Low Carbon Transition

To achieve carbon neutrality, CSC has established a two-phase medium- and long-term roadmap. As an integrated steel producer, CSC relies on coke as both a reducing agent and energy source, resulting in significantly higher carbon intensity compared to electric arc furnace operations. Economic and resource limitations, such as large equipment investments, high transition costs, and limited access to mature technology and green energy, constrain the widespread short-term application of hydrogen metallurgy and carbon capture technologies, despite their carbon reduction potential. In addition, raw material supply restrictions and market competition have compounded existing challenges. Therefore, similar to other steel mills worldwide, CSC currently encounters a number of problems in some of its strategies, such as a lack of mature technology and hydrogen resources and the need for equipment revamp, and will eventually face challenges in three areas-technology, resources, and capitals. Through active investment in R&D and ongoing cross-departmental collaboration, CSC will research, evaluate, and implement the most feasible carbon reduction strategies for the steel industry, with adjustments made on a rolling basis based on reviews. Currently, CSC does not intend to use carbon offsets as a strategy for carbon neutrality.

CSC is committed to the principles of a just transition as it moves forward with its low-carbon transformation, and it is aware of the possible effects the transformation may have on employees. For employees, CSC adheres to the spirit of continuous improvement in human capital. In addition to the routine skills training provided, when organizational adjustments or production line restructuring occur, CSC will assist employees in finding suitable job positions and provide relevant training to help them adapt to the adjusted job responsibilities or work arrangements.

Regarding retraining and career transition support, CSC promotes mandatory training for key positions within each unit and provides an e-Learning platform to effectively deliver skills, knowledge, and experience transfer, helping employees quickly understand new job content and work methods or processes.

The support measures for adjustments to employee working conditions arising from the company's transformation process are also reflected in the spirit of the Collective Bargaining Agreement, specifically Article 48, signed between CSC and the China Steel Corporation Labor Union. Through the existing governance framework and cross-department coordination mechanisms, CSC gradually integrates human resource development and communication support into the overall planning to mitigate transformation risks and strengthen organizational resilience.

CSC is committed to climate action and has implemented an Internal Carbon Pricing (ICP) mechanism as part of sustainable development. Adopting the shadow pricing method, CSC has set an ICP TWD 300 per tonne of CO₂e emissions, in alignment with the Carbon Fee Collection Regulations issued by the Ministry of Environment. CSC also periodically reviews ICP and considers following factors:

• Global standards and regulations
• Price of carbon tax or carbon offset credits
• The ICP of peers
• Price of renewable energy
• Sensitivity analysis in business decisions

The ICP serves as a corporate governance tool to drive carbon reduction efforts. The implementation scope covers GHG Scope 1 and Scope 2. Objectives for implementing ICP include as follows:

• Drive energy efficiency and reduce energy consumption
• Conduct cost-benefit analysis
• Encourage lower-carbon production processes, technology development and investment
• Comply with climate-related regulations
• Influence strategy and financial planning
• Achieve climate-related policies and targets
• Conduce to climate investments decision making and risk analysis

The ICP is applied to make business decisions related to capital expenditure, production planning, procurement, product development and risk management by internalizing the cost of carbon emissions, so that CSC could evaluate the total cost and benefit of the climate-related projects. It also urges CSC to strengthen lower-carbon strategies and execute process improvement projects thanks to it benefits to cost reduction. All things considered, the implementation of ICP is conducive to enhancing internal carbon reduction performance, advancing a planned effort to execute carbon emissions control, and contributing to CSC's climate-related policies and targets of carbon emissions reduction and sustainable development.

CSC has formulated the “Carbon Trading and Management Regulations” in accordance with MOENV's rules and regulations as well as international practices, with the relevant operations incorporated into ISO 14001 Environmental Management Systems. Meanwhile, applications for GHG offset credits are submitted by the Environmental Protection Department at CSC to the competent authority. As of the end of 2025, CSC has 4.532 million tonnes of CO₂e in GHG offset credit balance.

In response to climate change, verifying and disclosing the carbon footprints of enterprises have gradually become major issues that stakeholders pay attention to. In order to update carbon footprint information and establish a more comprehensive carbon management mechanism, CSC has implemented and successfully completed the carbon footprint inventory of 22 major product categories, such as that of hot-rolled steel coils, with the joint efforts of all production units. It was granted an external verification opinion statement by BSI on December 25, 2025.

During the internal verification process, CSC was repeatedly faced with factors, such as the inconsistency of the sources of the supporting data. Therefore, it was necessary for CSC to establish an inventory management system that would link the existing information system to expedite the calculation of carbon footprints, reduce on-site workload of manpower, and then manage through the system, which was an important tool, by monitoring the statuses of carbon emissions in the production plants.

In response to the gradually emerging carbon tariffs and the trendy issue of carbon neutrality, various industrial companies with brand recognition have been competing to set carbon neutrality goals, and their supply chains have also responded by investing in establishing product carbon emission baselines and reducing carbon emissions. CSC, as a major international supplier of steel products, will continue to conduct carbon footprint verification to better understand the degree of carbon exposure. Furthermore, it will meet the expectations of the authorities, customers, and the supply chains, work collectively with the aforementioned parties in terms of sustainability and the reduction of carbon emissions, respond to inquiries from investors or customers, and understand carbon risk exposure.

Verification Opinion Statement

The carbon footprint of hot-rolled coils is 2.219 kgCO₂e/kg.

• In 2025, the total capital expenditure related to carbon reduction will be approximately NT$2.290 billion.
• According to the company's plan for 2025~2030, the four medium-term carbon reduction paths include charging reduced iron into the blast furnaces, injection of hydrogen-rich gas in the blast furnaces, co-production of steel and chemicals, and increasing the use of scrap. After CSC conducts initial inventory, we estimates a total capital expenditure of around NT$17 billion. The amount will be modified in accordance with future technological advancements and will submit to the boards based on progress of each project.