[Samsung New Environmental Strategy] Mobilizing All Technologies Including 'Ultra-Low Power Semiconductors'... Financial and Tax Risk Management Also Included

M&A Sensitivity... Risk Management Needed Even Without Carbon Neutrality Mention
IFRS Disclosure Burden... High-Intensity ESG Management Enhances Brand Value

[Asia Economy Reporter Moon Chaeseok] The core of Samsung Electronics' newly announced "New Environmental Management Strategy" on the 15th is to develop innovative new technologies that drastically reduce emissions during the manufacturing process of semiconductors and electronic products. Even considering South Korea's reality of having less renewable energy supply and higher costs compared to advanced countries, the company views achieving carbon neutrality through renewable energy self-sufficiency as an urgent task that can no longer be postponed. Analysts also interpret this decision as reflecting a determination to prevent weakening investment sentiment in the financial and investment sectors, protect brand value, and proactively respond to carbon tax risks in major markets such as the U.S. and Europe.

Among Samsung Electronics' detailed strategies are ▲developing ultra-low power semiconductors and electronic products that reduce power consumption ▲maximizing resource circulation throughout the entire product lifecycle from raw materials to disposal ▲minimizing water consumption by maximizing water recycling ▲applying carbon capture and utilization technologies at DS (semiconductor) division sites by 2030 ▲promoting the use of fine dust detection, analysis, and removal technologies in local communities by 2030. The company stated it will accelerate the development of essential technologies to reduce carbon emissions across the entire value chain (supply chain) and mobilize collaboration with stakeholders including citizens and governments.

A pond located inside the Samsung Electronics Pyeongtaek Campus. (Photo by Samsung Electronics)

Samsung Electronics plans to invest 7 trillion won by 2030 to reduce process gases, collect and recycle waste electronic products, conserve water resources, and minimize pollutants. As the company that consumes the most electricity in the world (25.8 TWh as of last year), this investment decision stems from a sense of crisis that carbon neutrality goals cannot be achieved without reducing carbon emissions from the production stage. Samsung Electronics explained, "Because of the large power demand, securing renewable energy is not easy, and domestic renewable energy supply conditions are unfavorable, but we are taking on the 'challenge' toward carbon neutrality to contribute to solving the environmental crisis, a pressing issue for humanity."

The reason Samsung Electronics unveiled an eco-friendly management strategy 30 years after the 1992 "Samsung Environmental Declaration" is partly to accelerate ESG (Environmental, Social, Governance) management and enhance brand value following Vice Chairman Lee Jae-yong's reinstatement, but some view it as a decision to proactively manage financial and tax risks. Even before Lee's reinstatement, Samsung Electronics consistently informed customers about developing "low-power" semiconductors and home appliances, as well as energy reduction policies linked to the home appliance platform "SmartThings." In particular, the decision to join RE100 (Renewable Electricity 100%) is seen as groundbreaking, considering Samsung Electronics had already sufficiently procured renewable energy in the U.S., Europe, and China by 2020 through measures exceeding RE100 requirements.

For example, BlackRock, the world's largest asset management company holding a 5.03% stake in Samsung Electronics (as of the end of March), issued a stewardship code report criticizing limited shareholder access to Samsung Electronics' "green strategy" information. They pressured the company to disclose its carbon neutrality strategy more transparently. It is practically difficult for manufacturers to ignore demands from major institutional investors. From a financial and accounting perspective, the draft mandate for "sustainability disclosure" imposed on companies by the UK International Financial Reporting Standards (IFRS) Foundation is also a burden.

A pond created with purified water through Samsung Electronics Hwaseong Plant's 'Green Center'. (Photo by Samsung Electronics)

There is also speculation that this decision was made with awareness of tax reforms in major markets such as the U.S. and Europe. The European Union (EU) plans to implement the Carbon Border Adjustment Mechanism (CBAM) in 2025. The U.S. has also expressed its intention to introduce a strong carbon border tax system. Considering recent U.S. administrative regulations such as the Inflation Reduction Act (IRA) and the Chips and Science Act (CSA), which aim to actively incorporate South Korea into its domestic supply chain, it is argued that Samsung Electronics had no choice but to announce a strong carbon neutrality policy.

Alongside Vice Chairman Lee's determination to reform management under the "New Samsung" vision, there are also calls for strong risk management to achieve significant mergers and acquisitions (M&A) results. Although the likelihood of carbon neutrality being directly linked to deal content is limited, there is a need to eliminate "noise." Currently, potential M&A target companies for Samsung Electronics include the UK fabless semiconductor design company "ARM," the German automotive, industrial, and power system semiconductor company "Infineon," and the Dutch company "NXP."

A Samsung Electronics employee wets their hands in a pond created with purified water at the Hwaseong plant's 'Green Center.' (Photo by Samsung Electronics)

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