Navigating ESG in Taiwan (Part II): Practical Tips for Incorporating ESG Clauses into Supply Agreements
This article is the second in our series on navigating ESG requirements in Taiwan. As noted in Part I, Taiwan’s ESG regulatory framework continues to diverge in important ways from that of the European Union (EU). Most notably, mandatory ESG disclosures in Taiwan are currently limited to publicly listed companies or companies in certain designated industries. As a result, foreign companies seeking to assess their Scope 3 emissions or gather environmental data from Taiwanese suppliers may find that such information is unavailable unless those suppliers are subject to the mandatory disclosure regime.
Moreover, although disclosure of Scope 3 emissions is encouraged in Taiwan, it is not yet mandatory. Accordingly, EU-based companies subject to the Corporate Sustainability Reporting Directive (CSRD) may find it necessary to impose ESG-related obligations contractually in order to obtain the data required for compliance.
While integrating more stringent ESG standards into supply chains can yield significant long-term benefits—including risk mitigation, improved resilience, and enhanced brand value—such contractual obligations may go well beyond what is required under current Taiwanese law. For EU companies, it is critical to strike a practical balance between regulatory compliance and the operational capabilities of Taiwanese suppliers. The following are three practical tips for incorporating ESG expectations into supply relationships in Taiwan:
1. Conduct ESG-Focused Due Diligence
If you are engaging a new Taiwanese supplier or manufacturer, ESG-focused due diligence is essential. Even for existing suppliers, revisiting due diligence specifically from an ESG perspective will help ensure alignment with evolving regulations in your home jurisdiction. In addition to standard areas of inquiry—such as financial health, reputation, ownership, and operational capacity—your diligence should seek to understand a supplier’s current ESG practices and data capabilities. Importantly, ESG criteria vary across jurisdictions, so it is essential to clearly communicate your expectations using measurable, transparent standards.
2. Establish a Timeline and Begin Data Collection Early
Although the CSRD allows a transitional period for Scope 3 reporting, data collection should begin as early as possible. Environmental data is not always readily accessible in Taiwan, and the process of gathering, verifying, and formatting such data can be time-consuming. EU buyers should provide clear guidance to their Taiwan suppliers regarding data collection methodologies and timelines, supported by open dialogue on feasibility. Even if a formal supply agreement is not yet in place, legal and procurement teams should consider establishing a process for structured environmental data collection.
3. Sign a Master Supply Agreement with ESG Clauses
To mitigate legal and operational risks, companies should formalize their supply relationships through a comprehensive master supply agreement (MSA). The MSA negotiation process can uncover critical areas of divergence in expectations and capabilities. Importantly, ESG clauses should be tailored to reflect both the regulatory obligations of the buyer and the practical limitations of the supplier. These clauses should be structured to encourage cooperation, enable phased implementation, and allocate responsibilities for reporting, data accuracy, and compliance.
In summary, while Taiwan’s ESG framework is developing, EU companies cannot assume that Taiwanese suppliers will be equipped to meet CSRD-aligned requirements without contractual support. Thoughtful due diligence, proactive planning, and carefully drafted supply agreements are key tools for bridging the regulatory gap.
If you have any questions or require assistance with your supply relationships in Taiwan, please contact Greg Buxton at gbuxton@winklerpartners.com.
Written 1 July 2025 by Gregory A. Buxton, Emma Chiu.