Risk Management

Natural Capital Depletion: Avoiding the Impacts of Raw Material Extraction on Natural Capital

Mineral

Electronic products require a variety of functionally significant metals depending on their performance needs, among which tantalum, tin, tungsten, and gold are essential for the operation of electronic devices. These metals are used in manufacturing components such as resistors, capacitors, central processing units, hard drives, memory modules, motherboards, and connectors. In 2024, analysis showed that the metals used by ASUS were sourced from 693 smelters, with the distribution as follows: Asia 62.0%, the Americas 14.8%, Europe 14.8%, Africa 7.5%, and Australia 1.0%. In line with the Organization for Economic Cooperation and Development (OECD) due diligence procedures, ASUS conducts supply chain smelter investigations, establishing management mechanisms, identifying and assessing risks, formulating risk mitigation measures, and disclosing management results to ensure responsible minerals management. Since 2018, 100% of ASUS’ tantalum, tin, tungsten, and gold have been sourced from qualified smelters, thereby avoiding issues such as labor exploitation, armed coercion, child labor abuse, and environmental destruction caused by illegal operations.

As one of the designated responsible minerals, tin is not only prohibited by ASUS from being sourced from conflict-affected areas but also monitored for origins linked to unsustainable mining in Indonesia. Unregulated extraction, coupled with neglect by multinational corporations, has resulted in poor working conditions and severe environmental damage in Indonesian mining operations. The Indonesian Tin Working Group—a coalition of electronics companies, tin producers, industry associations, and civil society advocates—seeks to address these challenges. ASUS has joined this organization to support project initiatives aimed at mitigating the environmental impacts of unsustainable mining in the region.

Cobalt, a critical material for battery production, is another focus area. According to the European Union’s Critical Raw Materials Review Report, one-third of the world’s cobalt is sourced from the Democratic Republic of Congo and neighboring countries, where illegal mining risks are prevalent. In 2019, the Responsible Minerals Initiative (RMI) classified cobalt as a fifth-category managed mineral. ASUS has developed a five-year smelter qualification transition plan, requiring suppliers to progressively increase the proportion of cobalt sourced from qualified smelters, with the goal of achieving 100% qualified cobalt sourcing by 2025.

Boundaries and Scope

In accordance with the definition in the Product Category Rules (PCR), ASUS defines the boundaries and scope to cover the main components and supply chains of products that account for 90% of its revenue:

• Value chain: Tier 3 raw materials, Tier 2 components, Tier 1 assembly by contract manufacturers, and Tier 0 ASUS operations, including product design, validation, and marketing activities.
• Main components: CPU, memory, display, GPU, resistors, capacitors, motherboards, connectors, mechanical parts, hard drives, cables, batteries, power supplies, keyboards, and packaging.
• Environmental impact indicators: greenhouse gases, water resources, waste, and water pollution.

Following the 2024 assessment of operational activities and value chain environmental footprints, ASUS reports the current status for water resources, solid waste, and greenhouse gases as follows:

Environmental Profit and Loss Analysis Results

The results of the Environmental Profit and Loss analysis are as follows: greenhouse gases account for the highest share at 53.07%, followed by freshwater resources—comprising wastewater pollution at 45.32% and water resource usage at 0.88%—and waste at 0.73%.

Breaking down further by environmental hotspots for each tier—Tier 0 ASUS operations (design, validation, and marketing), Tier 1 contract manufacturing assembly, Tier 2 components, and Tier 3 raw materials (as shown in the figure):

• Greenhouse gases: The primary impacts are concentrated in Tier 1 and Tier 2 of the value chain, mainly from energy consumption and process emissions, indicating that carbon reduction remains ASUS’ top environmental management priority. The relative increase in greenhouse gas emissions in 2024 is mainly due to updates to monetization factors and increased procurement from upstream suppliers.
• Wastewater pollution: Accounting for 45.32% of total environmental impact, wastewater pollution is the second-largest environmental factor. It primarily originates from the use of chemicals and cleaning activities in production processes, highlighting the need to strengthen wastewater discharge management.
• Water resource usage: Water usage accounts for 0.88%, with the majority concentrated in water-intensive manufacturing processes. In the future, water recycling, reuse, and efficiency optimization should be strengthened to address the increasing global pressure on water resources.
• Solid waste: The greatest environmental impacts occur during the raw material extraction and component manufacturing stages. ASUS headquarters adheres to a zero-landfill standard, reducing waste generation and environmental burdens by improving process efficiency, promoting a circular economy, and expanding material recycling. ASUS also collaborates with suppliers to enhance waste management at the production stage and promote resource reuse.

Compared to climate change, which can be addressed through global-scale mitigation and removal of greenhouse gas emissions to achieve unified targets such as limiting warming to within 1.5°C, biodiversity issues involve highly complex interactions between freshwater, marine, and terrestrial natural capital and human activities. Due to variations in geographical conditions and sources of pressure, biodiversity management requires more region-specific assessment and management approaches.

Risk and Opportunity Identification

Based on the environmental hotspot analysis results¹ASUS focused on freshwater resources—the second-largest environmental impact—and, in accordance with the TNFD guidance and the Network for Greening the Financial System’s report Nature-related Financial Risks: A Conceptual Framework to Guide Action by Central Banks and Supervisors, identified nature-related risks and opportunities for its operations and key suppliers.

ASUS defines nature-related risks as follows:

• Physical risks: Water resource usage, where ASUS’ access to water resources may be reduced due to environmental degradation and the loss of ecosystem services, potentially resulting in economic losses for ASUS and its supply chain.
• Transition risks: The likelihood of facing stricter regulations on water resources, soil, and waste, with an expanded regulatory scope for the supply chain in the future, requiring the development of corresponding measures.

ASUS Value Chain Biodiversity Impact Assessment Tool

In 2023, ASUS identified supplier impacts on biodiversity by utilizing geospatial databases such as the Integrated Biodiversity Assessment Tool (IBAT) and Key Biodiversity Areas (KBA). In 2024, ASUS further enhanced its biodiversity inventory capabilities. Considering that key suppliers are primarily located in mainland China, ASUS incorporated official local biodiversity databases, including data layers for National Nature Reserves, National Wetland Parks, and National Parks, to improve the accuracy and comprehensiveness of overall biodiversity risk assessments.

Biodiversity Impact Assessment of Operational Headquarters on the Local Environment

Last year, the operational headquarters conducted analysis using online databases such as the Integrated Biodiversity Assessment Tool (IBAT) and Key Biodiversity Areas (KBA), and was not located within internationally recognized biodiversity key areas. Considering that overall environmental impacts across the value chain are primarily concentrated in the supply chain, ASUS will focus on supply chain location analysis.

Biodiversity Impact Assessment of Supplier Sites on the Local Environment

ASUS has approximately 700 suppliers worldwide, with around 70% located in mainland China. Among these, about 26% are in the Pearl River Delta region, such as Shenzhen and Guangzhou; approximately 21% are in the Yangtze River Delta region, including Suzhou and Shanghai; around 10% are in the Chongqing area and Central China; and about 4% are in the Eastern Fujian region. Other suppliers are located in the Indochina Peninsula and Taiwan, accounting for approximately 30%.

Based on the results of the environmental profit and loss assessment and natural capital impact pathways, ASUS conducted point-based analysis using the latitude and longitude data of key freshwater resource suppliers. This was supplemented with both global biodiversity mapping scales and national-level analyses to evaluate the relationship between supplier sites and biodiversity-sensitive areas, thereby strengthening biodiversity-related audits and management. The 2024 analysis identified one new supplier in Vietnam located near the An Hai Biodiversity Hotspot, and two new suppliers in mainland China situated near³six National Wetland Parks, as illustrated in the figure below. To prevent potential impacts from ASUS suppliers on local biodiversity, newly identified suppliers in 2024 are subject to enhanced biodiversity audits—for example, reviewing biodiversity policies and verifying compliance reports and reduction plans related to wastewater and waste. Suppliers identified in the previous year will continue to be included in the annual audit process to ensure ongoing compliance.。