SK emphasizes social value as key management index

Lee Hyung-hee, who leads the social value committee in SK SUPEX Council, speaks during a press conference at SK Group office in Jung-gu, Seoul, Tuesday. Courtesy of SK Group

By Nam Hyun-woo

SK Group introduced its own scheme measuring social value created by its units, in an apparent bid to assess its units' commitment and responsibility to society, according to the group, Tuesday.

During the unveiling of their social contributions, 16 SK units did not dress up their numbers, with some units logging trillions of won in losses. SK officials said this shows Chairman Chey Tae-won's intention to show the group does underscore the importance of social value and is committed to improving society.

During a press conference, SK Group said it has introduced a measuring scheme converting the social value created by its units into a monetary value, and plans to unveil the numbers to the public through each unit's financial statement or sustainability report. Also, the numbers will account for 50 percent of each unit's key performance indicators, which shows how effectively a company achieves its business objectives financially.

“SK is measuring social value because we need an index and standard to drive a company to create greater social value,” said Lee Hyung-hee, who leads the social value committee in the group's top decision-making body, SUPEX Council.

According to Lee, SK defines social value as a bigger concept covering corporate social responsibility and charity activities, showing “how nice” a company was in its business practices.

For example, SK Lubricant is selling a premium lubricant base which improves fuel efficiency by 2 percent thus lowering greenhouse gas emissions. The company calculated the products created social value worth 131.5 billion won in 2018.

Through this rationale, the group said SK Innovation and SK hynix each created social value worth 2.3 trillion won and 9.9 trillion won in indirect contributions to the economy ― such as job creation or tax payment ― but posted 1.19 trillion won and 456.3 billion won losses in contribution to society, respectively.

“SK Innovation and SK hynix showed minus performance in contribution to society, because their pollutants were calculated as environmental costs,” an SK Group official said.

“Following the losses, those companies will reduce those minus factors and expand eco-friendly business models.”

“Some units have claimed the group should not unveil the exact losses in social value, but Chey said disclosing the numbers means we have the intention to improve what we posted in losses, and demand our units come up with improvements,” Lee said.

The scheme is in line with Chairman Chey's initiative of highlighting businesses' contributions to society. Chey has been promoting the idea for years at international forums and conferences, saying social value can guarantee long-term growth and stability for businesses.