In 2019, LG Chem established a vision and strategy for sustainability and selected nine key areas, which laid the foundation and strengthened the determination to pursue sustainability. In 2020, we proclaimed mid- to long-term goals including carbon-neutral growth, focusing on five top priorities among the key areas, and accelerated their implementation to become a pioneer in Korea. From now on, LG Chem will select and manage key indicators that must be prioritized from an ESG perspective to communicate with various stakeholders more proactively and strengthen our competitive edge.
By analyzing indicators from global standards, evaluation agencies, and within the industry, we chose 120 ESG indicators, integrated them into 30, and finalized 20 key indicators through a materiality test. Furthermore, based on the concept of stakeholder capitalism proposed by the World Economic Forum (WEF), we classified key indicators into four categories: environment, society, governance (ESG), and growth. In the future, LG Chem plans to disclose our ESG approaches and performances based on these key indicators.
In particular, the approaches and performances for ESG applied the methodology of sustainability-related financial disclosure, jointly suggested by CDP (Carbon Disclosure Project), CDSB(Climate Disclosure Standards Board), GRI(Global Reporting Initiative), IIRC(International Integrated Reporting Council), and SASB(Sustainability Accounting Standards Board) based on the recommendation of TCFD(Taskforce on Climate-related Financial Disclosure). Our internal management and external disclosure of ESG indicators will also be upgraded based on this methodology.
| 구분 | Sustainability Areas | Indicators |
|---|---|---|
Environment
|
Climate Action | GHG Emission Reduction |
| Water Management | Water Withdrawal, Consumption and Discharge | |
| Renewable Energy | Energy Consumption Reduction | |
| Environment Protection | Air Pollutants Reduction | |
| Responsible Products | Product Responsibility and Chemical Stewardship | |
| Environment Protection | Waste Emission and Recycling | |
| Environment Protection | Water Pollutants Reduction | |
| Circular Economy | Reused and Recycled Materials | |
Social
|
Safety & Wellness | Employee and Process EH&S |
| Human Rights & Diversity | Talent Attraction, Training and Employee Engagement | |
| Human Rights & Diversity | Employee Diversity, Equity and Inclusion | |
| Responsible Supply Chain | Supply Chain Sustainability | |
| Human Rights & Diversity | Human and Labor Rights | |
| New Areas | Community Engagement | |
Governance
|
New Areas | Corporate Governance |
| New Areas | Corporate Ethics and Behavior | |
| New Areas | Cyber and Information Security | |
| New Areas | Public Policy and Regulation | |
Growth
|
Responsible Products | Sustainable Solutions |
| Responsible Products | Customer Satisfaction |
As of 2020, it includes the LG Chem headquarters, all domestic and overseas production sites, and R&D campuses.
The financial information partially applies the K-IFRS consolidated financial statement standards, and in case the reported scope is different, it is indicated separately.
※ Excludes data from production sites where business withdrawal is confirmed, LG Energy Solution, and FarmHannong
In 2020, LG Chem established the Sustainability Strategy Team under the CEO to help establish core strategies on corporate-wide sustainability, set mid- to long-term goals, and derive tasks for implementation. Major sustainability-related issues are reported and discussed at monthly management meetings of corporate-wide top management, and matters related to climate change are by far the highest priority. We also hold in-depth discussions on a regular basis at the weekly corporate staff meetings attended by the CEO and major executives of the corporate. In addition, the Energy Committee consisting of the CEO and plant leaders convenes annually to review greenhouse gases and energy-related activities and establish future plans. With the new ESG Committee established within the Board of Directors, the BOD plans to pursue a more professional and systematic response to climate changes related to greenhouse gases and energy.
Identifiable risks posed by climate change include increased operating costs in response to the strengthening of existing regulations (such as the emissions trading scheme) and new regulations that may serve as new trade barriers (e.g., the introduction of a carbon border adjustment mechanism); weakened competitive edge of high-carbon products due to changes in market and customer preferences; and physical losses that may occur to assets and supply chains following climate change such as heatwaves, storms, and sea-level rise. Nonetheless, LG Chem recognizes the crisis as an opportunity, doing our best to preoccupy new markets and increase sales through the development of low-carbon products and technologies, convert to the low-carbon system, and reduce operating costs from transportation.
Until 2019, LG Chem proactively responded to climate change risks and discovered business opportunities through our electric vehicle and ESS battery business portfolio. In 2020, we completed the spin-off process of LG Energy Solution to expand our businesses in the field. To continue to respond to risks arising from climate change and create new business opportunities, we are reorganizing our business portfolio and focusing our capabilities on eco-friendly materials that are recycled or bio-based and battery (cathode) materials.
Furthermore, we aim to go beyond our business portfolio and also convert domestic and overseas power plants to use 100% renewable energy. We plan to reach RE100 by 2030 for overseas business sites and 2050 for domestic business sites according to the local conditions in each country. In addition, we are actively investing in R&D to reduce greenhouse gas emissions from a mid- to long-term perspective, developing carbon capture and utilization (CCU) technology, new NCC processes, and low-carbon/eco-friendly process technologies.
LG Chem has declared the mid- to long-term goals of carbon-neutral growth, which will maintain the 2019 GHG emission level by 2050, and RE100 (Renewable Energy 100%), which will convert all energy use to renewable energy by 2050. As the international community has reached a consensus on net-zero emissions as the major response to climate change, LG Chem is internally reviewing to raise our mid- to long-term target.
1) Domestic greenhouse gas emissions are stated based on the submission of the greenhouse gas statement, including the emissions from the headquarters and sales offices.
1) Renewable energy consumption is expected to increase in the future as overseas power purchase agreements (PPAs) and domestic green premium systems are under discussion in 2021.
LG Chem is continuously inspecting legal risks through voluntary inspections of related laws and regulations, headed by the corporate EH&S department and the EH&S departments of each business sites. Based on these results, we are deriving areas that require improvement and selecting key tasks to respond proactively. Items that are subject to legal management undergo regular monitoring to check whether the management standards are constantly maintained. LG Chem is continuously expanding the scope to preemptively improve even the areas that are not subject to regulation.
For new business sites established after 2020, it will be mandatory to acquire the landfill zero certification, and we plan to gradually expand this rule to existing business sites to fulfill corporate social responsibility. To establish a more thorough and preemptive EH&S management system, we are raising awareness among our members by discovering, sharing, and awarding best practices of corporate-wide EH&S at annual meetings.
1) Domestic water intake from water stress regions is 1.4%.
1) In the case of NOx and SOx, emissions from Yeosu and Daesan plants increased due to changes in the emission calculation method in accordance with the enforcement of the Domestic Air Control Zone Act.
LG Chem conducted an analysis of domestic and international chemical management laws and policies with the Chemical Stewardship Team in the EH&S department, and based on this, established a process for collecting chemical substances for each product. We are fulfilling our responsibility for product safety by monitoring information in real-time with the established chemical management system.
In particular, hazardous chemicals are classified into Levels 1, 2, and 3 based on internal classification standards, and prohibited substances designated in Levels 1 and 2 undergo eco-friendly material reviews with strict handling conditions applied from the raw material procurement stage to minimize related risks. The status of high-risk substances is constantly reviewed and presented to directors in annual reports.
1) EU REACH: Registration, Evaluation, Authorization and Restriction of Chemicals in the EU
2) SVHC (Substances of Very High Concern): High-risk substances listed in Annex XIV of EU REACH Regulation
3) CMR: Substances classified as carcinogenic, mutagenic or toxic to reproduction (CMR) according to hazard categories 1A and 1B of the Harmonized Classification, Labelling and Packaging (CLP) Regulation
4) Risk Assessment Ratio: Ratio of substances that have completed registration in REACH to all substances in chemical products
5) LCA performance ratio is based on sales by product, including internal transactions
LG Chem has established a research organization to develop reuse/recycling technologies to strengthen our capabilities. Each company is leading the expansion of its business portfolio based on recycled raw materials and building a new growth engine in line with the paradigm shift towards a circular economy.
As for plastic materials, in the short term, we are producing and offering PCR (Post Consumer Recycled) products made of raw materials that applied mechanical recycling. Through this effort, we are raising awareness of the circular economy in which waste plastics, considered as garbage in the past, become high value-added resources. In the mid to long term, we plan to consolidate the circular system of resources and obtain product competitiveness through chemical recycling technology. For our battery materials, we plan to preemptively establish a sustainable supply chain by building a production system through partnerships with companies that have metal refining and smelting technologies for the main ingredients and introducing recycled raw materials in the mid to long term.
In the case of sustainability-related business portfolios such as the expansion of reuse/recycled raw materials, we are reporting and inspecting key issues for each company at the monthly corporate-wide management meetings. By reviewing mid-to-long-term business strategies through annual business reports, we hope to fulfill our role as a global chemical company in establishing a global resource circulation system.
LG Chem is implementing the M-Project (Magnolia Project) to innovate and advance the EH&S management system, under the principle that there is no business worth conducting at the expense of EH&S. Through M-Project, we go beyond complying with minimum legal regulations to establish a preemptive risk management system. We will innovate our workplace to be the safest and derive tasks for improvement by reporting related conditions and performance to the top management at monthly management meetings.
In particular, we aim to reduce incident indicators by 20% every year, and we are strengthening our EH&S capabilities by establishing a new organization, recruiting new professionals, investing in EH&S, and enacting and revisioning technical guidelines.
※ While it is desirable to obtain three years of data for a better comparison, the data from the last two years are offered here because it is difficult to accurately calculate the number of full-time workers at each workplace in 2018 due to company reorganization and business withdrawals. 수 산출이 어려워 최근 2개년 데이터만 기재함
The three-year data will be provided later.
1) Fatality Rate: Total number of fatal incidents*200,000/total working hours
2) TRIR (Total Recordable Incident Rate): Total number of recorded incidents*200,000/total working hours
3) LTIR (Lost Time Incident Rate): Total number of incidents on closure*200,000/total working hours
4) PSTIR (Process Safety Total Incident Rate): Number of process safety incidents*200,000/total working hours
5) The number of total working hours is based on regular employees working 300 days and 8 hours.
*The number of process safety incidents is based on the comprehensive internal incident index criteria considering injuries, fires, spills and leaks, and amount of loss.
Led by our corporate Procurement Department and procurement departments within each business companies, LG Chem seeks to create a sustainable corporate ecosystem with our suppliers. We have established supply chain issues related to suppliers and are monitoring the status of contract conclusions in real-time through purchasing regulations that include supplier management regulations. Through this, we are establishing a preemptive response system so that individual issues of suppliers do not spread to the overall risk of LG Chem's supply chain.
In addition to real-time monitoring, the CSR evaluation results of suppliers are reflected in the regular purchase evaluation for each company to collectively check the sustainability-related risks and management capabilities of suppliers. By identifying tasks for improvement, we aim to achieve shared growth with our suppliers. We plan to apply an advanced CSR evaluation system that reflects LG Chem's sustainability strategy to strengthen our competitiveness.
1) Standards for regularly trading suppliers are based on internal standards and exclude suppliers with less than 3 orders and 300 million KRW in purchases per year (less than 100 million KRW for Life Sciences)
2) "High-risk suppliers" refers to suppliers that have scored less than 65 points in the supplier CSR evaluation.
3) Due to COVID-19 in 2020, we stopped conducting on-site inspections and sent operating guides to suppliers to independently improve their management. From 2021, the evaluation system will be upgraded by reflecting LG Chem's sustainability strategy.
1) Leadership position refers to all levels of employees including or higher than the professionals
2) Executives refers to all levels of employees including or higher than department leaders or senior executives
1) There is no discrimination in remuneration due to gender, and factors such as number of years of service contribute to the difference in remuneration.
2) As of 2020, the ratio of the average female compensation to the male average compensation for executive positions (base salary + other cash incentives) is 94%
3) In the case of the Employee Engagement survey, the employee satisfaction survey was conducted and the survey response rate was 81% and the positive response rate was 77% in 2020
LG Chem focuses on the social contribution vision of “LG Chem Green Connector” and has established four strategic tasks—Green Education, Green Ecology, Green Energy, and Green Economy—to contribute to local communities and engage in social contribution activities. We conduct impact evaluations for our major programs, and continuously discover new items in line with the trend of the times to expand the scope of our contribution to the local community in the mid to long term. We annually review the status of our corporate-wide CSR performance and achievements and pursue long-term and consistent social contribution activities that are aligned with the corporate strategy.
1) Due to COVID-19, volunteer hours for LG Chem members have been drastically reduced in 2020.
Forming a board of directors with independence, expertise, and diversity is essential for effective and active governance. LG Chem reports all information related to corporate governance through the LG Chem Corporate Governance Report in accordance with the domestic securities market's disclosure regulations.
Based on Jeong-Do Management, LG’s unique mode of behavior, LG Chem is conducting risk assessments for illegal activities and corruption issues across areas spanning Audit, Legal, and Public Affairs Department. We strive to establish a fair and transparent culture not only for our members but for our stakeholders as well. Management diagnosis reports are conducted regularly, and performance and management conditions are monitored regularly through the audit committee twice a year, quarterly CEO reports, and regular corporate staff meetings.
Since 2012, LG Chem has appointed compliance officers and established and implemented compliance control standards. The purpose of compliance control standards is to classify the size and frequency of legal risks. The relevant validity evaluation is reported to the BOD once a year. In particular, with regard to anti-corruption measures and fair trade, we are inspecting risks through constant responses, and we plan to further advance the anti-corruption risk management process in the future. For fair trade issues such as collusion with subcontractors or agencies, the Public Affairs Department leads the implementation of annual CP (Compliance Programs) to preemptively check high-risk sectors and conduct preventive activities and training customized for each operating department.
1) The aggregation of data for training personnel was overlapped for each training area, and when offline training for working-level staff is included, it is expected to increase compared to the data above.
2) The data from training subcontractors and agencies increased by conducting online training in 2020.
LG Chem is operating an information security council that consists of security-related managers and executive levels from related organizations to deliberate on changes to the company's major security policies and discuss mid- to long-term plans. We also have a working-level committee composed of department heads from working-level departments to review agenda items, discuss and coordinate security measures, and review plans and performance. In 2021, we discussed the revision of corporate regulations on information security, the direction of security policy implementation, and the reconsideration of security policies to vitalize Smart Work.
Aside from the Information Security Committee, a corporate-wide risk management committee was established under the supervision of the CRO (Chief Risk Officer, currently concurrently served by the CFO). Under this committee, an information security subcommittee joined by security and infrastructure directors has been installed. All related work is reported to the Chief Information Security Officer, and performance and plans are reported to the CFO every month, doing our best to protect trade secrets, including key technologies and management strategies of LG Chem.
1) Information security risk assessment is carried out through accounting audits, mock hacking, and self-diagnosis. In 2020, self-diagnosis was performed on the Cheongju plant and related departments at the headquarters.
LG Chem recognizes that observing the tax laws of each country in which it operates business and fulfilling its duty to pay taxes faithfully as a taxpayer are important factors contributing to national finance as well as maximizing shareholder value. For sustainable management, we comply with the following tax policies and thoroughly manage tax risks.
LG Chem has established and operated the following tax-related principles and regulations.
Fulfilling tax returns and payment obligations faithfully in accordance with the relevant laws of each country
Maintain a transparent relationship with the tax authorities and faithfully fulfill the obligation to submit data requested by the tax authorities of each country
Establish and implement a reasonable transfer pricing policy in line with tax laws and OECD transfer pricing guidelines for international transactions with overseas corporations
Establish an efficient tax management system such as calculating the effective tax rate by country and identifying the tax payer following the introduction of digital tax
Prohibition of transfer of income to a tax haven for the purpose of tax evasion
For transparent tax information disclosure, it is disclosed to the outside through the annual audit report and the electronic disclosure system.
LG Chem is responding to tax risks by establishing the following tax management process.
Tax risk assessment based on advice from external experts and tax authorities when making important business decisions
Report to the management according to the type and amount of tax and clearly define responsibilities and tasks related to tax return and payment
In the event of tax risks such as uncertainties related to tax laws, the risks are resolved through collaboration with external experts
1) The total amount of reported taxes is based on consolidated financial statements
Led by the Public Affairs Department, our plans and status are reported to the management in response to annual government policies and regulations. When major issues arise, the details are constantly shared through reports. Centered on securing incentives in connection with major investments, maintaining existing items with tariff quota and discovering new items, and developing growth engine projects (battery materials, sustainable solutions, e-Mobility, and biopharmaceuticals), we identify tasks for policy support and improvement in regards to regulations that may affect our business, and make recommendations to the government.
1) In accordance with the Political Funds Act in Korea, corporate sponsorship of political organizations is prohibited.
2) The top five donors among industrial associations and their contributions are as follows (unit: 1,000 won):
- Korea Enterprises Federation: 321,450
- Korea Petrochemical Industry Association: 229,592
- GBA (Global Battery Alliance): 228,316
- PC/BPA Council: 206,181
- Korea Vinyl Environmental Council: 202,500
LG Chem provides differentiated sustainable solutions to our customers and stakeholders through an "outside-in" perspective that begins all business processes from the customer's point of view. LG Chem's sustainable solutions go beyond compliance with regulations. We evaluate and adjust our product portfolio and technologies according to the sustainability standards that we have defined and accommodate our customers' future business.
To establish sustainability standards for products and technologies, LG Chem analyzes indicators and initiatives of global standards and evaluation agencies, as well as guidance from government agencies such as EU Taxonomy, and identifies which sustainable values are globally pursued. Through benchmarking the industry, we have chosen six key areas of sustainability: carbon and energy, resource efficiency, product toxicity, biodiversity, water, and society. We plan to internally analyze and manage products and technologies being developed at LG Chem through negative impact checks (compliance with guidelines) and positive impact checks (key sustainability areas, contribution to financial performance). In the future, by strengthening the social impact analysis based on the Life Cycle Assessment (LCA) and the Value Balancing Alliance (VBA) framework, we will advance the degree of our products' improvement and contribution and upgrade their edge in sustainability.
Reduces carbon and contributes to reducing waste by using plant-based renewable raw materials such as waste cooking oil
Ensures biodiversity by reducing the use of palm oil, a high-risk material that may destroy rainforests
Reduces carbon and contributes to reducing waste through physical recycling of waste plastics
Synthesized using plant extracts, contributes to reducing carbon and waste as a raw material for biodegradable plastics
LG Chem's Customer Value Innovation Department supervises and supports corporate-wide customer value innovation activities. We consider customer-oriented thinking as the top priority in all business processes. Each company also established a customer value innovation team that oversees customer value innovation activities and works organically with the Customer Value Innovation Sector. On a biweekly basis, the management is reported on the status of customer value innovation activities and major customer pain points. The decisions are made through the corporate-wide management meetings, CEO-led customer value council, and corporate-wide monthly council. Through the Corporate Customer Value Innovation Team's customer satisfaction survey once a year, we gather specific feedback and establish the groundwork for improving customer satisfaction. We also derive tasks for improvement and proactively respond to the rising expectations of our customers.
1) The scope of the customer satisfaction survey is based on the scope of the entire business division that conducted the customer satisfaction survey.
2) Starting with the 2020 survey, the customer satisfaction surveys were conducted for all business divisions under the supervision of the Customer Value Innovation Team.
LG Chem is growing with humankind and society by continuously creating direct and indirect economic values as well as social and environmental values throughout its business activities. We will further consolidate this approach to gain trust from members of society and provide the best value to our stakeholders.
1) Total sales, corporate tax, raw material purchase, and dividends are based on consolidation accounting.
