As SK Innovation celebrated its 60^th 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. In the third interview of series, we invited Cho Kyung-mok, CEO of SK Energy to share his thoughts on the company’s growth.

Q1. Last year marks the 60^th anniversary of SK Innovation, as well as SK Energy. It was also the first year of implementing the company’s Financial Story. Let us hear about the details of outcomes in 2022. Could you give us some highlights regarding SK Energy’s performance in last year?

▲ (Left) SK Energy CEO Cho Kyung-mok (third from left) visits SK Bakmi Gas Station which was transformed into an eco-friendly energy hub located in Geumcheon-gu, Seoul, South Korea, in January 2022. / (Right) SK Energy CEO Cho Kyung-mok gives a welcome speech at the “SK Energy Sales Company CEO Seminar” held in November, 2022.

Last year, we made progress one step closer to the “Deep Change” we have been seeking after, as we accomplished significant outcomes in various areas. We’ve been running the CIC (Company in Company) system since 2021 in order to make our organization flexible and concentrate on changes. The CIC system gave birth to visible outcomes and grew into one of the bilateral core axes of SK Energy’s innovations.

Taking safety as a top priority, R&S (Refinery & Synergy) CIC enhanced competitiveness in existing businesses and solidified its profit structures as well. In addition to the process efficiency improvement and the transition to eco-friendly fuel in 2022, it’s on the right track to achieve the carbon reduction goal according to Net Zero Roadmap by proactively implementing various cost-requiring carbon reduction options, such as operation adjustment.

Also, through the Renewable Energy Certificate (REC), it has achieved a level of 20% of renewable energy among the amount of electricity in used, and it will keep increasing this ratio to expand the use of renewable energy. At the same time, preparations for the Green Transformation of the oil refining industry according to our Financial Story are proceeding smoothly. In order to respond to the demand for eco-friendly products in the future, it secured Feed (feedstock) that can produce recyclable and renewable products and established detailed strategies for the production process transition. In addition, it is also reviewing entry into the clean energy power generation business in order to respond to the electrification trend.

P&M (Platform & Marketing) CIC concentrates on its business model (BM) transformation into an eco-friendly platform enterprise, taking its network assets and marketing capabilities as its foundation. Last year, by stably running the demonstration project for hydrogen fuel cell stations, it formed a consensus for governmental regulation revision and established a foothold to develop its eco-friendly distributed power generation business. Besides, through investment in Atom Power, an American company that provides electric vehicle (EV) charging solutions based on semiconductor-based circuit breakers, and Korean company Autostay, which owns its differentiated car washing technology and subscription models, P&M CIC has also secured essential technological capabilities for the eco-friendly mobility platform business.

Q2. It is not a new story that volatility in the international energy market has intensified but seems like the forecasts this year are even more mixed. As the CEO of the biggest energy corporation in Korea, how are you approaching the market volatility issue?

Many experts are saying that the business environment will remain uncertain this year. With continuous geopolitical tensions rising over multiple regions, volatility in international political circumstances is also enlarging day by day. Concerns about the global economy caused by the trend of the high-interest rate are still ongoing, and it’s hard to deny that energy issues are core factors affecting the international relations.

The imbalance between global energy supply and demand that becomes more prominent after Russo-Ukrainian War has been bringing a big impact on the economy and security worldwide. It is also expected to exert influence in varied forms during the processes of continuous energy transition in the future. Since risk and opportunity are coexisting in the context of increased volatility, we will solidify the structure of performance and make greater and more well-organized efforts for our response to the crisis.

These well-organized efforts begin with building a preemptive response system to enable flexible reactions to the scenarios of rapidly changing business environment. Moreover, the best way to cope with the uncertain environment is only to ensure internal stability with firm practices of our Financial Story, I believe. After all, efforts and actions to achieve “Lower Carbon & Green Growth” are the solutions for sustainable corporations that the current business environment requires.

Q3. “Be flexible in coping with the crisis but stick to your own way.” We could feel SK Energy’s confidence from your remark. The Financial Story of SK Energy shares the same goals with Net Zero Roadmap after all, and on that point, please tell us how we can predict for to-dos of SK Energy in 2023.

Changes surrounding the company vary so widely in terms of scope and type. SK Energy should take the paradigm shift in energy and mobility as the center of those changes. And based on the shared awareness that internalizing the new paradigm and achieving Green Transformation are our have-to-dos, we should find future directions for SK Energy.

As not only a direct stakeholder in carbon-related issues but also an organization which knows best about carbon, SK Energy should become a spearhead in executing the Net Zero Roadmap and embrace the sense of grave responsibility that the carbon issue can only be solved with its most proactive initiatives. Therefore, SK Energy plans to further accelerate its carbon reduction activities and application of its methodologies toward Net Zero as before.

Especially, we need to multiply our efforts for carbon reduction in situations where we can forecast that anticipation about the end of COVID-19 pandemic will trigger increased energy demands as well as the consequently increased operation of power plants for carbon-based energy resources. Also, to respond to fundamental challenges that the petroleum business will encounter with, we will keep our efforts in creating profit structures that can secure sustainable growth by providing eco-friendly values. More specifically, with proactive efforts to secure eco-friendly raw materials that will accelerate Green Innovation, we will build our portfolio of eco-friendly products, and take continuous actions to develop eco-friendly energy solutions and mobility platform businesses.

Q4. SK Energy started as the first oil refinery company in Korea, which has overseen the national energy infrastructure. What future do you expect for the company in the next 60 years?

▲ SK Innovation Vice Chairman & CEO Kim Jun (fourth from left) and SK Energy CEO Cho Kyung-mok (third from left) are taking a commemorative photo at the SK Innovation 60^th anniversary event held 2022 October.

As I mentioned before, it is unimaginable to discuss SK Energy apart from the carbon reduction agenda. First of all, we need to admit that the trend of the energy transition is unfolding. Otherwise, we’re not able to assure of our sustainability even a few years ahead, let alone the next 60 years. The next 60 years of SK Energy should be paved with innovation in our business portfolio, which enhances corporate values through eco-friendly products, eco-friendly energy solutions, and mobility businesses that center on a circular economy as an essential element for achieving Net Zero.

I believe that the “All Time Net Zero” vision declared by Vice Chairman & CEO Kim Jun at the 60^th anniversary of SK Innovation last year is the future growth direction that SK Energy should pursue at the forefront. In order to achieve that, we need to communicate more closely with internal and external stakeholders to secure resources for the transition to eco-friendly business models, and to build and operate a highly advanced ESG management system. Obviously, these innovations toward Green Transformation cannot be made by our capabilities only. We will actively seek a way to find solutions for the green business by finding good partners that share these visions.

Briefly, our road for the next 60 years will be clearly different from the previous 60 years in terms of management philosophy and methodology. Standing on the foothold called ESG management, we will continue to move towards eco-friendly portfolio innovation.

Q5. While taking the lead in SK Energy’s “Green Transformation,” you have been simultaneously engaging in various activities inside and outside the corporation. One of those commitments would be that you’ve been leading the Carbon Reduction Certification Center, which was established for the first time by SK Group among Korean companies. The center was officially relaunched as an affiliate under the Korea Chamber of Commerce and Industry (hereinafter “KCCI”), and you must have special feelings about it.

The Carbon Reduction Certification Center was transferred last year and born again this year. Something being a “first” always brings special feelings. The Carbon Reduction Certification Center established the criteria to measure carbon reduction achievements of SK affiliates involved in the promotion of Net Zero, and attempted to issue the first voluntary carbon credits among Korean companies. And that led to outcomes, including the registration of 17 methodologies in total over the last two years as well as voluntary carbon credits issued for about 730 thousand tons. This center’s transfer to the KCCI is meaningful in that our carbon reduction efforts and implementation measures can now be utilized by all Korean companies from the perspective of sharing infrastructure.

The KCCI is currently building an operating system to ensure participation of more companies, and also discussing with the government on institutional support, so I expect to see the vitalized voluntary carbon credit market in Korea sooner or later. If that’s the case, I believe it is meaningful that SK Energy is not only playing a role in reducing carbon at the corporate level, but also establishing a nationwide voluntary carbon credit market at the domestic level. Our plan is to get diverse insights by utilizing data accumulated from continuous cooperation with the KCCI in the future, and I have expectations of our value improvement out of this down the road.

Q6. In the era of the energy transition, it seems inevitable that stakeholders show great attention to energy corporations. Please share some words to SK Energy’s stakeholders, SKinnonews readers, and other members.

▲ (Left) CEO of SK Energy Cho Kyung-mok is giving words of encouragement to the new employees of SK Innovation affiliates at ‘Conversation with CEO’ earlier this year / (Right) CEO of SK Energy Cho Kyung-mok is taking a group picture at the welcoming ceremony for new employees

As mentioned in the beginning, a high degree of uncertainty still lies in our business environment this year. But in retrospect, I find myself questioning whether there was any time with clear economic outlook in the past. The uncertainty would have been far worse in 1962 when SK Energy was established in Ulsan and began its business. However, the members in that turbulent time had spirits to overcome hardships along with their faith that they would evolve and improve. The legacy from them has been inherited down to us until now. Since SK Energy is sincere in reforming itself as an eco-friendly energy corporation, it will consistently make efforts with its unshakable volition even in the uncertain environment and crises we face.

In my recent new year’s address, I emphasized: “If we face incoming challenges with these ambition and faith, I have no doubt that we can break through all the challenges in 2023 and harvest the fruits for a more optimistic future.”

Our legacy of tenaciously overcoming hardships in the previous 60 years will be evolved to our power to achieve sustainable energy corporation and create the next renewed 60 years. Please send your ceaseless support for the future of SK Energy, an unprecedented sustainable energy corporation.