Sustainable Governance

Material Issues of the Year

Issue Date：2023/06/30

Material ESG Topics of the Year

The principle of Double Materiality is employed to identify the internal and external impacts of topics. In addition to the consideration of the impacts of ESG topics on the operations and businesses of CHT, the impacts from the operations and businesses of CHT on the society, environment, and people (human rights) are taken into account as well.

Material ESG Topics in 2022

Impact Type		Material Topic	Principle of Double Materiality		Cause of the Impact	Target of the Impact	The GRI Topic Aligned
Impact Type		Material Topic	Impact on the Operations and Businesses of CHT	Impact on the Society, Environment, and People	Cause of the Impact	Target of the Impact	The GRI Topic Aligned
Actual	Positive Impact	Competitive Remuneration and Benefits	Offer compensations and benefits superior to those of the region/industry at the main operating sites for employees to have economic security.	Establish steadfast community relations and increase employee loyalty to elevate the social identity of the Company at where it operates.	Business Activities	Employees	Market Presence
		* Cybersecurity and Privacy Protection	Establish well-rounded cybersecurity management systems and mechanisms, and conduct regular audits and exercises, to ensure that customer privacy is secure and free from violation, elevating the corporate reputation.	Provide high-quality cybersecurity services and technical support, effectively expand and communicate correct cybersecurity concepts and technical services, and assist industries and the general populace to effectively manage and control cybersecurity risks.	Business Activities Products and Services Business Relationships	Employees Customers	Customer Privacy
		5G Application and Industry Ecosystem	A large proportion of procurement is locally procured, along with building good local/community relations, to ensure supply integrity as well as financial and economic stability, benefiting the industrial ecosystem development.	Indirectly promote economic development in the region through supply chain procurement, including attracting other investments and increasing job opportunities to promote economic development in the region.	Products and Services Business Relationships	Significant Suppliers	Procurement Practices
		Green and Low-carbon Products and Information Labels	Actively develop sustainable low-carbon products and services, conduct regulatory checks in terms of health and safety, and carry out communication and training for internal units to ensure the legal compliance and conformity of products, services, and marketing in order to protect the corporate reputation.	A complete health and safety assessment mechanism for products and services is in place (including the electromagnetic radiation testing service); products and services have been fully assessed and labeled to protect the consumer rights of the broader society.	Products and Services	Customers	Customer Health and Safety
		Corporate Governance and Business Ethics	Consider anti-corruption risk as an overall risk of the Company for an effective assessment and management to minimize possible litigation and operational risks arising from corruption.	Establish complete anti-corruption policies and procedures to effectively manage corruption risks in the supply chain, reduce unethical business conducts in the industry, and elevate good social ethos.	Business Activities Business Relationships	Employees All Suppliers	Anti-corruption
		* Sustainable Supply Chain Management	Plan and institute the complete supplier sustainability management plan to assess and identify the environmental and sustainability risks of suppliers on a regular basis, improve their competencies, and reduce the risk of violation of the laws by the Company via a well-rounded ESG assessment and audit mechanism.	A complete sustainable supply chain management plan to regularly assess the ESG risks of suppliers and work with suppliers with excellent ESG performance to effectively reduce the environmental impacts from suppliers' operations and drive the improvement of ESG competencies in the industry.	Business Relationships	Significant Suppliers	Supplier Environmental Assessment
	Negative Impact	Carbon Emission Reduction and Climate Adaptation	High carbon fees (taxes) are levied due to the failure to effectively reduce carbon emissions in response to laws and regulations, resulting in increased direct/indirect operating costs and potentially decreased climate resilience and transformational adaptation competencies.	The inability to effectively promote climate transition actions, along with the failure in reducing carbon emissions, not only prevents achievement of the goal of net-zero emissions but also affects the low-carbon development of the ICT industry, damaging the competitiveness in the industry and rendering negative impacts on climate change.	Business Activities Business Relationships	CHT All Suppliers	Emissions
Potential	Negative Impact	Diverse and inclusive workplace	The rising average age of the organization and excessive homogeneity, failure to incorporate representatives of diverse groups, and inability to think outside the box hinder innovation and development, which impede the development of emerging industries and services.	The lack of diversified employment mechanism renders inability to provide ample job opportunities for diverse talents, obstacles for young talents to enter the job market, and impacts on the innovation, creativity, and entrepreneurship in the ICT industry, affecting the overall economic development of the industry.	Business Activities	Employees	Diversity and Equal Opportunity

Notes:
1. Double Materiality: When assessing sustainability/ESG topics, we consider both the impact of sustainability/ESG on corporate operations and businesses, as well as the impact (positive or negative impact) of corporate operations on the society, environment, and people.
2. "*" is a topic that has a significant impact and influence on external stakeholders.

ESG Topics with Impacts on Operations and Long-term Values

Item	Material Topic 1	Material Topic 2	Material Topic 3
Material Risks or Opportunities	Human capital development (insufficient development and empowerment of talents of emerging technologies)	Climate transition and physical risks (climate change mitigation and adaptation)	Cyber Security (Information and communication security management and personal data and privacy protection)
Impact on business values	Disadvantage in emerging business development: The remuneration of the Company may not be competitive enough to rival with international enterprises and well-known tech giants in Taiwan, which may result in the risk of difficulties in recruiting and retaining talents for emerging technologies. Impact on the Company's profitability:CHT's profit per capita is about NT$2.36 million. If the annual vacancies exceed 300, the impact on the profit will amount to NT$7.6 million. Organizational talent gap:The low birthrate in Taiwan and the massive employee retirement CHT is seeing requires passing down knowledge to and cultivation of new generations of talents to avoid talent gaps.	Telecom facilities (IDCs and base stations) are vulnerable to climate-related impacts (e.g. physical and policy), which will affect the operations and profits, including: Costs and expenditure:Taiwan adopted the "Climate Change Response Act" and is to levy a carbon fee in 2024. With emissions about 700,000 metric tons of carbon per year, CHT expects impacts on its operating costs/income. Adaptation failure:The business of CHT relies on operations of critical infrastructure (IDCs and base stations). An insufficient climate resilience will lead to operation disruption, resulting in increased operating costs and damage to corporate reputation.	CHT actively develops emerging technologies (e.g. 5G applications, virtualization, and AIoT). Any major cybersecurity or personal data incident will have impacts on corporate reputation and costs. Risk of penalties arising from violations:Regulatory agencies formulate strict information security and personal data regulations. Failure in legal compliance may result in the risk of administrative punitive actions, rendering impacts on costs and reputation. Security by design：The government in Taiwan has incorporated cybersecurity issues as the development focus for the industry. With cybersecurity R&D and service capacities, CHT can bring forth revenues and improve corporate image via its cybersecurity services.
Types of business impact	Revenue	Cost	Risk/ Revenue
Response Strategies	Recruitment via diversification and social media marketing: Set-up of permanent vacancies, agile recruiting, and recruitment of experienced workers Industrial-academic cooperation:In-depth cooperation with academic units; provision of internship opportunities and courses for units in emerging technology fields to attract potential talents Diversified talent cultivation:Customized talent training programs; a rehire mechanism for retired talents Enhanced talent retention mechanism:Ongoing design and improvement of compensations and benefits system to be superior to that in the industry; provision of flexible working place and working hours of mechanisms to retain outstanding talents	Promotion of a series of low-carbon transformation and physical risk adaptation actions Energy efficiency improvement:Use of high-efficiency electricity and air-conditioning equipment; introduction of new technologies (e.g. NGN_CN equipment development; replacement of old PSTN switches), and so forth Renewable energy development: Self-construction and procurement of renewable energy Climate-related physical risk adaptation actions: Formulation of climate change adaptation plans, planning the emergency backup capacity for the existing and new operating sites and communication equipment, adoption of dual-feeder power supply for critical IDCs, increase in the emergency power generation units and batteries, etc.	Strengthening industrial-academic cooperation:Cooperation with the industry and research units to develop instant products that meet market demands and usher in new business revenue into the Company Cybersecurity product optimization: Capturing the market/industry cybersecurity needs and increasing market penetration Ongoing development of new application markets:Focus on the government and the financial cybersecurity areas and quickly replication of success cases Joint procurement in cybersecurity:Creation of a joint procurement platform with subsidiaries to reduce external costs in cybersecurity project expenditure
Targets/Metrics	Target Year: 2025 An annual growth target of 2% by 2025 for the percentage of emerging technology talents The employment of emerging technology talents listed as a KPI to encourage various institutions to actively recruit and cultivate emerging technology talents Review of the status and effectiveness of talent acquisition on a monthly basis	Target Year: 2030/2050 Commitment to Net Zero by 2050 Setting the SBTs Joining RE100 for 100% green power by 2040 and 40% by 2030 100% IDCs on green power, reducing the PUE to 1.5 Formulation of a physical risk adaptation plan that is to 100% cover the existing and new operating sites and communication equipment	Target: 2025 100% IT asset management and log collection Establishment of vulnerability intelligence, early warning, and joint defense mechanisms with high-risk vulnerability handled and responded within 7 days 100% security check and patching of high-risk vulnerabilities for systems online and ongoing verification by independent third party for cybersecurity certification each year Establishment of a cybersecurity threat early warning and swift check and response mechanism for notification within 1 hour and emergency response completed within 24 hours
Progresses in 2022	31.7% of emerging technology talents in 2022 with an increase of 2% from 2021 Employment strategy of in-depth industrial-academic cooperation with schools in phases, agile recruitment for permanent vacancies, and other diversified recruitment channels 100% on-campus recruiting completed 100% review of the status and effectiveness of talent acquisition on a monthly basis Ongoing talent training of the Company and obtainment of emerging technology certificates and related functions development Ongoing improvement of the corporate website image and ongoing promotion through social media marketing to strengthen the brand image of an excellent corporate employer	Net-zero commitment completed, and application submitted to SBTi for review Scope 1 & 2 emissions totaled 714,098.036 t-CO₂e in 2022, with a decrease of 9.64% compared to 2020 levels Scope 3 emissions amounted to 1,916,216.5782 t-CO₂ in 2022, with a decrease of 4.61% compared to 2020 levels, in line with the carbon reduction pathway set by CHT 24.05 million kWh of renewable energy used in 2022, accounting for 1.67% of the total use in line with CHT's path to RE100 18.9 million kWh of renewable energy used by IDCs in 2022 with a PUE of 1.647, in line with the targeted path laid by CHT	100% IT asset management and log collection (100% completed in 2022) Establishment of vulnerability intelligence early warning and joint defense mechanism with high-risk vulnerability handled and responded within 7 days (100% completed in 2022) 100% security check and patching of high-risk vulnerabilities for systems online and ongoing verification by independent third party for cybersecurity certification each year (100% completed in 2022) Establishment of a cybersecurity threat early warning and swift check and response mechanism for notification within 1 hour and emergency response completed within 24 hours, with no cybersecurity or personal data breach in 2022 Over 730 international information security related certificates (e.g. ISO 27001 LA, CISSP, etc.) obtained by CHT employees cumulatively as of 2022
Remuneration Review Mechanism	Achievement of KPI on emerging technology talents included in the performance appraisal of senior managers The results of the overall performance appraisal linked with the fixed and variable compensations	KPIs related to carbon reduction and climate change adaptation included in the "Directions Governing Performances of Senior Managers of Chunghwa Telecom" as sustainability indicators linked with the variable compensation of senior managers The variable compensation of senior managers linked with the performance appraisal results of “Climate Change"	KPIs related to cybersecurity management and privacy protection included in the "Directions Governing Performances of Senior Managers of Chunghwa Telecom" as sustainability indicators linked with the variable compensation of senior managers The variable compensation of senior managers linked with the performance appraisal results of "IT Network Security"

2022 Material ESG Topics – Document Signed off by the Board of Directors