Climate Change Data

Environmental Metrics

ESG Focus Areas

• Ethical business conduct
• Regulatory compliance
• Economic performance
• Fair employment practices
• Energy and carbon footprint

Environmental Achievements

• 5.7% reduction in energy consumption (like-for-like)
• Estimated energy savings of 3,960 kWh per month in Malaysia by adjusting cooling water flow rate
• Expected savings of 114,245 kWh of power consumption per year and cost savings of RMB83,567 per year in Tianjin with LED lighting

Social Achievements

• Zero complaints from employees to regulatory authorities pertaining to unfair employment practices
• Zero confirmed cases of corruption within KESMI
• Maintained gender-diverse workforce

Governance Achievements

• Zero confirmed cases of non-compliance with environmental and socioeconomic laws and regulations
• Zero cases of corruption reported

Climate Goals & Targets

Environmental Challenges

• Lower demand for burn-in and testing services due to US-China trade war, lower car demand in China, and weak semiconductor industry
• Increased pricing competition
• Rising labor costs
• Cyclical and capital-intensive nature of the semiconductor industry
• Rapid technological changes

Mitigation Strategies

• Close collaboration with customers at new product introduction stage
• Proper allocation of capital investments
• Building production capacities based on customer demand
• Focus on automotive segment (more resilient than other segments)
• Relentless efforts to strive for greater productivity through innovation and factory automation
• Close watch over costs

Supply Chain Management

Supplier Audits: Regular assessments

Responsible Procurement

• Supplier Code of Conduct (covering compliance with laws, anti-corruption, no child labor, health and safety, human rights, conflict minerals)

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards – ‘Core’ option

Certifications: ISO 9001, ISO/TS 16949

Environmental Metrics

ESG Focus Areas

• Ethical Business Conduct
• Regulatory Compliance
• Economic Performance
• Fair Employment Practices
• Energy and Carbon Footprint
• Occupational Health and Safety

Environmental Achievements

• Reduced electricity consumption by 5.5% from FY2019 to 81.5 GWh
• Reduced indirect emissions by about 3.4% to 57.6 Kilo tonnes CO2

Social Achievements

• 0 complaints from employees to regulatory authorities pertaining to unfair or discriminatory employment practices
• 6% improvement in employee turnover rate to 277 employees
• 82% of procurement budget allocated to local suppliers in Malaysia and China

Governance Achievements

• 0 confirmed cases of corruption within KESMI
• 0 confirmed cases of non-compliance with environmental laws and regulations
• 0 confirmed cases of non-compliance with socioeconomic laws and regulations

Climate Goals & Targets

Environmental Challenges

• Lower volume for burn-in, testing and EMS due to lower demand and supply chain disruptions caused by the COVID-19 pandemic and US-China trade war
• Increased pricing competition leading to reduced profit margins
• Rising labour costs and competition for qualified personnel

Mitigation Strategies

• Re-aligned resources to manage the challenge of COVID-19, including contingency plans, work safety measures, and rescheduling production
• Introduced sensor test services to expand customer base and services
• Implemented prototype automated handling for burn-in to enhance service quality
• Phased off older test equipment and added new ones
• Investing in advanced equipment to build capacities and capabilities to support key customers’ growth plan, while carefully managing discretionary expenditures
• Collaborating closely with customers at their new product introduction stage and proper allocation of capital investments
• Building production capacities based on customers’ planned demands
• Cost-control measures including forced leave arrangements

Supply Chain Management

Supplier Audits: Approximately 3% of pay slips audited quarterly

Responsible Procurement

• Responsible sourcing of 3TG metals and PCBs
• Supplier Code of Conduct requiring compliance with laws and regulations, prevention of corruption, prohibition of child labour, safeguarding employee health and safety, upholding human rights, and elimination of conflict minerals
• ISO 9001:2015 or higher quality management systems for suppliers
• Regular supplier evaluations

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards: Core option

Certifications: ISO 9001

Environmental Metrics

ESG Focus Areas

• Ethical Business Conduct
• Regulatory Compliance
• Economic Performance
• Fair Employment Practices
• Occupational Health and Safety
• Energy and Carbon Footprint

Environmental Achievements

• 2% reduction in year-on-year energy consumption
• 5% reduction in electricity consumption from the previous year
• 6% reduction in Scope 2 emissions to 54.2 kilo tonnes CO2

Social Achievements

• More than 90% of workforce fully vaccinated by end of August 2021
• Introduced perfect attendance incentive program for staff
• Provided a one-time COVID-19 relief allowance for employees
• No substantiated complaints received from employees regarding unfair or discriminatory employment practices
• 0 work-related fatalities and injuries

Governance Achievements

• Established a Code of Conduct based on the Responsible Business Alliance Code of Conduct
• Implemented a Whistle-blower Policy
• Implemented a Grievance Handling Policy
• Implemented a Business Ethics Policy
• Implemented a Purchasing Policy
• 0 cases of corruption within KESMI reported

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic disruptions (workforce disruptions, supply chain constraints)
• Chip shortages impacting loadings
• Border closures and Movement Control Orders limiting manpower
• Volatility in the semiconductor supply chain
• Shortage of semiconductors causing production cutbacks in the automotive industry
• Uncertainties of COVID-19 pandemic threatening global economic recovery
• Rising labour costs and competition for qualified personnel hindering staff retention
• Increased pricing competition leading to reduced profit margins

Mitigation Strategies

• Full compliance with COVID-19 prevention guidelines
• Business continuity plans activated
• Swift steps to rebalance resources to fulfill customer loadings
• Investment in a new facility in Malacca
• Automation of burn-in production process
• Investment in advanced equipment to build capacities
• Careful management of discretionary expenditures
• Close collaboration with customers at new product introduction stage
• Building production capacities based on customers’ planned demands
• Work-from-home arrangements and split-team arrangements
• COVID-19 relief allowance for employees
• Regular audits on worker accommodation and transportation
• Strict control measures (temperature taking, face masks, sanitization, social distancing)
• Close communication with local authorities
• Work with local suppliers to review contracts
• Close working relationship with customers

Supply Chain Management

Supplier Audits: Quarterly audits on associate companies providing foreign workers, monthly audits on hostel conditions

Responsible Procurement

• Stringent criteria in selecting environmentally and economically accountable suppliers
• Supplier Code of Conduct (compliance with laws, anti-corruption, no child labor, employee health and safety, human rights, conflict-free mineral sourcing, ISO 9001:2015 or higher)
• Three-Step Supply Chain Management Process (Internal Requisition, Supplier Selection, Supplier Evaluation)

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards: Core option

Certifications: ISO 9001:2015, ISO 14001, IATF 16949:2016

Awards & Recognition

• Award from a customer for support during challenging times (KESM Test)

Environmental Metrics

ESG Focus Areas

• Corporate governance and business ethics
• Regulatory compliance
• Economic performance
• Energy and carbon footprint
• Occupational health and safety
• Fair employment practices

Environmental Achievements

• Installed rooftop solar panel system in one of its facilities in Malaysia, projected to generate approximately 650 MWh per year of renewable energy.
• Procured 797 MWh of renewable energy for one of our facilities in Malaysia through the Green Electricity Tariff program.

Social Achievements

• Zero work-related fatalities or recordable injuries for both employees and workers in FY2023.
• Employees underwent an average of 25.7 hours of training.

Governance Achievements

• 794 (92%) employees received training and communications on anti-corruption policies across Malaysia and China.
• Zero confirmed cases of corruption within KESMI.

Climate Goals & Targets

Environmental Challenges

• Declines in customers’ loadings resulting in reduced revenues.
• Labour shortages and increased labour costs.
• Competition for highly skilled employees.
• Rising energy and labour costs.

Mitigation Strategies

• Cost saving measures and “built-to-capacity readiness” were put in place to minimise the impact of reduced revenues.
• Agile manpower deployment.
• Accelerating automated processes.
• Installing environmentally friendly solar panel installations for energy saving.
• Plans to ensure that our facilities are fully cleaned, disinfected and equipped with essentials to maintain safe conditions for our employees as well as our customers alike from risks connected to COVID-19.

Supply Chain Management

Supplier Audits: Quarterly audits on contractors providing large numbers of outsourced workers; monthly audits on accommodations furnished to foreign workers.

Responsible Procurement

• Stringent criteria in selecting environmentally and economically accountable suppliers.
• Supplier Code of Conduct (covering compliance with laws, anti-corruption, child labour, health and safety, human rights, conflict minerals, and ISO 9001:2015 or higher).

Climate-Related Risks & Opportunities

Physical Risks

• Increased intensity and frequency of storms and floods
• Change in average temperature

Transition Risks

• Policy and legal changes (climate-reporting regulations)
• Reputation (increasing stakeholder expectations)

Reporting Standards

Frameworks Used: GRI Standards 2021, TCFD (phased approach)

Certifications: ISO 9001:2015, ISO 14001:2015, IATF 16949:2016

Third-party Assurance: Internal review by outsourced internal auditor, approved by KESMI’s Audit Committee

Environmental Metrics

ESG Focus Areas

• Corporate governance and business ethics
• Regulatory compliance
• Economic performance
• Energy and carbon footprint
• Occupational health and safety
• Fair employment practices

Environmental Achievements

• 2% reduction in year-on-year electricity consumption
• 3% reduction in total energy consumption
• Reduced Scope 1 emissions by 22% to 2,347 tonnes CO2e
• Reduced Scope 2 emissions by 4% to 52 kilotonnes CO2e
• Procured 1,740 MWh of renewable energy through the Green Electricity Tariff program

Social Achievements

• 709 (85%) employees received training and communications on anti-corruption policies
• Donated RM2,000 to the community, positively impacting 69 individuals
• Employees underwent an average of 34.7 hours of training
• Zero work-related fatalities and one minor injury

Governance Achievements

• Enhanced Non-discrimination Policy
• Implemented Workforce Risk Management Policy
• Achieved a FTSE4GOOD ESG rating of 3 out of 4 stars

Climate Goals & Targets

Environmental Challenges

• Global economic uncertainty
• Fluctuating demand
• Persistent supply chain disruptions
• Inflationary pressures
• Geopolitical tensions
• Intense competition and pricing pressures
• Cyclical and capital-intensive nature of the semiconductor industry

Mitigation Strategies

• Strategic emphasis on the automotive market
• Continuous improvement through extensive training programs
• Focus on service excellence
• Integration of green practices throughout operations
• Innovation, cost optimisation, and strategic agility

Supply Chain Management

Supplier Audits: Quarterly audits on contractors providing large numbers of outsourced workers; monthly audits on foreign worker accommodations.

Responsible Procurement

• Stringent criteria in selecting environmentally and economically accountable suppliers
• Supplier Code of Conduct
• Requirement for ISO 9001:2015 or higher quality management systems
• Elimination of conflict minerals

Climate-Related Risks & Opportunities

Physical Risks

• Increased intensity and frequency of storms and floods
• Change in average temperature

Transition Risks

• Policy and legal changes
• Reputation

Opportunities

• Energy efficiency
• Resource efficiency

Reporting Standards

Frameworks Used: GRI Standards 2021, TCFD

Certifications: ISO 9001:2015, ISO 14001:2015, IATF 16949:2016

Third-party Assurance: Internal review by outsourced internal auditor