MANAGING CLIMATE RISK CLIMATE-RELATED RISKS IMPACT MITIGATING RISKS AND OPPORTUNITIES Short-term Medium-term Long-term Policy and Legal Scenario: Mild (<2 deg Celsius warming) Scenario: Severe (>2 deg Celsius warming) Policy changes to impose taxes in the form of carbon taxes or plastic tax. Although we are currently not subject to carbon tax as our carbon emission is below the threshold level set by the Singapore authority, we anticipate there will be passed-on indirect increase in our business cost. Solar panels have been installed to transition to greener energy which will to some extent alleviate the increase in business cost. Failure to meet climate-related regulations. Failure to meet climate-related regulations may lead to fines and loss of business. We have a regulatory and compliance department to ensure compliance Technology Scenario: Mild (<2 deg Celsius warming) Scenario: Severe (>2 deg Celsius warming) High emission production process and equipment High emission from production processes and equipment contributes to global warming and leads to higher production cost. Adopt regular preventive maintenance making our manufacturing facility run more efficiently which in turn minimize energy consumption. Market Scenario: Mild (<2 deg Celsius warming) Scenario: Severe (>2 deg Celsius warming) Shifting customer preferences for more sustainable products Shifting customer preferences for more sustainable products may present a challenge if we are unable to meet their requirements. Conversely it brings opportunities for new products development in the industry, gravitating towards greener and sustainable products such as lower-carbon chemicals. As a chemical distributor, our goal is to align our product portfolio with customers’ demands. We are gradually introducing sustainable products. For example, we have added RSPO certified palm oil derivative products to our product portfolio. There will be potentially new growth areas within the industry that we can tap on to create new pillars of growth for our business. Reputation Scenario: Mild (<2 deg Celsius warming) Scenario: Severe (>2 deg Celsius warming) Increased expectations from stakeholders on sustainability practices Inability to meet stakeholders’ expectations may be detrimental to our reputation. Conversely aligning our Sustainability practices with the industry will enhance our business standing. Benchmarking our sustainability practices against internationally-recognised standards such as EcoVadis enables us to work closely with like-minded companies in the industry. MEGACHEM LIMITED ANNUAL REPORT 2025 88 SUSTAINABILITY REPORT
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