As SK Innovation celebrated its 60th anniversary in 2022, 2023 marks the beginning of a new 60 years of its history, and it is also the second year SK Innovation and all of its subsidiaries execute their Financial Story.
To learn more about the company’s strategies and plans for this year, we’ve met the executives of SK Innovation and its subsidiaries and asked them in detail. SK Innovation Chairman of the Board of Directors Kim Jong-hoon is the second guest of this interview series.
Q1. Early this year, SK Innovation Board of Directors (BoD) attended CES 2023 for the first time in person. Could you tell us about your impression on this event.
▲ SK Innovation Chairman of the Board Kim Jong-hoon (first from left) tours around SK exhibition hall at CES 2023 held in Las Vegas, the U.S. in January 2023.
CES showed me how the world is actually changing. Especially, the fact that many corporates have been focusing on “Connectivity” really impressed me. I could see how competitiveness and sharing were coexisting and crossing the boundaries by utilizing multiple technologies taking the Internet as their platform. A variety of feasible ideas and enthusiasm from startups surprised me as well. We can learn a lot from them, such as how to identify customer needs and create new markets, and be flexible in thinking and business methods.
As for SK’s booth, which showed our strong will for carbon reduction at CES, it embodied the message of “Carbon to Green” clearly and effectively, and there SK Innovation affiliates also successfully proved our performance and values. CES is an event that somehow marks the beginning of a new year to us, and it is a place full of energy towards change and the future. I hope such energy have reached all of you and stayed with you throughout the year.
Q2. The most distinguished feature in the execution of SK Innovation’s Financial Story is the strong push of “Lead/Help/Check (L/H/C)” by the BoD. In 2022, the first year of Financial Story, SK Innovation has made a lot of efforts and even declared the “All Time Net Zero” vision. Could you tell us about the results of those practices?
▲ SK Innovation Chairman of the Board Kim Jong-hoon discusses the current state of the company’s ESG management and its outcomes at a meeting with the Asian Corporate Governance Association (ACGA) on October 6, 2022.
The amount of carbon emissions we reduced last year is about 2 million tons more than the amount of 2019. It is also noteworthy that according to our “Net Zero Roadmap,” we made significant carbon reduction for three years in a row. As far as I know, SK Innovation is the only corporate in Korea that made such an accomplishment.
Making decisions from the perspective of management philosophy and execution of Financial Story is obviously an activity assigned to the BoD, but another role of us it is meeting various stakeholders to talk about our efforts and outcomes together. As part of this, I had meetings with major foreign groups of investors, including ACGA (Asian Corporate Governance Association) last year, and they gave positive evaluation after learning of SK Innovation and subsidiaries’ current state and achievements in ESG management.
As much as we’re giving trust that we are reinforcing the ESG management system with sincerity, we must keep moving forward with our genuine efforts.
Q3. 2023 marks the beginning of SK Innovation’s new 60 years, and this year is also the first year for us to implement the centennial promise of “All Time Net Zero” vision, as well as the second year of executing Financial Story. So on which part will the BoD focus in doing L/H/C this year?
▲ SK Innovation’s Board of Directors Chairman Kim Jong-hoon attends an on-site workshop with the outside directors on January 4th (US local time), a day before the opening of CES 2023.
The main theme of SK’s exhibition at CES 2023 is “Action”, and I can see considerable implications from it. The more our efforts get support and trust from global stakeholders, the greater responsibility we must take on and the more we have to prove. In that perspective, we need to look into closer details of what we are going to do, and check whether they are in the same direction we are willing to take.
It is because we believe this will eventually lead to enhancing our corporate value. In addition, we should communicate to deliver the results to the stakeholders in the right way. We wrote a story that shows where we are heading to, and we are responsible for delivering the story properly.
The year 2023 means a lot to SK Innovation’s BoD. In 2004, we declared “BoD-centered management” and start taking actions such as increasing the outside director ratio to 70%, and so 2023 marks the 20th year since the start of such BoD-centered management. Through all those years, I believe what the BoD has never missed is the sense of duty. As it is a time for change, it also means such sense of duty needs to shine even brighter.
The BoD will continue to make efforts while bearing the sense of duty to realize SK Innovation’s “All Time Net Zero” vision based on how we conduct L/H/C.
Q4. Like you announced at Story Day in 2021, SK Innovation’s BoD has been concentrating on completion of Governance Story until now. Could you explain more about the latest version of Governance Story?
Establishment and improvement in the governance system is an important starting line in order to complete ESG management and nurture corporate values internally. And from an outer perspective, it’s an essential requirement for being recognized as a top-class company by stakeholders.
Issues on governance are often counted as one of the reasons that Korean companies receive underestimated valuations in markets. Korean companies particularly get lower scores in the governance section than those of other advanced countries. In order to solve that problem and get proper assessment on corporate values, in 2019, SK Innovation changed its system to where outside director assumes the chairman position of the BoD. Since 2021, the BoD has practiced its decision to exercise its rights to vote related to evaluation, remuneration, and succession of CEOs. The scope of the BoD’s authority is getting wider and stronger. These are mostly unprecedented events in the business world in Korea.
Therefore, consistent reinforcement of independence and expertise of the BoD is essential to realize “Financial Story,” which aims for the business-structural transition from “carbon business” to “green business.” The innovative efforts will be made constantly until the day SK Innovation is acknowledged for its globally exemplary governance structure.
Q5. Last year you gave a video lecture for SK Group members with a theme of “Changing International Order & Our Respond.” And the uncertainty in the international order is expected to be immensely enlarged from the perspective of the business environment. How can we respond to that?
▲ SK Innovation Chairman of the Board Kim Jong-hoon is giving lecture about “Changing International Order & Our Respond” to SK Group members in December 2022 through mySUNI, SK Group’s online learning system.
In an interview with SKinno News two years ago, I mentioned that corporates must always prepare for “Rainy Day,” and now I’m afraid that this year we will have to face Rainy Day.
The international community is currently on the verge of transition. US-China hegemony competition, the importance of cutting-edge technologies, the confrontation between liberal democracy and authoritarianism, and retreat of multilateralism: with these four phenomena, countries have begun to see each other as possible economic threats, despite mutual dependence they heightened. That’s why I used the expression of the “age of great transition” to discuss the status of the international community in the mySUNI lecture last year.
This trend won’t be greatly altered in 2023, either, as I expect. Because of that uncertainty, countries are plunging into rivalry aiming for technological supremacy, and there rises the concept of “economic security,” which emphasizes stability rather than maximizing profit and efficiency. And I think we need to pay attention to this point deeply. So I pointed out the solutions, such as knowledge-based creativity, mature liberal democracy, and fair competition and cooperation inside and outside Korea.
We can also translate this issue from the company’s perspective. When interpreting the mature liberal democracy as corporate culture and governance, we can fully apply those three directions. The “Rainy Day” reveals which one has better fundamentals. The BoD won’t hesitate in conducting L/H/C to let SK Innovation keep its constitution enhancement and endure the “Rainy Day” well.
Q6. You were appointed as an outside director of SK Innovation in 2017 and have performed your duty as SK Innovation’s first Chairman of the Board who is an outside director since 2019. Could you summarize and evaluate your activities at the BoD?
▲ SK Innovation’s Board of Directors Chairman Kim Jong-hoon participates in various activities at the Board.
Since 2017, we have talked about important topics, such as Deep Change, SV Creation, Sharing Infrastructure, Financial Story, Governance Story, and more. Those keywords are not momentary fashion but subjects we still have to deal with.
Looking back what I have done, I could tell that my works were attempts to introduce those concepts into SK Innovation and embody the outcomes from them. As a chairman of the Board who was appointed among outside directors, which is a rare case among affiliates of large business groups in Korea, I spent a lot of time and made efforts to acquire information related to the business environment and let the BoD make reasonable decisions.
Creating and stabilizing new Governance Story were worthwhile to me as well. In creating SK Innovation’s Governance Story, the only guideline was whether it matched with our concerns and the direction our company is willing to take. And I am proud that our unique BoD story is unfolding.
Q7. Please share a few words with SK Innovation’s members who are creating new corporate values, as well as stakeholders who are expecting them.
We hear and say a lot about ESG. At the Ulsan Forum held last year, SK Group Chairman Chey Tae-won said, “E is for relationships between human and nature, S is for human itself, and G is for human-to-human relationships.” To borrow his interpretation in its entirety, from the perspective of SK Innovation’s Board of Directors Chairman, I believe the G may represent relationships between enterprise and stakeholders.
To keep the relationships healthy, both enterprise and stakeholders should play an essential role for each other. Therefore, the company and its members need to L/H/C mutually, and they should all be consistently sincere in communication with stakeholders. In that point, I think we should face each other with a more active and open mind.