Stakeholder Engagement

Stakeholder Engagement

Each year, TSMC complies with GRI Standards for Stakeholder Inclusiveness, Sustainability Context, Materiality, and Completeness. Through three phases that include identification, analysis, and confirmation, we assess sustainability issues and carry out materiality analysis to align TSMC's strategies for sustainability management with our long-term goals. The GRI Standards also serve as a guideline for compiling our CSR report, allowing us to examine TSMC's current progress in sustainability, promote improvement within organizations, and create shared value for society and TSMC. On May 11, 2020, the Chairperson of the ESG Committee reported to the Board of Directors on the communications the Company initiated with internal and external stakeholders. The report included communication methods and frequency to various stakeholders, stakeholder concerns and issues, and TSMC's responses.

TSMC Materiality

Material Issues and TSMC Value Chain

Operational Impact
Focuses Material Issues Operational Impact GRI Standard Specific Topics Upstream Company Operations Downstream
Profitability Revenue Customer Satisfaction Employee Engagement Risk c Purchase Stage Wafer Fabrication Packaging/ Testing Customer Use
Ethical Management Ethics Code Anti-corruption & Anti-competitive Behavior
Regulatory compliance Environmental Compliance & Socioeconomic Compliance
Innovation and Service Innovation Management Energy
Sustainable Product Customer Health and Safety
Customer Service Customer Privacy
Responsible Supply Chain Supplier Sustainability Management Procurement Practices, Supplier Environmental Assessment & Supplier Social Assessment
Green Manufacturing Energy Management Energy
Climate Change Emissions & Economic Performance
Water Management Water, Effluents and Waste
Air Pollution Control Emissions
Waste Management Effluents and Waste
Inclusive Workplace Talent Attraction and Retention Economic Performance, Labor/Management Relations, Diversity and Equal Opportunity, and Market Presence
Talent Development Training and Education
Human Rights Labor / Management Relations, Non-discrimination, Freedom of Association and Collective Bargaining, Forced or Compulsory Labor, and Human Rights Assessment
Occupational Safety and Health Occupational Health and Safety
Common Good Social Participation Economic Performance, Indirect Economic Impacts, and Local Communities

Material Issues & Risk Management

Risk Consideration
Risk Mitigation
Material Issues Risk Consideration Risk Type Risk Mitigation Our Approach
Strategic Operational Hazardous
Code of Ethics and Business Conduct Employee violations of the TSMC Ethics Code Reinforce Both Internally and Externally: The management team of TSMC takes ethics and regulatory compliance seriously. It is reflected not only internally in the formulation of compliance policies and procedures, providing training and promotion activities, and periodic assessments and declarations, but also externally through the participation of third parties. Furthermore, the culture of ethics and regulatory compliance is cultivated through effective reporting channels and whistleblower protection Please refer to "Ethics and Regulatory Compliance" in this Report
Regulatory Compliance Regulatory non-compliance by the company Regulatory Compliance:Ensure the Company's regulatory compliance through a series of measures to track and evaluate legislation, set and implement plans for regulatory compliance, conduct compliance training and maintain open reporting channels Please refer to "Ethics and Regulatory Compliance" in this Report

Please refer to 2019 TSMC Annual Report: 6.3 Risk Management
Innovation Management Inability to foresee changes in technologies and develop innovative technologies Technology Leadership:Continuous investment and efforts on leading-edge technology development to maintain TSMC's technology leadership in the semiconductor industry Please refer to "Innovation Management" in this Report
Inadequate intellectual property protection

Patent Protection: TSMC continuously updates the Company's patent portfolio to fully protect its R&D achievement through expanding its portfolio

Trade Secret Protection: TSMC strengthens the Company's operations and intellectual property innovation through the registration and management of trade secrets, which involves recording and integrating applications for trade secrets that are competitive advantages for the Company

Please refer to "Innovation Management" in this Report

Please refer to 2019 TSMC Annual Report: 6.3 Risk Management
Product Quality Challenges to with product quality and yield Quality Capability Improvement: Leverage machine learning to construct an outgoing visual defect inspection and classification system for 12-inch wafers to increase employee productivity

Raw Material Management: Stricter control of purchased raw materials, build comprehensive testing capabilities for incoming shipments, strengthen trial tests before the use of raw materials, and reinforce online IC chip inspections
Please refer to "Product Quality" in this Report
Customer Service Losing customers Precise Response: Provide excellent customer service through close collaboration with customers and customer meetings and surveys on a regular basis to understand and respond to their requirements and feedback

Virtual Fab: Provide comprehensive information in a timely manner to ensure the success of customer's final products; strengthen processes and systems to hold the highest standards to protect customer product information
Please refer to "Customer Service" in this Report
Supplier Sustainability Management Supplier concentration and supplier non-compliance with TSMC or legal requirements Improve Supply Chain Sustainability: Carry out the four major management approaches of Code Compliance, Risk Assessment, Audit Participation, and Consistent Improvement. Following the TSMC Business Continuity Management Policy, we will reinforce supply chain resilience and continue to disperse production sites as well as assess new suppliers to achieve a diverse sourcing strategy Please refer to 2019 TSMC Annual Report: 6.3 Risk Management

Please refer to "Supplier Sustainability Management" in this Report
Energy Management Energy shortage or power outage Increase Energy Efficiency: Plan for new energy-saving measures each year and actively implement energy-saving measures, increasing the efficiency of power consumption Please refer to "Climate Change and Energy Management" in this Report
Climate Change Operational impact and rising GHG emissions brought on by climate change Drive Low-carbon Manufacturing: Continue to use best available technology to reduce emissions of greenhouse gases (GHG), becoming an industry leader in low-carbon manufacturing

Use Renewable Energy: Continue to purchase renewable energy while establishing a solar-energy power system, increasing the use of renewable energy

Strengthen Climate Resilience: Establish climate change countermeasures and preemptive precautions, lowering the risks of climate change
Please refer to "Climate Change and Energy Management" in this Report
Water Management Water scarcity or shortage and the environmental impact of wastewater Risk Management of Water Resources:Enforce climate change mitigation policies, implement water conservation and water shortage adaptation measures

Develop Diverse Water Sources: Integrate internal and external company resources to develop regenerated water technology; implement water conservation and the use of regenerated water in the manufacturing process

Develop Preventive Measures: Improve the efficiency of water pollution prevention and removal of water pollutants
Please refer to "Water Management" in this Report
Waste Management Environmental impact of waste or waste management vendors' non-compliance with TSMC or legal regulations Source Reduction: Promote waste reduction by waste source separation and demand low consumption chemical equipment from our suppliers

Circular Economy: Collaborate with business partners to develop new waste recycling technology in order to increase the amount of waste recycled and reused

Audit and Guidance: Conduct joint evaluation and supervision based on standards of waste management firms in the high-tech Industry
Please refer to "Waste Management" in this Report
Air Pollution Control Environmental impact of air pollutants Use Best Available Technology:Adapt best available technology to deal with pollution caused by operations and mitigate environmental impact

Strengthen Monitoring of Prevention Facilities: Leverage backup systems and dual-track management, along with pollutant monitors, to ensure that equipment functions as intended and prevent abnormal occurrences
Please refer to "Air Pollution Control" in this Report
Talent Attraction and Retention Unable to attract talent Hire Employees with Shared Visions & Values: Establish a standard for talent selection; build diverse recruiting channels; promote the internship program and the Overseas Recruitment Project; and work with top universities around the world to facilitate momentum for long-term growth Please refer to "Talent Attraction and Retention" in this Report
Talent Development Talent cultivation and training programs are unable to support innovative technologies and operations of new fabs in TSMC Advocate for Self-learning: Offer diverse learning resources and channels to encourage self-learning among employees and improve their technical capabilities in order to achieve of technology development or volume production tasks Please refer to "Talent Development" in this Report
Human Rights Allegations of human rights violations Human Rights Due Diligence: Continue to strengthen our commitment to human rights and risk mitigation according to the TSMC Human Rights Policy and Responsible Business Alliance Code of Conduct

Sustainability Risk Management: All suppliers are required to comply with the Code of Ethics and Business Conduct, and to follow regulations on human rights and conflict-free minerals. TSMC continues to conduct sustainability risk assessments, and encourages major critical suppliers to join the Responsible Business Alliance (RBA)
Please refer to "Human Rights" in this Report

Please refer to "Supplier Sustainability Management" in this Report
Occupational Safety and Health Occupational accidents, occupational diseases, earthquakes, fires, chemical hazards, emerging infectious diseases (e.g. COVID-19) Advocate Safety Culture: Deeply instill a people oriented safety culture, manage safety risks and establish an intrinsically safe working environment

Comprehensive Health Management: : Implement the prevention of occupational diseases and promote a comprehensive health management

Internal-External Alliance: Collaborate with external parties to establish a safer working environment in our supply chain

Reinforce Responses to Compound Disasters: Regularly carry out drills for compound disasters, e.g. fire drill for earthquake-induced fires, improve the aseismic capabilities of tools and equipment, enhance production recovery capability and new fab planning

Prevention of Infectious Diseases: Establish a guideline for the response of notifiable diseases; convene a committee for disease prevention when necessary; identify, implement, and monitor the pandemic to adopt appropriate measures
Please refer to 2019 TSMC Annual Report: 6.3 Risk Management

Please refer to "Occupational Safety and Health" in this Report

Stakeholder Communication