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Creating sensory experiences to enhance well-being and sustainability
n 2023, we introduced a new mission: "To become a worldclass provider of audio-visual perception solutions," and a brand proposition: "Creating sensory experiences to enhance well-being and sustainability." This new brand direction integrates six core values to deepen our corporate culture and bring our vision to reality.
01
Established the Sustainable Development and Nomination Committee
02
Referenced IFRS and GRI applying the principle of "Double Materiality"
Analysis and Identification
Analysis and Identification of Material Issues
MERRY conducts regular sustainability impact assessments each year to review and evaluate high-impact issues, formulate sustainability promotion strategies, and action plans, and set short, medium, and long-term goals for key items. In 2023, with the official release of the IFRS Sustainability Disclosure Standards and the European Sustainability Reporting Standards (ESRS), MERRY adopted "GRI 3: Material Topics 2021" as the foundation. Simultaneously, it also referenced IFRS and ESRS guidelines on sustainability impacts, applying the principle of "Double Materiality" to incorporate sustainability impacts into Impact Materiality and Financial Materiality. This involves a five-stage identification process to assess the impact of MERRY's operational activities on social, environmental, people, and human rights sustainability aspects (external impacts) and the financial impacts on MERRY due to the need to manage these external impacts (internal impacts). By balancing these internal and external impacts, the sustainability impact analysis results are produced, determining the key sustainability issues to be prioritized for reporting.
Based on MERRY's operational activities, business relationships, and stakeholder profiles, relevant sustainability issues are collected with reference to global sustainability reporting standards (GRI, SASB, and TCFD) and international sustainability evaluation indicators. The Sustainable Development and Nomination Committee, the Sustainable Development Promotion Team, and relevant core executives analyze the degree of actual or potential positive or negative impacts each issue has on the economy, environment, and people (including human rights) within the company's operational activities and business relationships. They quantify the impact on their own operations and further discuss the importance of each issue, ranking them accordingly. Finally, the Sustainable Development & Nomination Committee discusses and confirms the key sustainability issues, prioritizing the disclosure of related goals and management outcomes.
Explanation of Sustainable Impact Assessment
Identification of Priority Key Issues for Disclosure
Based on the results of the sustainability impact analysis, using the double materiality assessment method, MERRY has identified a total of 8 key issues: 8 negative and 4 positives. Additionally, there are 7 secondary issues that are categorized for continuous monitoring. After final confirmation by the President, the management policies and promotion outcomes of the 8 key issues are prioritized for reporting in this report. Since this year marks the first use of the double materiality assessment method, there are differences compared to the previous year’s analysis approach. Specifically, the "Energy Management" issue identified in previous years has been merged into the "Climate Strategy" for a comprehensive assessment in 2023.
Material Sustainability Issues and Corresponding Standards
We reviewed the 31 topic standards of the GRI Sustainability Reporting Standards and matched them with our material issues. We selected 9 relevant GRI topic standards and 2 customized topics. Additionally, we aligned with the SASB Hardware Industry Standards to ensure the comprehensiveness and compliance of the report. This initiated the preparation process for this report.
Timeframe of Impact for Material Sustainability Topics
| Material Disclosure Topics | Explanation of External Sustainability Impacts | Explanation of Internal Financial Impacts | Timeframe of Impact | |
|---|---|---|---|---|
| Economic Influence | Negative | The relocation of manufacturing plants in response to customer transfers has impacted employees and the supply chain. | The volatility of manufacturing plants has led to increased capital expenditures, changes in funding arrangements or investment structures, and short-term cost increases for MERRY and suppliers due to reduced yield rates at new plants, as well as additional recruitment and training costs for employees. | Already Occurred |
| Positive | Increasing revenue through clean technology can improve the overall carbon reduction results of the industry and support the promotion of green finance. Additionally, advocating for sustainable materials and high-energy-efficiency products can drive supply chain recognition of sustainable design development and material demand. | Accelerating the development and mass production of sustainable materials and high-energy-efficiency products helps meet customer demand, increase market share, and improve gross margins. | Already Occurred | |
| Innovation Management | Negative | The rising demand for low-energy products and low-impact environmental materials underscores the importance of keeping pace with competitors in terms of development progress and future-oriented product design capabilities. Failure to do so may impact order acquisition and revenue generation if the products do not meet customer needs. | If there is a lag in product development due to sustainable design, it may result in insufficient order acquisition capability for newly introduced sustainable products, leading to a decline in revenue. Additionally, existing product profit margins may be lower, impacting the pre-tax profit and loss. | Already Occurred |
| Positive | MERRY has initiated plans for sustainable product design. If it can outperform competitors in terms of implementation schedule or early deployment to meet customer demand, it can potentially increase market share. | Responding to the introduction of new materials may require increased investment in research and development expenses. Additionally, capital expenditures may increase due to the addition of new production line equipment for new products. However, mass production of new products can lead to higher operating income. | Already Occurred | |
| Quality Management | Negative | Some suppliers occasionally provide materials that do not meet quality standards, resulting in sporadic customer complaints and return incidents. | Customer complaint incidents may lead to increased return costs or replenishment expenses, and may even result in additional compensation fees. | Already Occurred |
| Sustainable Supply Chain | Negative | The increasing environmental and social requirements from strategic partner customers, such as sustainable materials, recyclable materials, zero landfill waste, and human rights due diligence, lead to rising direct costs. | The limited choice of suppliers restricts the bargaining power of suppliers, leading to the risk of increased raw material costs. | Already Occurred |
| Product Responsibility | Negative | As international regulations on substance management become increasingly stringent, failure to complete improvements before the effective deadline may result in operational disruptions, such as the inability to ship goods to customers. | Suppliers may potentially reduce the number of providers in the same m a t e r i a l i n d u s t r y i n the future due to their inability to provide materials that comply with substance management regulations. This reduction in supply may lead to cost increases due to decreased supply. | Already Occurred |
| Positive | MERRY has utilized the GPMS (Green Product Management System) platform to manage upstream raw materials, enabling rapid identification of future restrictions on hazardous chemicals to comply with regulations or early customer requests. | Through systematic management, it's possible to quickly identify affected materials and engage with suppliers early to ensure access to compliant materials before regulatory or customer-requested deadlines. This proactive approach enables the early introduction of alternative materials to meet customer demands, ultimately increasing order volume. | Already Occurred | |
| Talent Attraction and Retention | Negative | In recent years, the semiconductor industry has exerted significant force in talent acquisition. For MERRY , which has been focusing on the audio field for nearly 50 years, the competition for top talent poses a challenge as it seeks to compete in the future of audio and sensory products. This could potentially result in a shortage of talent. | In response to the current expectations of job seekers for fixed salaries, there may be an increase in employee recruitment costs. Additionally, related human resource costs such as research and development expenses, operating expenses, and management expenses are likely to continue growing to cope with the dual impact of intense competition for electronics and electrical engineering talent and declining birth rates. | 1-2 Years |
| Positive | MERRY benchmarks its salary and benefits against companies in central Taiwan to provide employee benefits that exceed regulatory requirements. Additionally, it has implemented an employee stock trust system in hopes of attracting top talent to join MERRY and retaining existing high-performing employees. | To create a competitive workplace environment, MERRY enhances its employee care measures from the aspects of work, life, and health. Additionally, it provides an employee stock trust system and increases related expenses for salary and benefits. Through the recruitment and retention of top talent, there is an opportunity to accelerate the development schedule of new technologies or products, enabling early mass production to increase operating income. | Already Occurred | |
| Information Security | Negative | While MERRY continues to improve and strengthen its existing information security deployments, the ever-evolving threats in information security pose risks such as data breaches or loss, leading to financial losses or ransom demands. | Continual improvements are made to systems and network equipment, involving capital expenditures for equipment procurement and operating expenses for services provided by cybersecurity consultants. Interruptions in operations and resulting downtime losses may occur due to system disruptions or data loss. Additionally, additional expenses may arise from ransom demands if data is stolen. | Already Occurred |
| Climate Strategy | Negative | Strategic partner customers have been increasing MERRY' requirements for carbon reduction and energy efficiency performance year by year. The continued intensity of carbon reduction and energy-saving requirements in both products and operations may lead to situations where technology does not meet customer needs or where order amounts decrease due to processes being unable to meet customers' energy-saving goals. | To enhance MERRY' competitive advantage in both product and technology aspects, increasing research and development manpower and investing in related research and development expenses will be undertaken for technology development and product testing. Additionally, on the process side, in response to customer demands for increased green energy usage and energy efficiency, both direct costs will rise through the purchase of green energy (or renewable energy certificates) and capital expenditures will be made to improve equipment efficiency | Already Occurred |