[Innovation of SKI]③ Caring for Environment and Local Communities Together... Leading ESG Management

Creating Social and Environmental Value for Sustainable Growth
Value Added of 5.85 Trillion Won Generated in Ulsan

Editor's NoteSK Innovation, regarded as the 'most successful privatization' company, will celebrate its 60th anniversary on the 13th. Starting with Korea National Oil Corporation in October 1962, it was acquired by SK Group (then Seonkyung Group) in 1980, evolving through 'Yukong' to become a core affiliate within SK Group. SK Innovation became a decisive turning point for SK Group's business expansion from textiles to petrochemicals. Over the past 60 years, SK Innovation has grown from Korea's first refining company to a comprehensive energy and petrochemical enterprise and is now seeking innovation once again. This is the so-called 'Carbon to Green' financial story, a major shift in business focus from fossil fuels to eco-friendly energy. Facing the challenge of climate change, it is growing non-refining businesses such as electric vehicle batteries, waste plastics, and eco-friendly materials as core portfolios. We review the footprints of SK Innovation's innovation journey and look ahead to its future vision.

[Asia Economy Reporter Choi Seoyoon] Despite management uncertainties caused by the International Monetary Fund (IMF) foreign exchange crisis, the global financial crisis, and the recent pandemic, SK Innovation has continued its interest and contributions to the environment and local communities. This is based on the judgment that sustainable growth can be achieved only by creating not only economic value but also social and environmental value and coexisting with local communities.

First Domestic Net Zero Report Published...Continuously Discovering Eco-Friendly New Businesses

SK Innovation is transforming its existing businesses to focus on eco-friendliness and continuously discovering new eco-friendly businesses. In July last year, it published the 'Carbon Net Zero Special Report,' the first of its kind by a Korean company, and announced plans to reduce net carbon emissions by half within ten years. In addition to reducing greenhouse gases, it decided to precisely measure the global carbon reduction contribution effect and set comprehensive goals. This is also a first among Korean companies.

As part of net zero efforts, affiliate SK Energy launched Korea's first carbon-neutral petroleum products, and the secondary battery materials affiliate SK IE Technology (SKIET) completed joining RE100 in September last year.

At SK Ulsan Complex (CLX), SK Innovation and its affiliates are carrying out various eco-friendly projects, such as inputting eco-friendly pyrolysis oil as raw material for refining and petrochemical processes. Thanks to these efforts, SK Innovation received an A+ in the ESG comprehensive evaluation by the Korea Corporate Governance Service last year.

[Image source=Yonhap News]

"Ulsan is an SK City"... 73.9% of Regional Added Value Comes from SK

SK Innovation shares the history of Ulsan Industrial Complex (formerly Ulsan Industrial Center), Korea's first industrial base. After the government designated Ulsan Industrial Center in 1962, it was the first to complete a refinery plant in Ulsan. This marked the beginning of Korea's refining and petrochemical industry. Currently, SK Energy, SK Geocentric, and SK Lubricants production facilities are concentrated within SK Innovation's eight subsidiaries at SK Ulsan CLX.

While SK Ulsan CLX expanded its refining capacity to become the world's third-largest through facility investments such as heavy oil cracking units, Ulsan itself grew into a prominent industrial city. Ulsan's export value, which was $260,000 in 1962, grew 286,000 times over 60 years to $74.3 billion last year.

SK Innovation has steadily contributed to the growth of the local economy and played a role in Ulsan's promotion to a metropolitan city. According to Statistics Korea, among Ulsan's employed population, 2,258 people (as of 2019) work for SK Innovation, accounting for over 43% of employment in the local chemical industry. The added value created by SK Innovation in Ulsan amounts to 5.8492 trillion KRW, representing 73.9% of SK's share within Ulsan's chemical industry (7.919 trillion KRW).

Kim Hyungwook, Team Leader of External Cooperation at SK Ulsan CLX, said at a press briefing held on the 6th at SK Happiness Town in Ulsan, "I dare to say that Ulsan is an SK city," adding, "Not only Ulsan CLX but also from 1995 for ten years, we donated 10 billion KRW annually to create Ulsan Grand Park, and employees voluntarily donate 1% of their salaries to Ulsan City to alleviate social polarization." He added, "The company also contributes the same amount as a win-win fund for partner companies, totaling about 1.4 to 1.5 billion KRW annually."

[Image source=Yonhap News]

Chairman Chey Tae-won: "We Must Contemplate the Future of Ulsan, the Company's Origin"

Following Chairman Chey Tae-won's order to "find ways to jointly contemplate the future of Ulsan, the origin of SK Innovation," a forum was held last month in Ulsan, the first of its kind nationwide.

At the Ulsan Forum, Chairman Chey Tae-won said, "While the Icheon Forum is a place to find internal measures for SK's major transformation, the Ulsan Forum is a completely 'open forum' with external participation," adding, "It should be a venue to find solutions to create a new Ulsan in the era of energy transition."

Marking its 60th anniversary this year, SK Innovation plans to accelerate expanding ESG management into the local community domain. Yoo Jaeyoung, General Manager of SK Ulsan CLX, said, "Sixty years is considered the start of the second act of life. Facing an era of industrial structural transformation, SK Innovation will cooperate more closely with Ulsan City to achieve the joint goal of net zero."