The ‘era of changes,’ which entails the COVID-19 pandemic, accelerating climate change, and rapidly developing ICT technology, is here. More and more companies are introducing Environmental, Social, and Governance (ESG) management to pursue a sustainable growth amid rising uncertainties.
SK hynix has already made various efforts to better communicate with the society and address social issues. And early this year, the company announced its ‘SV2030’ roadmap aimed at maximizing social value (SV). SK hynix is also accelerating its efforts on ESG management by establishing an ESG decision-making structure that enhances management’s responsibility and the Board of Directors’ supervision of environmental, social, and governance issues.
And recently, SK hynix has published its latest Sustainability Report that contains its ESG footprint of last year. Reflecting growing interest in ESG issues by stakeholders, SK hynix tried to make the report more accessible and informative. Let’s take a look at SK hynix 2021 Sustainability Report and find out more on what has been done in the past year and should be done in the months to come.
Sustainability Report, the Communication Channel between Company and Stakeholders
ESG has now become a hot keyword among companies regardless of the industries they belong to. It refers to a comprehensive consideration of non-financial factors such as environmental, social, and governance when conducting business activities. It is growing fast in accordance with interests in global issues such as COVID-19 or climate change. The COVID-19 pandemic was a good reminder for companies of the importance of crisis management capability, while responding to environmental changes that can no longer be put aside has become a top priority. As a result, a growing number of stakeholders are now turning to ESG indicators to understand and analyze how valuable a corporate is.
The best communication channel that stakeholders can take advantage of to see if a company is faithfully implementing its ESG commitments would be the ‘sustainability report.’
With sustainability reports attracting more attention every year, an increasing number of companies are making public their sustainability reports annually. In January, the Financial Supervisory Service and the Financial Services Commission announced that all Kospi-listed companies with more than KRW 2 trillion in assets will be required to submit ESG filings starting from 2025. The authorities plan to expand the rule to all Kospi-listed companies from 2030.
SK hynix has been publishing its Sustainability Report since 2008 to provide information on its economic, social, and environmental activities to stakeholders transparently.
2021 Sustainability Report
This year, SK hynix focused on its responses on major global issues and changes in business environment in its latest sustainability report. In the newly-added ‘Global Challenge’ section, SK hynix explained how it responded to the global issues like COVID-19 and climate change. ‘Our Business’ section demonstrates the company’s plan to carry out ESG commitments from a business perspective to eventually realize its Financial Story. ‘ESG Focus’ section is about SK hynix’s activities and achievements in key ESG issues, including green management, safety and health, and supply chain-related responsibility. Detailed information recommended by the Sustainability Accounting Standards Board (SASB)1 Standards, which are sustainability-related accounting standards, and Task Force on Climate-related Financial Disclosures (TCFD), can be also found in the ‘Appendix.’
Enhanced TCFD Disclosures: Report that Meets the Needs of External Stakeholders
There are more than 600 organizations that assess ESG management globally. SK hynix has enhanced sustainability report disclosures in accordance with SASB Standards and TCFD Recommendations, given their credibility, influence, and information usefulness in the capital market. It especially provided detailed information on how it’s tackling climate change in accordance with TCFD guideline throughout the entire report.
TCFD Recommendations are structured around Governance, Strategy, Risk Management, and Metrics and Targets. It recommends organizations identify climate-related risks and opportunities according to the frameworks for the four thematic areas and disclose their expected financial impact. Among the recommendations, SK hynix particularly focused on disclosures of ‘governance’ and ‘strategy’ areas.
In the ‘Response to Climate Change’ of ‘Global Challenge’ section, the report touches heavily on SK hynix’s Governance System on Climate Change. In December 2020, SK hynix newly installed directly under the CEO a department dedicated to ESG Strategy to enable efficient response to key ESG issues at home and abroad. And since February, it has been running an ‘ESG Management Committee’ comprised of key executives including the CEO. The ESG Management Committee, a body that establishes the company-wide ESG strategy, shares in-depth discussions on mid-to-long-term ESG strategy direction and specific action plans such as ways to achieve net zero and water management strategy.
SK hynix also identified potential risks and opportunities of climate change to reflect them into its long-term strategy and carry into action, while analyzing their financial impact in the report.
Human Rights Report: Leading the Way
An increasing number of investors are joining a call from the organizations including the Corporate Human Rights Benchmark (CHRB) in demanding companies disclose human rights-related information. Also, with relevant legislations underway both at home and abroad, the need to preemptively disclose relevant information and remove legal risks is rising.
SK hynix has published the ‘Human Rights Report’ separate from the Sustainability Report for the first time this year to beef up disclosures on human rights management and responses by assessing potential impacts of the issues and providing the assessment results comprehensively. Previously, information on human rights was covered only as part of the sustainability reports.
The Human Rights Report shows the company’s responses to potential human rights risks identified by the human rights impact assessment (HRIA) and the management status of each issue. SK hynix conducted HRIA on its local units, global subsidiaries, and joint ventures for manufacturing, and identified potential human rights issues.
When it comes to human rights issues, it is important to demonstrate what actions have been taken when an issue occurred and whether a company has in place the appropriate system for prevention. It is meaningful that SK hynix has published an independent Human Rights Report separate from the Sustainability Report as not many companies share information on human rights domestically.
Epilogue… Behind the Publication of the 2021 Sustainability Report
ESG Innovation Team Jungeun Yoon TL, Sunghyun Jeon TL, and Jongchan Kim TL
Q. What are the key topics of SK hynix’s ESG management in 2021?
The most important change for the ESG management this year, no doubt, was establishment of the ‘ESG Management Committee.’ Building the right governance is the starting point for implementation of ESG management. We now have an established body where the top management, executives and the relevant teams can set up ESG strategy together and enhance execution.
Q. This year marks the 13th that SK hynix has published its Sustainability Report. Looking back on the past 14 years of sustainable management activities, what makes this year’s report special?
It would be the first time that we published the report solely based on the ESG perspective. Starting from the very first planning stage, our aim was to create a report not just for us, but all our external stakeholders. So, we tried to reflect recent ESG trends and requirements of external stakeholders and applied TCFD, SASB standards to provide fair and transparent information. In addition, we not only explained calculation methods for data values, but also additionally disclosed data that were not provided previously.
Q. Any particular part of the report you would like to recommend to readers as the entire report is quite extensive?
We strongly suggest readers check the ‘CEO’s Message’ part on pages 3 and 4. It’s a nice overview of the ESG management blueprint that SK hynix aims to unfold. Same for the Human Rights Report. We also like the ‘ESG Management’ (p.30~31) part as it describes the governance and role of organization in managing risks and identifying new business opportunities by integrating ESG into the long-term strategy. Another recommendation would be the ‘Response to COVID-19’ (p.11~17) part, which demonstrates our global risk-management capacity. Others include the ‘Response to Climate Change’ (p.18~21) and ‘ESG Focus-Green Management’ (p.39~44) parts.
Q. What is the objective of the ESG Strategy including the ESG Innovation Team?
We have three key topics on our agenda. First, we aim to solidify the system to help the ESG decision-making structure settle across the entire company. Second, we will establish a comprehensive ESG risk management system that conducts review of company-wide implementations by identifying ESG risks and establishing response strategies. Lastly, we will continue to provide information on ESG management and improvement progress transparently through SK hynix official website and the Sustainability Report to strengthen communication with stakeholders including investors to build a stronger relationship based on trust.
Q. What is the ultimate message that SK hynix aims to deliver through its 2021 Sustainability Report?
As mentioned in the CEO’s Message, ESG is ‘a path to be taken firmly, and one to be taken first’ for SK hynix. It will not be easy and few changes may be seen or felt immediately, but SK hynix is dedicated to leading ESG management in the era of big changes.
1Newly launched as the Value Reporting Foundation after a merger with the International Integrated Reporting Council (IIRC) in June 2021
