SK hynix Takes a Fresh Look at ESG Through PRISM Framework

Enterprises are starting to recognize the importance of sustainability as both external and internal uncertainty, including abnormal climate phenomena and the continuing COVID-19 pandemic, grows. In response to this fast-changing era, companies around the world have recently started to actively introduce ESG (Environmental, Social, and Governance) practices while simultaneously working towards sustainable development.

SK hynix is ​​also ensuring that ESG management is up to par by developing an ESG strategy framework¹⁾, PRISM, which details its ESG activity goals. On July 28th, SK hynix issued its Sustainability Report 2022 based on PRISM and its TCFD Report 2022 covering activities aligned with the TCFD²⁾ recommendations, which conveyed the company’s veritable ESG commitment to relevant stakeholders. Shin Kwan-ik, Yoon Jung-eun, and Hwang Eun-sun from the ESG Engagement Team within the ESG Strategy Department provided us with more details.

SK hynix’s ESG strategy framework shows that it is serious about ESG in five letters: P.R.I.S.M.

Since sustainability has become an important criterion in assessing a company’s value, more and more stakeholders are measuring the sustainability of a company based on ESG indicators. Accordingly, SK hynix realized the need for a framework that showcases its ESG strategy, planning and execution at a glance, and developed the new PRISM framework that forms the backbone of SK hynix’s ESG management. PRISM is a five-letter abbreviation that represents the core messages that SK hynix strives to convey.

The ESG Strategy Department laid out the company’s goals by linking them with the existing SV2030 guidelines (SK hynix’s medium to long-term roadmap to maximize social value creation) to establish PRISM. The department added goals in the areas of governance and supply chain management that were not included in SV2030, and quantified detailed target numbers.

PRISM’s system diagram designed to communicate the framework’s value with stakeholders. The five triangular pieces, each with a message, interlock to form a pentagon, symbolizing SK hynix’s continuous ESG management based on the virtuous social cycle pursued.

 

PRISM, as the name implies, relays the message that SK hynix will transparently communicate with stakeholders, while also reflecting the goal of spreading a positive influence around the world, like a spectrum of light emitted through a prism. There are five messages, one for each pillar. The first, “P (Pursue a brighter future based on our philosophy)”, means pursuing a brighter future based on DBL (Double Bottom Line)³⁾ management. This is PRISM’s most critical message and shows SK hynix’s desire to make a better world by strengthening DBL management via ESG management.

“R (Restore the environment to preserve the planet)” means that SK hynix will become a company that protects the Earth by restoring the environment and contains the message that it will grow as an eco-friendly company.

“I (Innovate our technology for tomorrow)” means creating a better world with innovative and future-oriented technologies. It also expresses the company’s aim to continuously innovate its technology for an eco-friendly step that protects the Earth.

“S (Synchronize sustainability efforts with our partners)” captures the meaning of making efforts to build a sustainable industrial ecosystem with SK hynix’s partners. It conveys the message that SK hynix will grow with its partners to contribute to strengthening the semiconductor ecosystem.

The last pillar, “M (Motivate our people toward excellence)”, reflects SK hynix’s goal to create an environment where members can demonstrate leadership based on diversity, as well as motivating them to reach their potential and achieve excellence. It also reflects the company’s goal of upgrading its corporate culture to provide diverse opportunities to its members, such as appointing female leaders and establishing an educational infrastructure.

What are the detailed goals for each of PRISM’s five pillars?

The ESG Strategy Department specified ESG activities in line with PRISM’s five pillars and the goals to be achieved by 2030 under each activity.

A closer look at the goals under “P (Pursue)” shows that SK hynix plans to create a cumulative social value of KRW 1 trillion by 2030 via its social contribution activities for local communities. Additionally, to strengthen the diversity of governance, the ratio of gender and nationality diversity will increase to 30%, the integrated incident rate will reduce by 10% to create a safe and healthy workplace, and the prevalence rate of metabolic syndrome will be decreased by 10%.

“R (Restore)” includes goals related to SK hynix’s eco-friendly projects, with the company previously declaring that it would achieve net zero and RE100⁴⁾ by 2050. PRISM specified goals in line with these commitments as well as adding new goals to mitigate the impact of climate change. The company plans to maintain direct and indirect GHG emissions (Scope 1 and 2) at 2020 levels and achieve a renewable energy use rate of 33% by 2030. In terms of its water management, SK hynix set the goal of achieving 600 million tons of accumulated water resource conservation and receiving 99% of the ZWTL⁵⁾ Gold grade certification.

“I (Innovate)” consists of goals to improve the manufacturing process in order to achieve the eco-friendly projects in the above-mentioned “R (Restore)”. SK hynix’s plans include reducing process gas emissions by 40%, improving the destruction and removal efficiency of abatement systems to 95%, and doubling HBM (High Bandwidth Memory) products’ energy efficiency.

In “S (Synchronize)”, SK hynix set newly reorganized supply chain management goals in 2021. All newbusiness partners signed the SK hynix Supplier Code of Conduct, and for Tier 1 partners SK hynix provides an ESG online self-assessment tool so that the partners can self-monitor how they measure up in terms of environment, safety, ethics, and human rights. If a partner is classified as a high-risk supplier, it will be closely scrutinized and subject to an ESG field on-site assessment every two years. SK hynix plans to invest a cumulative total of KRW 3 trillion in shared growth technology cooperation for other partners.

Finally, the “M (Motivate)” goals address diversity and member growth, which are emerging as important values in ESG’s social domain. The plan will triple the ratio of female executives and ensure 10% representation of women in team leader positions to foster female leaders. In addition, the company plans to provide an environment and system to provide over 200 hours of self-development education per employee to develop its members’ competencies.

Shin Kwan-ik, Technical Leader at ESG Engagement Team

 

Shin Kwan-ik said, “PRISM is a framework created to effectively communicate with stakeholders on how SK hynix will develop ESG management. It will lead to smoother communication with stakeholders by implementing the plans for each area of ESG more systematically.”

Incorporating PRISM into the 2022 Sustainability Report

Following PRISM’s development, SK hynix published its Sustainability Report for 2022. As there was no separate framework in the past, the focus was mainly on ESG-related key issues, but the five PRISM tenets form the table of contents in the 2022 report.

SK hynix Sustainability Report 2022, reorganized based on PRISM (Download)

 

The updated Sustainability Report details goals for ESG activities in 2022 that will help achieve PRISM’s 2030 goals. The contents were also structured around achievements and related cases from 2021.

Hwang Eun-sun, Technical Leader at ESG Engagement Team

 

Hwang Eun-sun said, “Among the ESG activities carried out by our company, those which our employees participated in were mainly reflected in the Sustainability Report. The previous report read like a thesis, so this time, we wanted to increase accessibility by showcasing real-world cases that captured experiences.”

Another change in the Sustainability Report 2022 was the stand-alone publication of the TCFD Report 2022. Previously, the TCFD reporting requirements were only included as an appendix in the company’s sustainability reports.

TCFD Report 2022 to be published for the first time by SK hynix in 2022 (Download)

 

The TCFD report 2022 contains a detailed analysis of climate-related risks and opportunities, as well as an analysis of various climate change scenarios. For climate change-related risks with high impact and likelihood in particular, SK hynix estimated and disclosed financial impacts quantitatively – one for each of the transition and physical risks – based on the scenario analysis. The transition risk analysis is based on the Network for Greening Financial System (NGFS) climate scenarios while key assumptions were made with South Korea’s nationally determined contribution (NDC) targets for 2030 and 2050 carbon-neutral scenario. For physical risks, the company used the Korea Meteorological Administration (KMA)’s detailed climate change scenario for South Korea that applied statistical downscaling based on the Representative Concentration Pathways (RCP) scenario.

SK hynix communicates with stakeholders through various channels, from sustainability reports to TCFD reports. So, what message does SK hynix want to convey via each report?

Yoon Jung-eun, Technical Leader at ESG Engagement Team

 

“We wanted to inform the process and performance of ESG-related activities in the Sustainability Report and our efforts to manage climate change risks in the TCFD Report. Through these two reports, we want to convey SK hynix’s sincerity, which strives to make the world a better place.” Yoon Jung-eun emphasized.

The ESG Strategy Department not only transparently discloses the process of carrying out PRISM’s detailed goals, but also plans to evolve PRISM by periodically updating the goals themselves in accordance with the changing times and the needs of various stakeholders.

Lastly, we heard about SK hynix’s future commitment to ESG management, which is already being carried out.

“ESG has recently emerged as a hot topic in corporate management, and many companies are participating in the movement. To implement real ESG management, it is important to sincerely communicate specific goals, strategies, and processes across all ESG areas. In the meantime, SK hynix has built a mid-to-long-term roadmap, SV2030, which is based on DBL management principles and has also been creating social value by carrying out various detailed activities accordingly. In addition, to further advance this approach, SK hynix endeavors to make PRISM a milestone that informs the direction of the company’s ESG management. We hope that SK hynix stakeholders will take an active interest in whether the plans disclosed in PRISM are being implemented and the goals are being achieved.”

 

¹Framework: A system containing mid- to long-term strategic directions and value propositions.
²TCFD (Task Force on Climate-related Financial Disclosures): A consultative body formed in 2015 by the Financial Stability Board, entrusted by G20 finance ministers and central bank governors to demand voluntary and consistent disclosure of climate-related information. In 2017, TCFD announced its disclosure recommendation so that companies can analyze climate change-related risks and opportunities and reflect them in their business strategies. The recommendation is considered a global standard for climate change disclosure by major countries and companies around the world.
³DBL (Double Bottom Line): SK hynix’s management principle to break away from the Single Bottom Line, which pursues only economic value and profits, by increasing economic values (EV) and social values (SV) in every business activity to grow its business and return benefits to society.
⁴RE100 (Renewable Energy 100): A declaration to procure 100% of electricity via renewable energy. The Climate Group, a multinational non-profit organization based in the UK, started the movement in 2014 and more than 300 companies worldwide have joined the initiative to date.
⁵ ZWTL (Zero Waste to Landfill): UL (Underwriters Laboratories), the first safety standard certification body in the US, assigns a grade by subtracting the weight of non-recyclable waste from the total weight of waste and quantifies the recycling rate. ZWTL ratings include Platinum (100%), Gold (95-99%), and Silver (90-94%).