Let us together start the new 60 years to create happiness for our stakeholders!

Dear members of SK Innovation!

2023, the Year of the Rabbit has dawned. I wish with all my heart to all of you and your family members that this year be filled with happy and healthy moments.

We celebrated SK Innovation’s 60^th anniversary in 2022, when the market was extremely unstable including the imbalance in the supply chain of raw materials caused by geopolitical issues and the global pandemic that has been going on for 3 years. Nevertheless, thanks to the efforts of all members of SK Innovation, we have achieved a financial performance higher than any other year since the company was established.

We have also made meaningful achievements toward our Carbon to Green goal with the full implementation of financial stories and the internalization of ESG management.

From the perspective of the business portfolio transformation, SK Innovation started to get fully engaged in developing its New Green Portfolio including small modular reactors, ammonia-based fuel cell systems and gasification of solid waste.

Companies mainly involved in energy and chemical business areas strengthened the profitability of existing businesses, while at the same time they began to pursue other businesses in response to the electrification and recycling megatrends. SK Energy’s P&M CIC advanced into the business of energy superstations capable of distributed power generation and EV charging. SK Energy’s R&S CIC and SK Trading International sought transformation into petrochemical-balanced refinery and renewable energy business expansion. Other SK companies like SK Geo Centric built the foundation of Ulsan Plastic Recycle Cluster; SK Enmove, which changed its name last year, launched the data center liquid immersion cooling business; SK Incheon Petroleum carried out the hydrogen business associated with SK Group; and SK Earthon laid the foundation for portfolio innovation by securing global CCS storage for business transformation.

SK On, which is engaged in the battery and materials business, co-launched BlueOval SK as a joint venture with Ford (U.S.), and SK IE Technology further raised growth expectations in the global market through its first official shipment of battery separators to the largest private company in Vietnam.

At the same time, the G.R.O.W.T.H. management system, which is SK Innovation’s unique ESG strategy, was fully implemented from which we reduced more than 2 million tons of carbon emissions compared to 2019. Our intensive efforts to reduce carbon emissions after establishing the Net Zero Roadmap made SK Innovation become the only company in South Korea that has demonstrated meaningful carbon emissions reduction achievements for 3 years in a row. The sincerity in our efforts for ESG management and Net Zero, such as being rated ‘A’ in MSCI (Morgan Stanley Capital International) ESG Ratings for 2 consecutive years, has led to the support and trust of global stakeholders.

I believe members of SK Innovation are the reason behind these great achievements. We have put our trust in the company and actively challenged ourselves toward the changing future. I sincerely express my gratitude to each and everyone’s passion and hard work, striving for change and innovation in each respective position.

Dear members of SK Innovation! Our journey toward sustainable growth is not going to be any easier this year with the expected slowdown in demand and intensifying competition in the green business in addition to the uncertainty of interest and exchange rates.

Above all, in order to bring the history of great growth and development that SK Innovation has recorded since its foundation in 1962 into the next 60 years, it is essential to introduce a new management system; that is, Management System 2.0 that will transform the previous system focused on financial performance into corporate value-oriented management system. To this end, as the CEO of SK Innovation, I would like to focus on the following three targets this year marking the beginning of the next 60 years.

First, we should enhance corporate value through portfolio innovation and accelerated action.

If SK Innovation seeks to be evaluated by the market to have a high corporate value, we need tangible achievements from the transition to the New Green Portfolio.

As a green portfolio designer & developer, SK Innovation will continue to build a new green portfolio through, for example, clean energy production linked to electrification, BMR business expansion by setting up a recycle value chain, and transition to low-carbon energy based on Net Zero technologies of our own.

Companies engaged in the energy and chemical areas should continuously create practical achievements that meet market expectations in terms of the transition to green business. SK On and SK IE Technology should ensure profitability and growth potential based on their differentiated competitive edge.

Second, we should internalize ESG as the corporate management philosophy.

2022 was a year in which SK Innovation strengthened the system and foundation of ESG management through strong promotion of G.R.O.W.T.H., its unique ESG management strategy and the establishment of an ESG data platform that facilitated transparent disclosure of the progress and achievements for all tasks.

We declared 2062, All Time Net Zero earlier in our 60^th anniversary event. As it can be seen from this, Carbon Net Zero among other ESG elements is the key to achieving sustainable growth and earning the trust of our global stakeholders, and we will continue our vigorous efforts to reduce carbon emissions in 2023. We will structurally reduce scope 1 and scope 2 emissions through the implementation of Green Operation and lower the carbon intensity to include even scope 3 emissions by linking it with the transition to Green Portfolio, thereby gradually building a system that can sustain Net Zero across all SK Innovation affiliates. In addition, we will expand the ESG data platform, which is currently designed with a focus on South Korea, to cover Europe, the U.S., China and other countries with the aim to properly equip ourselves with the ESG management system.

More important than well-planned ESG management strategies is how earnestly those strategies are exercised and what material achievements are made therefrom. When these achievements are recognized and trusted by the outside world, it will lead to an increased corporate value of the company. To this end, all executives and the board of directors will continue to have transparent communication with external stakeholders.

Let us further advance the system for ESG implementation and create tangible achievements, again in 2023.

Third, we should establish and develop a new management system to grow in the next 60 years.

In order to achieve continuous growth and corporate value increase based on portfolio innovation/implementation and the internalization of ESG management, it is essential to establish and develop a future-oriented management system. SK Innovation will therefore break away from the existing strategy and assessment/compensation system focused on financial performance and will actively engage in the transition to Management System 2.0 by setting up KPIs linked to corporate value and introducing the Value Sharing Compensation System.

Also, under the common goal of corporate value enhancement, all business entities affiliated with SK Innovation will accelerate the board of directors-centered management going forward. All business entities should have the elements required for the board of directors-centered management to be put into practice and advance the decision-making structure to consider and discuss key corporate management agenda including short-term management targets, future financial stories and pre/post management of compliance and business risks.

Dear members of SK Innovation!

In 2022, SK Innovation affiliates demonstrated an unprecedented high financial performance through the commitment of members of SK Innovation. However, unfavorable business environment is expected in the coming year 2023 including a sharp fluctuation of international energy prices, interest rate rises centered around the U.S. and global economic downturn. To overcome these adverse conditions, SK Innovation will rally its capabilities across the company, prepare different scenarios and reinforce risk management so that resources can be effectively allocated and used.

Since launching in 1962 as the first oil and chemical company in South Korea, we have continued to challenge ourselves to be the driving force that moves the world for the past 60 years. In 2023, let us altogether overcome the crisis once again and take a strong step forward for the beginning of the next 60 years.

My dearest members of SK Innovation! I wish you a Happy New Year and may your home be filled with health and happiness. Thank you.

January 2, 2023

Jun Kim

Vice Chairman and CEO

SK Innovation