현대제철 통합보고서

Supply Chain Risk management

Every year, Hyundai Steel conducts supply chain ESG assessments to identify potential risks within its supply chain. For this, we inspect suppliers' management of labor/human rights, environment, ethics/compliance and health/safety. Additionally, based on the ESG assessment result, we select high risk suppliers to establish improvement plans, and conduct monitoring on the improved outcome.

Supply Chain ESG Assessment

Hyundai Steel conducts 'supply chain ESG evaluation' every year to maintain a sustainable supply chain. In 2021, we conducted it on 351 suppliers to identify potential risks. The assessment consist of 50 items across four sectors including labor and human rights(14), ethics(11), health and safety(13), and the environment(12). Of these, the bottom 5% of suppliers(26 in 2021) were categorized as high-risk and received on-site due diligence. The high-risk suppliers submitted improvement plans and successfully resolved all risks. In particular, risks relating to labor and human rights were promptly improved by revising the employment rules and establishing the Charter of Human Rights. Systems were also improved, such as establishing an internal risk communication channel and preparing an emergency response system. Hyundai Steel requires our suppliers to have ESG capabilities greater than a certain level through integrated supply chain management. Suppliers that do not meet our internal evaluation criteria in the sectors of ethics and legal compliance may receive disadvantages in bidding and sanctions in business. Hyundai Steel provides consulting to suppliers which need to improve ESG capabilities and operates an 'Eco Partnership' program to select excellent ESG suppliers. Suppliers selected as Eco Partnership Certification Companies will receive benefits such as applying additional points and granting long-term supply rights during the regular evaluation for three years after selection.

Results of Supplier Risk Assessment in 2021

Code of Conduct

Companies supplying products and services to Hyundai Steel are required to adhere to its Supplier Code of Conduct. Our suppliers must create safe workplaces, respect the human rights of workers, and continuously strive to protect the environment. They must also operate their businesses in an ethical manner, source raw materials lawfully and maintain management systems. Each of these rules is equally important, and our suppliers must comply with all related laws and regulations.

Promotion Policy for Shared Growth

Hyundai Steel operates a range of support programs on finance, technology and management in order to achieve mutual growth with its suppliers and provides them with effective support in the areas they need. We have also concluded a fair trade agreement with the Fair Trade Commission, which evaluates our performance under the agreement. We thus made clear to internal and external parties our commitment to win-win growth. For this, we continue to develop mutually beneficial partnerships with our suppliers under the three key principles of 'fair trade compliance, continuous strengthening of partnership fundamentals, and supplier communication'.

Main Programs for Win-Win Growth

Communication Channels with Suppliers

Subcommittees and Communication Channels

Hyundai Steel is building a business model for win-win growth with its suppliers through a range of programs. We introduce our purchasing policies and product management plans through the subcommittees for each purchasing area and, in 2021, the sub-committees were convened for 23 times involving 168 suppliers. Our suppliers can submit requests and suggestions for improvement of purchasing systems and activities through an on-line communication channel, and 19 requests were resolved in 2021. Hyundai Steel will continue operating diverse various communication channels to strive shared growth with suppliers.

Proposal Platform

Hyundai Steel holds a technology fair annually, to publicize excellent technologies of its suppliers and help expand their sales channels. In 2022, we plan to establish a new proposal platform to maintain the publicity effect of the technology fair at all times and ensure continuous application to the fields. During a specific period, we will open a special event website, just as the one for the technology fair, and exhibit items that were applied to actual business sites or drew strong interest, and will award and post Eco-Partnership certificates to eco-friendly proposals and eco-certified suppliers. The Eco-Partnership of Hyundai Steel is a certification awarded to small and medium-sized suppliers that contribute to eco-friendly management, and was launched in 2020 as a move to cooperate with the government's environmental policy and to realize the sustainable management of suppliers. Suppliers selected as Eco Partnership Certification Companies will be awarded certification plaque and signboard, and will receive benefits such as applying additional points and granting long-term supply rights during the company's regular evaluation for three years after selection. In addition, the suggestion platform will serve as a channel of networking with suppliers through online tech seminars and various events. Hyundai Steel will continue to enhance technological competitiveness for suppliers and strengthen shared growth.

Conducting EGS Education for Suppliers

Hyundai Steel provided ESG training programs to its suppliers to help promote their understanding of ESG. The topics of the ESG training program covered ethical management (concept, Ethical charter and Code of Conduct of Hyundai Steel), human rights management(concept, elements of human rights management, human rights management at Hyundai Steel) , environmental management (concept, climate change, carbon neutrality, circular economy, bio diversity), safety management (concept, safety management at business sites, the Act on the Punishment of Severe Disasters), information security (information protection, cyber security, compliance with data protection), supply chain management (sustainable supply chain management, conflict materials, ESG assessment on global supply chain, supply chain management by Hyundai Steel). The training program was conducted for two months from April to May in 2022, and 147 suppliers completed training. Hyundai Steel will continue to provide ESG training to its suppliers on a regular basis in support of their competency improvement.

Supporting Win-Win Growth

Win-Win Growth Fund

Hyundai Steel has raised, through financial institutions, a Win-Win Growth Fund worth KRW 40 billion to help pay the interest expenses of its suppliers' operational loans. This enables our suppliers to reduce their financial expenses and obtain the funds they need for their business, helping to ensure a stable supply chain.

Collecting Steel ESG Fund for Shared Growth

Hyundai Steel created the 'Steel ESG Win-Win Fund' together with the Korea Steel Association, POSCO, and IBK Industrial Bank, to promote ESG management by the small and medium-sized steel makers. The Steel ESG Win-Win Fund is designed to provide funds necessary for ESG management of small and medium-sized steel companies and amounts to KRW 150 billion. This fund will be used to pay interest so that SMEs can get loans at interest rates lower than market rates. SMEs and suppliers that have acquired ESG-related certifications or submitted an ESG fund utilization plan can use the fund even if they have no business relationship with the Company. The Steel ESG Win-Win Fund is expected to give practical benefit over 200 companies as it charges lower interest rates but increases the loan limit, compared to the 'Steel Win-Win Cooperation Fund' created to overcome the COVID-19 pandemic in 2020.

Financial Support for Win-Win Growth

To fundamentally address environmental risks of its suppliers, Hyundai Steel provides consulting on their energy consumption and helps to build energy management systems for free. We conduct specialized consulting on environment and energy, so as to identify optimal energy saving solution for our suppliers and also provide training to their employees, thereby enhancing suppliers' capability to manage environmental risks. In 2021, approximately KRW 300 million was spent on 10 suppliers, which enabled them to save KRW 95 million in energy costs. Hyundai Steel began this initiative in 2014 and a total of 41 suppliers have thus far built facilities and systems for energy saving, worth about KRW 1.8 billion. Going forward, we will continue to help our suppliers save energy, thereby enhancing business competitiveness and ability to respond to environmental risk across the supply chain.

Operating the Performance Sharing System

Hyundai Steel operates a system where suppliers submit proposals on domestic production and functional improvement of parts, etc., and share the outcome of their contributions. We help suppliers to implement the proposals they make and provide incentives, such as long-term procurement contracts, for those who successfully implement their proposals. This way, our suppliers can ensure a stable supply network and enhance technological competitiveness, and we can improve efficiency through cost savings and higher productivity. Thus far, 127 proposals have been adopted, including 19 new projects in 2021. Among them, the Company signed long-term procurement contracts with 10 suppliers.

Soil Scrap Treatment Support

Hyundai Steel cooperates with its suppliers, making active efforts to help them solve environmental problems. We are the only domestic steelmaker supporting steel scrap suppliers with the dispose of dirt scraps in dumping sites since 2012. This support program is meaningful in the point that we can enhance our suppliers' competitiveness by improving the quality of steel scrap and solve environmental issues, such as fugitive dust generated from steel scrap distribution. Every year, Hyundai Steel has subsidized the disposal of 50,000 tons of soil scrap, and plans to continue supporting the disposal of soil scraps generated from 130 dumping sites in 2022. Hyundai Steel will pay keen attention to the ESG issues of its suppliers and explore ways to promote shared growth.

Win-Win Growth Program