NAVIGATING ESG IN TAIWAN (PART I)

NAVIGATING ESG IN TAIWAN (PART I)

Bridging Regulatory Gaps Between the European Union and Taiwan

The rapid development of ESG (Environmental, Social, and Governance) regulations in the European Union (EU) is having a significant ripple effect on global supply chains, including those involving suppliers in Taiwan. Prominent EU ESG regulations include:

  • The Corporate Sustainability Reporting Directive (CSRD)
  • The Corporate Sustainability Due Diligence Directive (CSDDD)
  • The Carbon Border Adjustment Mechanism (CBAM)
  • The Sustainable Finance Disclosure Regulation (SFDR)

Taiwan plays a critical role in global manufacturing and technology supply chains. To maintain competitiveness and ensure continued market access, Taiwanese companies must understand and respond to emerging ESG requirements in the EU.

However, Taiwan’s ESG regulatory framework does not always align with EU requirements. Companies subject to EU ESG laws often need data from Taiwanese suppliers, and gaps in local regulations may hinder compliance. This article provides a comparative overview of Taiwan’s current environmental disclosure requirements and key aspects of the CSRD, identifying certain material divergences that affect EU-reporting companies sourcing from Taiwan. (This article does not purport to present an exhaustive list of all such divergences, merely material, representative differences.)

Overview of Taiwan’s ESG Reporting Requirements

In line with its Financial Supervisory Commission’s (FSC) Sustainable Development Action Plans, Taiwan has recently strengthened ESG reporting obligations for listed companies. The Taiwan Stock Exchange Corporation (TWSE) has amended its “Rules Governing the Preparation and Filing of Sustainability Reports by TWSE Listed Companies,” requiring all listed companies—regardless of size or sector—to publish sustainability reports beginning this year.

Additionally, the FSC has released a draft amendment to the “Regulations Governing Information to be Published in Annual Reports of Public Companies.” This amendment would require listed companies to include a dedicated sustainability section in annual reports in accordance with IFRS Sustainability Disclosure Standards. These developments indicate Taiwan’s intent to converge with global ESG reporting standards, particularly by aligning with the CSRD in its emphasis on climate-related disclosures and integrating sustainability with financial reporting.

Key Differences from the CSRD

Despite progress, Taiwan’s framework remains distinct from the EU’s in several critical respects.

  1. Coverage of Companies

While EU ESG regulations apply broadly across company sizes and sectors, Taiwan’s rules are currently limited to publicly listed companies. Small and medium-sized enterprises (SMEs) in Taiwan are not subject to mandatory ESG disclosures. As a result, smaller suppliers in Taiwan may be unfamiliar with ESG concepts and unprepared to provide the necessary data for EU customers to meet CSRD requirements.

  1. Content and Materiality Assessment

The CSRD mandates a double materiality assessment—evaluating both how sustainability issues affect the company and how the company impacts the environment and society. In contrast, Taiwan’s TWSE assigns disclosure obligations based on industry categories defined in its “Key Points for Classifying and Adjusting Categories of Industries of Listed Companies.” Although the TWSE encourages companies to apply materiality assessments, the approach is generally less rigorous and standardized than under the CSRD. EU-reporting companies may need to assist or require their Taiwanese suppliers to implement more comprehensive materiality assessments aligned with CSRD expectations.

Opportunities and Challenges for EU Companies

Taiwan’s ESG infrastructure is evolving. TWSE has launched a digital ESG platform, including an automated sustainability report generation tool and the ESGInfoHub, which centralizes ESG-related data and indexes. These tools can help multinational companies obtain environmental information from Taiwanese suppliers more efficiently.

Nevertheless, substantial reporting gaps will persist. Companies with EU ESG obligations should engage with their Taiwanese suppliers, review supply agreements for ESG data access provisions, and consider legal or consulting assistance to ensure regulatory alignment.

For additional support with your ESG supply chain obligations in Taiwan, please contact Greg Buxton at gbuxton@winklerpartners.com.

Written 10 June 2025 by Emma Chiu, Gregory A. Buxton