Climate Change Governance System

SK networks has tweaked its business portfolio oriented towards reducing its impact on climate change with the board of directors decisions to transfer its LPG business (2017), petroleum product wholesale business (2017) and petroleum product retail business (March 2020), and withdrawal from the Australian coal business (2019). In March 2021, the ESG Management Committee composed of the CEO and five outside directors was newly launched so as to actively respond to environment-related issues including climate change, and all board of directors members have been participating in the ESG Management Committee since May 2022.

Climate Change Governance

Management and supervision of the Board of Directors on risks and opportunities associated with climate change

In recognition of sustainability issues including climate change as important decision-making matters, SK networks established the ESG Management Committee in March 2021 to facilitate decision-making over an integrated perspective. Later on, a process was set up so that matters reviewed in advance by the ESG Management Committee were subject to the final decision of the board of directors.

<History of discussions on climate change>
The ESG Management Committee discussed and deliberated issues related to climate change twice in 2021 and three times in 2022 (as of August).

SK networks offers various opportunities including workshops to help the ESG Management Committee’s outside directors make decisions based on climate change and sustainability and to enhance their ESG expertise. In 2021, SK networks hosted the Biz. Comm. Day to deliver lectures (May 2021) about ESG finance, carbon neutrality and TCFD recommendations on climate-related financial disclosures, to officials and shared SK networks environment consulting results (September 2021). In addition, the first ESG Management Committee meeting was held in June 2021 to report ESG-related BM Value Up directions and Net Zero 2040 targets. In the ESG Management Committee workshop held in July 2022, reports were made regarding the first-half performance of SK networks including carbon reduction and ESG-related index achievements. The workshop also involved discussions of trends and regulations related to climate change issues both at home and abroad as well as the current state, future direction and action plans of SK networks’ environment management. Through these arrangements, SK networks is actively providing support to increase the sensitivity of the board of directors members to climate change and environmental issues so that they can be reflected in their decision-making.

Management and supervision of top management on risks and opportunities associated with climate change

Since August 2021, SK networks has been running the company-wide ESG Promotion Committee attended by key executives including the CEO. In addition to the commission’s eight members, representatives and business unit heads of SK networks subsidiaries also participate in the committee’s meetings to discuss issues and trends related to climate change, follow up on risks and opportunities and response measures.

<History of discussions on climate change>
The Company-wide ESG Promotion Committee discussed issues related to climate change and environmental issues twice in 2021 and eight times in 2022.

In addition, the Social Value (SV) Division was created to establish company-wide climate response strategies, based on business model innovations as well as management system improvements that are in progress. Social Value Division analyzes and evaluates risks and opportunities related to climate change and reports directly to the management including CEO, on issues, establishing strategies and other tasks related to climate change.

The SV Implementation Office has been running the SV meet up since 2020 which is a company-wide consultative body dealing with ESG issues. The office also launched the CoE (Committee of Experts) in 2022, following the Net Zero 2040 declaration, which meets bimonthly together with the SV meet up to accelerate greenhouse gas reduction activities, enhance environmental management and train in-house environment experts. Environmental CoE shares business model improvement/innovation cases incorporating progress on Net Zero 2040 per business line, major risks and opportunities associated with climate exchange, with CEO and supervisors/working-level contacts at each BU (including subsidiaries) taking the helm and engaging third party experts to deliver lectures and thereby enhance environmental competence.

Net Zero 2040

After the Net Zero 2040 declaration in June 2021, SK networks joined SBTi in September 2022 seeking to respond to climate change and resolve environmental issues.

Scenario of GHG* Emissions and Net Zero 2040(Unit: 1000 tCO₂eq)

온실가스* 배출량 및 Net Zero 2040 시나리오 (단위: 천tCO2eq)

• 2020년 - 51(1.5℃)
• 2025년 - 40(1.5℃) / 45(Well below 2℃) / 55(BAU**)
• 2030년 - 30(1.5℃) / 38(Well below 2℃) / 58(BAU**) → SK 네트웍스 감축량 목표
• 2035년 - 15(1.5℃) / 19(Well below 2℃) / 61(BAU**)
• 2040년 - 0(1.5℃) / 0(Well below 2℃) / 64(BAU**)

• *Figures are for eight companies, including SK networks and its subsidiaries. Verification of SBTi goals is in progress, and figures are subject to change.
• **Business-as-Usual
• *** Scope 1, 2 emissions (excluding Scope 3)
• **** Emissions reflecting the green premium

GHE emissions

※ Greenhouse gas emissions

In 2023, SK Networks plans to reduce approximately 691 tons of greenhouse gas (GHG) emissions by converting business vehicles to EVs, replacing aging facilities, and optimizing energy use. Another reduction of approximately 2,742 tons of GHG emissions is also targeted through RE100 measures. A total of 1,610 tons of GHG emissions were reduced in the first half, and key measures included the conversion to EVs (31 tons) and RE 100 initiatives (1,579 tons: 735 tons from self-generated power, 22 tons from REC consumption, and 23 tons from green premium). As a result, GHG emissions reduction was recorded at 45.8% (region-based: 47.6%) of the market-based emissions compared to the 2023 target emissions.

To achieve Net Zero 2040, GHG emissions are measured monthly, and reduction measures are inspected to enhance execution. The Corporate ESG Promotion Committee and Environment CoE & SV Meet-up are in place to share the achievements with the management.

Plan for Renewable Energy Transition

With the goal of a 100% transition to renewable energy by 2040, SK networks has established a mid to long-term roadmap based on REC purchases, third-party PPAs, and solar energy use.

2040 RE100 Roadmap

2040 RE100 Roadmap (REC구매, 제3자 PPA, 태양광)

• 2020년
• 2025년 - 15.6%
• 2030년 - 32.1%
• 2035년 - 68.4%
• 2040년 - 100%

Renewable Energy Consumption

※ Ratio of renewable energy in 2022: 11% (calculation standards of RE100: amount of renewable energy used/total electric power consumption)

EV100 Roadmap

※ Base : K-EV100

Electric vehicle conversion

전기차 전환실적

• 2021년 전환율 연간목표 2.2% / 실적 3.1%
• 2022년 전환율 연간목표 5.0%
• 2022년 8월말 전환율 실적 5.0%
• 2022년 8월말 전환율 연간전망 5.9%

Eco-friendly (climate change) training

SK networks members* are raising their awareness of the importance of the environment though mySUNI, a SK Group’s training platform, where various subjects are covered including ESG, carbon neutrality, resource circulation and hydrogen energy. These sessions are further connected to in-depth learning about eco-friendly business models. As of 2021, each member completed 9.2 hours of environmental training
All employees completed 9.2 hours of eco-friendly training per person in 2021 and 5.8 hours per person in 2022.
* includes contract workers and excludes Walkerhill members