Discussion of carbon accounting on corporate decision-making—taking Taiwan’s cement industry as an example 1. Establish the problem The World Economic Forum proposed ten major impact issues in its global risk report, five of which are related to the environment. Sustainable development has become an important policy in various countries. Outsiders and insiders focus more on non-financial information in financial statements to measure the company's future development prospects. ISSB also announced two draft disclosure guidelines in March 2022. Among them, IFRS S2 points out "climate-related disclosure requirements", emphasizing the dangers that climate change may cause to a company's finances and how companies should respond to the impact of climate change. In response to sustainable development, carbon tariffs, carbon market transactions and carbon border adjustment mechanisms have emerged in recent years. Taiwan's National Development Council also announced the "2050 Net-Zero Emission Policy Path Blueprint" in 2022 to study the carbon pricing system and require companies to disclose it in their financial statements. Greenhouse gas emissions and reduction methods. And what are the trends in the company's strategy in response to carbon policies? What policies will be formulated that are different from the past? Will they reduce production to comply with carbon emission limits, or invest more capital expenditures to optimize production capacity. How these strategies will affect financial report numbers and whether traditional financial report analysis is no longer suitable is very important for outsiders to make judgments and is worth exploring. The cement industry is an industry with very high carbon emissions, accounting for approximately 7% of global carbon emissions. This article takes Taiwan cement as the object of discussion and analysis. First, in order to achieve carbon reduction goals, the company will simply introduce scientific optimization of operating processes. Taiwan Cement's 2021 sustainability report first proposed the slogan of "zero waste, zero pollution, zero emissions" and formulated scientific carbon reduction plans for cement, energy and waste materials, such as carbon dioxide capture technology, ultra-high performance concrete and Build a brake monitoring system. Whether these scientific operating systems are major expenditures of capital and affect individual indicators of financial statements will affect the judgment of outsiders. In addition, in order to develop new materials and production technologies, the company's proportion of R&D expenses changes year by year, which will also affect the decisions of outsiders. Second, carbon pricing is the basis of carbon rights collection and carbon fee systems. Many companies have now internalized external costs as costs through “internal carbon pricing”. Effective carbon pricing will encourage companies to invest in more energy-saving projects and reduce pollution and energy consumption. The current Taiwanese government has not yet formulated a complete carbon pricing system, and many companies have adopted internal carbon pricing as company costs. Although carbon pricing will increase corporate costs, in terms of future prospect assessment, companies can measure the difficulties they will face in the carbon border tax and carbon fee systems in the future, prepare in advance, and gain future market competitiveness. The sustainability report submitted by Taiwan Cement in 2021 stated that 100% of factory production equipment is subject to carbon prices, and an AI carbon reduction management plan has been introduced as a carbon reduction tracking and target to establish the basis for carbon pricing. However, TCC did not point out clear carbon pricing. It will be discussed whether incorporating internal carbon pricing will affect the judgment of outsiders when reading financial reports. Third, in response to the carbon reduction policy, the company plans to invest in what kind of industries, which will affect the equity method used in the financial report to transfer the investment benefits. The company originally moved to areas with lower carbon prices to avoid carbon prices. Whether it will incur more production costs due to the rapid increase in carbon reduction awareness is also the focus of outsiders' attention. 2. Solve problems (1) Capital expenditures and R&D expenses In its annual reports for 2020 and 2021, TCC pointed out that in recent years, it has been different from general capital expenditures and has added major capital expenditures on green energy and environmental protection. Among them, land purchased to expand storage space for alternative raw materials and reduce the consumption of natural resources; strengthen equipment required for waste treatment; subsidiary Taiwan Cement Green Energy invests in solar energy, wind power, etc.; investment in energy storage devices and various Environmental protection facilities. These capital expenditures are all related to reducing carbon emissions. It can also be seen that TCC has been moving towards energy transformation to respond to the global carbon reduction trend. Regarding R&D expenses, Taiwan Cement will invest more in carbon capture projects and actively invest in the development of ultra-high performance concrete. (2) Internal carbon pricing Since Taiwan Cement's production bases are mainly located in Taiwan and mainland China, the implementation of Taiwan's carbon fee system and China's inclusion of the cement industry in national carbon trading will have an impact on financial reports. Regarding the expenditure on carbon fees, this climate finance expenditure will account for 8.1% of the combined financial report revenue of Taiwan and Mainland China. In response to the impact of carbon fees, TCC has been more actively investing in alternative raw fuels, carbon capture and renewable energy. At the same time, carbon emission intensity has been included in the key performance assessment indicators at the factory to achieve internal carbon reduction goals. (3) Reinvestment using the equity method China has actively promoted carbon neutrality and other policies in recent years, and rising coal prices have forced Taiwan Cement to transform. Taiwan Cement uses intelligent electric mining trucks to achieve zero carbon emissions in the mining part and reduce its market share in China. In order to assist in the processing of local waste in China, TCC established environmental protection technology companies in Beijing, Hangzhou, and Guangxi, China in 2020, and has also become the largest single unit in the collaborative processing of urban waste in China. The sustainability report states: "Waste treatment is our (Taiwan Cement) 2030 solution." In addition to its past investments in China and India's International China Rubber Company, Taiwan Cement has recently expanded its market to Europe and actively developed low-carbon cement business. TCC cooperated with Turkey's OYAK Group in 2018 to establish a joint venture to enter the European market. In order to cope with the EU carbon trading system and reduce dependence on imported fuels, this joint venture actively researches alternative fuels, which not only reduces coal consumption but also stabilizes the supply of raw materials, killing two birds with one stone. TCC also entered Portugal in 2019 to develop alternative energy sources so that its gross profit margin can still be maintained at a certain level despite the rising coal prices caused by global oil supply. In addition to the European market, TCC has also expanded its territory to Africa and set up a new factory in Cameron. This new factory can effectively reduce the heat consumption required during the manufacturing process and reduce carbon emissions. In 2020, it invested in African ivory environmentally friendly cement and recognized investment income of 762 million yuan. From TCC's march into Europe and Africa, it can be seen that TCC is actively moving towards the new energy market. TCC continues to adhere to the principle of long-term strategic investment and actively expand its R&D and in-house capabilities in green energy, batteries, energy storage, and electric fast charging. Although it has performed poorly in the Chinese market in recent years, its active investment in energy creation, energy storage, and green energy will become its future competitiveness in response to the rise of global ESG awareness and reduce the costs that may arise from border carbon trading and carbon tariffs across countries. 3. Conclusion Judging from TCC’s accounting decisions in recent years, TCC is committed to promoting green energy, energy storage and renewable energy to catch up with the global carbon reduction trend. Not only has it invested more in carbon reduction technologies in capital expenditures and R&D expenses, it has also changed its global layout from cost reduction to carbon expense reduction. It has also established research subsidiaries such as TCC Green Energy, TCC Energy Storage, and Energy Technology. Green energy and alternative energy. The impact of carbon accounting on the cement industry not only changes the direction of cost research and development, but also changes the global layout strategy.
