One Year Since SK Innovation's Financial Story Announcement: "Clear Vision and Execution Make for a Highly Successful Strategy"

Global Scholar, American Professor Analyzes SK Innovation's Green Transformation

Kanan Ramaswamy, Professor at Thunderbird School of Global Management, Arizona State University, USA. Photo by SK Innovation

[Asia Economy Reporter Donghoon Jung] A global scholar has evaluated SK Innovation's core financial story, 'Green Transformation,' as a "strategy with a high likelihood of ultimate success."

According to SK Innovation on the 4th, Professor Kanan Ramaswamy of the Thunderbird School of Global Management at Arizona State University said, "SK Innovation's Green Transformation is a strategy that clearly reflects SK's intention to innovate," and analyzed that "it completes a clear vision for the future and has a reasonable execution plan."

Professor Ramaswamy is a well-known global scholar specializing in the energy industry including renewable energy, sustainable management, corporate governance, and mergers and acquisitions. This analysis of SK Innovation's Green Transformation was conducted jointly with SK Innovation. The results were published in the form of a column on the news channel Skino News on the 4th.

In this analysis, Professor Ramaswamy concluded that SK Innovation's Green Transformation strategy has three key factors: ▲clear purpose and vision, ▲validity of the execution plan, and ▲intangible advantages such as corporate culture and management systems, along with SK management equipped with an entrepreneurial spirit of 'can do,' making the ultimate success highly likely.

In particular, citing SK Chairman Chey Tae-won's commitment to carbon reduction and his firm stance on greenwashing controversies, he evaluated SK Group as one of the few companies that have solidified a clear sense of purpose and determination in response to the global challenge of climate change.

Clear Purpose and Vision

He praised SK Innovation for deeply focusing on ESG broadly and specifically on achieving net zero through green anchoring and green transformation strategies. He analyzed that by quickly embracing change and responding strategically with consistency, SK Innovation was able to allocate resources optimally for new businesses.

Regarding the Green Transformation strategy, which best reflects SK Innovation's intention to innovate existing businesses, he diagnosed that "it clearly recognizes the fundamental reality that energy transition from fossil fuels is inevitable and that fossil fuels will be needed for a considerable period until the transition to renewable energy is realized." He added, "Unlike some other companies that simply dispose of refining facility assets as a change of ownership, SK Innovation is attempting to turn the threat of aging into an opportunity for growth with a sense of responsibility to propose sustainable solutions to the climate crisis."

He also cited the clarity of the strategy as the greatest strength of the Green Transformation strategy. He mentioned Vice Chairman Kim Jun's declaration at the Financial Story Day last July that "through 'Carbon to Green' innovation, we will transform into an 'Eco-friendly Energy & Materials Company (Green Energy & Materials Co.).'" This is a clear message with a defined 'what' and 'why' direction.

From the same perspective, he highly evaluated SK Innovation's conclusion that concerns about climate change will lead to a radical reorganization of the petrochemical business in the near future and that it has defined specific transition schedules and stages to actively prepare for the changing environment.

Validity of Execution Plan

Professor Ramaswamy analyzed that SK Innovation's Green Transformation strategy systematically includes two approaches: a groundbreaking and mid-to-long-term carbon reduction plan requiring new technologies, and a plan for the organization to gradually reduce carbon emissions through small changes.

He stated, "SK Innovation is reviewing various technologies and alternatives such as carbon capture and storage (CCS) in the upstream oil development sector, as well as pyrolysis and depolymerization in the downstream and chemical sectors." He added, "In refining and marketing, renewable raw materials and net-zero crude oil are being introduced, and efforts are underway to build energy superstations utilizing renewable energy."

He also cited SK Innovation's immediate and gradual carbon reduction efforts over the past year as an example of achievements. He explained that by actively utilizing existing technologies and capabilities, SK Innovation is improving process efficiency, limiting operation of high carbon-emitting facilities, increasing the introduction of power generated from renewable energy, and promoting heat recovery, upcycling, and wastewater reduction.

Additionally, Professor Ramaswamy analyzed SK Innovation's global technology partnerships as an excellent execution strategy rarely seen in the petrochemical industry. Partnerships with companies specializing in pyrolysis, depolymerization, and data center immersion cooling technologies not only jointly participate in core technology development and commercialization, resulting in mutual wins, but also hold great potential for SK Innovation's business innovation.

Intangible Advantages such as Corporate Culture and Management Systems

He also viewed positively the governance improvement efforts emphasized by SK Innovation. Governance systems that control and supervise the establishment and execution of the Green Transformation strategy centered on the board of directors, the formation of an ESG committee at the board level, and linking ESG performance to CEO evaluations were cited as important factors for the success of the Green Transformation.

Professor Ramaswamy emphasized the importance of actually proving the positive outcomes of the strategy. SK Group Chairman Chey Tae-won recently stated in an interview with the BBC, "Essentially, fossil fuel companies can change, and actual results will be evidence of the efforts." He said, "Compared to peer competitors, the Green Transformation journey that aims to address climate change concerns in a more fundamental way supports Chairman Chey's words."

He also diagnosed, "Today, I have not seen a company that transparently discloses plans, schedules, and achievements for promoting eco-friendly businesses as much as SK Innovation, and this is an important measure to dispel suspicions of greenwashing." He concluded, "SK Innovation, celebrating its 60th anniversary, is establishing and executing the Green Transformation strategy in a clear and transparent manner, and the future challenge will be to create progressive results and demonstrate true innovation through outcomes."

Regarding this analysis, SK Innovation stated, "While it is meaningful that the importance and significance of the Green Transformation strategy have been recognized through an objective analysis by a global scholar, it can also be interpreted as a call to produce concrete results and present a successful direction for change in the petrochemical industry." It added, "Since communication and trust with stakeholders are important for the financial story including Green Transformation, we will use this evaluation as an opportunity to enhance execution capability."