SK's social experiment

SK Group Chairman Chey Tae-won speaks during a session on the sidelines of the World Economic Forum in Davos, Switzerland, Thursday. Choi stressed the importance of a company’s role in creating social value. Courtesy of SK Group

By Oh Young-jin

SK Group is conducting an interesting experiment to address one big challenge facing World Inc.

Recently, SK hosted Social Value Connect 2019 for over 4,000 participants, double the expected number, and started a big debate about how the firms should pay back society.

One event preceded the Connect gathering, which merited at least the same level of attention but did not get it because of a technicality. It is about accounting method.

The event was related to SK's adoption of “triple bottom line” for its performance in social value or more correctly social returns on investment and environment impact.

On the basis of the two years' surveys, the group disclosed its key subsidiaries' results. One notable fact involved SK Innovation, an energy affiliate, which under SK's triple bottom accounting method counted down 1.4 trillion won or about $1.1 billion for greenhouse gas emissions.

Of course, the number was not counted under the black-and-white standard accounting practices that boil down to profit or losses ― not yet at least.

Chairman Chey Tae-won is determined to press for social factors to be included as part of the commonly accepted accounting method to the point of getting integrated into global practices, “however much time it may require,” according to multiple inside sources.

For that, SK firms have been persuaded and encouraged to pay far more attention to their social functions, if not as much as its profit-showing bottom line. Already, more 1,000 items have been developed to gauge the firms' effort to add to the firm's social contributions.

The social value created or destroyed by the firms would result in CEO promotions or their sacking, if everything goes to plan.

If Chey remains persistent, the current system could be more sophisticated and more acceptable to other businesses than SK firms.

Of course, the challenge is that Chey's method clashes with the existential purpose of business ― profit-making. It is hard to overcome it, but some involved in the SK initiative argue that the current system is the result of years of practices so the triple bottom could be adopted eventually if the system was finessed to reflect the priorities of changing business environments.

In other countries, Chey's triple method already has been tried and given up as implausible or an extension of philanthropy.

When I participated in the SOCAP, the social capital market fair, in San Francisco last year, leading figures of the movement left me with impressions that the social returns could not translate into trustworthy numbers.

On the basis of such a conclusion, they were more focused on encouraging finance investment managers such as banks or funds to take social value factors into consideration when making investment decisions.

As grounds for their “impact investing,” they cited millennials' tendency for their money to be invested in more socially conscionable businesses and transfers of huge amounts of wealth to these young people from the aging baby boomer generation.

Obviously, that justification is not good enough because it leaves the manufacturers, the real source of damage to environment for instance, out of the picture.

So when told that SK was trying to apply the social and environment-friendly rules to its manufacturing affiliates. Many were obviously taken by surprise.

There are a couple of reasons why we wish Chey luck with his triple bottom endeavor.

First, it would not just make his firms and, potentially, others more attentive to the needs of the people and society, but also obligate them to do so because the investors would likely heed their social numbers for investment decisions.

This would strengthen the tenuous connections between the people and the corporations as members of the community. Once mutual trust is rebuilt, the two estranged counterparties would become convinced of the benefit of cooperating on many pressing tasks.

That would help the world bridge the wealth gap and avoid the class struggle between haves and have-nots.

Remember the Occupy Wall Street protests against the richest 1 percentile?

When the movement failed to address the grievances of the dispossessed, populist leaders took over with U.S. President Donald Trump representing the trend. Brexit is a phenomenon with the same root. Korea's candlelight protests that forced a change of government were an offshoot of the trend. So are the Yellow Vest protests.

It is hard to predict what will come next, but surely we need all the help we can get to take the thousand cuts approach to nix this big inequality problem rather than waiting for a non-existent solution at one fell swoop. Chey's effort can be one of those thousand.

If it falls short of that, it would still polish his image and his group's image in the eyes of the public.

Oh Young-jin (

foolsdie@gmail.com

, foolsdie5@koreatimes.co.kr) is digital managing editor of The Korea Times.