Naver and Kakao, Having Achieved Record Performance, Now Enter the 'ESG Management' Era

[Asia Economy Reporter Kang Nahum] Riding on the unprecedented performance driven by the surge in untact (contactless) demand due to COVID-19 last year, Naver and Kakao are strengthening their ESG (Environmental, Social, and Governance) management this year. They plan to move away from the unconditional pursuit of economic value and further enhance corporate value by creating social value through coexistence and mutual growth, as well as establishing a virtuous cycle structure in the IT ecosystem.

According to industry sources on the 12th, Naver and Kakao recorded their highest-ever performance last year. First, Naver posted KRW 5.3041 trillion in revenue and KRW 1.2153 trillion in operating profit last year, thanks to explosive growth in new business areas such as fintech and cloud. These figures represent increases of 21.8% and 5.2%, respectively, compared to the previous year. Operating profit exceeding KRW 1 trillion was achieved for the first time in three years since 2017.

In the fourth quarter alone, revenue rose 11.2% from the previous quarter to KRW 1.5126 trillion. Operating profit increased by 11% to KRW 323.8 billion compared to the previous quarter.

Kakao has entered the KRW 4 trillion revenue era. Strong growth in key business sectors such as KakaoTalk, content, mobility, and simple payment drove the record-high performance. Specifically, consolidated revenue last year increased by 35% year-on-year to KRW 4.1567 trillion. Operating profit rose 121% year-on-year to KRW 456 billion.

Consolidated revenue for the fourth quarter last year was KRW 1.2351 trillion, up 12% from the previous quarter and 46% from the same period last year, while operating profit was KRW 149.8 billion, up 25% from the previous quarter and 88% year-on-year.

Benefiting from COVID-19, both companies showed higher growth than ever before and plan to accelerate ESG management to meet demands for social responsibility.

Naver established an ESG committee under the board of directors last quarter and set ESG promotion directions along with a 2040 Carbon Negative goal. At the end of the year, it published its first sustainability management report detailing major ESG issues and management status.

Han Seong-sook, CEO of Naver, said, "We plan to update this annually. To this end, we have formed a dedicated team under the Chief Financial Officer and will lead ESG management by implementing key improvement tasks in various areas, including eco-friendliness."

In particular, Naver plans to emphasize mutual growth with small and medium-sized enterprises (SMEs) and strives to provide digital-based business opportunities. CEO Han said, "Naver continuously creates support programs for SMEs at each stage of startup and growth and builds structures to help them grow. We expect Naver to grow together with the growth of SMEs."

Kakao also defined ESG this year as "Kakao's promise and responsibility to create a better world" and selected four key focus areas to pursue: ▲ solving social problems in the Kakao way ▲ growing together with people sharing the IT ecosystem ▲ fulfilling corporate responsibility in the digital society ▲ creating a sustainable global environment.

In this regard, Kakao established an ESG committee last month chaired by Kim Beom-su, chairman of Kakao's board of directors, and is currently carrying out about 80 initiatives. It plans to publish a sustainability management report detailing ESG activities in the first half of this year.

Chairman Kim also announced his intention to donate half of his wealth. His assets include 12,170,631 Kakao shares held in his personal name and 9,929,467 Kakao shares owned through K Cube Holdings, which he owns 100% of. The combined value exceeds KRW 10 trillion. Half of this amounts to more than KRW 5 trillion.

Yeo Min-soo, co-CEO of Kakao, said, "ESG management is not much different from Kakao's reason for existence to create a better world. Also, Chairman Kim's donation decision will serve as a foundation for building a better society and act as a catalyst for advanced corporate management and culture."