2024 Task Force on Climate-Related Financial Disclosures (TCFD) Framework
Governance
onsemi's governance structure ensures oversight of climate-related risks and opportunities. The Governance and Sustainability (GS) Committee of the Board of Directors is responsible for environmental, health, safety, and sustainability initiatives, including climate strategy, risk management, and opportunities. This committee meets at least four times annually and comprises at least three independent Board members. The full Board reviews progress on climate and sustainability goals, including the Net Zero 2040 target, near-term SBTi-validated targets, and metrics such as energy usage, waste generation, and water withdrawal. Progress is reported quarterly by the Chief Marketing Officer and VP of Sustainability and ESG.
Climate-related risks and opportunities are managed at the highest organizational level. The Enterprise Risk Management (ERM) program, overseen by a Risk Committee including the CEO, CLO, CFO, CSO, EVP of Global Manufacturing and Operations, and SVP of Corporate Strategy, is responsible for identifying, managing, and mitigating risks. Executive staff are assigned as risk sponsors, working with risk owners for day-to-day management. ERM findings are communicated monthly to the Risk Committee and the Board. Business units and functional departments are responsible for understanding and acting on climate-related risks and opportunities, with input from various groups including finance, legal, manufacturing, business continuity, new product development, supply chain, ESG, human resources, and customer experience.
Strategy
onsemi identifies and assesses the actual and potential impacts of climate-related risks and opportunities on its business, strategy, and financial planning. These impacts are considered across the short, medium, and long term.
Climate-Related Risks and Opportunities: Identified risks include transitional and physical risks affecting operations, value chain, financials, supply chain, workforce, disclosure, and reputation. Opportunities arise from increased demand for onsemi products related to climate solutions. These impacts can be general or location-specific.
Impact on Business, Strategy, and Financial Planning: Realized impacts are integrated into strategic decision-making, including business continuity, capital expenditure, and new product development.
Resilience and Scenario Analysis: onsemi conducts climate scenario analysis to inform its climate adaptation and resilience plan. This involves considering different climate scenarios, including a 2°C or lower scenario, to understand potential impacts and build resilience. The scenarios used are:
- Failure to Decarbonize: Warming above 3°C by 2100, with international cooperation breakdowns and increased irreversible climate effects.
- Orderly Decarbonization: Warming limited to 1.5°C by 2100, with advancements in sustainable technology, global decarbonization policies, and carbon pricing.
- Disorderly Decarbonization: Warming around 2°C by 2100, with abrupt and uneven climate policies and increased financial consequences.
This analysis helps identify and integrate relevant climate-related risks and opportunities into the company's overall business strategy.
Risk Management
onsemi's processes for identifying, assessing, and managing climate-related risks are integrated into its overall risk management framework.
Identification and Assessment: Scenario analysis is used to understand the impacts of climate change on business operations, corporate strategy, and the value chain. This helps identify potential physical and transitional risks. These scenarios are used to understand potential risk exposure and build resilience.
Management: Action planning and trigger monitoring activities are undertaken to build resilience to potential climate-related risks. Owners are assigned to monitor and manage these risks. The ERM team conducts a yearly risk identification and prioritization cycle, including interviews with key leaders across functions. Outputs are used by the Executive Risk Committee to create yearly risk mitigation plans.
Integration: Climate-related risk and opportunity assessment is integrated into business continuity planning, capital expenditure planning, and new product development.
Metrics and Targets
onsemi monitors various quantitative metrics to assess climate-related risks and opportunities and manages these through defined targets.
Metrics Used: Metrics include total greenhouse gas emissions, total energy consumption (including percentage from renewables), total water withdrawal, and energy, emissions, and water intensity.
GHG Emissions (FY2024):
- Scope 1: 776,500 MTCO2e
- Scope 2: 705,200 MTCO2e
- Scope 3: 952,200 MTCO2e
Risks Related to GHG Emissions: Regulations aimed at decarbonization may lead to increased operational expenditures due to carbon prices and carbon border adjustments.
Targets:
- Achieve Net Zero Emissions by 2040 (Net Zero 2040) across Scope 1, 2, and 3.
- Meet near-term targets validated by SBTi.
- Utilize 50% renewable energy by 2030 and 100% by 2040.
Risk and Opportunity Disclosures
Transition Risks
Transition risks are most significant under the Orderly and Disorderly Decarbonization scenarios.
Own Operations
- Risk: Introduction of national carbon pricing schemes and/or carbon border adjustment mechanisms.
- Financial Impact: Increased expenditure, potential reduction in product margins, and increased exposure to legal liability.
- Timeframe: Negligible impact currently, increasing in the medium term.
- onsemi Response: Achieving Net Zero Emissions, integrating with strategic planning and risk management (e.g., internal carbon price in capital expenditure planning), and enhancing disclosure.
- Risk: Regulatory limits on carbon-related processes.
- Financial Impact: Reduced revenue from production capacity reduction and increased exposure to legal liability.
- Timeframe: Negligible impact currently, increasing in the medium term.
- onsemi Response: Same as above.
- Risk: Varied availability of renewable energy.
- Financial Impact: Increased expenditure for sourcing renewable energy.
- Timeframe: Some impact currently, increasing in the medium term, particularly in the Failure to Decarbonize scenario.
- onsemi Response: Same as above.
- Risk: Increased sustainability reporting and assurance requirements.
- Financial Impact: Increased expenditure on staff and data/information systems.
- Timeframe: Impact present today, increasing in the medium term.
- onsemi Response: Same as above.
Supply Chain
- Risk: Carbon pricing schemes and/or carbon border adjustment mechanisms applied to onsemi suppliers.
- Financial Impact: Increased expenditure for raw materials, products, and services; potential reduction in product margins.
- Timeframe: Negligible impact currently, increasing in the medium term.
- onsemi Response: Understanding supplier emissions through Scope 3 inventory and supplier engagement, including incorporating ESG matters into supplier scorecards.
- Risk: Limitations on access or availability to raw materials due to increasing regulations.
- Financial Impact: Reduced revenue if raw materials cannot be supplied, and increased expenditure for alternate suppliers.
- Timeframe: Negligible impact currently, increasing in the medium term.
- onsemi Response: Same as above.
- Risk: Pressure to demonstrate deforestation-free supply chain.
- Financial Impact: Increased expenditure for investigating deforestation and potentially switching suppliers.
- Timeframe: Negligible impact currently, increasing in the medium term.
- onsemi Response: Same as above.
Physical Risks
Physical risks are most prevalent under the Failure to Decarbonize scenario.
Own Operations
- Risk: Production disruption from extreme weather (including indirect impacts like government-imposed power restrictions).
- Financial Impact: Reduced revenue from lost production and increased expenditure for restarting production.
- Timeframe: Impact occurs in some locations, with increasing frequency and severity in the medium term under all scenarios.
- onsemi Response: Enhanced Business Continuity Planning, Infrastructure Planning considering climate scenarios, and Accelerate Resource Efficiency (energy conservation, efficiency measures, water recycling).
- Risk: Damage to onsemi facilities.
- Financial Impact: Increased expenditure for repairs and insurance costs.
- Timeframe: Impact occurs in some locations, with increasing frequency and severity in the medium term under all scenarios.
- onsemi Response: Same as above.
- Risk: Limits to energy and water availability.
- Financial Impact: Reduced revenue from lost production and increased expenditure for higher energy and water costs.
- Timeframe: Impact occurs in some locations, with increasing frequency and severity in the medium term under all scenarios.
- onsemi Response: Same as above.
- Risk: Extreme weather impacts employee health, safety, and productivity.
- Financial Impact: Increased expenditure and liability risk, potential reduced revenue from absenteeism.
- Timeframe: Impact occurs in some locations, with increasing frequency and severity in the medium term under all scenarios.
- onsemi Response: Same as above.
Supply Chain
- Risk: Extreme weather impacts onsemi supplier locations and/or supply chain logistics.
- Financial Impact: Reduced revenue from lost production.
- Timeframe: Impact occurs in some locations, with increasing frequency and severity in the medium term under all scenarios.
- onsemi Response: Exploring incorporation of future scenarios into supplier engagement and business continuity requirements for prospective suppliers.
Climate-Related Opportunities
Climate-related opportunities are most significant under the Orderly and Disorderly Decarbonization scenarios.
Customer/Market Demand
- Opportunity: onsemi products supporting electrification of transport, infrastructure, and wider renewable energy.
- Financial Impact: Increased revenue due to higher market demand for electrification technologies.
- Timeframe: Impact occurs in some locations and sectors, with potential to increase and expand to new geographies/sectors.
- onsemi Response: Sustainable Product Ecosystem strategy targeting decarbonization and efficiency applications; Integration into Strategic Planning for new product development and manufacturing capacity expansion.
- Opportunity: onsemi products supporting solutions for energy, water, and other resource efficiency.
- Financial Impact: Increased revenue due to higher market demand for resource efficiency technology solutions.
- Timeframe: Impact occurs in some locations and sectors, with potential to increase and expand to new geographies/sectors.
- onsemi Response: Same as above.
- Opportunity: onsemi products supporting technology for avoided emissions and carbon removals.
- Financial Impact: Increased revenue due to higher market demand for avoided emissions and carbon removal technology.
- Timeframe: Negligible impact currently, increasing in the medium term.
- onsemi Response: Same as above.
Own Operations
- Risk: Extreme weather impacts employee health, safety, and productivity.
- Financial Impact: Increased expenditure and liability risk, potential reduced revenue from absenteeism.
- Timeframe: Impact occurs in some locations, with increasing frequency and severity in the medium term under all scenarios.
- onsemi Response: Enhanced Business Continuity Planning, Infrastructure Planning considering climate scenarios, and Accelerate Resource Efficiency.
