Stakeholder Engagement

Stakeholder Engagement

As we progress towards corporate sustainability, TSMC places great importance on the expectations and demands of internal and external stakeholders. As such, TSMC has established a framework for ESG disclosure in compliance with the latest AA 1000 Accountability Principle issued in 2018. The framework is established on the four major principles of Inclusivity, Materiality, Responsiveness, and Impact. Each year, TSMC regularly evaluates stakeholder feedback and ESG trends through diverse communication channels. We also continue to conduct materiality analysis to identify material ESG topics and establish long-term ESG targets, adopt action plans, and track ESG progress and efficacy accordingly. GRI Standards are also adopted by TSMC as the enduring standard for identifying material issues within TSMC. We have integrated ERM (enterprise risk management) to assess the trends and impact of risks posed by material ESG issues, explain to the public how TSMC is mitigating risks, and build a resilient organization capable of thriving under changing global landscapes.

Phase I: Inclusivity Phase II: Materiality Phase III: Responsiveness Phase IV: Impact Define Major Stakehold-ers 1 Identify Sustainability Issues 2 Decide Disclosure Boundaries 6 Review Disclosed Content 7 Assess Level of Interest 3 Analyze Impact on Operations 4 Formulate Long-term Goals 8 Evaluate Impact 9 Map the Materiality Matrix 5 In compliance with the AA 1000 SES (Stakeholder Engagement Standards, SES), TSMC regards the following six stakeholders as the major stakeholders for engagement: employees, shareholders/investors, customers, suppliers/vendors, and government & society (community, academic institutions, media, NGO/NPO). By evaluating global sustainability trends and engaging with internal/external stakeholders, TSMC identified 21 ESG issues relevant to TSMC in 2020. In 2020, materiality analysis was conducted through surveys due to the COVID-19 pandemic. Each organization evaluated influential stakeholders that TSMC frequently engaged with, and issued ESG surveys to said stakeholders. We received 842 replies in 2020, and used the surveys to analyze their level of interest in ESG issues relevant to TSMC. The ESG Steering Committee, led by Chairman Mark Liu, and the ESG Committee Chairperson and Senior Vice President Lora Ho would spearhead efforts to analyze the impacts of each issue on operations (profitability, revenue, customer satisfaction, employee cohesion, risk) and review the sustainability roadmap for long-term development with a total of 150 colleagues that included TSMC's senior vice presidents, vice presidents, senior fab directors, and fab directors. The ESG Committee was able to identify 14 ESG issues as material based on materiality analysis in 2020. TSMC assessed each issues' impact on the boundaries of TSMC's value chain from supply chain and company operations to customers. Pursuant to GRI Standards, we have also identified 23 material topics specific to TSMC in alignment with the ESG issues and collected internal information, data, and management approaches for disclosure in compliance with reporting regulations. Corporate governance, risk management, ethics, regulatory compliance, economic performance, tax policies, and information security are seven issues classified under General Disclosures by the GRI Standards. While they will not be mapped in the materiality matrix, relevant information will be disclosed annually. TSMC has established 2030 targets for each material ESG issue. The ESG Committee will regularly review progress towards annual targets and formulate changes to the following year accordingly. Plans, progress, and changes will be disclosed in the annual CSR Report for external parties.

TSMC Materiality

An Innovation Pioneer An Admired Employer A Responsible Purchase Power to Change Society A Practitioner of Green Power Impact on TSMC Operations Stakeholder Interest Innovation Management Product Quality Customer Service Water Management Energy Management Waste Management Climate Change Air Pollution Control Social Participation Talent development Human Rights Occupational Safety and Health Talent Attraction and Retention Supplier Sustainability Management

Material Issues and TSMC Value Chain

Operational Impact
GRI
Roles Material Issues Operational Impact GRI Standard Specific Topics Upstream TSMC Operations Downstream
Profitability Revenue Customer Satisfaction Employee Cohesion Risk c Procurement Stage Wafer Fabrication Packaging/ Testing Customer Use
An Innovation Pioneer Innovation Management ✓ ✓ ✓ Energy ✓ ✓ ✓
Product Quality ✓ ✓ ✓ Customer Safety and Health ✓ ✓ ✓ ✓
Customer Service ✓ ✓ Customer Privacy ✓
A Responsible Purchaser Supplier Sustainability Management ✓ ✓ ✓ Procurement Practices, Supplier Environmental Assessment, Supplier Social Assessment ✓
A Practitioner of Green Power Energy Management ✓ ✓ Energy ✓ ✓ ✓ ✓
Climate Change ✓ Emissions and Economic Performance ✓ ✓ ✓ ✓
Water Management ✓ Water, Effluents and Waste ✓ ✓ ✓
Air Pollution Control ✓ Emissions ✓ ✓
Waste Management ✓ Effluents and Waste ✓ ✓ ✓
An Admired Employer Talent Attraction and Retention ✓ ✓ Economic Performance, Labor/Management Relations, Diversity and Equal Opportunity, Market Presence ✓ ✓
Talent Development ✓ ✓ Training and Education ✓ ✓
Human Rights ✓ ✓ ✓ Labor / Management Relations, Non-discrimination, Freedom of Association and Collective Bargaining, Forced or Compulsory Labor, Human Rights Assessment ✓ ✓ ✓
Occupational Safety and Health ✓ ✓ Occupational Safety and Health ✓ ✓ ✓
Power to Change Society Social Participation ✓ Economic Performance, Indirect Economic Impacts, Local Communities ✓ ✓

Material Issues & Risk Management

更多來自投資人、客戶、環保團體 對台積公司增加再生能源使用的要 求，可能造成公司成本增加，若無 法滿足此要求，則將影響企業聲譽 減緩作為請參考本報告書「 氣候變 遷與能源管理 」 氣候變遷 氣候災害造成營運衝擊、溫室氣 體排放上升、溫室氣體排放減量 法規及其他要求 供應鏈中斷（包含原物料、機台設 備）將影響公司營運及對客戶的承 諾 減緩作為請參考民國109 年年報「 6.3 風險管理 」及本報告書「 供應商永續 管理 」 供應商永續管理 採購集中、供應商不符台積公司或 法規要求 先進製程在技術難 度、生產成本及供 應鏈難度劇增，若 無法洞察技術的改 變及發展創新技 術，公司競爭優勢 及市佔率將會受到 影響 減緩作為請參考本 報告書「 創新管 理 」 公司需以專利保護研 發創新成果，確保技 術領先地位，捍衛公 司與客戶全球營運自 由。如果沒有完善專 利保護，可能影響公 司技術競爭優勢 減緩作為請參考本 報告書「 創新管理 」 及民國109年年報 「 6.3風險管理 」 晶圓產品品質檢驗隨著產品複 雜度增加備受挑戰，若未檢出 不合格產品，將造成客戶損失 並影響企業聲譽 品質異常的原物料可能造成產 品報廢並影響客戶及公司營運 減緩作為請參考本報告書「 產 品品質 」 創新管理 產品品質 無法洞察技術的 改變及發展創新 技術 專利保護─公司的 研發創新成果未能 以專利適當保護 產品品質與良率受到挑戰 若無法及時招募到質量俱優的人才， 公司業務可能因此受到影響 減緩作為請參考本報告書「 人才吸引 與留任 」 人才吸引與留任 無法及時招募到質量俱優的人才 空汙防制設施若操作不當或故障，導 致空氣汙染物排放超過法規標準，將 使公司遭受主管機關處罰，影響企業 聲譽 減緩作為請參考本報告書「 空氣汙染 防制 」 空氣汙染防制 空氣汙染物排放影響環境 水源供應異常，產能受限，無法達到 客戶需求 廢水排放異常，汙染環境造成外界觀 感不佳 減緩作為請參考本報告書「 水管理 」 水管理 水源供應短缺或中斷、廢水排放影響 環境 電力供應異常，產能受阻，影響企業 聲譽 影響客戶下單信心 減緩作為請參考本報告書「 氣候變遷 與能源管理 」 能源管理 電力供應短缺或中斷 Risk Aspects Risk Type Likelihood and Trend Severity Upwards Sideways Downwards Strategic Operational Hazardous Business/ Operation Impact and Our Approach

Stakeholder Communication

Engagement
  • Intra-organizational engagement and work meetings/daily
  • Communication meetings at all levels/quarterly
  • Labor-management meetings/quarterly
  • Fab Caring Circle, Employee Opinion Box, and Ombudsman System/ as needed
  • Employee survey/annually
  • Ethics training/annually
  • Employee core values survey/biannually
Issues
  • Talent Attraction and Retention
  • Talent Development
  • Company's Long-term Development in Current Geopolitical Situation
  • Ethics and Regulatory Compliance
  • Social Participation
Focus Areas Responses from TSMC
  • Company's long-term development under tense geopolitical situations and the global pandemic
  • Helped employees understand how TSMC can grow given the current global landscape and competitive market through internal channels
  • Strengthen industry-academia collaborations around the world to discover and cultivate more young talent
  • Continued to improve the quality and quantity of semiconductor courses and expand industry-academia collaboration to information engineering fields
  • Strengthened dual career ladder system for both management and technical expertise to allow employees to develop to their full potential in the right places according to their personal characteristics and skills
  • Expand interaction and cooperation across organizations to broaden employee vision and foster well-rounded talents
  • Strengthened employee training and offered more opportunities for internal transfers so that our employees can grow with the Company
  • Host a variety of activities for employees to help achieve a better work-life balance
  • Continued to host various art, family, and sports events as well as clubs to facilitate a better work-life balance among employees
  • Leverage big data or AI tools to upgrade office automation to improve productivity and reduce work hours
  • Introduced the latest Industry 4.0 and Industrial AI technology to build a knowledge base for engineering analysis and make knowledge smarter
  • Provide the latest regulations for related employees
  • Updated ethics and regulatory compliance training materials. Employee training completion rate was 99.72% with 50,482 employees having received training; management training completion rate was 100% with 5,425 managers having received trainings.
  • Offer more opportunities for employees to engage with society and help the disadvantaged
  • Continued to invest in society through the TSMC Education and Culture Foundation and the TSMC Charity Foundation; continued to encourage employees to volunteer

It's been years since I worked at TSMC, and I'm very happy that I was dispatched by my school to TSMC for the industry-academia partnership. I am working with TSMC and outstanding professors to advance exploratory research, narrow the gap between the industry and schools, and cultivate outstanding semiconductor professionals through the semiconductor courses.

- Marvin M.F. Chang, Director of Corporate Research, TSMC
Engagement
  • General shareholders' meeting/annually
  • Investor conferences/ quarterly
  • Face-to-face meetings, video conference calls and telephone conference calls/ as needed
  • Annual report, CSR report, and annual report on Form 20-F with the US Securities and Exchange Commission/ annually
Issues
  • Financial Performance
  • Innovation Management
  • Risk Management
  • Climate Change
Focus Areas Responses from TSMC
  • Impact from global politics and economy on the Company's operations and TSMC's response
  • Changes in the nature of competition
  • In 2020, through quarterly investor conferences and 262 investor meetings, TSMC communicated with its investors about market trends, growth strategies, and profitability, and expressed its opinions on changes in the business environment
  • Future growth potential and profitability
  • With the support of strong operating performance and future growth potential, TSMC has been providing positive return to investors for 12 consecutive years
  • Dividend policy
  • TSMC distributed cash dividends on a quarterly basis. Shareholders of TSMC common shares received a total of NT$10 cash dividend per share in 2020
  • Measures in response to climate change and energy policy
  • Disclosed ESG information and data according to semiconductor industry indicators issued by SASB (Sustainability Accounting Standards Board). Held Climate Risk & Opportunities Workshops to identify climate risks and opportunities according to the TCFD framework (Task Force on Climate-related Financial Disclosures); a total of 5 climate risks (inc. zero emission trends) and 1 opportunity (improve company reputation) were added in 2020

TSMC's unrelenting pursuit of technology leadership, commitment to long-term shareholder returns and professional investor communication reflect its impressive values, business philosophy and culture. We look forward to seeing the Company's unique business model empower many wonderful technological innovations in the decades ahead, while creating win-win partnerships with its stakeholders.

- Stefan Magnusson & Stanley Lu, Orbis Investments
Engagement
  • Business and technology assessment/quarterly
  • Customer satisfaction survey/annually
  • Customer meetings/ as needed
Issues
  • Innovation Management
  • Product Quality
  • Customer Service
  • Information Security
Focus Areas Responses from TSMC
  • Technology development schedules and plans
  • TSMC was able to offer 833 process technologies and 77 packaging technologies in line with its technological roadmap
  • Capacity planning and production information
  • New TSMC-Online™ technical file navigation system assisted customer to access up-to-date information easily
  • In response to the COVID-19 pandemic, TSMC offered remote auditing services to support customer's product launching on schedule and win customer trust
  • Product quality
  • By using a dynamic hotspot failure identification approach at the system level, we were able to increase the success rate of failure analysis, accelerate the development of new processes, and speed up the trouble-shooting stage during customer designs. This helped to reduce process flaws and make products more reliable
  • Information protection
  • TSMC created information protection protocols, built automated information security management system, and obtained ISO 27001 certification to be compliant with international security standards. Fab 12B/14A/15B have received ISO 15408 certifications, guaranteeing the highest level of safe production and information protection for our customers. All fabs with ISO 15408 certifications are ready to receive high security level orders and ensure optimal safety management in the production process and along the supply chain

With TSMC's expertise in advanced wafer fabrication technology and support in quality and reliability assurance, MediaTek is able to offer leading innovative designs that fulfill the strict requirements for high-end chipset solutions, recognized by tier-one clients around the world.

- HW Kao, Corporate Vice President, MediaTek

TSMC's customer service teams have a clear understanding of our manufacturing needs and fights hard to support our interests. They always provide prompt responses and are very professional in handling issues. It is a pleasure to work with them. We hold them as the benchmark for service excellence. Please keep up good work and momentum on the support.

- Dilip Vijay, VP and GM of APD/CSG/DCSG, Broadcom
Engagement
  • Supplier Management Forum, Responsible Supply Chain Forum & Supply Chain ESH Training Forum/ annually
  • Supply Online 360 Global Responsible Supply Chain Platform/as needed
  • On-site support & audit/as needed
  • Supplier meetings/as needed
  • Supplier Information Security Association meeting/monthly
Issues
  • Sustainable Supply Chain Management
  • Ethics and Regulatory Compliance
  • Product Quality
  • Workplace Safety and Health
  • Information Security
Focus Areas Responses from TSMC
  • Carry out sustainable actions and continue to improve
  • Built Supply Online 360, a global supply chain management platform; established online TSMC Supplier Sustainability Academy with five lessons on Supplier Code of Conduct now available online
  • TSMC's ethics and regulatory compliance and supplier code of conduct
  • All tier 1 suppliers signed the Supplier Code of Conduct and complied with business ethics (completion rate: 100%).
  • Raw material quality
  • 24 critical suppliers completed third-party supplier audits on sustainability risk by RBA-certified institutions; 12 suppliers received consultation on process advancement and quality improvement.
  • Establish effective ESH management mechanisms
  • Hosted Responsible Supply Chain Forum and related training courses for suppliers to share experience; required suppliers to apply learnings to factory operations
  • Information security compliance, assessment results, and sharing experiences
  • Held nine Supplier Information Security Association meetings, completed supplier information security assessments for nine suppliers, and carried out five supplier information security programs to raise awareness for information security across the supply chain

We should shoulder the responsibility for environmental protection and strive to develop innovative green technologies by advancing processes, reducing industrial waste, and preventing pollution. We look forward to working with TSMC in the future and fulfilling our social responsibilities.

- Alvin Hsieh, Sr. Regional Director of Entegris Asia LLC, Taiwan Branch

Sustainability should be the cornerstone of corporate growth. We are happy to be partnering with TSMC towards sustainable operations and a positive cycle.

- Chou-Sin Chen, President of Chang Chun Petrochemical Co., Ltd., a Subsidiary Company of Chang Chun Group
Engagement
  • Official correspondences and visits/as needed
  • Interviews to provide industry experience and advice/as needed
  • Conferences (e.g., briefings, public hearings, symposia, seminars, meetups)/as needed
  • Communication platforms of the industry associations/ monthly
Issues
  • GHG Reduction/ Energy Management
  • Water Management
  • Environmental Regulations
  • Occupational Safety and Health
  • Innovation Management
Focus Areas Responses from TSMC
  • Build factories that use diverse energy sources and increase use of renewable energies
  • Established 100% renewable energy target for TSMC by 2050 and joined the RE100
  • Build factories that use diverse water sources and increase use of reclaimed water
  • Commenced construction of the TSMC Water Reclamation Plant in Southern Taiwan Science Park and made plans to introduce domestic reclaimed water as a water source; the reclaimed water plant is slated to be in commission in 2021
  • Comply with environmental regulations
  • Represented the Taiwan Semiconductor Industry Association in discussions with the EPA on reasonable and viable air pollutant emission standards for the semiconductor industry
  • Improve ESH management across the supply chain
  • Held seven ESH Experience-sharing Workshops and asked suppliers to set long-term sustainability goals for energy conservation, carbon reduction, fire prevention, occupational safety and health, and emergency response
  • Application for U.S. investments
  • In December 2020, TSMC incorporated the TSMC Arizona Corporation and has made plans to build a 12-inch wafer fab in Phoenix, Arizona; the fab will employ 5nm processes and is slated to be in commission in 2024 to fulfill strong North American market demands for advanced technology
  • Development trends in advanced semiconductor process technologies
  • Visited the U.S. Patent and Trademark Office, upon invitation, to share development trends in semiconductor technologies and TSMC's technologies

TSMC is the first semiconductor company in the world to join RE100, showing exemplary foresight, pioneering 100% renewable energy practices, and spearheading change among other corporations.

- Helen Clarkson, CEO of The Climate Group