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ESG Report Questionnaire

Environmental Friendliness

Environmental Management

SDGs

Task Force on Climate-Related Financial Disclosures(TCFD)

The SKS Board of Directors oversees climate-related issues through the Sustainable Development Committee, which regularly reviews the Company's strategies, risk management, and opportunities in response to climate change. At the management level, Sustainable Development Executive Teams—comprising Corporate Governance, Sustainable Development, Environment, and Social teams—are responsible for identifying climate risks and opportunities, and for promoting energy conservation, carbon reduction, green transportation, and related action plans. These teams report regularly to the Board of Directors.

1. Board Responsibilities

  • Act as the highest decision-making body for climate change risk management and assumes ultimate responsibility for managing climate-related risks at SKS.
  • Approve climate change risk management strategies to guide, supervise, and manage the Company's exposure to climate risks.
  • Regularly review climate-related issues to ensure that climate risks and opportunities are incorporated into business decision-making.
  • Refer to relevant international TCFD guidelines and domestic regulatory timelines to ensure the ongoing effectiveness of climate risk management and disclosure.

2. Responsibilities of Management and Executive Teams

  • The Sustainable Development Committee is responsible for identifying and managing climate change issues, as well as formulating and promoting related strategies.
  • The Sustainable Development Executive Teams (Corporate Governance, Sustainable Development, Environment, and Social) regularly assess climate risks and propose response measures through relevant departments.
  • The Sustainable Development Team and the Environment Team are responsible for implementing low-carbon transition plans as well as energy-saving and emission reduction initiatives.

Following an internal assessment of climate issue likelihood and impact, SKS identifies climate risks and opportunities within the categories of Transition Risks (Policy and Legal, Technology, Market, and Reputation), Physical Risks (Acute and Chronic), and Opportunities (Resource Efficiency, Energy Source, Products/Services, Markets, and Resilience). A total of 6 climate risks and 5 climate opportunities were identified, including 3 significant climate risks and 2 significant climate opportunities.

Identification and Response to Significant Climate Risks and Opportunities
Risk Type Specific Risk Severity of Impact Likelihood of Occurrence Timeframe Assessment Financial Impact Management Approach Response Measures and Action Plans
Climate Risk Transition Risk (Policy and Legal)
  1. To align with the Climate Change Response Act, the Company must improve its energy efficiency, which may lead to increased operating costs.
  2. Carbon emission regulations are becoming stricter, and enterprises are required to pay carbon taxes or purchase carbon credits.
 High High Short-term
  1. Increased operating costs: The Company may be required to pay carbon taxes or purchase carbon credits.
  2. Greater market competition pressure: Failure to meet standards may result in the loss of corporate clients.
Mitigation Control
  1. Establish a carbon inventory mechanism to reduce carbon emissions.
  2. Improve the energy efficiency of equipment and provide low-carbon services to align with market trends.
  3. Introduce low-carbon equipment to reduce carbon-related costs.
Transition Risk (Market)
  1. Increasing demand from corporate clients for low-carbon products and services may reduce the competitiveness of traditional security services.
 High Medium Medium-term
  1. Declining demand for system security services may impact revenue.
  2. The Company may need to invest R&D funds and adopt low-carbon technologies or services.
Mitigation Control
  1. Launch low-carbon and energy management monitoring systems.
  2. Offer low-carbon security services.
Physical Risk (Acute)
  1. Extreme weather events (such as typhoons and heavy rain) may cause equipment damage, monitoring interruptions, and increased staff dispatches, leading to higher operating costs.
High High Medium-term
  1. Higher maintenance and replacement costs for equipment; monitoring interruptions may affect customer trust.
  2. Difficulties in dispatching personnel could potentially affect client safety.
 Adaptation
  1. Enhance equipment weather resistance and install backup systems.
  2. Strengthen disaster prevention and emergency response mechanisms.
Physical Risk (Chronic)
  1. Rising temperatures may result in higher electricity prices, resulting in increased operating costs.
Medium High Long-term
  1. Rising electricity costs may impact operating profit.
 Mitigation Control
  1. Install energy-saving and energy storage equipment.
  2. Plan for the procurement of renewable energy.
Supply Chain
  1. Suppliers are required to comply with low-carbon standards, which may affect supply chain stability.
Medium Medium Short-term
  1. Increased supply chain management costs and higher switching costs for suppliers.
 Mitigation Control
  1. Establish green procurement standards and select low-carbon suppliers.
Technology
  1. Transitioning to low-carbon services may result in higher short-term costs.
 Medium Medium Long-term
  1. Higher costs for R&D and equipment upgrades.
 Mitigation Control
  1. Gradually introduce low-carbon equipment and technologies to reduce long-term carbon emissions.
  2. Collaborate with strategic partners to share R&D resources.
Climate Opportunity Markets
  1. Develop low-carbon services to attract external collaboration.
 High High Short-term
  1. New business growth: Develop low-carbon services and expand into new markets.
 Mitigation Control
  1. Launch integrated solutions combining energy monitoring systems with low-carbon services.
Resource Efficiency
  1. Introduce smart energy management and green energy applications to reduce long-term operating costs.
High High Long-term
  1. Reduce long-term energy costs and enhance operational efficiency.
 Mitigation
  1. Establish a carbon management system to optimize energy efficiency.
Supply Chain
  1. Collaborate with low-carbon suppliers to enhance green brand competitiveness.
Medium Medium Medium-term
  1. Develop new business opportunities and differentiate to expand the market for low-carbon services.
 Mitigation Control
  1. Promote carbon reduction transition and certification initiatives in collaboration with partner vendors to enhance partnership stability.
Technology
  1. Enhance AI-based video surveillance and energy monitoring technologies to improve security performance.
Medium Medium Long-term
  1. Improve service efficiency to reduce labor and maintenance costs.
  2. Develop new business opportunities and further expand the market for low-carbon services.
 Adaptation
  1. Promote AI smart service systems to reduce carbon emissions and energy waste.
  2. Introduce AI image analysis and cloud-based management services.
Government and Industry Subsidies
  1. Apply for government subsidies to reduce the costs of low-carbon transition.
Medium Medium Short-term
  1. Meet the government subsidy criteria to secure subsidy resources.
 Mitigation
  1. Accelerate the achievement of carbon reduction targets.
Note:

Short-term (1–3 Years), Medium-term (3–5 Years), Long-term (5–10 Years).

SKS conducted a scenario analysis of climate change with reference to the AR6 (the Sixth Assessment Report) released by the United Nations Intergovernmental Panel on Climate Change (IPCC), and selected the SSP1-2.6 and SSP5-8.5 scenarios.

Category SSP1-2.6 Scenario Analysis SSP5-8.5 Scenario Analysis
Scenario Analysis
  1. Climate change is viewed as a major global issue, driving the pursuit of sustainable development, the implementation of high-efficiency technologies, and greater emphasis on environmental responsibility.
  2. With the carbon tax rising to NT$300 per ton, SKS must strengthen its carbon management and carbon reduction technologies.
  3. Transition risks increase, requiring more resources to transform operational processes and services.
  4. The market places greater emphasis on environmental performance, prompting SKS to develop low-carbon services and green management practices.
  1. An economy driven by fossil fuels and lacking effective climate response measures leads to frequent extreme weather events.
  2. A temperature increase of 3.4°C results in heavier rainfall and extreme heat events, affecting equipment operation and personnel safety.
  3. Equipment damage and increased maintenance frequency lead to higher operating costs.
  4. Employee training and risk response procedures must be strengthened to enhance emergency response capabilities.
Key Risks Increased transition risks, rising carbon costs, and a need to quickly adapt to environmental trends. Increased physical risks (heavy rainfall, high temperatures), pose challenges to equipment and personnel.
Specific Impacts The carbon tax rises to NT$300 per ton, raising operating costs; investments are required to transform processes and services. Increased frequency of equipment damage leads to higher maintenance and replacement costs; employee health and attendance risks also rise.
Financial Impacts
  1. Increased carbon tax expenditures.
  2. Capital expenditures are required for investing in low-carbon technologies and green services.
  3. Opportunities to enhance corporate sustainability ratings and market appeal, creating opportunities to attract new customers and generate revenue.
  1. Increased maintenance and repair costs.
  2. Higher costs for employee training and insurance.
  3. If not properly addressed, these issues may result in service interruptions and revenue loss.
Response Strategies
  1. Strengthen carbon inventory and carbon management.
  2. Invest in low-carbon technologies and green product development.
  3. Promote green security operations.
  1. Strengthen climate disaster response procedures.
  2. Enhance employee safety training and operational flexibility.
  3. Optimize equipment, facilities, and backup systems.

To address climate issues, SKS integrates assessment methods into the risk management process (see Chapter 2 for details of the risk management process assessment methods), with an inter-departmental risk management team acting as the unit responsible for risk management established under the Sustainable Development Committee. As for risk assessment, SKS adopts the " three lines of defense," with the dedicated personnel in each department, department heads, and the Risk Management Team setting up a measurement and monitoring mechanism when risks are detected. In terms of climate issues, we also refer to SKS's risk management process, which includes risk identification, risk measurement, risk monitoring, risk reporting and disclosure, and risk response. In addition, we further analyze the level of impact and probability of climate risks and opportunities in the risk identification section and rank these items.

The process of climate risk and opportunity identification
Compile a List of Climate Risks & Opportunities

Based on the interaction between SKS's operational conditions and the environment, and with reference to TCFD's climate-related financial disclosure recommendations, SKS compiles a list of risks and opportunities.

Gather All Departments to Identify Issues

The Sustainable Development Committee and the Risk Management Team convene a meeting and conduct discussion workshops and surveys to identify the short, medium, and long-term impacts caused by climate risks and opportunities. Additionally, we rank them on a scale of 1-5, representing low to high for the level of impact, and a scale of 1-6 from low to high for the probability.

Identify and Rank Significant Risks & Opportunities

The risks scoring 16 and above, resulting from multiplying their level of impact and probability, are classified as climate risks and opportunities with a high level of impact and high probability. Additionally, these risks are ranked through discussions with the management.

Evaluate Risks & Formulate Strategies

The Sustainable Development Committee evaluates the changes in products, services, or management processes resulting from identified risks across various scenarios. After assessing the impact on SKS's operations, the Committee assists in formulating strategies to address climate issues. Subsequently, it develops suitable measurement methods to track these strategies based on the requirements of each department.

Report, Disclose & Track the Risks

The Sustainable Development Committee periodically monitors the sustainability performance of each department and office regarding climate issues, and reports changes in climate-related regulations and the execution performance of climate strategies to the Board of Directors or management at least once a year.

The Company sets short, medium, and long-term goals in response to climate-related risks and opportunities, implements them effectively, and regularly reviews and adjusts its goals. The achievement status is disclosed in the sustainability report. In 2022, the Company initiated the greenhouse gas inventory for the headquarters and completed the inventory process, establishing 2022 as the base year for future reference. An annual energy performance target of a 0.5% reduction compared to the previous year has been established as a continuous improvement goal. To promote sustainable development and ensure that carbon reduction targets are achieved, the Company plans to complete greenhouse gas inventories and obtain third-party verification for all business entities within the Group by 2029.

1.GHG Inventory

SKS set 2021 as the base year, with total emissions of 4,863.29 (tCO2e/ year). An annual energy performance target of 0.5% reduction compared to the previous year was set, in addition to a target of 20% reduction in carbon emissions for the entire group in 2027 compared to the base year. By October 2023, we completed the Scope 1, 2, and 3 GHG emissions inventory and verification for the parent company, with a target to complete the inventory and verification for the entire business entity by 2029. 

2.E Solution for Administrative Management

Since 1999, SKS introduced the Business Process Management (BPM) system, which allows employees to do administrative work on mobile devices even not in the office. Shin Kong Security has implemented paperless administrative operations, transitioning from traditional paper-based approval processes to electronic signatures. Each electronic approval is equated to one A4 paper, and in 2024, approximately 3,359,255 sheets of A4 paper were saved. According to data from the Taiwan Paper Industry Association, an average tree can produce about 8,000 sheets of A4 paper. Therefore, the paperless initiative by Shin Kong Security in 2023 saved the equivalent of approximately 419.91 trees from being cut down.

3.Purchase High-efficiency and Energy-saving Equipment

Since 2020, the Company has progressively replaced air conditioning units in office locations with energyefficient models. In addition, outdated lighting systems have been replaced, with the headquarters building retrofit completed by 2021. The Company has set a target to reduce electricity consumption by approximately 0.3% annually (equivalent to about 15,000 kWh) and plans to complete the full replacement of lighting fixtures across all office sites by 2027. Upon completion, this initiative is expected to reduce electricity usage by approximately 1.5%, or about 75,000 kWh.

4.Promotion of Green Management, Services, and Actions

SKS has implemented a security equipment recycling program for clients. Recovered equipment is rigorously tested 
and refurbished, and items that meet regulatory standards are reused to extend their life cycle and improve equipment efficiency. Over the past 3 years, the average equipment recycling rate has remained at approximately 93%, and the average reuse rate has remained at approximately 46.6%. The Company prioritizes green procurement by selecting environmentally friendly products that are recyclable, low-polluting, and resource-efficient. A sustainable procurement management policy has been established based on supplier dependency and sustainability performance, incorporating carbon emissions and ESG factors as evaluation criteria. Through products, services, and educational assistance and collaboration (including with schools, communities, social networks, and multimedia platforms), SKS raises stakeholder awareness and consensus on climate change and the net-zero transition. Furthermore, the Company works together with stakeholders to create a low-carbon and sustainable ecosystem and achieve the collective goal of mitigating global warming.