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 Universal Standards 2021 is also adopted by TSMC as the enduring standard for identifying material issues within TSMC.
On climate-related issues, TSMC is using the Task Force on Climate-related Financial Disclosures (TCFD) framework proposed by the Financial Stability Board (FSB) to identify climate risks and opportunities. Based on the results, measures and goal management were established to effectively track response progress and outcomes, thereby lowering the financial impact of climate risks on business operations. In September 2021, TSMC published its TCFD Report, becoming a semiconductor industry frontrunner in climate disclosure. The Report is updated every year.
In addition, TSMC also discloses ESG information and data according to semiconductor industry indicators issued by Sustainability Accounting Standards Board (SASB).
As a global leader in green manufacturing, TSMC has been actively discussing and evaluating the feasibility of Net Zero Emissions. The Company is actively finding solutions for the reduction and abatement of scope 1 GHG, electricity saving, renewable energy/carbon credit procurement, carbon removal technology and so on. TSMC is also expanding its focus to supply chain’s carbon reduction action.
In 2021, TSMC updated its Climate Change Statement and declared the long-term goal of Net Zero Emissions by 2050, while setting the short-term goal of Zero Growth in Emissions by 2025. By actively implementing emission reduction measures, the Company works to make its carbon emissions return to the 2020 level by 2030.
The Science Based Targets Initiative (SBTi) is jointly established by the Carbon Disclosure Project, We Mean Business Coalition, UN Global Compact and World Wildlife Fund. The initiative provides companies with a clearly-defined path to reduce emissions in line with the Paris Agreement goals. TSMC pledged in 2017 to set a science-based target. However, with a drastic increase in global demand in recent years, TSMC's capacity grew by more than 10% CAGR, which led to a greater carbon footprint. On the other hand, the renewable energy supply for the Company's main manufacturing sites remained immature and insufficient, posing a significant challenge for the Company to meet SBT requirements in the short-term. Nonetheless, the Company has taken operational growth and development trends in carbon reduction into account and set zero growth in emissions as its main target in the short-term. The Company will continue to assess its mid- and long-term targets to fulfill SBT requirements.
TSMC, voluntarily answering the calls for net zero emissions, selected the SSP1-1.9 carbon reduction scenario (1.5°C goal scenario) set forth by the Sixth Assessment Report of IPCC in 2021 to assess potential carbon emission increase as a result of future operation expansion and new fabs. The scenario is also applied to evaluations of various existing carbon reduction actions to analyze the financial impact from low-carbon transition risks. For the 2050 zero emission target, TSMC is formulating related mitigation measures and continuing to strengthen various green, innovative actions. In addition to these actions, TSMC has also voluntarily joined the RE100 and is now actively facilitating developments in renewable energies in the region and seeking potential opportunities to reduce carbon emissions.
In 2022, TSMC purchased 2,190 GWh of renewable energy, Renewable Energy Certificates (RECs) and carbon credits, representing 10.4% of TSMC's power consumption. TSMC overseas sites used 100% renewable energy.
The renewable energy development in Taiwan is in the early stage. How to construct and provide sufficient renewable energy is the challenge at this stage. To address the challenge, TSMC is working with the Ministry of Economic Affairs, Bureau of Energy, Bureau of Standards, Metrology, and Inspection, Taiwan Power Company and the Allied Association for Science Park Industries to eliminate the gap between needs and supply of renewable energy as well as scheme out details for future wheeling transaction.
TSMC added another renewable energy source from small hydroelectric stations, continued to increase power supply from onshore wind farms, increased renewable energy usage by 47% to 970 GWh, and maintained 100% use of renewable energy in global offices. TSMC also signed a power purchase agreement (PPA) for 1.3 GW of renewable energy with the option to increase around 3,900 GWh of green energy each year. By the end of 2022, the Company has signed on 2.9 GW of renewable energy through PPAs, which can reduce around 4.6 million metric tons of carbon emissions each year.
TSMC is striving to strike a balance between green energy sources and traditional ones. By purchasing renewable energy and supporting government policies, TSMC seeks to drive the development of renewable energy sectors and related industries and make good use of green energy without affecting the reliability of its own power supply system. Our measures include:
Use Renewable Energy: TSMC is committed to 100% renewable energy in global operations and zero direct CO2 emissions from electricity consumption by 2050. TSMC hopes to drive the use of renewable energy in the global semiconductor industry through its own sustainable actions.
Increase Energy Efficiency: In 2022, TSMC continued to expand its energy conservation efforts. In addition to exploring energy saving opportunities in existing facilities, TSMC collaborated with its equipment suppliers to develop new energy saving programs. Over 195 energy saving programs have been verified and introduced into new facilities. Additionally, TSMC founded Engineering Center for Green Manufacturing in 2022 to comprehensively assess and manage net zero emission strategies, energy conservation modules and facility equipment, and green technology development. The energy-saving measures are integrated across facilities for roll-out as the standard designs for new facilities.
Expand Energy-saving Measures: In 2022, TSMC carried out 684 energy-saving measures across 8 different categories and was able to conserve 700 GWh in energy consumption, equivalent to nearly 360,000 metric tons of carbon emissions.
TSMC is leading the world in high-performance, energy-saving semiconductor technologies that enable customers to deliver energy-efficient products. According to analysis from the Industry, Science, and Technology International Strategy Center of the Industrial Technology Research Institute (ITRI), each 1 kWh that TSMC devoted to production helped the world conserve 4 kWh of energy.
TSMC identified EUV as one of the keys to driving the advancement of semiconductor process technologies. In the past 10 years, TSMC has worked closely with suppliers and performed big data analysis to pinpoint the major factors that cause EUV’s high energy consumption. By so doing, the Company was able to optimize EUV energy conversion efficiency and reduce EUV light source degradation by more than 10 times. By working with suppliers, TSMC will continue to improve the energy efficiency of EUV tools and strive towards the goal of Net Zero Emissions by 2050.
Please refer to below graph for TSMC’s water consumption rate at the three science parks in Taiwan and the water recycling rates:
The four major water conservation measures at TSMC are to "Reduce Facility System Water Consumption, Increase Wastewater Recycling of Facilities, Improve Water Production Rate of the System, and Decrease Water Discharge Loss from the System." These four measures are integrated with three water management strategies of "Managing water resource risks, Developing diverse water sources, and Developing preventive measures." TSMC strives to uncover more opportunities to conserve water and has developed 38 distribution systems based on the composition and concentration of wastewater from fabrication for wastewater classification and resource management. Equipment is then used to decompose pollutants and increase water recycling. In regard to long-term water management strategies, TSMC adopts the AWS (Alliance for Water Stewardship) standards to ensure sustainable actions towards water recycling.
In addition to city water, TSMC has developed new water sources. Take the Company’s production base in Taiwan for example:
TSMC follows the KPIs list as below for water management:
TSMC keeps constant and close communications with local and overseas authorities on water-related issues to ensure TSMC is able to acquire sufficient alternative water supply in a drought situation and transport the water to TSMC fabs. TSMC also works with the government on water reclamation plants.
In 2022, TSMC built Phases 6, 7 and 8 for Fab 18. While not yet in operation (volume production level), the new facilities still consumed water at a fixed rate, which made the average unit water consumption a challenging target for the Company. Excluding the effect from new facilities, the unit water consumption reduction rate was 15.6% in 2022. Going forward, facilities below a certain economic scale will be excluded from the calculation of unit water consumption.
Ever since the beginning of the project, TSMC has been working closely with the City of Phoenix to ensure sufficient water supply for the new fab. For decades, Phoenix has been proactively building the necessary infrastructure to provide a sustainable water supply, while it also boasts a combination of a diverse and robust water portfolio including five water sources from the Colorado River, Verde River, Salt River, groundwater and reclaimed water. Phoenix has been designated by the State of Arizona as having a 100-year assured water supply.
TSMC is committed to sustainable water resource management. The new fab in Arizona will follow the same principle and copy smart from TSMC fabs in Taiwan to optimize water use efficiency and fulfill the goal of environmental sustainability.
TSMC has invested considerable effort in building a comprehensive wastewater treatment system and a water reclamation system to reduce water consumption, decrease wastewater discharge and increase overall water efficiency. Wastewater treatment includes acidic and caustic treatment, HF treatment and NH3-N treatment, among others. To reduce total water usage, TSMC's effluent water is graded by content and purity. The cleanest is reused in the manufacturing process; the second grade taken from the recycling treatment is used for air scrubbing in the cleanroom, as a source of water for the cooling towers, among others. After the recycling treatment, the concentrated wastewater that cannot be recycled further is discharged to treatment facilities for final wastewater treatment. Due to TSMC’s multiple layers of reclamation and recycling, the wastewater discharged to the treatment facilities is above the standard required by the Arizona State Government.
Also, TSMC also plans to build an industrial recycled water plant in Arizona Fab to gradually achieve Near Zero Liquid Discharge, advancing toward the goal of circular economy. Through the water reclamation system, TSMC strives to optimize water efficiency with the goal of all tap water used daily being completely reclaimed and each drop of water used an average of 3.5 times. Approximately 65% of the water used in the Arizona fab will come from TSMC’s in-house water reclamation system, helping to reduce local water consumption.
To ensure sustainable ecosystems and maintain biodiversity, TSMC regularly assesses changes in ecosystems surrounding TSMC fabs, cultivates indigenous species, created firefly habitats within TSMC operation sites. In addition to implementing eco-friendly practices, the Company also declared its Biodiversity Statement in 2023. TSMC's Biodiversity Statement commits to working with stakeholders to protect and deepen the integrity of biodiversity and working with supply chain partners to raise awareness and comply with related regulations within business locations, fulfilling its mission of strengthening environmental protection. TSMC also commits to achieve net zero deforestation, no net loss of nature and biodiversity, and net positive impact by 2050.
Board diversity is one of the key considerations for TSMC in terms of evaluating director candidates. TSMC Guidelines for Nomination of Directors requires the Board to evaluate candidates based on, among other considerations, their professional knowledge, experience, diversity of backgrounds (including gender, age, and culture), business judgement, commitment to uphold TSMC's core values, and reputation for ethical conduct and leadership.
TSMC's Board is comprised of a diverse group of professionals from different backgrounds in industry, academia, law, etc. These professionals include citizens from Taiwan, Europe and the U.S. with world-class business operating experience, one of whom is female.
The total compensation paid to the executive officers is decided based on their job responsibility, contribution, and company performance. Each quarter, the Compensation Committee reviews executive’s performance and company’s business results so as to determine the compensation amount for individuals, and then submits to the Board of Directors for approval.
Different executive officers are responsible for different categories of sustainability performance, and the sustainability performance will be part of their overall performance review.
In April 2021, TSMC’s Board approved the issuance of employee restricted stock awards (RSAs) for the year 2021, to attract and retain corporate executives and to link their compensation with shareholders’ interests and ESG achievements.
Please refer to the February 15, 2022 press release of Board Resolution and Meeting Agenda of June 8, 2022 Annual Shareholders’ Meeting for employee restricted stock awards (RSAs).
Talent is definitely critical to the global semiconductor industry’s success. Therefore, TSMC’s global footprint expansion not only enables us to better support our customers, but it also gives us more opportunities to attract global talents. To attract more talent and create a sustainable talent pipeline for the semiconductor industry, TSMC continues to invest in semiconductor related research through close collaboration with global top universities.
In Taiwan, TSMC has been working closely with the local universities through joint research projects, co-teaching courses and scholarship programs to help students gain knowledge and obtain hands-on training experiences. TSMC also has close partnerships with renowned universities globally for research collaboration, which cultivate more talent for the industry’s continued innovation.
TSMC issued its statement of Diversity and Inclusion in 2019:
TSMC believes strongly in the value of a diverse workforce. Developing future semiconductor talent in an inclusive fashion allows the industry to unlock the full potential of the human resources available to the world. TSMC hires and promotes without regard to gender, religion, race, nationality, or political affiliation because we respect differences, and believe that equal employment opportunity strengthens our competitiveness.
In addition, TSMC believes the workforce should reflect society. Diversity among our management and employees gives us an advantage by enabling the Company to better understand all segments of society and the marketplace, and better address their needs and demands.
With TSMC’s Diversity and Inclusion statement, TSMC has been conducting multiple initiatives. For example, the Company conducted the global employee engagement survey so as to obtain employees’ feedback and look for enhancement opportunity. The Company also set goals for the percentage of female managers, percentage of female fresh graduate hires in technical roles, etc, and reviewed them regularly. In 2022, the R&D Organization Diversity and Inclusion Committee was formed. Additionally, TSMC officially established the employee resource group Women@tsmc in 2022 to provide female employees with a platform to support each other. In the future, TSMC will design projects according to different stages of employees' careers. These include experience camps for people with disabilities and job content design, forming diverse employee resource groups, hosting training courses to raise awareness of diversity and inclusion, implementing flexible work hours, as well as support programs for expatriates and their families in a bid to create a diverse and inclusive experience for employees.
TSMC adopts the RBA Code of Conduct and the UNGPs approved by the United Nations Human Rights Council to manage the human rights issues of its operations, suppliers, and business partners, as well as formulate the Human Rights Policy. Human Rights Policy is TSMC’s overarching principle of human rights governance. The internal governance structure is as follows:
In 2022, TSMC launched the survey of salient human rights issues. A total of 73 managers and colleagues participated in the identification of human rights issues; the members included ESG committee members, the heads of sustainability reports of various organizations, and ESG representatives. The importance and impact of various human rights indicators on TSMC and its value chain were measured from a cross organizational perspective. Based on the investigation results, 11 salient human rights issues were identified along with the targets that are impacted by the issues. In 2023, TSMC will use these results to organize a cross unit human rights taskforce, which will follow the UNGPs framework to conduct due diligence, perform risk investigation and assessment, implement mitigation and remedial measures, launch human rights education and training, as well as disclose human rights management progress and goals to stakeholders.
TSMC supports sourcing conflict-free raw materials as a practice of humanitarianism and compliance with social ethics. Therefore, TSMC has adopted a series of compliance measures based on industry best practices, including the due diligence framework by the Organization for Economic Cooperation and Development (OECD), the Model Supply Chain Policy for a Responsible Global Supply Chain of Minerals from Conflict-affected and High-risk Areas. TSMC is also a firm supporter of the Responsible Business Alliance (RBA) and Global e-Sustainability Initiative (GeSI) , requiring suppliers to source conflict-free raw materials according to the Responsible Minerals Assurance Process (RMAP).
TSMC requires suppliers to comply with our responsible minerals sourcing policy and sign a statement of conflict-free minerals for products containing tantalum, tin, gold, and tungsten.
Since 2018, TSMC has disclosed to customers the source smelters for cobalt used in TSMC products. In 2020, TSMC completed 100% of due diligence on conflict-free minerals sourcing for the supply chain. Since 2021, TSMC annually audited at least three suppliers of tantalum, tin, gold, and tungsten annually, ensuring that these suppliers formulate and implement Conflict free Minerals Management Processes and conduct due diligence on upstream suppliers. For more details about TSMC’s Due Diligence Framework and risk management, please refer to Conflict Minerals Report from TSMC website.
As a member of the Responsible Business Alliance (RBA), TSMC sets its Supplier Code of Conduct according to RBA's Code of Conduct. It requires suppliers to comply with the Code of Conduct while encouraging them to ask their upstream suppliers, contractors, and service providers to approve and adopt the same code in practices and management. New suppliers must sign the TSMC Supplier Code of Conduct to be eligible for partnerships. The new suppliers must undergo regular risk assessments and audits in future partnerships and continue to improve according to audit results.
In 2020, TSMC further established the TSMC Supplier Sustainability Standard, which specifies five major categories for implementation, focuses on sustainable conduct, and helps suppliers to take tangible actions for sustainability.
TSMC asks suppliers to complete the Self-Assessment Questionnaire every year to check its compliance level of TSMC Supplier Code of Conduct. TSMC also uses third-party institutions to audit suppliers.
TSMC uses RBA-certified third-party institutions to audit whether our suppliers comply with TSMC Supplier Code of Conduct to improve labor rights, safety and health, environmental protection, business ethics, and the efficiency of their management systems, and reduce disruption risk for business operations.