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.
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.
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 to set a science-based target in 2017; however, due to lack of guidance on the semiconductor manufacturing sector, TSMC was unable to set our target within the 24-month period recommended by SBTi. TSMC will continue to monitor the latest development of guidance from SBTi.
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 2020, TSMC purchased 1,230 GWh of renewable energy, Renewable Energy Certificates (REC) and carbon credits, achieving 7.6% 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.
By communicating closely with the government and with the support from renewable energy businesses, Taiwan was able to reach its first renewable energy wheeling milestone in May 2020. The Solar Plant in Chiayi County generated and transmitted renewable energy to TSMC, and a number of onshore wind farms transmitted energy to TSMC fabs in Taiwan in the fourth quarter of 2020, a sign that Taiwan's renewable energy sector is growing stronger. As of the end of 2020, TSMC has signed power purchase agreements to purchase 1.3 GW of renewable energy, which will reduce 2.2 million metric tons of carbon emissions each year, helping achieve 100% renewable energy used in global offices, and making contribution to climate change mitigation.
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 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: TSMC launched the Green Manufacturing Engineering Program in 2020 to better integrate the energy conservation planning and implementation of all manufacturing tools across TSMC fabs.
Expand Energy-saving Measures: The New Generation Equipment Energy Conservation Program, launched in 2018, applied 139 energy-saving measures to 68 different types of 5nm and 3nm manufacturing tools, helping TSMC save 200 GWh of energy consumption in 2020.
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 the three water management processes of "Water Supply Diversity, Water Efficiency Management, and Wastewater Resource Recycling". 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 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.
Although the drought that Taiwan experienced in first half of 2021 was the worst in the past 50 years, TSMC, backed by its comprehensive water management, was still able to manage water usage without any operational disruption.
Due to test production in new fabs, unit water consumption did not meet our target for 2020. TSMC continues to commit to the development of water reclamation technologies to improve water efficiency, and the TSMC Tainan Science Park Reclaimed Water Plant is expected to be operational by the first half of 2022.
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.
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.
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 to cultivate a more diverse and inclusive workplace. 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, and hiring of employees with disabilities” and review them regularly. In addition, TSMC also conducted an inclusive leadership workshop and established an internal Diversity and Inclusion committee. Fit-for-purpose flexibilities and benefits are provided to employees to better accommodate and support their needs at different life stages.
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.
By 2021, TSMC plans to audit at least three suppliers that use tantalum, tin, gold, and tungsten to strengthen disclosures from suppliers.
For more details about TSMC’s Due Diligence Framework and risk management, please refer to Conflict Minerals Report from TSMC website or the website of the US Securities and Exchange Commission.
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.