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The Korea Herald is publishing a series of interviews with executives of South Korea’s leading corporations on their response to environmental, social and corporate governance, or ESG, issues, which have become central factors globally in measuring the sustainability of an investment or business decision. -- Ed.
Since even before the environmental, social and corporate governance trend caught on in corporate Korea, LG Innotek has been making quiet efforts for years for the betterment of lives at the workplace and in communities.
Just like the hundreds of tiny electronic components produced by the firm that have become part of people’s daily lives, ESG factors have permeated into the lives of LG Innotek’s rank-and-file employees, according to its Chief Financial Officer Kim Chang-tae.
“LG Innotek’s ESG initiative can be differentiated from other companies’ in that its principle is to have all employees practice ESG in their ordinary tasks in different manners, not just the (ESG) team members,” said Kim in an email interview with The Korea Herald.
On the surface, the firm, which has set up an ESG committee this year, may appear to be on the same page with many other local companies just starting to realize the values and relevance of the ESG agenda in their business.
But at LG Innotek, ESG has already been incorporated in its business and organizational culture – only it didn’t have a name and an organ dedicated to it yet, Kim said.
“The ESG factors are reflected in the whole process of our business from R&D, procurement, product designs and manufacturing, quality control to marketing, and are managed strictly,” the executive said.
Watching it emerge as the hottest agenda in the global corporate world, the firm made it a goal to become a “top ESG company,” and has launched various training programs aimed at making every worker an ESG professional.
As the company’s top financial official, Kim pointed to a shift of focus when making investment decisions amid the growing calls for ESG worldwide.
“The company had mainly considered financial issues when making an investment before ESG trends, but we are now considering the investment’s possible impacts on our customers, shareholders, executives and employees, contractors and regional communities,” he said. The company could consider issuing EGS bonds in the future, he added.
Under the vision “Right Promise, Better Tomorrow,” LG Innotek has made widely recognized achievements in ESG management, according to Kim.
The company placed third among 100 Korean firms in a recent evaluation of ESG activities by a local research institution.
For the environmental factor, the company’s carbon emissions in ratio to annual sales were reduced by around 20 percent to 3.1 tons per 100 million won ($90,000) in 2020.
The effort led to the sale of 29,000 tons of certified emission reductions last year, generating over 600 million won in profit.
It was not an easy task for an electronic component maker. The industry is a heavy carbon emitter as climate-warming gases like SF6 and CF4 are widely used for the cleaning and etching processes. One kilogram of SF6 emits greenhouse gases equivalent to using 22,800 kg of carbon dioxide.
Such attainment is attributed to the introduction of an energy-focused management system called ISO 50001 in 2012, Kim said.
The company established photovoltaic and other highly efficient facilities to cut its energy costs. And it has secured approximately 9,000 patents at home and abroad in relation to technologies designed to cut carbon emissions.
Last year alone, it could save a total of 5.2 billion won in energy costs, down 17 percent from the previous year. This was against a 19.6 percent growth in sales.
All these efforts were essential to producing electronic components that are highly efficient in energy use, highly trusted in performance and environmentally friendly, he stressed.
LG Innotek boasts a robust portfolio of eco-friendly motors and sensors for braking and steering, electric vehicle components, lighting modules, highly efficient ferrite material elements and high-performance 5G and 6G communication modules.
“I don’t think ESG is a temporary trend,” Kim said. “In the long run, the agenda would have a huge impact on the global industrial landscape and society.”
Even now, many overseas institutions are taking into account ESG factors of Korean companies when investing in them, singling out companies that lack efforts, according to the executive.
“For ESG management to take root properly in the Korean corporate culture, the government needs to come up with policy and institutional support,” he said. “Korea needs a system that would better cope with the increasing issuances of ESG bonds, and related policy measures that could support companies to accelerate their ESG moves.”
By the target year of 2050 for ESG, the world would have a whole new different ecosystem for corporations, Kim expected.
“In every process of decision-making at companies, an activity’s contribution to cutting carbon emissions would be considered,” he said.
The world would go beyond carbon neutrality to seek carbon “negative,” he said.
“Among all, not a particular organization of a company but all employees should make the efforts to reach carbon ‘negative,’ based on systematic support from the government,” he underlined.
For society, the components manufacturer’s top priority is safety of its employees, the CFO said.
“If a situation does not guarantee safety, employees do not start the work,” said Kim. “This is the most basic but important principle at LG Innotek to achieve our goal of no accident, no injury.”
The company has created an organization for workplace safety, which sets goals and plans measures in line with global standards, under the office of the chief executive officer.
And LG Innotek’s corporate social responsibility programs are well received not only in Korea but also in other countries.
It has been running educational programs like Junior Pine Tree Class and Good Neighbor Plus for the vulnerable here.
In China, Indonesia and Poland, where the firm operates regional branches, it has been offering localized programs for schools and local communities.
The company is increasing efforts to carry out shareholder-friendly policies and make governance more transparent, Kim mentioned.
This year, LG Innotek more than doubled dividends as part of efforts to enhance shareholder value.
And as many market watchers have noticed, the company moved forward its schedule for regulatory filings by more than one month to provide investors and shareholders with company information as early as possible to reinforce transparency.
“For independence and diversity of the company’s board of directors, internal directors are not included in the recommendation committee for external directors,” Kim said. “Next year, the company is preparing to invite some outstanding female experts from different fields to the board.”
By Song Su-hyun (firstname.lastname@example.org)