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.
To truly embrace the ESG trends in business management, it is important to look at things from an investor’s point of view, says Lee Bang-sil, vice president of South Korea’s chipmaker SK hynix.
“ESG is basically a concept driven by investors. It looks similar to corporate social responsibility when it comes to the three components: Environment, society, and governance, but there is a difference in whose point of view it is,” she said during in an email interview with The Korea Herald.
Lee, who joined the chipmaker in January to speed up its ESG strategy, is a renowned expert on sustainable business management. She has introduced a new corporate growth model which focuses on generating profits and tackling social problems at the same time, through her book “Big Profit” that she co-authored in 2017.
ESG management is all about integrating nonfinancial ESG factors into the company’s long-term business strategy, Lee said.
Investors want to know about the potential risks arising from a corporation’s relationship with the environment and society, as well as various stakeholders in the value chain ecosystem. They also request information about the decision-making process through which the company manages such risks, the official explained.
As more and more investors become ESG-conscious and take account of such factors in their investment decisions, ESG has become a major management trend as well, prompting companies to change.
For corporations, however, the trend is more than just currying favor with investors. By looking through the lens of investors, companies can obtain a longer-term, broader perspective on its business and business environment, she said.
“The core of ESG management is directly connected to the question of how to create value that can contribute to the sustainable growth of a company,” she said.
At SK hynix, ESG is not just about risk management. It is seen as a new growth engine, Lee continued.
“By incorporating ESG factors into the company’s long-term strategy, SK hynix is managing risks and seeking to discover new business opportunities to create new value.”
It is an important component of the company’s “Financial Story,” through which it hopes to explain to customers, investors and the market -- the Financial Society as the firm puts it -- how the company is seeking growth and preparing to create value.
“Basically, SK hynix is pursuing continuous growth through the two flagship businesses DRAM and NAND, while actively promoting its unique Financial Story to contribute to humanity and society by strengthening ESG,” she said.
At SK hynix, unlike many other corporations here, CEO Lee Seok-hee has taken a hands-on approach with ESG efforts, Lee pointed out.
The company’s ESG Management Committee consists of 12 members, including the CEO and other top officials from global marketing and sales, manufacturing technology, safety and health environment, management support, human resources, and sustainability management.
“The committee not only discusses the current status of ESG issues, but holds in-depth discussions on agendas related to the company’s long-term strategy, such as concrete action plans for the goal of achieving Net Zero by 2050,” Lee said.
The committee’s discussions are proposed to the board of directors as agenda items so that the ESG issues can be managed and supervised at the level of the board, the highest decision-making body of the company.
“To this end, SK hynix is striving to internalize ESG management from various angles, having established this year the ESG-dedicated organization under the direct control of CEO,” she said.
Of the three ESG factors, environmental factors could be the hardest to tackle in the chip industry, which as a whole releases tens of millions of tons in greenhouse gas emissions every year.
“As SK hynix runs actual manufacturing facilities, structurally, it is inevitable that more environmental loads are incurred compared to fabless companies in the same industry,” she said. “However, SK hynix has been making efforts to minimize carbon emissions without slowing down its growth.”
Through its 2022 ECO Vision plan announced in 2018, the company has vowed to reduce greenhouse gas emissions intensity by 40 percent from the business-as-usual level in 2016 by 2022.
As a result, the greenhouse gas emissions intensity last year was expected to be less than 20 tons per billion won, much lower than the 2016 performance value (29.7 tons per billion won), Lee explained.
“In addition, SK hynix has been making continuous efforts to improve process energy efficiency through system expansion, replacement of old equipment, and system optimization,” she said.
One example was using artificial intelligence technology to derive an optimal operation model for outdoor air conditions. It cut down electricity costs by 4.4 billion won ($3.9 million) last year.
They also strived to save 6.9 billion won in electricity costs by optimizing operations through their chiller, cooling tower and waste heat recovery system.
Along with the efforts to cut carbon emissions on the manufacturing front, SK hynix is committed to going green with its introduction of eco-friendly chips to the market.
“SK hynix is materializing its environmental efforts through low-power semiconductor products,” she said.
The official pointed to the world’s first DDR5 released in October last year.
SK hynix’s DDR5 has a storage capacity of up to four times larger, with a bandwidth two times faster than its predecessor DDR4, but uses 20 percent less power.
Including the DDR5 technologies, SK hynix holds more than 300 domestic and international registered patents related to the latest low-power semiconductor products, Lee added.
“In the future, SK hynix will continue accumulating future chip manufacturing technologies and expand rollouts of low-power semiconductors,” she said. “In addition to high bandwidth memory, a memory solution optimized for next-generation AI systems, NAND-based enterprise SSDs with much lower power consumption compared to previous HDDs, and other low-power semiconductor products will continue to expand.”
Furthermore, the company plans to come up with “ultralow-power” memory products that can improve energy efficiency by four to five times compared to the current HBM, and AIM, which stands for artificial intelligence in memory, which increases power efficiency by putting an AI-operating function in the memory, she said.
