code”, “Standards of Ethical Conduct”, “CPDC Procedures for Ethical Management and Guidelines for Conduct” and “CPDC Standards and Solutions of Ethical Conduct for Personnel at All Levels”, governing dishonest and unethical behavior, bribery, corruption, unfair competition, confidentiality, conflict of interest, political donations, and strengthening of ethical business management training. In addition to disclosing the CPDC ethical and business integrity philosophy and policy through internal regulations, annual reports, the corporate website and other promotional materials, product launch conferences, institutional investor conference and other external activities are also used to help suppliers/contractors, customers, other agencies and personnel understand the ethical management concept and rules. These serve as a guide for everyday business interactions at CPDC and the implementation of CSR.
Company Business Integrity Code
Procedures for Ethical Management and Guidelines for Conduct
Standards of Ethical Conduct
Employee Code of Conduct CPDC introduced the "Non-Disclosure Agreement" and "Employee Conduct Policy" to regulate fair trading, conflicts of interest, insider training, intellectual property rights, confidentiality and non- compete clauses. When new employees first report for duty, they are required to understand and sign two declarations stating that they will obey laws and regulations governing the protection of trade secrets. They also guarantee that they will not infringe on the intellectual property rights of other people or violate company rules. The signing of the declarations enhances the professional ethical standards of employees. Integrity is also introduced to their routine work and processes.
Employee Conduct Policy
59
Education and Training on Ethical Business Management Orientation training is organized by CPDC for new employees. Ethical business management is incorporated into the curriculum with internal and outside instructors invited to teach new employees. At the same time, the "Procedures for Ethical Management and Guidelines for Conduct" require CPDC to undergo at least one ethical business management education or training session every year. In 2020, internal and external education and training related to integrity management issues (including relevant courses on integrity management regulations compliance, prohibition on insider trading and internal control) were held for all operating locations (including Myanmar and Vietnam), with a total of 1,400 employees undertook 1,167 personnel hours of education and training. Education and training helped employees gain a full understanding of CPDC's ethical business management policy, preventive programs and the consequences of unethical behavior. No violation of integrity management and ethical behavior occurred in 2020.
Political Donation CPDC has rules that ban illegal political donations and for making political donations. Employees are banned from making direct or indirect donations to political parties, organizations engaged in political parties, or individuals. Political donations may not be used to secure business benefits or a competitive edge. No political donations were made by CPDC in 2020.
Whistleblower System and Protection CPDC has a "Whistleblower System" and "Whistleblower Incentive and Protection Measures" in place. Employees and outside personnel are encouraged to actively report any unethical or illegal behavior. If a stakeholder discovers that an employee is engaging in illegal or improper behavior that may impact the rights of other people or the company, or if they intend to exploit their position for improper gain, they may submit a complaint in writing, by phone or through e-mail stating who, where, when, what and how along with any supporting information to the Audit Office of the responsible unit. The Audit Office did not receive any complaints in 2020. CPDC and personnel assigned to handling complaints should investigate and report on the matter in a fair and impartial manner. The whistleblower should be protected against retribution or improper treatment. Confidentiality should be maintained throughout the entire process. Dedicated hotline: 02-8787-1003 Whistleblower Email: [email protected]. In addition, for investors, suppliers/contractors, customers, local residents and employees, the Stakeholder Area on the CPDC website provides dedicated contact with names, direct lines and email for making complaints or submitting feedback.
The Stakeholder Area of the CPDC Website
60 Procedures for Handling Improper Benefits If Improper Benefit is Suspected
Work-related interest does not Work-related interest does exist exist
If unable to return, then Return or reject, notify deliver to the relevant direct superior and the Can be accepted company unit within 3 days relevant company unit
If return, accept upon payment, confiscation, donation to Should be reported to the charities or some other suitable advice is suggested by the direct superior within 3 days relevant unit, notify the competent supervisor for approval before and the relevant company unit implementing the advice notified if necessary
Comply with regulations and respond to domestic and international initiatives CPDC actively participates in and supports important standards or advocacy in Taiwan and internally. We have also joined petrochemical, business and trade-related associations to stay in touch with industry peers and stay on top of the latest trends. Through associations' suggestions and opinions on the current regulations and policies, CPDC is aware of risks and opportunities well so that we stay competitive. For domestic and external advocacy, CPDC actively supports the government's energy conservation and carbon reduction policy by participating in the Voluntary GHG Reduction Plan of the MOEA Industrial Development Bureau to promote the reduction of GHGs. For product safety and environmental risk control, in addition to continuing to promote domestic/overseas certification on quality and environmental management, CPDC also complies with the requirements of the EU Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) directive as well as other related domestic guidelines. In addition, for the re-zoning issue of the Dashe Petrochemical Industry Zone, CPDC and other petrochemical companies jointly established the "Dashe Industrial Area Sustainability Working Group" to continue communicating with the government, local elected representatives and nearby residents. Attention was drawn to the continuous and effective improvements to industrial safety and environmental protection throughout the Dashe Petrochemical Industrial Area when appropriate. (Please refer to 4.3.1 Community Communication for the External Communication by Dashe Industrial Zone)
2020 CPDC Donations and Expenses 2018 2019 2020 Policy Lobbying 10,906 10,853 9,719 Political Contribution 0 0 0 Association Participation 5,535 4,393 3,731 Others 52 103 99 Total 16,493 15,349 13,549 Note: 1. Unit: thousand
61 CPDC's Participation and Investment in Association in 2020 Investment Association Name Participation 2018 2019 2020 Topics Executive Petrochemical Industry Association of Taiwan Board 240 240 240 Member Petrochemical Board Taiwan Synthetic Resins Manufacturers Association 168 168 168 Production Member Chinese Petroleum Institute Member 5 5 5 Taiwan Institute of Chemical Engineering Member 20 50 50 Taiwan Chemical Industry Association Member 31 200 200 Board Cross-Strait CEO Summit 300 386 100 Member Corporate Taiwan Association of Corporate Governance governance Member 20 10 10 Professionals Taiwan Stock Affairs Association Member 16 17 13 Taiwan Chamber of Commerce & Industry Member 8 8 8 Chinese National Association of Industry and Member 20 20 20 Commerce, Taiwan Kaohsiung Chamber of Industry Member 54 56 54 Local Miaoli County Industrial Association Member 24 24 24 Communication Toufen Industrial Park Business Association Member 7 7 7 and Cooperation Kaohsiung Linhai Industrial Park Business Member 10 10 10 Association Dashe Petrochemical Industry Park Association Member 10,483 10,262 9,416 Board Kaohsiung Commerce Development Association - 80 80 Member Taiwan Technology Industry Legal Officers Member 2 2 2 Intellectual Association Property Taiwan Administrative Law Association Member 5 5 5 Protection Taiwan Association for Trade Secrets Protection Member 0 60 60 Chinese Arbitration Association, Taipei Member 9 9 9 Taiwan Safety Council Member 20 20 20 Taiwan Responsible Care Association Member 190 190 190 Miaoli County Nurses Association Member 1 1 1 Taiwan Association of Occupational Health Nurses Member 1 1 1 Occupational Regional Defense Organization for Underground Member 3,182 2,037 1,416 Safety and Health Pipelines of Kaohsiung City Kaohsiung City Dashe Industrial Zone Joint Fire Member 1,465 1,369 1,334 Brigade Association for the Safety of Liquid Ammonia Member 12 18 6 Transportation Workers, Taiwan Employment relations Miaoli County Employment Relation Association Member 6 6 6 management Taiwan Cogeneration Association Member 20 20 20 Equipment and Taiwan Boiler Association Member 3 3 3 Chemical Pressure Vessel Association Member 5 5 5 Management Taiwan Acid and Alkali Industries Association Member 60 60 60 Ammonia Anhydrous Association Member 6 0 6 Total 16,493 15,349 13,549 Note: 1. Unit: thousand
2.3.2 Response to Major Regulatory Compliance Incidents Adherence to all relevant environmental protection, industrial safety, labor health and product quality regulations is the fundamental goal of all production and operational activities to minimize the impact of our daily business operations on the surrounding environment and the community.
62 Facing penalties, CPDC accepted it with sincerity, and immediately held internal meetings to propose improvement measures for the deficiencies. The relevant corrections have been implemented, and some have been reviewed and approved by the competent authority. In the future, CPDC will continue to replace old and worn equipment and strengthen employee education and training in order to prevent further violations. In addition, a total of 9 employees with disability were recruited in 2020 to provide suitable and safe work and fulfill social responsibility.
Penalties and Fines Against CPDC in 2020 Number of Amount of Aspect Reason Penalties Fine (NTD) Social 1 Violation of the Labor Standards Act 100,000 1.The VOC test value of the waste transported by the resource recovery vehicle exceeded the standard 2. Abnormalities in the balance of waste disposal reporting Environmental 5 3. Abnormalities in the application for extension of 396,560 waste treatment permit 4. Black smoke from FLARE 5. Seawater pond B of the Anshun Site failed verification inspection Note: Regarding the "Decathlon Kaohsiung Flagship Store" case in 2020, according to the contract, Yikung Construction Co., Ltd. acting as the builder leased the land from CPDC for construction, and then subleased to Decathlon. Therefore, the actual actor is Yikung Construction Co., Ltd. The Company assumes the responsibility of fines merely being the owner of the land asthe name builder. The violation of water runoff by Yikung Construction Co., Ltd. was not intentional. The company had already obtained a construction license and had filed a water runoff reduction plan. As such incident occurred during the course of hypothetical works and site preparation, it was considered by the Environmental Protection Bureau to be in violation of the law and fined NTD42.5 thousand.
Reason and Total Amount of Serious Fines Imposed Against CPDC in 2020 Penalized units Reason Main Deficiency Improvement Amount of Fine On June 16, 2020, the Department of Labor, Taipei City Government conducted an inspection and found that colleague Guan from the Violation of CPDC paid back wages to Legal Counsel had 28 hours Article 24 of the colleague Guan on June Taipei Office of untaken compensatory time 10 "Labor 29, 2020 immediately after off at the time of the Standards Act" the inspection. resignation on May 9, 2020. CPDC had paid insufficient wages for untaken compensatory time off at the time of resignation. On April 13, 2020, the 1. Set the high propylene evaporator in the temperature/high flow AN2 plant was emptied. The alarm at Flare to determine Violation of AN staff manually opened the if the propylene has been Article 32 of the Dashe Plant gate valve of the pipeline by completely replaced with 10 "Air Emissions about half thread and nitrogen. Control Act" discharged the propylene to 2. Revise the SOPs and Flare. The colleague at the prepare teaching materials other end did not release for the incident to enhance
63 Penalized units Reason Main Deficiency Improvement Amount of Fine enough atomized steam, staff education and training resulting in incomplete so as to improve the combustion and black smoke. responding capability of CPDC later received the staff. ruling on May 26, 2020.
On July 20, 2020, the CPDC prepared Environmental Protection improvement measures for Bureau of Tainan City the unqualified sites and Government performed the Violation of the submitted an improvement sampling verification of the checkpoint plan. The Environmental bottom sediment of the specification of Protection Bureau of Anshun Site Seawater Pond B. Later on the "Anshun Tainan City Government 20 September 21, 2020, a letter Site approved the improvement was sent to notify that some Remediation plan at the review meeting of the sampling results did not Plan" on September 23, 2020. meet the remediation The improvement project objectives, and administrative is completed within 8 penalties were imposed. months. Note: 1. Unit: NTD ten thousand 2. Only fines over NTD 100 thousand were included due to materiality
64 Chapter 3 Smart Production Note Note: The data and performance disclosed in this Chapter are based on the three CPDC plants (Toufen Plant, Dashe Plant, and Hsiaokang Plant). The data from the Taipei Office, Douliou Plant, Qiaotou Plant, and Anshun Site will be included later, depending on the completeness of the data.
3.1 Product Development Strategies 3.1.1 Smart Production CPDC began promoting the intelligent production program at the end of 2016. Through cross- departmental integration and systemic review, we promote intelligent production through five aspects, including automated inspection, intelligent control, real-time monitoring, smart transportation, and preventive maintenance, with Industry 4.0 as the direction and unmanned factories as the goal. CPDC's intelligent projects were implemented in two phases. The Company has invested a total of NTD 647 million to promote 69 intelligent projects and completed the infrastructure of intelligent production, including process data, access control (including contractors), transportation and storage management, operation environment monitoring, power monitoring, and other systems, with an annualized real benefit of NTD 122 million. We will formerly introduce an intelligent management system in 2021 and activate unmanned factory operations while increasing production output, reducing consumption, and decreasing business risks.
Real and potential annualized benefits of each aspect No. of Amounts Annual benefits (NTD thousand) Aspect Projects (NTD thousand) Real Potential Automated inspection 13 95,519 51,446 13,503 Preventive maintenance 6 154,041 30,020 4,328 Intelligent control 32 212,276 39,834 19,084 Real-time monitoring 11 120,169 - - Smart transportation and storage 7 65607 863 14,367 Total 69 647,612 122,163 51,282
3.1.2 Green Innovation and Development Innovation and R&D are the compasses of CPDC to create competitive differentiation and move towards the blue ocean. The research and development center was established by CPDC in 1996 and the R&D team now has hundreds of people. Through the core technologies of catalyst, synthesis, polymerization, composites, and multifunctional process design, CPDC introduces research on new energy, green environment, recycled economy materials, and biodegradation to develop unique high value fine chemicals, enhance competitiveness, and create the second core of petrochemical business. At the same time, we build plants to commercialize high value-added products (Qiaotou Plant, fine chemical plants, etc.), strengthen the integration of upstream and downstream raw material supply chain, create greater value, and enhance the overall competitiveness of CPDC.
Functions and Services of R&D Center Derivatives New Technology Core Technology Energy Efficiency Development Development Catalyst Development AN Derivatives New Energy Research Hydrogenation Process Technology
65 Derivatives New Technology Core Technology Energy Efficiency Development Development Environmental Phenone Hydrogenation Synthesis Technology CPL Derivatives Protection Green Process Process Development Polymerization Cyclohexanone Circular Economy Special Chemicals Technology Derivatives Materials Development Material Composites Biochemicals Polymer Derivatives - Technology Development Multi-function Process Biodegradable Materials - - Design Development
CPDC Product Green Innovation and R&D Strategy Potential/Established Innovative Green R&D Strategies in response to Product Life Cycle Environmental Impacts Impacts The petrochemical industry Use raw materials with a lower environmental relies heavily on energy and footprint, R&D of biomass raw materials, and fossil raw materials. The gradually reduce the reliance on fossil raw production, transportation, and materials Supply and Use of use of raw materials have an Promote green procurement within the Raw Materials impact on the environment, enterprise, give priority to purchasing products including a higher carbon with environmental labels, and support footprint and water footprint manufacturers who invest in green than other materials. manufacturing Improve existing process technology and introduce intelligent production management to reduce production costs Improve production efficiency, reduce the use of raw materials, water and energy resources, Process and reduce the environmental footprint improvement Promote circular economy to produce more products with the same amount of energy and The petrochemical industry resources used has the characteristics of high Collaborate with external partners and research energy and water institutes to shorten R&D time and improve consumption, which requires a production efficiency large amount of energy and Develop related products and derivatives from water resources in the existing processes, capture the advantages of manufacturing process raw materials, and strengthen the integration of upstream and downstream raw materials supply Production chain Manufacturing and Develop high value, green economy products Development with market development potential and expand product chains, such as specialty chemicals, circular economy materials, biodegradable materials, etc. Promote local procurement to reduce carbon emissions from product transportation Conduct regular transportation safety Product Carbon emissions from management assessments of transportation transportation product transportation contractors to avoid environmental and social impacts caused by the transportation processes (please refer to 4.1.1 Profile of Supply Chain Management) Product waste Waste generated after Promote circular economy and process recycling, reuse, transportation or use of upgrading to reduce by-products and waste 66 Potential/Established Innovative Green R&D Strategies in response to Product Life Cycle Environmental Impacts Impacts and treatment products Improve product quality and durability, product recycling and reuse, and extend product life cycle Recover product packaging materials for recycling (please refer to 3.1.3 Use of Raw Materials)
In line with the government's policy of promoting high value petrochemicals and investing in Taiwan to promote the prosperity of local industries and increase job opportunities, CPDC built the Qiaotou Plant in Kaohsiung and invested in a fine chemical plant in Miaoli in 2020. The construction cost of the Qiaotou Plant is approximately NTD450 million, with an estimated annual production capacity of 9,000 tons of engineering plastics. In the face of the increasingly challenging global market, after the addition of the Qiaotou Plant, CPDC will accelerate its own production lines and materials development to complete the planning of upstream and downstream integration of the industry. For the direction of circular economy materials, we have achieved the concept of corporate sustainability. By 2020, we have developed a series of recycled industrial plastic products using ABS, PP, and PA6 recycled materials, with each product containing more than 20% recycled materials. At the same time, we have also developed high-flowing material specifications, which help to reduce customers' processing time and efficiently lower energy consumption. In the future, we will actively research and develop and move into high value-added fields. We plan to invest NTD 6 billion in the construction of the fine chemical plants by phases, with future production items, including OPP downstream optical derivatives, glycol series monomers, and multi-purpose nylon, which will help CPDC enter the high-end optical application market, key additives for coatings, etc. It can be widely applied to co-polyester products in combination with the Company's own polymerization technology to expand to a richer and more diversified downstream product line, demonstrating the results of vertical integration of CPL supply chain and continuously accumulating operational capacity. Approximately NTD 442 million was invested by CPDC in R&D-related activities (including costs and capital expenditure) in 2020. 9 new patents were also obtained bringing our effective patent portfolio to 187 patents. Our R&D capabilities are therefore continuing to increase and gather steam. CPDC began introducing the Taiwan Intellectual Property Management System (TIPS) in 2010, which is supported by the MOEA Industrial Development Bureau, and was TIPS-certified, so as to create, maintain and use the Company's intellectual property to make the greatest benefits to the Company. The president is responsible for the performance of the Company's intellectual property management, and the supervisors at all levels have the same responsibility for the units they lead. They require personnel to work together and aim to increase the number of annual internal patent examinations to more than 5 cases, while continuing to grow, progress, and innovate.
R&D Spending and Patents Acquired in the Past 5 Years Year 2016 2017 2018 2019 2020 Unit (NTD thousand) 198,273 236,348 335,436 401,655 442,279 New Patents Granted 11 8 7 9 9 Expired or Abandoned 0 0 2 1 12 Patents
67 Year 2016 2017 2018 2019 2020 Cumulative Patents Granted 170 178 183 191 187 and Maintained
3.1.3 Use of Raw Materials CPDC’s use of raw materials mainly comes from the materials for producing main products and services. Due to industrial characteristics, the products are mainly delivered by tank trucks, and the recycling of product packaging materials is mainly wood pallets. Since wood pallets have a service life, those that cannot be recycled are disposed of by customers. The annual recycling ratio is maintained at around 70%.
2020 Bulk Raw Materials List Raw material items Weight Phenol 147,412 Ammonia 393,955 Non-renewable Coal 92,334 material Propylene 207,988 Sulfuric acid (including oleum) 195,457 Renewable Water 5,247,098 materials Nitrogen 7,780 Note 1. Unit: MT 2. Water resources include tap water (3,758,982 MT), pure water (905,131 MT) and ultra-pure water (582,985 MT).
Proportion of Renewable and Non-Renewable Materials Used in the Past 5 Years 2016 2017 2018 2019 2020 Non-renewable 13.58% 12.68% 12.51% 11.49% 16.10% material Renewable 86.42% 87.32% 87.49% 88.51% 83.90% materials
Reclaimed ratio of renewable products and their packaging materials in the past 5 years Product Type 2016 2017 2018 2019 2020 Wooden pallets 71% 67% 72% 68% 69%
3.2 Climate Change Response Climate change issues have continued to heat up at the international and regional levels over the years. The passage of the Paris Agreement at the end of 2015 made climate change an issue that national governments and top international enterprises must now face. Active management and proactive response have been adopted by CPDC in response to climate change and risks under our vision of green petrochemistry. CPDC is also following the mainstream approach of making mitigation and adaptation the two key axes of development for climate change response strategies in order to effectively respond to the challenge and take advantage of its business opportunities. As a leader in the petrochemical industry, CPDC must step up to the plate on climate change. CPDC has long held ourselves to the highest standards by continuing to introduce international management standards aimed at improving energy management efficiency and resilience to climate 68 change. In addition to the introduction of the ISO 50001: 2011 energy management system at three production plants and getting third-party certification, we are in the process of ISO 50001:2018 certification renewal in 2021. In addition, GHG inventories were conducted in accordance with the ISO 14064-1: 2006 specification with guidance at the organization level for quantification and reporting of GHG emissions and removals at the three CPDC plants. Carbon reduction targets were then set based on the results of the inventory. The inventory of energy consumption was used as the starting point for a reduction plan that is gradually developed into climate change action across multiple domains.
3.2.1 Climate Change Mitigation For climate change management, CPDC started by tracking regulatory changes through the Environmental Protection and Pollution Control Center so that response strategies can be developed. At the same time, we are collecting domestic and overseas leading energy-saving and carbon- reducing technologies and provide technical support and experience sharing. For climate change mitigation, led by the president, we set a cross-plant Carbon Reduction Promotion Team to promote energy-saving and carbon-reduction project and hold energy-saving and carbon-reduction meetings once every quarter. Toufen Plant, Dashe Plant, and Hsiaokang Plant propose annual energy-saving and carbon-reduction plans for the following year in the 4th quarter of each year, which will be put into practice after approval by the board of the directors. In addition, CPDC instructs the secretariat team to track the energy consumption, GHG emissions, and reduction benefits of the 3 plants, and regularly review the relevant management policies.
Organization of the CPDC Carbon Reduction Promotion Team President ↓ Secretariat (Petrochemical Production Department, Occupational Safety Center, Environmental Protection Center, Corporate Relations Office) ↓ Toufen Plant Dashe Plant Hsiaokang Plant Technical Team Technical Team Technical Team Environmental Team Environmental Team Environmental Team
In line with the government's GHG reduction target, each plant's annual energy-saving and carbon-reduction target is "The actual carbon-reduction and energy-saving benefit of the new project must reach 2% of its base year carbon emissions or energy use". Carbon reduction is based on the GHG emissions of the three CPDC plants in 2005, and energy saving is based on the energy consumption of the 3 plants in 2008. In 2020, the actual energy saving for both the Toufen Plant and the Dashe Plant reached the target of reducing the annual energy consumption by 2%. Only the Dashe Plant met the target for actual carbon reduction, while the other two plants failed to meet the target due to the impact of the COVID-19 pandemic on the capacity operating rate.
"Actual" Energy Savings and Carbon Reductions at Each CPDC Plant Over the Past 5 Years
69 Base Year Plant Item 2016 2017 2018 2019 2020 2% Target Energy 89,471 33,627 35,133 142,490 180,372 93,538 Toufen savings Plant Carbon 18,585 5,027 2,875 11,962 14,895 6,697 reduction Energy 34,531 7,945 29,937 36,014 115,344 81,838 Dashe savings Plant Carbon 5,503 1,348 1,711 2,180 6,958 6,594 reduction Energy 58,856 47,408 107,103 168,386 158,984 51,626 Hsiaokang savings Plant Carbon 12,381 8,629 45,764 10,337 13,320 3,073 reduction Note 1. Unit of carbon reduction: tonnes-CO2e 2. Unit of energy savings: GJ 3. Definition of actual energy savings and carbon reduction: The amount of energy saving and carbon reduction that occurred in the following year after the results of projects in the previous year were tracked and completed. If the project in the previous year is completed in the following year, it will be calculated in proportion to the remaining month. 4. The base year for the GHG inspection of the Toufen Plant is 2014. The reason for the change is the newly added production line, which exceeds the significance threshold. The base year for the GHG inspection of the Dashe Plant and Hsiaokang Plant is 2005.
In response to international trends and the reduction targets of the "Greenhouse Gas Reduction and Management Act", CPDC has defined the short-term (2025), medium-term (2030), and long-term (2050) carbon-reduction targets. The setting of the short-, medium- and long-term targets will hopefully produce a more comprehensive and far-reaching carbon-reduction plan. At present, the three CPDC plants have proposed plans for the total reduction target at the 2019 Q1 Energy-Saving and Carbon-Reduction Meeting, which is continuously tracked by the secretariat team.
CPDC Short-, Medium- and Long-Term Carbon Emission Reduction Targets Year 2005 2025 2030 2050 Carbon emission Short-term target Medium-term target Long-term target Description base year achievement year achievement year achievement year Annual total Annual total carbon Annual total carbon Annual total carbon carbon emissions emissions reduced emissions reduced emissions reduced Target 1,823,479 MT by 20% versus the by 30% versus the by 50% versus the base year base year base year Note: 1. As there is no production activity in the Taipei office, the scope of setting carbon emission target is the three CPDC plants, including Toufen Plant, Dashe Plant, and Hsiaokang Plant
CPDC continues to budget every year for plants to replace old equipment or purchase equipment with better operating efficiency. In 2020, the three CPDC plants invested a total of NTD 133 million to promote 26 new projects. Active efforts are underway to improve our energy conservation, carbon reduction, and water conservation performances to help mitigate climate change. The results are also reported to the competent authorities.
70 Estimated Annualized Performance of New Energy Conservation and Carbon Reduction Projects Promoted in 2020 Financial Estimated Energy Estimated Carbon Estimated Water No. of Investment Savings Reductions Savings Plant Projects (NTD No. of CO2e No. of No. of GJ Metric tons thousand) Projects (metric tons) Projects Projects Toufen Plant 9 27,590 119,896 9 9,414 9 - - Dashe Plant 10 100,047 54,718 5 3,146 6 285,844 7 Hsiaokang 7 5697 5,806 4 344 4 12993 3 Plant Total 26 133,334 180,420 18 12,904 19 298,837 10 Note 1. This is the number of energy conservation and carbon reduction projects newly proposed by each plant in 2020 along with the benefits they are expected to generate in the future (annualized). The figures are estimated before the implementation of the project, and represent the expected benefits from their completion in the future. 2. 1 KLOE = 37,656 MJ = 37.656 GJ
CPDC GHG Emissions CPDC measures the carbon footprint of our business processes against the highest standards. The three CPDC plants conduct inspections every year for scope 1 and scope 2 in accordance with ISO 14064-1: 2006 organizational carbon inspection standards and entrust external impartial third- party organizations to verify our results. No inspections have been conducted for scope 3. An internal inventory with no external verification was completed for the Taipei Office due to its low volume of emissions, most of which came from electricity usage (scope 2). At this stage, we have completed the GHG inventory of regions under the operational control of companies in Taiwan. In the future, we will continue to include new production plants and continue to aim to disclose GHG emissions in overseas regions.
GHG Emissions of CPDC Units Over the Past 5 Years Emission source 2016 2017 2018 2019 2020 Scope 1 1,111,268.9 1,128,873.1 1,110,198.8 956,413.9 375,278.8 Toufen Scope 2 1,226.4 2,207.1 973.3 4,239.3 16,997.3 Plant Total 1,112,495.4 1,131,080.2 1,111,172.1 960,653.2 392,276.1 Scope 1 157,130.0 154,687.7 138,429.4 145,030.9 135,421.3 Dashe Scope 2 26,477.0 32,004.9 30,195.1 30,171.5 25,494.2 Plant Total 183,607.0 186,692.6 168,624.5 175,202.4 160,915.5 Scope 1 447,231.0 691,239.0 716,033.2 634,549.3 404,461.8 Hsiaokang Scope 2 177,342.0 165,622.0 127,427.6 142,114.9 121,791.5 Plant Total 624,573.0 856,861.0 843,460.8 776,664.2 526,253.3 Scope 1 1,715,629.9 1,974,799.8 1,964,661.4 1,735,994.1 915,161.8 Total GHG Scope 2 205,045.4 199,834.0 158,595.9 176,525.6 164,283.0 emissions Total 1,920,675.4 2,174,633.8 2,123,257.3 1,912,519.7 1,079,444.8 Note 1. Unit: mtCO2e 2. The data published by the MOEA Energy Bureau on December 26, 2019, set the electricity emission coefficient for 2018 is 0.533 kg CO2e/kWh, using the GWP value given in the 4th IPCC report 3. The GHG emissions of the Toufen Plant, the Dashe Plant, and the Hsiaokang Plant in 2020 are self-calculated and shall be verified by external impartial third parties.
71 CPDC continuously monitors the GHG emissions per unit of product. By product category, the GHG emissions per unit of the main products, CPL and AN, have shown a downward trend in the past 5 years. In particular, the Toufen Plant was affected by the COVID-19 pandemic in 2020, and the production was reduced by nearly 50%, resulting in an increase in unit emission intensity.
Trend in GHG Emission per Unit of Product Over the Past 5 Years Year Product Audit Target 2016 2017 2018 2019 2020 Toufen Plant 7.15 5.62 5.53 6.00 9.74 CPL Hsiaokang Plant 3.55 4.31 4.58 4.42 3.87 Emissions per unit 5.91 5.42 5.51 5.89 6.95 Dashe Plant 0.92 0.9 0.73 0.81 0.83 AN Emissions per unit 0.92 0.9 0.73 0.81 0.80 Note 1. Unit: Metric ton CO2e/Metric ton Products 2. Energy consumption per unit of product is based on the annual total energy consumption divided by total production. The GHG emission per unit of product is calculated by using the GWP value from the 4th IPCC report to calculate the annual GHG emissions then divided by total production. 3. The data of the Toufen Plant excludes the GHG emissions from the electricity sales of the co-generation plant and is the actual CPL production emissions data.
Main Product Carbon Footprint Verification CPDC proactively verifies the carbon footprint of its products, in accordance with ISO 14064-3: 2006, and its verification adheres to the ISO 14067: 2018 (CPL/PA6) and ISO14067:2013(AN) standards. We have gradually obtained verification certificates for products such as CPL, AN, and Nylon Chips. Through carbon footprint verification, in addition to providing information for internal carbon mitigation strategies, we also provide more insights enabling customers to understand and calculate their own carbon footprint, further improving the added value to our customer. Lifecycle GHG Emissions Verified Product Declaration Emission Unit (Unit: Kg carbon dioxide (CO2) equivalent) Lifecycle Stage Raw Material Manufacture Total CPL 2.956 1.377 4.33 PA6 4.499 0.693 5.19 AN 3.983 0.555 4.54
3.2.2 Climate Change Adaptation In recent years, international response to climate change has changed from focusing not only on GHG reduction to also giving more emphasis to adaptation. How to cope with and manage the impacts of climate change is one of the key challenges in environmental responsibility for the petrochemical industry due to the nature of its raw materials and processes. The stability of raw materials and the supply chain as well as the stability and safety of the plants are all areas that CPDC will continue to monitor and strengthen in the future. These will be essential to sustainability in a changing environment. The Executive Secretariat of the CSR Committee analyzed the risks and opportunities related to climate change to understand what potential risks and opportunities climate change may pose to CPDC and to support the international sustainability trend of disclosing climate-related financial
72 information. We use the TCFD directive issued by the Financial Stability Board to identify major climate change risks and opportunities for CPDC. In addition, we develop climate change strategies and conduct financial impact analysis on three high-risk climate factors.
Disclosure of Financial Structure Related to Climate Change Framework of Four Major CPDC Management Practices Disclosure of TCFD The CSR Committee is the governance institution for all environmental, social, and governance issues, including climate change mitigation and adaptation as well as energy management at CPDC. The CSR Committee annually reports to the Chairman on climate Governance change and energy management issues (please refer to 1.2.1 Sustainability Governance Framework). For energy management, the Carbon Reduction Promotion Team is responsible for reviewing energy consumption and carbon emissions (please refer to 3.2.1 Climate Change Mitigation) According to the 2°C scenario, CPDC analyzes the risk items under the future climate impact and identifies the impact level on CPDC (for the management and response Strategy related to climate change risks, please refer to 3.2.2 Climate Change Adaptation - Description and Management on High Risk Factors for Climate Change) CPDC uses the climate change risk matrix to identify and sort related risks. Risks path is also used to establish how key risk factors may impact CPDC operations financially Risk and conduct an inventory of response strategies. Please refer to the Identification Process Management of Climate Risks, Risk Matrix, and Description and Management on High Risk Factors for Climate Change in this Chapter. CPDC sets management indicators, including GHG emissions, water resource use, waste Indicators and emissions, air pollutant emissions, etc. We also continue to monitor our energy and GHG Targets emissions (For the setting of each target, please refer to 3.2.1 Climate Change Mitigation and 3.3 Production Environmental Footprint)
Identification Process of Climate Risks Process Steps Description To understand climate change and its impact on financial risks and opportunities, the CSR committee, finance VP chair and invite members Establish Consensus from R&D, petrochemical production, finance, environmental health & safety, market development, to participate in a TCFD workshop, organize the TCFP working group, and establish a common understanding and consensus.
Establish a risk items checklist, according to the TCFD recommended Risk Items list, international research, industry characteristics and benchmarking Gather Risk Items analysis, containing transition risks, including policy & regulations, Checklist technology, market, reputation, 4 major categories. Physical risks include acute and chronic climate change risks. Lastly, 18 items related to CPDC various risk items were also listed. Using the 2℃ global warming assumption, we outlined each factor and its Scenario Setting scenario and impacts. According to the degree of potential impact, potential vulnerability, and Identified major climate incidence rate of risks, we evaluated these threefold directions, listing climate risks, drafting a risk matrix change risk into high, medium, and low ratings. Lastly, we identified "Green Product Replacement", "Cost of GHG Emissions Increases", and "More
73 Process Steps Description Droughts Caused by Change in Precipitation Pattern", as the 3 major climate risks to CPDC. Targeting the High-Risk Items, inventory the current actions and future Management and Response response plans for CPDC . Evaluate the financial Targeting high risk, high potential impact items, and high vulnerability items impact for CPDC, we evaluate the impact on our financials.
Risk Matrix
Description and Management on High Risk Factors for Climate Change High Risk Impact Risk Management Risk Type Risk Explanation Factors to CPDC and Response In response to the transformation to high value products and circular economic CPDC proactively trends, we need to Operating moves towards high invest in talent and Costs value products, capital for R&D of high currently, we have value, environmental, developed OPP Green Product Technology low carbon materials technology, and Alternatives Transition and products continue to develop Risk If competitors also other downstream transform successfully derivative products, to and develop green, high increase product Operating value products, value. Revenues customers may, due to demand, switch orders to our competitors CPDC must allocate In response to low Low Carbon Operating Technology talents and capital to carbon transformation Technology Costs develop low carbon trends, the R&D
74 High Risk Impact Risk Management Risk Type Risk Explanation Factors to CPDC and Response Transformation products and center has invested in Costs technologies, to face developing green the trend towards a low environmental carbon emission future production processes, During the change to and the plants have low carbon, it may be allocated personnel Operating necessary to replace and capital towards Costs equipment that is still lowering carbon Asset working with high emissions. Values efficiency and lower pollution equipment If the amount of carbon emissions exceeds the future allowed quotas, CPDC has established we may be required to more stringent short, purchase carbon credits medium, and long- or subject to fines, term carbon reduction which may increase the targets than the production cost of our national GHG products. In addition, reduction targets. failure to comply with Operating Each year the Plants national policies and Costs establish carbon regulations that results Operating reduction targets and in a high carbon Revenues budgets. Through the footprint of products Asset carbon and energy may damage the image Values reduction team, of the Company and monitoring and increase investors' Increase in performance are worry, which in turn Regulations GHG emission tracked quarterly. may lead to a shift in costs Also, the three CPDC customer orders. If the plants have gradually carbon-reduction effect installed solar energy is significant, the equipment, in revenue can be compliance with increased by trading the regulatory excess carbon credits requirements. In the To fulfill national GHG future, we will reduction targets, we continue to track are required to invest in energy and GHG GHG reduction, Operating emissions. With replacement and Costs CPDC's current renewal of equipment, Asset reduction trend and as well as to construct Values the expected renewable energy introduction of carbon generation equipment, reduction and carbon resulting in an increase capture technologies in operating costs for the next 30 years, If carbon reduction we hope to achieve efforts are not Energy the ultimate goal of sufficient, the Tax/Carbon Operating carbon neutrality by Regulations application of carbon Tax Costs 2060 taxes would result in Regulations increased operating costs, also, additional
75 High Risk Impact Risk Management Risk Type Risk Explanation Factors to CPDC and Response costs may be required in GHG reduction efforts Petrochemical fuel credit reductions or Operating cancellations may result Costs in higher raw material R&D Center has been costs developing bio-based Fossil fuel mining may plastics, working with be regulated, lowering other companies, market sales, higher Operating academia, developing crude oil prices, and Costs high lipid content increasing raw material Raw Material plants to derive oil- Market costs. Shortages based products. If If fossil fuels are successful, plant- completely restricted, based sources for oil replaced, this may products may become impact the Company's Operating possible, replacing revenues. Also, the Costs current demands for impact on the business Operating fossil fuels. model would require Revenues substantial changes and R&D for transformation. Environmental groups CPDC proactively and communities may communicates with protest and surround the community Operating the factory due to high surrounding the plant Costs carbon emissions. The areas. By establishing Operating Company may have to a credible Revenues pay higher costs to relationship, we also communicate with proactively disclose stakeholders. environmental data, Industry issue a CSR report, Reputation High carbon emissions Stigma participate in may result in negative international media attention, creates evaluations, etc. to confidence concerns assist in potential from investors to the Asset stakeholders' industry and company, Values communications and lowering investments, demonstrating resulting in lower share CPDC's efforts in prices and market environmental values. protection. Higher energy usage, Operating CPDC establishes an higher energy costs Costs annual target to If electricity supply is reduce each year's Long Term restricted, the cost of Operating energy usage by 1%, Physical Climate Heat Wave fuel generation of Costs which all personnel Risks Change energy will increase are working towards. Electricity brownouts Through green Operating or restrictions may procurement, Revenues impact production purchasing energy-
76 High Risk Impact Risk Management Risk Type Risk Explanation Factors to CPDC and Response saving devices, we can further reduce energy usage. Also, each plant has invested in rooftop Asset High temperatures may solar energy Values result in higher repairs equipment and use the Operating and maintenance costs low pressure steam Costs produced by the production processes for energy production, and develop renewable energy. Water shortages impact Plant performs water plant's production water pressure testing, Operating usage, resulting in testing different water Revenues lowered production or shortage scenarios. In Drought stopped production. the past, phase 3 Long Term Caused by water restrictions have Climate Change in Construct water storage been implemented, Change Precipitation areas, pumps, or thus, plants have their Pattern Operating emergency water own water storage Costs sources, resulting in areas, limiting water cost increases. impacts on production.
Assessment on Financial Impact Climate Change Risk 2℃ Scenario Explanation Impact and Losses to CPDC Factors According to the IPCC AR5 RCP 2.6 scenario, the drought period in East Asia would increase Based on the 2℃ Scenario Analysis by 1 month, and the no rainfall period of CPDC may face 3 major drought Taiwan would increase by 23.7% to 28.9% at events by 2050, and face 4 weeks of the end of 21st century. Drought frequency level 2 water restrictions (20% would increase, and a major drought is reduction in supply) and 10 weeks of Drought expected to occur every decade. level 3 water restrictions (supply 5 Caused by days, no water for 2 days), this would Change in Past historical records for droughts indicated result in a 45% reduction in production Precipitation that in 2015 a 3-week, level 2 drought and at the Toufen plant, a 50% reduction at Pattern water restriction was put in place. In 2002, a the Dashe plant, and a 25% reduction level 3 water restriction was in place for 8 at the Hsiaokang Plant, substantially weeks. If the no-rainfall days increase by impacting the revenues for CPDC. The 23.7% to 28.9%, estimates are that level 2 impact on Toufen Plant would be the water restrictions may increase to 4 weeks and most evident, at a 43% reduction in level 3 water restrictions may increase to 10 revenue levels. weeks.
77 Climate Change Risk 2℃ Scenario Explanation Impact and Losses to CPDC Factors In accordance with IEA 2017 ETP 2DS Based on the 2℃ Scenario Analysis, scenario, by 2050, the emissions levels should CPDC would have to face additional be 67.1% lower than 2014. Using a linear costs to purchase carbon credits in regression base year of 2015, each year would excess of allowed limits or require require a 3% reduction in GHG, thus, 2050 proactive investment in low carbon would require a 66.1% reduction versus 2015 technology to be able to fulfill the Increase in to fulfill the IEA 2DS scenario. carbon emission roadmap. The GHG investment in renewable energy is a emission costs In accordance with the CPDC target to achieve focus for CPDC, representing 60.6% "2050 emissions less than 50% of 2005 levels", of total low-carbon transformation each year requires a 1.5% reduction in carbon costs. Thus, to fulfill its requirements, emissions. If the base year is converted to CPDC would have to increase its 2015, by the year 2050, a reduction of 41.67% operational costs. compared to 2015 is needed, which still falls short of the 2DS scenario roadmap. In accordance with IEA 2017 ETP 2DS Based on the 2℃ Scenario Analysis, scenario, by 2050, the emissions levels should the national carbon control regulations be 67.1% lower than 2014. Using a linear have been tightened to international regression base year of 2015, each year would standards. Based on the 2°C Scenario require a 3% reduction in GHG, thus, 2050 Analysis, assuming that CPDC can would require a 66.1% reduction versus 2015 achieve its carbon-reduction plan as to fulfill the IEA 2DS scenario expected, it is likely to create stable Energy According to CPDC’s estimated actual carbon carbon trading revenue from 2045 Tax/Carbon reduction of "2050 emissions less than 82% of onwards, and the average carbon Tax 2005 levels", if the base year is converted to revenue through carbon trading credits Regulations 2015, by the year 2050, a reduction of 71% will reach NTD 74.5747 million per compared to 2015 will be achieved, which is year by 2050. Without considering the roughly the same as the 2DS scenario roadmap allocation of credits, if the country and better than the nation's carbon reduction implements a carbon pricing system, roadmap, the Greenhouse Gas Reduction and CPDC may have to pay the carbon Management Act. costs of at least NTD 338 million, or at most over NTD 800 million, based on different carbon pricing standards
3.3 Production Environmental Footprint The production and operation of the petrochemical industry use a lot of energy resources, thus CPDC pays attention to the environmental footprint of its operational process. All CPDC plants have introduced the ISO 14001 environmental management system to reduce the environmental impact of our plants as well as prevent pollution and spills. The management system is enforced to ensure that all emissions and waste produced during plant production are treated in accordance with the law. ISO 9001 quality management system and ISO 45001 occupational safety and health management system have also been introduced at the three CPDC plants. Integrated management maximizes the benefits for quality, environment, and occupational safety and health.
78 Green plant (including clean production and plant green buildings) Starting in 2017, CPDC has started promoting the application of green plant certification. In recent years, CPDC has been successively obtained the clean production and green building certifications, which have been transferred to green plant certification. Currently, all three plants of CPDC are certified as green plants by the Ministry of Economic Affairs, demonstrating CPDC's commitment to environmental sustainability. CPDC has a total of 7 green buildings, with 2 buildings certified as Diamond grade, 1 each of silver grade and bronze grade, 3 qualified grade buildings, and 6 buildings categorized as renovated old buildings. The Hsiaokang Plant Warehouse South Door Office is a new office building, which will be transferred from the waiting list to qualified green building certification in 2021. In addition, the clean production certification of the green plant of the Dashe Plant was extended in 2020 after assessment.
3.3.1 Environmental Policy and Environmental Protection Expenditures CPDC continues to invest in environmental protection as part of our commitment to the environment. We continue to invest in environmental protection policies, such as greenhouse gas and energy management, environmental pollution prevention and control and disclose environmental protection industrial safety incident reports. In 2020, environmental protection expenditure at CPDC mainly went towards external testing of pollutants, waste removal, external research, soil and ground water remediation, air pollution prevention, and process improvements. The total amount spent on each item is listed below. (Violations of environmental laws and regulations are disclosed in 2.3.2 Response to Major Regulatory Compliance Incidents)
Environmental Protection
Health, safety, and environmental protection
Environmental protection and industrial safety report
Environmental Pollution Prevention Expenditure at Each CPDC Plant in 2020 Hsiaokang Item Toufen Plant Dashe Plant Plant External testing of pollutants 4,436 4,942 2,968 Operating Waste removal and disposal 17,767 14,347 1,915 Costs Joint sewage treatment costs 0 9,587 19,416 Soil and ground water remediate costs 168 2,186 879 79 Hsiaokang Item Toufen Plant Dashe Plant Plant Air pollution management costs 2,328 726 2,690 Permits and verification 8,424 43 270 External research - 403 0 Soil and ground water remediate costs 2,355 0 0 Capital Training of dedicated personnel 21 0 0 investment Process improvement - Maintenance type 70,626 77,547 75,240 Process improvement - Plan type 302,837 0 0 Subtotal 408,962 109,781 103,378 Total 622,121 Percentage of operating costs 3.6% Change in pollution prevention expenditure +11.1% (compared to 2019) Note 1. In 2020 consolidated operating costs amounted to NT$17,544,864 thousand 2. In 2019 pollution prevention expenditure amounted to NT$560,097 thousand. 3. Currency Unit: NTD thousand
The Amount that CPDC Plans to Invest towards Environmental Protection Over the Next 3 Years 2021 2022 2023 Unit (NTD thousand) 172,350 189,585 208,544 Note: 1. Expenditures for 2021 are the planned figures. Expenditures for the two following years are estimates 2. Source: CPDC 2020 Annual Report
3.3.2 Energy Management and Emissions The main types of energy used by the three CPDC plants are natural gas, fuel oil, steam, and electricity. The Toufen Plant has a cogeneration plant that burns coal as one of its sources of electricity. Hsiaokang Plant's energy supply is integrated with other factories in the industrial park. Steam used in production is purchased from nearby China Steel Corporation, a partnership that improves energy efficiency for both companies. In 2020, the renewable energy generation capacity of the Dashe Plant reached 291,552 kWh, and the Toufen Plant and Hsiaokang Plant are under planning. In 2020, CPDC saved 88,187 KLOE in energy consumption. In terms of energy saving and carbon reduction, the Company has 26 projects, which are expected to reduce 12,904 tons of CO2e in greenhouse gases per year. From the total energy consumption statistics of each plant, it can be seen that the energy consumption of products has gradually decreased in recent years.
Energy Consumption and Type at CPDC Plants in 2020 Item Toufen Plant Dashe Plant Hsiaokang Plant Non-Renewable, Externally 120,216,960 177,615 414,443,520 Purchased Electricity Renewable Energy 0 1,050 0 Consumption Diesel Fuel 471,912 0 3,046,983 Non- Gasoline 0 0 88,768 Renewable, LPG 0 0 242,252 Externally Natural Gas 400,289,230 892,151,412 7,107,984
80 Item Toufen Plant Dashe Plant Hsiaokang Plant Purchased Heavy 51,051,494 0 21,742,153 Fuels Oil/Fuel Oil Coal 2,348,853,685 0 0 Non-Renewable, Externally 0 0 585,030,415 Purchased Steam Externally Non- Sold 312,360,257 1,049 0 Renewable, Electricity Externally Externally Sold Energy 0 100,557,215 0 Sold Steam Total Energy Consumption 2,608,523,024 791,771,813 1,031,702,075 Steam for Internal Use 968,220,026 738,524,345 1,296,647,469 Note 1. Unit: MJ 2. Total Energy Consumption calculations are non-renewable, externally purchased electricity + non-renewable, externally purchased fuels + non-renewable, externally purchased steam - non-renewable, externally sold energy. Does not include own use steam volumes. 3. Dashe's own use steam is produced during the production process, through effective capture and reuse 4. The conversion factors used for each type of energy is as follows: Natural gas 9,000 kcal/m3, LPG 6,635 kcal/L, Diesel 8,400 kcal/L, Gasoline 7,800 kcal/L, Fuel oil 9,600 kcal/L, Electricity 860 kcal/kWh, Fuel coal 6,080 kcal/kg (Heat Content of Energy Products published by Energy Bureau, updated on April 22, 2019); Steam: 754 kcal/kg, 685 kcal/kg (based on the energy reporting data from 2015 for Toufen Plant and Hsiaokang Plant), 740 kcal/kg (data from high-pressure steam used at Dashe Plant) 5. 1Kcal ＝ 4.184x10−3MJ; LPG: 1kg ＝ 1.818L
Total Energy Consumption at CPDC Plants Over The Past 5 Years Year 2,016 2017 2018 2019 2020 Toufen Plant 5,925 6,374 5,967 5,639 2,609 Dashe Plant 1,120 986 990 971 792 Hsiaokang Plant 2,212 1,897 1,492 1,143 1,032 Total of all three plants 9,257 9,257 8,449 7,753 4,433 Note 1. Units: TJ 2. Conversion Method: 1 KLOE = 37656 MJ = 0.037656 TJ 3. Product Intensity = Total Energy Consumption/Production Volume
500kW ORC power generation equipment The Dashe Plant generates a large amount of reaction heat from the AN process by heat exchange to produce high pressure steam and medium and low pressure steam for use in the process. However, the low pressure steam at the end of the process cannot be used due to the low pressure and can only be emitted into the atmosphere. The Dashe Plant has built the first domestic 500kW ORC (Organic Ranking Cycle) power generation equipment, which effectively recovers the heat energy of low pressure steam into electricity and condensate, saving 3,200 kWh of electricity and 49,000 MT of water per year, with a total annual benefit of NTD 10 million. The carbon reduction amounted to 1,674 tons, which is equivalent to 4.3 Daan Forest Park.
81 AN Turbine Compressor Performance Improvement Plan The Dashe Plant AN turbine compressor has been in operation for over 40 years. Due to plant expansions at Dashe, the production volumes are at 132% of the original design, and the turbine compressor operating at excess loading by 17%. Screws and parts may weaken and fail, resulting in unexpected stoppages in production. For stability in operations, we renewed the turbine and improved the performance of the compressor in 2019. The original design for turbine compressor was to use motors and the turbines as the power source. After upgrades, the motors can be stopped and the turbine itself can provide sufficient power, driving a 3% increase in AN production output, saving 8,954,904 kWh of electricity annually, lower carbon emissions by 4,800 metric tons per year, and decrease the failure rate of the equipment. The project was completed in 2020 with the improvement of the second production line, and it was successfully accepted.
3.3.3 Air Pollutant Management CPDC reduced air pollutants emitted during the production process through process improvements as well as upgrades to equipment. In terms of the management system, the three CPDC plants abide by the air pollutant emission intensity per unit product set by the Taipei office every year, as compliance for checking the management of air pollutants. In terms of improvements to the manufacturing process, CPDC abandoned its previous high-emission Cyclohexane process and switched completely over to the Phenol method that produced far less emission, in 2014. The emission of air pollutants was cut dramatically by 50%. A review of CPDC's air pollutant emissions in 2020 showed that the emissions of nitrogen oxides (NOx), sulfur oxides (SOx), volatile organic compounds (VOCs), and suspended particulates (TSP) decreased compared to 2019, mainly due to stoppages and single line operations in some months at the Toufen Plant. The improvement project includes the addition of a backup system for VOC tail gas treatment in the Toufen Plant, replacing the original CTO (catalytic oxidizer) with an RTO (regenerative combustion system), with the CTO acting as a backup for the RTO anomaly to improve the stability of the tail gas treatment system. The incinerator cyclone separator and outlet air duct of the Hsiaokang Plant were renewed to stainless steel SUS316 to reduce the corrosion rate of dilute sulfuric acid droplets on the material and sulfur oxide emission. CPDC promises to continue reducing our emission of air pollutants through process refinements and equipment upgrades for the local residents' safety and peace of mind.
Total Air Pollutants Emitted by Each CPDC Plant in the Past 3 Years Toufen Plant Dashe Plant Hsiaokang Plant Total Category 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 NOx 515 354 148 40 44 47 44 13 36 599 410 241 SOx 144 112 37 12 13 3 13 31 11 169 156 56 VOCs 1,155 205 88 47 40 26 121 119 98 1,323 364 216 TSP 40 39 11 12 7 7 5 3 4 57 49 22 Note 1. Unit: Metric Tons 2. All numbers are rounded to whole numbers
82 3. Emissions for each plant come from self-monitoring and are calculated using monitoring data of the continuous automatic monitoring equipment, the test results, and the published emission coefficients 4. VOCs include hazardous air pollutants and flared/vented hydrocarbons; none of the plants produce Persistent Organic Pollutants (POP) 5. For the calculation of VOCs, CPDC has now switched completely over to the phenol method which produces far lower emissions. Though emissions at Hsiaokang Plant are based on actual readings, Toufen Plant uses the emission coefficient for the Cyclohexanone process published by EPA as required by the competent authorities, so the value is higher than it actually is 6. Only environmentally friendly refrigerants are used at CPDC and no Ozone Depleting Substances (ODS) are emitted during the production process
Construction project of a backup system for VOC tail gas treatment in the Toufen Plant The newly built RTO furnace (regenerative combustion system) is to introduce VOCs into the reactor for heating to make the VOCs in the waste gas decompose into carbon dioxide and water under high temperature environment, and emit into the atmosphere. The heat energy generated in the oxidation process can be stored in the ceramic heat accumulator in the furnace, so that the heat accumulator heats up and stores the heat, creating a high-temperature reaction environment in the furnace and reducing the fuel required to heat the waste gas. Replacing the original CTO (catalytic oxidizer) with RTO with the CTO serving as a backup for RTO anomaly can not only improve the stability of the tail gas treatment system, but also save operating costs such as catalyst, electricity, and fuel, and increase the VOCs reduction rate (90%→95%) to achieve the goal of continuous air pollution reduction.
Renewal of incinerator cyclone separator and outlet air duct of the Hsiaokang Plant The incinerator cyclone separator was originally designed to be made of carbon steel, and the incinerator is currently incinerating mainly dilute ammonium sulfate waste. The flue gas after incineration contains a large concentration of SOx. The flue gas will carry dilute sulfuric acid droplets to the cyclone separator after dissolving salts in the dissolution tank, causing corrosion of the steel plate. The avoidance of corrosion and rupture of the cyclone separator steel plate caused flue gas emissions without the treatment of pollution control equipment to be released into the atmosphere in violation of the Air Pollution Control Act. The cyclone separator made of stainless steel SUS316 is remanufactured to reduce the corrosion rate of dilute sulfuric acid droplets on this material.
3.3.4 Water Resources Management The pattern of precipitation in Taiwan has changed in recent years. Rainfall periods cannot be predicted based on historical trends, leading to an increase in the frequency of heavy storms and extended droughts. The unstable water supply poses a risk to business operations. The year 2020 even witnessed an extreme record, with no typhoon bringing any rainfall during the rainy season, the first time since 1964, causing reservoir level in each area to be on alert. The petrochemical industry is a water-intensive industry that uses a large amount of water during the production process. A stable water supply is therefore critical to CPDC, and water resource management plays a key role in the sustainability of petrochemistry.
83 According to the results of CPDC's TCFD climate change risk identification, "changes in rainfall patterns lead to drought" is the number one physical risk. Besides, the AQUEDUCT Water Risk Atlas from the World Resources Institute was used by CPDC to rate the level of water resource risk at each site. All the three CPDC plants are located in medium and high risk (2-3) regions on water resources. For CPDC, which is located in a high-risk area of water resources and is highly dependent on water resources, rising to the challenges of water change by conserving water will not only reduce a company's environmental footprint and costs. It will also boost the management resilience of CPDC in an uncertain environment. "Zero wastewater discharge" has therefore been set by CPDC as our ultimate goal. The three principles of "inventory", "reduction", and "circulation" now guide further developments in water resource management.
Inventory: The three CPDC plants actively engage in water consumption surveys. In 2018, we carried out the CPL Water Footprint Inventory in Toufen Plant to check the current water consumption status of products during their life cycle. The inventory results are then used to develop a water resource improvement project and water conservation plan. In 2019, in response to the TCFD project, the three CPDC plants conducted the water stress test and evaluation to simulate the impact of the water supply on production. which was effectively applied to the water restrictions measures in 2020. For the evaluation results, please refer to 3.2.2 Climate Change Adaptation. In 2020, we carried out the CPL Water Footprint Inventory in the Hsiaokang Plant and the CPL and PA6 Water Footprint Inventory in the Toufen Plant to check the current water consumption status of products during their life cycle. The inventory results are then used to develop a water resource improvement project and water conservation plan. In particular, CPL in the Hsiaokang Plant obtained ISO 14046: 2014 verification statement, and CPL and PA6 in the Toufen Plant obtained ISO 14046:2014 verification statement.
CPL Water Footprint in the Hsiaokang Plant Life cycle water footprint assessment results Verification results of the impact on each stage of products Verification Raw material Manufacture Impact index Unit Total subject (Indirect water use) (Direct water use) Water consumption L/kg 22.319 13.254 35.57 (Water scarcity) Water pollution- biological oxygen g/kg 17.417 0.000 17.42 demand (BOD) CPL Water pollution- chemical oxygen g/kg 18.076 0.561 18.64 demand (COD) Water pollution- g/kg 13.997 0.177 14.17 suspended solids (SS)
CPL Water Footprint of the Toufen Plant Life cycle water footprint assessment results Verification results of the impact on each stage of products Verification Raw material Manufacture Impact index Unit Total subject (Indirect water use) (Direct water use) Water consumption CPL L/kg 27.364 25.047 52.41 (Water scarcity)
84 Life cycle water footprint assessment results Verification results of the impact on each stage of products Verification Raw material Manufacture Impact index Unit Total subject (Indirect water use) (Direct water use) Water pollution- biological oxygen g/kg 21.808 0.000 21.81 demand (BOD) Water pollution- chemical oxygen g/kg 22.640 0.132 22.77 demand (COD) Water pollution- g/kg 7.808 0.022 7.83 suspended solids (SS)
PA6 Water Footprint in the Toufen Plant Life cycle water footprint assessment results Verification results of the impact on each stage of products Verification Raw material Manufacture Impact index Unit Total subject (Indirect water use) (Direct water use) Water consumption L/kg 55.442 18.517 73.96 (Water scarcity) Water pollution- biological oxygen g/kg 22.847 0.000 22.85 demand (BOD) PA6 Water pollution- chemical oxygen g/kg 23.873 0.030 23.90 demand (COD) Water pollution- g/kg 9.081 0.005 9.09 suspended solids (SS)
All three CPDC plants are located in industrial parks designated by the MOEA and all of their water is supplied by the water utility so there is no need for concern about negative impacts to the water quality and water resources of local nature reserves. In 2020, the total water withdrawal was 7,337 ML, which was all from surface freshwater, the total water discharge was 2,437 ML, and the total water consumption was 4,902 ML. In terms of discharge standards, all effluent from CPDC plants is tested for water quality before discharge and comply with the "Effluent Standards". In 2020, there were no violations of water resources-related regulations by CPDC.
Water Withdrawal and Discharge by CPDC Plants Over the Past 5 Years Audit Category 2016 2017 2018 2019 2020 Target Water 4,335 5,767 5,906 4,968 2,215 Toufen Withdrawal Plant Wastewater 1,655 1,747 1,975 1,741 530 Discharge Water 2,379 2,448 2,341 2,343 2,194 Withdrawal Dashe Plant Wastewater 899 829 831 786 741 Discharge Water 3,197 3,692 3,394 3,352 2,928 Hsiaokang Withdrawal Plant Wastewater 1,455 1,401 1,337 1,315 1,163 Discharge Total Water Withdrawal 8,576 9,911 11,908 11,640 7,337 Total Wastewater Discharge 3,971 4,010 3,976 4,144 2,434 Total Water Consumption 4,605 5,901 7,931 7,497 4,902 85 Note 1. Unit: Million Liters (ML), 1 ML = 1000KL 2. Total Water Consumption = Total Water Withdrawal - Total Water Discharge 3. The amount of water withdrawal and discharge is presented as integers and calculated after rounding off 4. Wastewater from the Toufen Plant is treated at the level-3 treatment facility on-site before being discharged into Zhonggang River through the government-approved outfall of the industrial park. Dashe Plant discharges into the joint sewage treatment plant of Dashe Industrial Park while Hsiaokang Plant discharges into the joint sewage treatment plant of Linyuan & Dafa Industrial Park. Both discharge into the waters of Taiwan Strait 5. All effluent discharged by each plant has passed the test for water quality to ensure compliance with the "Petrochemical Industry Effluent Standard" as well as the intake specifications of the industrial park's joint sewage treatment plant
2020 CPDC Wastewater Discharge Information Surface water 530 By destination Third-party water 1,904 Freshwater 2,434 By freshwater and other water Other water 0 Not treated 0 By level of treatment Secondary treatment 0 Tertiary treatment 2,434 Total Water Discharge 2,434 Note 1. Unit: Million Liters (ML), 1 ML = 1000KL 2. Scope of statistics: Toufen Plant, Dashe Plant, and Hsiaokang Plant 3. The third-party water is an urban water supplier or sewage treatment plant, public or private facilities, and other organizations involved in the provision, transportation, treatment, removal or use of water, and discharge water 4. The number of water consumption and discharge is presented as integers and calculated after rounding off 5. Freshwater is defined as total dissolved solids per liter <= 1000 mg, and other water is defined as total dissolved solids per liter > 1000 mg 6. The wastewater from the three CPDC plants is treated through tertiary treatment before discharge
Reduction: The water consumption per ton of product for the baseline year (2014) serves as the basis for setting an annual water-saving target of 2% each year. The three CPDC plants carried out a total of 12 water-saving projects in 2020 and the annualized water saving benefit is expected to reach 343,310 metric tons.
The Actual Water Saving of the three CPDC Plants in 2020 Actual water saving Water Consumption per 2% water-saving Achievement benefits in 2020 unit in the base year target (metric tons) Rate (metric tons) Toufen Plant 39 142,135 0 0% Dashe Plant 11.51 48,499 19,755 41% Hsiaokang Plant 21.73 79,228 11,021 14% Note: 1. 2% water saving target = 2014 (base year) water consumption per unit x projected output this year x 2%. 2. The annual water-saving, carbon-reduction, energy-saving, and power-saving targets are all proposed at the energy- saving and carbon-reduction meetings in the fourth quarter of the previous year. Thus, data is calculated based on the estimated output rather than the actual output. 3. Because the cooling water Blow Down recovery system project at Dashe Plant has not yet started operation and been assembled, the actual amount of water saved in 2020 was not included. It will continue to be tracked in 2021.
86 Circulation CPDC is moving in the direction of sustainable water resource management in keeping with the spirit of zero wastewater discharge. We have continued to refine our water recovery technology, including reclaimed water recycling system, ammonia nitrogen wastewater recycling, and carried out the establishment of rainwater recovery system. In addition, the three CPDC plants actively cooperate with external units, coordinate with local governments and manufacturers in industrial areas, and jointly develop the recycled water circular economic. The Hsiaokang Plant responded to the Kaohsiung Wastewater Treatment Plant and Drainage Water Recovery and Reuse Project; the Toufen Plant signed a letter of intent with Guoyang Environmental Technology Company for recycled water. In the future, after the completion of the two projects, 1,000 metric tons and 6,000 metric tons of recycled water will be brought to the Hsiaokang and Toufen plants, respectively.
Waste heat and low pressure steam ORC power generation system at the Dashe Plant AN plant generates more than 15 tons of waste heat and low-pressure steam per hour, which is very wasteful. Therefore, two 500kW low-pressure steam ORC generators were installed from 2019 to 2020, which not only convert the emitted low-pressure steam into electricity, but also recycle it into condensate, which was both energy-saving and water-saving. At present, both units are in operation and can generate about 6.7 million kWh of electricity and save 100,000 tons of water per year. On September 11, 2020, one of the units passed the Energy Bureau's on-site survey and was awarded a grant of up to NTD 5 million for the "2019 Waste Heat and Waste Cooling Recovery Technology Demonstration Application Project".
3.3.5 Waste Disposal Management The concept of the circular economy has been gaining momentum around the world in recent years. In response to the global trend of green environment and the government's 5+2 industrial innovation policy, CPDC has introduced the concept of circular economy into waste management. In addition to effectively collecting by-products, such as crude acetonitrile, hydrocyanic acid, and ammonium sulfate, which are sold as raw materials for other enterprises, we also make changes to the production process to reduce the number of byproducts and waste. Process recovery rate is also improved to achieve the goal of waste reduction at the source. The phenol process developed by CPDC and adopted across the board in 2014 did not just double production output through process improvements, but raw material consumption and byproducts were also greatly reduced to realize the policy of waste reduction at the source. At the same time, CPDC is actively studying the recovery and purification of main and byproducts to identify ways of enhancing the development of circular economy of products. Examples include the recovery of Benzene/Toluene, cogeneration SCR system, cogeneration ESP, recovery of heavy liquids, and activation of anaerobic wastewater system. General industrial waste produced by the 3 CPDC plants generally consists of waste lubricants, non-hazardous organic liquids or solvents, domestic waste, waste timber compounds, construction or building waste mixtures, organic sludge, non-organic sludge, and waste insulation, etc. The main methods for disposal include recycling, incineration, landfill, heat treatment, solidification, and chemical, physical, or biological treatment. In terms of hazardous industrial waste, Hsiaokang Plant
87 mainly produces Chromium and its compounds, Dashe Plant mainly produces waste liquid from extraction and the base of the Acetonitrile column. Disposal is through solidification and incineration. All waste at CPDC is disposed of in accordance with the law. Emission or treatment permits are applied where necessary and reported truthfully to the competent authorities. Most waste is currently disposed of through external contractors while waste liquids at Dashe Plant and Hsiaokang Plant are incinerated internally. The permits for internal incineration currently run until 2024 and 2025. For waste disposed of through external contractors, CPDC uses licensed waste removal and treatment contractors in accordance with the law. Vehicle GPS tracking is used to track waste movements and their final destination. Plant staff also accompany or follow the contractor's vehicles at random to ensure that all waste is being properly disposed of. This prevents the creation of additional environmental burdens or pollution. In addition, CPDC's products are mainly loaded and transported by tank trucks, and only nylon chips and byproduct ammonium sulfate use packaging materials. There was no recall of related products in 2020, so there was no recycling operation of relevant packaging material.
Proportion of General and Hazardous Industrial Waste 2019 2020 Weight Weight Percentage Percentage (Metric Tons) (Metric Tons) General Industrial Waste 58,463 59.9% 32,045 46.5% Hazardous Industrial Waste 39,293 40.1% 36,845 53.5%
Composition of Waste Produced by CPDC in the Past 5 Years Composition of Waste Annual removal of waste (MT) Category Name of waste 2016 2017 2018 2019 2020 General Spent ion-exchange resins 19 55 74 29 21 General Waste plastic mixtures 15 46 127 101 180 General Waste thermal insulation material 113 66 97 79 46 Other waste glass, ceramic, brick, tile, and General 45 76 8 26 30 clay mixtures General Waste refractory materials - 16 16 23 - General Construction or building waste mixture 12 1 66 25 34 General Wood waste mixture 83 68 72 44 23 General Organic sludge 293 151 291 572 662 General Inorganic sludge 118 281 236 645 430 General Non-hazardous sludge - - 12 - - Fly ash from incinerator General 10 26 31 10 11 (general industrial waste) Other non-hazardous waste catalyst or General - - 32 - 27 mixture Non-hazardous organic waste liquids or General 18,028 24,782 24,282 23,835 16,569 waste solvents General Waste lubricants 38 65 25 47 53 General Waste oil mixture - - - - 200 General General waste from business activities 181 161 17 181 183 General Waste activated carbon - - - - 8
88 Composition of Waste Annual removal of waste (MT) Category Name of waste 2016 2017 2018 2019 2020 Waste wire and cable General 4 - 14 3 3 (by physical treatment) Waste catalysts containing precious metals General (gold, silver, palladium, platinum, iridium, - - - - 8 rhodium, ruthenium, and ruthenium) General Waste wood 23 18 30 30 42 General Coal-fired fly ash 37,441 35,869 34,916 29,641 11,871 General Coal-fired bottom ash 2,923 2,787 2,873 2,361 930 General Scrap steel 100 1 - - - General Waste activated carbon 363 834 882 759 665 Waste transformers and waste capacitors with polychlorinated biphenyls and General - 33 - - - containing grease that weigh less than 50ppm Recycling Waste wood - - - - 39 Recycling Waste activated carbon - - - - 8 Subtotal 59,810 65,335 64,262 58,410 32,045 Chrome and its chemical compounds (not including scrapped hide powder, Hazardous dander, and pieces generated from the 1 18 39 32 - process to manufacture or use animal leather) Waste liquid with pH less than (equal to) Hazardous - 0 2 2 0 2.0 Other flammable commercial waste Hazardous - - - - 2 mixtures Hazardous Waste liquid from the manufacture of AN 16,227 17,100 16,972 17,484 16,553 Waste liquid from the base of the Hazardous Acetonitrile column from the manufacture 19,561 20,757 20,836 21,540 20,289 of AN Subtotal 35,789 37,876 37,849 39,058 36,845 Total 95,599 103,211 102,110 97,468 68,843 Note In 2020, the production volume was adjusted due to the impact of the COVID-19 pandemic, resulting in significantly lower production of some waste materials than in previous years, such as coal-fired fly ash and coal-fired bottom ash
Waste Disposal Method of CPDC plants in the Past 5 Years Toufen Plant Dashe Plant Hsiaokang Plant Category (Unit: Tons) 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Total Waste 40,793 39,630 39,152 33,466 14,117 40,289 42,352 42,612 43,918 41,683 14,514 21,254 20,712 20,129 13,091
Recycle 40,610 39,494 38,822 32,623 13,347 0 0 31 24 47 240 251 240 186 161
Incineration 56 47 155 36 47 4,298 4,404 4,427 4,441 4,139 14,031 20,691 20,221 19,615 12,791
Landfill 127 89 0 0 22 37 59 163 10 12 161 48 212 150 6
General Physical Treatment 0 0 175 563 451 4 21 10 60 269 71 246 39 34 43
Solidification 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Heat treatment (other than 0 0 0 244 250 161 11 171 357 370 10 0 0 112 90 Incineration) Sub-Total 40,793 39,630 39,152 33,466 14,117 4,501 4,495 4,803 4,892 4,838 14,513 21,236 20,712 20,097 13,091
ardo
Haz
us
Incineration 0 0 0 0 0 35,788 37,857 37,807 39,024 36,845 0 0 0 0 0
89 Toufen Plant Dashe Plant Hsiaokang Plant Category (Unit: Tons) 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Solidification 0 0 0 0 0 0 0 0 0 0 1 18 0 32 0 Recycle 0 0 2 2 0 Sub-Total 0 0 0 0 0 35,788 37,858 37,809 39,026 36,845 1 18 0 32 0 Note 1. Fly ash recovery at the Toufen Plant was not included in the 2016 report but has been included since 2017 2. The incineration of general business waste at the Toufen Plant and Hsiaokang Plant includes energy recovery; the incineration of general business waste at the Dashe Plant does not include energy recovery 3. The number of waste production is presented as integers and calculated after rounding off 4. CPDC has no chemically treated hazardous business waste, and no hazardous waste was transported, imported, or exported in 2020
3.3.6 Prevention of Environmental Pollution CPDC sets high standards for itself on the remediation and prevention of environmental pollution. Under our vision of green petrochemistry, we have been upholding the basic principle of continuous improvement of the ISO14001 environmental management system for many years in an effort to reduce the negative environmental impacts of our production processes with zero emission as the ultimate goal. Through a complete monitoring system and linkage with local environmental protection bureaus, we can accurately control and monitor the status of each plant and perimeter, aiming to exceed regulations and minimize the impact on the environment. The environmental pollution prevention strategy at CPDC is divided into four levels from inside out: "process waste reduction", "end-of-pipe treatment", "VOCs management", and "environmental monitoring". The Environmental Protection Center at Taipei Office is the top supervisory unit responsible for general planning on emerging environmental protection issues and the tracking of pollution prevention performance. A dedicated team is also assigned to each plant to carry out pollution prevention, monitoring, and improvement operations for each project through the environmental management system.
CPDC's Environmental Pollution Prevention and Control Strategy Process Waste Reduce all types of pollutants produced by production processes through process Reduction improvement, improved production efficiency, waste recycling and reuse. Improve emissions quality and keep all types of pollutants within the standards End-of-Pipe through sorting wastewater for treatment, improving the performance of treatment Treatment facilities, and addition of high-efficiency treatment equipment. VOCs Reduce the dispersion of VOCs through sealed production processes, exhaust Management recovery system, sealed sampling system, and low-leakage equipment components. Environmental Environmental monitoring systems are deployed to keep track of plant air and Monitoring effluent quality at all times.
The system is also linked to the monitoring system of the industrial park Environmental monitoring includes regular mandatory testing at each CPDC plant, as well as the placement of automated monitoring facilities (CEMS) in the emission of fixed pollution sources to continuously monitor their operating status or emission of air pollutants. To maximize the benefits for environmental protection, the facilities are linked to the local environmental protection authorities to improve monitoring and inspection efficiency for both CPDC and the competent authorities.
90 Industrial safety test stations have also been installed throughout each CPDC plant and their surrounding area to ensure the safety of workers. There were no leakage incidents in CPDC in 2020.
Environmental Protection/Industrial Safety Test Stations at Each CPDC Plant Environmental Protection Test Station Industrial Safety Test Station Plant (No. of items monitored) (No. of items monitored) Toufen Plant 125（11） 55（2） Dashe Plant 152（3） 61（2） Hsiaokang Plant 157（14） 101（4） Total 434（21） 217（6） Note: The number of items monitored does not count duplicate items
3.3.7 Chemical Management Legitimacy is the most basic requirement for CPDC's chemical management. It is also a guideline for protecting personnel from chemical hazards and avoiding environmental pollution caused by leakage. CPDC has established the "Hazard Generalization Operation Procedures", and the three CPDC plants must formulate "Hazard Generalization Plans" and specify the "Hazardous Chemicals List" in accordance with this procedure, which will be handed over to Environmental Protection and Pollution Prevention Center for storage and consolidation. For the management of toxic chemical substances, factories have established the "Operating Procedures for Toxic Chemical Substance Management". Manufacturing, export, import, sale, use, storage, waste toxic chemical substances, and accident handling, all meet the four principles required by the EPA, certificate, application, prevention, and label, and report. The containers with hazardous chemicals in the factory area should be clearly marked according to the prescribed format, including the name, hazardous ingredients, warning words, hazard warning messages, hazard prevention measures, and the name, address, and telephone of the manufacturer, importer, or supplier. Different pipelines are separated by colors so that employees can understand the substances in the pipelines and enhance safety awareness.
Hazardous Substances in CPDC's Main Products Toufen Plant Dashe Plant Hsiaokang Plant Total Number of Products 4 4 4 Number of Hazardous Products 2 3 3 Hazardous Products Proportion 50% 75% 75% Total Number of Raw Materials 7 3 5 Number of Hazardous Raw 7 3 5 Materials Hazardous Raw Materials 100% 100% 100% Proportion Note 1. The identification of hazardous substances refers to the following domestic and international standards (1) Environmental Protection Administration, Executive Yuan (2) European REACH Substances of Very High Concern (SVHC) Authorization, Candidate, or Restriction Lists (3) European Restriction of Hazardous Substances (RoHS) Directive (4) California prop 65 list 2. Raw materials and intermediate products used in small amounts are not included
91 3. In the Toufen Plant, the products belonging to hazardous substances include CPL and OPP; the raw materials belonging to hazardous substances include phenol, cyclohexanone, toluene, benzene, CPL, liquid ammonia, and fuming sulfuric acid 4. In the Dashe Plant, the products belonging to hazardous materials include AN, cyanic acid, and crude acetonitrile; the materials belonging to hazardous materials include propylene, liquid ammonia, and sulfuric acid 5. In the Hsiaokang Plant, the products belonging to hazardous substances including CPL, sulfuric acid, and cyclohexanone; the raw materials belonging to the hazardous substances include phenol, liquid ammonia, benzene, toluene, and molten sulfur. 6. Hazardous products/hazardous products analyzed for harmfulness (AN and HCN) accounted for 48.99% of total revenue
Chemical Management in the Supply Chain Phase Description Choose qualified transport contractors and distribute the tank trucks that have passed the high-pressure test according to the process requirements. The driver must receive regular education and training from the factory, and all materials are Transportation transported with special barrels. In addition, vehicles and drivers transporting supplier selection hazardous chemicals must obtain the necessary qualification certificates and relevant licenses in accordance with the law. Each transportation contractor provides GPS of the vehicle to keep track of its movement. When the raw materials are filled from the port to the tank truck, special joints, flanges, and pipelines are used for filling. The operators wear complete protective Chemical loading equipment to prevent the escape of ammonia gas during filling and the possibility of personnel coming in contact with it. After the tank truck enters the factory and is weighed, it must be driven to the operation area according to the designated route. After the on-site employees confirm that the weighing note is correct, the operators wear appropriate protective Unloading in the equipment for unloading according to the standard operating procedures (SOP) and factory work instruction (WI) regulations. Different materials use special joints, flanges, and discharge arms, and gas detectors are also installed on site according to different material needs to maintain safe operation. For different chemicals in the storage area, if there is incompatibility, there shall be a proper distance between them, and they should not be mixed. The storage place shall be far away from fire source, maintain ventilation, prohibit fire and smoke, and Chemical storage prepare appropriate safety protective equipment. Both storage tanks and process pipelines are required to install gas detectors, fire sprinkler systems, and instrument systems and monitor values such as liquid level, temperature, pressure, etc. When the product is sold, special dry joints are used in the filling station. There is a Product special pipeline between the tank truck and the storage tank so there is no problem transportation with leakage or personnel coming in contact with it. We also appointed qualified, heavy duty, and anti-collision tank trucks to transport products.
Chemical Management Education and Employees Health Management CPDC uses a lot of chemicals in the R&D and production process. Therefore, we have continued to implement chemical management education since our employees first reported for duty. The factory's occupational and environmental team has compiled chemical training materials regarding the characteristics of toxic chemicals. Through classes and tests, we ensure that employees are familiar with the characteristics and knowledge of related chemicals, and the exam pass rate in 2020 was 100%. In addition, we arrange practical training on the use of antidotes for toxic chemicals and AED first aid to enhance employees' response ability in the event of an emergency disaster. In July 2020, CPDC’s Dashe Plant cooperated with the Ren Da Industrial Park Service Center, Industrial
92 Development Bureau, Ministry of Economic Affairs to conduct a regional joint emergency response drill to stop the leakage of AN filling stations and tank trucks due to the crash of tank trucks caused by the driver feeling ill. The Dashe Plant belongs to the operation place of toxic chemical substances. In addition to arranging special physical examinations in accordance with regulations, we arrange for all employees in the factory to conduct detailed medical examinations every year with the highest frequency of medical examinations in the industry. By comparing the health check results with the list of diseases that are not suitable for operation announced by the competent authority, we revise the suitability of worker's selection.
Toxic Chemical Reduction CPDC contributes to reducing the use of hazardous chemicals and the generation of hazardous chemical waste and waste liquid. Existing hazardous wastes are treated by incineration. Through the good operation of the wastewater concentration system, the amount of hazardous business waste incinerated in 2020 was effectively reduced by about 2,000 tons compared to the previous year. In addition, we estimate the possibility of improving the conversion rate of AN and reducing the conversion rate of hazardous waste liquid through a new type of catalyst, so as to achieve the effect of controlling the generation of hazardous substances from the source.
93 Chapter 4 Communication and Dialogue 4.1 Sustainable Supply Chain Management As globalization and specialization in international trade continue, the risk management of suppliers and the supply chain sustainability is now a key component of CPDC's sales and production. Raw material and equipment procurement costs represent 89.54% of total costs & expenses, demonstrating the importance of supply chain management to CPDC. In supply chain management strategy, CPDC hopes the relationships with suppliers and customers are based on stable, profitable, long-term partnerships. During the operational process, we jointly take on the responsibility for CSR, lower the impact on the environment, and create a balance between economy and social benefits. We bring our suppliers partners together to draw their attention and work on major issues of human rights, workplace safety, environmental protection, and sustainable governance.
4.1.1 Profile of Supply Chain Management CPDC Industrial Supply Chain Overview CPDC is located in the upper-middle stream of the petrochemical industry value chain. We purchase raw materials needed for production from upstream suppliers to produce AN, CPL, PA6, and OPP products through manufacturing plants. These are then used by downstream customers to produce end petrochemical products. For upstream raw materials, CPDC depends on foreign imports for 100% of its primary raw materials of liquid ammonia and coal. The rest comes from domestic suppliers, to support local procurement and reduce carbon emissions from the transportation of product. For downstream customers, a stable, long-term sales relationship is maintained. Some of our customers have signed supply and sales contracts.
Supply Chain Management Responsible Department The two main procurement departments at CPDC are the Raw Materials Procurement Office and Joint Procurement Office. The Raw Materials Procurement Office oversees the procurement of upstream primary and auxiliary raw materials to ensure the smooth operation of the company's production. This involves market research and analysis for key raw materials as well as supplier development, screening, assessment, and relations management. Joint Procurement Office is in charge of all purchasing outside of raw materials, including production machinery and spare parts, instrumentation, catalysts, and chemical agents. It is also responsible for the contracting of engineering construction projects.
Standards for the Selection of Suppliers The three key indicators of "supply performance and capability", "environmental management", and "ethical business management" described below are used by CPDC when selecting suppliers: 1. Supply Performance and Capability: CPDC selects suppliers based on supply capacity, price, quality, and safety. We also conduct prior visits to suppliers to ensure the stable quality and source of raw materials. Long-term supply contracts have also been signed with suppliers throughout the supply chain. These are supplemented by searching for a greater variety of stable supply chains to reduce the risk of supply chain disruption.
94 2. Environmental Management: CPDC devised the "Supplier/Contractor Environmental Management Questionnaire" because we attach great importance to suppliers' environmental management. Questions are asked (including the adoption of ISO14001, presence of dedicated industrial safety and environmental protection personnel, wastewater and exhaust from processes, etc.) to evaluate supplier performance in the two key aspects of environmental management and environmental protection. Risk assessment is also conducted for the raw material and production process of vendors to ensure that the procurement will not have a major environmental or social impact on the source community. The response rate of the environmental management questionnaire for new suppliers/cooperative factories in 2020 reached 90%. We will continue to promote it to new suppliers in the future. 3. Ethical Business Management: Before a business relationship is established between CPDC and a potential supplier, an ethical business check is conducted to ensure that the other party is a legitimate business that does not engage in unethical behavior, and does not demand, provide or accept bribes.
Supplier CSR Declaration & Commitment Letter For supplier CSR management, CPDC and our main suppliers all make compliance with local laws and regulations a basic requirement. All suppliers must comply with local regulations on corporate governance, environmental protection, labor, and human rights. CPDC hopes that partners can embrace the same sustainable development goals and commitments as we do by respecting the local society, obey national laws, understanding, complying with CPDC's Standards of Ethical Conduct and Company Business Integrity Code during their service delivery. We also hope that they can actively respond to environmental protection, industrial safety, and social issues by embracing accountability and continuous improvement. Since 2016, CPDC has urged suppliers and contractors to sign the "Supplier CSR Declaration &Commitment Letter" and has incorporated the Supplier and Contractor CSR Declaration & Commitment Letter as part of the vendor contracts. Through a voluntary declaration, we hope that vendors will accept, implement and support the ESG (environmental, social, and governance) principles, so as to establish the concept of sustainability in our partners. All of the Company's 827 suppliers signed the CPDC Supplier CSR Declaration & Commitment Letter in 2020.
Supplier CSR Declaration
Supplier CSR Declaration Signatory Overview 2019 2020 Operating Site Type Required Required Signatories Percentage Signatories Percentage Signatories Signatories Contractor 275 275 100% 188 188 100% Taipei Office Supplier 187 156 83% 170 170 100% Contractor 85 85 100% 96 96 100% Toufen Plant Supplier 63 63 100% 92 92 100%
95 2019 2020 Operating Site Type Required Required Signatories Percentage Signatories Percentage Signatories Signatories Contractor 86 86 100% 33 33 100% Dashe Plant Supplier 89 89 100% 161 161 100% Hsiaokang Contractor 96 96 100% 42 42 100% Plant Supplier 63 63 100% 36 36 100% Contractor - - - 6 6 100% Qiaotou Plant Supplier - - - 3 3 100%
Supplier Evaluation A supplier evaluation system has been defined by CPDC and an annual evaluation plan is developed each year. The Company conducts visits and evaluations on vendors that completed higher turnover during the year, transportation contractors, and new suppliers; for engineering contractors, the project owner department conducts a supplier comparison once construction is completed for performance tracking and management. Contractors are also required to enforce safety management in accordance with the relevant regulations to ensure that the procurement strategy of CPDC balances the five goals of quality, price, environmental protection, safety, and health. Supplier assessment methods include telephone, email, and on-site audit. In 2020, a total of 19 on-site audits of transportation suppliers were performed, and the rest were communicated by telephone and email. In addition to visiting suppliers to conduct annual evaluations, CPDC also regularly communicates with suppliers and contractors on major industrial safety and environmental protection issues. If there is any negligence, then an incident analysis is conducted to identify the cause and push for continuous improvement. No supplier violations that impact human rights, the environment, labor, or society were reported to the CPDC in 2020.
CPDC Supplier Selection and Evaluation Procedures
Complete basic information New suppliers Supplier ability and "environmental application evaluation management questionnaire"
Supplier environmental, safety, and health annual evaluation Raw materials: Risk rating" M" or above, domestic manufacturing or processing capabilities, and actual procurement personnel Raw materials: Annual purchasing amount of NT$5 million or above and has domestic manufacturing or processing capabilities
Supplier quality Supplier evaluation and Request improvement Evaluation visits and re-evaluation Lower than 75 Points Or single item 0 points
Post event Scores lower than 75 points after re-evaluation: will be listed as an unqualified supplier, and will not be allowed to participate in tendering for 2 years. Further evaluations are follow up needed and if there are substantial improvements, can be re-listed as a qualified supplier (failed or passed) There are improvements after re-evaluation, can be listed as qualified supplier
96 Training for Purchaser and Selection of New Suppliers The Joint Procurement Office regularly implements buyer education and training to enhance the professional procurement skills of the buyers and their knowledge and understanding of the production equipment in the three CPDC plants, so as to make the case handling process smoother and at the same time achieve the goal of saving procurement costs. In the first half of 2020, the course schedule was suspended due to the COVID-19 pandemic. In the second half of the year, two international trade courses were arranged. In addition, in order to avoid excessive reliance on existing suppliers and weaken the ability to control costs and manage risks, new suppliers are introduced, and relationships are established every year. Such measure not only can achieve the effect of controlling costs and improving efficiency, but also allow the Company through new suppliers to learn about new products, without being limited by the fixed transactions and cost models of existing suppliers. By introducing 46 new suppliers, the Joint Procurement Office saved approximately NTD92.37 million in procurement costs in 2020.
Green Procurement and Local Procurement CPDC actively promotes green procurement within the enterprise. We follow the guidelines on the EPA's Green Life Information Website and give priority in purchasing products with Type 1 and Type 2 environmental protection labels. By supporting products that meet the characteristics of reduction, reusable, recyclable, low pollution, energy saving, resource saving, or environmental friendliness, CPDC provides the most substantial support to manufacturers that invest in green manufacturing. In addition, CPDC responds to local procurement and minimizes carbon emissions caused by product transportation. In the future, we will continue to aim at increasing green procurement and the local procurement ratio.
Amount of various procurements Item 2019 2020 Green Procurement 14,351,171 14,003,400 Friendly Charity Procurement 97,125 358,400 Note: 1. Currency Unit: NT$ 2. Definition of green procurement: According to the guidance of the EPA's Green Life Information Website 3. Definition of friendly charity procurement: Purchase gift boxes, fruits, and products from non-profit organizations, social enterprises, disadvantaged groups, and local farmers
Transportation Safety Management To prevent serious environmental and social impacts from improper transportation safety management by suppliers, CPDC conducts regular transportation safety evaluations on transportation contractors. Any areas of poor performance are investigated by CPDC to identify the main cause. CPDC also notifies transportation contractors of relevant results. A re-evaluation is conducted by CPDC at the transportation contractor's next job. If no corrective action is taken, then penalties up to contract termination may be imposed. The evaluation of transportation suppliers in 2020 used 80% as a passing grade. Those who fail to meet a passing grade shall be subject to re-evaluation in the current year. If they fail the re- evaluation, they will not be able to participate in the tendering in the following year. A total of 18 transportation contractors were evaluated in 2020, and 1 failed in the initial evaluation. CPDC has
97 asked suppliers to thoroughly investigate the results and make improvements to any areas of deficiency. Their performance will be used as the basis for supplier selection in the future. In 2020, we added humanitarian action in the evaluation, and improvements to the previous evaluation will be recorded in the future. We also added management indicators and reward and punishment mechanisms for transportation suppliers and require transportation suppliers to purchase additional third-party liability insurance and establish reward and punishment mechanisms, to ensure the stability and sustainability of the supply chain.
Results of Initial Evaluation for Transportation Suppliers in 2020 2019 Average 2020 Average Year-on-Year Item Note completion rate completion rate Change Positive Company Overview 88% 95% +3% growth Negative Driver experience 93% 92% -4% growth Negative Safety policy and communication 89% 88% -7% growth Negative Working procedures and instructions 86% 87% -4% growth Negative Safety equipment 97% 93% -5% growth Driver recruitment, training, and Negative 100% 90% -7% management growth Vehicle installation, management, and Negative 85％ 86% -9% maintenance standards growth Transportation quality and Positive 98％ 97% +3% environmental protection growth Humane Care - 97% New items Improvement on the previous - - New items evaluation deficiencies Average total supplier score 92％ 92% - Steady
Explanation and Action Taken for Items with Negative Growth Item Reason for Negative growth Follow-up by CPDC The qualification of the driver's certification in the operation of high- Optimize the audit content of Driver experience pressure containers and high-tech emergency response vehicles in the equipment is added to the questions, evaluation table which increases the scoring difficulty Blood pressure measurement and Optimize the audit content of accident classification management Safety policy and accident reports of the transportation before the driver leaves the car are communication suppliers in the evaluation table to added to the questions, which achieve proactive tracking effect increases the scoring difficulty A mechanism for handling abnormal situations and emergency drills Working procedures and Include dynamic evaluation of 60%, during holidays and night time are instructions revise static evaluation to 40% added to the questions, which increases the scoring difficulty The transportation suppliers’ own Optimize the questions of evaluation Safety equipment inspection before dispatching table and scoring mechanism 98 Item Reason for Negative growth Follow-up by CPDC vehicles and whether it has an emergency response vehicles are added to the questions. Small-scale transportation suppliers lack such mechanism The establishment of the institutional To ensure the safety of public aspect and the integrity of on-the-job transportation of dangerous goods, Driver recruitment, training are added to the questions we include third-party liability training, and management insurance for goods in the evaluation items Whether points are given to the In view of this year’s introduction of safety assessment of transportation third-party liability insurance for the Vehicle installation, routes and the proportion of the transportation of CPDC goods, we management, and occupancy of the environmental class will actively develop second and maintenance standards of transportation vehicles are added third suppliers in order to reduce to the questions transportation costs
Safety Quality Evaluation Score of Transportation Contractors in 2020 (Percentage) Transportation Suppliers' Number A B C D E F G Year 2018 92 99 91 92 91 82 - 2019 76 95 96 96 92 96 90 2020 85 95 95 82 85 90 84
4.1.2 Supply Chain Sustainability Risk Evaluation In recent years, it is reported that suppliers and contractors violated human rights, environmental protection, and other laws and regulations, which caused negative impact on companies' reputation. In order to enhance the understanding of supply chain risks, CPDC will continue to strengthen sustainable supply chain management. In 2019, CPDC conducted supply chain risk assessments for suppliers whose annual purchase amount reached NTD15 million or suppliers with high irreplaceable raw materials or equipment, in order to identify the current status of suppliers' sustainable promotion, understand the risk points and be able to respond to them in advance (please refer to the 2019 Corporate Social Responsibility Report for the assessment results). The following lists the supply chain sustainability risk identification process. In addition to the implementation in 2019, we will continue to conduct questionnaire surveys on supply chain sustainability risks and analyze the high- risk aspects of the questionnaire results to understand the sources of risks and strengthen internal management in order to reduce the impact of the risks.
Procedures of Supply Chain Sustainability Risk Identification Phase Description Based on international best practices and industry examples, we designed a self- assessment questionnaire on sustainability risk, the content covers sustainable Survey Design governance and disclosure, occupational safety and health, environmental protection, moral integrity, labor and human rights, etc. Formulate Considering the importance, the first phase of the self-assessment questionnaire was Questionnaire & conducted for the risk of raw materials and equipment suppliers with an annual Dispensing purchase amount of more than NTD15 million, or that is highly irreplaceable Principles 99 Phase Description The number of questionnaires dispensed and collected was used to calculate the Dispensing and percentage of the total annual procurement amount, which were used as the basis for Recovering whether to gradually expand the threshold of questionnaire dispensation in the future, Questionnaire with a view to gradually and completely implement the supply chain sustainability risk assessment Analysis Results Analyze the better and worse aspects and analyze the reasons According to the questionnaire score of each supplier, divide into high-risk, medium- Supplier Rating risk, and low-risk suppliers Strengthening Incorporate ESG ratings into the existing supplier selection criteria, gradually Internal integrate with the supplier scoring mechanism, and require medium- and high-risk Management Act suppliers to continuously improve ESG performance
4.2 Customer Relationships Management 4.2.1 Customer Communication CPDC has set up the "After-Sale Service and Customer Complaint Procedure" to continuously follow up on products after sales to ensure that the quality of products meets customers' needs and maintain customer relations. Therefore, we regularly distribute questionnaires to our customers at the end of each year to conduct customer satisfaction surveys, with a 100% customer coverage rate. The scope of questionnaire survey includes product quality, delivery status, after-sales service, product image, etc. We communicate with the customer to determine what improvements should be made for areas that score below 70. We then review and develop strategies for improving product quality and services. CPDC has also set up an open channel for communication with the customers and established internal procedures for handling customer complaint and improvement to ensure that customer feedback is fully conveyed and reviewed, and proper actions are taken to rectify the situation. In 2020, CPDC received three customer complaints cases related to quality management improvement, improvement on all of them have been completed after thorough communication with customers. We will continue to maintain good relationships with our customers in the future. According to the results of the 2020 customer satisfaction survey conducted by CPDC's Toufen, Hsiaokang, and Dashe plants, all achieved a customer satisfaction rating of over 85 points, indicating that customers were generally very satisfied with the products and services we provide. Among them, the satisfaction level of AN slightly declined compared to 2019. The actual survey revealed that there was an increase in the total number of customers, and the scores of each category reached 90 or above.
CPDC Product Customer Satisfaction Results Product 2018 2019 2020 AN 94.67 95 95 CPL 90 91 92 PA6 94.43 88.68 96 Note: 1. The satisfaction rating for each plant is based on the average of all customer scores for the same product. 2. Since satisfaction was calculated on a plant basis in 2018 and 2019, and on a product basis in 2020, the satisfaction scores of CPL have been recalculated and revised.
100 Customer Complaints Process 1. When a customer • A customer provides feedback to the Sales Dept. provides feedback 2. Send personnel to • The Taipei office sends out a representative to inquire into the problem inquire into the problems and fills out the Customer Feedback Form. • The Sales Dept. determines the cause of the complaint and proposes 3. Determine the causes solutions to the customer. If the customer accepts the proposal, the case and provide a will be closed and filed and handed over to the relevant department for preliminary response implementation of the proposed solution. • The Sales Dept. fills out a Customer Complaint Processing Form and 4. Investigate the customer sends the form to the Production Management Dept. for follow-up complaint and rectify the processing. problem • The Production Management Dept. submits the customer complaint. • After the Production Management Dept. and the Sales Dept. approve the 5. Reply to the customer proposal, the Sales Dept. will reply to the customer with the result of the investigation and the proposed solution. • The department causing the problem takes actions to rectify the problem 6. Track improvement and based on the result of the investigation and the proposed solution. effectiveness • Track the effectiveness of the actions taken to rectify the problem according to the Management and Review Operating Procedures
4.2.2 Product Quality Management Comprehensive quality management and control procedures are implemented by CPDC at every step from the acquisition of raw materials to their storage, production, and product transportation to ensure that quality products are delivered to the customer. Rigorous internal requirements are enforced to maintain product quality. Safety labels and instructions, as well as the transportation process employs the"5S Workplace Organization" method (Sort, Set in order, Shine, Standardize and Sustain), Total Production Management (TPM), Total Quality Management (TQM), and Hazard and Operability Study (HAZOP) to meet customer expectations to the highest standards. For product safety labeling, hazard labels are applied for CPL, AN, and Nylon Chip products in accordance with domestic regulations. Material Safety Data Sheets have also been produced so that product safety information can be effectively communicated to customers. The quality-first management philosophy at CPDC meant there were no violations relating to the provision and use of our products in 2020, nor any violations relating to product safety labels.
CPDC Product Quality Management Process • The Procurement Office reviews the supplier contracts • The Technology Team drafts a production plan and submits it to the Raw Materials Production Department for approval Procurement and • The Procurement Office evaluates the suppliers and procures raw materials Acquisition as planned • The Management Team completes the raw material receiving, storage, and quality testing procedures • The QC Division under the Production Team conducts sampling and testing according to the relevant procedures • Production operators conduct manufacturing process control based on the Process Operations manufacturing process control checklist, operation control records, and test results • If the manufacturing process is not stable or the process is out of the scope of control, adjustments should be made according to relevant procedures 101 • The QC Division under the Production Team conducts product sampling and testing according to the testing procedure to ensure product quality Product Testing and • When a product is found to be defective, isolation and abnormality tracking Storage should be done according to the procedures • The Management Team stores and ships the products according to relevant procedures and contract terms • Survey and test-drive the planned transportation routes, confirm the shipping route, and get positions with GPS along the whole route Product transportation • The tank of the transportation truck is designed to prevent tumbling and in compliance with the US DOT407 standards • Safety marks on vehicles • Conduct regular and ad hoc internal quality audits Management review and • The management calls regular meetings to review the operations of the improvement quality control system and ensure the continuous applicability of the system
4.3 Social Communications CPDC's three main production plants at Toufen, Dashe, and Hsiaokang are located in Miaoli County and Kaohsiung City. The Qiaotou Plant, completed in late 2020, is also located in Kaohsiung City. We appreciate the importance of securing the support and acceptance of local residents and competent authorities. A variety of communication channels and community relations-building activities are employed by each plant to maintain a positive relationship with their local communities.
4.3.1 Community Communication The most important goal in communication for CPDC is to maintain a symbiotic relationship with local communities surrounding the plants. As far as CPDC is concerned, community communication is the mission of every employee at all times, and every contact with local residents is an important opportunity for communication. As each plant is located in different counties and cities, communication with local communities and residents takes geographic location, customs, traditions, and events into account in order to use the most appropriate method to communicate in the most effective manner. All CPDC plants have a defined "Quality, Safety and Health, Environment and Energy Management Consulting and Communication Procedure" in place to govern the principles and process of stakeholder communications and dialogue. At the same time, complaints can also be made at each plant over the phone or in person. Each plant has a standard operating procedure in place for dealing with telephone complaints or local residents visiting in person. If any improvements are necessary, then actions are taken by the responsible department based on the content of the complaint with follow-up conducted by the General Administration Section.
Complaint Handling SOP at each Plant
Take Effective Action Record, Review, and Complaint Received Verify Complaint and Pollution Control Improve
Inform the complainant the If a telephone complaint or Notify Manufacturing If a pollution complaint is result of action taken. a resident visits in person, section of the complaint to true, then corrective action Record matter in the record the subject of the check if it is true. Go out of is taken by the "External Communication complaint and their contact the plant to check, if Manufacturing section Log" for further review and details necessary immediately improvement
102 In addition to complaints by phone or in person, local residents can also submit their feedback to the local arbitration committee for the plant's location. CPDC plants actively coordinate with the relevant departments and cooperate with their investigations. No complaints were received by the three CPDC plants in 2020.
External Communication by Dashe Industrial Area The CPC's Kaohsiung Plant was closed or relocated in 2015. In Letter Fu-Chien-Tu-Tze No. 211694 dated November 7, 1998, issued by the Kaohsiung County Government regarding "Motions for Changing Dashe Urban Plan (3rd overall review)", the conditions of Motion No. 7 required production plants in Dashe Petrochemical Industrial Park where the Company's Dashe Plant is located to move elsewhere by 2018, and the county government to change it to Class B industrial area according to the legal procedures. The content of the "Motions for Changing the Dashe Urban Plan (4th overall review)" submitted in Letter Kao-Shih-Fu-Tu-Fa-Kuei-Tze No. 10130250600 dated January 13, 2012 by Kaohsiung City Government to the Ministry of the Interior remained unchanged. On March 22, 2019, the Kaohsiung Urban Planning Commission deliberated to change the Dashe Industrial Area from special industrial area to Class B industrial area. Production can still continue in the area, but expansion and rebuilding cannot. Kaohsiung Petrochemical Industry General Union established a self-help association on December 14, 2020 to continuously communicate with the government to degrade to Class A industrial area. At the same time, we request the government to formulate a sunset clause and supplementary measures, so that manufacturers can respond to and relocate the factory in a timely manner. In addition, the establishment of the petrochemical program at Renwu Senior High School as a joint effort between CPDC and other petrochemical companies further enhanced local students and their parents' understanding of the petrochemical industry. A campaign to boost local understanding of the petrochemical industry was also developed to continue strengthening local communication, resolve differences and promote harmony. We hope this will lead to the continued production and sustainable development of the factories within the industrial area.
Adoption of Air Quality Purification Zones and Public Spaces CPDC participates in government environmental protection related activities to promote the development of petrochemical business to the neighboring communities, and also actively invests in environmental improvement and maintenance, which not only can enhance the excellent corporate image and visibility but also achieve a triple win situation for the community, the enterprise, and the government. The Environmental Protection Bureau of Kaohsiung City has been promoting the greening and beautification of exposed earth and subsidizing the establishment of air quality purification zones (hereinafter referred to as “APZ”) for many years. It is hoped that the adoption mechanism by the private sector can enhance and maintain the overall quality and environment of APZ through businesses, maintenance units, or communities working together. In 2020, through the cooperation of the Environmental Protection Bureau of Kaohsiung City and related units, we continued to maintain the APZ. The Dashe Plant continued with the adoption of the APZ of the Yo- Chung Elementary School in Nanzih District. The Hsiaokang Plant continued with the adoption of part of the Kaohsiung Municipal Social Education Center. Both Dashe Plant and Hsiaokang Plant were awarded the 2019 outstanding enterprise for "Air Quality Purification Zone Maintenance". In 2020, the Toufen Plant continued with the adoption of the public space in the Toufen Industrial Area 103 and carried out greening management and maintenance adoptions to improve the landscape and environmental quality, and was awarded a Certificate of Appreciation .
Adoption of Dongxing Wetland Park To protect environmental sustainability and fulfill our corporate social responsibility, Toufen Plant began adopting the Dongxing Wetland Park in Toufen, Miaoli County, in 2013. The wetland is part of the Zhonggang River - Dongxing Bridge Remediation Project administered by the Environmental Protection Bureau of Miaoli County. The Toufen Plant sponsored and adopted the artificial wetland established as part of the project to support its maintenance and management, and the planting of wetland plant species to fulfill the goal of environmental friendliness. CPDC will continue to take an interest in environmental issues in the future.
4.3.2 Remediation and Development of Anshun Site Background Information Anshun site was an alkali-chlorine factory owned by Kagakude Negai O Ka Corporation during the Japanese Period that was later taken over by Taiwan Alkali Industrial Corp. ("Taiwan Alkali"), state owned enterprise. A Pentachlorophenol (PCP) factory was constructed, and production operations continued. When the factory was closed in 1979, around 5,000 kg of PCP was left in the storage on the site. After extended exposure to rainwater, the soil and surface water were polluted by PCP, mercury, and dioxin. In 1983, Taiwan Alkali was merged into CPDC, which was also state- owned at the time, under the directive of the MOEA. Its contaminated land, therefore, became the responsibility of CPDC as well. The contamination is a product of history, but CPDC has worked actively to take responsibility for site remediation. Extensive investment was made into a long-term remediation plan that will gradually rehabilitate the contaminated site. Remediation of the Anshun site is based on the concept of the Remediation Train. The program was launched in 2009 and stage 1 was completed in 2014. Stage 2 of pollution remediation began in 2015 and is expected to be completed by 2024. Between the start of planning and the present day, CPDC has sunk a massive amount of funding into laboratory research, pilot plant testing, project review, and actual plant construction and operation. Local and foreign experts were also invited to review the remediation technologies. CPDC engaged in long-term development of related technologies with an attitude of transforming challenges into growth. Substantial progress has been achieved under the current project timetable and it has now become a model for other international remediation projects.
Main Remediation Methods Heat Treatment Decontamination Technology Wet Treatment Reduction Technology Used for treating soils contaminated with high levels Used for soil with dioxin and mercury of dioxin and mercury. Heat is used to evaporate contamination less than 200 mg/kg. Contaminants contaminants in the soil. Dioxin is broken down by are separated through differences in particle size the high temperature while mercury vapor is and specific weight. Level of contamination can recovered through condensation. The contaminated be reduced by 70%. soil can be 100% decontaminated.
104 Remediation Progress and Procedures On the administrative level, the remediation plan for the Anshun site is supervised by the Environmental Protection Bureau of the Tainan City Government. In terms of its execution, remediation efforts are supervised by the Environmental Protection and Pollution Prevention Center of the CPCD Taipei Office. A joint remediation team is responsible for the implementation of the remediation task. Our personnel regularly produce daily, weekly, monthly, and semi-annual reports on the site, and perform internal inspection through daily sample taking, monitoring, and recording of relevant indicators. Once data indicates abnormal conditions, we will immediately troubleshoot and resolve the deficiency. Also, to effectively communicate to the local government and local community the progress and status of the Anshun site remediation, CPDC performs a construction audit every 2 months, and holds a community town hall meeting and report every 6 months. We invite government and local leaders to participate in the verification of factory testing audits and other opportunities, to ensure the Anshun site remediation information remains open and transparent. The Anshun site has both mercury and dioxin pollutants, which is unique in the world, and the remediation technology is very difficult. CPDC has overcome the difficulties encountered in remediation one by one since the remediation started in 2009. By the end of 2020, a total of 292,400 tons of contaminated soil had been treated and certified by the Environmental Protection Bureau, which was a glorious milestone and a model for contamination remediation technology that can serve as a benchmark for future domestic and international contamination remediation. In addition, CPDC also cooperates with several universities and colleges to conduct research on mercury and dioxin removal technology in soil and has filed patents and published papers. We are also committed to environmental education, guiding the next generation to use this as a reference to care for the environment. Since 2009, 64,100 tons of highly contaminated soil have been treated by the heat treatment on site, and 228,300 tons of medium to low contaminated soil have been treated by the wet treatment on site. According to the third revision of the pollution remediation plan approved by the Tainan City Government, a target of 59,000 tons of contaminated soil shall be treated at the site in 2020, and a total of 59,751 tons of contaminated soil were treated at the Anshun site in 2020, with an achievement rate of 101.3 %.
105 1. Annual check target: (1) Heat treatment should remediate 30,000 tons of contaminated soil (2) Wet treatment should remediate 29,000 tons of contaminated soil (3) Verification of the decontamination of the Mono-vegetation Zone should be completed (4) Verification of the decontamination of Seawater Pond B should be completed Remediation results 2. Annual results: Future Target 1. Results of removal of (1) Heat treated 18,438 1. 2021 contaminated soil tons of contaminated (1) Complete the (1) Bush Zone 28,653 m3 soil government (2) Forest Zone 9,155 m3 (2) Wet treated 41,313 certification of (3) Alkali-Chlorine Zone tons of contaminated Seawater Pond B 25,456 m3 soil 2. 2023 (4) Seawater Pond B 61,628 (3) Completed the (1) Complete the m3 verification of the remediation of Seawater (5) Mono-vegetation Zone decontamination of Pond A 3,796 m3 Seawater Pond B (2) Complete the 2. 36.4% reduction in decontamination of PCP contaminated area Zone in Q3 (14.81 hectares/37.1 hectares) 3. 2024 (1) Complete the verification of the decontamination of PCP Zone in Q1
2009 2014 2015 2018 2019 2021 2024 Stage 1 Remediation Stage 2 Remediation
Remediation results (2018) Complete the decontamination of the Mono-vegetation Zone
106 Remediation Process Step1 Remediation Plan Preparation of the Remediation Supplementary investigation on some sites before remediation Plan Setting standards for sedimentation cleanup Technical feasibility assessment of rectification method On-site storage + partial intermediate treatment
Step2 Detailed planning design and outsourcing Outsourcing of the of remediation project Remediation Project Design
Step3 Facilities setup, including access roads/buffer Construction of the belts/secondary pollution protection/barriers Remediation Project in the construction area
Design and planning of intermediate Setup of sedimentation tank and Excavating temporary storage for treatment technology wastewater treatment equipment Bush Zone/Single vegetation area
Self-verification/EPA verification Field test of intermediate treatment Sediment dredging and cleaning of technology Seawater Pond B
Removing regulatory restrictions of Feasible Not Feasible the site Intermediate treatment on high concentration soil Separately fill-in sealing and storage site by division
Layered storage in sealing and storage site/Landscaping
Step4 Verification, remediation, and monitoring after remediation
Verification/Cancellation of Remediation/Revegetation Environmental Monitoring Regulatory Listing Soil pollution control standards Imported soil backfilling/Land Groundwater Monitoring preparation Air Monitoring Partial dredged soil backfilling Leachate Monitoring Revegetation
Environmental Monitoring An environmental monitoring program has been set up by CPDC for the plant and its surrounding environment to effectively control environmental pollution factors and reduce environmental risks, and regularly take and analyze samples, such as air quality, groundwater quality, river water quality, noise, and vibration to track all changes in environmental quality. In addition, other data such as temperature, humidity, mercury vapor, and dioxin are monitored round the clock. The exhaust gas from the heat treatment (rotating kiln) plant and its surrounding environment are monitored as well. Monitoring work can be divided into three categories according to the nature of the work: 107 1. Site environmental monitoring: regular monitoring of environmental quality, such as groundwater, air, noise and vibration, surface water (including river and site drainage), and drainage ditch sediment at the site perimeter or contaminated area 2. Environmental monitoring of treatment units: periodic monitoring of the perimeter environment, exhaust, and drainage of each treatment unit, e.g., when the heat treatment and wet treatment plants are in operation, the perimeter air and wastewater emission values need to be checked 3. Autonomous quality control testing of treatment units: monitor the effectiveness of the treatment process of each treatment unit. For example, the soil after heat treatment and wet treatment has to be verified by autonomous quality control, autonomous verification, and government verification before it can become qualified soil
The environmental footprint of the Anshun site in 2020 was similar to that of 2019. The main reason for the increase in water consumption is to assist the neighboring residents and the Luermen Matsu Temple with watering and irrigation; the main reason for the increase in energy consumption is the reheat operation of the heat treatment equipment after stoppages.
Environmental Footprint of Anshun Site over the Past 3 Years 2018 2019 2020 Electricity consumption (kWh) 1,787,000 3,038,400 3,249,000 Water consumption (KL) 26,811 47,476 82,048 Diesel (KL) 671.2 1,936.621 1,860.9 Waste (Metric Tons) 1.55 2.113 1.074
The water resource management at Anshun site is based on the relevant management regulations as well as the approved remediation plan and water pollution prevention plan. The water sources of Anshun site are provided by the Taiwan Water Corporation. Main purposes include sprinkling water to prevent air-bone dust, irrigating landscaping plants, domestic water, cooling water for factories, etc. In addition, due to the suspension of the ecological pool since 2018, there is no wastewater recovery, and the wastewater discharge is 2,860 metric tons. The quality of the discharged water has been tested. The SS is lower than 25mg/L and the total mercury is lower than 0.002mg/L, which has a higher standard of water quality than Category C water bodies. In the future, water will continue to be reclaimed and reused through RO technology (for irrigation and topping up the eco-pond) at Anshun site to reduce the consumption of water resources. Energy conservation measures will continue to be promoted at Anshun site in the future. The greening rate of the site will also be increased to reduce GHG emissions. Green vegetation remediation technology will be developed and implemented at the same time to reduce or avoid the use of heat treatment. Low-carbon technologies have been listed as a potential remediation solution. Remediation use advanced, low-carbon techniques will allow the remediation goals to be met with a smaller environmental footprint.
Organizational structure and resource allocation 1. Organizational Structure In order to enhance the implementation of the Anshun site remediation and management mechanism, CPDC established a more complete organizational structure of the Anshun Site and set 108 up the "Anshun Plant Pollution Remediation and Management Team" in October 2020, which is led by the Chairman of CPDC Corporation, with the goal of strengthening the Anshun remediation. In addition to the regular discussions at the monthly meeting chaired by the Chairman, we are committed to establishing a supply of environmental protection, social responsibility, human rights, safety, and sustainable development to ensure that the remediation is completed on time and with quality. 2. Resource Allocation In order to strengthen the organizational structure and functions of the "Anshun Plant Pollution Remediation and Management Team", the team gathers CPDC's talents from all levels, such as the Administrative Department, Occupational Safety and Health Center, Environmental Protection and Pollution Prevention Center, etc., to be stationed at Anshun Site to provide supervision, management, technology, communication, and consultation services. In addition, in order to ensure the internal control of all aspects of Anshun Site, the audit unit of the Taipei Office has also upgraded its auditing mechanism to ensure compliance with laws and regulations, as well as focusing on the working environment, employee rights and benefits to fulfill corporate social responsibility. Approximately NTD2.956 billion has been spent on the remediation of soil contamination at the Anshun site between the start of remediation efforts in 2009 and the end of 2020. Remediation funding over previous years is tabled below.
Past Funding for Remediation of the Anshun Site Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Cost (NTD in hundreds of 1.43 1.96 2.34 7.00 3.69 2.82 1.07 1.04 1.20 3.63 3.38 29.56 millions)
Stakeholder Engagement Multiple communication channels are set up according to the needs of the stakeholders in order to understand the expectations and needs of each party and respond appropriately. 1. Government agencies: mainly the Environmental Protection Bureau of Tainan City Government. The main demands are the progress of remediation and secondary pollution prevention. There are staff from the Occupational Safety and Environmental Protection Center stationed at Anshun site to ensure the safety of the project and prevent secondary pollution and to respond to government agencies' questions immediately in addition to daily inspections of the plant. 2. Neighborhoods: The main targets are the residents of Luermen Matsu Temple, Xiangong Village, Luer Village, and Sicao Village. In order to respond to the needs of neighborhood stakeholders, CPDC has a dedicated staff to respond to and handle the demands of neighbors, while the Luermen Matsu Temple mainly conducts temple fairs and cultural activities. The Company has agreed to lend the parking lot to the temple unconditionally based on the principle of public welfare and good neighborliness. 3. Contractors: Contractors handle the construction of the site according to the contract. In order to ensure the smooth progress of the project, the project is handled by a dedicated person, who is responsible for discussing with the contractors and the Environmental Protection Bureau from time to time
Social Impact 1. Promotion of Academic Development at Local Universities
109 Since the remediation effort was launched in 2009, CPDC has cooperated with 13 local professors in environmental engineering, biological science, and soil science to carry out 16 research projects. More than 30 research experts were cultivated between 2010 and 2013 during Phase 1 of the "Integrated Rehabilitation of Vegetation at Site of Toxic Contamination - Development of Green Technology for Dioxin Contamination at Anshun site" research project. The patent for "Microbial reagents for scavenging dioxin pollutants present in a contaminated medium and methods of using the same" was also licensed to CPDC through technology transfer, resulting in 3 domestic patent applications, a total of 22 domestic and foreign research papers and publications. We provided the tertiary education in Taiwan with the perfect place to put theory into practice. We hosted 2 visits from universities in 2020. The visitors included 50 teachers and students.
2. Best Venue for Environmental Education CPDC hopes that more K-12 students can learn about the story of this land and inspire them to protect the environment. In previous years, Anshun site was opened for schools in the vicinity that applied for environmental education visits. However, due to the impact of the COVID-19 pandemic, many group visits were declined in 2020 due to environmental safety and the seriousness of the pandemic. With the cooperation of many parties, there was no outbreak of the pandemic at Anshun site, fortunately. In the future, the site will be opened gradually, according to the situation of the COVID-19 pandemic, so that people can understand the history of the park and environmental education, and more younger generations on the land can understand the importance of environmental conservation.
3. Landscaping and Carbon Sink Benefits Since the remediation of Anshun site began in 2009, CPDC has invested a lot of resources to remove the contaminated soil and reduce the contaminated area. Since 2011, we have successively completed the renovation of the forest area, single vegetation area, and grass area, and conducted green construction on the 3.3 hectares' forest area. In addition to the native plants in the reserved area, waterways, and building sites, we also added turf and shrub plants, turning the forest area into an environmental education park. The renovated grass area and single vegetation area are all under continuous greening. CPDC hopes to create a sustainable local environment through our efforts.
4. Filming of the Benchmark Achievement of Pollution Remediation Anshun site is contaminated by a number of pollutants and is the only site in the world to be contaminated with mercury and dioxin simultaneously. The difficulty of site remediation is well- known globally. In order to record the brilliant remediation results, the Soil and Groundwater Pollution Remediation Funds commissioned TAIYI Advertising Inc. to visit the Anshun site to film the completed remediation area and the remediation process to facilitate the release of the video of the soil remediation achievement.
Annual Planting Area of Anshun Site Year Item 2017 2018 2019 2020 Category Green Space*1 (Area, m2) 100,253 100,253 100,253 100,253 Shrub*2 (Area, m2) 1,843 1,135 1,135 1,135 Planting Arbor*3 Arbor 8,370 8,370 8,370 8,370 (Area, m2) Broadleaf 2,365 2,365 2,365 2,365 110 Year Item 2017 2018 2019 2020 Category Big Arbor Broadleaf tree Conifer 19,104 19,104 19,104 19,097.25 Loose-leaf tree Palm 190 190 190 190 Carbon Annual Carbon Sinks－ 26,233 26,060 26,060 26,056 Sink Total*4 (MT) Note: 1. The green space is recorded as area, and the formula for estimating carbon sinks is the green area (m2) x20kg- CO2e/m2-yr 2. For the shrub, if survey data is available, the species, quantity, and total planting area shall be recorded (the green space included can be calculated in m2); if not, the total planting area can be recorded, and the formula for estimating carbon sinks is total area (m2) x 300kg-CO2e/m2-yr 3. For the arbor, if survey data is available, the species, quantity, and total planting area shall be recorded (the green space included can be calculated in m2); if not, the total planting area can be recorded, and the new planting can be regarded as small trees. The formula for estimating carbon sinks is total area (m2) x 600kg-CO2e/m2-yr 4. The planting volume also increases or decreases each year. The figures in the above table are the general situation of planting in that year. If the above tree planting figures times carbon sinks, there will be a slight difference from the total annual carbon sinks.
5. Provide Employment Opportunities and Care for Local Residents During the remediation of Anshun site (formerly Taiwan Alkali Corporation), we spend about NTD 2 million per year to hire local residents for remediation work, increase job opportunities and income for local residents, and promote many programs with the city government to drive and improve the local economy. In addition, by holding public welfare activities in Tainan City, CPDC invites local authorities to act as co-organizers, and community groups in Luer, Sicao, and Xiangong villages to set up stalls to sell their products, for public and welfare organizations to join in the fun. CPDC also actively invests in local communication and local operations, establishes good interactions with neighboring villages' offices and community development associations, and actively participates in local community activities. In 2020, we invested NTD43,200 in community activities. CPDC personally promotes living together and prospering with the locals, as well as contributes in the celebration of festivals (Mother's Day, Father's Day, Mid-Autumn Festival, Double Ninth Festival), participation in the Sicao Community Development Association, promotion of the concept of sanitation and pandemic prevention, and care of elders living alone and the elderly in the community. In addition, CPDC allocates an additional NTD 1.5 million to the designated account of the Annan District Office, Tainan City each year as the health care fees for the residents of Sicao, Luer, and Xiangong villages. We hope the local community will recognize CPDC's efforts and together build a sustainable local development for Anshun.
111 Chapter 5 Corporate Care 5.1 Talent Development Teamwork and execution are the two branches of the Company's sustainable development, and talents are the root systems that support the growth of the branches. In recent years, with the development of the dual core businesses of petrochemical and land development and the retirement of senior employees, CPDC's talent recruitment and cultivation strategy has also been adjusted. We actively recruit elite talent with international thinking and transnational capabilities and started an MA program and manager's succession plan. By continuously expanding the talent pool, we strengthen our management capabilities of outstanding talents and accumulate energy for the sustainable development of the Company. The proportion of internal promotion in 2020 reached 34%.
5.1.1 Human Resources Structure CPDC promotes local employment, creates local employment opportunities, and further thrives local development. Furthermore, we care about human rights and prohibit child labor. The total number of employees in 2020 was 1,349, including 1,344 full-time employees and 5 contract employees Due to the industrial characteristics and the current status of domestic talent development, male employees constitute the majority of full-time employees, with a male to female ratio of 5.08: 1 (1,123 male employees; 221 female employees). In order to balance the ratio of male and female in the traditional petrochemical industry, CPDC has actively increased the number of female employees, which has increased by 49.3% compared to 2015 (from 148 to 221). In the future, we will continue to contribute to the women empowerment issue in traditional industries through recruitment and improving human rights and gender equality systems.
2020 CPDC Employee Structure Overview Female Male (Number Indication Proportion (%) (Number of Proportion (%) of people) people) Taipei Office 214 59.61% 145 40.39% Toufen Plant 327 91.60% 30 8.40% Operating Dashe Plant 258 92.14% 22 7.86% Site Hsiaokang Plant 260 95.59% 12 4.41% Qiaotou Plant 19 73.08% 7 26.92% Douliou Plant 45 90.00% 5 10.00% Under 30 177 78.32% 49 21.68% Age 31 - 50 822 84.31% 153 15.69% Distribution Over 51 124 86.71% 19 13.29% Leadership Level 13 100.00% 0 0.00% Management Level 298 93.71% 20 6.29% Title Non-Management Level - General 812 80.16% 201 19.84% Employees Ph.D 14 93.33% 1 6.67% Educational Master 242 74.92% 81 25.08% Background Bachelor 748 85.29% 129 14.71% High School and below 119 92.25% 10 7.75% Domestic 1,123 83.56% 221 16.44% Nationality Foreign 0 0.00% 0 0.00% Total 1,123 83.25% 221 16.38% Note: 1. Does not include contract personnel 112 2. The ratio of male to female at operating sites is calculated based on the number of employees in each plant 3. The leadership level is vice president level (including) and above 4. The management level is from foreman to assistant manager/plant chief 5. The boundary of this report is the Taipei Office and the three CPDC plants (Toufen, Dashe, and Hsiaokang). In order to present the complete employee structure, the new plants (Qiaotou Plant and Douliou Plant) are included in the statistics (Qiaotou Plant started operation in October 2020, and Douliou Plant is currently managed by Toufen Plant)
Female-friendly workplace CPDC has mostly male employees, and female employees only account for 16.38%. On Women's Day 2020, the chairman sent flowers and small gifts to each level and department to thank the petrochemical female elites. We thank female personnel for their dedication to the Company and family and create a female-friendly workplace.
Annual New Employees and Resigned Employees Statistics CPDC goes to campus and deepens the brand recognition among young students through industry academia cooperation and job exhibitions at colleges and universities. With the petrochemical industry's shift to high-value products and intelligent factory in recent years, and the rapid growth of the land development business, the demand for talents has become increasingly diverse, including chemical industry, land asset management, risk management, reinvestment management, circular economy, big data, AI, and other fields. At the same time, in response to CPDC's overseas business strategy, we promote overseas talent recruitment and training programs and build a frontline battle team to gradually strengthen CPDC's talent pool. Through the inheritance of experience from senior personnel, newly recruited employees can quickly learn in a safe manner to make up for the impact of the retirement wave on CPDC to demonstrate a new atmosphere of sustainable development.
New Recruits New New New Recruitment Male Recruitment Female Recruitment Total Rate (Total) Rate (Male) Rate (Female) Under 30 49 4.36% 12 5.43% 61 4.54% 31 - 50 79 7.03% 28 12.67% 107 7.96% Over 51 10 0.89% 1 0.45% 11 0.82% Total 138 12.28% 41 18.55% 179 13.32% Note: 1. New recruitment rate = (total number of new recruits in 2020/total number of employees on the last day of 2020) *100%
Number of Employees Who Left the Company and Turnover Rate in 2020 Turnover rate Turnover rate Turnover rate Male Female Total (Male) (Female) (Total) Under 30 33 2.94% 13 5.88% 46 3.42% Voluntary 31 - 50 73 6.50% 20 9.05% 93 6.92% Resignation Over 51 42 3.74% 7 3.17% 49 3.65% Non- Under 30 2 0.18% 2 0.90% 4 0.30% Voluntary 31 - 50 7 0.62% 6 2.71% 13 0.97% Resignation Over 51 0 0.00% 0 0.00% 0 0.00% Total 157 13.98% 48 21.72% 205 15.26% Note: 1. Turnover rate = (total number of resigned employees in 2020/total number of employees on the last day of 2020)*100% 2. Turnover rate includes retired employees
113 Mentorship System for New Employees In order to provide appropriate guidance for new recruits, assist new recruits to adapt to company system and organizational culture as early as possible, help new recruits stabilize work and develop interpersonal relationships, and reduce discomfort with unfamiliar environments, assist new recruits in achieving self-achievement, and improve retention rates, CPDC has a mentorship system for level 2-6 of new non-management employees. The mentors are excellent and qualified senior employees. The term of the mentorship is 3 months and the mentors must be evaluated by the unit supervisor after the end of mentoring task, so as to ensure that the mentors complete the tasks and perform the expected function.
Remuneration System and Performance Management CPDC hopes that our employees will pursue a long-term career development. Therefore, the establishment of a fair, just, and competitive salary structure is the key for the Company. In 2020, the starting salary of CPDC's basic level personnel is NTD30,000, and the starting salary of new graduates from college is NT$35,000, which is 1.26 times and 1.47 times the Taiwanese base salary of NTD23,800, respectively. This means that we provide good competitive salary. CPDC, employees' remuneration structure, includes basic salary, subsidies, additional pay, bonuses, and other payments required by laws and regulations. In order to appreciate the employees' hard work, according to CPDC's "Articles of Incorporation", CPDC distributes 3% of the annual profit as employees' compensation, sharing the sweet results with employees. In addition to the annual festival bonuses, there are also performance bonuses, which can be divided into year-end bonus, monthly bonus, quarterly bonus, and attendance bonus. The achievement of individual performance, departmental performance, plant-wide performance, and other indicators are used as a basis for bonuses distributions. We encourage all employees to work together with CPDC and make efforts in the increase of income source, reduction in costs, and quality maintenance of the Company.
2020 CPDC annual salary information for full-time employees in non-management roles Item 2017 2018 2019 2020 Total payroll of full-time employees in non- 673,359 1,252,121 1,076,283 980,775 management roles Number of full-time employees in non- 1,017 1,174 1,191 1,262 management roles (persons) Average salary of full-time employees in non- 662 1,067 904 777 management roles Median of salary of full-time employees in - 935 814 715 non-management roles Note: 1. Currency Unit: NTD thousand 2. All numbers are rounded to whole numbers 3. The numbers for 2017 and the median of salary for 2018 were self-assessed and are not CPA-verified
CPDC values equal rights for male and female and equal pay for equal work. We have clear salary, salary scale, and food allowance, which do not differ according to gender. At present, the calculation of the male-female salary ratio adopts the actual full salary as the calculation basis and includes variable salary, such as overtime pay, night pay, shift allowance, performance bonus, attendance bonus, etc. Differences in job function or performance will cause difference in payment. CPDC has more male employees who mainly serve as technicians and do shift works, and fewer 114 females who mainly serve as administrative staff. Therefore, even if the job grades are the same, there are some differences in the salary composition structure, which is the reason for the difference in salary ratios.
Ratio of the average salary of male and female in the business decision-making level, management level, and non-management level in 2020 Average Female Average Male Percentage Salary Salary Business decision-making level (fixed salary only) 0 188,992 0 Management level (fixed salary only) 70,932 48,954 1.45 Management level (full salary) 84,732 60,132 1.41 Non-management level (full salary) 46,810 42,877 1.09 Note: 1. Ratio = Average female salary/average male salary
CPDC encourages employees to participate in goal setting and performance management. Employees and their direct supervisors together set up departments and individuals key performance goals for business and occupational functions. In addition to the usual business communication and feedback which employees can follow at any time, the direct supervisors shall conduct performance evaluation and performance feedback every six months as a basis of incentive and promotion or an opportunity to help solve difficulties. The proportion of employees receiving performance evaluation in 2020 reached 100% (excluding those who are on leave without pay, contract employees, temporary staff, and those who have been employed for less than 9 months). The performance evaluations of new employees, trainees, and current employees are governed by CPDC regulations such as "Plant Regulations Governing Monthly Performance Evaluations and Incentive", "Regulations Governing Departmental Performance Evaluations and Incentives for the Taipei Office", "Guidelines for New Employee Training and Evaluations", and "Employee Evaluation Regulations". To encourage a proactive approach by employees, outstanding employees from each unit are selected by CPDC in accordance with the "Guidelines for Selection and Recognition of Outstanding Personnel" each year. Such outstanding employees are rewarded with overseas field trips.
5.1.2 Education and Training Extensive resources are invested by CPDC every year into providing employees with a variety of education and training. The training provides employees with the basic skills they need for their work and builds up a pool of expertise for future development and promotion. In addition to on-the- job training, other training includes self-run training courses, external training, and subsidizing employees for self-education. CPDC encourages employees to self-enrich when they are off duty. Therefore, we set up encouragement measures for employees' self-education, which includes job- related courses, foreign languages, public and private universities and colleges, and government- approved training institutions. The number of subsidies in 2020 reached NTD90,000.
115 Education Hours and Investment Amount in the Past 4 Years Total training hours Total amount of training Average training hours per (hours) (NTD thousand) person (hours) 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 Taipei Office 8,491 11,077 7,962 7,004 1,964 2,547 1,221 938 32.41 36.68 21.75 19.51 Toufen Plant 17,697 24,745 23,932 21,154 1,927 2,141 1,984 1,848 45.15 62.65 60.59 59.25 Dashe Plant 20,875 26,140 22,366 22,083 1,093 1,843 1,676 1,385 69.12 86.56 75.82 78.87 Hsiaokang Plant 12,107 12,307 15,225 13,191 1,072 961 1,207 1,377 45.01 44.43 51.96 48.50 Total 59,170 74,269 69,485 63,432 6,056 7,492 6,088 5,547 48.30 58.20 51.51 47.20 Note: 1. Average training hours per person (hours) = Total training hours (hours)/Total employees
2020 CPDC Self-Run Courses Mandatory Training Non-Mandatory Training Item Number of Number of Hours Hours participants participants Industrial Safety and 5,971 17,400 1,923 9,201 Environmental Protection Chemical Engineering 3,604 6,955 3,365 6,960 Mechanical Maintenance 550 981 968 2,402 Information Management 297 689 641 1,300 Business Management 1,979 5,681 1,106 3,370 Financial Management 0 0 9 100 Quality Management 851 2,472 272 642 Technology Development 65 195 37 316 Other 699 2,940 985 1,832 Total 14,016 37,312 9,306 26,120
Acquisition of Licenses for each Operation Site of CPDC in 2020 Operating Site Number of licenses Taipei Office 33 Toufen Plant 113 Dashe Plant 140 Hsiaokang Plant 12 Note: 1. The source of certification includes, internal training (e.g. invite BSI to conduct ISO conversion training), external training (e.g. PMP project manager training) or certification obtained through foreign language subsidies (e.g. TOEFL, TOEIC, IELTS)
Education and Training Hours and Number of Persons in CPDC's Operational Sites - by Grade and Gender Taipei Office Toufen Plant Dashe Plant Hsiaokang Plant Number of Number of Number of Number of Hours Hours Hours Hours Persons Persons Persons Persons Male 1,223 416 6,561 114 4,622 68 3,178 1,248 Management Roles Female 902 311 167.5 4 79 2 43 19 Non-Management Male 2,773 585 13,226.5 264 16,542 233 9,509 3,765 Roles Female 2,099.5 587 1,198 38 840 21 461 205
116 1314 Love Sharing Website In order to promote lifelong learning, make learning not restricted by space and time, and strengthen employees' ability to use digital self-learning and fragmented time, CPDC actively promotes the introduction of digital learning systems. In 2019, the 1314 Love Sharing Website and mobile apps were launched. In 2020, a total of 65 online courses were uploaded. The total number of times used throughout the year was 2,298. In the future, the Human Resources Department will continue to promote and enrich the content of the 1314 Love Sharing Website to encourage employees to acquire knowledge through new methods.
Learning after getting off work In order to gradually implement employees' cross-functional and cross-domain learning and let the company's future successors and managers understand the cross-department content. CPDC promotes the learning after getting off work plan, which is held on every Monday and Wednesday evenings. The directors and employees of various departments conduct the course descriptions and the content will cover the introduction of tasks of various departments, project management methods, sharing of reading experience, use and teaching of word processing software, workplace pressure adjustment, sharing of current events, etc. In 2020, we conducted a total of 19 learning after getting off work lessons.
5.2 Happy Workplace 5.2.1 CPDC Human Rights Policy The international community is paying more and more attention to the issue of human rights. Inactive actions on human rights will cause the risk of sustainable operation. In order to protect the basic human rights of employees and create a respectful, equal, safe, and friendly working environment, CPDC endorses the “International Human Rights Convention”, "The Ten Principles of the UN Global Compact", "United Nations Guiding Principles on Business and Human Rights", International Labour Organization “Declaration of Fundamental Principles and Rights at Work” and other internationally recognized guidelines, and follows the regulations to establish “CPDC Human Rights Policy” in 2020 as a reference standard for ourselves and related enterprises. In addition to our own employees, we also value the labor rights of suppliers and contractors in each operating base and require external partners not to use child labor. In 2020, there was no cases of child labor in related units. In the future, we will strengthen human rights education training and advocacy both internally 117 and externally, implement our high regard for people, and conduct human rights due diligence procedures.
CPDC Human Rights Policy
In order to fulfill our corporate social responsibility and human rights commitments, CPDC has planned a human rights due diligence process to identify human rights risks and potential issues by reviewing relevant domestic and international issues and domestic labor laws and regulations, identifying groups and stakeholders (such as suppliers, all employees, customers, the general public, etc.) that may be impacted, and conducting questionnaire surveys with relevant units to assess the probability of occurrence and impact of each issue. Based on the results of the questionnaire, we conduct risk assessments on issues with high risk and impact, propose measures to respond to the assessment results, and conduct regular follow-up reviews and timely optimization of human rights policies in an attempt to effectively reduce the impact and influence of human rights risks and improve human rights protection on various issues. In the future, we will conduct human rights due diligence on a regular basis as and when appropriate.
Human Rights Due Diligence Procedures Regularly review domestic and foreign human rights issues and related information 1. Risk and domestic labor laws and regulations to collect and identify human rights risks Identification and potential issues, identify the sources of risk and the affected parties in an attempt to establish the basis for human rights risk assessment 2. Impact Conduct surveys on the groups and stakeholders that may be affected by the identified Assessment human rights issues, and rank the risks based on the assessment results Review the management measures, risk mitigation measures, and risk mitigation 3. Develop status for each human rights issue, formulate improvement plans and do follow-ups Improvement Plan to achieve risk prevention and control 4. Regular Track Regularly track and review human rights risk-related procedures, assessment tools, and Review and management practices to continuously optimize human rights risk management
Impacted Groups and Issues Identified through Human Rights Due Diligence Core Groups Issue Value Chain Title Response Action Functions Considered Identification Develop Work Instructions and Contractor Safety Management Procedure, Inbound Occupational convene joint operation Engineering Construction Safety and agreement organization Petrochemical Contractors Employees Health meetings before Products Raw Material Upstream construction, and manage Land Suppliers personnel access with access Development Logistics control systems Suppliers Child No child labor Prioritize the issuance of the Full-time Prohibition of CSR Report to suppliers. employees discrimination Suppliers are required to Contract Equal pay for sign a CSR commitment 118 Core Groups Issue Value Chain Title Response Action Functions Considered Identification employees equal work letter and conduct supply Foreign Labor- chain risk assessments. We employees management provide feedback to consultation suppliers with high human No forced labor rights risks. In addition, Overtime human rights issues are also payment in included in the supplier accordance with evaluation questionnaire. the law CPDC declares that it does not use child labor and actively filters the resumes of applicants under the age of 16. Applicants are Child No child labor required to submit the Company's special personnel information form on the first day they report for work, and sign the form to show responsibility Own Establish a software and employees Employing the hardware environment that Disabled disabled is friendly and barrier-free persons for the disabled Set up a breastfeeding room, Indigenous a mailbox and a hotline for peoples employee complaints and Own opinions, a whistleblower employees Prohibition of system and a whistleblower Disabled discrimination protection system. persons Formulate measures for LGBTQ parental leave, and open Full-time group recruitment for the employees vacancies Contract Midstream Establish measures for employees attendance, overtime, and Internship leave, and regulate Job seekers No forced labor reasonable working hours and maximum overtime hours Set up the constitution of labor unions in each operation site, the implementation rules of labor-management meetings, and the channels Labor- Own for employee grievances. management employees Facilitate communication consultation between employers and employees on employee welfare and cultural and recreational activities through the Employees' Welfare Committee CPDC values the safety of employees' workplace. In Occupational addition to proper Safety and management of chemicals, Health we formulate standard operating procedures in the 119 Core Groups Issue Value Chain Title Response Action Functions Considered Identification factory area, and regularly organizes related drills and announcements to strengthen safety awareness. Hazard labeling of CPL, Occupational Petrochemical Customers' AN, PA6 and other Safety and customers employees products, and production of Health safety data sheets No relevant actions at Child No child labor present Prohibition of discrimination Land Equal pay for development Full-time equal work customers employees Labor- Tenant Contract management No relevant actions at Downstream enterprises employees consultation present (shopping Foreign No forced labor mall/commercial employees Overtime office) payment in accordance with the law Disabled Employing the No relevant actions at persons disabled present Elderly Children Environmental No relevant actions at General public Disabled safety present persons The CSR report discloses information and energy Safety of living consumption on the environment: remediation of the Anshun sewage and air site, improves processes and pollutant equipment, and reduces emissions carbon emissions, air pollutant emissions, and energy use Residents The CSR report discloses Others Others General public surrounding Safety of the information and energy the plants living consumption on the environment: remediation of the Anshun pollution site. The site environmental remediation monitoring program is causes carried out simultaneously secondary around the site and in the pollution of the surrounding environment, living with regular resident environment briefings and project audits Note: 1. The above human rights actions and management policies are applicable and cover 100% of CPDC's operating bases in Taiwan, including Taipei Office, Toufen Plant, Dashe Plant, Hsiaokang Plant, Qiaotou Plant, and Douliou Plant
5.2.2 Labor-Management Relations Labor-Management Communication CPDC has established a number of labor-management communication channels to ensure smooth and open communication. These channels are used to listen to our employees to speed up coordination, communication, and response. In addition to the plant and company-level unions that 120 serve as the primary official channel for communication with employees, employees can also submit their feedback and suggestions through the Employee Welfare Committee, employee grievance channels, and other less formal, routine channels of communication to the company depending on the nature of the incident.
Labor-Management Communication Channels Communication Description Channels Plant- and company-level labor-management meetings are held every quarter for Union two-way communication between labor and management representatives. Plant- and company-level employee welfare committees are convened every Employee Welfare quarter for labor and management representatives to the committee to engage in Committee two-way communication on employee benefits and cultural/recreational activities. Issues relating to personal rights or management system can be discussed with Routine the direct superior or the manager in charge of performance evaluations. Other Communication channels that can be used by employees include the suggestion program, HR Channels interviews, meetings, quarterly and annual evaluations. The Management Section at each plant and the HR unit at the Taipei Office are Employee Grievances responsible for processing employee grievances and feedback. Grievances Channel mailbox: [email protected]
Union Membership and Operation CPDC has established four unions in Taipei Office, Toufen Plant, Dashe Plant, and Hsiaokang Plant in accordance with the Trade Union Act. The unions act as the spokesperson for all employees. The union presidents are elected from among the 9 directors. A supervisory committee made up of 3 supervisors elected separately by the union is responsible for supervising the operation of the union. The four unions at CPDC operate independently of each other. The Toufen, Dashe, and Hsiaokang unions have also set up a joint committee chaired by union representatives from each plant in rotation. The committee convenes directors' and supervisory meetings at each plant for sharing and studying legislative information as well as promoting harmonious labor-management relations. Regional and company-level labor-management meetings are convened every quarter between union and management representatives at CPDC. The company-level labor-management meetings are chaired in rotation by labor and management representatives. In 2020, CPDC hosted 4 labor- management meetings to discuss issues such as the performance evaluation system, group insurance, employee bonuses, and food allowances. After each labor-management meeting, CPDC issues a response to every motion passed at the meeting and tracks their subsequent progress to ensure that every item is implemented in full. Employees are also notified of any important announcements. At present, except for the appointed managers, 100% of the employees of the three CPDC plants are covered by the collective bargaining agreement.
121 Union and Labor-Management Meeting Framework
Labor-Management Meeting at Taipei Office the Taipei Office
Regional Joint Tri-Plant Committee
Toufen Plant Hsiaokang Plant Taipei Office Plant Dashe Plant Union Union Union Union
Labor-Management Meeting Motions and Response in 2020 Motion CPDC Response The union went to China for CPDC visited China in October 2020 to provide employees with care employee care and seminars and shared feedback during the meeting. In view of the economic downturn, we agreed to the extension of Proposal on the extension of overtime compensatory time off for another year and asked the unit overtime compensatory time off supervisors to advise personnel to arrange more compensatory time off Due to the impact of the pandemic on operational performance, the Flexible relaxation of D and E allocation ratio of D and E grade employees for performance grade ratio in performance evaluation in the second half of 2020 had been adjusted to maintain appraisal appropriate operational manpower and flexibility of dispatching
Routine Communication and Grievance Channels CPDC management uses meetings or other suitable occasions to keep employees up to date on current developments in the company and Taiwan's petrochemical industry as well as future business opportunities. If mass layoffs are required due to a major change in the business, advance notice exceeding the minimum notice period will be given in accordance with the" Labor Standards Act" and "Act for Worker Protection of Mass Redundancy". The CPDC policy and spirit of "putting people first" means that nobody should be subjected to discrimination or harassment. Employment will be terminated in accordance with Article 57 of the "Work Rules" for any serious incidents involving discrimination or gender equality. Sexual harassment cases will be handled in accordance with the rules and process set down in "Guidelines for Establishing Measures of Prevention, Complaint and Punishment of Sexual Harassment in the Workplace". Sexual harassment committees dedicated to the handling of sexual harassment cases have been established at the Taipei Office and each plant. Under the CPDC's "Guidelines for Dealing with Employee Complaints", employee complaints and feedback are the responsibility of the management section at each plant and the HR unit of Taipei Office. Once a complaint is received by the responsible unit, it is forwarded to the appropriate unit to take action if necessary or be reported up the chain of command. In 2020, CPDC had one labor grievance case in which an employee was paid insufficient wages for unpaid compensatory time off
122 when leaving the Company. CPDC had paid back wages to the employee after inspection. (For details, please refer to 2.3.2 Response to Major Violations)
5.2.3 Employee Benefits Group Insurance In addition to providing every employee with mandatory Labor Insurance and National Health Insurance as required by law, CPDC provides group insurance policies for employees as well to protect their lives and enhance their welfare. Group insurance includes life insurance, accident insurance, cancer insurance, and medical insurance. To show compassion and care for our employees' families, we also provide our employees' parents, children, and spouses with group medical insurance at a reduced cost.
Health Examination As employees are the company's most important asset, employees' health reflects the company's business performance. Annual health examinations are organized by CPDC for employees to help them understand their own health. If an employee must engage in work with higher levels of risk, then special health examinations are arranged by CPDC to avoid assigning employees work that their health is unsuitable for. In 2020, the cost of health examinations was up to NTD 5,544,250.
Family Care Programs To help employees balance their work and family life, unpaid parental leave and breastfeeding room are offered by CPDC in accordance with the Gender Equality in the Workplace Act. Eligible employees may apply if necessary. In 2020, a total of 79 employees were eligible to apply, including 73 male employees and 6 female employees. A total of 2 persons applied. The reinstatement rate was 100% and the retention rate was 100%. In addition, employees can apply for home leave, children's scholarships, financial gifts to the elderly, childbirth subsidy, marriage subsidy, family day movie, etc. Through the perfect system, CPDC becomes the most reliable support for every employee. In addition to maintaining the same benefits for expatriate employees as those in Taiwan, we also assist in resettlement for expatriate employees and subsidies for the relocation of accompanying family members, airline tickets, children's education, accommodation, and transportation.
CPDC Parental Leave in 2020 Male Female Total Number of people eligible for parental leave during the year (A) 73 6 79 Actual number of applications for parental leave during the year (B) 0 2 2 Application rate (B/A) 0% 33% 3% Number of employees expected to return from parental leave during the year (C) 0 1 1 Actual number of employees that returned from parental leave during the year (D) 0 1 1 Reinstatement rate (D/C) 0% 100% 100% Number of reinstated employees in the last year (E) 0 1 0 Number of employees still with the company one year after reinstatement in the last year (F) 0 1 0 Retention rate (F/E) 0% 100% 0% Note: 1. After six months of employment, before each child reaches the age of three, employees may apply for unpaid parental leave 123 Retirement Benefits In order to thank employees for dedicating the best years of their lives working together with CPDC, CPDC has set up an "Employee Retirement Procedure ". Employees who meet the qualifications for retirement can apply according to the procedure. CPDC provides a complete retirement system to take care of the lives of retired employees. In addition to pension payments from the national labor insurance, we set up a labor retirement reserve supervision committee according to the law and allocate monthly retirement reserves. Employees who are employed after the implementation of the Labor Pension Act in 2005, or choose to work under the system, monthly contributions are made to the Labor Retirement Reserve Supervision Committee Bank of Taiwan Bank's old system retirement reserve account in accordance with the law. For employees covered by the new pension system, CPDC makes monthly contributions equal to 6% of the employee salary to their individual labor pension account with the Bureau of Labor Insurance. In addition to corporate monthly 6% contribution, personnel can choose to allocate 0~6% of their salary to the retirement fund account. In addition, CPDC encourages employees to save and has set up the "Employee Shareholding Trust Procedure ". Through joint trust, employees can invest in the company's stocks, hold them for a long time, and work together for the company's operation and profit to achieve a win-win goal for both labor and management. Employees can contribute up to 10% of their salaries and bonuses each month as personal deposits. CPDC will also make equivalent deposit amount to the employees' shareholding trust as rewards. The trust holding fund account is used by the trustee to purchase CPDC shares. After a certain period of time, employees can apply for partial withdrawal or continue the trust in accordance with the provisions of the trust contract.
CPDC Retirements and Pension Fund Status in 2020 Item Amount or number of persons Retirement Account Opened by Labor Pension Supervisory Committee NTD 215,317,986 at Bank of Taiwan Number of retirements 36 persons
Employee Welfare Committee Employee Welfare Committees have been established by CPDC at the Taipei Office and each plant. The committee is responsible for organizing employee benefits such as local and overseas trips, ball games, mountain-climbing activities, family activities, and other competitions from time to time. Some of the activities are even open to employees' families. In 2020, CPDC expenditures on employee welfare exceeded NT$34.55 million, providing events that assist in achieving work-life balance.
124 Employee Welfare Expenditures by each CPDC Operating Location in 2020 Item Welfare Matters Cultural and Recreational Activities Subtotal Taipei Office 5,045,262 415,357 5,460,619 Toufen Plant 8,364,900 455,473 8,820,373 Dashe Plant 10,284,300 976,911 9,269,811 Hsiaokang Plant 8,362,492 337,193 8,699,685 Qiaotou Plant 212,400 89,638 2,302,438 Total 32,278,354 2,274,572 34,552,926 Note: 1. Currency Unit: NT$ 2. Benefits include Lunar New Year bonuses, end-of-year party lottery draws, cash gift for birthdays, and other allowances. Cultural and recreational activities include travel subsidies, ball games, mountain-climbing, and other employee activities 3. The boundary of this report is the Taipei Office and the three CPDC plants (Toufen, Dashe, and Hsiaokang plants). In order to present the complete employee welfare expenditures, the new Qiaotou Plant is included in the statistics (Qiaotou Plant started operation in October 2020)
CPDC's Exercise Culture "People" are the most precious assets of an enterprise and the key to its sustainable operation. To promote the healthy development of employees, CPDC actively creates a quality environment for employees to work and be healthy at the same time. In addition to the establishment of sports clubs of different nature in each plant, some plants are equipped with badminton courts, softball fields, fitness equipment, etc. Every year, four major healthy activities are held regularly across plants, including table tennis tournaments, badminton tournaments, softball tournaments, and joint hiking. This also helps to enhance the interaction and communication between the employees and the officers in different plants, and build up the team spirit. In 2020, CPDC spent a total of NT$1.063 million on health promotion activities (including physical fitness and external sports competition subsidies).
CPDC and CPDC Dashe Plant were jointly selected as 【2020 i-Sports Company】 The Sports Administration, Ministry of Education has been promoting the i-Sports Certification since 2017 in order to promote a disciplined exercise culture among the general public and employees. CPDC passed the review for the first time this year, and CPDC and CPDC Dashe Plant (which applied separately) were jointly selected as the 【2020 i-Sports Company】.
5.2.4 Occupational Health and Safety An occupational safety and health management system has been put into place by CPDC to continue maintaining, improving, and promoting the working environment and health of employees. The system covers all operational activities, products, and services involving each CPDC plant and occupational safety. At present, there is an Occupational Safety and Health Committee (hereinafter referred to as "OSH Committee") at the Taipei Office and each production plant. Each quarter, an OSH Committee meeting is held. 4 meetings were held by each committee in 2020. The OSH Committee is made up of both labor and management representatives as required by law and chaired by either the president or plant chief. Labor representatives, who jointly review, coordinate, and establish occupational safety and health-related matters, account for more than one-third of each OSH Committee. The president sets the annual industrial safety goals each year. The goals for each plant 125 are announced so that they can focus on promoting key parts of the industrial safety policy. The OSH committees are also responsible for tracking occupational injuries and diseases within the Company. Such incidents must be reported to the OSH committee during the quarterly meeting and adhere to reporting procedures. Any corrective actions should be done and publicized as soon as possible to prevent similar incidents from happening again. The newly established Qiaotou Plant and Douliou Plant will also establish an OSH committee in accordance with the regulations.
Management Structure of the Occupational Safety and Health Committee
Taipei Office OSH Committee Chairman: President
Toufen Plant OSH Committee Dashe Plant OSH Committee Hsiaokang Plant OSH Committee Chairman: Chief of Toufen Plant Chairman: Chief of Dashe Plant Chairman: Chief of Hsiaokang Plant
Hazard identification and risk assessments have been conducted at the three CPDC plants. The identification of high-risk factors and processes was used to manage the risks and opportunities of occupational safety and health so that CPDC can obey the related rules, and lower the impact on our employee's health and safety. CPDC develops response strategies and corresponding improvements to continue strengthening employee risk awareness and reinforcing the importance of safety protection.
CPDC Hazard Identification and Risk Assessment Severity Frequency Probability A B C D E FR 1 51~100 1 1 2 3 4 FR 2 26~50 1 2 3 4 4 FR 3 11~25 2 2 3 4 4 FR 4 1~10 2 3 4 4 4 Note: 1. Frequency Probability (FR)＝ Operational Exposure Frequency (OF) x Possibility of Occurrence (P) 2. Based on the Operational Exposure Frequency (OF), Possibility of Occurrence (P), and Consequential Severity, each unit judges the "action measures that shall be planned" and "risks and opportunities that shall be dealt with"
Description of Occupational Safety and Health Risk and Opportunity Level Risk and Opportunity Levels Action and Measure Must establish improvement goals and plans, and integrate "operation control procedures", "supervision and measurement requirements" with the organization management system. Regularly review, control, and Class1 supervise the effectiveness of the plan, and list them as inspection and key improvement projects Risk/opportunity analysis is required and shall propose strategic planning
126 Risk and Opportunity Levels Action and Measure Need to establish operation control procedures and supervision measurement requirements, and review, control, and supervise the Class2 effectiveness of the plan every year Risk/opportunity analysis is required and shall propose strategic planning Conditionally accept the existing control measures and safety protection Class3 devices, and the responsible unit can decide to establish operation control procedures as needed Class4 Accept the status quo, no need to take any measures
2020 Hazard Identification and Risk Assessment Unit Toufen Plant Dashe Plant Hsiaokang Plant Hazard identification and risk 1237 797 502 assessment projects Class3 Accept the existing control measures and safety 156 162 178 protection devices Class2 Propose strategic 37 34 42 planning Class1 Goal management plan 0 1 0
Industrial safety and environmental protection are major issues for CPDC. In addition to the Plant Chiefs of the three CPDC plants reporting the progress of the industrial safety and environmental protection project in the monthly business report, the promotion of supervisors at all levels must also pass the assessment of industrial safety items. Besides, any material news or changes, discussion of resolutions and resolutions related to occupational safety and health shall be regularly communicated with employees through the OSH Committees and labor-management meetings. The collective bargaining agreement signed between CPDC and the plant unions also provides protection for employees' workplace health and safety.
Industrial Safety Risk Management The Occupational Safety and Health Center is in charge of safety and risk management at CPDC. The Industrial Safety and Environmental Protection Section at the Hsiaokang Plants, and the Industrial Safety Section at the Toufen Plant and Dashe Plant all cooperate with the Occupational Safety and Health Center to promote and implement the relevant policies and measures. The three CPDC plants have received the ISO 9001, ISO 14001, ISO 45001, and TOSHMS and ISO 50001 certifications. In 2019, the Hsiaokang Plant received the Kaohsiung City Government approval as a high-performing safety and health unit (valid until June 2021). Hazards identification and risk assessment methods are also in place for environmental protection and occupational safety and health. These along with the corresponding management, monitoring, and improvement measures are used to prevent environmental, safety and health-related disasters within our plants. Emergency Notification Procedure and Emergency Preparation and Response Control Procedure have been established at the Taipei Office and each plant as well to ensure that response measures can be activated in time when there is an accident, for damage control and post-disaster recovery.
127 Process Safety Management CPDC has applied AI image intelligence analysis technology to high-risk industrial safety operations and environmental issues to optimize human-machine collaboration and reduce hazard risks. "Process Safety Management" has been designated by CPDC as a key focus area of industrial safety over the past few years. In 2016, CPDC began leading the push to integrate the system of "Process Safety Management" into existing EHS systems and gradually established an integrated PSM system for the three CPDC plants by promoting 14 PSM work tasks. Through problem identifying, procedure documents drafting, training and promotion plan activities executing, and regular reviewing by PDCA cycle, CPDC could achieve process safety, stable production, and protection of personnel from any accidents, such as fire, explosions, leaks, or any other major incidents due to procedural mistakes. In accordance with the requirements of the International Council of Chemical Association's (ICCA) Global Process Safety Indicator Reporting Guidelines, CPDC has incorporated the Tier II process safety leakage threshold limit value of API 754 standard for process safety events to be reported into the Company's Emergency Notification Procedure. Each plant has also set the Tier II process safety leakage threshold limit value for chemicals. If an excess of Tier II process safety leakage threshold limit value occurs at each plant, a quick report must be made.
Process Safety Management Promotion Procedures Process Description Taipei Office and the three CPDC plants separately establish the PSM Establish promotion team and PSM executive team and establish dedicated personnel Organization in charge for each project promotion Evaluate Evaluate and inventory current conditions, using industry peers as Current benchmarks Conditions Implement assessment and testing system for employees in process hazard Strengthen analysis (PHA), management of change (MOC), and pre-startup safety Training review (PSSR) to enhance the ability of the performing employees The designated supervisor is responsible, and the PSM executive secretary Execute Plan of the plant area assists in the implementation of various PSM projects The plant area holds a monthly PSM promotion review meeting, a Regular quarterly PSM promotion meeting convened by the vice president of the Verification petrochemical production department, and conducts compliance audits on the process safety management of the three CPDC plants, annually Connect PSM with performance assessment indicators to establish a Link to KPIs corporate culture of valuing process safety
Expected Benefits of PSM Implementation Can effectively prevent fire, explosion, leakage, and other major disasters. Establish the company's PSM organizational structure and related management procedures and methods and meet the requirements of the US Occupational Safety and Health Administration's (OSHA) regulations and domestic laws, with the possibility of on-site implementation. Implement Mechanical Integrity, establish equipment and pipeline deterioration assessment mechanism, analyze the occurrence and failure probability of various damage mechanisms and further calculate the remaining life of equipment pipelines, formulate detection strategies, and
128 implement reliable and effective inspection and maintenance methods for critical pipeline equipment. When the factory is equipped with hazardous equipment (such as the first type of pressure vessel, high-pressure gas specific equipment) which contains catalyst, molecular sieve, or other special substance, it is necessary to apply for an extended internal inspection period for review. Promoting the implementation of the PSM system can meet the auditing conditions of the labor inspection agency. Continue to promote the Hazard and Operability Study (HAZOP). In 2019, the Class A hazardous workplace of the three CPDC plants has been reported in accordance with the Ministry of Labor’s “Enforcement Regulations Governing the Regular Implementation for Process Safety Assessment” (in accordance with Article 8 of the regular implementation regulations of the process safety assessment of the Ministry of Labor, it shall be reported to the labor inspection agency for recording every five years).
Pipeline Safety Management The Company provides chemical safety data sheets (SDS) at the operation site for the operators to check, and the management of each chemical is in accordance with international and national regulations. In addition, there are many pipelines on the site for the process. To avoid confusion in identification, we have posted the Global Hazardous Substances (GHS) icons on chemical storage tanks, containers, and pipelines in accordance with international regulations to enable employees to clearly understand pipeline fluid substances. In addition, in order for on-site operators to identify hazardous fluid pipelines in a clearer and easier way, we collect and refer to the foreign industry practices. For flammable, explosive, toxic, and other dangerous fluid pipelines, CPDC strengthen the labeling on pipeline flanges and valve outlets, top and bottom of the inspection, risk of fluid splashing, and other operations that need to identify the location of the pipeline fluid so as to enhance operators' hazard potential identification on pipelines.
Underground Pipeline Maintenance and Management To strengthen the transportation of underground pipelines, effectively manage underground pipelines outside of the plants, and establish a sound management procedure, in 2015 CPDC began submitting an annual pipeline maintenance plan for the following year to the Kaohsiung City Government for review at the end of each year. Confirmations have also been obtained from Kaohsiung City Government. The four main risk indicators of pipeline design, corrosion, improper operation, and third-party damage along with factors such as leakage and impact are used for assessment and classification of overall risk. To effectively monitor and manage the transmission safety of regional underground pipelines as well as carry out continuous maintenance, CPDC Dashe Plant and other related petrochemical companies set up the Regional Defense Organization for Underground Pipelines of Kaohsiung City. Dashe Plant serves as the administrative liaison for the No. 6 Conduit Organization, responsible for internal and external administration, correspondence, and coordination. CPDC Hsiaokang Plant became the Vice President and emergency response representative for the No. 2 Conduit, responsible for promoting the sharing of emergency response and joint defense experience for its pipeline cluster as well as the organizing of education, training, and drills. Most of CPDC's external underground 129 pipelines have now been shut down and scrapped. Only one backup AN pipeline running from CPC to the Dashe Plant is left. The pipeline has been preserved by nitrogen sealing and cathodic anti- corrosion prevention. Nevertheless, the Dashe Plant and the Hsiaokang Plant continue to play a supporting role for each conduit to fulfill our social responsibility.
Coal Bunkers and Anoxic Workplaces Management Coal bunker is a statutory anoxic operation place, and isolation measures are taken. CPDC posts precautions for anoxic operations at the entrance of the coal bunker, and provides on-site equipment such as breathing protective gear, ladders, safety belts, or lifelines to ensure the safety of the operators. In order to strengthen the safety of coal bunker operations, we conducted work contact before construction to confirm the health status, operation content, and safety protective equipment of the workers on the day. All operations must follow standard operating procedures, hazard identification, and risk assessment results, and plan related operational processes to reduce the possibility of occupational accidents. CPDC strengthens environmental management in the field of confined space operations and also installs ventilation equipment in places that may be lacking oxygen. Personnel or contractors must wear oxygen, hydrogen sulfide, methane, or other harmful gas concentration measuring instruments during operation, and monitor with surveillance at all time to avoid the disaster of coal pile collapse. In addition, CPDC regularly arranges personnel to conduct workplace inspections and audits. Abnormalities shall be immediately improved or reviewed to avoid the recurrence of abnormalities.
Risk Monitoring and Management CPDC uses the PDCA method to evaluate the industrial safety risk management mechanisms. The Occupational Safety & Health Center regularly establishes " Quality, Environment, OSHA Management System internal audit annual plan and checklist", and "industrial safety and environmental site visit audit plans". Personnel from the Taipei Office and the three CPDC plants, who have passed internal audit training and earned certificate, execute quarterly audits and annual overhaul audits of plant and R&D center, and China Business Division audits. Targeting deficiencies and providing rectification plans until all deficiencies are improved.
Industrial Safety Risk Monitoring and Management Process
Review areas Perform Establish audit Execute audit Verify Management that need corrective plan plan improvement review reinforcement measures
Industrial Safety Incident Response and Actions In addition to regular monitoring and review of environmental, industrial safety and health management systems at the plants, an incident notification, response, and investigation process has also been developed by CPDC. If there is an environmental or industrial safety accident such as leakage, fire, or explosion at a plant, the incident must be reported to the Audio/Visual Command Center of Taipei Office in accordance with the Emergency Notification Procedure. The Taipei Office must also act and issue a public response immediately.
130 Each CPDC plant has its own "Emergency Preparation and Response Control Procedure" and "Emergency Response Plan". This enables the most effective emergency response and management that is tailored to their local conditions in the event of a disaster or accident. CPDC divides emergencies and disasters into three levels based on their severity and scope. The extent of response and notifications changes according to the level to ensure that communication and cooperation can be maintained with plant employees, nearby plants in the industrial area, and local competent authorities. An "Incident Investigation and Follow-up Management Process" was also developed for all types of incidents in order to investigate in detail, report and record the incidents of all environmental safety and health at the plants. The "Corrective and Preventive Action Procedure" then ensures the effective execution of corrective actions to prevent the accident from happening again. In 2020, CPDC has no contractor deaths, and the contractor's LTIFR is 1.66. In 2020, Dashe Plant suffered 1 major safety incident. The follow-up examinations, discussions, and improvements are as follows:
Statement of Dashe Major Safety Incident The safety incident was caused by an instantaneous high-temperature arc generated by the arc energy, resulting in high-temperature burns to two construction workers. The injured were immediately classified and treated for burns on site, and ambulances were contacted to take them to the Naval General Hospital for medical treatment. During their hospitalization, the plant nurses provided necessary medical consultation and assistance. The Dashe plant conducted a review of the incident and commenced a comprehensive inventory of the drawer-type switchboard and fixed switchboard in the plant. Fixed switchboards should be specifically marked and warned of power-off operations while establishing relevant control measures. On the management side, it is required to clearly classify the scope of operation of the plant operators and contractors, strengthen the education and training of plant personnel to enhance the safety awareness and alertness of personnel. It is also necessary to require the project contracting unit to list specific information and preventive measures to be taken according to the environmental conditions, main hazard contents, and hazard factors of the operation projects. For high-risk operation projects, contractors are required to provide work safety analysis (JSA) and implement education and training for hired employees or subcontractors and keep records. On the institutional level, we should establish the relevant implementation regulations for electrical live line operations, and make clearer definitions for electrical live line operations and related personnel, so that all personnel have the same awareness and implement relevant regulations.
In addition to management and maintenance from the source and risk assessment, emergency response drill is conducted at different times each year. A suitable plan of emergency response drill is designed for each plant based on their requirements to effectively manage the risks from industrial safety, long-distance underground pipelines, and emergency events, improve the emergency response capabilities of our personnel, and implement a multi-faceted risk management policy. CPDC has determined, in accordance with the list of occupational diseases defined by the Labor Insurance Act, that occupational diseases with potential risks from our routine operations include: AN poisoning and related complications, occupational hearing impairment, Benzene/Benzene homologue poisoning, and related complications, Hydrogen Chloride/chlorine compound poisoning and related complications. CPDC continues to provide our personnel corresponding health
131 examination for occupational diseases, so that we can ensure all personnel are protected from the harm of occupational hazards.
Emergency Response Drills at the three CPDC Plants in 2020 Response type Toufen Plant Dashe Plant Hsiaokang Plant Qiaotou Plant Leak Drill 65 32 24 1 Fire Drill 12 16 8 0 Leak & Fire Drill 13 12 0 0 Power Outage Drill 1 3 8 0 Testing without warning 2 0 2 0 Hydrogen Cyanide Poisoning Drill 0 0 0 0 Night-time Drill 0 4 20 0 Other (e.g. natural disasters, 5 4 0 0 personnel burn injuries) Total 98 71 62 1 Note: The boundary of this report is the Taipei Office and the three CPDC plants (Toufen, Dashe, and Hsiaokang plants). As the new Qiaotou Plant has conducted emergency response drills, it is included in the statistics (Qiaotou Plant started operation in October 2020)
Occupational Safety and Health Performance of CPDC Operating Locations over the Past 3 Years (Full-Time Employees) Major Lost-Time Occupational Occupational Occupational Absence Rate Injury Operating Injury Rate Disease Rate Fatalities Accidents Recordable Year (AR) Frequency Site (IR) (ODR) (Excluding Rate (LTIFR) Fatalities) Male Female Male Female Male Female Male Female Male Female Male Female Male Female 2018 0 0 0 0 0.81 0.38 0 0 0 0 0 0 0 0 Taipei 2019 0 0 0 0 0.1 0.19 0 0 0 0 0 0 1 0 Office 2020 0 0 0 0 0.52 0.39 0 0 0 0 0 0 0 0 2018 0 0 0 0 1.24 3.35 0 0 0 0 0 0 0 0 Toufen 2019 0.24 0 0 0 0.21 0.03 1.19 0 1 0 1 0 1 0 Plant 2020 0 0 0 0 0.14 0.03 0 0 0 0 0 0 0 0 2018 0 0 0 0 0.1 0.22 1.5 0 0 0 0 0 1 0 Dashe 2019 0.64 0 0 0 0.14 0.2 3.2 0 0 0 0 0 1 0 Plant 2020 0 0 0 0 0.05 0.22 0 0 0 0 0 0 2 0 2018 0 0 0 0 0.08 0 0 0 0 0 0 0 1 0 Hsiaokang 2019 0 0 0 0 0.13 0.14 0 0 0 0 0 0 0 0 Plant 2020 0 0 0 0 0.57 0 0 0 0 0 0 0 0 0 Qiaotou 2020 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Plant
Occupational Safety and Health Performance of CPDC Operating Locations over the Past 3 Years (Temporary Employees) Lost-Time Injury Occupational Occupational Operating Absence Rate (AR) Frequency Rate Fatalities Year Injury Rate (IR) Disease Rate (ODR) Site (LTIFR) Male Female Male Female Male Female Male Female Male Female 2018 0 0 0 0 0 0 0 0 0 0 Taipei 2019 0 0 0 0 0 0 0 0 0 0 Office 2020 0 0 0 0 0 0 0 0 0 0 2018 0 0 0 0 0.53 5.11 0 0 0 0 Toufen 2019 0 0 0 0 0.05 0.04 0 0 0 0 Plant 2020 0 0 0 0 0 0 0 0 0 0 2018 0 0 0 0 0.04 0.22 0 0 0 0 Dashe Plant 2019 0 0 0 0 0 0 0 0 0 0 132 Lost-Time Injury Occupational Occupational Operating Absence Rate (AR) Frequency Rate Fatalities Year Injury Rate (IR) Disease Rate (ODR) Site (LTIFR) Male Female Male Female Male Female Male Female Male Female 2020 0 0 0 0 0 0 0 0 0 0 2018 0 0 0 0 0 0 0 0 0 0 Hsiaokang 2019 0 0 0 0 0 0 0 0 0 0 Plant 2020 0 0 0 0 0 0 0 0 0 0 Qiaotou 2020 0 0 0 0 0 0 0 0 0 0 Plant Note: 1. Occupational Injury Rate (IR)＝ (Number of occupational injuries/Total work hours) x 200,000* (200,000 is based on 50 weeks in each year, 40 work hours a week, for every 100 employees.). Work-related accidents do not include accidents that occur during commuting to and from work 2. Occupational Disease Rate (ODR)＝ (Number of occupational diseases/Total work hours) x 200,000* 3. Absence Rate (AR)＝(Days absent from work/Total workdays) x 100% (Days absent from work are all absences due to employees being unable to work, such as sick leave and work injury leave. It does not include preapproved leave such as maternity leave) 4. Lost Time Injury Frequency Rate (LTIFR) = (Number of lost time injury during reporting period/Total work hours of employees during reporting period (hrs)) × 1,000,000 LTIFR: Number of lost time injuries per million hours worked Definition of lost time injury: An injury resulting in fatality, permanent disability, or lost time from work (must be at least 24 hours, 1 day, or 1 shift of work time) 5. Major occupational accidents (excluding fatality) refers to any injury other than fatality that is sufficient to cause the total loss of any part of a limb or the loss of its function 6. Recordable occupational injury refers to the injury of the victim without loss of working hours or loss of working hours for less than one day 7. CPDC has set the threshold for reporting process safety incidents in the " Emergency Notification Procedure, in which, the threshold for reporting is reached with the injury or death of a person or the loss of working hours reaches more than one day, or when any employee inside or outside the plant needs to be hospitalized for treatment 8. The boundary of this report is the Taipei Office and the three CPDC plants (Toufen, Dashe, and Hsiaokang Plant plants). As the new Qiaotou Plant has occupational safety and health performance result, it is included in the statistics (Qiaotou Plant started operation in October 2020)
Employee Caring and Support Plans CPDC commits to providing employees with medical and health services, such as resident doctors and nurses to handle on-the-spot services, and the promotion of mental and physical wellness programs. The plants are equipped with an infirmary and basic first-aid facilities are located at the sites. Automated External Defibrillator (AED) devices have been installed at the Taipei Office and all three plants. Annual health examinations are arranged for all personnel along with related health guidance and education. To ensure the health of our employees, CPDC provides annual health examinations. The content of the health examination depends on the manufacturing process and use of chemical materials by plant. Employees at the Toufen Plant undergo additional checks for Benzene, dust, n-Hexane, noise, and ionizing radiation; employees at the Dashe Plant undergo additional checks for Mercury, Nickel, ionizing radiation, and Chromic Acid; employees at the Hsiaokang Plant undergo additional checks for Benzene, noise, ionizing radiation, Formaldehyde, and Potassium Dichromate. The results from the three CPDC plants have been reported to the local authority and Workforce Development Agency, Ministry of Labor. The regular and special health examinations are used to understand the mental and physical health of employees so that the optimal arrangements can be made at work. (For regular employee health checkups, please refer to 5.2.3 Employee Benefits) We also provide pre-service health examinations for new employees and use this as a basis for suitable work assignments. If an employee must perform work with special health hazards, then
133 special health examinations are organized by the Company, and the relevant information is submitted to the competent authorities for reference. Besides, health classification and management have been implemented by each plant in accordance with the Regulations of the Labor Health Protection issued by the Ministry of Labor of Executive Yuan. We monitor the physical health of every employee and track those with health issues.
2020 Occupational Safety and Health Seminars/Training Course Name No. of Training Participants Training Hours Health Seminars 291 1,920 Occupational Safety and Health and Rescue Training 2,238 9,071
CPDC actively promotes the health promotion of employees. In addition to promoting the health of personnel, it also brings good benefits to employers, including reducing medical expenses and reducing the number of sick leaves; improving employees' morale, productivity, work motivation, and work performance; improving employees' physical and mental functions; increasing interaction and communication opportunities among employees or between employers and employees; improving the labor-management relationship. When the employees feel cared for by the employer helps to increase the cohesion of the organization.
2020 Employee Health Activity Management Results Taipei Toufen Dashe Hsiaokang Qiaotou Douliou Total Office Plant Plant Plant Plant Plant On-site services by occupational medical 0 49 12 12 0 1 74 specialists/doctors Health education seminars 97 41 18 38 0 0 194 Health examinations 160 383 312 289 0 0 1,144 (persons) Sporting events 28 2 105 3 0 0 138 Note: 1. Unit: Sessions 2. Health Examinations includes Annual Health Examinations and Screening Co-organized with Government Agencies 3. Health education advocacy includes industrial and environmental notification, pandemic prevention promotion, seminars, quitting smoking, etc. 4. Sports activities such as subsidies for employees to participate in external sports competitions, internal annual ball sports competitions, etc. 5. The boundary of this report is the Taipei Office and the three CPDC plants (Toufen, Dashe, and Hsiaokang plants). As new plants (Qiaotou Plant and Douliou Plant) have conducted employee health activity management, the new plants are included in the statistics (Qiaotou Plant started operation in October 2020, and Douliou Plant is currently managed by Toufen Plant)
Workplace safety is another important potential risk factor at CPDC. These are due to an inadequate understanding of each plant's internal operating procedures and safety management regulations by external contractors. For the effective management of contractor safety and to reduce the risk of joint operations, contractors' contracts at all production plants must include Work Instructions and Contractor Safety Management Procedure as attachments. Contractors are required to carry out safety management in accordance with the relevant regulations. Contractors are also required by CPDC to convene a preparation meeting before the start of work to ensure the personal safety of all internal and external personnel during joint operations.
134 To help familiarize contractors with the plant environment as well as industrial safety, health, and environmental protection regulations, the three CPDC plants conduct industrial safety seminars and training for contractors during routine operations or annual overhauls. In 2020, contractor training was conducted for 5,422 persons across the company and the percentage of trained personnel reached 100%. To ensure that all contractors are properly trained before the start of work, CPDC maintains a registry of trained personnel and produces certificates with the holder's photo attached. The training certificate and registry are used as the basis for the issuance of access passes.
Contractor Training Performance in 2020 No. of Training Participants Plant Total Routine Annual Overhaul Toufen Plant 1,174 489 1,663 Dashe Plant 1,214 1,007 2,221 Hsiaokang Plant 812 726 1,538 Total 3,200 2,222 5,422
5.3 Social Charity Participation 5.3.1 Social Charity Approach Guided by our founding vision of “giving back to the community,” CPDC is also committed to “community engagement for symbiotic growth” for social care. We make our operating locations the starting point to work together towards the three axes of “petrochemical education,” “support for rural schoolchildren” and “elderly care.” We are in alignment with the United Nations Sustainable Development Goals of No Poverty (SDG1), Good Health & Well-being (SDG3), Quality Education (SDG4), Reduced Inequalities (SDG10). CPDC's social welfare investment strategy is carried out in two ways: the Corporate Relations Section of CPDC Taipei Office is responsible for coordinating the planning and organizing CSR activities every quarter, including accompanying the elderly and caring for the disadvantaged, combining the theme of "sending love to the rural areas" and integrating environmental education issues, such as understanding the chemical industry, environmental coexistence, energy saving and carbon reduction into public welfare activities; the other part is evaluated and handled by each plant, giving priority to serving the surrounding neighborhood and disadvantaged units, or actively responding to CSR activities organized by the competent authorities. CPDC continues to set up a budget for social welfare investment every year. In 2020, a total of 152 CSR activities were held, with an expenditure of approximately NTD15.722 million. The volunteer culture that has been gradually established since 2017 has attracted more personnel to the volunteer services in 2020, with approximately 425 participating volunteers and approximately 2,487 people being served in a single year.
CPDC Social Charity Participation Strategy Charity Applied Strategy Strategic Explanation SDG Target The petrochemical industry was the focus Promote students' of Taiwan's early economic growth, but understanding of the Petrochemical Education after decades, it has given the public a SDG4 petrochemical industry stereotypical image of old age, highly Raise the intentions of dangerous, and highly polluting, etc. To students wanting to join 135 Charity Strategic Explanation Applied Target Strategy SDG reverse the misconceptions of young people the petrochemical about the petrochemical industry, and to industry in the future enhance the concept of green plants and Establish the positive green petrochemicals, so as to attract young image of CPDC people to join the chemical industry is the important direction of CPDC's efforts to promote petrochemical education. According to the report, Taiwan may enter an "ultra-high-age" society by 2025, meaning that one out of every five people Provide resources, assist will be over 65 years old. In the rural areas, elderly to travel due to the serious loss of the young outdoors, and provide population, the proportion of elderly living companionship alone is very high. Social participation, SDG1 Increase the positive Elderly Care physical and mental health, and safety of SDG3 image of CPDC the elderly are important public issues. In Improve the rapport with response to the government's long-term the local community care policy, CPDC has joined hands with Avoid or decrease the external charity organizations to contribute number of protests to the field of elderly care from the perspective of companionship. In rural areas where resources are scarce Increase the and grandparenting is common, students are opportunities of outdoor less able to access the same educational resources and developmental space as in visits for students in rural areas urban areas, and they even have to help Provide educational with household expenditures, putting them SDG1 Rural Student at a disadvantage in terms of learning and SDG4 support or Care accompaniment to living. CPDC is committed to alleviating SDG10 students in rural areas the disparity of the living conditions of students in rural areas by organizing Improve the rapport with the local community various small-scale CSR activities to care Increase the positive for and accompany students so as to fulfill educational entertainment. image of CPDC Annual Charity Project Total Invested Value Charity Project Direct Invested 15,722,242 Cash contributions (NT$) 15,722,242 Budget (NT$) Time: employee volunteering during paid Annual volunteering (times) 425 31,600 working hours (NT$) In-kind giving: product or services donations, Number of groups served 326 669,518 projects/partnerships or similar (NT$) Number of people served 2,487 Management overheads (NT$) 450,000 (person) * NOTE: The data in the red frame is supplemented after verification by a third party in this report, and has nothing to do with the verification unit of this report.
2020 Statistics of Charity Events by Type Type Number of cases Percentage Public Welfare Purchasing 1 0.66% Local Community Participation 116 76.32% Underprivileged Care 6 3.95% Education Culture 4 2.63% Charity Donations 9 5.92% Environmental Sustainability 16 10.53% Total 152 100%
136 5.3.2 Petrochemical Education Through an industry-academia partnership, CPDC has continued to develop and secure the future petrochemical talent pool. In 2020, CPDC cooperated with Taiwan University's Department of Chemical Engineering, Petrochemical Class of Renwu High School, and other educational units to organize petrochemical-related professional courses and camps, providing young students with the opportunity to get in touch with the operation practices of the petrochemical industry, and to understand the industry content, importance, and CPDC's corporate characteristics and development visions.
Industry-Government-Academia Strategy Alliance at Renwu Senior High School A strategic alliance was formed between CPDC and other petrochemical plants in the Dashe and Renwu regions to establish a partnership with Renwu Senior High School. The first Renda petrochemical program was launched in 2015 to bring together school, industry, and government resources for motivating student interest in learning, expanding industry knowledge, and cultivating future job skills. In 2020, the Petrochemical class special workshop "Green Energy and Circular Economy" follows international trends and demonstrates to students the transformation for the petrochemical industry due to environmental topics, which received the CommonWealth Parenting magazine's attention and reporting. This program was well received by external parties, and in 2018 held a renewal ceremony, extending the industry-academic partnership program to 2022. In an effort to actively attract talent to enter the petrochemical industry, CPDC established a priority employment pathway for students that graduated from the "Renda Petrochemical Program" to the Dashe Plant as a full-time engineer. In addition, the CPDC's Dashe Plant also provides 1~2 graduates with internship opportunities every year, hoping that such practical experience can enhance their understanding of the petrochemical industry and accumulate the competitiveness for future employment.
Hosted the NTU Chemical Summer Science Camp plant visit In order to fulfill corporate social responsibility and cultivate chemical talent, CPDC has been cooperating with the NTU Chemical Summer Science Camp for a long time. In 2020, for the seventh time, we assisted in arranging the group to visit CPDC 's Toufen Plant. Through detailed explanation and introduction, a total of 113 high school and university students had a better understanding of chemical plant operations, products, processes, and production technologies, and learned to wear safety protection equipment for practical experience. We hope that after the visit, the students could strengthen their interest in the chemical industry and move toward the chemical industry in the future.
5.3.3 Local Engagement The Corporate Relations Section of CPDC is responsible for planning and organizing at least one social welfare activity per quarter. In 2020, due to the impact of the COVID-19 pandemic and the government's pandemic prevention measures, the activities were suspended in the first half of the year, while CSR activities such as the "Free Gifts" and the "CPDC Public Welfare Bus" were
137 conducted in the second half of the year, attracting enthusiastic responses from all employees (including employees from the plants). The three CPDC plants of Toufen, Dashe, Hsiaokang, and the Tainan Anshun site (formerly Taiwan Alkali Corporation) also voluntarily organize or co-host community events according to local needs. During the pandemic, CPDC even cooperated with or hosted donation of materials and other related charity activities. Through donations, participation, and scholarships, the Company has been able to bring residents closer, and establish friendly interaction and communication with local village chiefs, unit responsible person, community, school teachers and students. CPDC set up the “1314 Anshun Neighborhood Scholarship” at Siangong Elementary School and Jhenhai Elementary School near Anshun site (formerly Taiwan Alkali Corporation) that is under remediation by the Company. CPDC also subsidized after-school care at the two schools. A total of NTD320,000 was invested for the year, hoping to motivate students to continue learning, boost their confidence and sense of achievement, as well as enhance their character and academic performance through the scholarships and after-school care classes. This has earned us the gratitude and appreciation of the schools, students, and parents for many years. In 2020, CPDC invested a total of NTD15,722,242 in local participation, including rural care, community networking, donations to communities, donations of pandemic prevention materials, and sponsorships for activities held by local governments.
Joint pandemic prevention through love and care CPDC Toufen Plant donated two batches of sodium hypochlorite to Toufen City Office and Miaoli County Council and discussed with local authorities and public representatives on pandemic prevention issues to contribute to the prevention of the pandemic. CPDC Dashe Plant cooperated with the Dashe District Office and joined hands with the manufacturers in Dashe Industrial Park to support the "Warm Hearts for the Future" campaign promoted by the Kaohsiung City Government and sent the collected products to the disadvantaged people in the Dashe District through buying pre-orders products from multiple stores in the Dashe District. It has brought a lot of warmth to the community affected by the of the pandemic. In collaboration with the Hsinchu Blood Donation Center, the Toufen Plant held its first blood donation event in the plant. In an active response to such activity, a total of 43 employees donated 16,500 c.c. of blood.
1314 free gifts mobilization CPDC cooperated with "Give-Circle" for the first time to hold the "Love Box Delivery" public welfare activity and launched a donation campaign at 5 office locations. The campaign's goal of 30 boxes was reached within half a month, with a total of 480 kilograms and 1,260 items donated, reducing 988.8 kilograms of carbon emissions for the earth. The materials went to 10 counties and cities across Taiwan, and 19 public welfare organizations and schools benefited. The campaign met five SDGs goals, including Reduced Inequalities (SDG 10), Sustainable Cities and Communities (SDG 11), Responsible Consumption and Production (SDG 12), Climate Action (SDG 13), and Partnerships for the Goals (SDG 17).
138 Christmas Charity Bus On Christmas Eve 2020, CPDC held the second "CPDC Charity Bus" activity. Our employees volunteer to buy the gifts from the wishlists of the children of two rural elementary schools in Bao Lai Elementary School, Liouguei District, and Neimen District, Shi-Men Elementary School in Kaohsiung City, which triggered enthusiastic response within the Company, and all 69 gifts were collected within 4 hours. On December 17 and 18, the Corporate Relations Section took the teachers and students from the two schools to experience astronomy and watch a 3D astronomy film at the Tainan Astronomical Education Area and gave the collected Christmas gifts to the children in person. This event is now in its second year and will be held at the end of every year to become a regular event so as to fulfill our CSR and bring warm wishes from our partners in CPDC to the children in rural areas.
139 GRI Standards - Content Index GRI Standards - Disclosures Disclosure Chapter Page GRI 102: General Disclosures 2016 Organizational profile 102-1 Name of the organization 1.1.1 CPDC Profile P.18 102-2 Activities, brands, products and services 1.1.1 CPDC Profile P.18 102-3 Location of headquarters 1.1.1 CPDC Profile P.18 102-4 Location of operations 1.1.1 CPDC Profile P.18 102-5 Ownership and legal form 1.1.1 CPDC Profile P.18 102-6 Markets served 1.3.2 Market Overview P.37 102-7 Scale of the organization 1.1.1 CPDC Profile P.18 5.1.1 Human Resources 102-8 Information on employees and other Workers P.112 Structure 4.1.1 Profile of Supply Chain 102-9 Supply chain P.94 Management 102-10 Significant changes to the organization and its supply chain 1.1.1 CPDC Profile P.18 1.3.1 External Environment P.34 Analysis 102-11 Precautionary Principles or approach 3.2.2 Climate Change P.72 Adaptation 2.1.2 Risk Management P.50 2.3.1 Business Integrity P.59 Regulations 102-12 External initiatives 5.2.1 CPDC Human Rights P.117 Policy 2.3.1 Business Integrity 102-13 Membership of associations P.59 Regulations Strategy Chairman's Letter P.4 102-14 Statement from senior decision-maker From The President P.6 1.3.1 External Environment P.34 Analysis 102-15 Key impacts, risks and opportunities 2.1.2 Risk Management P.50 3.2.2 Climate Change P.72 Adaptation Ethics and Integrity 102-16 Values, principles, standards and norms of behavior 1.1.2 Company Vision P.22 2.3.1 Business Integrity 102-16 Values, principles, standards and norms of behavior P.59 Regulations 2.3.1 Business Integrity 102-17 Mechanisms for advice and concerns about ethics P.59 Regulations Governance 1.2.1 Framework of Sustainable P.28 Governance 102-18 Governance structure 2.1.1 Framework of Corporate P.42 Governance 1.2.1 Framework of Sustainable 102-19 Delegating authority P.28 Governance 102-20 Executive-level responsibility for economic, environmental and social 1.2.1 Framework of Sustainable P.28 topics Governance 102-21 Consulting stakeholders on responsibilities of economic, 1.2.1 Framework of Sustainable P.28 environmental and social topics Governance 2.1.1 Framework of Corporate 102-22 Composition of the highest governance body and its committees P.42 Governance 2.1.1 Framework of Corporate 102-23 Chair of the highest governance body P.42 Governance 2.1.1 Framework of Corporate 102-24 Nominating and selecting the highest governance body P.42 Governance 2.1.1 Framework of Corporate 102-25 Conflicts of interest P.42 Governance 140 GRI Standards - Disclosures Disclosure Chapter Page 2.3.1 Business Integrity P.59 Regulations 102-26 Role of the highest governance body in setting purpose, value and 1.1.2 Company Vision P.22 strategy 2.1.1 Framework of Corporate 102-27 Collective knowledge of the highest governance body P.42 Governance 2.1.1 Framework of Corporate 102-28 Evaluating the highest governance body's performance P.42 Governance 1.3.1 External Environment 102-29 Identifying and managing economic, environmental and social P.34 Analysis impacts 2.1.2 Risk Management P.50 1.3.1 External Environment P.34 102-30 Effectiveness of risk management process Analysis 2.1.2 Risk Management P.50 102-32 Highest governance body's role in sustainability reporting About This Report P.3 2.1.1 Framework of Corporate P.42 Governance 102-35 Remuneration policies 5.1.1 Human Resources P.112 Structure 2.1.1 Framework of Corporate 102-36 Process for determining remuneration P.42 Governance 2.1.1 Framework of Corporate 102-37 Stakeholder involvement P.42 Governance Stakeholder Engagement Stakeholders and material issue 102-40 List of stakeholder groups P.8 analysis 5.2.2 Labor-Management 102-41 Collective bargaining agreements P.120 Relations Stakeholders and material issue 102-42 Identifying and selecting stakeholders P.8 analysis Stakeholders and material issue 102-43 Approach to stakeholder engagement P.8 analysis Stakeholders and material issue 102-44 Key topics and concerns raised P.8 analysis Reporting Practice 102-45 Entities included in the consolidated financial statements 1.1.1 CPDC Profile P.18 102-46 Defining report content and topic boundaries About This Report P.3 102-47 List of material topics About This Report P.3 102-48 re-statements of information About This Report P.3 102-49 Changes in reporting About This Report P.3 102-50 Reporting period About This Report P.3 102-51 Date of most recent report About This Report P.3 102-52 Reporting period About This Report P.3 102-53 Contact point for questions regarding this Report About This Report P.3 102-54 Claims of reporting in accordance with GRI standards About This Report P.3 102-55 GRI content index GRI Standards - Content Index P.140 About This Report P.3 102-56 External assurance Assurance Statement P.148 GRI 103: Management Approach 2016 Stakeholders and material issue 103-1 Explanation of the material topic and its boundary P.8 analysis Disclosure of Material Topics and Specific Topics Corporate Governance and Business Integrity 1.2.2 Sustainable Development 103-2 The management approach and its components P.32 Strategies and Objectives 103-3 Evaluation of the management approach 2.3 Business Integrity P.59 2.3.1 Business Integrity 205-1 Operations assessed for risk related to corruption P.59 Regulations 205-2 Communication and training about anti-corruption policies and 2.3.1 Business Integrity P.59 procedures Regulations 141 GRI Standards - Disclosures Disclosure Chapter Page 2.3.2 Response to Major 205-3 Confirmed incidents of corruption and actions taken Regulatory Compliance P.62 Incidents 206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly 2.3.1 Business Integrity P.59 practices Regulations 2.3.2 Response to Major 307-1 Non-compliance with environmental laws and regulations Regulatory Compliance P.62 Incidents 2.3.1 Business Integrity 415-1 Political contributions P.59 Regulations 2.3.2 Response to Major 419-1 Non-compliance with laws and regulations in the social and economic Regulatory Compliance P.62 area Incidents Business Performance 2.2.1 Business Performance and 103-2 The management approach and its components P.54 Distribution 2.2.1 Business Performance and 103-3 Evaluation of the management approach P.54 Distribution 1.1.3 Business Model and Six P.25 Capitals 201-1 Direct economic value generated and distributed 2.2.1 Business Performance and P.54 Distribution 2.2.1 Business Performance and 201-4 Financial assistance received from government P.54 Distribution 2.2.1 Business Performance and 203-1 Infrastructure investments and services supported P.54 Distribution 2.2.1 Business Performance and 203-2 Significant indirect economic impacts P.54 Distribution Risk Management 3.2.2 Climate Change 103-2 The management approach and its components P.72 Adaptation 3.2.2 Climate Change 103-3 Evaluation of the management approach P.72 Adaptation Sustainable Supply Chain Management 4.1 Sustainable Supply Chain 103-2 The management approach and its components P.94 Management 4.1 Sustainable Supply Chain 103-3 Evaluation of the management approach P.94 Management 4.1 Sustainable Supply Chain 204-1 Proportion of spending on local suppliers P.94 Management 4.1.2 Supply Chain 308-1 New suppliers that were screened using environmental criteria P.99 Sustainability Risk Evaluation 4.1.1 Profile of Supply Chain 308-2 Negative environmental impacts in the supply chain and actions taken P.94 Management 4.1.2 Supply Chain 414-1 New suppliers that were screened using social criteria P.99 Sustainability Risk Evaluation 4.1.1 Profile of Supply Chain 414-2 Negative social impacts in the supply chain and actions taken P.94 Management R&D and Innovation in High Value Products 3.1.2 Green Innovation and 103-2 The management approach and its components P.65 Development 3.1.2 Green Innovation and 103-3 Evaluation of the management approach P.65 Development Chemical Safety Management 103-2 The management approach and its components 3.3.7 Chemical Management P.91 103-3 Evaluation of the management approach 3.3.7 Chemical Management P.91 416-1 Assessment of the health and safety impacts of product and service 3.3.7 Chemical Management P.91 categories Information Security and Digital Transformation 103-2 The management approach and its components 2.1.2 Risk Management P.50 142 GRI Standards - Disclosures Disclosure Chapter Page 103-3 Evaluation of the management approach 2.1.2 Risk Management P.50 418-1 Substantiated complaints concerning breaches of customer privacy 2.1.2 Risk Management P.50 and losses of customer data Remediation of Polluted Site 4.3.2 Remediation and 103-2 The management approach and its components P.104 Development of Anshun Site 4.3.2 Remediation and 103-3 Evaluation of the management approach P.104 Development of Anshun Site 4.3.2 Remediation and 203-2 Significant indirect economic impacts P.104 Development of Anshun Site Climate Change Mitigation and Adaptation 103-2 The management approach and its components 3.2 Climate Change Response P.68 103-3 Evaluation of the management approach 3.2 Climate Change Response P.68 201-2 Financial implications and other risks and opportunities due to climate 3.2.2 Climate Change P.72 change Adaptation 3.2.1 Climate Change 305-1 Direct (Scope 1) GHG emissions P.69 Mitigation 3.2.1 Climate Change 305-2 Indirect (Scope 2) GHG emissions P.69 Mitigation 3.2.1 Climate Change 305-4 GHG emissions intensity P.69 Mitigation 3.2.1 Climate Change 305-5 Reduction of GHG emissions P.69 Mitigation Energy Management 3.3.2 Energy Management and 103-2 The management approach and its components P.80 Emissions 3.3.2 Energy Management and 103-3 Evaluation of the management approach P.80 Emissions 3.3.2 Energy Management and 302-1 Energy consumption within the organization P.80 Emissions 3.3.2 Energy Management and 302-2 Energy consumption outside of the organization P.80 Emissions 3.3.2 Energy Management and 302-3 Energy intensity P.80 Emissions 3.3.2 Energy Management and 302-4 Reduction of energy consumption P.80 Emissions Air Pollution Control 103-2 The management approach and its components 3.3.3 Air Pollutant Management P.82 103-3 Evaluation of the management approach 3.3.3 Air Pollutant Management P.82 305-6 Emissions of ozone-depleting substances (ODS) 3.3.3 Air Pollutant Management P.82 305-7 Nitrogen oxides (NOx), sulfur oxides (SOx), and other significant air 3.3.3 Air Pollutant Management P.82 emissions Monitoring and Management of Environmental Pollution 3.3.6 Prevention of 103-2 The management approach and its components P.90 Environmental Pollution 3.3.6 Prevention of 103-3 Evaluation of the management approach P.90 Environmental Pollution 3.3.6 Prevention of 306-3 Significant spills P.90 Environmental Pollution Waste Disposal Management 3.3.5 Waste Disposal 103-2 The management approach and its components P.87 Management 3.3.5 Waste Disposal 103-3 Evaluation of the management approach P.87 Management 3.3.5 Waste Disposal 306-2 Waste by type and disposal method P.87 Management 3.3.5 Waste Disposal 306-4 Transport of hazardous waste P.87 Management Water Resources Management 103-2 The management approach and its components 3.3.4 Water Resources P.83 143 GRI Standards - Disclosures Disclosure Chapter Page Management 3.3.4 Water Resources 103-3 Evaluation of the management approach P.83 Management 3.3.4 Water Resources 303-1 Water withdrawal by source P.83 Management 3.3.4 Water Resources 303-2 Water sources significantly affected by withdrawal of water P.83 Management 3.3.4 Water Resources 303-3 Water withdrawal P.83 Management 3.3.4 Water Resources 306-1 Water discharge by quality and destination P.83 Management 3.3.4 Water Resources 306-5 Water bodies affected by water discharges and/or run-off P.83 Management Ecological Conservation and Biodiversity 4.3.2 Remediation and 103-2 The management approach and its components P.104 Development of Anshun Site 4.3.2 Remediation and 103-3 Evaluation of the management approach P.104 Development of Anshun Site 304-1 Operational sites owned, leased, managed in, or adjacent to, protected 4.3.2 Remediation and P.104 areas and areas of high biodiversity value outside protected areas Development of Anshun Site 304-2 Significant impacts of activities, products, and services on 4.3.2 Remediation and P.104 biodiversity Development of Anshun Site Circular Economy 3.1 Product Development 103-2 The management approach and its components P.65 Strategies 3.1 Product Development 103-3 Evaluation of the management approach P.65 Strategies 301-1 Materials used by weight or volume 3.1.3 Use of Raw Materials P.68 301-2 Recycle input materials used 3.1.3 Use of Raw Materials P.68 Occupational Health and Safety 5.2.4 Occupational Health and 103-2 The management approach and its components P.125 Safety 5.2.4 Occupational Health and 103-3 Evaluation of the management approach P.125 Safety 5.2.4 Occupational Health and 403-1 Occupational health and safety management system P.125 Safety 5.2.4 Occupational Health and 403-2 Hazard identification, risk assessment, and incident investigation P.125 Safety 5.2.4 Occupational Health and 403-3 Occupational health services P.125 Safety 403-4 Worker participation, consultation, and communication on 5.2.4 Occupational Health and P.125 occupational health and safety Safety 5.2.4 Occupational Health and 403-5 Worker training on occupational health and safety P.125 Safety 5.2.4 Occupational Health and 403-6 Promotion of worker health P.125 Safety 403-7 Prevention and mitigation of occupational health and safety impacts 5.2.4 Occupational Health and P.125 directly linked by business relationships Safety 403-8 Workers covered by an occupational health and safety management 5.2.4 Occupational Health and P.125 system Safety 5.2.4 Occupational Health and 403-9 Work-related injuries P.125 Safety 5.2.4 Occupational Health and 403-10 Work-related ill health P.125 Safety HR Development and Management 103-2 The management approach and its components 5.1 Talent Development P.112 103-3 Evaluation of the management approach 5.1 Talent Development P.112 202-1 Ratios of standard entry level wage by gender compared to local 5.1.1 Human Resources P.112 minimum wage Structure 202-2 Proportion of senior management hired from the local community 5.1.1 Human Resources P.112 144 GRI Standards - Disclosures Disclosure Chapter Page Structure 5.1.1 Human Resources 401-1 New employees hires and employee turnover P.112 Structure 401-2 Benefits provided to full-time employees that are not provided to 5.2.3 Employee Benefits P.123 temporary or part-time employee 401-3 Parental leave 5.2.3 Employee Benefits P.123 404-1 Average hours per year per employee 5.1.2 Education and Training P.115 404-2 Programs for upgrading employee skills and transition assistance 5.1.2 Education and Training P.115 programs 404-3 Percentage of employees receiving regular performance and career 5.1.1 Human Resources P.112 development reviews Structure 5.1.1 Human Resources 405-1 Diversity of governance bodies and employees P.112 Structure 5.1.1 Human Resources 405-2 Ratio of basic salary and remuneration of women to men P.112 Structure Human Rights Assessment 5.2.1 CPDC Human Rights 103-2 The management approach and its components P.117 Policy 5.2.1 CPDC Human Rights 103-3 Evaluation of the management approach P.117 Policy 201-3 Defined benefit plan obligations and other retirement plans 5.2.3 Employee Benefits P.123 5.2.1 CPDC Human Rights 406-1 Incidents of discrimination and corrective actions taken P.117 Policy 407-1 Operations and suppliers in which the right to freedom of association 5.2.2 Labor-Management P.120 and collective bargaining may be at risk Relations 409-1 Operations and suppliers at significant risk for incidents of forced or 4.1 Sustainable Supply Chain P.94 compulsory labor Management Social Care and Engagement 4.3.1 Community 103-2 The management approach and its components P.102 Communication 103-3 Evaluation of the management approach 5.3.1 Social Charity Strategy P.135 4.3.2 Remediation and P.104 Development of Anshun Site 203-2 Significant indirect economic impacts 5.3.1 Social Charity Strategy P.135 5.3.2 Petrochemical Education P.137 5.3.3 Local Engagement P.137 413-1 Operations with local community engagement, impact assessments, 4.3.1 Community P.102 and development programs Communication 413-2 Operations with significant actual and potential impacts on local 4.3.1 Community P.102 communities Communication
145 Appendix True Value Assessment Item Scope Description Direction 2020 2019 Change Whole CPDC CPDC GHG Emissions Environmental and social costs caused by GHG emissions Negative -1,897,856 -4,293,191 -56% (Scope1 and Scope2) Air Pollution Discharge The Three CPDC Plants Environmental and social costs caused by air pollutant discharge Negative -48,542 -137,835 -65% Water Resource The Three CPDC Plants, Environmental and social costs caused by water consumption Negative -1,523,010 -1,998,029 -24% Consumption Taipei Office Occupational Injury or Fatal The Three CPDC Plants, Social costs caused by occupational injury or fatal accident Negative -49,190 -48,671 1% Accident Contractors Promotion of National The contribution of taxes and fees to the country's overall economy and Whole CPDC Positive 0 (Note 2) 145,953 -- Infrastructure infrastructure Economic and social benefits created by paying employees' salaries and Salary and Welfare Whole CPDC Positive 1,433,937 1,818,568 -21% benefits Create Economic Added The economic value of the petrochemical industry created by the Value of Petrochemical Whole CPDC procurement of key raw materials, including Taiwan and overseas Positive 4,561,869 7,376,610 -38% Industry procurement Local Public Welfare/Social Benefits of purchasing public welfare/social enterprise products to support Whole CPDC Positive 416 99 320% Enterprise Procurement the development of related institutions Benefits of purchasing green products to support the development of Green Procurement Whole CPDC Positive 15,327 14,373 7% related institutions Development and After employees leave the Company, the increased salary value due to 5,610 Investment in Human Whole CPDC functional enhancement will be beneficial to the country's overall economic Positive 4,311 -23% (Note 3) Capital development EBITDA Whole CPDC EBITDA Positive 1,316,373 3,449,185 -62%
Integrated P&L 3,813,635 6,332,672 Note: The values in the table are rounded to the nearest whole number, so there is a slight difference between the total amount of each item and the consolidated profit or loss Note 2: Externalities are calculated as zero because no tax was paid on losses in 2020 Note 3: Due to the adjustment in the calculation method, the data on human capital development and investment in 2019 has been restated
146 Environmental Protection Record Numerical comparison in Item Unit 2016 2017 2018 2019 2020 2020 Goals 2020 Achievement Rate the past 2 years GHG (Scope 1) Emissions Tons 1,715,629.81 1,974,799.97 1,964,661.41 1,735,994.13 915,161.79 47.28% 2,212,944.52 205% GHG (Scope 2) Emissions Tons 205,043.96 199,834.34 158,595.94 176,525.64 164,283.03 6.94% Non-renewable MWh 2,322,466.00 2,216,560.00 2,077,728.47 1,995,105.85 1,034,734.96 48.14% energy usage Purchased MWh 263,662.00 227,428.50 206,599.60 204,042.83 148,566.14 27.19% electricity usage Energy Usage Purchased steam 2,368,533.18 188% MWh 370,529.29 340,975.17 247,956.25 170,711.69 162,508.45 4.81% volume Purchased electricity and MWh 385,374.00 213,665.00 185,339.54 216,075.04 86,809.47 NA steam volume Water Water ML 9,910.92 11,907.85 11,640.43 10,663.01 7,336.57 31.20% 8,578.88 117% consumption Resource Chemical Consumption Tons 297.79 316.76 286.95 234.65 214.89 8.42% 301.37 140% Oxygen Demand General Industrial Waste Tons 59,806.50 65,360.98 64,667.13 58,433.73 32,045.90 45.16% 41,570.19 130% generated General Industrial Waste Waste Disposal Tons 54,937.00 60,483.17 59,469.68 52,583.58 26,393.29 49.81% 34,237.58 130% recycle/reuse/sale volume Hazardous Industrial Waste Tons 35,789.20 37,875.61 37,809.53 39,057.93 36,845.13 5.67% 43,216.00 117% generated NOx Emissions Tons 1,013.45 932.00 599.00 410.50 231.16 43.69% 610.72 264% SOx Emissions Tons 162.72 139.52 169.00 156.40 51.09 67.33% 174.62 342% VOCs Emissions Tons 1,653.00 2,420.00 1,323.00 363.55 212.59 41.52% 278.52 131% Note: 1. In 2020, due to the impact of the COVID-19 pandemic, the production volume was reduced. Therefore, the related emissions were lower than expected 2. Sold energy and carbon emissions are attributable to the buyer, hence, no performance comparison is conducted
147
INDEPENDENT ASSURANCE OPINION STATEMENT
China Petrochemical Development Corporation 2020 Corporate Social Responsibility Report The British Standards Institution is independent to China Petrochemical Development Corporation (hereafter referred to as CPDC in this statement) and has no financial interest in the operation of CPDC other than for the assessment and verification of the sustainability statements contained in this report. This independent assurance opinion statement has been prepared for the stakeholders of CPDC only for the purposes of assuring its statements relating to its corporate social responsibility (CSR), more particularly described in the Scope below. It was not prepared for any other purpose. The British Standards Institution will not, in providing this independent assurance opinion statement, accept or assume responsibility (legal or otherwise) or accept liability for or in connection with any other purpose for which it may be used, or to any person by whom the independent assurance opinion statement may be read. This independent assurance opinion statement is prepared on the basis of review by the British Standards Institution of information presented to it by CPDC. The review does not extend beyond such information and is solely based on it. In performing such review, the British Standards Institution has assumed that all such information is complete and accurate. Any queries that may arise by virtue of this independent assurance opinion statement or matters relating to it should be addressed to CPDC only. Scope The scope of engagement agreed upon with CPDC includes the followings: 1. The assurance scope is consistent with the description of China Petrochemical Development Corporation 2020 Corporate Social Responsibility Report with the following exceptions: • The data reliability for six capitals identified in IIRC and KPMG True Value. 2. The evaluation of the nature and extent of the CPDC’s adherence to AA1000 AccountAbility Principles (2018) and the reliability of specified sustainability performance information in this report as conducted in accordance with type 2 of AA1000AS v3 sustainability assurance engagement. This statement was prepared in English and translated into Chinese for reference only. Opinion Statement We conclude that China Petrochemical Development Corporation 2020 Corporate Social Responsibility Report provides a fair view of CPDC CSR programmes and performances during 2020. The CSR report subject to assurance is materially correct without voluntary omissions based upon testing within the limitations of the scope of the assurance, the information and data provided by CPDC and the sample taken. We believe that 2020 economic, social and environmental performance information are correctly represented. The CSR performance information disclosed in the report demonstrate CPDC’s efforts recognized by its stakeholders. Our work was carried out by a team of (CSR) report assurors in accordance with the AA1000AS v3. We planned and performed this part of our work to obtain the necessary information and explanations we considered to provide sufficient evidence that CPDC’s description of their approach to AA1000AS v3 and their self-declaration in accordance with GRI Standards: Core option were fairly stated. Methodology Our work was designed to gather evidence on which to base our conclusion. We undertook the following activities: ⎯ a top level review of issues raised by external parties that could be relevant to CPDC’s policies to provide a check on the appropriateness of statements made in the report ⎯ discussion with managers on CPDC’s approach to stakeholder engagement. Moreover, we had sampled two external stakeholders to conduct interview ⎯ interview with 20 staffs involved in sustainability management, report preparation and provision of report information were carried out ⎯ review of key organizational developments ⎯ review of the extent and maturity of the relevant accounting systems for financial and non-financial reports ⎯ review of the findings of internal audits ⎯ the verification of performance data and claims made in the report through meeting with managers responsible for gathering data ⎯ review of the processes for gathering and ensuring the accuracy of data, followed data trails to initial aggregated source and checked sample data to greater depth during site visits ⎯ the consolidated financial data are based on audited financial data, we checked that this data was consistently reproduced ⎯ review of supporting evidence for claims made in the reports ⎯ an assessment of the organization’s reporting and management processes concerning this reporting against the principles of Inclusivity, Materiality, Responsiveness and Impact as described in the AA1000AP (2018) Conclusions A detailed review against the Inclusivity, Materiality, Responsiveness and Impact of AA1000AP (2018) and sustainability performance information as well as GRI Standards is set out below: Inclusivity In this report, it reflects that CPDC has continually sought the engagement of its stakeholders and established material sustainability topics, as the participation of stakeholders has been conducted in developing and achieving an accountable and strategic response to sustainability. There are fair reporting and disclosures for economic, social and environmental information in this report, so that appropriate planning and target-setting can be supported. In our professional opinion the report covers CPDC’s inclusivity issues and has demonstrated social responsible conduct supported by top management and implemented in all levels among organization. Materiality CPDC publishes material topics that will substantively influence and impact the assessments, decisions, actions and performance of CPDC and its stakeholders. The sustainability information disclosed enables its stakeholders to make informed judgements about CPDC's management and performance. In our professional opinion the report covers CPDC’s material issues. Responsiveness CPDC has implemented the practice to respond to the expectations and perceptions of its stakeholders. An Ethical Policy for CPDC is developed and continually provides the opportunity to further enhance CPDC’s responsiveness to stakeholder concerns. Topics that stakeholder concern about have been responded timely. In our professional opinion the report covers CPDC’s responsiveness issues. Impact CPDC has Identified and fairly represented impacts that were measured and disclosed in probably balanced and effective way. CPDC has established processes to monitor, measure, evaluate and manage impacts that lead to more effective decision-making and results-based management within an organization. In our professional opinion the report covers CPDC’s impact issues. Performance information Based on our work described in this statement, specified sustainability performance information such as GRI Standards disclosures disclosed in this report, CPDC and BSI have agreed upon to include in the scope. In our view, the data and information contained within China Petrochemical Development Corporation 2020 Corporate Social Responsibility Report are reliable based on procedures undertaken by means of vouching, re-tracking, re-computing and confirmation. GRI Sustainability Reporting Standards (GRI Standards) CPDC provided us with their self-declaration of in accordance with GRI Standards: Core option (For each material topic covered by a topic-specific GRI Standard, comply with all reporting requirements for at least one topic-specific disclosure. Based on our review, we confirm that social responsibility and sustainable development disclosures with reference to GRI Standards’ disclosures are reported, partially reported or omitted. In our professional opinion the self- declaration covers CPDC’s social responsibility and sustainability topics. Assurance level The high level assurance provided is in accordance with AA1000AS v3 in our review, as defined by the scope and methodology described in this statement. Responsibility This CSR report is the responsibility of CPDC’s chairman as declared in his responsibility letter. Our responsibility is to provide an independent assurance opinion statement to stakeholders giving our professional opinion based on the scope and methodology described. Competency and Independence The assurance team was composed of Lead auditors experienced in relevant sectors, and trained in a range of sustainability, environmental and social standards including AA1000AS, ISO 14001, ISO 45001, ISO 14064 and ISO 9001. BSI is a leading global standards and assessment body founded in 1901. The assurance is carried out in line with the BSI Fair Trading Code of Practice.
For and on behalf of BSI:
Peter Pu, Managing Director BSI Taiwan
Statement No: SRA-TW-2020004
2021-06-18
Taiwan Headquarters: 2nd Floor, No. 37, Ji-Hu Rd., Nei-Hu Dist., Taipei 114, Taiwan, R.O.C.
BSI Taiwan is a subsidiary of British Standards Institution.