SK Group

RATING

SECTOR

Construction, Oil & Gas Operations, Mining and Chemicals

WEBSITE

CONTACT

26, Jong-ro, Jongno-gu
Seoul, 03188
Republic of Korea

Tel: 0844 8849651

STOCK EXCHANGE

LISTING

EMPLOYEES

4,086

CONTENT SOURCE

FURTHER READING

Report created by Kavita Kripalani

SK Group

SECTIONS :  Sustainability    Evaluation  •  Progress  •  Watch  •  Overview

Company Activity

SK Group is the third largest conglomerate or “chaebol” in South Korea. SK Group is composed of 95 subsidiary companies that share the SK brand name and Group’s management culture named SKMS (SK Management System). It changed its name from Sunkyong Group to SK Group in 1997. The cornerstone of SK Group is its energy & chemicals division.

SK Group has more than 70,000 employees who work from 113 offices worldwide. While its largest businesses are primarily involved in the chemical, petroleum, and energy industries, SK Group also owns South Korea’s largest wireless mobile phone service provider, SK Telecom, and provides services in construction, shipping, marketing, local telephone, high-speed Internet, and wireless broadband (WiBro). On March 20, 2010, SK further broadened its range of business to semiconductors by merging Hynix into SK Hynix, the world’s second largest memory semiconductor manufacturer.

SK restructured in 2007. Under the reorganization, SK’s main entity, SK Corporation, was split into an investment company, now named SK Holdings, and an operating company, now named SK Energy. SK Energy produces batteries for CT&T and Hyundai electric vehicles.

Company Sustainability Activity

SKMS is SK Group’s unique business management system established in 1979. It has since served as the foundation for SK’s sustainability and growth. SKMS is what makes SK’s corporate culture in that it functions as a decision-making guidepost for people at SK. 

SKMS reads that: “a company should continue to pursue stability and growth to ensure perpetual existence and development. And a company shall create value to its customers, employees and shareholders, thus contributing to the social and economic development and greater happiness for all.” Under this philosophy, they are committed to pursuing sustainable management.

SK Group is a parent company to SK Holdings. SK Group’s 2020 Sustainability Report is written on behalf of SK Holdings.

Highlights

Pharmaceuticals

  • SK holdings is accelerating its entry into the bio sector by investing in an antibody drug development company. They have invested in Hummingbird Bioscience, a Singapore-based venture company, in an effort to secure advanced technology to enter the antibody drug market.
  • In particular, Cenobamate, a new anti-epileptic drug independently developed by SK biopharmaceuticals and granted US FDA approval for sale in November 2019, is the first case of a Korean pharmaceutical company directly receiving FDA approval for the sale of a new drug without exporting the technology.

Medicine Production

  • SK holdings has expanded its contract manufacturing organization (CMO) business to the world’s best level by integrating three pharmaceutical production units distributed in Korea, the United States, and Europe. Currently, SK pharmteco, an integrated CMO corporation, oversees the operation of SK Biotech in Korea, SK Biotech in Ireland, and AMPAC in the US.
  • In 2020, AMPAC, a US subsidiary of SK pharmteco, earned global recognition when the US Department of Health and Human Services selected the company as a supplier of critical medicines needed during the COVID-19 response, as well as for the US- government project to stockpile essential medicines in the long term.

Materials

  • SK siltron and SK materials, which SK holdings acquired to strengthen the semiconductor business value chain, posted excellent results in terms of sales and operating profit. In addition, SK siltron acquired DuPont’s silicon carbide (SiC) division, which develops next-generation wafers, to strengthen their presence in the power semiconductor market, which is essential for electric vehicles.

New Energy

  • As part of a series of investments in the gathering & processing (G&P) system of the US to accelerate the energy business in North America, which is rapidly growing around shale energy, SK holdings invested about KRW 170 billion in a US firm called Blue Racer Midstream. G&P is a gathering and processing service that transports the gas produced in wells to pipelines and processes it for sale to the end consumer, which is a key midstream process between energy production and final consumption. In this way, SK holdings is growing into a leading G&P investment company in Korea that fosters and invests in global energy as a future growth engine.

Logistics

  • SK holdings invested KRW 25 billion in Belstar Superfreeze, a cold chain logistics company, in an effort to strengthen its logistics competitiveness, becoming the second-largest shareholder of Belstar and the first Korean company to acquire a technology for reusing cold energy from LNG in a cold chain (low-temperature transport system). Based on its unique technology and business development experience, Belstar will participate in multiple projects to develop new cold chain logistics centers using LNG cold energy led by public enterprises and local governments in Korea. SK holdings plans to build a cold chain network in Asia in collaboration with various partners within the group. As such, SK holdings has not only gained an edge in the promising low-temperature logistics sector but has also created social value through energy-saving and recycling.
 

Targets

Bio & Pharmaceuticals

  • Pursue IPO and commercialization of biopharmaceuticals, expand the pipeline. 
  • Create synergy by launching an integrated CMO unit.

Materials & New Energy

  • Enhance the portfolio by investing in and cooperating with global materials companies. 
  • Establish and expand the renewable energy portfolio.

Logistics & Agri-Food

  • Accelerate the expansion of the cold chain based on ESR experience.
  • Increase the agri-food portfolio’s value through projects in Southeast Asia.

Mobility & Emerging Tech

  • Discover and explore new growth areas.

Reorganize the portfolio structure of invested companies and build a virtuous cycle investment system centered on lead/help and return on investment.

  • Lead/assist the establishment and execution of invested companies’ new financial stories.
  • Reduce the cash burden of holdings and gain market confidence in realizing investment performance.
 

Progress

ICT technology innovation and R&D investment

  • Support for customers’ BM innovation and creation of environmental outcomes through CloudZ service
  • With the emerging trend of convergence among industries based on hyper- connectivity, ultra-intelligence, and super-convergence, which is made through the convergence of information and communication technology (ICT), the needs of society and customers for cloud services are continuously expanding
  • SK holdings provides shared infrastructure-based IT services to meet customers’ needs through CloudZ service. By providing business model innovation tools, they have achieved environmental improvements by saving energy and resources. Furthermore, the “CloudZ DR service” specialized for cloud disaster recovery automated the process of recognizing, disseminating, and handling various events in the cloud environment to provide fast and stable operation services in any customer environment, thereby improving customer data and operational stability.

Eco-friendly Data Center

  • SK holdings is reducing its energy consumption by operating an eco-friendly data center that utilizes IT technologies. The Daedeok Data Center has constantly improved energy efficiency by optimizing operations and investing in facilities and has maintained the Green Data Center (GDC) certificate ever since it obtained the first certification in 2013.
  • The Green Data Center certification is a program aimed at saving energy by increasing the efficiency of electric power consumption and the Data Center of SK holding is recognized for its numerous efforts in saving energy and preserving the environment. In this regard, Pangyo Data Center boldly adopted renewable energy sources such as solar power generators and geothermal heat pumps at its design and construction stages, thus laying the foundations for an eco-friendly data center. They are maximizing energy efficiency by deploying high-efficiency facilities like modular uninterruptible power supplies (UPS) and free cooling refrigerating machines.

Energy Usage Reduction at Data Center

  • The expansion of Pangyo Data Center is to be completed by the second half of 2020 in order to meet the diverse requirements of its customers by analyzing DC trends and responding to the rapidly changing IT environment.
  • The data center also decided to follow the global trend towards the adoption of environmentally friendly policies and to improve energy efficiency by setting its PUE target to 1.3, which is significantly lower than the global average of 1.5. To achieve this objective, it has adopted high-efficiency solutions and facilities to minimize the loss of electric power and secured a system for monitoring and managing greenhouse gas emissions in real-time. The adoption of a containment structure in order to eliminate energy loss caused by the mixing of cold/hot air in the computer room has actually minimized wasted energy. The data readings from temperature sensors attached to racks are collected and analyzed to remotely control the air conditioners, thereby avoiding any unnecessary consumption of electricity.
  • In 2019, all of the fluorescent lighting at the data center was replaced by LED lighting, thus enabling the data center to save some 1,032 MWh of electricity per year, which translates into around KRW 105 million of electricity cost savings.

Maximizing Data Center Efficiency

  • By securing a flexible infrastructure with which it can respond to current IT trends and customer needs, SK holdings have established an environment for the stable operation of cloud services and the rapid ramp of the services. Through its global top-tier level of data center facilities and operational competency, the company is able to protect the critical IT assets of customers and provide an optimum environment for IT operation with stable electricity, air conditioning, and security services.
  • In addition, through Data Center Infrastructure Management (DCIM), the company monitors major infrastructure facilities in the data center in real time to prevent risks that may arise in the event of an emergency. The company also runs optimized operational processes and automated environments with which it is improving the efficiency and reliability of data center operations.

Eco-friendly Offices

  • SK Holdings is successfully conserving energy and reducing greenhouse gas emissions by building eco-friendly offices through the introduction of high-efficiency facilities and improvements in facility operating methods. In 2019, the company reduced the usage rates of heat and electricity by optimizing the heating and air-conditioning of its buildings. The company saved about KRW 100 million worth of energy by carrying out activities to reduce heat and electricity consumption.
  • The company is contributing to reducing environmental pollution and saving energy by converting old company vehicles into eco-friendly (hybrid) vehicles.

Implementation of Materiality Assessment

  • SK holdings conduct the “materiality assessment process” to analyze the internal and external business environments and various expectations and interests of stakeholders and to effectively report the outcomes and future goals. Based on global standard indicators, they have established a sustainability management issue pool and evaluated the importance of issues through media research, industry-specific reports, issue benchmarking, and surveys. Issues that were finally selected through materiality assessment have been fully disclosed in the SK holdings’ Sustainability Report.

Strategic development of DT technology competencies

  • SK holding aims to accelerate the introduction of innovations to its business models (BM). To that end, the company is dedicated to developing human talents who possess advanced digital technology skills. For the strategic development of such talents, the company runs a focused training program on digital transformation technologies comprising different educational targets for each skill level.
  • In 2019, the company trained 416 employees with level-2 skills (and hence capable of working by themselves) through intensive coursework combining theory and practical training. It trained 125 employees with level-3 skills through mentoring by experts. Furthermore, through a review board, 4 employees with level-4 (the highest caliber experts recognized in the market) were selected, and they are currently being managed as a pool of experts who can provide tailored growth support.
  • The company wants to increase its pool of DT technology experts by turning its entire technology delivery personnel into DT experts by 2021. In the future, the company will develop and rely on experts through the company’s pipeline and increase strategic training with a segmented curriculum for each of the company’s business – a curriculum that accommodates the needs of each business and that can teach the key competencies.

Reinforcing Capacity based on the IDP (Individual Development Program)

  • In order to help employees further develop their skills, SK holdings is augmenting its IDP-based employee development system. This system can determine a person’s competency levels through “self-profiling”. The competency data is used as input data when creating competency development plans for both individuals and teams, and needs-based training programs. In 2019, 1-on-1 interviews between supervisors and employees were conducted in order to establish the IDP. Upon completion of the IDP and with the employees putting their plans into action, a data-based Plan-Do-See system was firmly put into place.
  • In 2020, the employees have now begun to voluntarily develop and implement competency development plans that match their career goals through the IDP by themselves. Indeed, thanks to the IDP, the foundation for developing employee competencies is getting even stronger. The company is also making concerted efforts to establish a culture conducive to learning through individual learning accounts, which are aimed at strengthening their ability to develop employee competencies, and “Growth Day,” which was launched to ensure that some working time is set aside for learning. Moreover, team leaders, as employees themselves, are required to develop their own IDP and follow through with the plan. In this way, they are encouraging them to assume the role of playing coaches.
 
 

Certificates

  • Green Data Center (GDC) certificate

United Nation Sustainable Development Goals

United Nations SDGs Compliance

SDG 3

  • Promote health of people by operating digital healthcare services based on SK holdings’ industrial characteristics such as Vitality and 3A
  • Under the influence of COVID-19, national health protection is realized by supporting work platforms using Untouch technology.
  • Based on business model innovation, solidify a business model capable of creating both social and economic values
  • Promote welfare of all generations by successfully introducing projects that can contribute to promote national health

SDG 4

  • Foster talents in ICT by providing employment mentoring to the disabled and socially vulnerable groups and contribute to the advancement of the ICT industry
  • Contactless support in education and job searching with visual communications system for job related education, tests, and job interviews
  • Strengthen the capabilities of the domestic ICT industry based on various activities aimed at fostering ICT workforce
  • Provision of stronger support for people to access to education/job training session equally under the situation caused by COVID-19
  • Offer equal employment opportunity to the disabled and vulnerable groups
  • Build ICT capacity in education targets by providing quality education

SDG 8

  • Create quality jobs by practicing and spreading sustainable business activities such as creation of social values
  • Improve company reputation by resolving social issues of insufficient jobs for the disabled and liaising with diverse stakeholders
  • Expand performance of the business society generated from product development-production-sales
  • Reinforce communications and cooperation with business partners through which shared achievements
  • Expand indirect contributions to the economy through corporate business activities
  • Expand social contribution performance created from social contribution activities in the local community

SDG 10 

  • Based on digital-based industrial characteristics of SK holdings, provide consulting supports to social companies undergoing difficulties in management
  • Improve reputation and expertise of SK holdings within the industry by focusing on social value creation activities based on the professional capacity of employees
  • Indirectly contribute to resolving social issues approached by Social Enterprises that participated in consultation support (health/medical, environment, improved quality of life, disasters)
 

Evaluation

SK Group has some certificates and listings. They produce a report with targets and goals for reducing their CO2 emissions, energy consumption, renewable energy, recycling, renewable energy, and wellness and innovation in alignment with the UN Sustainable Development Goals.

Although the company has made some decent progress to align with UN SDGs, they set vague, nonspecific targets. They also lack clear metrics to support its targets and progress. The company is engaging in some activities that are sustainable, but their credibility is extremely questionable due to its involvement in controversies, most notoriously for its negligence in their humidifier sterilizer product, which has been linked to more than 1,500 deaths. This disregard for human life in no way reflects a “sustainable” company. 

This company has been rated a F. 

Analyst Outlook: Negative

Although the company has created the perception of an effort to align with sustainable practices, it seems half-hearted at best. Their role in the horrendous illness and deaths of thousands of their own consumers cannot be overlooked. They must contemplate the true soul of their business and make considerable reparations if they are to ever earn the trust of the public again.

Key Points

  • SK Group is accused of donating a total of Won11.1B ($9.8M) to two non-profit foundations between 2015 and 2016 to win the presidential pardon of its chairman Chey Tae-won, who was in jail for embezzlement and other financial crimes.
  • SK Chemicals’ humidifier disinfectant scandal is one of South Korea’s worst consumer goods disasters.
  • In 2011, consumers started to report deaths and illnesses allegedly tied to humidifier disinfectants, widely used in households in dry winters. A government-led investigation confirmed the link between the two in February the next year.
  • According to the ministry, a total of 7,103 damage cases, including more than 1,500 deaths, has been reported as of Dec. 29, 2020. Among them, 4,114 cases have been confirmed to be related to toxic humidifier disinfectants.
  • In July, the Special Commission on Social Disaster Investigation called official tallies “the tip of the iceberg” and estimated the actual figures to be much higher at approximately 670,000 relevant cases and 14,000 deaths.
  • The Seoul Central District Court said the causal relations between lung-related illnesses such as asthma and the chemical substances used to make the product — methylchloroisothiazolinone (CMIT) and methylisothiazolinone (MIT) — have not been firmly established.
  • A high-ranking official at SK Chemicals has been arrested for trying to cover up evidence amid a probe into the case of deadly humidifier disinfectants. Prosecutors suspect that the company, now SK Discovery, might have hidden toxicity-indicating data in an organized scheme.
  • The Seoul Court has acquitted the former chief executives of SK Chemicals. In response to the latest ruling, the victims of the tragedy denounced the court’s decision, saying “it is totally unacceptable.” Prosecutors also pledged to make an appeal with the higher court.
  • Received CDP ratings of “D” and “F” for the years of 2019 and 2020.
Share this Post