Description
Based on its management principles "Customer-Value Creation" and "People- Oriented Management," which have served as the philosophical grounds for sustained growth since its inception, LG Electronics strives for sustainability management that takes society, the environment, and economy into consideration in a holistic and balanced manner. In order to actively carry out the ethical and social responsibilities that our stakeholders expect of us, LG Electronics works to become a healthy organism in the market ecosystem and assume a proactive role in making the system healthier with our products and services.
3 2013-2014 LG Electronics Sustainability Report
CONTENTS
Overview
Report Overview/Contents
CEO Message
Management Messages
Fair Business Practices
Who We Are
What We Do
Where We Operate
CSR Management
2-3
4-5
6
7-11
12-13
14-15
16-17
18-19
Stakeholder Communication
Stakeholder Engagement & Communication
Stakeholder Consultation on CSR
Materiality Analysis
20-23
24-25
26-27
Key Progress & Performance
Key Progress & Performance 28-29
Appendix
Economic Data
Environmental Data
Social Data
Independent Assurance Statement
Memberships/Awards & Recognitions
GRI/UNGC Index
Past LGE Sustainability Report/
Contributors to Report Preparation
85
86-88
89
90-91
92
93-96
97
Management Philosophy
Corporate Governance
Compliance Risk Management
Jeong-Do Management
Fair Trade
7
8
9
10
11
Disclosure on Management Approach
Customer Communications
Improving Communication
with Customer Service
Developing Products Offering Greater
Accessibility to the Disabled
Securing Product Quality & Safety
Protection of Personal Information
30
31-32
33
34-35
36
36-37
Materiality Report
With Our Customers 30-37
With the Environment 38-55
Disclosure on Management Approach
Products with Greener Features
Product Stewardship
Green Partnership
Environmental Awards and
Accolades in 2013
EESH Management System
GHG Emissions Reduction
Minimizing Environmental Impact
at our Business Sites
Improving EESH at Business Sites
38
39
40-44
45
46-47
48
49-51
52-53
53-55
With Our Suppliers 56-65
Disclosure on Management Approach
Our Principles for Win-Win Growth
Fostering “No. 1” Suppliers
Supplier CSR Risk Management
Confict Minerals
56
57-58
58-59
60-63
64-65
66-73
Disclosure on Management Approach
Social Contribution
Key Social Contribution Programs
66
67
68-73
With the Community
74-83
Disclosure on Management Approach
Global Workforce
Talent Acquisition & Cultivation
Corporate Culture/Work-life Balance
Protection of Labor Rights
74
75
76-77
78-79
80-83
With Our Employees
Overview
In preparing its 2013-2014 Sustainability Report, LG Electronics adopted
the G4 guidelines of the Global Reporting Initiative (GRI). As part of the pro-
cess for implementing the guidelines, we reviewed newly introduced indices
against the previous year’s edition to identify the aspects that are lacking in
our report. In order to incorporate these aspects as much as possible, we had
extensive communication with business departments.
We collected opinions fromour internal and external stakeholders through a
wide range of communication programs, and performed a materiality analy-
sis to identify the information that both LG Electronics and stakeholders
thought to be material. Based on the fndings, we tried to introduce infor-
mation concerning “Material Aspects” as defned by the G4 guidelines. Ex-
ternally, we worked with a third party assurer to review the analysis results
against the aspects perceived as material to industry peers to verify what is
missing from each other’s list (and vice versa), and internally, we reviewed
the results with related business departments to select and introduce the
information that is material and useful both to LG Electronics and our stake-
holders. Articles on material aspects prepared by business departments
were fnalized after a review by management and a third party assurer.
Reporting Principles
The G4 guidelines of the Global Reporting Initiative (GRI), the United Na-
tions Global Compact (UNGC) Index, the Accountability Principles Standard
(AA1000APS), and the Stakeholder Engagement Standard (AA1000SES)
Reporting Scope
This report covers all LGE business sites, both in Korea and overseas, and supplier
sites, including activities and performance in economic, environmental, and social
areas (for the detailed scope of reporting, please refer to notes for each table).
Assurance
Independent Assurance Statement
(Korea Productivity Center) (See pp. 90-91)
Reporting Boundary
Information is organized based on material issues and presented under the “DMA
(Disclosure on Management Approach)” for each section.
Reporting Period
Data from the calendar year 2013, fromJanuary 1 to December 31 (for qualita-
tive measures of performance, some data from the frst half of 2014 was also
included)
REPORT OVERVIEW
LIFE’S GOOD
WITH LG
Everyone at LG Electronics strives to
create the very best value for customers,
ones that bring excitement and
conveniences into their lives. Furthermore,
LG Electronics carries out its responsibilities
as a corporate citizen with great passion,
such as helping those in need to protecting
the environment of the earth, in an
effort to bring greater happiness to
its stakeholders, including customers,
investors, and communities.
The ultimate goal LG Electronics strives
to achieve through its sustainability
management efforts is to help all its
stakeholders achieve sustainable happiness.
Information Sources concerning
LG Electronics’ Sustainability Management Efforts
LG Electronics Website Annual Report
The information contained in this document is intended for international viewing
and may not apply in your jurisdiction. This report also contains some “forward-
looking statements”- that is, statements related to future, not past, events. In
this context, forward-looking statements often address our expected future
business performance and intentions, and often contain words such as “expect,”
“anticipate,” “intend,” “plan,” believe,” “seek,” “see,” or “will.” Forward-looking
statements by their nature address matters that are, to different degrees, un-
certain. These uncertainties may cause our actual future results to be materially
different fromthose expressed in our forward-looking statements in this report.
CSR Team, LG Electronics LG Twin Towers, 128 Yeoui-daero,
Yeongdeungpo-gu, Seoul, Korea
Email : [email protected]
Tel : 82-2-3777-3263
WWW.LG.COM/SUSTAINABILITY
5 2013-2014 LG Electronics Sustainability Report 4 2013-2014 LG Electronics Sustainability Report
To Our Stakeholders
First and foremost, we would like to express our deepest gratitude for your ongoing support and trust in LG Electronics.
With the protracting economic recession and intensifying uncertainties in the business environment, it is becoming
increasingly challenging to achieve “sustainable growth.” It is, however, also true that such challenges provide us with a
great opportunity to identify new growth engines and to prepare for the future.
LG Electronics will build “Sustainable Competitiveness.”
Since the day of our inception, we have always embraced challenges with high spirits. We have never compromised on
our commitment towards delivering differentiated values to customers, and have never wavered from the sense of
responsibility for society, while devoting our organizational resources to developing “sustainable competitiveness” that
only LG Electronics can deliver.
In 2014, we intend to fully focus our efforts and resources on securing competitiveness that enable us to grow
strong against ferce competition to ensure market leadership in our core businesses, while making bold and decisive
movements to expand our market share and our infuence quickly in new businesses.
To remain true to our fundamental promises to customers and society, we will also thoroughly comply with Jeong-Do
Management and the related laws and regulations in creating customer value, both in terms of the process and the
outcome.
Capitalizing on our collective capabilities, LG Electronics will contribute to the global community.
In making social contributions, we will make consistent and committed efforts across the organization to create
differentiated values as we press forward to achieve our primary goal – environmentally friendly development
and production processes. We will work to find specific ways to contribute to the global community with our core
capabilities, such as businesses, technologies, and channels, and implement them effciently.
In particular, we will continue the existing programs designed specifcally to provide real and effective support to those
who are willing to work towards self-sustainability as part of our mission to create a hopeful world for all.
Everyone at LG Electronics will come together as one to repay customers’ trust.
Guided by our management philosophies “Customer-Value Creation” and “Human-Oriented Management,” everyone at
LG Electronics, from management to individual employees, will come together as one in achieving sustainable growth
against tough business conditions and in making meaningful contributions to society.
We sincerely seek your continued support and guidance in our endeavors.
May 2014
Vice Chairman & CEO Bon Joon Koo
CEO MESSAGE
7 2013-2014 LG Electronics Sustainability Report 6 2013-2014 LG Electronics Sustainability Report
As a guiding principle for all LG employees in their thoughts and actions, the
LG Way articulates our belief in attaining the vision of becoming “No.1 LG”
through “Customer-Value Creation” and “People-Oriented Management” as
we base our business practices on the principles of “Jeong-Do Management.”
Management Principles
As a philosophical basis for our business operations, LG Electronics’ Manage-
ment Principles also serve as our guiding principles for sustainable manage-
ment. Everything we do at LG Electronics starts from our aspiration to put a
smile on our customers’ faces and to make their lives more convenient with
our products, and this commitment toward people, society, and new ideas
drive our business activities. These principles will serve as an enduring inspira-
tion for our efforts toward sustainable management for years to come.
1) Customer-Value Creation
“Customer-Value Creation” is the ultimate goal toward which our business
activities strive, attained by putting customers frst and delivering the best
value possible.
2) People-Oriented Management
“People-Oriented Management” expresses our commitment toward creating
an environment where our employees can reach their full potential and utilize
their abilities to the fullest, which is achieved by promoting employee creativ-
ity and autonomy, and implementing a merit-based reward system.
Jeong-Do Management
“Jeong-Do Management” is LG Electronics’ unique guidelines for business
practices born out of our strong conviction that it is possible to compete fairly
and produce results with integrity by continuously strengthening our funda-
mentals. Our management principles are put into action when our employees
practice Jeong-Do Management.
No. 1 LG
The ultimate goal we strive to achieve through Jeong-Do Management, as well
as the management principles behind it, is to become “No.1 LG.” This stands
for our commitment to become a dominant leader in the global market by
securing unrivaled competitiveness and consistently leading the market on a
global level.
MANAGEMENT
MESSAGES
MANAGEMENT
PHILOSOPHY
Vision
Strive to become a respected
market-leading company
Management Principles
The objective of our business activities
and the principle for management
Guidelines for our action upon which we strive to
compete fairly and produce results with integrity by
continuously strengthening our fundamentals Code of Conduct
Jeong-Do
Management
People-Oriented
Management
Customer-Value
Creation
No. 1
LG
Ultimate Goals behind “No. 1 LG”
1. Move beyond the Korean market and triumph in competitions with
global market leaders
2. Secure unrivaled competitive edge, in terms of price and brand power,
to enjoy a dominant market position
3. Establish LG Electronics as a dominant market leader by continuously
expanding and creating markets with No.1 products and services
No. 1 LG
Trusted by
Customers
Coveted by
Talented Professionals
Favored by
Investors
Feared and Respected by
Competitors
LG Way Vision Structure
Based on close collaboration with our suppliers,
LG Electronics will strive to create the most optimal
business operating system in the world.
LG Electronics fully understands that the competitive-
ness of our suppliers directly translates into our own
competitiveness –as our parts producers improve their
competitiveness, so will our fnished products become
more competitive. LG Electronics will continuously work
to eliminate unfair business practices and support our
suppliers in their efforts toward stronger competitive-
ness. Everyone at LG Electronics clearly understands
that striving for shared growth based on win-win part-
nerships is not only the right path toward fulflling our
corporate social responsibility but also an effective
strategy for strengthening our competitiveness. Based
on this recognition, we will strive for transparent and
ethical business practices that take the welfare of the
entire society into consideration as we align our actions
with Jeong-Do Management.
LG Electronics strives for technology that creates
harmony between people, products, and technology.
LG Electronics is hard at work to develop the technolo-
gies required by mankind and provide value to custom-
ers through those technologies. In order to develop
technologies that deliver differentiated value to cus-
tomers, we are shifting the focus of our unique work
style from optimizing each process to optimizing entire
processes as a whole. This means that our approach to
technology development is now more focused on con-
sumer convenience, rather than manufacturing effcien-
cy. Based on our existing strengths in hardware tech-
nology, we will also improve capabilities in software,
including operating systems, to secure technological
competitiveness across the value chain and to achieve
sustainability for both our technologies and businesses.
Jong Sik
Kim
COO (Chief Operating Offcer)/
President
Skott
Ahn
CTO (Chief Technology Offcer)/
President
Wayne
Park
GSMO (Global Sales & Marketing Offcer)/
Executive Vice President
Ho Geon
Hwang
Chief Human Resource Offcer/
Senior Vice President
Choong Hak
Lee
Business Support Offcer/
Senior Vice President
LG Electronics cares for consumer convenience
and the environment, and delivers innovations
to customers.
Our marketing strategy consists of making products
sought by consumers and becoming the frst to mar-
ket the products that deliver convenience to consumers
and are kind to the environment. To this end, we are not
only making efforts into securing manufacturing com-
petitiveness but also working to strengthen our mar-
keting competitiveness through marketing strategies
tailored for each country and region. We will continue
to strive to become a sustainable business through
genuine efforts toward consumer communication and
engagement, as well as through products that offer
high energy effciency and have no negative impact on
the environment.
LG Electronics strives to become home to a group
of talented professionals who embrace
changing business landscape and create new value.
Business success in the year 2014 lies heavily on how
fast we can respond to changes in the business envi-
ronment. Although businesses, during the period of
fast growth for the country, used to seek talent suited
for disciplined and structured operations, corpora-
tions are now seeking talented professionals who pos-
sess so-called “nomadic” traits, such as adaptability
to fast changing environments, affnity for exploring
new things, and a drive for creating value. In order to
attract such talented professionals, LG Electronics is
hard at work to build a diverse workforce, foster local
talent who are integral to our global operations, and
implement HR policy that empowers all our employees
to fully utilize their expertise, thereby ensuring that LG
Electronics continues to create new value for years to
come.
LG Electronics actively engages with diverse
stakeholders.
In an effort to deliver differentiated value to our stake-
holders, LG Electronics actively seeks out opinions from
experts in economic, environmental, and social issues,
and incorporates their feedback into our business op-
erations. In addition, we continuously pursue social con-
tribution initiatives that take advantage of our products
and capabilities, and actively support our employees’
voluntary social contribution activities. Based on the
trust bestowed on us by our stakeholders, LG Electron-
ics will strive to achieve sustainable growth and become
a respected corporate member of the global society.
9 2013-2014 LG Electronics Sustainability Report 8 2013-2014 LG Electronics Sustainability Report
Significance of Compliance
Compliance issues concerning business operations are on the continuous rise,
and stronger regulations and penalties are being implemented to address the
issue. Businesses now could face tens of billions of dollars in fnes, as well as
criminal charges against their employees, for a failure to comply with laws
and regulations, and this further increases the signifcance of compliance risk
management for corporations.
Independent Compliance Risk Management
To increase the effectiveness of our compliance programs and ensure the in-
dependence of the Chief Compliance Offcer, in December 2013, LG Electron-
ics expanded and transferred the Compliance Offce to directly under the CEO,
from its previous position under the Legal Department. We also changed re-
lated business processes to ensure that the Chief Compliance Offcer directly
reports to the Board of Directors or CEO on compliance issues in a timely
manner. In addition, LG Electronics briefs the BOD on its compliance efforts
(compliance and validity assessment results) on an annual basis to help the
BOD carry out effective oversight of the company’s compliance management
performance (annual briefng completed in February 2013).
Strengthening Compliance Awareness of Employees
1. In-Class Training for Organization Leaders
LG Electronics believes that strong compliance awareness of our executives
and middle managers is critical for creating a corporate culture that sup-
ports effective compliance management and promotes a compliance mindset
among our employees. As such, LG Electronics conducts regular compliance
training for newly appointed organization leaders to help them exercise strong
leadership in compliance issues. The training consists of courses on the impor-
tance of compliance, non-compliance cases, and our principles for compliance
issues.
2. Online Compliance Training for Employees
In order to enhance employees’ compliance mindset by sharing information
about regulation changes and company principles, LG Electronics conducts
annual online compliance training for all our business employees across the
world. The training introduces laws and regulations, employee roles and re-
sponsibilities concerning compliance, examples of compliance failure from
other corporations, and the Employee Code of Conduct. In 2013, 97 %of our
business staff (50,832 out of 52,602) completed the training, and signed a
pledge for compliance with laws & regulations and the Code of Conduct to
renew their commitment towards responsible conduct.
CORPORATE
GOVERNANCE
COMPLIANCE
RISK MANAGEMENT
Shareholders
As of year-end 2013, LGElectronics’ total shares issued and outstanding were
180,833,806 (common stock: 163,647,814/preferred stock: 17,185,992).
The number of non-voting shares amounted to 17,949,160 (9.9%) of the
total outstanding. The largest shareholder, LG Corp. (the LG Group’s hold-
ing company) owned 30.5% of the shares. Every year, the Chairman of BOD
personally updates shareholders on our performance at the Annual General
Meeting (AGM) and collects feedback from shareholders on management is-
sues that require decision-making. LG Electronics also maintains a section on
its website to feld investor inquiries as a channel through which we collect
investor feedback on our business performance and present our responses.
Shareholders’ opinions and suggestions are gathered, carefully reviewed by
management and the BOD, and incorporated into corporate policies and busi-
ness operations.
Strengthening Independence of Board of Directors (BOD)
The BOD consists of seven Directors, four of whom are Outside Directors. All
Directors serve a three-year term and at the end of the tenure, their reinstate-
ment is determined based on performance evaluation. Directors perform their
duties independently from any infuence of major shareholders and manage-
ment. In addition, LG Electronics has in place a compliance system to review
business transactions for potential confict of interest and verify BODapproval
status on such transactions. This system was implemented to prevent Direc-
tors from pursuing personal profts for themselves or a third-party through
business opportunities obtained by using their positions as a BOD member
and incurring unforeseen losses to shareholders. If a business transaction has
not obtained a BOD approval, the BOD is briefed on such transactions in ad-
vance for the approval process.
Role of BOD
The BOD actively provides recommendations for important management de-
cisions and conducts unbiased evaluation and supervision of management. In
particular, Outside Directors monitor overall corporate management activities
and keep management in check, while offering concrete and substantial ad-
vice to management. In 2013, the BOD was convened nine times to review a
total of 42 agendas (33 for approval, 9 for reporting), including the approval
for self-dealing by directors. Of the 42 agendas, 41 were approved in its origi-
nal form, and one was approved after revision. The Directors’ attendance rate
for the BODmeetings was on average 97%. At the meeting held in April 2012,
the BOD moved to establish “Corporate Social Responsibility” as an offcial is-
sue to be reported to the BOD to strengthen the BOD’s commitment toward
the issue. In line with the action, the BOD is briefed annually on CSR activities,
including economic, social, and environmental issues identifed through en-
gagement with stakeholders (i.e. Stakeholder Consultation on CSR) and our
Sustainability Report, to facilitate the active engagement of BOD members.
BOD Committees
The BOD is supported by three Board Committees: the Audit Committee, the
Management Committee, and the Outside Director Candidate Recommenda-
tion Committee. The Audit Committee is comprised entirely of three Outside
Directors and is responsible for oversight and monitoring to ensure fair corpo-
rate management as well as accounting transparency and conformance. The
Management Committee reviews and determines the agendas delegated by
the BOD and other ordinary management activities. In 2013, the Manage-
ment Committee reviewed a total of 43 agendas. The Outside Directors Can-
didate Recommendation Committee carefully selects qualifed candidates for
Outside Directors in accordance with Article 542.8 of the Commercial Law of
Korea and recommends them to the AGM for appointment to ensure fairness
and transparency in the nomination of candidates.
Evaluation and Compensation
Compensation for BOD members is made within the regulations pertaining to
BOD compensations and as approved by the AGM. The evaluation of manage-
ment and executives of LG Electronics is performed year round. Top manage-
ment and executives are evaluated on whether they have set and achieved
challenging goals in fnancial, social and environmental areas, whether their
business objectives, comprised of quantitative and non-quantitative factors,
were achieved, as well as their professional capabilities, based on a fair and
objective process. Appropriate compensation is determined and made based
on the outcome of the evaluation.
27
806
15
1,129
No. of Coures No. of Participants
Title/Position/Profle
CEO, Vice Chairman
Representative Director/CFO, President
Vice Chairman,
LG Management Development Institute
Professor, Business Administration, Seoul National University
Chair Professor, Sejong University,
Former Editor-in-chief, Dong-A Ilbo
Lawyer,
Former Deputy Minister of Justice
Professor, Mechanical & Aerospace Engineering, Seoul National University
Date Appointed
March 2014
March 2014
March 2014
March 2013
March 2012
March 2012
March 2013
Note
Management Committee (Chairman)
Management Committee
Chairman of BOD
Outside Director Candidate
Recommendation Committee (Chairman)
Management Committee
Audit Committee (Chairman)
Audit Committee
Outside Director Candidate
Recommendation Committee
Audit Committee
Outside Director Candidate
Recommendation Committee
BOD Status (As of March 31, 2014)
Category
Inside Director
Non-executive
Director
Outside Director
Name
Bon Joon Koo
David Jung
Yu Sig Kang
Chang Woo Lee
Kyu Min Lee
Sang Hee Kim
Chong NamChu
2013 Online Pledge for Compliance
In-Class Compliance Training in 2013
Period
April 14-June 28, 2013
May 27-July 20, 2013
No. of
Targets
30,141
22,461
52,602
Completion Rate (%)
(No. of Completed)
97
(29,231)
96
(21,601)
97
(50,832)
Korea
Overseas
Total
Online Compliance Training in 2013
All LG Electronics employees hereby
pledge to:
1. Put LGE management principles into
action based on our commitment for
delivering the best value to our customers,
employees, and shareholders.
2. Comply with the laws and regulations of all
countries in which we operate.
3. Duly comply with compliance policies and
procedures concerning business activities,
including the “LG Electronics Employee
Code of Conduct.”
4. For compliance issues that present a
dilemma, consult supervisors or related
departments and make appropriate actions
accordingly.
5. Report all cases of non-compliance with
the Code of Conduct and company policies,
confirmed or suspected.
Position-specifc
Training
Leadership
Workshop
11 2013-2014 LG Electronics Sustainability Report 10 2013-2014 LG Electronics Sustainability Report
Strong Commitment toward Jeong-Do Management
Jeong-Do Management is LG Electronics’ unique guidelines for employee con-
duct, and conveys our belief that we can still come out on top and produce
meaningful results by consistently strengthening fundamentals and fairly
competing in the market with integrity. This belief is clearly expressed in the
CEO’s statement: “Our commitment toward Jeong-Do Management and com-
pliance not only is a promise to ourselves, but also a solemn pledge to our
customers and society. Non-compliance, in any circumstance, does not work
in favor of the company.” Based on this strong commitment toward Jeong-
Do Management, LG Electronics requires not only our employees but also our
suppliers to conduct themselves in line with Jeong-Do Management.
Amendments to Code of Ethics
First established in 1994, LG Electronics’ Code of Ethics is comprised of “Code
of Ethics,” “Guidelines for Practice,” and the “Explanation Guidelines for Prac-
tice” that provides principles behind specifc guidelines. The Code of Ethics has
been translated into 14 different languages and distributed worldwide, and
the Handbook was produced in Korean, Chinese, English, Spanish, Polish, and
Arabic, and distributed to all employees to raise awareness on LG Electron-
ics Employees’ Code of Ethics, and to encourage our employees to embrace
Jeong-Do Management. In order to ensure transparency in transactions with
interested parties and to promote fair business conduct of our employees, we
amended the Code of Ethics in January 2014 to strengthen the provisions
pertaining to receipt of cash or valuables from interested parties. Based on the
amendments, all LG Electronics employees are now prohibited from accepting
personal gifts from interested parties regardless of the amount, as well as
from having personal dealings with interested parties.
Jeong-Do Management Pledge and
Voluntary Disclosure of Violations
In 2013, LG Electronics required all its employees at Korea and overseas to
sign and submit a pledge for “Jeong-Do Management” online, and 98.5% of
our employees have completed the process. We also require our suppliers to
do the same on a regular/irregular basis. In particular, LG Electronics requires
suppliers to submit a pledge for Jeong-Do Management as part of the Master
Purchase Agreement, in an effort to ensure that all companies that have busi-
ness transaction with LG Electronics make the pledge.
In order to highlight the importance of compliance with Jeong-Do Manage-
ment and relevant laws & regulations, we encouraged our employees to vol-
untarily disclose any violations. Based on these efforts, LGElectronics continu-
ously works to prevent risks that could potentially cause irreparable damages
to the company.
Whistleblower System
LG Electronics has in place a whistleblower system (ethics.lg.co.kr) to receive
internal and external reports concerning any actions in violation of the Em-
ployee Code of Ethics and Jeong-Do Management, such as accepting gifts
from interested parties, lack of transparency in selecting suppliers, improper
acquisition of the shares of the company’s business partners, illegal/improper
use of company assets, manipulation of documents/fgures, false reporting,
etc. We also have strong measures in place to thoroughly protect the identity
of whistleblowers. In addition, we utilize the Win-Win Growth website to col-
lect anonymous reports concerning unfair and unjust treatment suffered by
our external stakeholders. Over the past three years, a total of 1,375 claims
were reported and handled through the whistleblower system and the Win-
Win Growth website.
Counseling Center
In order to respond to employee inquiries on Jeong-Do Management, LG Elec-
tronics established a counseling center and offers one-on-one counseling on
the everyday practice of Jeong-Do Management. The center receives inquiries
via intranet, phone, and email, and provides counseling on the interpretations
of the Code of Ethics, congratulatory/condolence cash gifts, appropriate pro-
cedures for handling such gifts, and how to deal with business expenses. In-
quirers can choose to disclose the details of their inquiries, but if they decide
otherwise, we also make every effort to protect their identity and the details
of their inquiries. In 2013, a total of 177 inquiries were made to the counsel-
ing center. Frequently discussed topics are also organized into FAQs and used
as training materials both at Korea and overseas.
Global Training and Awareness Promotion on Jeong-Do Management
LG Electronics provides training on Jeong-Do Management to highlight our
belief that “Jeong-Do Management is not an option but an implicit require-
ment for the very survival of the company” and help our employees embrace
the common principles behind this philosophy. In 2013, we conducted in-class
Jeong-Do Management training for 14,923 employees (Korea and overseas)
and 435 suppliers. The training was comprised of internal and external case
studies and guidelines for everyday practice to help our employees and suppli-
ers embrace Jeong-Do Management and make choices that prevent corrup-
tion and irregularities from occurring.
In 2014, we plan to strengthen “train-the-trainer” programs for Jeong-Do
Management instructors based in our overseas subsidiaries, to ensure that
Jeong-Do Management is established as an everyday practice at our overseas
locations.
Fair Trade Compliance Activities
Our Fair Trade Compliance Program is comprised of internal control activities
designed to prevent compliance risks and increase employee awareness about
fair trade. To this end, we have in place a basic enforcement system that is
designed to repeatedly convey our commitment toward fair trade by top ex-
ecutives, constantly monitor against non-compliances, and conduct improve-
ment programs. We also brief top management on our fair trade activities on
an annual basis to promote voluntary employee participation in our efforts
for fair trade.
Fair Trade Activities
In 2013, as part of our anti-collusion efforts, we expanded targets for train-
ing, oversight, and monitoring against cartel activities from sales & marketing
staff to include R&D staff as well. In 2014, we plan to strengthen our ad-hoc
inspections, measure the effectiveness of training, and assess employee com-
pliance with guidelines to reduce risks associated with non-compliances.
In January 2014, LG Electronics was levied a penalty in Korea for unfair trade
practices. As a response measure, we plan to further break down employee
business functions and implement training programs on unfair trade practices
specifc to each business function to raise employee awareness against non-
compliances.
In January 2014, LG Electronics was fned in Korea for unfair labeling and
advertisement practices. As part of our efforts to minimize such compliance
risks, we produced guidelines and internal checklists for related staff members
and established a system to perform a two-step compliance review based on
the guidelines and checklists. Under the new internal control system, staff
members in charge of the project are required to perform an initial screening
against non-compliances, after which related departments conduct a follow-
up review to minimize compliance risks.
In order to prevent non-compliances and unjust treatment toward suppliers
in our transactions with them, we conduct training for related staff members
and perform a review on a regular basis. In 2014, we plan to make particular
efforts to response to the emerging issue of “Misappropriation and Dispos-
session of Technology” and reengineer our business processes to prevent such
practices.
In 2013, LG Electronics was rated “Excellent” in the Fair Trade & Win-Win
Growth Partnership Agreement Observance Assessment conducted by the
Korea Fair Trade Commission and again, recognized for its exemplary commit-
ment to win-win growth and excellent performance in the area.
Mid- to Long-term Direction
Based on ongoing monitoring and improvement efforts, LG Electronics will
continue to strengthen its internal control efforts toward preventing compli-
ance risks associated with fair trade practices. In particular, we will strengthen
our support system to empower business companies and overseas subsidiar-
ies to actively engage in fair trade compliance efforts.
JEONG-DO
MANAGEMENT
FAIR TRADE
2011
2012
2013
452
450
473
Irregularities/Corruptions
Complaints
Other (HR, Supplier Grievances, etc.)
6
73
21
Ongoing Monitoring
of Non-compliances
Business Process
Improvement Efforts
Repeated Conveyance of
Commitment by Management
Employee Training &
Pledge
Establishment of/Compliance
with Action Guidelines Number of Cases Reported (Past Three-Year Data)
LG Electronics Cartel Prevention System
Types of Reports in 2013 (%) Actions Taken in 2013 (%)
Warning
Light Disciplinary Actions
Strong Disciplinary Actions
40
43
17
13 2013 - 2014 LG?? ????????? 2013 - 2014 LG?? ?????????
Since its establishment in 1958, LG Electronics has pioneered the electronics industry in
Korea and made a significant contribution to its ascent into the nation’s signature industry with
world-class competitiveness. Based on our sense of pride and duty as the nation’s leading
corporation, LG Electronics will strive to become a sustainable business that fulfills its
social responsibilities by delivering differentiated value to diverse stakeholders.
Although a slump in global demand from the widespread recession and
intensifying competition created a tough business climate in the year 2013,
we were able to deliver robust year-on-year growth by introducing premium products
aggressively and expanding global sales. In particular, stronger fundamental
competitiveness helped our core products (mobile handsets, washing machines,
and air conditioners) lead the sales growth. We saw, however, a slight erosion in
profitability across our business segments (LCD TVs, Home Appliances, etc.)
except for air conditioners due to intensifying price competition,
rising prices of some commodities, and increases in overall R&D costs.
who we are and
our created & shared value
LG Electronics Overview
(As of December 31, 2013/Consolidated) Flow of Economic Value (Unit: KRW billion/Parent)
· Non-operating Income & Financial Profts: Figures are stated in
accordance with the Korean International Financial Reporting
Standards (K-IFRS).
· Operating Expenses: Sales costs and administrative expenses
· Taxes & Dues: Corporate taxes, public dues, resident tax and
a special tax for rural development
· Capital Costs: Interest payments and dividends
· Past data was revised to refect changes
and additions to fnancial accounting
standards.
2011
28,097.1
-138.5
27,958.6
28,361.0
2,488.5
252.8
25.6
10.8
31,138.7
-3,180.1
2012
25,427.2
-285.8
25,141.4
25,381.0
2,860.6
267.3
26.0
19.4
28,554.3
-3,412.9
2013
28,078.9
-33.3
28,045.6
28,292.8
3,195.7
264.3
30.1
24.3
31,807.2
-3,761.6
Sales
Non-operating Income and Financial Profts
Economic Value Generated
Operating Expenses
Wages and Benefts
Capital Costs
Taxes & Dues
Donations
Economic Value Distributed
Economic Value Retained
Economic Value Generated, Distributed, and Retained (Unit: KRW billion/Parent)
28,078.9
30.1
33,700.0
3,195.7
Interest Payments
227.4
Sales
36.9
Dividends
Taxes & Dues
24.3
Donations
Wages &
Benefts
Purchasing &
Service Expenses
Customer
Shareholders
Creditor
Community
Employee
Supplier
Government
58.1404
Sales
(Unit: KRW trillion)
Operating Income
(Unit: KRW trillion) 1.2847
Total Assets
(Unit: KRW trillion) 35.5281
Total Liabilities
(Unit: KRW trillion) 22.8387
No. of
Shareholders 214,253
No. of
Shares 180,833,806
Credit Rating
AA (Korea)
Baa2 (Moody’s)
BBB- (S&P)
1USD = KRW1,108 (2011)/1,063 (2012)/1,095 (2013)
· Past data was revised to refect changes and additions to fnancial accounting standards. Unit: KRW billion, (USD billion)
Parent Consolidated
Corporate Profile (As of December 31, 2013)
Industry
Main Product
Manufacturing
TV, Home Theater System, BluRay Player, Mobile Handset,
Laptop Computer, Refrigerator, Washing Machine,
Cooking Appliance, Built-in SystemKitchenware, VacuumCleaner,
Health Care Appliance, Air Conditioner, Monitor, Security System,
Commercial Display, etc.
Organization Name
Location of
Headquarters
CEO
Date of Establishment
No. of Employees
LG Electronics, Inc.
LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu,
Seoul, Korea
Bon Joon Koo, , David Jung
October 1, 1958
82,432 (Korea: 38,440/Overseas: 43,992)
2011
2012
2013
Sales
57,739.9 (USD 52.1)
28,097.1 (USD 25.4)
55,122.6 (USD 51.9)
25,427.2 (USD 23.9)
58,140.4 (USD 53.1)
28,078.9 (USD 25.6)
2011
2012
2013
Operating Income
1,216.7 (USD 1.14)
46.2 (USD 0.04)
1,284.7 (USD 1.17)
-213.9 (USD -0.20)
331.6 (USD 0.30)
-263.9 (USD -0.24)
12
15 2013-2014 LG Electronics Sustainability Report 14 2013-2014 LG Electronics Sustainability Report
We successfully maintained the second largest global market share in LCD
TVs for five consecutive years since 2009 by aggressively expanding pre-
mium offerings (OLED TVs and Ultra-HD TVs) and engaging in differentiated
marketing programs.
Home Entertainment
Sales, Consolidated
(Unit: KRW billion) 21,152.0
Sales, Consolidated
(Unit: KRW billion) 12,969.7
Sales, Consolidated
(Unit: KRW billion) 11,801.0
Sales, Consolidated
(Unit: KRW billion) 4,642.9
Sales, Consolidated
(Unit: KRW billion) 7,574.8
36.4%
Although we were able to maintain our strong competitive edge in major ap-
pliances (i.e. refrigerator, washing machine) based on greater product capacity
and energy efficiency compared to our competitors, we took a slight hit in
terms of profitability from intensifying price competition and the rise in prices
for some commodities.
Home Appliance
Air Conditioning & Energy Solution
A global leader in technological innovations for consumer electronic products,
mobile communication devices, and home appliances, LG Electronics is organized into
five business divisions: Home Entertainment (HE), Mobile Communications (MC),
Home Appliance (HA), Air Conditioning & Energy Solution (AE), and Vehicle Components (VC).
LG Electronics demonstrates strong product leadership in segments such as TV, mobile handset,
air conditioner, washing machine, and refrigerator (as of July 1, 2014, LG Electronics expanded its
business organizations from four business companies (HE, MC, HA, and AE Company) to five,
establishing the Vehicle Complements (VC) Company).
what we do
Seong Jin Jo
President & CEO/
Home Appliance
Company
LG Electronics strives to become No.1 in creating customer
value and delivering customer satisfaction.
Based on superior innovations, we are leading the market with No. 1 products
that continuously increase customer values. We will continue to work towards
No.1 in customer satisfaction through products that create customer value and
satisfy customer needs.
INTERVIEW
Vehicle Components and Other Affiliates
We are delivering customer value by developing and supplying in-vehicle
infotainment components, and will contribute to improving safety and envi-
ronmental standards for automobiles through engine components and HVAC
systems developed based on our superior motor and compressor technolo-
gies.
13.0%
In order to lead the market in smart technologies and embedded systems
for automobiles, we will continuously discover differentiated values.
We will mobilize group-wide capabilities in electronics, communications, and
proprietary technologies to create products customers need. We will also strive
for unparalleled product quality and safety based on a zero-defect quality sys-
tem to successfully position LG Electronics as the top tier 1 business partner in
the global market for shared growth.
Woo Jong Lee
President & CEO/
Vehicle Components
Company
INTERVIEW
8.0%
We were able to successfully maintain our competitive edge against competi-
tors by introducing products that satisfy local needs, while increasing operat-
ing profits through business structure improvement and profitability manage-
ment.
Hwan Yong Nho
President & CEO/
Air Conditioning
& Energy Solution
Company
We will lead the market by continuously introducing products
that offer high energy efficiency and satisfy local needs.
We will actively respond to local regulations on energy efficiency and take the
initiative in proposing building-level energy saving solutions. As a responsible
member of local economy, we will also contribute to promoting related indus-
tries, creating jobs, and fostering talent in communities in which we operate.
INTERVIEW
We were able to achieve sales growth thanks to the successful introduction
of our new LTE product models, such as the Optimus G Pro and the Optimus
G2, and strong global sales performance. We also made progress with prof-
itability by improving our cost structure through cost management efforts.
Mobile Communications
22.3%
Jong Seok Park
President & CEO/
Mobile Communi-
cations Company
We will discover differentiated customer value in their everyday lives.
We will work hard to maintain and further build up the great momentum
for the existing products to firmly establish LG Electronics as one of the top
three players in the global market. We will also actively carry out our social
responsibilities by introducing products that fully address the needs and pain
points of global customers.
INTERVIEW
Hyun Hwoi Ha
President & CEO/
Home Entertain-
ment Company
We will continue to create values for customers and
change their lives through market-leading products.
Based on LGE’s superior technology and infrastructure, we will make every
effort to create values for customers and make their lives more comfortable.
Our efforts will contribute to LGE’s becoming a changing force in the global
market and achieving Global No. 1.
INTERVIEW
20.3%
17 2013-2014 LG Electronics Sustainability Report 16 2013-2014 LG Electronics Sustainability Report
North America
South & Central America
Europe
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
5
2
7
11,409.4
20
5
7
1
7,852.2
13
4
8
7
1
4,438.9
8
CIS
Korea
China
Asia
Middle East & Africa
India
Global Employees, Breakdown by Country (As of Year-end 2013)
No. of Employees
% of Total Employee
Korea
38,440
47
CIS
2,378
3
Europe
5,183
6
North America
1,792
2
South & Central America
9,309
11
Middle East & Africa
2,045
2
China
11,518
14
Asia
7,335
9
India
4,432
6
82,432
Total Number of
Employees
41
Production
Sites 46
Sales
Subsidiaries 59 R&D Center 15 Other
Global Operations
LG Electronics is a global corporation that services customers worldwide with a vast network of
production, sales, service, and R&D locations and has business operations in more than 200 countries.
With a renewed sense of responsibility as a global corporation, LG Electronics will further strengthen
its efforts towards customer satisfaction and mutual prosperity by implementing
cohesive global strategies and introducing products that satisfy local needs.
where we operate
Production
Sales
R&D Center
Sales (KRW billion)
% in Sales
Production
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
2
15
3
3
6,448.8
11
Production
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
2
1
3
3,852.7
7
Production
Sales
R&D Center
Sales (KRW billion)
% in Sales
2
2
2,018.8
3
Production
R&D Center
Sales (KRW billion)
% in Sales
5
7
2
3,698.2
6
Production
Sales
R&D Center
Sales (KRW billion)
% in Sales
13
3
3
6
3,971.9
7
Production
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
1
8
34
14,449.5
25
HQ
Production
R&D Center
Sales (KRW billion)
% in Sales
Principles for Sustainability & CSR Management
Based on its management principles “Customer-Value Creation” and “People-
Oriented Management,” which have served as the philosophical grounds for sus-
tained growth since its inception, LG Electronics strives for sustainability man-
agement that takes society, the environment, and economy into consideration
in a holistic and balanced manner. In order to actively carry out the ethical and
social responsibilities that our stakeholders expect of us, LG Electronics works
to become a healthy organism in the market ecosystem and assume a proactive
role in making the system healthier with our products and services. Moreover, we
strive to take care of our communities, help those in need become self-reliant,
engage and communicate with a variety of stakeholders throughout this pro-
cess, and form a trust-based relationship with them.
Sustainability & CSR Management System
In order to facilitate sustained value creation and build strong fundamentals, LG
Electronics established the CSR Committee as a subcommittee of the Executive
Management Committee from 2009 (comprised of top executives, including the
CEO) to brief executives on CSR issues and obtain executive decisions on the
issues. In addition, we also report CSR issues (i.e. buyer requests, risk assess-
ment results, social contribution efforts) in management meetings at each busi-
ness company, in which the company president and executives participate, to
raise management awareness on CSR issues and facilitate improvement efforts.
Since 2011, LGElectronics has identifed CSR issues that require corporate-level
improvement efforts and implemented necessary measures on an annual basis.
In 2013, we selected 10 corporate-level tasks—including establishing a confict
minerals response system and enhancing employee volunteer programs—and
engaged in diverse initiatives throughout the year. In 2014, we will offcially
launch the Executive Council for Sustainability Management, comprised of HQ
executives in charge of managing CSR issues (labor, human rights, ethics, envi-
ronment, and supply chain), to strengthen our task execution and to promote
inter-departmental collaboration.
Since 2012, LG Electronics has participated in the LG CSR Committee and
Management Council led by LG Corp. to establish group-level directions for so-
cial contribution and assessing performance, and to improve risk assessment
criteria. Our working-level CSR Staff Council consists of CSR managers from
HQ, business companies, and overseas subsidiaries, and is organized into three
working-level groups that each handle stakeholder requests and external as-
sessment, social contribution, and risk management. The council is entrusted
with formulating specifc action plans and improvement measures for each area
and translating our CSR objectives into actual performance.
Mid- to Long-term Directions
LG Electronics annually selects strategic CSR tasks and focuses its organization-
al capabilities on those tasks throughout the year in order to engage in CSR ac-
tivities that satisfy the expectations of the international community and stake-
holders and contribute to improving our business competitiveness. Although our
efforts have been more focused on establishing a system and framework thus
far, we are now planning to direct our resources and capabilities to implementing
change management and increasing the connection between our CSR efforts
and business activities.
As for risk management, we plan to expand our improvement efforts based on
the EICC standards throughout our supply chain and to make preemptive re-
sponses to emerging issues (e.g. student workers), in an effort to create a sound
and healthy working environment and to facilitate responsible sourcing. In terms
of social contribution, LG Electronics intends to expand cases of CSV (Creating
Shared Value) through social contribution activities that take advantage of our
core capabilities, while also strengthening links with our marketing activities. In
addition, we will enhance the system for collecting opinions of diverse stakehold-
ers and incorporating their feedback into our business operations.
LG Electronics fully understands that training and awareness programs are inte-
gral to incorporating CSR efforts into our business practices. As such, in 2013,
we launched an online training program (in Korean) and included a CSR course
in the curriculum for the Marketing College. In 2013, approximately 5,300 em-
ployees (including new hires) completed the online CSR training programs, and
the English edition was launched in May 2014. We also send out a biweekly CSR
newsletter to all our employees (Korea and overseas) to inform them about lat-
est CSR trends and to raise awareness.
Awards & Recognitions
For the second straight year, LG Electronics was listed in the DJSI World Indices
(Leisure Equipment & Products and Consumer Electronics Industry), announced
in September 2013 as part of the 2013/2014 Dow Jones Sustainability Indices
(DJSI). LG Electronics has been also included in the DJSI Asia-Pacifc (four con-
secutive years) and the DJSI Korea (fve consecutive years). In January 2014, LG
Electronics made the “Global 100: Most Sustainable Corporations in the World”
for the frst time, being ranked 82nd in the list released annually at the World
Economic Forum.
In addition, LG Electronics received the Best Practice Award in MDGs (Millen-
nium Development Goals) at the UNGC Value Awards hosted by the UNGC Korea
Network. The company was also named as the Asia Future Forum’s East Asia 30,
received the Minister of Industry, Trade & Energy Prize at the 2013 Most Loved
Company in Korea Awards, and named one of the 2013 Excellent Businesses in
Children’s Rights.
Awards & Recognitions
1 2 3 4 5
1. Included in the DJSI World 2013
2. Received the 2013 Most Loved Company in Korea Awards
3. Received the 2013 UNGC Value Awards
4. Named Excellent Business in Children’s Rights in 2013
5. Selected as 2013 East Asia 30
CSR Management
Organization of LGE Sustainability/CSR Management
CSR Committee
CSRTeam(Coordinator)
·Set CSR Strategies & Policies
·Establish CSR Operations System
·Manage Corporate-level CSR Improvement Tasks
·Provide Guidance & Monitor HQ/Subsidiary CSR Activities
·Conduct Training for HQ/Subsidiary CSR Staff
Suggestions/
Feedback
Share Activities/
Solicit Opinions
Working-level CSR Staff Council
·Formulate Action Plans for Corporate-level CSR Strategies & Carry Out Improvement Tasks
·Promote Collaborative Network & Share Best Practice Cases
HQ Business Company Overseas Subsidiary
Stakeholder Engagement
1. Expert Opinions
2. Stakeholder Consultation
3. Customer Feedback
· CSR Strategies & Activities,
Suggestions concerning
Stakeholder Engagement
· Sustainability Report
Review & Feedback
Report Approval
Executive Council for Sustainability Management
·Set CSR Directions & Select Agendas for CSR Committee
·Make Executive Decisions on CSR Activities
Board of Directors
Mid- to Long-term Strategic Tasks
2014 2015 2016 2017 2018
CSR Risk
Management
Strategic Social
Contribution
Stakeholder
Engagement
CSR Change
Management
• Include CSR issues in the criteria for regular supplier assessment
• Develop guidelines for the grievance resolution system
• Develop a working hour monitoring system
• Establish & implement a corporate-level business continuity plan
• Develop and implement guidelines for stakeholder engagement
• Strengthen customer engagement fromtheir viewpoint
• Improve the environmental data management systemand disclosure of the data
• Conduct awareness survey on major global stakeholders and monitor their responses
• Operate the Executive Council for Sustainability Management
• Develop and conduct CSR training programs for overseas employees
• Establish CSR training as a mandatory training programfor Korean employees
• Establish the CSR Committee as a subcommittee of the Board of Directors
• Expand cause marketing products and CSR marketing
• Promote employee volunteering and donations
For LG Electronics to earn trust fromstakeholders and achieve sustainable growth, we must:
LGE Principles for
Sustainability & CSR Management
Strive to become
a healthy organism
in the market
ecosystem.
Assume a proactive
role in making the
market ecosystem
healthier throughout
our business activities,
including products
and services.
Take care of our
communities and
help those in need
become self-reliant.
Engage and
communicate
with a variety
of stakeholders
throughout the
process.
19 2013-2014 LG Electronics Sustainability Report 18 2013-2014 LG Electronics Sustainability Report
doc_147929723.pdf
Based on its management principles "Customer-Value Creation" and "People- Oriented Management," which have served as the philosophical grounds for sustained growth since its inception, LG Electronics strives for sustainability management that takes society, the environment, and economy into consideration in a holistic and balanced manner. In order to actively carry out the ethical and social responsibilities that our stakeholders expect of us, LG Electronics works to become a healthy organism in the market ecosystem and assume a proactive role in making the system healthier with our products and services.
3 2013-2014 LG Electronics Sustainability Report
CONTENTS
Overview
Report Overview/Contents
CEO Message
Management Messages
Fair Business Practices
Who We Are
What We Do
Where We Operate
CSR Management
2-3
4-5
6
7-11
12-13
14-15
16-17
18-19
Stakeholder Communication
Stakeholder Engagement & Communication
Stakeholder Consultation on CSR
Materiality Analysis
20-23
24-25
26-27
Key Progress & Performance
Key Progress & Performance 28-29
Appendix
Economic Data
Environmental Data
Social Data
Independent Assurance Statement
Memberships/Awards & Recognitions
GRI/UNGC Index
Past LGE Sustainability Report/
Contributors to Report Preparation
85
86-88
89
90-91
92
93-96
97
Management Philosophy
Corporate Governance
Compliance Risk Management
Jeong-Do Management
Fair Trade
7
8
9
10
11
Disclosure on Management Approach
Customer Communications
Improving Communication
with Customer Service
Developing Products Offering Greater
Accessibility to the Disabled
Securing Product Quality & Safety
Protection of Personal Information
30
31-32
33
34-35
36
36-37
Materiality Report
With Our Customers 30-37
With the Environment 38-55
Disclosure on Management Approach
Products with Greener Features
Product Stewardship
Green Partnership
Environmental Awards and
Accolades in 2013
EESH Management System
GHG Emissions Reduction
Minimizing Environmental Impact
at our Business Sites
Improving EESH at Business Sites
38
39
40-44
45
46-47
48
49-51
52-53
53-55
With Our Suppliers 56-65
Disclosure on Management Approach
Our Principles for Win-Win Growth
Fostering “No. 1” Suppliers
Supplier CSR Risk Management
Confict Minerals
56
57-58
58-59
60-63
64-65
66-73
Disclosure on Management Approach
Social Contribution
Key Social Contribution Programs
66
67
68-73
With the Community
74-83
Disclosure on Management Approach
Global Workforce
Talent Acquisition & Cultivation
Corporate Culture/Work-life Balance
Protection of Labor Rights
74
75
76-77
78-79
80-83
With Our Employees
Overview
In preparing its 2013-2014 Sustainability Report, LG Electronics adopted
the G4 guidelines of the Global Reporting Initiative (GRI). As part of the pro-
cess for implementing the guidelines, we reviewed newly introduced indices
against the previous year’s edition to identify the aspects that are lacking in
our report. In order to incorporate these aspects as much as possible, we had
extensive communication with business departments.
We collected opinions fromour internal and external stakeholders through a
wide range of communication programs, and performed a materiality analy-
sis to identify the information that both LG Electronics and stakeholders
thought to be material. Based on the fndings, we tried to introduce infor-
mation concerning “Material Aspects” as defned by the G4 guidelines. Ex-
ternally, we worked with a third party assurer to review the analysis results
against the aspects perceived as material to industry peers to verify what is
missing from each other’s list (and vice versa), and internally, we reviewed
the results with related business departments to select and introduce the
information that is material and useful both to LG Electronics and our stake-
holders. Articles on material aspects prepared by business departments
were fnalized after a review by management and a third party assurer.
Reporting Principles
The G4 guidelines of the Global Reporting Initiative (GRI), the United Na-
tions Global Compact (UNGC) Index, the Accountability Principles Standard
(AA1000APS), and the Stakeholder Engagement Standard (AA1000SES)
Reporting Scope
This report covers all LGE business sites, both in Korea and overseas, and supplier
sites, including activities and performance in economic, environmental, and social
areas (for the detailed scope of reporting, please refer to notes for each table).
Assurance
Independent Assurance Statement
(Korea Productivity Center) (See pp. 90-91)
Reporting Boundary
Information is organized based on material issues and presented under the “DMA
(Disclosure on Management Approach)” for each section.
Reporting Period
Data from the calendar year 2013, fromJanuary 1 to December 31 (for qualita-
tive measures of performance, some data from the frst half of 2014 was also
included)
REPORT OVERVIEW
LIFE’S GOOD
WITH LG
Everyone at LG Electronics strives to
create the very best value for customers,
ones that bring excitement and
conveniences into their lives. Furthermore,
LG Electronics carries out its responsibilities
as a corporate citizen with great passion,
such as helping those in need to protecting
the environment of the earth, in an
effort to bring greater happiness to
its stakeholders, including customers,
investors, and communities.
The ultimate goal LG Electronics strives
to achieve through its sustainability
management efforts is to help all its
stakeholders achieve sustainable happiness.
Information Sources concerning
LG Electronics’ Sustainability Management Efforts
LG Electronics Website Annual Report
The information contained in this document is intended for international viewing
and may not apply in your jurisdiction. This report also contains some “forward-
looking statements”- that is, statements related to future, not past, events. In
this context, forward-looking statements often address our expected future
business performance and intentions, and often contain words such as “expect,”
“anticipate,” “intend,” “plan,” believe,” “seek,” “see,” or “will.” Forward-looking
statements by their nature address matters that are, to different degrees, un-
certain. These uncertainties may cause our actual future results to be materially
different fromthose expressed in our forward-looking statements in this report.
CSR Team, LG Electronics LG Twin Towers, 128 Yeoui-daero,
Yeongdeungpo-gu, Seoul, Korea
Email : [email protected]
Tel : 82-2-3777-3263
WWW.LG.COM/SUSTAINABILITY
5 2013-2014 LG Electronics Sustainability Report 4 2013-2014 LG Electronics Sustainability Report
To Our Stakeholders
First and foremost, we would like to express our deepest gratitude for your ongoing support and trust in LG Electronics.
With the protracting economic recession and intensifying uncertainties in the business environment, it is becoming
increasingly challenging to achieve “sustainable growth.” It is, however, also true that such challenges provide us with a
great opportunity to identify new growth engines and to prepare for the future.
LG Electronics will build “Sustainable Competitiveness.”
Since the day of our inception, we have always embraced challenges with high spirits. We have never compromised on
our commitment towards delivering differentiated values to customers, and have never wavered from the sense of
responsibility for society, while devoting our organizational resources to developing “sustainable competitiveness” that
only LG Electronics can deliver.
In 2014, we intend to fully focus our efforts and resources on securing competitiveness that enable us to grow
strong against ferce competition to ensure market leadership in our core businesses, while making bold and decisive
movements to expand our market share and our infuence quickly in new businesses.
To remain true to our fundamental promises to customers and society, we will also thoroughly comply with Jeong-Do
Management and the related laws and regulations in creating customer value, both in terms of the process and the
outcome.
Capitalizing on our collective capabilities, LG Electronics will contribute to the global community.
In making social contributions, we will make consistent and committed efforts across the organization to create
differentiated values as we press forward to achieve our primary goal – environmentally friendly development
and production processes. We will work to find specific ways to contribute to the global community with our core
capabilities, such as businesses, technologies, and channels, and implement them effciently.
In particular, we will continue the existing programs designed specifcally to provide real and effective support to those
who are willing to work towards self-sustainability as part of our mission to create a hopeful world for all.
Everyone at LG Electronics will come together as one to repay customers’ trust.
Guided by our management philosophies “Customer-Value Creation” and “Human-Oriented Management,” everyone at
LG Electronics, from management to individual employees, will come together as one in achieving sustainable growth
against tough business conditions and in making meaningful contributions to society.
We sincerely seek your continued support and guidance in our endeavors.
May 2014
Vice Chairman & CEO Bon Joon Koo
CEO MESSAGE
7 2013-2014 LG Electronics Sustainability Report 6 2013-2014 LG Electronics Sustainability Report
As a guiding principle for all LG employees in their thoughts and actions, the
LG Way articulates our belief in attaining the vision of becoming “No.1 LG”
through “Customer-Value Creation” and “People-Oriented Management” as
we base our business practices on the principles of “Jeong-Do Management.”
Management Principles
As a philosophical basis for our business operations, LG Electronics’ Manage-
ment Principles also serve as our guiding principles for sustainable manage-
ment. Everything we do at LG Electronics starts from our aspiration to put a
smile on our customers’ faces and to make their lives more convenient with
our products, and this commitment toward people, society, and new ideas
drive our business activities. These principles will serve as an enduring inspira-
tion for our efforts toward sustainable management for years to come.
1) Customer-Value Creation
“Customer-Value Creation” is the ultimate goal toward which our business
activities strive, attained by putting customers frst and delivering the best
value possible.
2) People-Oriented Management
“People-Oriented Management” expresses our commitment toward creating
an environment where our employees can reach their full potential and utilize
their abilities to the fullest, which is achieved by promoting employee creativ-
ity and autonomy, and implementing a merit-based reward system.
Jeong-Do Management
“Jeong-Do Management” is LG Electronics’ unique guidelines for business
practices born out of our strong conviction that it is possible to compete fairly
and produce results with integrity by continuously strengthening our funda-
mentals. Our management principles are put into action when our employees
practice Jeong-Do Management.
No. 1 LG
The ultimate goal we strive to achieve through Jeong-Do Management, as well
as the management principles behind it, is to become “No.1 LG.” This stands
for our commitment to become a dominant leader in the global market by
securing unrivaled competitiveness and consistently leading the market on a
global level.
MANAGEMENT
MESSAGES
MANAGEMENT
PHILOSOPHY
Vision
Strive to become a respected
market-leading company
Management Principles
The objective of our business activities
and the principle for management
Guidelines for our action upon which we strive to
compete fairly and produce results with integrity by
continuously strengthening our fundamentals Code of Conduct
Jeong-Do
Management
People-Oriented
Management
Customer-Value
Creation
No. 1
LG
Ultimate Goals behind “No. 1 LG”
1. Move beyond the Korean market and triumph in competitions with
global market leaders
2. Secure unrivaled competitive edge, in terms of price and brand power,
to enjoy a dominant market position
3. Establish LG Electronics as a dominant market leader by continuously
expanding and creating markets with No.1 products and services
No. 1 LG
Trusted by
Customers
Coveted by
Talented Professionals
Favored by
Investors
Feared and Respected by
Competitors
LG Way Vision Structure
Based on close collaboration with our suppliers,
LG Electronics will strive to create the most optimal
business operating system in the world.
LG Electronics fully understands that the competitive-
ness of our suppliers directly translates into our own
competitiveness –as our parts producers improve their
competitiveness, so will our fnished products become
more competitive. LG Electronics will continuously work
to eliminate unfair business practices and support our
suppliers in their efforts toward stronger competitive-
ness. Everyone at LG Electronics clearly understands
that striving for shared growth based on win-win part-
nerships is not only the right path toward fulflling our
corporate social responsibility but also an effective
strategy for strengthening our competitiveness. Based
on this recognition, we will strive for transparent and
ethical business practices that take the welfare of the
entire society into consideration as we align our actions
with Jeong-Do Management.
LG Electronics strives for technology that creates
harmony between people, products, and technology.
LG Electronics is hard at work to develop the technolo-
gies required by mankind and provide value to custom-
ers through those technologies. In order to develop
technologies that deliver differentiated value to cus-
tomers, we are shifting the focus of our unique work
style from optimizing each process to optimizing entire
processes as a whole. This means that our approach to
technology development is now more focused on con-
sumer convenience, rather than manufacturing effcien-
cy. Based on our existing strengths in hardware tech-
nology, we will also improve capabilities in software,
including operating systems, to secure technological
competitiveness across the value chain and to achieve
sustainability for both our technologies and businesses.
Jong Sik
Kim
COO (Chief Operating Offcer)/
President
Skott
Ahn
CTO (Chief Technology Offcer)/
President
Wayne
Park
GSMO (Global Sales & Marketing Offcer)/
Executive Vice President
Ho Geon
Hwang
Chief Human Resource Offcer/
Senior Vice President
Choong Hak
Lee
Business Support Offcer/
Senior Vice President
LG Electronics cares for consumer convenience
and the environment, and delivers innovations
to customers.
Our marketing strategy consists of making products
sought by consumers and becoming the frst to mar-
ket the products that deliver convenience to consumers
and are kind to the environment. To this end, we are not
only making efforts into securing manufacturing com-
petitiveness but also working to strengthen our mar-
keting competitiveness through marketing strategies
tailored for each country and region. We will continue
to strive to become a sustainable business through
genuine efforts toward consumer communication and
engagement, as well as through products that offer
high energy effciency and have no negative impact on
the environment.
LG Electronics strives to become home to a group
of talented professionals who embrace
changing business landscape and create new value.
Business success in the year 2014 lies heavily on how
fast we can respond to changes in the business envi-
ronment. Although businesses, during the period of
fast growth for the country, used to seek talent suited
for disciplined and structured operations, corpora-
tions are now seeking talented professionals who pos-
sess so-called “nomadic” traits, such as adaptability
to fast changing environments, affnity for exploring
new things, and a drive for creating value. In order to
attract such talented professionals, LG Electronics is
hard at work to build a diverse workforce, foster local
talent who are integral to our global operations, and
implement HR policy that empowers all our employees
to fully utilize their expertise, thereby ensuring that LG
Electronics continues to create new value for years to
come.
LG Electronics actively engages with diverse
stakeholders.
In an effort to deliver differentiated value to our stake-
holders, LG Electronics actively seeks out opinions from
experts in economic, environmental, and social issues,
and incorporates their feedback into our business op-
erations. In addition, we continuously pursue social con-
tribution initiatives that take advantage of our products
and capabilities, and actively support our employees’
voluntary social contribution activities. Based on the
trust bestowed on us by our stakeholders, LG Electron-
ics will strive to achieve sustainable growth and become
a respected corporate member of the global society.
9 2013-2014 LG Electronics Sustainability Report 8 2013-2014 LG Electronics Sustainability Report
Significance of Compliance
Compliance issues concerning business operations are on the continuous rise,
and stronger regulations and penalties are being implemented to address the
issue. Businesses now could face tens of billions of dollars in fnes, as well as
criminal charges against their employees, for a failure to comply with laws
and regulations, and this further increases the signifcance of compliance risk
management for corporations.
Independent Compliance Risk Management
To increase the effectiveness of our compliance programs and ensure the in-
dependence of the Chief Compliance Offcer, in December 2013, LG Electron-
ics expanded and transferred the Compliance Offce to directly under the CEO,
from its previous position under the Legal Department. We also changed re-
lated business processes to ensure that the Chief Compliance Offcer directly
reports to the Board of Directors or CEO on compliance issues in a timely
manner. In addition, LG Electronics briefs the BOD on its compliance efforts
(compliance and validity assessment results) on an annual basis to help the
BOD carry out effective oversight of the company’s compliance management
performance (annual briefng completed in February 2013).
Strengthening Compliance Awareness of Employees
1. In-Class Training for Organization Leaders
LG Electronics believes that strong compliance awareness of our executives
and middle managers is critical for creating a corporate culture that sup-
ports effective compliance management and promotes a compliance mindset
among our employees. As such, LG Electronics conducts regular compliance
training for newly appointed organization leaders to help them exercise strong
leadership in compliance issues. The training consists of courses on the impor-
tance of compliance, non-compliance cases, and our principles for compliance
issues.
2. Online Compliance Training for Employees
In order to enhance employees’ compliance mindset by sharing information
about regulation changes and company principles, LG Electronics conducts
annual online compliance training for all our business employees across the
world. The training introduces laws and regulations, employee roles and re-
sponsibilities concerning compliance, examples of compliance failure from
other corporations, and the Employee Code of Conduct. In 2013, 97 %of our
business staff (50,832 out of 52,602) completed the training, and signed a
pledge for compliance with laws & regulations and the Code of Conduct to
renew their commitment towards responsible conduct.
CORPORATE
GOVERNANCE
COMPLIANCE
RISK MANAGEMENT
Shareholders
As of year-end 2013, LGElectronics’ total shares issued and outstanding were
180,833,806 (common stock: 163,647,814/preferred stock: 17,185,992).
The number of non-voting shares amounted to 17,949,160 (9.9%) of the
total outstanding. The largest shareholder, LG Corp. (the LG Group’s hold-
ing company) owned 30.5% of the shares. Every year, the Chairman of BOD
personally updates shareholders on our performance at the Annual General
Meeting (AGM) and collects feedback from shareholders on management is-
sues that require decision-making. LG Electronics also maintains a section on
its website to feld investor inquiries as a channel through which we collect
investor feedback on our business performance and present our responses.
Shareholders’ opinions and suggestions are gathered, carefully reviewed by
management and the BOD, and incorporated into corporate policies and busi-
ness operations.
Strengthening Independence of Board of Directors (BOD)
The BOD consists of seven Directors, four of whom are Outside Directors. All
Directors serve a three-year term and at the end of the tenure, their reinstate-
ment is determined based on performance evaluation. Directors perform their
duties independently from any infuence of major shareholders and manage-
ment. In addition, LG Electronics has in place a compliance system to review
business transactions for potential confict of interest and verify BODapproval
status on such transactions. This system was implemented to prevent Direc-
tors from pursuing personal profts for themselves or a third-party through
business opportunities obtained by using their positions as a BOD member
and incurring unforeseen losses to shareholders. If a business transaction has
not obtained a BOD approval, the BOD is briefed on such transactions in ad-
vance for the approval process.
Role of BOD
The BOD actively provides recommendations for important management de-
cisions and conducts unbiased evaluation and supervision of management. In
particular, Outside Directors monitor overall corporate management activities
and keep management in check, while offering concrete and substantial ad-
vice to management. In 2013, the BOD was convened nine times to review a
total of 42 agendas (33 for approval, 9 for reporting), including the approval
for self-dealing by directors. Of the 42 agendas, 41 were approved in its origi-
nal form, and one was approved after revision. The Directors’ attendance rate
for the BODmeetings was on average 97%. At the meeting held in April 2012,
the BOD moved to establish “Corporate Social Responsibility” as an offcial is-
sue to be reported to the BOD to strengthen the BOD’s commitment toward
the issue. In line with the action, the BOD is briefed annually on CSR activities,
including economic, social, and environmental issues identifed through en-
gagement with stakeholders (i.e. Stakeholder Consultation on CSR) and our
Sustainability Report, to facilitate the active engagement of BOD members.
BOD Committees
The BOD is supported by three Board Committees: the Audit Committee, the
Management Committee, and the Outside Director Candidate Recommenda-
tion Committee. The Audit Committee is comprised entirely of three Outside
Directors and is responsible for oversight and monitoring to ensure fair corpo-
rate management as well as accounting transparency and conformance. The
Management Committee reviews and determines the agendas delegated by
the BOD and other ordinary management activities. In 2013, the Manage-
ment Committee reviewed a total of 43 agendas. The Outside Directors Can-
didate Recommendation Committee carefully selects qualifed candidates for
Outside Directors in accordance with Article 542.8 of the Commercial Law of
Korea and recommends them to the AGM for appointment to ensure fairness
and transparency in the nomination of candidates.
Evaluation and Compensation
Compensation for BOD members is made within the regulations pertaining to
BOD compensations and as approved by the AGM. The evaluation of manage-
ment and executives of LG Electronics is performed year round. Top manage-
ment and executives are evaluated on whether they have set and achieved
challenging goals in fnancial, social and environmental areas, whether their
business objectives, comprised of quantitative and non-quantitative factors,
were achieved, as well as their professional capabilities, based on a fair and
objective process. Appropriate compensation is determined and made based
on the outcome of the evaluation.
27
806
15
1,129
No. of Coures No. of Participants
Title/Position/Profle
CEO, Vice Chairman
Representative Director/CFO, President
Vice Chairman,
LG Management Development Institute
Professor, Business Administration, Seoul National University
Chair Professor, Sejong University,
Former Editor-in-chief, Dong-A Ilbo
Lawyer,
Former Deputy Minister of Justice
Professor, Mechanical & Aerospace Engineering, Seoul National University
Date Appointed
March 2014
March 2014
March 2014
March 2013
March 2012
March 2012
March 2013
Note
Management Committee (Chairman)
Management Committee
Chairman of BOD
Outside Director Candidate
Recommendation Committee (Chairman)
Management Committee
Audit Committee (Chairman)
Audit Committee
Outside Director Candidate
Recommendation Committee
Audit Committee
Outside Director Candidate
Recommendation Committee
BOD Status (As of March 31, 2014)
Category
Inside Director
Non-executive
Director
Outside Director
Name
Bon Joon Koo
David Jung
Yu Sig Kang
Chang Woo Lee
Kyu Min Lee
Sang Hee Kim
Chong NamChu
2013 Online Pledge for Compliance
In-Class Compliance Training in 2013
Period
April 14-June 28, 2013
May 27-July 20, 2013
No. of
Targets
30,141
22,461
52,602
Completion Rate (%)
(No. of Completed)
97
(29,231)
96
(21,601)
97
(50,832)
Korea
Overseas
Total
Online Compliance Training in 2013
All LG Electronics employees hereby
pledge to:
1. Put LGE management principles into
action based on our commitment for
delivering the best value to our customers,
employees, and shareholders.
2. Comply with the laws and regulations of all
countries in which we operate.
3. Duly comply with compliance policies and
procedures concerning business activities,
including the “LG Electronics Employee
Code of Conduct.”
4. For compliance issues that present a
dilemma, consult supervisors or related
departments and make appropriate actions
accordingly.
5. Report all cases of non-compliance with
the Code of Conduct and company policies,
confirmed or suspected.
Position-specifc
Training
Leadership
Workshop
11 2013-2014 LG Electronics Sustainability Report 10 2013-2014 LG Electronics Sustainability Report
Strong Commitment toward Jeong-Do Management
Jeong-Do Management is LG Electronics’ unique guidelines for employee con-
duct, and conveys our belief that we can still come out on top and produce
meaningful results by consistently strengthening fundamentals and fairly
competing in the market with integrity. This belief is clearly expressed in the
CEO’s statement: “Our commitment toward Jeong-Do Management and com-
pliance not only is a promise to ourselves, but also a solemn pledge to our
customers and society. Non-compliance, in any circumstance, does not work
in favor of the company.” Based on this strong commitment toward Jeong-
Do Management, LG Electronics requires not only our employees but also our
suppliers to conduct themselves in line with Jeong-Do Management.
Amendments to Code of Ethics
First established in 1994, LG Electronics’ Code of Ethics is comprised of “Code
of Ethics,” “Guidelines for Practice,” and the “Explanation Guidelines for Prac-
tice” that provides principles behind specifc guidelines. The Code of Ethics has
been translated into 14 different languages and distributed worldwide, and
the Handbook was produced in Korean, Chinese, English, Spanish, Polish, and
Arabic, and distributed to all employees to raise awareness on LG Electron-
ics Employees’ Code of Ethics, and to encourage our employees to embrace
Jeong-Do Management. In order to ensure transparency in transactions with
interested parties and to promote fair business conduct of our employees, we
amended the Code of Ethics in January 2014 to strengthen the provisions
pertaining to receipt of cash or valuables from interested parties. Based on the
amendments, all LG Electronics employees are now prohibited from accepting
personal gifts from interested parties regardless of the amount, as well as
from having personal dealings with interested parties.
Jeong-Do Management Pledge and
Voluntary Disclosure of Violations
In 2013, LG Electronics required all its employees at Korea and overseas to
sign and submit a pledge for “Jeong-Do Management” online, and 98.5% of
our employees have completed the process. We also require our suppliers to
do the same on a regular/irregular basis. In particular, LG Electronics requires
suppliers to submit a pledge for Jeong-Do Management as part of the Master
Purchase Agreement, in an effort to ensure that all companies that have busi-
ness transaction with LG Electronics make the pledge.
In order to highlight the importance of compliance with Jeong-Do Manage-
ment and relevant laws & regulations, we encouraged our employees to vol-
untarily disclose any violations. Based on these efforts, LGElectronics continu-
ously works to prevent risks that could potentially cause irreparable damages
to the company.
Whistleblower System
LG Electronics has in place a whistleblower system (ethics.lg.co.kr) to receive
internal and external reports concerning any actions in violation of the Em-
ployee Code of Ethics and Jeong-Do Management, such as accepting gifts
from interested parties, lack of transparency in selecting suppliers, improper
acquisition of the shares of the company’s business partners, illegal/improper
use of company assets, manipulation of documents/fgures, false reporting,
etc. We also have strong measures in place to thoroughly protect the identity
of whistleblowers. In addition, we utilize the Win-Win Growth website to col-
lect anonymous reports concerning unfair and unjust treatment suffered by
our external stakeholders. Over the past three years, a total of 1,375 claims
were reported and handled through the whistleblower system and the Win-
Win Growth website.
Counseling Center
In order to respond to employee inquiries on Jeong-Do Management, LG Elec-
tronics established a counseling center and offers one-on-one counseling on
the everyday practice of Jeong-Do Management. The center receives inquiries
via intranet, phone, and email, and provides counseling on the interpretations
of the Code of Ethics, congratulatory/condolence cash gifts, appropriate pro-
cedures for handling such gifts, and how to deal with business expenses. In-
quirers can choose to disclose the details of their inquiries, but if they decide
otherwise, we also make every effort to protect their identity and the details
of their inquiries. In 2013, a total of 177 inquiries were made to the counsel-
ing center. Frequently discussed topics are also organized into FAQs and used
as training materials both at Korea and overseas.
Global Training and Awareness Promotion on Jeong-Do Management
LG Electronics provides training on Jeong-Do Management to highlight our
belief that “Jeong-Do Management is not an option but an implicit require-
ment for the very survival of the company” and help our employees embrace
the common principles behind this philosophy. In 2013, we conducted in-class
Jeong-Do Management training for 14,923 employees (Korea and overseas)
and 435 suppliers. The training was comprised of internal and external case
studies and guidelines for everyday practice to help our employees and suppli-
ers embrace Jeong-Do Management and make choices that prevent corrup-
tion and irregularities from occurring.
In 2014, we plan to strengthen “train-the-trainer” programs for Jeong-Do
Management instructors based in our overseas subsidiaries, to ensure that
Jeong-Do Management is established as an everyday practice at our overseas
locations.
Fair Trade Compliance Activities
Our Fair Trade Compliance Program is comprised of internal control activities
designed to prevent compliance risks and increase employee awareness about
fair trade. To this end, we have in place a basic enforcement system that is
designed to repeatedly convey our commitment toward fair trade by top ex-
ecutives, constantly monitor against non-compliances, and conduct improve-
ment programs. We also brief top management on our fair trade activities on
an annual basis to promote voluntary employee participation in our efforts
for fair trade.
Fair Trade Activities
In 2013, as part of our anti-collusion efforts, we expanded targets for train-
ing, oversight, and monitoring against cartel activities from sales & marketing
staff to include R&D staff as well. In 2014, we plan to strengthen our ad-hoc
inspections, measure the effectiveness of training, and assess employee com-
pliance with guidelines to reduce risks associated with non-compliances.
In January 2014, LG Electronics was levied a penalty in Korea for unfair trade
practices. As a response measure, we plan to further break down employee
business functions and implement training programs on unfair trade practices
specifc to each business function to raise employee awareness against non-
compliances.
In January 2014, LG Electronics was fned in Korea for unfair labeling and
advertisement practices. As part of our efforts to minimize such compliance
risks, we produced guidelines and internal checklists for related staff members
and established a system to perform a two-step compliance review based on
the guidelines and checklists. Under the new internal control system, staff
members in charge of the project are required to perform an initial screening
against non-compliances, after which related departments conduct a follow-
up review to minimize compliance risks.
In order to prevent non-compliances and unjust treatment toward suppliers
in our transactions with them, we conduct training for related staff members
and perform a review on a regular basis. In 2014, we plan to make particular
efforts to response to the emerging issue of “Misappropriation and Dispos-
session of Technology” and reengineer our business processes to prevent such
practices.
In 2013, LG Electronics was rated “Excellent” in the Fair Trade & Win-Win
Growth Partnership Agreement Observance Assessment conducted by the
Korea Fair Trade Commission and again, recognized for its exemplary commit-
ment to win-win growth and excellent performance in the area.
Mid- to Long-term Direction
Based on ongoing monitoring and improvement efforts, LG Electronics will
continue to strengthen its internal control efforts toward preventing compli-
ance risks associated with fair trade practices. In particular, we will strengthen
our support system to empower business companies and overseas subsidiar-
ies to actively engage in fair trade compliance efforts.
JEONG-DO
MANAGEMENT
FAIR TRADE
2011
2012
2013
452
450
473
Irregularities/Corruptions
Complaints
Other (HR, Supplier Grievances, etc.)
6
73
21
Ongoing Monitoring
of Non-compliances
Business Process
Improvement Efforts
Repeated Conveyance of
Commitment by Management
Employee Training &
Pledge
Establishment of/Compliance
with Action Guidelines Number of Cases Reported (Past Three-Year Data)
LG Electronics Cartel Prevention System
Types of Reports in 2013 (%) Actions Taken in 2013 (%)
Warning
Light Disciplinary Actions
Strong Disciplinary Actions
40
43
17
13 2013 - 2014 LG?? ????????? 2013 - 2014 LG?? ?????????
Since its establishment in 1958, LG Electronics has pioneered the electronics industry in
Korea and made a significant contribution to its ascent into the nation’s signature industry with
world-class competitiveness. Based on our sense of pride and duty as the nation’s leading
corporation, LG Electronics will strive to become a sustainable business that fulfills its
social responsibilities by delivering differentiated value to diverse stakeholders.
Although a slump in global demand from the widespread recession and
intensifying competition created a tough business climate in the year 2013,
we were able to deliver robust year-on-year growth by introducing premium products
aggressively and expanding global sales. In particular, stronger fundamental
competitiveness helped our core products (mobile handsets, washing machines,
and air conditioners) lead the sales growth. We saw, however, a slight erosion in
profitability across our business segments (LCD TVs, Home Appliances, etc.)
except for air conditioners due to intensifying price competition,
rising prices of some commodities, and increases in overall R&D costs.
who we are and
our created & shared value
LG Electronics Overview
(As of December 31, 2013/Consolidated) Flow of Economic Value (Unit: KRW billion/Parent)
· Non-operating Income & Financial Profts: Figures are stated in
accordance with the Korean International Financial Reporting
Standards (K-IFRS).
· Operating Expenses: Sales costs and administrative expenses
· Taxes & Dues: Corporate taxes, public dues, resident tax and
a special tax for rural development
· Capital Costs: Interest payments and dividends
· Past data was revised to refect changes
and additions to fnancial accounting
standards.
2011
28,097.1
-138.5
27,958.6
28,361.0
2,488.5
252.8
25.6
10.8
31,138.7
-3,180.1
2012
25,427.2
-285.8
25,141.4
25,381.0
2,860.6
267.3
26.0
19.4
28,554.3
-3,412.9
2013
28,078.9
-33.3
28,045.6
28,292.8
3,195.7
264.3
30.1
24.3
31,807.2
-3,761.6
Sales
Non-operating Income and Financial Profts
Economic Value Generated
Operating Expenses
Wages and Benefts
Capital Costs
Taxes & Dues
Donations
Economic Value Distributed
Economic Value Retained
Economic Value Generated, Distributed, and Retained (Unit: KRW billion/Parent)
28,078.9
30.1
33,700.0
3,195.7
Interest Payments
227.4
Sales
36.9
Dividends
Taxes & Dues
24.3
Donations
Wages &
Benefts
Purchasing &
Service Expenses
Customer
Shareholders
Creditor
Community
Employee
Supplier
Government
58.1404
Sales
(Unit: KRW trillion)
Operating Income
(Unit: KRW trillion) 1.2847
Total Assets
(Unit: KRW trillion) 35.5281
Total Liabilities
(Unit: KRW trillion) 22.8387
No. of
Shareholders 214,253
No. of
Shares 180,833,806
Credit Rating
AA (Korea)
Baa2 (Moody’s)
BBB- (S&P)
1USD = KRW1,108 (2011)/1,063 (2012)/1,095 (2013)
· Past data was revised to refect changes and additions to fnancial accounting standards. Unit: KRW billion, (USD billion)
Parent Consolidated
Corporate Profile (As of December 31, 2013)
Industry
Main Product
Manufacturing
TV, Home Theater System, BluRay Player, Mobile Handset,
Laptop Computer, Refrigerator, Washing Machine,
Cooking Appliance, Built-in SystemKitchenware, VacuumCleaner,
Health Care Appliance, Air Conditioner, Monitor, Security System,
Commercial Display, etc.
Organization Name
Location of
Headquarters
CEO
Date of Establishment
No. of Employees
LG Electronics, Inc.
LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu,
Seoul, Korea
Bon Joon Koo, , David Jung
October 1, 1958
82,432 (Korea: 38,440/Overseas: 43,992)
2011
2012
2013
Sales
57,739.9 (USD 52.1)
28,097.1 (USD 25.4)
55,122.6 (USD 51.9)
25,427.2 (USD 23.9)
58,140.4 (USD 53.1)
28,078.9 (USD 25.6)
2011
2012
2013
Operating Income
1,216.7 (USD 1.14)
46.2 (USD 0.04)
1,284.7 (USD 1.17)
-213.9 (USD -0.20)
331.6 (USD 0.30)
-263.9 (USD -0.24)
12
15 2013-2014 LG Electronics Sustainability Report 14 2013-2014 LG Electronics Sustainability Report
We successfully maintained the second largest global market share in LCD
TVs for five consecutive years since 2009 by aggressively expanding pre-
mium offerings (OLED TVs and Ultra-HD TVs) and engaging in differentiated
marketing programs.
Home Entertainment
Sales, Consolidated
(Unit: KRW billion) 21,152.0
Sales, Consolidated
(Unit: KRW billion) 12,969.7
Sales, Consolidated
(Unit: KRW billion) 11,801.0
Sales, Consolidated
(Unit: KRW billion) 4,642.9
Sales, Consolidated
(Unit: KRW billion) 7,574.8
36.4%
Although we were able to maintain our strong competitive edge in major ap-
pliances (i.e. refrigerator, washing machine) based on greater product capacity
and energy efficiency compared to our competitors, we took a slight hit in
terms of profitability from intensifying price competition and the rise in prices
for some commodities.
Home Appliance
Air Conditioning & Energy Solution
A global leader in technological innovations for consumer electronic products,
mobile communication devices, and home appliances, LG Electronics is organized into
five business divisions: Home Entertainment (HE), Mobile Communications (MC),
Home Appliance (HA), Air Conditioning & Energy Solution (AE), and Vehicle Components (VC).
LG Electronics demonstrates strong product leadership in segments such as TV, mobile handset,
air conditioner, washing machine, and refrigerator (as of July 1, 2014, LG Electronics expanded its
business organizations from four business companies (HE, MC, HA, and AE Company) to five,
establishing the Vehicle Complements (VC) Company).
what we do
Seong Jin Jo
President & CEO/
Home Appliance
Company
LG Electronics strives to become No.1 in creating customer
value and delivering customer satisfaction.
Based on superior innovations, we are leading the market with No. 1 products
that continuously increase customer values. We will continue to work towards
No.1 in customer satisfaction through products that create customer value and
satisfy customer needs.
INTERVIEW
Vehicle Components and Other Affiliates
We are delivering customer value by developing and supplying in-vehicle
infotainment components, and will contribute to improving safety and envi-
ronmental standards for automobiles through engine components and HVAC
systems developed based on our superior motor and compressor technolo-
gies.
13.0%
In order to lead the market in smart technologies and embedded systems
for automobiles, we will continuously discover differentiated values.
We will mobilize group-wide capabilities in electronics, communications, and
proprietary technologies to create products customers need. We will also strive
for unparalleled product quality and safety based on a zero-defect quality sys-
tem to successfully position LG Electronics as the top tier 1 business partner in
the global market for shared growth.
Woo Jong Lee
President & CEO/
Vehicle Components
Company
INTERVIEW
8.0%
We were able to successfully maintain our competitive edge against competi-
tors by introducing products that satisfy local needs, while increasing operat-
ing profits through business structure improvement and profitability manage-
ment.
Hwan Yong Nho
President & CEO/
Air Conditioning
& Energy Solution
Company
We will lead the market by continuously introducing products
that offer high energy efficiency and satisfy local needs.
We will actively respond to local regulations on energy efficiency and take the
initiative in proposing building-level energy saving solutions. As a responsible
member of local economy, we will also contribute to promoting related indus-
tries, creating jobs, and fostering talent in communities in which we operate.
INTERVIEW
We were able to achieve sales growth thanks to the successful introduction
of our new LTE product models, such as the Optimus G Pro and the Optimus
G2, and strong global sales performance. We also made progress with prof-
itability by improving our cost structure through cost management efforts.
Mobile Communications
22.3%
Jong Seok Park
President & CEO/
Mobile Communi-
cations Company
We will discover differentiated customer value in their everyday lives.
We will work hard to maintain and further build up the great momentum
for the existing products to firmly establish LG Electronics as one of the top
three players in the global market. We will also actively carry out our social
responsibilities by introducing products that fully address the needs and pain
points of global customers.
INTERVIEW
Hyun Hwoi Ha
President & CEO/
Home Entertain-
ment Company
We will continue to create values for customers and
change their lives through market-leading products.
Based on LGE’s superior technology and infrastructure, we will make every
effort to create values for customers and make their lives more comfortable.
Our efforts will contribute to LGE’s becoming a changing force in the global
market and achieving Global No. 1.
INTERVIEW
20.3%
17 2013-2014 LG Electronics Sustainability Report 16 2013-2014 LG Electronics Sustainability Report
North America
South & Central America
Europe
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
5
2
7
11,409.4
20
5
7
1
7,852.2
13
4
8
7
1
4,438.9
8
CIS
Korea
China
Asia
Middle East & Africa
India
Global Employees, Breakdown by Country (As of Year-end 2013)
No. of Employees
% of Total Employee
Korea
38,440
47
CIS
2,378
3
Europe
5,183
6
North America
1,792
2
South & Central America
9,309
11
Middle East & Africa
2,045
2
China
11,518
14
Asia
7,335
9
India
4,432
6
82,432
Total Number of
Employees
41
Production
Sites 46
Sales
Subsidiaries 59 R&D Center 15 Other
Global Operations
LG Electronics is a global corporation that services customers worldwide with a vast network of
production, sales, service, and R&D locations and has business operations in more than 200 countries.
With a renewed sense of responsibility as a global corporation, LG Electronics will further strengthen
its efforts towards customer satisfaction and mutual prosperity by implementing
cohesive global strategies and introducing products that satisfy local needs.
where we operate
Production
Sales
R&D Center
Sales (KRW billion)
% in Sales
Production
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
2
15
3
3
6,448.8
11
Production
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
2
1
3
3,852.7
7
Production
Sales
R&D Center
Sales (KRW billion)
% in Sales
2
2
2,018.8
3
Production
R&D Center
Sales (KRW billion)
% in Sales
5
7
2
3,698.2
6
Production
Sales
R&D Center
Sales (KRW billion)
% in Sales
13
3
3
6
3,971.9
7
Production
Sales
Other
R&D Center
Sales (KRW billion)
% in Sales
1
8
34
14,449.5
25
HQ
Production
R&D Center
Sales (KRW billion)
% in Sales
Principles for Sustainability & CSR Management
Based on its management principles “Customer-Value Creation” and “People-
Oriented Management,” which have served as the philosophical grounds for sus-
tained growth since its inception, LG Electronics strives for sustainability man-
agement that takes society, the environment, and economy into consideration
in a holistic and balanced manner. In order to actively carry out the ethical and
social responsibilities that our stakeholders expect of us, LG Electronics works
to become a healthy organism in the market ecosystem and assume a proactive
role in making the system healthier with our products and services. Moreover, we
strive to take care of our communities, help those in need become self-reliant,
engage and communicate with a variety of stakeholders throughout this pro-
cess, and form a trust-based relationship with them.
Sustainability & CSR Management System
In order to facilitate sustained value creation and build strong fundamentals, LG
Electronics established the CSR Committee as a subcommittee of the Executive
Management Committee from 2009 (comprised of top executives, including the
CEO) to brief executives on CSR issues and obtain executive decisions on the
issues. In addition, we also report CSR issues (i.e. buyer requests, risk assess-
ment results, social contribution efforts) in management meetings at each busi-
ness company, in which the company president and executives participate, to
raise management awareness on CSR issues and facilitate improvement efforts.
Since 2011, LGElectronics has identifed CSR issues that require corporate-level
improvement efforts and implemented necessary measures on an annual basis.
In 2013, we selected 10 corporate-level tasks—including establishing a confict
minerals response system and enhancing employee volunteer programs—and
engaged in diverse initiatives throughout the year. In 2014, we will offcially
launch the Executive Council for Sustainability Management, comprised of HQ
executives in charge of managing CSR issues (labor, human rights, ethics, envi-
ronment, and supply chain), to strengthen our task execution and to promote
inter-departmental collaboration.
Since 2012, LG Electronics has participated in the LG CSR Committee and
Management Council led by LG Corp. to establish group-level directions for so-
cial contribution and assessing performance, and to improve risk assessment
criteria. Our working-level CSR Staff Council consists of CSR managers from
HQ, business companies, and overseas subsidiaries, and is organized into three
working-level groups that each handle stakeholder requests and external as-
sessment, social contribution, and risk management. The council is entrusted
with formulating specifc action plans and improvement measures for each area
and translating our CSR objectives into actual performance.
Mid- to Long-term Directions
LG Electronics annually selects strategic CSR tasks and focuses its organization-
al capabilities on those tasks throughout the year in order to engage in CSR ac-
tivities that satisfy the expectations of the international community and stake-
holders and contribute to improving our business competitiveness. Although our
efforts have been more focused on establishing a system and framework thus
far, we are now planning to direct our resources and capabilities to implementing
change management and increasing the connection between our CSR efforts
and business activities.
As for risk management, we plan to expand our improvement efforts based on
the EICC standards throughout our supply chain and to make preemptive re-
sponses to emerging issues (e.g. student workers), in an effort to create a sound
and healthy working environment and to facilitate responsible sourcing. In terms
of social contribution, LG Electronics intends to expand cases of CSV (Creating
Shared Value) through social contribution activities that take advantage of our
core capabilities, while also strengthening links with our marketing activities. In
addition, we will enhance the system for collecting opinions of diverse stakehold-
ers and incorporating their feedback into our business operations.
LG Electronics fully understands that training and awareness programs are inte-
gral to incorporating CSR efforts into our business practices. As such, in 2013,
we launched an online training program (in Korean) and included a CSR course
in the curriculum for the Marketing College. In 2013, approximately 5,300 em-
ployees (including new hires) completed the online CSR training programs, and
the English edition was launched in May 2014. We also send out a biweekly CSR
newsletter to all our employees (Korea and overseas) to inform them about lat-
est CSR trends and to raise awareness.
Awards & Recognitions
For the second straight year, LG Electronics was listed in the DJSI World Indices
(Leisure Equipment & Products and Consumer Electronics Industry), announced
in September 2013 as part of the 2013/2014 Dow Jones Sustainability Indices
(DJSI). LG Electronics has been also included in the DJSI Asia-Pacifc (four con-
secutive years) and the DJSI Korea (fve consecutive years). In January 2014, LG
Electronics made the “Global 100: Most Sustainable Corporations in the World”
for the frst time, being ranked 82nd in the list released annually at the World
Economic Forum.
In addition, LG Electronics received the Best Practice Award in MDGs (Millen-
nium Development Goals) at the UNGC Value Awards hosted by the UNGC Korea
Network. The company was also named as the Asia Future Forum’s East Asia 30,
received the Minister of Industry, Trade & Energy Prize at the 2013 Most Loved
Company in Korea Awards, and named one of the 2013 Excellent Businesses in
Children’s Rights.
Awards & Recognitions
1 2 3 4 5
1. Included in the DJSI World 2013
2. Received the 2013 Most Loved Company in Korea Awards
3. Received the 2013 UNGC Value Awards
4. Named Excellent Business in Children’s Rights in 2013
5. Selected as 2013 East Asia 30
CSR Management
Organization of LGE Sustainability/CSR Management
CSR Committee
CSRTeam(Coordinator)
·Set CSR Strategies & Policies
·Establish CSR Operations System
·Manage Corporate-level CSR Improvement Tasks
·Provide Guidance & Monitor HQ/Subsidiary CSR Activities
·Conduct Training for HQ/Subsidiary CSR Staff
Suggestions/
Feedback
Share Activities/
Solicit Opinions
Working-level CSR Staff Council
·Formulate Action Plans for Corporate-level CSR Strategies & Carry Out Improvement Tasks
·Promote Collaborative Network & Share Best Practice Cases
HQ Business Company Overseas Subsidiary
Stakeholder Engagement
1. Expert Opinions
2. Stakeholder Consultation
3. Customer Feedback
· CSR Strategies & Activities,
Suggestions concerning
Stakeholder Engagement
· Sustainability Report
Review & Feedback
Report Approval
Executive Council for Sustainability Management
·Set CSR Directions & Select Agendas for CSR Committee
·Make Executive Decisions on CSR Activities
Board of Directors
Mid- to Long-term Strategic Tasks
2014 2015 2016 2017 2018
CSR Risk
Management
Strategic Social
Contribution
Stakeholder
Engagement
CSR Change
Management
• Include CSR issues in the criteria for regular supplier assessment
• Develop guidelines for the grievance resolution system
• Develop a working hour monitoring system
• Establish & implement a corporate-level business continuity plan
• Develop and implement guidelines for stakeholder engagement
• Strengthen customer engagement fromtheir viewpoint
• Improve the environmental data management systemand disclosure of the data
• Conduct awareness survey on major global stakeholders and monitor their responses
• Operate the Executive Council for Sustainability Management
• Develop and conduct CSR training programs for overseas employees
• Establish CSR training as a mandatory training programfor Korean employees
• Establish the CSR Committee as a subcommittee of the Board of Directors
• Expand cause marketing products and CSR marketing
• Promote employee volunteering and donations
For LG Electronics to earn trust fromstakeholders and achieve sustainable growth, we must:
LGE Principles for
Sustainability & CSR Management
Strive to become
a healthy organism
in the market
ecosystem.
Assume a proactive
role in making the
market ecosystem
healthier throughout
our business activities,
including products
and services.
Take care of our
communities and
help those in need
become self-reliant.
Engage and
communicate
with a variety
of stakeholders
throughout the
process.
19 2013-2014 LG Electronics Sustainability Report 18 2013-2014 LG Electronics Sustainability Report
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