[Initial Insight] Are You Ready for ESG Management?

[Asia Economy Reporter Kim Jong-hwa] Although it has been almost two months since 2021 began, it is not unusual to spend a few days during the Lunar New Year holiday and say, "Now it really starts in earnest," as people refocus their relaxed New Year's resolutions. Companies, after the whirlwind of closing annual performance in December, have been busy in January with executive appointments, organizational restructuring, and concretizing new business strategies, warming up to run their business for the year. Now, after the Lunar New Year holiday, they are entering a full sprint mode.

This year, the stock investment craze has generated many issues, making the economic sector more dynamic than ever. Along with this, a keyword related to corporate management that has been increasingly emphasized recently is 'ESG.'

ESG stands for Environment, Social, and Governance. It refers to companies leading environmental protection, actively engaging in social contribution activities such as supporting socially vulnerable groups, and practicing ethical management by strictly adhering to laws and ethics through transparent governance.

It is natural that companies should practice ESG management rather than being solely obsessed with profit pursuit, but the renewed focus now likely reflects the fact that its implementation is by no means easy. ESG management is not just about forming a good corporate image but is becoming an essential condition for corporate sustainability.

In January last year, Larry Fink, CEO of BlackRock, the world's largest asset management company, declared, "Investment decisions will be based not only on simple financial performance but also on sustainability." Since then, BlackRock has put this declaration into practice by excluding companies that earn more than 25% of their total revenue from coal-fired power production and manufacturing from their stock and bond portfolios. Global investment banks have made ESG an important criterion for corporate evaluation, and the National Pension Service also joined by announcing in January last year that it would invest 50% of its total assets in ESG companies by 2022.

One year later, domestic companies are also trying to meet investors' expectations. This year, group heads have competed to emphasize ESG management in their New Year's addresses, and the establishment of 'ESG Committees' is spreading like a trend.

In particular, Ssangyong Cement's move to establish the first 'ESG Management Committee' in the domestic cement industry at the end of last year is highly significant. Ssangyong Cement, a leading company in the cement industry, which is considered a representative of non-environmentally friendly industries, draws more attention with its ESG management declaration. It points to the future direction of the cement industry.

Last year, Ssangyong Cement experienced a 4.4% decrease in sales compared to 2019 due to the contraction of the construction and real estate market caused by COVID-19, decreased domestic and international cement demand due to abnormal summer weather such as heavy rain and typhoons, and falling sales prices. However, operating profit increased by 9.2%, achieving an operating profit margin of 17%.

Since declaring its environmental management policy in 2008, Ssangyong Cement has focused on eco-friendly investments, and it is analyzed that the concentrated investment of about 100 billion KRW over the past two years to fully operate the recycling resource processing facility has greatly contributed to the improvement of operating profit.

In a challenging management environment, practicing ESG will be a demanding task, but it is an unstoppable trend. Preparedness captures opportunity. May ESG management become a growth opportunity this year.

This content was produced with the assistance of AI translation services.