Taiwan Semiconductor Manufacturing : 2021 Materiality Analysis Report

2021

TSMC Materiality Analysis Report

Contents

03

Letter from the ESG

Committee 04

Chairperson

Executive

Summary

08		Analysis Process 8	12
Materiality		Methodology 9	Results
Analysis
Guidelines

19

Management

Approach

05		Sustainability Management at TSMC 5
Background		Materiality Analysis Roles 5
		Materiality Definitions 6
		GRI 3 Material Topics Analysis Process 7

Survey Participants 12

Stakeholder Concerns 13

Impact on TSMC Operations 14

Material Issues 15	32
Correlation Analysis 17		Definitions of ESG Issues 32
	Appendix		Glossary 34

Material Issues and Impact 19		References 34
Management Approach for Material Issues 20

TSMC Materiality Analysis Report

Letter from the ESG

Executive

Background

Materiality Analysis

Results

Management

Appendix

3

Committee Chairperson

Summary

Guidelines

Approach

Letter from the ESG Committee Chairperson

As a world-leading dedicated IC foundry service provider, TSMC is committed to delivering an innovative technology platform to help customers achieve various chip innovations and to provide products that are more advanced, powerful, energy-efficient, and safe. Our goal at TSMC is to drive positive change and progress in society through technology.

As TSMC strives to achieve sustainable management, we have become deeply aware that corporate growth cannot be independent of social development.

TSMC has built a mutually dependent and mutually influential relationship with employees, shareholders/ investors, customers, suppliers/ contractors, government/associations, and community residents. In the face of complex issues and our many stakeholders, TSMC must spotlight these issues, communicate our objectives, and determine priority sustainability issues to exert our influence. TSMC has taken an in-depth evaluation and looked into the risks and opportunities from various ESG issues and also listened

to our stakeholders' expectations and suggestions when identifying TSMC's material issues, planning sustainable strategies, and outlining long-term targets. All the while, TSMC continues to regularly disclose ESG information through diverse channels.

TSMC has conducted materiality analysis, collecting feedback from stakeholders to understand their concerns and changing attitudes toward TSMC's ESG issues.

In the 2021 materiality analysis, TSMC expanded the scope of engagement surveys to include stakeholders concerned with TSMC and increased the response rate by 27%. TSMC also compiled feedback from various management personnel and colleagues in charge of promoting sustainable development to identify important sustainability issues, their impact

on TSMC operations, and potential concerning challenges. In 2021, a total of 206 people offered their feedback, a 37% increase from the previous year.

TSMC has positioned the sustainability report as a management tool.

Before compiling the report, we ask departments to submit a concrete action plan to improve issues they are responsible for and a data quality checklist which is approved by the VP or higher of each department to maintain the effectiveness and credibility of disclosed information. For important sustainability issues, TSMC invites business units to report directly to the ESG Committee regarding progress toward long-term goals and future action plans as part of our efforts to fulfill TSMC's commitment to sustainability.

TSMC strives to fulfill its responsibilities as a corporate citizen and materiality analysis is an important guideline

for us as we promote sustainable management. Looking into the future, TSMC will continue to perfect materiality analysis methods and processes to strengthen stakeholder communication and partnership as we work together to map out a better sustainable blueprint towards common good.

TSMC strives to fulfill its responsibilities as a corporate citizen and materiality analysis is an important guideline for us as we promote sustainable management.

Lora Ho, Senior Vice President and ESG Committee Chairperson

TSMC Materiality Analysis Report

Letter from the ESG

Executive

Background

Materiality Analysis

Results

Management

Appendix

4

Committee Chairperson

Summary

Guidelines

Approach

Executive Summary

TSMC conducts materiality analysis annually, collecting stakeholder expectations and feedback to identify material issues to guide the sustainability report. Based on the materiality analysis outcomes, TSMC will realign sustainability targets and strategies for planning and reallocating resources into TSMC's material issues.

In 2021, TSMC changed the frequency of materiality analysis from once a year to once every three years to comprehensively track trends and changes in the long-term targets of all material issues and to also help perfect the Plan-Do-Check-Act (PDCA) management cycle. Based on the 2020 materiality analysis, TSMC confirmed 119 ESG issues relevant to TSMC, aligning with international sustainable standards, trends, and stakeholder perspectives. With feedback from 17 TSMC departments as well as vice presidents and senior vice presidents of all BUs, TSMC determined 23 ESG issues on governance, economy, environment, and society.

During the materiality analysis process, TSMC ranks ESG issues by priority in consideration of stakeholder concerns and impact on TSMC operations. To confirm the objectiveness of results, the ESG Committee determines material issues according to stakeholder perspective and TSMC's ESG focuses in recent years.

In 2021, a total of 1,082 stakeholders and 206 TSMC executives/colleagues participated in the materiality analysis. In the 2021 materiality analysis, TSMC defined 14 material issues and reviewed corresponding long-term goals, programs, and resource allocation.

Compared to last year, stakeholders and TSMC executives were more concerned with Climate and Energy in 2021. Therefore, TSMC drastically increased its position in the materiality matrix. Also, to support the Diversity and Inclusion Statement, TSMC added the new material issue of Diversity and Inclusion.

In addition, TSMC has been using correlation analysis to explore whether there are any correlations or dependency between ESG issues. TSMC uncovered that Business Continuity, Product Quality and Safety, Risk Management, and Ethics have the highest positive correlation with other ESG issues from stakeholder surveys, while Sustainable Supply Chain, Regulatory Compliance, and Information Security have the highest positive correlation with other ESG issues from internal impact surveys filled out by executives and employees. Though the analysis outcome does not determine material issues, it nonetheless remains helpful by giving TSMC insight into shifting stakeholder concerns and correlations between ESG issues, allowing us to perfect stakeholder communication strategies.

In the future, TSMC will plan and execute a more comprehensive and in-depth statistical analysis as well as continue to advance the materiality analysis guidelines so that we can convert stakeholder concerns into valuable information that can help the company promote sustainable management.

During the materiality analysis process, TSMC ranks ESG issues by priority in consideration of stakeholder concerns and impact on TSMC operation

TSMC Materiality Analysis Report

Letter from the ESG

Executive

Background

Materiality Analysis

Results

Management

Appendix

5

Committee Chairperson

Summary

Guidelines

Approach

Background

Sustainability Management at TSMC

TSMC's ESG Policy is the top guiding principle for sustainable development at TSMC. The TSMC ESG Matrix set by TSMC's Founder, Dr. Morris Chang, clearly defines TSMC's ESG scope. In response to the vision of "Uplifting Society," TSMC implements sustainability governance effectively in its core business of dedicated IC foundry services. TSMC actively develops positive relationships with all stakeholders, including employees, shareholders/ investors, customers, suppliers/contractors, and society to create shared value and pursue a sustainable future.

In compliance with the vision and mission of the TSMC ESG Policy, TSMC has established the ESG Steering Committee, the highest-level ESG decision-making center in TSMC. TSMC's Chairman chairs the ESG Steering Committee and the ESG Committee chair acts as the executive secretary. Senior executives from various functions work alongside the two committee chairs to evaluate the Company's core operational capacity, establish mid-to-long term ESG goals, and align UN SDGs with the Company's core advantages for a development blueprint.

The ESG Committee is an interdepartmental communication platform that serves to ensure ESG Steering Committee decisions are upheld. ESG Committee members are senior executives appointed to the Committee by Chairman Mark Liu and are tasked with the goal of aligning with international standards, gaining insight into international trends, and building a top-down operation model across the company. ESG Committee members will also spearhead annual SDG objectives and strategies across different committees, track performance, and balance stakeholder interests to ultimately ensure that ESG Strategies are fully integrated into the Company's daily operations. To such ends, TSMC identifies issues with significant impact on TSMC operations through materiality analysis and responds to stakeholder concerns and expectations regarding ESG issues so that all functions can prioritize dimensions with a greater impact when investing in sustainability programs.

Materiality Analysis Roles

TSMC conducted the materiality analysis in line with GRI 3: Material Topics 2011 from the GRI Universal Standards 2021 released in October 2021 by the Global Sustainability Standards Board (GSSB).

Objectives of Materiality Analysis	stakeholder
	Learn about
	concerns across
	different ESG issues

Outline a sustainable strategy blueprint

Compile and	Strengthen effective	Identify positive and
disclose the	communication	negative impact
sustainability report	with external parties

In response to the vision of "Uplifting Society," TSMC implements sustainability governance effectively in its core business of dedicated IC foundry services. TSMC actively develops positive relationships with all stakeholders, including employees, shareholders/investors, customers, suppliers/contractors, and society to create shared value and pursue a sustainable future.