Industry Accelerates ESG Management... New Focus on 'Local Community Demands' (Comprehensive)

Targeted Communication with Local Communities
Socially Responsible Management as a Key Issue

▲Hyundai Oilbank Refinery Plant Overview

[Asia Economy Reporter Oh Hyung-gil] As ESG (Environmental, Social, and Governance) management emphasizing corporate social responsibility accelerates, resolving conflicts with local residents has emerged as a major issue in the industrial sector. Companies are responding by strengthening communication with local communities.

According to the industry on the 4th, Hyundai Oilbank is facing conflicts with local small business owners over unpaid construction fees ahead of the operation of the Heavy Oil Petrochemical Cracking (HPC) facility at its Seosan plant.

Using heavy oil, which is cheaper than naphtha, can reduce production costs and diversify products such as ethylene and polypropylene. Previously, Hyundai Oilbank estimated the expected annual profit from operating the HPC facility to be about 500 billion KRW.

This large-scale petrochemical project, in which 3 trillion KRW was invested together with Lotte Chemical, is a meaningful project aimed at reducing the sales ratio of refining business and strengthening non-refining businesses, but controversy over unpaid construction fees arose just before the Lunar New Year holiday.

As subcontractors involved in the construction have not received settlements amounting to thousands of billions of KRW and face bankruptcy, even nearby small business owners, who are heavily affected by the local ecosystem, are directing criticism not only at the construction companies but also at Hyundai Oilbank.

Hyundai Oilbank maintains the position that "since it is an EPC (Engineering, Procurement, and Construction) contract, the payment responsibility to partners lies with the project owner," but as subcontractors demand resolution from the primary contractor, protests and conflicts show signs of prolonging.

Such controversy is burdensome as the company prepares for an Initial Public Offering (IPO). Hyundai Oilbank applied for a preliminary review for listing on the Korea Exchange's KOSPI market in December last year. Considering that the preliminary review takes about 45 business days, the results are expected around the 18th of this month.

POSCO, which recently succeeded in transitioning to a holding company system, is also suffering from excessive demands from the Pohang local community. Conflict was triggered when POSCO Holdings headquarters and the Future Technology Research Institute were planned to be established in Seoul.

On the 28th of last month, members of the Gyeongbuk Provincial Council from the Pohang area visited the POSCO Center in Seoul, where the temporary shareholders' meeting was held, protesting against the holding company's establishment in Seoul and delivering a letter demanding that POSCO Holdings and the research institute be located in Pohang.

Moreover, Yoon Seok-yeol, the presidential candidate of the People Power Party, stated, "The concentration of large corporations in the metropolitan area accelerates the extinction of local areas and can lead to a decline in national competitiveness," and clearly expressed opposition to POSCO's holding company being established in Seoul, turning the issue into a political offensive.

POSCO plans to continuously communicate with the local community and is considering measures to persuade the community. Previously, POSCO established an 'ESG Committee' under the board of directors of its steel subsidiary, which has close ties to the local community, to enhance ESG response capabilities and actively communicate with the local community.

An industry insider said, "Large-scale capital-intensive companies play a significant role in the local community and have been conducting volunteer and donation activities in the region for decades," but added, "However, demands from local residents have recently increased to the extent that they affect management issues, causing growing burdens."

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