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Corporation Sustainable Management Value Chain Management

Value Chain Management

Value Chain ESG policy

We at SKC seek win-win relationships and cooperation with our subcontractors based on the principle of mutual trust. As such, we treat them as equal partners in all our activities related to environment, society, and governance structure (transparent management), and aim to strengthen our cooperation with them in order to establish a sustainable management system to be shared with our subcontractors.

In close cooperation with our subcontractors, we are striving to expand the procurement of eco-friendly goods and services to cope with climate change and to equip ourselves with a support system for improving the environmental management capabilities of the subcontractors, in order to take the lead in creating economic and social value based on shared growth through the provision of support in such areas as education, finance, and technology.
Value Chain ESG policy
SKC has declared 2021 as the initial year of implementing ESG management; and, in terms of value chain management, SKC will comply the prevailing laws and ethics jointly with the subcontractors to reduce risk factors in the value chain.
1. Compliance with business regulations
All corporate and business affairs shall be carried out based on the relevant regulations and procedures, and the full period of preservation of decision-related materials shall be observed. Such materials shall not be lost, damaged, or hidden. Also, the regulations on decisions made under the direction of the executive and senior management and other document management regulations shall be observed.
2. Conclusion of contracts
Business negotiations and the signing of contracts shall be conducted within the authorized rights, and all contracts (including electronic contracts) shall be drawn up in accordance with the Company’s in-house regulations and procedures and the relevant laws. Furthermore, all contracts shall include all the contents agreed to by the parties thereto, and each contract shall be recorded and stored according the prescribed method.
3. Ethical management/Anti-corruption
When engaging in a transaction with a subcontractor, SKC shall carry it out in good faith, both legally and ethically; shall thoroughly observe the relevant laws and corporate regulations; and shall conduct itself ethically and with integrity. SKC’s employees shall not offer or receive any bribes or kickbacks in relation to SKC’s corporate and business affairs and shall observe the UN Convention against Corruption and the anti-corruption laws of each country. The usual level of gifts and entertainment may be accepted in maintaining business relationships with SKC partners, but SKC employees shall comply with the generally accepted business customs and practices. Gifts or entertainment that go beyond the usual level, and which may have an influence on business decisions, shall be considered a bribe and thus shall neither be offered nor accepted. The term “gifts and entertainment” provided in the foregoing paragraph covers valuable or pecuniary interests and non-pecuniary interests.
4. Fair trade
Employees shall observe sound principles of fair market competition and shall not engage in any unfair joint collusion in bidding in an attempt to readjust the price or production quantity. Prices shall be fixed independently based on a rigorous cost analysis and the overall market conditions. Prices shall be derived from documents based on openly disclosed materials, and the validity of the sources shall be verifiable.
5. Subcontractors
SKC’s Subcontractors shall have the right to make independent decisions on the purchase or sale of goods, prices, and counterparties to transactions. Any attempt to block such an independent decision may constitute a violation of the Monopoly Regulation and Fair Trade Act. Employees shall refrain from using anti-competitive practices or committing deceptive or fraudulent acts; shall never fail to engage in transactions aimed at the mutual benefit of the Company and its subcontractors; and shall ensure transparency in the conduct of all transactions. Opportunities to enter into transactions shall be equitably provided to all the relevant parties; and all transactions shall be handled fairly and equally according to the principle of mutual respect.
6. Win-win cooperation
SKC employees shall respect the personnel of SKC’s subcontractors and work with them based on the principle of win-win cooperation and shall strive to jointly strengthen the competitiveness of the Company and its partners through the provision of technological and management support. Employees shall provide subcontractors with fair opportunities to enter into transactions and shall not engage in any unfair acts, such as using the Company’s advantageous/bargaining power over them, and shall strive to secure mutual benefits and joint development. Employees shall strive to minimize risks to the Company and its partners by conducting risk evaluations based on ESG management indicators according to the international guidelines.
7. Environment
Employees shall strive to meet the requirements of environmental regulation and take positive steps for environmental conservation by carrying out purchasing activities in accordance with the relevant laws and government policies.
8. Procurement of eco-friendly products and services
Employees shall strive to minimize environmental impacts throughout the entire process of design, manufacture, distribution, use and disposal of products and the development and supply of eco-friendly products, materials and services. They shall also aim to expand eco-friendly technologies including reuse and recycling, promote the development and use of goods conducive to the reduction of GHG emissions, and minimize the use of toxic materials, etc.
9. Prohibition of the use of conflict minerals
We at SKC shall not purchase any conflict minerals (produced in the Democratic Republic of the Congo and neighboring countries) unless the RBA’s* requirements regarding information on the country of origin and certification of the legal right to mining work are fully satisfied.
*The RBA (Responsible Business Alliance) is a non-profit organization composed of enterprises that strive to fulfill their social responsibilities in order to create sustainable value.
We at SKC view our subcontractors as our partners in pursuing ESG management and have accordingly established a code of conduct to help them establish a shared growth ecosystem.
This code of conduct sets forth the conditions that our subcontractors are required to observe as partners in the practice of ESG management.
SKC’s subcontractors shall observe the code of conduct and all applicable laws and regulations and shall conduct their business in an ethical fashion.
SKC, or external organizations designated by SKC, may visit the subcontractors to check whether they are observing the code of conduct, and request them to make improvements or take remedial steps in the event that they are found to have violated the code of conduct.
In addition, SKC may halt all transactions or terminate a contract with a subcontractor in the event that the latter fails to take the required steps to remedy a serious violation within the deadline set by SKC.
Where the code of conduct is in conflict with the local laws and regulations of a country, the stricter of the two shall prevail and the code of conduct may be readjusted reasonably as required.
This code of conduct may be verified at the official SKC website. Subcontractors are notified of any changes to the code of conduct in advance via the official SKC website and the integrated purchase website.
1. Human rights/labor
Subcontractors shall not discriminate against any employee based on such factors as gender, age, sex, nationality, region, race or ethnicity, religion or the like, and shall respect their civil liberties and treat them with dignity.
All employees including temporary, contractual, dispatched, migrant, and regular employees, etc. shall be guaranteed their basic rights and civil liberties, including the right to work under the local laws and regulations. All work shall be voluntary. No employee shall be forced to work against their will.
Work hours shall not exceed the number of hours and number of days per week stipulated in the laws and regulations, except in the event of an internal emergency or other special circumstances. Subcontractors shall ensure that their employees’ work hours do not exceed 52 hours per week, and employees shall be entitled to at least one day off per week.
2. Prohibition of conflict minerals
In cooperation with SKC, subcontractors shall not use any conflict minerals (produced in the Democratic Republic of the Congo and neighboring countries), and shall comply with the RBA’s* requirement to disclose information on the relevant country of origin and guarantee that the minerals used by them have been legally mined.
* The RBA (Responsible Business Alliance) is a non-profit organization composed of enterprises that strive to fulfill their social responsibilities to create sustainable value.
3. Environmental protection
Subcontractors shall obtain and maintain all environmental approvals and authorizations legally required to operate their business, observe all the relevant laws and regulations, and strive to minimize their environmental impact.
Subcontractors shall fully recognize their environmental responsibilities, systematically be aware of the status of all toxic substances and waste/waste water used by them, and strive to identify, manage, reduce, scrap, and/or recycle them.
Subcontractors shall reduce or minimize their air pollutant emissions, energy consumption, and GHG emissions, and observe the regulations prohibiting the incorporation of toxic substances into their products based on the establishment of an environmental management system.
Subcontractors shall manage such matters as identification marking and information labeling concerning all the substances they use in order to ensure the safe handling, transportation, storage and use of their products.
4. Ethical management/Anti-corruption
Subcontractors shall observe the relevant laws and regulations and the corporate regulations by recognizing the importance of ethical management for the sustainable conduct of their business and by engaging in fair transactions.
Subcontractors shall legally and ethically carry out all their transactions in such a way that their ethicality and trustworthiness remain uncompromised.
Subcontractors shall maintain the highest level of integrity and fairness in all their transactions and shall not engage in any acts of corruption, bribery, misappropriation or extortion.
Subcontractors shall thoroughly protect all intellectual property rights, customer-related information, and personal information.
5. Health and safety
Subcontractors shall obtain all health and safety-related approvals and authorizations needed to operate their business and observe all the relevant laws and regulations.
Subcontractors shall ensure their employees’ health and safety and strive to make their workplaces safe and healthy by eliminating all risk factors.
Subcontractors shall strive to minimize losses and/or damages caused by accidents by establishing procedures and measures designed to cope with each type of accident.
Subcontractors shall provide adequate personal protective equipment to all employees who are exposed to danger in their work duties and periodically check and assess the status of any risk factors.
Subcontractors shall conduct assessments of safety risk on a regular basis, hold training sessions on health and safety, and inform employees of the danger of accidents and risk factors.
6. Management system
Subcontractors shall operate a system of management related to human rights, labor and environmental protection, ethical management, and health & safety, and shall ensure that the following pledges are faithfully observed:
1) To observe the relevant laws and corporate regulations voluntarily and willingly.
2) To fulfill the obligations and responsibilities of senior and executive management.
3) To deal with and monitor the relevant laws and regulations and customer demands.
4) Ro conduct risk management (related to environment, safety/health, labor, and ethics)
5) To carry out objective management and assessments.
6) To implement the procedure for remedial actions.
7) To encourage feedback from, and the participation of, employees.
8) To operate educational and training programs.

Eco-friendly Green Purchases

We recognize our responsibility to pass on a clean and healthy environment to future generations, and to continue with our efforts to expand the range of eco-friendly goods and services, in order to address the issue of climate change and put the goal of environmental management into practice with the aim of achieving the target of Net Zero 2040.
We entered into an agreement on voluntary green purchasing with the engea Environmental Industry & Technology Institute (KEITI) in 2014, and since then have practiced eco-friendly green purchasing on a permanent basis.
Amount of Eco-friendly Green Purchases, 2015-2020 KRW 49.3 billion
  • Eco-friendly Certified Products*(Recycle) Office supplies, construction materials, household goods, etc.
  • Outstanding Recycled Products(Reuse) Packing materials composed of waste paper & waste wood, etc.
  • Low-carbon Certified Products(Reduce) Household goods, construction materials, food materials, etc.
  • Energy-saving Products Electronic products, etc.

* Goods designated by the KEITI; goods judged to be suitable based on the environmental standards and equivalent products etc.

SKC’s current eco-friendly purchase policy, which is limited to partial items that can be reused two or more times by SKC and its primary customers, will be expanded to include construction and maintenance goods and services, with the focus on 3R (Recycle, Reuse, Reduce) products and energy-saving products. From 2022, the policy will be operated not only by SKC, but also by companies in which SKC has invested, in order to reinforce the implementation of the policy through the use of recycled raw materials.
Eco-friendly Green Purchases
In addition, to overcome the limitations on expanding the purchase of eco-friendly goods and services due to the traditional purchase method centered on quality, cost and delivery, incentives have been applied to the adoption process in a bid to expand the purchase of eco-friendly goods and services, while environmental capabilities have been reinforced through ESG management with SKC’s subcontractors.

Method of Promoting the Reinforcement of Vendors’ Environmental Capability

Method of Promoting the Reinforcement of Vendors’ Environmental Capability

Policy for Supporting Shared Growth with Subcontractors

We aim to foster a culture of pursuing fair transactions with our subcontractors, build mutually trusting relationships, and establish a mutually sustainable management system. To this end, we provide support for our subcontractors’ technologies, financial issues, and training, etc. to help them enhance their competitiveness, all of which leads to the creation of social value.
Our support programs include those linked to our affiliates and customized programs for us and SKC-invested businesses. In 2021, we expanded the level and range of support for the programs linked to our affiliates by including even SKC-invested businesses’ subcontractors.
Policy for Supporting Shared Growth with Subcontractors
Category Program Overview Performance (2020) Goal (2022)
Financial support SK Shared Growth Fund Provision of operational/facility fund at low interest rate to subcontractors (in tandem with IBK). KRW 3 billion/year KRW 4 billion/year Expanded to include SKC-invested businesses
Improvement of Payment Condition Payment conditions changed to cash payment. SKC/SKC-invested businesses SMEs 100% (2025)
Technical support Technical Support for R&D Support for analysis/testing processes related to our/SKC-invested businesses‘ use of analysis equipment; support for R&D/technological development capability through the dispatch of researchers. 36 cases Expansion of subcontractors receiving support and SKC-invested businesses
Technical Support on SHE Operation of SHE technological support program including training on risk factors and health & safety education. 26 cases Expansion of support for subcontractors and SKC-invested businesses
Management support New material technology-based open platform Enhancement of businesses’ operational capabilities by providing professional consulting to startups, social enterprises, ventures, SMEs, subcontractors, businesses in local communities based on R&D, management infrastructure, safety/environmental core capabilities held by us and other institutions taking part in the platform. Participation of more than 300 professional institutions/businesses Expansion of relevant institutions/participating businesses
Communication Holding of periodic informal meetings with subcontractors; promotion of mutual understanding through the sharing of information on the status of business operations and relevant issues. 4 businesses 30 businesses
One-on-one communication through open channels at all times. - New establishment
Job expo-related support Job expo held for more than 100 primary/secondary subcontractors in tandem with affiliates. Plan aborted due to the COVID-19 pandemic (1 business in 2019) 3 businesses
Education support CEO Seminar on SK’s Shared Growth - Integrated MBA course Enhancement of CEO’s perspective and strengthened networking for primary subcontractors. Education on strategy, accounting, financial, marketing, personnel and organizational capabilities. 24 people from 17 businesses Increased to 30 people from 30 SKC-invested businesses
CEO Seminar for win-win with semiconductor business Lecture on semiconductor-related biz/tech insights 5 people from 5 businesses Increased to 10 people from 10 secondary/tertiary suppliers
Training of subcontractors’ recruits (in connection with the group) Training to equip employees with capabilities focused on job-related knowledge Plan aborted due to the COVID-19 crisis.
As our subcontractor support programs are focused on making our policy increasingly sophisticated, we will continuously operate such programs and improve their quality, as well as developing new programs. As of 2021, we plan to enter Phase 3 of our shared growth support initiative and to strengthen ESG-centered joint cooperation in order to establish a sustainable value chain system. We will provide support to our subcontractors to help them with their ESG management activities and minimize their risks. In addition, we will strengthen communication with them by establishing a communication channel within the procurement system, while our ESG Committee, led by the CEO, will evaluate and study subcontractors’ ESG risks and management/shared growth so that we can provide them with substantial and effective support. Moreover, we will form and operate the relevant committees under the Board of Directors to exclusively deliberate on key items of agenda.

Subcontractor support policy roadmap

Subcontractor support policy roadmap

ESG Risk Support Policy for Subcontractors

SKC announced 2021 as the inaugural year of its ESG management, under which we will recognize all our subcontractors as our partners in ESG practices. Accordingly, SKC emphasizes subcontractors’ compliance with our ESG policies and obtains their pledges to take part in activities geared to ESG assessment and improvement in order to achieve our ESG goals and minimize any risks. Our subcontractor-related ESG management is focused on two broad perspectives: i) strengthening management execution and ii) revising and/or supplementing our existing policies.

Reinforcement of Implementation of ESG Risk Management/Support for Subcontractors

So far, our subcontractor-related management has been pursued with the focus on existing QCD and social value; however, from 2022, our evaluation* of subcontractors’ capabilities will include ESG factors. For those assessed to have poor management capabilities, we will mark them as being high-risk and incentivize them to improve their existing practices to meet our standards.
* Evaluation/management of the following: 3 environmental sectors; 2 health & safety sectors; 7 labor/personnel sectors; and 5 ethics sectors.

Subcontractor ESG risk management and improvement process

Subcontractor ESG risk management and improvement process

Objectives of ESG risk support for subcontractors

In order to establish a stable value chain, SKC conducts subcontractor-related ESG assessments in the following four areas: environment; health and safety; labor and human rights; and ethics. We identify those entities that require improvement based on the results and findings of our assessment, pursue ways to provide such entities support for the reduction of risks, and provide them with consulting. We are striving to make our subcontractor-related ESG management policy ever more sophisticated and to expand the scope of those entities subject to assessment in order to grow and develop with them.
협력사 ESG Risk 지원 목표
2021 2022 2023
Objectives
  • Establishment of ESG management policy / Joint performance by all SKC-invested businesses
  • Number of subcontractors subject to ESG evaluation: 40
  • Collection of pledges to implement ESG: Subcontractors subject to priority control.
  • Sophistication of the subcontractor-related ESG management system
  • Number of subcontractors subject to ESG evaluation: 50%
  • Collection of pledges to implement ESG :70%
  • Number of subcontractors showing improvement : 100%
  • Expansion of subcontractors subject to evaluation - evaluation/application.
  • Number of subcontractors subject to ESG evaluation : 100%
  • Collection of pledges to implement ESG :100%
  • Number of subcontractors showing improvement : 100%
Major
Activities
  • Establishment of subcontractor-related ESG management methods
    - Setting the criteria for identifying subcontractors that require priority control.
    - Establishment of the diagnosis/assessment policy.
    - Establishment of improvement/support methods.
  • Pilot evaluation of major subcontractors.
  • Establishment of methods for identifying high-risk subcontractors.
  • Collection of pledges to implement ESG from subcontractors subject to priority control.
  • Evaluation of subcontractors engaged in transactions over the past year.
  • Make subcontractor-related ESG management methods more sophisticated
    - Evaluation of subcontractors engaged in transactions with us over the past year
    - Specification of subcontractor-related ESG management methods by reflecting the results of the 2021 evaluation.
    - Improvement of the evaluation-related system.
    - Expansion of the evaluation of subcontractors.
    - Development of improvement/support programs.
    - Perform due diligence of high-risk businesses and provide support for improvement.
    - Check reliability of self-evaluation.
  • Evaluation of subcontractors engaged in transactions over the past two years.
  • Establishment of support for the subcontractor-related ESG management system.
  • Establishment of support/monitoring methods.