KINIK upholds the philosophy that environmental protection must be taken into account in business operations, we continue to implement environmental-friendly management strategies and measures. Driven by international sustainability trends and the national 2050 net-zero path, we have gradually achieved our carbon reduction goals through the implementation of organizational GHG inventory, product carbon footprint inventory, and the introduction of circular economy projects. In addition, KINIK attaches great importance to the risks and opportunities associated with climate change, and has also incorporated climate action into the company's risk management and operational strategies, and actively develops response strategies and contingency measures; we drive several management and reduction plans addressing the environmental-related topics on water resource, air pollution, wastes and more, and march towards the vision of sustainable operation.

Climate Action

KINIK is committed to promoting the concept of environmental sustainability and diligent actions in order to uphold the spirit of "Good to You, Good to Me, and Good to All". In line with the 2050 net-zero path proposed by the government, the Company has established a baseline by executing an organizational GHG and product carbon footprint inventory as the operational guideline for future carbon reduction planning. In addition, in the face of emerging risks and climate change issues, we have also included them into the company's management and supervision mechanism, and actively developed response strategies and contingency measures; we drive several management plans addressing water resource, air pollution, wastes and other environmental topics, expanding into the development of circular economy projects and march toward the vision of sustainable operation.

1.Climate Governance

Following international trends and domestic laws and regulations, we have introduced the Task Force on Climate-related Financial Disclosures (TCFD) framework to build climate topic management mechanism based on the four core elements of “Governance, Strategy, Risk Management, and Indicators and Targets." We also assess the impact and influence of climate issues on business activities, and then identify climate risks and opportunities; thereby, formulating various measures and plans and improving policies.

The organizational structure of climate governance in KINIK is in which the board of directors, as the highest supervisory unit, is responsible for formulating the Company's climate development strategies and plays a decision-making role in major climate promotion projects. The Sustainable Development Committee has been established under the Board of Directors to report the results of climate governance implementation to the Board of Directors on a regular basis; the Executive Committee and various functional groups under the Sustainable Development Committee are the main implementation units, responsible for implementing response measures and improvement measures for climate risks or opportunities Program. The implementation process of climate governance is described as follows:

This year, through the identification of climate risks and opportunities, the climate impact of the current situation of KINIK is identified. The identification process is described as follows:

2.GHG emissions management

Given the intensification of climate change and various net zero policies introduced by the government, domestic enterprises actively conduct carbon inventory, plan long-term carbon reduction plans, and implement various greenhouse gas reduction measures to work together for climate change mitigation. KINIK has formulated the "Safety, Health, and Environment Management Manual" as the basis for the Company's GHG inventory and management. The manual content specifies that each factory area shall establish a GHG inventory mechanism in accordance with ISO 14064-1:2018, and shall follow the "Management Regulations for Greenhouse Gas Inventory” to complete the greenhouse gas inventory every year. In 2021, the Company conducted the first complete greenhouse gas inventory for the five factories in Taiwan and passed third-party verification. This year is also set as the base year for the Company's greenhouse gas reduction. In 2022, we will continue to implement Category 1 and Category 2 greenhouse gas inventory and verification. Compared with the base year, in 2022, Category 1 greenhouse gas emissions were reduced by 318.84 tons of CO2e, Category 2 greenhouse gas emissions by 1,767.22 tons of CO2e, and Category 1 and Category 2 greenhouse gas emission reductions were 2,086.06 tons of CO2e, compared to the baseline of the annual carbon reduction by 4.54%, exceeding the target of 3% carbon reduction per year. In addition, the analysis of carbon emissions over the years shows that the greenhouse gas emission intensity is on a downward trend year by year, reaching 6.84 tons of CO2e/NTD million in 2022. In terms of Categories 3 to 6, the Company conducted its own inventory of Category 4 (upstream power and commercial fuels) greenhouse gas emissions, and reduced 682.90 tons of CO2e compared to the base year in 2022. In the future, we will continue to improve our greenhouse gas reduction measures to achieve the goal of net zero carbon emissions by 2050.

Product Carbon Footprint Inventory and Verification

To realize the government’s net-zero carbon emission goal by 2050, the goal has been included in the Company's sustainable development vision. In addition to completing the greenhouse gas inventory and verification in accordance with ISO 14064-1:2018 every year, in 2022, with the support of the Chairman PO-CHUAN, LIN and CEO JUNG-CHE, HSIEH, the Abrasives B.U., Diamond B.U. and Semiconductor Materials B.U. launched the carbon footprint inventory project of main products or services. KINIK has comprehensively inventoried the product life cycle of ceramic grinding wheels, conventional CMP diamond disks, and reclaimed wafer services to grasp the greenhouse gas emissions of the three products or services in each life cycle, and has obtained ISO 14067: 2018 product carbon footprint verification statement issued by SGS certification company. Completion of the carbon footprint verification of the main products or services of the three major business units, which enabled the Company to identify and plan carbon reduction opportunities for products, and further transform into a green digital intelligent manufacturing service center. In addition to providing high-quality products and services, it also combines intelligent and green manufacturing processes into operations, work with suppliers to expand the influence of carbon reduction and enhance the sustainable competitiveness of products, moving towards the goal of net zero carbon emissions by 2050, and realize the business philosophy of "Good together".

3.Energy Management

In response to the trends of carbon reduction and energy conservation, improving energy efficiency and introducing renewable energy have become important issues for enterprises to consider during their operations. In 2022, the Shulin Plant and Zhubei Plant completed the introduction and verification of the ISO 50001:2018 energy management system, and established a comprehensive energy management system in accordance with the "Energy Management Manual". The CEO acts as the representative of the Energy Management Committee convening regular meetings to inspect and review the energy consumption situation and energy-saving promotion results for continuous achievement of the goal of reducing energy consumption by 2% every year. According to the Company's energy use composition structure in 2022, externally purchased electricity was the main source of energy consumption, accounting for 82% of the total energy use, followed by natural gas. In 2022, the Company promoted various energy-saving programs and replacement for energy-saving equipment. The total energy consumption was reduced by 24,430.29 GJ compared with the base year 2021, which was equivalent to energy saving by 7.46%, and the effect was better than the annual energy saving target of 2%. The further calculated energy intensity is 47.25 GJ/NTD million. In 2022, the fifth plant of KINIK implemented a total of 11 power-saving plans, including the replacement and efficiency improvement of variable frequency air compressors, process cooling water system maintenance, and adjustment of ice machine water temperature settings. The Company successfully saved energy for 4,882,130.24 kWh, reduced 17,576 GJ in energy consumption, equivalent to a 5.8% reduction in energy consumption. In the future, we will also continue to move toward the goal of purchasing or self-producing renewable energy, improving energy efficiency, and reducing process energy consumption, in order to reduce the impact of energy shortages.

Water Resource Management

As a member of the semiconductor industry, the water resource is an indispensable part of the manufacturing process. Under the influence of climate change and frequent extreme weathers, the water supply in Taiwan has become increasingly unstable. In 2023, the government began to collect water consumption fees to encourage enterprises to make water-saving improvements. In the past, the Company has attached great importance to the management of the impact of water intake and discharge, and invested in water resource recycling and reuse programs. By improving the efficiency of water resource use, we are committed to reducing water consumption and implementing the concept of sustainable water use.

To systematically promote various environmental protection measures, the Company has implemented the ISO 14001:2015 environmental management system. Among them, for water resource management items using the World Resources Institute (WRI) tool to assess the water stress of each operating location, in 2022, we have identified the five plant sites for water intake and discharge are all located in low-to-medium water stress areas. The water resources of KINIK are mainly domestic and process water, and the water sources are mainly freshwater from third-party tap water and groundwater. In 2022, the total third-party tap water intake was 526.69 million liters, and the total groundwater intake was 877.21 million liters. The total water intake was 1403.9 million liters, of which recycled and reused water accounted for 28.41% of the total water intake. Water reuse, condensate recycling and reverse osmosis (RO) water recycling are used to achieve the annual water recycling rate target and move toward the long-term goal of recycling 30% of water every year. In addition, the total water discharge to the surface was 924.49 million liters, the total water discharge to a third party was 168.51 million liters, the total water discharge was 1093 million liters, and the total water consumption was 310.9 million liters. The total water withdrawal in 2022 was reduced by 60.5 million liters compared to 2021, and the total water consumption was reduced by 5.82 million liters.

Effluents Management

All factory areas of KINIK have installed wastewater treatment facilities in accordance with the law, and the quality of effluents is regularly monitored to comply with legal standards. Each factory site has been inspected for chemical oxygen demand (COD), suspended solids (SS), and pH of its effluent. Regular reporting and discharge are conducted according to the regulations.

Air Pollution Emission Management

KINIK has established the "Regulations for Air Pollution Prevention and Control" as the supreme management guideline for air pollutants, and regulates air pollutants with reference to the "Regulations Governing the Collection of Air Pollution Control Fee" of the Taiwan Environmental Protection Administration, and regularly monitors its gas emissions volume for nitrogen oxides (NOx), sulfur oxides (SOx), volatile organic compounds (VOCs), particulate matter (PM), persistent organic pollutants (POPs), and hazardous air pollutants (HAPs). KINIK ensures that the air pollutants emissions are treated by the factory equipment so that their concentration level meet the legal limit. The air pollution treatment equipment in each factory area is regularly maintained and updated to minimize the impact of air pollution from the production process on the environment. In 2022, the total emission of air pollutants was 81,251 kg, of which nitrogen oxides (NOx) were reduced by 536 kg compared to 2021.

Waste Management

1.Due Diligence Management of Waste

KINIK actively promotes process improvement to reduce waste generation to reduce the negative impact and pollution of hazardous industrial waste and general industrial waste on the environment, and has established the "Waste Management Regulations" to manage waste generation and disposal. For effective recycling and utilization of resources, waste treatment is prioritized in the recycling and resource flow direction, such as physical solidification of sludge into concrete aggregates and pulverization of plastic buckets into plastic aggregates for reuse.

In addition to waste recycling and reuse, KINIK also places great emphasis on the legal removal and disposal of waste. According to the "Waste Disposal Act", each factory selects qualified waste removal contractors recognized by the Environmental Protection Agency based on the hazard of waste. On-site audits are implemented according to the Waste Supplier Audit Program to ensure the safety of the supplier's operating environment and the legal and proper disposal of various wastes. In 2022, the Company planned 23 audits on waste clearance and treatment companies. In response to the assessment of the new supplier of Yingge Plant, 26 audits were conducted in 2022, with an achievement rate of 113%. We strictly control waste clearance and final disposal operational requirements.

Waste Clearance and Treatment Suppliers Audit Process

2.Waste generation and disposal

In 2022, the fifth plant of KINIK generated a total of 1,675.56 metric tons of waste, of which general industrial waste is the main source, and hazardous industrial waste only accounts for 1.28%. In order to maximize the efficiency of resource use and reduce pollution, KINIK has committed to increasing the proportion of waste recycling by 1% every year. In 2022, the volume of recycling for resource utilization reached 1,485.55 metric tons, accounting for 88.66% of the total waste. In the past three years, the amount of waste to resources has reached more than 80%. In the future, we will continue to reduce the amount of waste and increase the ratio of waste as our long-term goal.

Circular Economy

Striving to achieve the vision of net zero carbon emissions by 2050 and become a green intelligent manufacturing and service center of grinding solutions, carbon reduction in the product manufacturing process has become an important part of the Company's promotion of net zero and green intelligent manufacturing. KINIK has preliminarily identified carbon emission hotspots through organizational greenhouse gas inventory and product carbon footprint inventory, and planned a net zero vision and carbon reduction goals accordingly. Considering that transforming to a circular economy business model is a key step to achieving net zero, KINIK has been proactively promoting circular economy projects in recent years. The Abrasives B.U. recycles a large number of resin wheels every year, and achieves the goal of reducing and recycling process waste through recycled grinding wheel products. KINIK maximizes resource efficiency and further demonstrates carbon reduction results. The Company's waste resin wheel recycling technology was awarded the "Waste Resource Circular Economy Evaluation, Two-Star Excellence" by the Environmental Protection Administration in 2018. In 2021, KINIK was invited to present our achievements in the “Resource Circularity Best Cases Outcomes Handbook.” The recycle period of reclaimed abrasives is increased to 48 days as approved by the Ministry of Economic Affairs (MOEA). This shows that our achievements and outcomes of reclaimed grinding wheels in the circular economy have been recognized. Every year, KINIK continues to research and make breakthroughs in recycled grinding wheel technology, recycling and screening waste resin wheels to select regenerated abrasives for recycling in the manufacturing process. We also provide contract customers with waste grinding wheels recycling services to conserve resources and achieve the ultimate goal of zero waste. In 2022, a total of six batches of waste resin wheels were recovered, with a cumulative reuse of 10.01 tons. The average recovery rate of recycled abrasive is 20.36% which varies depending on the nature of the waste resin wheels, and the highest is 30%. In order to continuously improve the recovery rate of recycled abrasives, we have completed the quality testing of the remaining particle sizes and put them into production, and expects to increase the recovery rate of recycled abrasives to more than 90%. KINIK has further demonstrated its creativity and ingenuity to give the dust collection new life, recycling and remanufacturing it into culture balls, incense diffuser bricks, deodorizing fresh-keeping balls and even cultural and creative products. In addition to continuously improving the recycling and reuse rates of products and waste, we will continue to practice the spirit of circular economy and create more business opportunities in the circular economy in the future.