Response to Climate Change

Mid- to long-term climate change response strategies and objectives

Hyosung Chemical is a global company that focuses on businesses with a significant impact on climate change. We make various efforts throughout our management to reduce this impact. In order to meet the nationally determined contribution (NDC) goals of the Korean industrial sector announced in 2021, our Green Management Vision 2030 aims to reduce GHG emissions by 14.5% compared to 2018.

To achieve the target, we establish and implement an annual facility investment plan for energy reduction, and all relevant departments, including planning, research, production, and power generation, formulate plans for mid- to long-term reduction goals and provide regular updates to the ESG Management Promotion Committee and the Board of Directors. Regarding reductions that are difficult to achieve through internal energy conservation efforts alone, we plan to promote long-term implementation through the purchase of domestic third-party PPAs produced with new and renewable energies and reduction certificates, and to gradually increase the use of renewable energy.

Execution strategy

1
GHG reduction through external reduction projects such as SDM* in line with the Paris Agreement
2
Reduction of GHG emissions through energy conservation measures at business sites and expansion of the use of new and renewable energies
3
Efficient GHG management facilitated by the in-house carbon asset management system and product carbon footprint calculation system
4
Establishment of a climate change risk and opportunity identification process for risk hedge and opportunity identification

* SDM(Sustainable Development Mechanism) 파리협정상의 지속가능개발체제

Carbon emission by year and 2030 goal

(Unit : tCO2eq)

2018: 824,948 / 2019: 829,631 / 2020: 861,520 / 2021: 865,111 / 2022: 862,236 / 2030: 705,331

Climate change risk management

Establishment and operation of management process

1
Stakeholder demands
2
Risk identification via analysis of the internal and external business environment
3
Severity rating

Hyosung Chemical has established a risk management process that can identify and systematically respond to climate change-related risks and opportunities. We identify and evaluate risks by analyzing stakeholder demands and the internal and external business environment. Climate change risk factors include transition risk due to market and technological changes resulting from the transition to a low-carbon economy, and short- and long-term physical risks due to the impact of climate change, such as typhoons, droughts, and floods.

Each year, Hyosung Chemical updates its risk management status in order to identify new risks and enhance the concreteness of its countermeasures. Significant risks are reported to the ESG Management Promotion Committee and assessed annually to determine if countermeasure objectives have been met. In addition, we have implemented internal carbon pricing1) to manage climate change risks and identify opportunities by incorporating them into strategic decision-making such as business direction and investment. We also use the carbon price according to GHG emissions for economic feasibility analysis when accounting for the cost of oversupply and deficit of emission allowances according to the emissions trading system, establishing workplace energy use plans, and making facility investments. This is done by calculating carbon emissions and distributing economic evaluation guidelines and GHG emission calculators throughout the organization.

1) Internal carbon price: A company voluntarily sets a price for carbon emissions to internalize the economic cost of GHG emissions.

Risk management process

01

Understanding the internal and external situation

Investigation of internal and external stakeholder demands
02

Risk identification

SWOT, 3C analysis, etc.
03

Risk assessment

Likelihood, severity
04

Risk measures

Establishment and implementation of risk reduction measures
05

Risk identification and change management

Risk change management after implementation of measures
06

Report to the Board of Directors or top management

Major risk reporting

Financial impact and response for climate change
and environmental issue risk/opportunity

Learn more about CDP Reports

기후변화 및 환경 이슈 리스크/기회 별 재무적 영향 및 대응 방안
Risk / Opportunity			Period¹⁾	Financial Impact²⁾		Response
Transition Risk	Policy/ Regulation	Carbon emissions price rises EU CBAM, US CCA, etc Strengthening global carbon regulations	Mid to Long-term	●	Increase in the cost of purchasing emissions rights due to a reduction in greenhouse gas quotas in the domestic emissions trading system and an increase in the proportion of paid emission rights allocations. Carbon tax payment is required when EU CBAM and US CCA target items are expanded to include plastic and organic chemical products.	Monitoring reduction performance by business site according to carbon emission reduction roadmap (greenhouse gas reduction by more than 14.5% compared to 2018 emissions by 2030)
	Technology	Increasing demand for transition to low-carbon, eco-friendly technologies /products	Mid to Long-term	-	Increased cost of calculating carbon footprint for each product and obtaining eco-friendly certification Increased R&D costs for developing low-carbon, eco-friendly technologies/products	Calculate carbon footprint by product Expansion of PCR-PP, PCR-PET film product business Expansion of R&D investment to develop low-carbon, eco-friendly technologies/products
	Market	Increasing demand from stakeholders to reduce carbon emissions and expand use of renewable energy	Mid to Long-term	●	Decrease in sales due to failure to meet stakeholder requirements	Discovering plans to reduce carbon emissions through carbon emissions reduction TFT quarterly meetings Expansion of renewable energy procurement through green premium rate system and purchase of renewable energy supply certificates (RECs)
	Reputation	Increasing investor interest in climate change response efforts	Mid-term	-	Decrease in investment due to decline in ESG evaluation score/rating	Expansion and disclosure of ESG information ESG evaluation score/rating increased (KCGS, CDP, Ecovadis, etc)
Physical Risk	Acute	Natural disasters such as heat waves, typhoons, floods, heavy snow, etc.	Short-term	●	Production disruptions due to physical asset damage, such as flooding at business sites Transaction losses occur due to delays in logistics transportation due to typhoons and heavy snow.	Supplementing facilities in preparation for abnormal weather Establishment of emergency training and guidelines Establishing a logistics emergency contact network and signing up for insurance
Physical Risk	Chronic	Average temperature rise	Long-term	-	Rising heating and cooling costs to manage product quality and maintain a working environment	Introduction of high-efficiency cooling and heating equipment
Opportunity	Product /Service	Growing demand for sustainable products Increased demand for waste reuse/recycled products	Mid to Long-term	●	Increased sales due to increased sales of POKETONE, TAC film & PCR PP products	Reduce product carbon footprint Expansion of eco-friendly certification product line
	Market	Generating profits through participation in the emissions trading system	Short-term	●	Generating profits through selling surplus carbon credits	Continue to discover ways to reduce carbon emissions through the Carbon Emission Reduction TFT

1) Period: ① short-term: Within 1 year / ② Mid-term: Within 1 to 5 years / ③ Long-term: After 5 years

2) Financial Impact : High(●) more than KRW 1 billion/year, Medium (●) KRW 500 million to KRW 1 billion/year, Low (●) less than KRW 500 million/year.

Climate change indicator management

Carbon Asset Management System

Since 2011, Hyosung Chemical has implemented and operated an IT-based carbon asset management system to monitor emissions at each business site. Using the system, we establish a GHG inventory at each business site and ensure a systematic management by monitoring emissions by facility and activity data in accordance with the Emissions Calculation Plan. In addition, we implemented a system for calculating the carbon footprint of products in June 2022 so as to measure and manage carbon emissions throughout the product life cycle.

Carbon emissions management

Hyosung Chemical has set a quantitative goal to reduce GHG emissions by 14.5% by 2030 compared to 2018. To achieve this Green Management Vision 2030, we have predicted production yield, energy consumption, and GHG emissions by business site until 2030 based on the business plan and have established an annual reduction business plan. For reductions that are difficult to achieve through our reduction projects alone, mid- to long-term investments are required, such as the purchase of renewable energy certificates and the installation of new and renewable energy power generation facilities. We calculate the cost and determine the financial impact of these climate change risks based on internal carbon pricing.

Internal carbon price increase

In 2021, Hyosung Chemical introduced internal carbon pricing in order to identify risks and opportunities associated with climate change as a result of the transition to a low-carbon economy. We use this information for company-wide business direction and investment decisions. Internal carbon pricing entails the company voluntarily internalizing the economic cost of GHG emissions by establishing a price for carbon emitted from management and business activities. Accordingly, Hyosung Chemical converts both the amount of carbon emitted and the amount of carbon emissions cut resulting from energy savings into a monetary value, incorporates it into economic evaluation, and uses it for energy facility replacement, new business expansion, and business investment. We will continue to do all we can to reduce GHG emissions as part of our efforts to achieve the Vision 2030 objective.

Management of climate change-related employee key
performance indicators (KPIs) and incentives

As performance indicators, Hyosung Chemical establishes energy reduction goals for production executives or plant managers relating to climate change, and GHG reduction goals for members of the Green Management Team. Their performances are evaluated so they are awarded incentives based on the evaluation outcomes. Moreover, in order to establish ESG management as a part of the corporate culture, the ESG Management Promotion Committee and the Board of Directors decided in 2021 to establish ESG management KPIs for employees and evaluate their performance. The initiative has been implemented since 2022. Accordingly, we have setup climate change indicators to evaluate all teams associated with energy conservation and greenhouse gas reduction, such as the ESG Management Team, Green Management Team, Production Team, and Power Generation Team, as well as relevant executives (including C-level).
Climate action

Development of eco-friendly materials using captured carbon dioxide

Hyosung Chemical promotes the development of an eco-friendly, low-carbon Poketone™ made from carbon monoxide produced by reforming carbon dioxide collected from factory effluent gas. We intend to continue to expand the commercialization of eco-friendly materials in an effort to reduce GHG emissions.

Expansion of renewable energy use

The Oksan, Yongyeon, and Gumi plants of Hyosung Chemical use waste heat to steam from incineration, a new and renewable energy source, from household waste incinerators near the business sites. The Yongyeon Plant uses the electricity generated by solar panels installed within the plant. Hyosung Chemical plans to continuously conduct solar panel installation projects at its business sites and to increase its use of new and renewable energies.

Building smart factories

Hyosung Chemical has set the establishment of smart factories as one of the Group's management policies and is continually improving its systems. In smart factories, all production-related resources are connected to the workplace in real-time, and the collected data is analyzed to build an optimized production environment. Enabling optimal operating conditions, smart factories not only contribute to increasing production yield but also reducing GHG emissions through lower energy consumption.

Support for energy conservation and GHG reduction for partners

Since signing business agreements for shared growth with large enterprises and SMEs with the Korea Energy Agency, Hyosung Chemical has been offering partners energy diagnosis and consulting services. Through a diagnosis of process and workplace environments, energy managers of partners can receive information on factors such as energy saving and GHG emission reduction factors, analysis of problems and economic feasibility, and improvement themes. We provide partners with support for energy-saving facilities where necessary.

Eco-friendly product and technology development

Hyosung Chemical focuses its efforts on the research and development of eco-friendly technologies and products, thereby securing future growth engines and achieving sustainable growth. We will take the lead in addressing climate change and establishing an eco-friendly business ecosystem through substantial investments in R&D, such as bolstering business capabilities for efficient energy use, setting up an eco-friendly hydrogen business, and developing resource recycling technology.
Learn more about Eco-friendly Technology Development

Task force activities for lowering carbon emissions

With carbon neutrality becoming an international concern, the national GHG emissions reduction target for 2030 in Korea has been increased. Hyosung Chemical has also increased its GHG emissions target to cut emissions by 14.5% by 2030 compared to 2018 levels. In an effort to reach our emissions target, we launched a carbon emissions reduction task force under the CEO. With the ESG Management Team leader, plant managers from each business unit and site, and the Public Affairs Team leader and Facility Technology Team leader as the members, the task force has formulated GHG reduction and energy-saving plans. Accordingly, we anticipate that the reduction strategy will be implemented with the highest impact.

Task force activities for lowering carbon emissions

Biodiversity activities

As the ecosystem continues to be destroyed by climate change, the obligation to preserve biodiversity is emerging. Hyosung Chemical supports and participates in efforts to preserve and promote biodiversity in order to nurture a thriving ecosystem for coming generations.

Biodiversity Policy

Biodiversity activities
Classification	Activity	Details	Period
Company-wide	Online training on climate change and biodiversity	Raising the awareness of biodiversity among employees	Every July
	Each business site entitled to clean up a river	Habitat conservation such as removal of harmful plants	Ongoing
	Plogging alongside the Hangang River near Mapo-gu and Sebitseom	Plogging alongside the Hangang River near Mapo-gu and Sebitseom	Since 2022
	Seagrass Forest Restoration Project	Threatened & Endangered Marine Species Restoration Project	2023 (planned)
Chemicals	Animal behavior enrichment	Support for the production and installation of animal feeding and movement-inducing devices	Since 2022

Plogging: A portmanteau of the Swedish verb "plocka upp," which means "to pick up," and the English word "jogging." Plogging is the act of picking up trash while jogging or walking.

Biodiversity training targeting
all employees

All employees received training on the impact of climate change on biodiversity and the connection to business operations. Through biodiversity training, Hyosung Chemical will continue to increase employee awareness of biodiversity.
Plogging and tree planting
with employees and citizens

Hyosung hosted the "Sevit ESG Color Festival" on Sebitseom. By planning "Sevit Re-Gen Plogging," a campaign of jogging alongside the Hangang River while cleaning, we carried out environmental cleanup activities together with local residents. In addition, the "Hyosung Forest of Sharing" event, in which citizens, Hyosung employees, and their families participate, was created in honor of Hyosung’s 50th anniversary in 2016. The event takes place each year at "Hyosung Forest of Sharing" located in Noeul Park, Mapo-gu. More than 3,000 seedlings of approximately 40 species have been planted as of 2022. In order to preserve the ecology of Noeul Park and support management, we are involved in annual environmental cleanup activities such as funding operating expenses. In addition, we contribute to the preservation and enhancement of the local environment (e.g. activities to protect the environment around factories) by promoting our in-house campaigns.
Behavioral enrichment of animals

Through "behavioral enrichment of animals," Hyosung Chemical and the Cheongju Zoo, a former habitat conservation institution, are working to preserve biodiversity. The Ministry of Environment designates out-of-habitat conservation institutions to ensure systematic conservation and propagation of endangered species that are difficult to conserve in their native habitats. In 2014, the Cheongju Zoo was designated as an out-of-habitat conservation institution for protecting and preserving 18 species, including (red-crowned cranes), (leopard cats), and (Asian black bears). Hyosung Chemical employees carry out the "behavioral enrichment of animals" in order to assist zoo animals in engaging in natural feeding and movement behaviors. Since Asian black bears have a highly developed sense of smell, they are fed with pumpkin snacks containing their preferred nuts or fruits to induce increased activity and unique behaviors. Kudzu vine balls are made for herbivores so that they can feed and engage in active play. It is anticipated that these activities will improve the physical and mental health of endangered species outside their natural habitats and increase their future proliferative capacity. Restoring the ecosystem is crucial for the survival of future generations; therefore, Hyosung Chemical will take the initiative in preserving and enhancing biodiversity.
Seagrass Forest Management Project

Together with the Korea Fisheries Resources Agency, Hyosung Chemical engages in a management project for seagrasses (eelgrasses) grown in Dadae-ri and Dapo-ri of Geoje-si, Gyeongsangnam-do. Seagrasses are species designated as endangered marine plants by the Conservation and Management of Marine Ecosystems Act. They play a vital role in the marine ecosystem by providing food, habitat, and spawning grounds, and are one of the blue carbon whose ability to absorb carbon has also been certified internationally. Hyosung Chemical conducts activities to improve the marine environment, including monitoring the state of business sites subject to management of the seagrass forest created by the Korea Fisheries Resources Agency, monitoring the habitat, planting supplementary seagrasses, and retrieving abandoned fishing gear. When a seagrass forest is established, the number of benthic animals, the number of species present, and the species diversity index increase 2.5-fold, 1.5-fold, and 1.2-fold, respectively, ensuring a healthy marine ecosystem.

On May 4, 2023, 25 executives and employees of Hyosung Group, including Hyosung Chemical Co., Ltd., participated in an event hosted by the Korea Fisheries Resources Agency commemorating Sea Arbor Day (May 10) and the Seagrass Forest Management Project and We transplanted about 1,000 shares of Seagrass seeds in Tongyeong-si, Gyeongsangnam-do. On November 8th of the same year, 10 Hyosung Group executives and employees, including our company, participated in an event held in Geoje-si, Gyeongsangnam-do, also hosted by the Korea Fisheries Resources Agency, and transplanted about 10,000 Seagrass seeds.