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 2023

Impact Type	Sustainability Aspects	Material Topic	Principle of Double Materiality		Cause of the Impact	Target of the Impact	The GRI Topic Aligned
Impact Type	Sustainability Aspects	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	G	Corporate operation with innovation for value creation	Operational innovation drives the development of new products and services, which helps scale up businesses, increase revenue and profit, and boost market share and competitiveness.	Innovation expands the scope of product and service applications, creates more job opportunities, and promotes local economic development; innovative technologies and solutions can reduce energy consumption and carbon emissions.	Business Activities Products and Services Business Relationships	Shareholders, Employees	Economic Performance
		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.	Business Activities Products and Services Business Relationships	All Suppliers	Procurement Practices
		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
	S	Happy Corporation Creation	A happy corporation can inspire employee engagement and creativity, enhance work efficiency, attract and retain brilliant talents, and strengthen the human capital advantage for a long-term corporate development.	A local happy corporation contributes to social harmony; a positive corporate brand image and reputation help promote social stability and development.	Business Activities Products and Services	Employees	Employment
		Customer Trust	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.	Business Activities	Customers	Customer Health and Safety
		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	Customers	Customer Privacy
Potential Positive	S	Protection of Employees’ Human Rights	Human rights protection strengthens employees' sense of trust and loyalty towards the Company, enhances the reputation of the Company for business ethics among external stakeholders, and attracts more brilliant talents to the Company.	The emphasis on labor rights can improve labor-management relations, reduce protests such as strikes and demonstrations by the employees of the Company, and thereby contribute to social stability.	Business Activities Products and Services	Employees	Freedom of Association and Collective Bargaining
Actual Negative	E	Carbon Emission Reduction and Climate Adaptation Action	High carbon fees (taxes) are levied in accordance with regulations due to the failure to effectively reduce carbon emissions, resulting in a rise in both direct and indirect operational costs, which may also reduce the resiliency and adaptability in transition for climate response.	The inability to effectively promote climate transition actions, coupled with the failure to reduce carbon emissions, not only prevents the achievement of net-zero emission targets but also impacts the low-carbon development of the ICT industry, weakens the industry competitiveness, and negatively affects climate change.	Business Activities Products and Services Business Relationships	Group Companies, All Suppliers	Emissions
	S	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 Products and Services Business Relationships	Employees	Diversity and Equal Opportunity
	G	Corporate Governance and Business Ethics	The influences from corruption and bribery issues may potentially lead to unfair business processes and decreased efficiency as well as legal penalties and fines, damage to the corporate reputation, and impact on stock prices and investor confidence.	Corruption and bribery practices will undermine public trust in the Company, raise social concerns about fairness and justice, lead to unfair distribution and abuse of public resources, and affect economic development.	Business Activities Business Relationships	Employees, All Suppliers	Anti-corruption
Potential Negative	E	Net-zero Transition and Green Energy Economy	Achieving net-zero emissions and transitioning to a green energy economy demands significant financial investment, which may be influenced by fluctuations in market demand and changes in government policies and regulations, potentially increasing corporate costs and impacting profitability.	Communities reliant on the traditional energy industries may experience income disruptions due to the transition, while the land use for green energy development may lead to loss of agricultural land, impacting the livelihoods and lives of local farmers.	Business Activities	Group Companies, All Suppliers	Energy
	E	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.	Stakeholders Defined Topic	Significant Suppliers	Supplier Environmental Assessment
	S	Cybersecurity and Privacy Protection	Personal data breach or misuse may result in fines or penalties, damage to brand image, and loss of customer trust, while compliance with personal data protection laws and regulations necessitates significant investment of time and resources.	Personal data breach or misuse undermines public trust in the telecommunications industry, threatens privacy, and potentially give rise to issues such as identity theft and financial fraud.	Stakeholders Defined Topic	Customers	Customer Privacy

Note: 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.

Integration of Material Issues with the Risk Management Process

The results of material topic identification are included in CHT Enterprise Risk Management (ERM) System each year for the annual assessment of the likelihood value of the inherent risks derived from the material ESG topics, followed by proposal of mitigate action and reassessment of the likelihood values of the residual risks, which remain within the risk appetite of the Company as manageable risks.

Risk Event Identification and Mitigation Actions of Materiality Assessment

Material Topic	Identified Risk Event	Risk Mitigation Actions
Economic Performance	New service market development	Proactively explore the B2B and B2C businesses. Accelerate overseas market development via overseas subsidiaries.
Emission	Sustainability and climate strategies	Request renewable energy suppliers to increase the wheeled power amount in time. Reduce carbon emissions via technology, such as PSTN to all-IP transformation, 5G C-RAN architecture, base station energy conservation, etc.
Diversity and Equal Opportunity	Human resource management and development	Plan for technical knowledge transfer and training. Continuously supplement manpower through various recruitment channels. Continuously administer remuneration surveys to improve the compensation and benefits system.
Customer Privacy	Information security and privacy protection	Conduct general training to equip internal employees with the notion of trade secrets via digital learning. Utilize news for cases studies from time to time.
Anti-corruption	Ethical Corporate Management Best Practice Principles, Code of Ethical Conduct	Plan to introduce the ISO 37001 Anti-Bribery Management System. Conduct case studies and random checks. Encourage employees to actively report violations.

Notes:
1. Material topics are identified on the basis of GRI Topic-specific Standards.
2. Employment: With a comprehensive employee welfare system that gains the Company the reputation as a Happy Corporation, there is no relevant risk event included.
3. Freedom of Association and Collective Bargaining: As employees enjoy the freedom of association and collective bargaining, there is no relevant risk event included.
4. Procurement Practices: With an active promotion of local procurement, facilitating local economic development, there is no relevant risk event included.

ESG Material Topics with Impacts on Operations and Long-term Values

Item	Material Topic 1	Material Topic 2	Material Topic 3
Material Risks or Opportunities	Recruitment difficulty in and loss of talents for emerging technologies	Low-carbon transition and physical risk adaptation actions	Provision of a secure, trustworthy digital environment
Impact on Business Values	Recruitment difficulty in and loss of talents for emerging technologies will affect the AI, AIoT, big data, and cloud businesses and service developments of the Company. The impact on the Company's profitability: CHT's profit per capita is about NT$2.27 million. The annual vacancies exceed 350 in 2023, and the impact on the profit from the failure in manpower replenishment will amount to NT$790 million. Decreased operational efficiency and disadvantaged market competitiveness: The inability of CHT to fully leverage AI technology due to a shortage of talent in emerging technologies will result in reducing operational efficiency and an inability to deliver competitive products and services, negatively impacting CHT’s market position and professional image.	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: Taiwan has passed the “Climate Change Response Act", which specifies the policy of net-zero emissions by 2050. It will raise the operating costs of the Company, including the increased direct costs (e.g. green energy procurement) and capital expenditures (e.g. purchase of high-efficiency equipment & renewable energy plant construction and purchase) incurred from the carbon reduction projects executed for Net Zero by 2050, with an estimated additional expenditure amounted to NT$1.066 billion by 2025. An insufficient climate resilience will lead to operation disruption, resulting in increased operating costs and damage to corporate reputation.	CHT, as a provider of critical telecommunications infrastructure, is committed to building a secure and trustworthy digital environment, offering diverse ICT services and cybersecurity solutions. CHT ceaselessly strengthens its defense capabilities against cyberattacks to ensure the normal operation of governmental and corporate networks, and to protect the communication needs of the people. However, in the event of exacerbated geopolitical conflicts, the scale of attacks may expand, and once the defense fails, it may render serious impacts on the business operations of the Company, including business losses and reputational damage, with the maximum business loss reaching tens of millions of NTD per day, and the one-time fine of as high as 5 million NTD imposed by the government on the Company.
Types of business impact	Revenue	Cost	Revenue/ Risk
Response Strategies	Establishment of a decent corporate brand and reputation: Enhance the attraction of emerging technology talents. Recruitment of talents via multiple channels to actively solicit outstanding talents on campus:Set up different positions in line with the required talent competencies, expand the source of talent demand, and deepen the partnership with academic institutions to draw potential emerging technology talents. Diversified talent cultivation: Strengthen the cultivation of interdisciplinary talents, design secondary function programs, certifications, and other courses, and ensure learning transfer through OJT. Enhancement of workplace-friendly welfare measures: Continue to design and improve compensation and welfare systems that are better than the peers in the industry to retain outstanding talents.	Responses to Transition Risks Carbon reduction via technology: Introduce new 5G C-RAN architecture to reduce base station power consumption, lower emissions from base station operations, plan to phase out 3G networks in 2024 and upgrade to VoLTE, self-develop an intelligent EOC to automatically collect/analyze energy data for real-time energy-saving performance tracking. Use of renewable energy:Gradually increase the share of renewable energy through self-construction/generation and green energy procurement. Also, the Board of Directors approved the CPPA for the long-term procurement of 100-MW renewable energy in 20 years. Responses to Physical Risks 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.	Enhanced cybersecurity resilience: Establish comprehensive cybersecurity risk management and protection mechanisms, boost the resilience of network infrastructures, and ensure smooth communications. Offering cybersecurity solutions: CHT possesses the capabilities for cybersecurity R&D as well as service provision. The cybersecurity services can generate revenues for the Company and better its image. SMEs Empowerment:Assist small and medium-sized enterprises in their digital transitions and elevate their cybersecurity protection. Improvement of cybersecurity service stability: Optimize the response capabilities of cybersecurity operations and cybersecurity operation teams. Joint cybersecurity procurement: Establish a joint procurement platform with subsidiaries to reduce external costs associated with procurement.
Targets/Metrics	Target Year: 2026 An annual growth target of 2% by 2026 for the percentage of emerging technology talents Setting the KPIs for emerging technology talent hiring via talent inventory across organizations to encourage various institutions to actively recruit and cultivate emerging technology talents, and review of the status and effectiveness of talent acquisition on a monthly basis.	Target Year: 2050 Setting to Net Zero by 2050, and Commitment the SBT (long-term) targets . Validation of the near-term SBTs in July 2023 RE100 onboard in May 2023, with the commitment to a 100% renewable energy used by 2040 EV100 onboard in April 2024 with a commitment to 100% electrification of engineering and company vehicles by 2030 Formulation of “Chunghwa Telecom Short, Medium, and Long-term Climate Change Adaptation Plans” to 100% cover the existing and new operating sites and communication equipment.	Target Year: 2025 Deployment of high, medium, and low earth orbit satellites to strengthen the resilience of communication networks 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. Improvement to the response capabilities of SOC teams and shortening of the time for obstacle handling Optimization of cybersecurity operation and alert notification mechanisms
Progresses in 2023	38% of emerging technology talents in 2023 Corporate image promotion briefings organized at key universities, resulting in the acceptance of 80 students in emerging technology fields and 59 interns on board; the annual target for new emerging technology talent acquisition 100% achieved via diverse recruitment channels Ongoing talent training of the Company and obtainment of emerging technology certificates and related competencies development, with cumulative 2,094 employees obtaining 4,803 certificates in emerging technologies in 2023. Enhancement of workplace-friendly welfare measures: Ongoing promotion of ESOT as an incentive, flexible work locations and hours, reduced working hours for childcare with no pay reduction, childcare allowance, and establishment of childcare centers to retain outstanding talents	Net-zero commitment completed and application for the long-term target validation submitted to SBTi for review Scope 1 & 2 emissions totaled 664,365.5366 t-CO₂e in 2023, with a decrease of 15.94% compared to 2020 levels, in line with the carbon reduction pathway set by CHT. Scope 3 emissions amounted to 1,814,662.26 t-CO₂e in 2023, with a decrease of 5.3% compared to 2021 levels, in line with the carbon reduction pathway set by CHT. 73.57 million kWh of renewable energy used in 2023, accounting for 5.61% of the total use in line with CHT's path to RE100 66.94million kWh of renewable energy used by IDCs in 2023, the usage ratio is about 38.8% with a PUE of 1.626, in line with the carbon reduction pathway set by CHT. Various plans completed pursuant to the “Plans for Adaptation to Climate Change in the Short-/Mid-/Long-term of Chunghwa Telecom” in alignment with the short-, medium-, and long-term plans formulated at CHT	700 domestic and 3 international low earth orbit (LEO) satellite terminal equipment hotspots deployed in line with the project of the competent authority (LEO satellite introduction completed in 2023) Establishment of vulnerability intelligence early warning and joint defense mechanism with high-risk vulnerability handled and responded within 7 days (100% completed in 2023) 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. No cybersecurity or personal data breach in 2023. Improvement to the response capabilities of SOC teams and shortening of the time for obstacle handling (100% completed in 2023) Optimization of cybersecurity operation and alert notification mechanisms (100% completed in 2023)
Remuneration Review Mechanism	Achievement of KPI on emerging technology talents included in the performance appraisal of senior managers. The fixed and variable compensations awarded in proportion to the results of individual performance appraisal	KPIs related to the low-carbon transition and physical risk adaptation actions 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 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"

Material Issues of the Year