Sustainability is one of the core values in achieving LG Chem’s vision, “We connect science to life for a better future.” LG Chem has selected key ESG indicators to strengthen company-wide ESG implementation, and is actively introducing them into corporate management. Through the analysis of indicators from ESG reporting frameworks, ESG rating agencies, and peer industry, we consolidated 20 indicators that are most material to corporate sustainability. Based on the concept of “stakeholder capitalism” proposed by the WEF, our key ESG indicators are classified into four categories: Environment, Social, Governance (ESG), and Growth. Furthermore, LG Chem seeks to align ESG performance disclosure to global sustainability disclosure standards by keeping a list of indicators that may arise as potential issues in the global sustainability arena. We will continue to practice Sustainability for the environment, society, and customers sincerely, and promote transparent communication of its progress.
To keep pace with the rapidly evolving global regulatory landscape of ESG disclosures, LG Chem strives to disclose ESG Performance Data with consistency and integrity. In this regard, we comply with the general principles of ESG disclosure (Accuracy, Clarity, Comparability, Balance, Verifiability, and Timeliness) set out in the ESG Information Disclosure Guidance proposed by Korea Exchange. We disclose our ESG Performance Data by adopting the “Reporting on enterprise value - illustrated with a prototype climate-related financial disclosure standard” methodology developed by five leading sustainability and integrated reporting organizations—Carbon Disclosure Project (CDP), Climate Disclosure Standards Board, Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC), and Sustainability Accounting Standards Board (SASB)—based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
This report covers LG Chem’s performance data in FY 2021 collected from headquarters and sales offices, 35 domestic and global production sites, and R&D campuses. Data of LG Energy Solution and FarmHannong have been excluded from the report since 2019. * Financial statements have been written in accordance with the K-IFRS Consolidated Financial Statement Standards. Statements with different reporting scopes have been expressly stated otherwise.
Summary and target for each metric reflects the definition of ESG indicator as described by the CDP, GRI, SASB, TCFD, and S&P Global Corporate Sustainability Assessment.
| Category | Key ESG Indicators |
|---|---|
Environment
|
|
| Greenhouse Gas Emissions Reduction | |
| Energy Consumption Reduction | |
| Water Withdrawal, Consumption and Discharge | |
| Water Pollutants Reduction | |
| Air Pollutants Reduction | |
| Waste Discharge and Recycling | |
| Product Responsibility and Chemical Stewardship | |
| Reused and Recycled Materials | |
Society
|
|
| Employee and Process EH&S | |
| Employee Diversity, Equity and Inclusion | |
| Talent Attraction, Training and Employee Engagement | |
| Human and Labor Rights | |
| Supply Chain Sustainability | |
| Community Engagement | |
Government
|
|
| Corporate Governance | |
| Corporate Behavior and Ethics | |
| Cybersecurity and Information Security | |
| Public Policy and Regulation | |
Growth
|
|
| Sustainable Solutions | |
| Customer Satisfaction |
Chemical company’s greenhouse gas (GHG) emissions are classified into three scopes: direct emissions that occur from sources that are controlled or owned by an organization (Scope 1); indirect emissions associated with the purchase of electricity, steam, heat, or cooling (Scope 2); and other indirect emissions from assets not owned or controlled by the reporting organization (Scope 3). We plan to manage and reduce Scope 1, 2, and 3 emissions through preemptive identification of risks and opportunities associated with GHG emissions and setting reduction target.
1) Scope 3 emissions have been calculated for operations within Korea, on relevant categories of GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011)
* Scope 1 and Scope 2 emissions in Korea in 2020 have been revised in accordance with the verification outcomes of the Ministry of Environment
* Scope 1 and Scope 2 emissions in Korea in 2021 have been reported in accordance with the GHG Statements submitted to the Ministry of Environment; the data is subject to change depending on the verification outcomes
* Emissions calculations for some Scope 3 categories have been adjusted based on updated methodology
Total energy consumption includes both direct energy (energy consumption during operation) and indirect energy (energy purchased or acquired), and renewable energy includes self-generated renewable energy and purchased renewable energy. We will strive to actively reduce energy consumption by improving energy efficiency in all manufacturing processes and increasing the proportion of renewable energy.
* Direct and indirect energy consumption in Korea in 2020 have been revised in accordance with the verification outcomes of the Ministry of Environment
* Indirect energy consumption overseas in 2019 and 2020 have been revised to reflect updated data from production sites
As water scarcity aggravates, the importance of water resource management continues to rise. In this regard, we manage the amount of withdrawal, consumption, and discharge of water used in cooling, steam generation, and raw material processing during the manufacturing process. Furthermore, we intend to identify and minimize withdrawal from water-stressed areas.
* Data of 2019 and 2020 have been revised due to changes in data coverage (includes data from water and wastewater not subject to legal reporting)
In order to return the water used during the manufacturing process to the aquatic ecosystem, we strictly comply with permissible limits of water pollutants discharge and tightly monitor effluent water quality. We intend to minimize the discharges of water pollutants into aquatic ecosystems by measuring the discharges of chemical oxygen demand (COD), total nitrogen (TN), total phosphorus (TP), and suspended solids (SS); tracing the cause and the related impacts of discharge; and conducting regular inspections on wastewater discharge facilities.
* Data of 2019 and 2020 have been revised due to changes in data coverage (includes data from water and wastewater not subject to legal reporting)
Air pollutants generated through fuel combustion during the manufacturing process can impact our health and environment, hence we strictly comply with permissible limits of air pollutants emissions and tightly monitor air quality standards. We intend to lessen the emissions of air pollutants into the air by measuring the emissions of dust, NOx, SOx, hazardous air pollutants (HAPs), and volatile organic compounds (VOCs); tracing the cause and the related impacts of emissions; and conducting regular inspections on emission facilities.
* Data of 2019 and 2020 have been revised due to changes in data collection methodology (based on actual emissions)
* Reported data of some air pollutants have increased in 2021 due to new factories and the revision of the Clean Air Conservation Act
Wastes generated from business sites include general (nonhazardous) waste and designated (hazardous) waste. In addition to disposing wastes through legitimate means, we manage wastes based on different methods of treatment to reduce waste generation and increase the recycling rate. Waste treatment is classified into four types: recycling, incineration with heat recovery, incineration, and landfill. We analyze wastes directed to incineration and landfills, and strive to maximize the amount of waste recycled.
* Data of 2019 and 2020 have been revised due to changes in data coverage (includes data from wastes not subject to legal reporting)
Since chemical substances may pose risks during use, storage, and transportation, we evaluate risks that may arise from hazardous chemical substances, and maintain a database of products containing hazardous substances. We are continuing our efforts to reduce the use of hazardous substances or replace them with less hazardous chemicals. We actively carry out LCAs to analyze our products’ environmental impacts and identify areas for improvement.
1) Registration, Evaluation, Authorisation and Restriction of Chemicals
2) Substances of very high concern
3) Carcinogenic, mutagenic and reprotoxic chemicals
4) Percentage of substances registered amon chemical substances in sales products
In accordance with the obligation to reduce and recycle waste, we continuously monitor the input of reused and recycled raw materials processed by mechanical and chemical recycling, as well as the volume of products based on reused and recycled materials. We plan to actively expand the input of reused and recycled raw materials, and thereby increase the production volume of products based on them.
As chemical manufacturing is exposed to heavy equipment, hazardous substances, and high temperatures and high pressure, employee and process safety is of paramount importance. We have expanded the scope of EH&S management not only to employees but also to include employees of our in-house subcontractors. We operate EH&S policy and conduct regular facility inspections to prevent safety incidents. In the event of unforeseen incidents, we transparently disclose the number of EH&S incidents occurred.
1) Total fatality cases * 200,000 / Total working hours
2) Total recordable incident rate: Total recordable incidents * 200,000 / Total working hours
3) Lost time incident rate: Total lost time incidents * 200,000 / Total working hours
4) Process safety events
5) Process safety event rate: Total process safety events * 200,000 / Total working hours
* Total working hours refer to 8 hours a day for 300 days for full-time employees; Process safety events are reported based on the internal standards set in Accident Index which includes injuries, fire, leakages, amount of loss, etc.
* Fatality rate, TRIR, LTIR, and PSER of 2019 and 2020 have been revised due to the correction of the number of employees
We can promote work efficiency and improve job performance through fair treatment and inclusion of employees with diverse backgrounds and perspectives. We identify the diversity of domestic and global employees by gender, region, age, and job groups, as well as the ratio of management and executive positions in consideration of diversity. We monitor as well the equity of remuneration.
1) Leadership level refers to all positions from professionals/senior managers and above
2) Management level refers to all positions from professionals/senior managers and above excluding executive level positions
3) Number of persons with disabilities hired in 2019 and 2020 have been corrected to the numbers reported to Korea Employment Agency for Persons with Disabilities
To attract and develop talents of diverse backgrounds, we monitor the employee hires and turnover by age and gender, and provide leadership and job training in addition to statutory training. Going forward, we plan to expand the development and implementation of various programs in an effort to secure and nurture human resources and enhance employee engagement, and thus advance our competitive edge.
1) Senior Management level refers to all positions from department leaders/executives and above
We conduct risk assessments for labor and human rights, such as prohibition of child labor and protection of minors, voluntary employment and labor, freedom of association and collective bargaining, non-discrimination and respect for diversity, compliance with working hours, and fair remuneration. We plan to expand training on labor rights to raise employee awareness on the topic.
Issues arising in the supply chain, including but not limited to labor rights, resource depletion and anti-corruption, are regarded as shared responsibility of all companies in the supply chain, hence identifying and improving such issues has become a competitive advantage for companies. We plan to reinforce our supply chain sustainability and partnership with suppliers through ESG assessments and on-site inspections.
1) Regular suppliers, based on internal management standards, exclude suppliers with less than 3 orders and purchase value of less than KRW 300 million (KRW 100 million for suppliers in life sciences)
2) High-risk suppliers refer to suppliers that scored below 65 for Supplier CSR Assessment results
3) On-site audits have been suspended from 2020 due to COVID-19, and have been replaced with an operational guide
We engage with local communities through employment opportunities and regional development, as well as employee volunteering and partnership programs. We intend to reinforce our environmental and safety management, pursue active interaction with the local community, and continue to uphold our responsibilities as a community member.
1) Total contributions to local communities in 2019 and 2020 include contributions of LG Energy Solution; Contributions made by LG Energy Solution (KRW 2.6 B) and FarmHannong (KRW 10 M) have been excluded from 2021
2) Employee volunteer hours reduced significantly since 2020 due to COVID-19
A board of directors with independence, expertise, and diversity is essential to ensure effective and active corporate governance. Since the BOD is responsible for corporate policies and overall performance, we plan to establish a global governance system and internalize a BOD-centered management system through empowerment and capacity building.
We conduct regular inspections on corruption and bribery, and handle identified cases through disciplinary actions and/or legal procedures. Furthermore, we provide training on corporate ethics and fair trade to raise awareness and prevent recurrence. We plan to devise policies and strategies for corporate and employee behavior and ethics, and extend them to all business sites.
1) Anti-corruption training covers trainings on “Jeong-Do Management” and the Code of Ethics
2) Fair trade training covers trainings on subcontractors and compliance
We conduct risk assessments on cybersecurity and information security, and raise employee awareness through information security training. Information leakage occurs in various forms, such as leakage of core assets of a company as well as customer data. In this regard, we plan to establish a company-wide management system to securely collect, use, and manage information relevant to corporate processes.
Changes in public policy and regulation greatly influence corporate business, hence we report related issues and measures to the management on a regular basis. We continue to seek public-private partnerships by identifying policy support and promoting government proposals.
LG Chem recognizes that observing the tax laws of each country in which it operates and fulfilling its duty to pay taxes faithfully as a taxpayer are maximizing shareholder value and are important contributions to national finance. For sustainable management, we comply with the following tax policies and manage tax risks extensively.
LG Chem observes the following tax-related principles and regulations.
Fulfill tax reporting and payment obligations faithfully in accordance with the relevant local laws
Maintain a transparent relationship with the tax authorities and faithfully observe the obligation to submit data requested by the local tax authorities
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 that calculates the effective tax rate and identifies the taxpayer in each country following the introduction of digital tax
Prohibit the transfer of income to a tax haven for the purpose of tax evasion
Release the annual audit report and other information on the electronic disclosure system to provide transparent tax information
LG Chem is responding to tax risks through the following tax management process.
When making important business decisions, assess tax risks based on advice from external experts and tax authorities
Report to the executives depending on the type and amount of the tax, and clearly define responsibilities and tasks related to tax reporting and payment
In the event of tax risks such as tax law-related uncertainties, resolve the risks through collaborating with external experts
1) Reported taxes are based on consolidated financial statements of FY 2021
We established Sustainable Solutions as internal standards of classifying products with distinguished social and environmental values in terms of sustainability. We not only consider product characteristics such as bio materials and recycled materials, but also the social and environmental characteristics throughout the value chain, such as water consumption during manufacturing. We will continue to expand R&D investment and achieve sustainability competitiveness.
1) Based on consolidated financial statements of FY 2021
2) Represents simple deductions of revenues of LG Energy Solution and Common and others from Total; used for normalizing environmental data.
Common and others includes the revenues of FarmHannong, please refer to notes on consolidated audit report of FY 2021 for details
We reflect a customer-centered approach as a top priority across all our business processes, and identify improvement tasks through a customer satisfaction survey. We intend to foster a customer/market-oriented culture by monitoring customer pain points, and to meet customer expectations through active communication with customers.
1) % of business areas (petrochemicals, advanced materials, life sciences) that conducted customer satisfaction surveys; Surveys have been conducted for all business areas since 2020 under the supervision of the Customer Value Innovation Team
