CEO Conversations XXVIIII: Chin-Yuan Wu, Chairman, Taiwan Tea Corporation (2913 TT) and Sanyang Motor Co., Ltd. (2206 TT)
"Taiwan Tea Corporation is a very ESG (Environment, Social, and Governance) conscious company," said Chairman Wu, breaking the ice right from the start. In fact, Taiwan Tea Corporation has been rated as a low-risk company by Sustainalytics, an authoritative global ESG risk rating organization. Among the 187 companies of similar scale in the same industry, Taiwan Tea Corporation ranked second, and among the 13,609 listed companies (regardless of industry) analyzed by Sustainalytics, Taiwan Tea Corporation ranked 237th.
"ESG has been a priority for me since I joined Taiwan Tea Corporation," said Chairman Wu. "In the past, due to land issues and tea plantation construction, some reports in newspapers and magazines may not be fair. Therefore, in addition to our core business, I require our colleagues to thoroughly strengthen ESG, so that Taiwan Tea Corporation will not only be the pride of Taiwan in terms of products and production but also become the protector of Taiwan in terms of corporate governance, social responsibility and environmental protection.
Over 70% water saving in tea plantation irrigation with high technology to cope with extreme weather
"I am confident that the tea from Taiwan Tea Corporation is definitely first-rate and not inferior to any imported tea." Chairman Wu took a sip of Taiwan Tea Corporation's own Oriental Beauty Oolong on the tea table. "The largest planting area of Taiwan Tea Corporation is located in Pingtung Laupi Tea Factory, with a total planting area of 452 hectares. This is the largest tea-growing base in Taiwan, but it faces many challenges, especially with the extreme climate after global warming. The drought in Taiwan in 2021, which ended in May, caused NT$500 million dollars of agricultural damage, with Pingtung County suffering the most severe loss of NT$270 million dollars. "We adopted the most advanced irrigation technology for planting and installed six microclimate monitoring stations and soil moisture sensors in the tea plantation to analyze the most suitable growing conditions for our tea trees. In addition, we have introduced precision irrigation technology, covering 100% of the planting area. 14,000 drip holes cover each hectare of the 452 hectares planting area, to irrigate all the tea trees. With this technology, we have saved 70% of the water used for irrigation and 50% of the fertilizer applied. Not only does it give Taiwan Tea Corporation more leeway to cope with extreme weather, but it also makes the overall use of water resources more efficient.” From Chairman Wu's smile, he is quite satisfied. "Taiwan has an island climate, and its rivers are short and swift, so the usable water resources obtained from the annual rainfall are very limited. If I use more, others will use less. If Taiwan Tea Corporation can save more water, there is more water for others’ needs, which is a concrete demonstration of our social responsibility.”
Mountain as teacher, forest as friend, to create a unique environmental protection concept in Taiwan
Taiwan Tea Corporation was restructured from a tea factory under the Mitsui & Co., Ltd. established in 1899, and has a history of over 100 years. Due to the demand for planting tea trees, Taiwan Tea Corporation has large areas of hillside and woodland, which is quite different from the traditional sugar and fertilizer factories.
“Nowadays, we are all concerned about carbon emissions. Taiwan Tea Corporation is richly endowed with a large amount of forest land that can absorb carbon emissions from production. We cherish and actively preserve these primary woods, and have restored 475 hectares of woodland. According to our survey and statistics, our forest is the habitat of more than 20 species of endemic species in Taiwan”, said Chairman Wu, “In addition to preserving the primary woods, the tea plantations in the mountains are also being used at low density. Our mission is to allow people to enjoy the beauty of the mountains, drink good tea, and taste the agricultural products of the local farmers. In addition to drinking tea, dining and enjoying the scenic beauty of the mountains, there are also tea factory visits and farming experience activities, which are similar to coming to a tea factory of Taiwan Tea Corporation, satisfying the body, mind and soul all at once, and at the same time educating and entertaining.”
Regarding the company's unique leisure business, Chairman Wu also has a new idea, “We have land, sceneries, great tea and delicious food, but it's a waste to take such a beautiful landscape to build a resort hotel. So, we are planning camping and glamping camps in the hinterland of the tea plantation. It can provide more in-depth leisure services while preserving the mountains and forests to the maximum extent, generating a new connection between human and nature, which we believe will be appreciated by consumers.”
Not only organic, but also pollution-free.
While food safety has always been the most important concern for Taiwanese consumers, there has been a lot of news about pesticide residues and other food safety problems caused by Taiwanese manufacturers in the past in order to import tea at low prices. What does Chairman Wu think about the matter? "Food safety is so important. Taiwan's hand-shaken tea market and bottled tea market combined is worth more than NT$100 billion a year, and tea is the most popular beverage in Taiwan, but if consumers have prolonged exposure to tea imported from Vietnam with pesticide residues, the health problems that may arise will be very serious. From my point of view, food safety is inseparable from the quality of tea leaves, without safe products, it is a lie to say that it tastes good. Since 2003, when the organic tea seedling trial area was established, Taiwan Tea Corporation has been conducting organic production. Each year, we also plan natural farming methods to restore tea plantations and expand the organic farming area in the north, middle and south of Taiwan one by one. We aim to produce and manufacture tea with the highest quality and food safety standards, and have obtained organic product certification. Agriculture and Forestry also regularly inspects our products, and we have 473 pesticide residue tests in total. The rate of our tea passing the SGS inspection is 99.2%, and all those that do not pass are destroyed. This is my insistence on food safety.”
Taiwan Tea Corporation's tea products can be bought at factory stores throughout Taiwan, and the quality of the packaging is a high standard. “In the past, packaging has been relatively the less environmentally friendly part of our products, but since 2014, most of our tea bags and labels were redesigned with compostable, recyclable, or ecofriendly packaging. Although it is financially more costly, the externality cost borne by the society is much smaller than with traditional packaging materials. Furthermore, since 2015, all printed materials for the annual shareholders’ meeting have been printed on FSC certified recycled paper and soybean ink.” said Chairman Wu.
Align with International Standards and Head toward Mature Corporate Governance 3.0
In addition to his commitment to the environment and social responsibility, Chairman Wu has also been devoted to improving the corporate governance of Taiwan Tea Corporation since his succession. The current Board of Directors has a 93.4% attendance rate; the average independent directors’ tenure is 3 to 4 years, and there is a remuneration committee, audit committee, and corporate governance managers. "In the past, Taiwan Tea Corporation was not fully up to expectations in terms of land use and governance, which led to misunderstanding of the management by the outside. However, I believe that Taiwan Tea Corporation is essentially an excellent company, with an excellent brand and advantageous natural resources that should never be spoiled. Governance can be said to be the most important foundation of a company, and things cannot be hidden with strong systems and transparent information. All of our directors, including independent directors, as well as our management, are aligned in raising the corporate governance of Taiwan Tea Corporation to international standards." said Chairman Wu.
Another significant change is the proposal adopted by the Board of Directors on March 3 this year (2022), which will change the original board composition of 13 directors along with 3 independent directors to 11 directors and 4 independent directors in the future. This will increase the independence of the board of directors to more than 30%. Chairman Wu's attitude is very firm: " Independent directors can help the company consider the best interests of all shareholders when making decisions and reduce conflicts of interest. Because independent directors are not involved in corporate operations nor key investors, this can enable the Board of Directors to become fairer and more objective. Apart from that, independent director may provide abundant experience that other directors lack as well as bring in expertise and networking.” Speaking of this, Chairman Wu breathed a sigh of relief and said with a smile: “The decision made by the Board of Directors this time supports our determination for Taiwan Tea Corporation to head towards higher standards of corporate governance. I am grateful to all the directors for their support.”
“Institutional investors located in Europe and the U.S. attach great importance to independent directors. Independent directors at a majority of companies abroad account for more than one-third or even half of all board seats, allowing for independent directors to function independently. Compare this to the low proportion of independent directors on the boards in Taiwan, where directors generally exceed the number of independent directors.” Said Jeff Jackson, the director of Asian research at Glass Lewis, a leading proxy advisory services company.
Robust Corporate Governance Supporting the Growth of Main Business
Since Chin-Yuan Wu was elected as the chairman of Taiwan Tea Corporation, revenue has increased by 4.3% in 2020 and jumped to 18.4% in 2021, reaching NT$369 mn. The revenue of the tea industry increased by 39%, to NT$140mn. Since the new plant has not yet been officially initiated, sales in 2021 will only be 410 tons. After the new plant starts operating in 2022, it is expected that the sales volume will exceed 800 tons. "In 2022, I will make the core business: tea production and leisure business turn profitable. Laupi Tea Factory has fully completed the planting of 452 hectares, and the equipment needed in the tea factory is also well-prepared.” said Chairman Wu, "Last year, I said the achievements that everyone has already seen are only the first step of Taiwan Tea Corporation, and what I care about is to develop long-term strategy for Taiwan Tea Corporation, and create sustainable value for shareholders. I will definitely lead the colleagues of Taiwan Tea Corporation to continue making breakthroughs and make this over-hundred-year brand shine again.”
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