Today, the pressure that climate change puts on companies is no longer only moral, but also financial. In January, the EU’s Carbon Border Adjustment Mechanism officially came into force. Carbon emissions, no longer confined only to mentions in sustainability reports, are now an integral part of import declarations, customs clearance procedures and trading costs.
In addition to the new set of EU regulations, it is important to note that the externalization of climate commitments that companies have so successfully deployed before — one that passes on emission consequences to the public and leaves the cost of a green transition for the future — is no longer functional. Nevertheless, many medium-sized enterprises in Taiwan still treat climate governance as an issue that does not apply to them. Factories and equipment run all the same, and electricity costs are squeezed wherever possible. If the customer does not specifically ask, nothing changes. When regulations finally hit, companies complain that the government is rushing them, that clients are too demanding and that the EU is overly bureaucratic.
This is not because they are uninformed, but because of an outdated business mindset that says cash flow is more important than institutional shifts and that costs are only real when formally billed. However, in the current era, this instinct is especially dangerous, because it leads companies to mistakenly see clean energy transitions as optional, rather than a matter of survival.
What is doubly concerning is that instead of taking real action, many companies choose to perform the bare minimum. They may conduct investigations, write reports and make noises about net zero, but as soon as it comes to replacing equipment, adjusting manufacturing processes, reorganizing supply chains, or expending capital, they retreat.
The International Financial Reporting Standards Foundation’s guidance report last year on disclosing climate-related transition plans addresses this issue. Companies must not only provide a direction for their plan, but explain their assumptions and dependencies, and make impact assessments for financial performance and cash flow. In other words, the market is no longer just asking for an environmental, social and governance (ESG) framework, but for substantive follow-through.
The Taiwanese industry’s impasse, therefore, has never been just about funding. Last year, the government established a carbon pricing system with standard and preferential rates and clear declaration and payment systems. The true roadblock is that many small to medium-sized enterprises are still accustomed to understanding regulations as negotiable administrative burdens, rather than important signals of the modern industrial order being rewritten. With global commitments having failed to contain warming to 1.5°C, regulatory systems are necessarily set to become more exhaustive and would penetrate supply chains more directly. This is not alarmist, it is simply the reality that all export-oriented economies must face.
Taiwanese companies must be ready to bite the bullet on climate change commitments, not only by giving up older machinery, but also by ignoring the nostalgic urge to hold on a little longer until the wind changes.
It is not necessarily those with the highest emissions and worst technologies that would be eliminated first, but those who are last to admit to a simple fact: The shrewdly obtained profits of the past only pushed climate costs onto the rest of society, the environment and the next generation. Now that the bill has arrived, the challenge is not just to pay up, but to admit that one should have done so sooner.
Jack Huang is a consultant.
Translated by Gilda Knox Streader
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