From raw material extraction to product manufacture, LG Chem creates a decarbonized supply chain. Check out LG Chem’s 2022 Sustainability Report!
2023. 08. 24
2023. 08. 24
The Earth is on the brink of unprecedented crisis. UN secretary general Antonio Guterres said in his speech, “The era of global warming has ended; the era of global boiling has arrived,” urging the world to respond to the matter. This is a time when our collective efforts are needed more than ever. As climate crisis deepens more, let’s take a look at how LG Chem is approaching to the sustainability of our Earth.
In 2020, LG Chem established their Sustainability Strategy with the goal of ‘Providing innovative and distinguished sustainability solutions for the environment and society.’ Since then, the company has derived 5 major tasks from the sustainability strategy (e.g. responding to climate change and developing a responsible supply chain) and been taking various sustainable management actions. In order to communicate clearly about LG Chem’s sustainable business activities and performances with different interested parties, the company has been publishing a Sustainability Report on a yearly basis. The 2022 Sustainability Report <RE:ACT TO ZERO> is LG Chem’s 17th issue of the report, introducing the company’s sustainable management strategies as well as the key performances and future plans within the ESG (Environment, Social, Governance) sector. Furthermore, this report addresses LG Chem’s efforts to set up a decarbonized supply chain ecosystem connecting ‘Suppliers-LG Chem-Customers.’ Let’s take a look at the details of LG Chem’s efforts depicted in 2022 Sustainability Report, <RE:ACT TO ZERO>!
LG Chem has concretized a roadmap to achieve Net-Zero by 2050 by building detailed plans for each category of carbon reduction. The company’s devotion to eco-friendly business management can be seen in the introduction of carbon management system to track down and manage the amount of carbon emissions, and the switch to sustainability-centered business portfolio.
LG Chem declared their commitment to source 100% renewable energy at overseas business sites by 2030 and domestic business sites by 2050. The key factor to realize this goal is procuring sufficient renewable energy supply. LG Chem is thereby taking various measures to secure renewable energy for their overseas sites. As for domestic sites, the company has signed a long-term contract with an energy provider. Thanks to these efforts, LG Chem recorded 11.6% of renewable energy transition rate including all business sites, and 7 global sites have already achieved 100% transition to renewable energy.
LG Chem is passionate about introducing eco-friendly fuels to cut down greenhouse gases! Aiming to start operation in 2026, LG Chem intends to invest $2.5 billion (KRW 3.2 trillion) in Hwachi plant, Yeosu, Korea to establish a biomass energy plant. The new plant will mass-produce industrial steam electricity using waste wood, which is expected to reduce 99% of greenhouse gases compared to coals. With completion, LG Chem will be able to cut down annual 400,000 tons of carbon.
How can we make waste from production sites Zero(0)? LG Chem set up a strategy to reduce and recycle the incineration and landfill waste. As a result, a total of 3 business sites in Iksan and Naju of Korea and Quzhou, China obtained Zero Waste to Landfill (ZWTL) Certification in 2022 from UL Solutions, a global safety·environment certificate authority. In 2023, LG Chem Gimcheon site was added to the list.
LG Chem hopes to build a safe workplace through solutions based on scientific technology. CSEO (Chief Safety & Environment Officer) is a newly added position which serves as a control tower for Environment·Safety·Health within the company. LG Chem also adopted ‘The Seven Safety Commandments’ to solidify employees’ basic safety compliance culture.
Embracing diversity is the key to a successful business. Diversity in the organizational culture helps draw active participation and cooperation from employees, bearing innovative ideas and products. To solidify a free and communicative organizational culture, LG Chem began their ‘Speak-up Table’ program in 2019 where the CEO and employees can discuss and seek the direction of LG Chem’s future. For the past 4 years, more than 1,569 employees took part in 79 ‘Speak-up Table’ sessions and contributed to improving the organizational culture. Moreover, the company holds ‘Town Hall Meetings’ where the CEO and employees communicate about LG Chem’s strategies and business performances. These meetings record over 6,000 concurrent viewers each time.
LG Chem values growing with their partners and establishing a sustainable supply chain. To do this, the company conducts Supplier and ESG evaluation every year. In 2022, LG Chem carried out ESG evaluation on 762 suppliers. Among them, 17 high-risk suppliers underwent field inspection under the monitoring of a third party, through which they gained solutions for improvement. On top of that, LG Chem joined the Responsible Business Alliance (RBA) and applied the RBA standards to build a system for managing their suppliers’ ESG activities. The company shares these criteria with the suppliers, who then submit a written pledge to comply with the standards. Furthermore, LG Chem keeps close monitoring of the suppliers’ ESG risks based on the standards.
The importance of managing the supply chain is heightening due to factors such as labor force, exhaustion of resources, anti-corruption, etc. With the tightening of global environmental regulation, the spotlight is going to the concept of ‘supply chain decarbonization.’ What are LG Chem’s efforts to establish a decarbonized supply chain?
LG Chem has completed the Life Cycle Assessment (LCA) of all domestic-produced products to measure the carbon reduction effects of each product. LCA quantitatively evaluates a product’s environmental impacts throughout its entire supply chain (from raw material sourcing to product development), encompassing all inputs, outputs, and product system. LG Chem plans to complete LCA on all products including overseas production by 2023.
Does carbon emission occur only during production? The answer is no. In fact, our entire business activities such as working out of office or using office equipment involve carbon emissions. Scope 1·2·3 is a system which categorizes a company’s carbon emissions into different groups. Scope 1 refers to direct emissions produced from the company’s own resources. Scope 2 refers to indirect emissions that occur when the company purchases and uses energy sources from another party. Scope 3 refers to all indirect emissions except Scope 2, which is the most complex concept as it includes indirect emissions from the entire value chain required to make a product.
According to the research of World Economic Forum (WEF), 61% of the total carbon emissions produced by petrochemical companies falls under Scope 3. Therefore, in order for LG Chem to strengthen their low-carbon product competitiveness, the role of raw material suppliers (Scope3 upstream) is essential. LG Chem is aware of the significance of cutting down upstream carbon emission to establish a decarbonized supply chain that connects suppliers (upstream) and customers (downstream). The company is operating ‘Scope3 LCA TF’ directly under the CEO to support the measurement and management of suppliers’ carbon emissions by each product. LG Chem plans to calculate the product carbon footprint based on the actual Scope3 upstream process data to maximize the accuracy and completeness of their LCA results, and utilize the results to strategize the establishment and operation of a decarbonized supply chain.
LG Chem does not stop there, and will take one step further to build a consistent communication system that connects Suppliers-LG Chem-Customers to share information about product carbon footprints and facilitate the establishment of a decarbonized supply chain. LG Chem intends to build a decarbonization collaboration model by distributing the PCF calculation method based on their LCA methodology and Scope3 data collection guidelines, plus actively communicating about the LCA implementation system.
LG Chem formed the ESG committee in April 2021, aimed at internalizing ‘sustainability,’ a concept encompassing both financial and non-financial value, as the core value of the company’s growth. In order to procure LG Chem’s sustainable growth, the ESG committee deliberates on key management agendas related to ESG and reviews activities to achieve Net-zero.
Diversity, one of LG Chem’s core values, is present not just in employee demographics but also in the Board of Directors (BOD). The company appointed two female outside directors (taking up 29% of the BOD) to expand their board diversity, along with outside directors in management, industrial technology, finance·accounting, and law to strengthen their expertise.
To accomplish the sustainable development goal, LG Chem is expanding their global partnerships. In January 2023, LG Chem CEO Shin Hak-cheol was elected chair of an industrial consultative body at the World Economic Forum (WEF) in Davos, Switzerland, representing the chemical & advanced materials industry. Through consultation with global chemical and advanced materials companies, CEO Shin demonstrated a collective leadership to discuss key issues facing the industry, such as weakening of global supply chains and responding to climate change, etc. to prepare the countermeasures.
LG Chem operates a systematic and unified compliance program by establishing a global compliance IT system in 2023 to support and manage compliance befitting a global science company. In addition, by establishing a self-inspection system, the company is expanding employee participation in compliance and settling compliance as a company-wide organizational culture.
Read more details on <2022 Sustainability Report>!
LG Chem is striving to establish a decarbonized supply chain to preemptively respond to the climate crisis and promote sustainable growth. In 2022, the company left meaningful footsteps through various sustainable management activities in the areas of environment, society, and governance. LG Chem will continue to actively communicate with all stakeholders and step up as a company that provides new value to customers based on science.