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Brief Landcaping CSR in South Korea - Written by Impact Square (Nov. 2011)

<Table of Contents> 1. General CSR Environment 2. Key Figures A. Responsible Investment Assets B. Sustainability Report Publishers C. Global Initiative Involvement D. Corporate Philanthropy Stats E. Growth in Social Entrepreneurship F. Specific CSR issues to further work on 3. Key Players Non-financial Industry: Samsung & SK Financial Industry: NPS 4. Meta Players Public Institutions Professional Firms Indices & Ratings


1. General CSR Environment 1. As current administration(President Myung-Bak Lee)â&#x20AC;&#x2122;s focal policy emphasis is on Green Growth and/or Shared Growth, various initiatives and business policies are enacted and executed from industrial sector according to this administrative tendency. 2. Korean large conglomerates are facing high pressure regarding their social responsibility due to their peculiar governance and historically rapid industrial growth; they are now in need of redesigning their business into CSV framework as issues like rise of environment-friendly industry, importance of global supply chain management (unfair practices with subcontractor), emphasis on corporate citizenship along with global expansion are getting more societal attention. 3. Interests and focuses for social enterprise have recently augmented in a great deal among government, nonprofit sector and companies; thus related resources have experienced rapid growth, represented as increases in governmentâ&#x20AC;&#x2122;s supportive policies, expenditure on corporate philanthropy, participation of large foundation and general media exposure. Especially, Won-Soon Park, recently elected as a mayor of Seoul, is famously known as a founder of Beautiful Stores, Korean version of Oxfam, and also a great advocate for social entrepreneurship and related concepts. 4. National Pension Service(the nation-largest and globally fourth largest institutional investor, managing up to USD 280 bil) has become a signatory of PRI and is now expanding SRI assets in its portfolio; social funds and microfinance sector,

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i.e. Society Solidarity Bank and Miso Finance is also witnessing its breadth expansion, all leading to overall improvement in financial infrastructure for corporate philanthropy activities and foundation/incubation of social enterprise. 5. As more companies are showing CSR commitment, development of CSR-meta industry, such as CSR research, analysis, consulting, solution, index, investment, is being accompanied. Additionally, relevant industrial conferences, associations and academic curricula are springing up. 6. For ISO 26000 is introduced in Korea, domestic companies are trying to improve their responsible practices and qualities of their management standards.

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2. Key Figures A. Responsible Investment Assets • The volume of Socially Responsible Investment(SRI) amounts to 3.4 billion dollars, 2010 in Korean capital market. • National Pension, Private Education Fund, Government Employees Pension comes near to 1 billion dollars, while Private Equity Fund amounts to 1.5 billion dollars, 2010, taking more than a third of total volume. • The size of SRI is increasing, yet making little headway since 2009, comprising only 0.28% of market capitalization of Korea Exchange. • The number of funds, pertinent to environmental issues, nearly doubled during 2009, while ESG & Governance Funds showed little progress.

B. Sustainability Report Publishers

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<Korea-based Companies that publish CSR report, Source: Center for Good Corporation, March 2011>

â&#x20AC;˘ Some of the companies that publish the CSR reports: Samsung Electronics, LG Innotek, SK, LG Chem, Kia Motors, Korean Air, Kumho Petrochemicals

C. Global Initiative Involvement UN Global Compact â&#x20AC;˘ Currently 100 Korea-based corporations in total are the members of UN Global Compact, part of which are LG Electronics, Inc, Hyundai Motor Company, KB Kookmin Bank, GS Caltex Corporation, Hynix Semiconductor Inc., SK Chemicals UN Principle of Responsible Investment(PRI)

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• Currently 13 Korea-based companies in total are the signatories of PRI, part of which are Korea National Pension Service (NPS), Korea Teachers Pension, Allianz Global Investors Korea Limited, Eco-Frontier, Korea Corporate Governance Service (KCGS), Solability Co Ltd. and Sustinvest Co., Ltd. Dow Jones Sustainability Index • The index represents the top 30% of the largest 200 South Korean companies in the Dow Jones Global Total Stock Market Index • Each of 57 different industries was evaluated, part of which includes Samsung Electronics Co. Ltd, POSCO, Hyundai Mobis Co. Ltd, LG Chem Ltd Carbon Disclosure Project • 200 Korea-based companies were asked , 2011 through CDP, to measure and disclose their greenhouse gas emissions, water use and climate change strategies, and 86 of them, 43%, responded. • Some of the leading corporations in following CDP guidelines are Samsung Securities, Asiana Airlines, Hyundai Motors, LG Chem, and SK Telecom.

D. Corporate Philanthropy Stats

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<Korea Corporate Philanthropy 2009, Source: The federation of Korean Industries>

• 220 companies were surveyed by The federation of Korean Industries and this report was released at the end of 2010. • Of more than 200 corporations asked on their philanthropic activities on the global scale, 55% of them responded that they are currently engaged in global-level philanthropy. • 53% of those who have not yet been involved in global philanthropy said that they currently have plans to practice corporate philanthropy on the global scale in the foreseeable future.

E. Growth in Social Entrepreneurship

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• 578 companies were, to date, certified by Korea Social Enterprise Promotion Agency as a social enterprise. • According to the survey done by Korea Social Enterprise Promotion Agency, the primary reason for establishing a social enterprise is : Job creation(43.8%) Social Service offer(13.1%), Mixed(28.2), and etc(14.7). Some of the successful cases would be Beautiful Store, Noridan and Traveller’s map

F. Specific CSR Issues to Work on

<CSR Areas to reinforce, Source: The federation of Korean Industries>

• Other than the figure above, Center for Good Corporation also published a report which addresses 10 key CSR categories of interests and some of them are : Job security, Workplace safety, Human Rights, Environment, Distressed debt, and etc.

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3. Key Players Non-financial Industry: Samsung Group • Samsung Group is the biggest Korean multinational conglomerate corporation comprised of numerous affiliated businesses across various business sectors. Notable subsidiaries include Samsung Electronics ( the world’s largest IT company), Samsung Heavy Industiries (the world’s secondlargest shipbuilder), Samsung Life Insurance (the world’s 14th-largest insurance company), to name a few. They produce around a fifth of South Korea's total exports. Considering Samsung’s mighty influence on this country, their CSR initiative functions as a driving force of overall Korean CSR sphere. • Vision and Mission for Samsung’s corporate citizenship • Under their corporate citizenship mission”Happy Together”, Samsung pursues three visionary values: Hope, Harmony and Humanity. They emphasize Hope for for children and youth, Harmony for brighter and healthier community, and Humanity for facilitating corporate culture of sharing. • Since 1994, Samsung started their organized and systematic social contribution activities. The major focus of their CSR is placed on the following six representative areas: social welfare, culture and arts, education and research, environment preservation, sports promotion and international partnership.

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• Annual expenditure on CSR from Samsung amounts to $ 441 million (2005). •According to operation methods, • 62.8% was spent on donation/sponsorship, 35.5% on public service, and the rest 1.7% was spent on volunteer activities. •According to supporting areas, • Social welfare (45%), research and education (31.5%), culture and arts (16.2%) were the top three. • Challenges considering ESG Issues • While Samsung is praised for their leading CSR activities, it is somewhat ironical that one of Samsung’s affiliates was also named among the top 10 challenges of current Korean CSR issues and demands from a recently released report by ‘Center for good corporations’. They picked 10 major CSR challenges to be tackled and Samsung Electronics was ranked at the first place for the charge of employees being exposed to toxic substance at semiconductor plants. Unfortunately, Samsung denied the responsibility for the companies on the death of more than 40 employees. • Samsung is also widely known for its ‘no labor union management’. • In order to grow as a leading corporate citizen, Samsung needs to address these issues.

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SK Group • SK is also one of major corporate conglomerates along with SAMSUNG. SK has contributed to the growth and advancement of Korea by strengthening the national key industries including information & telecommunication, energy & chemicals, and logistics. • SK established and carries out a unique model of social commitment under its motto 'Spreading Happiness'. SK and its value of business activities place emphasis on maximizing happiness among the societies where it is part of : social commitment; providing educational opportunities to underprivileged; and providing jobs to establish a standard of living and independence. • Mission, principles and core domains for SK’s community contribution • SK explicitly express their community contribution mission as “Company that delivers happiness”. Along with the mission, three principles of their CSR philosophy follows as Happy revival, Happy participation, and Happy transformation • Five core domains: nurturing of a talent through an education • Dissolve the education gap for the neglected teenagers: inherit development of SK education business • Independence and self-reliance for the neglected families: independence and self-reliance • Volunteering of SK members: participation of SK members • Sharing of SK affiliates: spread SK technologyknowledge to the society

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• Spreading Happiness Globally : spreading wings of happiness • SK is especially highly rewarded for their various and creative CSR programs. One on One program policy encourages major SK companies to manage their own CSR program according to their core business and strength. SK firmly established its position as an example of socially responsible company in Korea.

Financial Industry: National Pension Service (NPS) • NPS pursues mission “Contribute to achieve stable and happy elderly life through various high quality pension welfare services”, and their vision is “Nice partner for a succeessful life” • Core values •Trust manifested in all relationships •Obligation to build a better life •Passion to achieve the global best • NPS, with total assets of 270 billion U.S. dollars, ranks as the fourth largest pension funds in the world following Japan, Norway, and Netherlands. • Joined UN PRI (Principles for Responsible Investment) in June, 2009. PRI is an initiative and a set of aspirational and voluntary guidelines for investment entities wishing to address environmental, social, and corporate governance issues (ESG). Since they joined UN PRI, National Pension Fund is leading SRI initiative in Korea.

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• There are 69 SRI (Socially Responsible Investing) funds in South Korea- 61 public funds, 2 private equity, 6 SRI pension mandates. Overall market size for Korean SRI fund is nearly $ 4.48 billion, and NPS explains more than 60% of the market size. • As of August 2011, NPS’s SRI fund comprises 4.8% of overall national pension fund’s stock investment, approximately $2.8 billion. SRI fund expenditure showed steady growth since its first investment in 2007 with $0.27 U.S. billion. Especially this year the amount doubled compared to last year’s figure and NPS aims to expand the SRI fund by 3.5 times within the next five years. • SRI fund’s annual investment earning rate records 15.38%, which is 6.36% point higher than benchmark rate. NPS considers revealing corporates lists once the evaluation criteria is firmly established. • For its contribution of outperforming SRI initiative, NPS was honored by the Association for Sustainability & Responsible in Asia, ASriA last September. • Last July, International Pension Conference was held in Seoul for three days where SRI was discussed as an important issue. The increasing awareness of SRI among the world’s biggest pension funds leaders also signifies the important movement headed towards corporate social responsibility. Former minister of Korean ministry of health and welfare announced that it will expand SRI fund up to $ 9.85 billion.

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4. Meta Players Public Institutions Presidential Committee on Green Growth (PCGG) • Established in 2008, Presidential Committee on Green Growth deliberates and mediates the green growth policies of Korean government. • The committee’s mission is to spread the vision of low-carbon green growth to all sectors of society in a practical way to accomplish sustainable, responsible development. To this end, the PCGG has recently taken on 20 additional experts from diverse fields such as legislation, finance, culture and arts as well as climate change, energy, green technology and green industry. • www.greengrowth.go.kr

KorCham CSR Korea Portal • CSR Korea Portal was built by Ministry of Knowledge Economy (MKE) and Business Institute for Sustainable Development (BISD) and is run by Korea Chamber of Commerce to give practical help to domestic companies in processing sustainable management and to provide information on various topics such as Philanthropy, Socially responsible investment, and Social enterprise. • The portal aims to lead and spread sustainable management for both present and future generations by providing a range of new information associated with corporate social responsibility; helping companies strengthen their ability to

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respond to ISO 260000, the international standard on social responsibility; and providing a cyber space for sharing and communicating information with various stakeholders in both directions through social media. • www.csr-korea.net

Commission on Shared Growth for Large and Small Companies • Commission on Shared Growth for Large and Small Companies was founded to reveal, research, and resolve social conflicts between large and small enterprises. • The commission estimates and publishes “Shared Growth Index” of major corporations; designates and examines standards of compatible businesses for small and medium enterprises; discovers and awards success models of shared growth; and helps communication between big and small companies. • The commission is comprised of 25 members including 9 CEOs of big enterprises and 9 CEOs of small and medium enterprises. • www.winwingrowth.or.kr

Korea Social Enterprise Promotion Agency (KoSEA) • The Agency was established to perform a variety of tasks related to social enterprise and its promotion. • It supports social entrepreneurs and social enterprise models; monitors and evaluates social enterprises; builds and manages social enterprise networks at local and national level; and operates social enterprise website and integrated information system.

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• www.socialenterprise.or.kr

Korea Sustainability Investing Forum (KoSIF) • Korea Sustainability Investing Forum aims to settle Sustainable and Socially Responsible Investment (SRI) in Korea, which refers to an investment that considers not only financial outcomes of an enterprise but also ESG aspects of its performance. • KoSIF offers information and education regarding SRI to investors and enterprises; issues and translates relevant publications; provides networking opportunities to the interested parties through forums, seminars and international conferences; researches and supports legislation to vitalize SRI in Korea; and performs Carbon Disclosure Project (CDP) in partnership with CDP London, Eco-Frontier. • www.kosif.org

UN Global Compact Network Korea • The United Nations Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. • The Global Compact pursues two complementary objectives: 1. Mainstream the ten principles in business activities around the world; 2. Catalyze actions in support of broader UN goals, including the Millennium Development Goals (MDGs). • www.unglobalcompact.kr

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Professional Firms Ecofrontier (partnered with MSCI Group) • In 1995 ECO was established to contribute to achieve global sustainable development in incorporating social and environmental value into economic value. ECO aims to provide companies, financial institutions, localities, governments and international organizations with sustainability solutions, from research, consulting, environmental technology, information technology, regulatory and financial advisory service, even to services for creating and commercializing of new types of business. • www.ecofrontier.com/eng

Ko-CSR (partnered with EIRIS) • Starting in 2007 KOCSR is an independent research organisation established by NGOs and a charitable foundation. It provides clients with non-financial information on governance and environmental issues, including stakeholders analysis. It makes partnership with EIRIS, a British SRI research firm, providing Korean companies’ CSR data and research on them. They helps FTSE and other global SRI institutional investors make decision on their investment • www.ko-csr.com

Korea Corporate Governance Service (KCGS) • KCGS is a non-profit organization. Its mission is to make policy recommendations for sustainable growth of companies by

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carrying out evaluation, research and surveys on corporate governance and CSR issues of listed companies. It provides ESG evaluation, proxy advisory service, sustainability report service, corporate governance & CSR education and research. • http://www.cgs.or.kr

Sustinvest (partnered with Trucost, Sustainalytics) • Sustinvest is the first SRI research & consulting institution established in Korea. It develops multi-layered ESG rating model systemically to analyze and evaluate risk and opportunity factors related to corporate ESG issues. It makes strategic partnership with Trucost, a worldly recognized corporate environmental assessment company. Applying Trucost’s environmental impact assessment methodology it developed a data base on the environment impact of domestic companies. • http://sustinvest.com

Impact Square • Impact Square is a Seoul-based impact business research and consulting firm. Impact Square defines a new business opportunity in an area where economic value and social value are met. It provides organizations which seek for creating shared value such as corporate philanthropy, nonprofits and social enterprises with consulting and incubating. In order to improve impact business ecosystem, it is in the process of launching the Hub Seoul as an official licensee. The Hub is a platform for changemakers with global networks over more than 30 cities.

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• www.impactsquare.com

Lime Globe • As a specialized firm in CSR and public-benefit marketing field, it provides domestic and foreign clients with consulting services in corporate philanthropy strategy and public image/ value betterment. Consulting areas include strategy, report development and integrated management system. • www.limeglobe.com

Nsyscom • Nsyscom specializes in corporate philanthropy consulting. Other than corporate consulting, its service area also covers education/workshop programs, corporate philanthropy report publication, nonprofit organization management consulting, fundraising strategy/event development. • www.nsyscom.co.kr

Indices & Ratings KRX SRI Index • Launched from September 14th, 2009, calculated by free-float market capitalization weighted method, in order to promote SRI of domestic companies and awareness of sustainable management • Commencement date/ index number is January 2nd, 2009/ 1000p, the composition includes 70 companies

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• Listed companies are selected among KOSPI/KOSDAQrepresentative companies, verified above B+ by SRI evaluation, that satisfy minimum liquidity criteria(market capitalization, trading value, liquidity ratio and etc) • SRI evaluation is executed by Korea Corporate Governance Service • Top 10 listed companies are: Samsung Electronics, Hyundai Motor Company, POSCO, Hyundai Mobis, Kia Motor Company, Shinhan Financial Group, LG Chem, KB Financial Group, Hyundai Heavy Industries, SK Innovation.

Korean Sustainability Index (KSI) • “Measurement model of social responsibility fulfillment” to measure corporate’s sustainability, based on ISO 26000 • Co-developed by Korean Standards Association(KSA, Korea’s official administrator of ISO 26000) and KDI School of Public Policy & Management in 2009 • Two major fields of measurement are about 1) how strategically the company responds to sustainability-relevant trends is and 2) how actively the company engages in managing/monitoring/improving its activities about sustainability-impact items. • The sustainability-relevant trends are selected by an external group of expertise commissioned by KSA and the sustainability-impact items are based on 7 major criteria of ISO 26000, such as governance, human rights and environment, just to name a few. • KSI conducted its 2011 survey over the summer over 128 companies from 33 industries (15 respectively from

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manufacturing and service industry and 3 from public service, ) and some of industry’s top performers are: LG electronics, Samsung Construction & Trading, POSCO, Hyundai Heavy Industries, SK Telecom, DaeGu Bank, GS Caltex, Korea District Heating Corp, and etc.

DJSI Korea • The first nation-level index of sustainability for Korea’s top 200 companies in market capitalization • Co-developed by US Dow Jones Indexes, Switzerland consulting/investment service firm SAM and Korea Productivity Center and basically following global analysis framework of index candidate companies • 2011/12 DJSI Korea has announced 29 sector leaders and 23 outstanding players; some of these sector leaders are: Samsung Electronics, LG Electronics, Samsung Securities, Amore Pacific, Asiana Airlines, S-Oil, Lotte Shopping, Nongshim, KIA Motor Company, KOGAS and etc. • Apart from DJSI Korea, there is Dow Jones Sustainability Korea 20 Index which tracks the performance of the largest companies in Korea that are included in DJSI Korea. These 20 components are selected according to a systematic corporate sustainability assessment that identifies the sustainability leaders in each of 57 industry groups.

East-Asia 30 • Researched by HERI (Hankyoreh Econimic Research Institute), and first published in 2010 October (annually renewed)

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• Analysis and final selection done by Asia CSR Expert Committee chaired by Cheol-ki Joo (also the secretary general of UN Global Compact Korea) and grouped by CSR experts from Korea, China and Japan • Along with East-Asia 30, the committee also announces top 30 CSR companies from each of the three countries and top 30 companies from each of ESG categories • 2011 reviewed companies are 306 in total (59, 190, 57 respectively from Korea, Japan and China) and the final EastAsia 30 consists of 20 Japanese, 5 Korean and 5 Chinese companies • Those 5 Korean companies listed in East-Asia 30 are : Hynix, Amore Pacific, Samsung SDI, LG Electronics and KIA Motor Company.

For questions or comments on this report, please contact: Helin Park Researcher, Impact Square helin@impactsquare.com

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Brief Landscaping CSR in South Korea