Kang Seung-woo is the Business Desk editor at The Korea Times. Prior to this position, he covered politics, national affairs, finance and sports.
KAI beefs up ESG efforts for sustainable management
Students at Sacheon Elementary School in Sacheon, South Gyeongsang Province, hold toy airplanes in the school gym during an Aviation Camp organized by Korea Aerospace Industries (KAI), April 14. Courtesy of KAI
By Kang Seung-woo
Company gets anti-bribery management systems certification for 1st time in Korean defense industry
By Kang Seung-woo
After establishing itself as a leading presence in the nation's defense industry, Korea Aerospace Industries (KAI) is now shifting its focus to environmental, social and corporate governance (ESG) sustainable management.
According to the Korea Corporate Governance Service (KCGS), KAI was awarded an A grade in its 2020 ESG overall rating for the third straight year, the first such achievement among domestic defense companies, showing that it is capable of practicing ESG management at the highest level.
ESG, referring to a set of management principles and criteria, has become a watchword for the Korean business community, as it encourages efforts toward sustainability and the joint prosperity of businesses and society.
The KCGS has seven levels of ratings ― S, A+, A, B+, B, C, and D, with S being the highest. Only 14.2 percent of 760 listed companies received an A rating or higher.
In the environmental category, the South Gyeongsang Province-based company received an A grade in 2020, up one notch from the previous year's B+ after improving on the ISO 14001 environmental management system-based method to dispose of waste materials that helped increase the recycling rate and reduce greenhouse gas emissions and waste.
In addition, KAI also encouraged its subcontractors to reduce pollutants by offering them incentives in accordance with their reduction rates, helping the firm gain recognition for practicing solid environmental management.
KAI officials inspect monitors at the central control room of its A350 smart factory in Sacheon, South Gyeongsang Province. Courtesy of KAI
KAI is currently developing a 100 million won ($88,000) customized smart manufacturing platform, based on Fourth Industrial Revolution technologies including artificial intelligence, set for completion by 2025 to strengthen its market competitiveness by accelerating digital-based manufacturing. The system will be passed on to its over 30 suppliers.
In addition, KAI has been applying an eco-friendly processing method in aircraft manufacturing in order to decrease toxic chemicals, while spending 11.4 billion won to build an integrated management system by the end of this year to improve safety, health, environmental management and chemical control.
KAI has shown a strong performance in the social category by receiving an A+ for three straight years since 2018.
In order to help reinforce the nation's defense capabilities via the military's own innovative activities, KAI provides sustainable education support by recognizing the demands from the Army, Navy and Air Force, and dispatching its experts as instructors.
Among its corporate social responsibility (CSR) activities, its Aviation Camp stands out.
As part of the company's knowledge, experience and space-sharing movement, the KAI Aviation Camp is an education program that provides teachers and students from elementary to high school with opportunities to experience mathematical and scientific theories that are applied in the real aerospace world.
Through the camp, teachers and students can learn math and science in an easier and more exciting way, and furthermore the company believes it could help resolve the problem of students avoiding majors of natural science and engineering.
Despite the COVID-19 pandemic that limits face-to-face contact, KAI has continued its CSR campaigns, as highlighted by its visiting education program which provides video and education materials showing how to make a personal air vehicle.
Also, KAI has operated the KAI Social Service Organization to fulfill its social responsibility beyond the limits of its profit-seeking. Via donations and participation in voluntary activities by executives and staff, the company is trying to grow as a partner of the community.
When it comes to corporate governance, it has built a solid governance structure.
The roles of the board chairman and CEO are separated to ensure the independence, specialization and responsibility of the board of directors, while the roles of auditors have been increased.
KAI officials are engaged in assembly work for the Korea Space Launch Vehicle's (KSLV-II) propellant tank. Courtesy of KAI
While adopting systems aimed at protecting shareholders' rights such as electronic voting, KAI also makes public its evaluation grade for corporate governance on its official website, helping boost investor trust.
Also, the company has gained recognition for its efforts to strengthen transparency in its management system in 2018, by achieving ISO37001, an anti-bribery management system certification. This was the first time for the certification to be granted to any institution in Korea's defense industry.
“KAI is now considering issuing ESG bonds as part of its efforts to emphasize its environmental and social initiatives. In addition, given that BlackRock, the world's largest asset manager, and local institutional investors will no longer invest in companies that do not practice ESG management, we are trying to keep pace with this stance,” a KAI official said.