SK bioscience ESG - Action on Climate Change

Governance

The Management and Supervision of the Board of Directors

SK bioscience’s key decision-making bodies, namely the Board of Directors and the ESG Committee, are responsible for issues concerning climate change response strategies and activities. The Board of Directors holds the responsibility for managing and supervising all ESG management factors, including climate change. On the other hand, the ESG Committee evaluates risks and opportunities, assesses ESG management performance, and monitors and reports the implementation progress of climate change responses to the Board. Furthermore, the Board of Directors secures climate change leadership by integrating ESG performance into the CEO’s key performance indicators(KPIs) and compensation system.

The Role of Executives

At SK bioscience, the ESG Team within the Strategic Planning Office under the CEO has established and operates a company-wide strategy to respond to climate change. Apart from overseeing the climate change response management strategy, the Strategic Planning Office makes crucial decisions regarding greenhouse gas reduction measures and investment activities. Additionally, it regularly monitors the activities of relevant departments such as their related strategies and risk management.

Climate Change Response System

Strategy

Net Zero Operation ? Short-to-mid-term Strategy to Achieve Net Zero at Business Sites

SK bioscience has set a GHG Net Zero goal and developed a roadmap in alignment with the Science Based Targets initiative(SBTi). In addition, we have identified GHG emissions by major sources at our business sites through voluntary GHG verification since 2021 and have established strategies for fuel switching and RE100 adoption to refine our Net Zero goal. At the same time, we have analyzed the economic feasibility of Net Zero costs to enhance the implementation of our strategies.

Net Zero in Value Chain ? Long-term Strategy to Respond to Climate Change

SK bioscience has completed the calculation of Scope 3 emissions for 2022 in order to plan reduction activities throughout the entire value chain. We plan to respond in stages by identifying the amount of GHG emissions in major categories. To achieve Scope 3 Net Zero, we will implement a gradual reduction strategy, starting with the conversion of internal and external vehicles to electric vehicles in the short term. Additionally, we will collect product LCA data and the emissions database of upstream and downstream transportation vehicles.

Business Site Net Zero Roadmap

사업장 Net Zero Roadmap 자세한 내용은 아래에서 참고해주세요

Risk Management

Climate Change Risk Management System

To manage climate change risks that have a direct or indirect impact on both financial and non-financial performance, SK bioscience conducts evaluations of potential climate-related risks. These evaluations take into account the timeframe(short, medium, and long-term), financial implications, and severity of the risks. The ESG Team collaborates with relevant departments to identify and assess climate-related issues, and subsequently reports them to the management. The management incorporates the identified risks and opportunities, along with their actual and potential impact, into their decision-making processes. The risk management system reflects domestic and international climate change policy objectives, Net Zero goals, achievements, and the level of exposure to climate risks. The key findings are then reported to both the ESG Committee and the Board of Directors. Our ESG Committee is systematically monitoring climate change risks and opportunities, but moving forward, we plan to internalize climate change risk management into our Enterprise Risk Management(ERM) system, which integrates business risks for effective supervision. Accordingly, we will minimize negative risks from climate change by identifying potential impacts on the entire company in the event of severe climate change risks and proposing countermeasures.

Climate Change Risk Management Framework

1. Identifying Climate related Risks
- Report to the Board of Directors regarding the business and operations that involve climate risk through ESG committees
- The relevant departments and the ESG Team identify climate risks and provide reports to the Board of Directors for consideration when launching new businesses and making future investments
2. Evaluating Climate related Risks
- The ESG Team: Evaluating investment and business risks in consideration of the criteria for climate-related risks(scale, operation, capability, willingness to mitigate risks, etc.)
- The range of evaluation can be adjusted based on the characteristics of the biotech sector, operation, transaction characteristics, and scale, The evaluation result determines the metrics
3. Risk Management Activity
- The ESG Team: Reporting on risk exposure levels, metrics, and level of target achievement
- Implementing policies to manage risks by business area, collecting and analyzing data, including GHG emissions
- Disclosing climate-related risks audit conducting verification of the accuracy, clarity, comparability, and timeliness of the information
4. Result Reporting
- Investment and business projects with high climate risks should be approved by the CEO and involve consultation with external experts, Employees regularly review and work towards improving the management practices with project managers, aiming to transition towards a sustainable business
- Reducing manageable risk exposures of climate-related metrics, determining targets that can be improved

Identifying Climate Change Issues based on TCFD recommendations

In line with the TCFD’s recommendations, SK bioscience has identified risks and opportunities that affect the sustainability of its business and its future response to climate change. At the policy level, the strengthening of carbon emission regulations and the introduction of carbon pricing act as drivers to accelerate corporate carbon reduction efforts. Additionally, the trend of mandating non-financial performance disclosure is promoting transparent reporting of carbon reduction performance. In the market, growing demand for environmentally friendly products and services is driving a premium for low- and zero-carbon products. From a reputation perspective, we anticipate that an organization’s brand image will soon be influenced by its climate change response performance, highlighting the importance of relevant R&D and technological capabilities. We also expect that extreme weather events will impact business operations and assets.

Climate Change Factors

Climate Change Risks and Opportunities

Climate change brings about various risks and opportunities that can directly or indirectly impact our financial and non-financial performance. Recognizing the significance of climate change on our business, SK bioscience has categorized these risks into transition risks and physical risks, and conducted risk and opportunity assessments. Building upon the evaluation outcomes, we plan to consistently manage the impacts of climate change.

Transition Risks

정책/법률, 시장, 평판, 기술의 기후변화 이슈, 리스크, 기회 요인, Our Approach을 나타낸표
Risk Type	Climate Change Issues	Risks	Opportunities	Our Approach
Policy/Law	Introduction of carbon tax/Regulations on carbon emissions	Introduction of policy-based carbon pricing & Increased carbon price burden	-	Establish & implement plans for achieving Net Zero goals, and disclose results
Policy/Law	Increasing trend of disclosing climate change action status	-	Increased sustainability of global collaborations as EU, U.S., and global organizations mandate disclosure of climate change actions	Strengthen responses to global initiatives to secure external trust
Market	Growing global needs for sustainable life sciences	Failure to adequately respond to the rise and spread of global infectious diseases and illnesses undermines corporate value Increased need to respond to post-pandemic trends regarding vaccine self-sufficiency and strengthening biosecurity	Strengthen the presence as a vaccine maker by taking a leading role in climate change actions Contribute to preventing the spread of disease caused by climate change	Set a Net Zero goal and unveil an implementation strategy Strengthen vaccine supply to developing countries Increase R&D, production, and supply of products related to diseases and infectious diseases
Market	Increasing possibility of receiving negative feedback from stakeholders and rising social costs	Stakeholder demand for a stronger response to climate change and the resulting increase in social costs	-	Set Net Zero goals
Reputation	Increasing trend of disclosing climate change action status	Failure to meet the climate change response requirements of global companies reduces opportunities to engage in C(D)MO	-	Disclose progress status and strategies and strengthen external communications
Reputation	Stakeholders’ perceptions of climate change response performance and communication	Delayed action on climate change damages brand credibility	Strengthen branding based on Public Commitments, including climate change action	Monitor and manage climate change action performance and encourage partners Strengthen external communications on infectious diseases response status
Technology	Increased demand for technologies that reduce environmental impacts and rising cost for low-carbon transition	Increased environmental burden from waste and single-use packaging materials Pollution of aquatic ecosystems during manufacturing, including organic solvents and pharmaceutical spills. Delays in research or decreased opportunities for research collaboration with joint research institutions(Sanofi, IVI)	-	Simplify packaging, upcycle, replace with recycled materials, etc. Establish a low-carbon product R&D plan

Physical Risks

급성, 만성의 기후변화 이슈, 리스크, Our Approach을 나타낸표
Risk Type	Climate Change Issues	Risks	Our Approach
Acute	Heat wave	Increased incidence of infectious diseases and heat-related illnesses due to rising temperatures Increased power usage and costs in production facilities and offices due to rising temperatures and heat waves	Review potential risks of infectious diseases and heat-related illnesses and enhance response measures Monitor and manage power consumption Identify and implement improvement plans
	Wildfire	Increased risk of damages to workplace facilities, structures, lives, and property by wildfires	Establish and implement a workplace safety and health management policy Establish a dedicated safety and health division Conduct regular facility inspections and assessments Evaluate and improve disaster prevention measures Set goals and measure performance for maintaining a safe environment
	Typhoon	Possible loss of workplace facilities and structures due to strong winds Potential for personal injuries and property damage caused by strong wind-induced facility loss
	Torrential downpour	Risks of river flooding, external water reflux, and flooding in low-lying areas due to torrential downpour
Chronic	Increased extreme weather events	Spread of vector-borne infectious diseases due to changes in the habitat of insects, rodents, etc.	Review the potential risks for emerging infectious diseases and zoonoses Strengthen proactive response to infectious diseases
Chronic	Increased average temperatures	Increased investment costs due to expanded power and cooling capacity of production facilities and offices	Replace power-intensive facilities and promote operational efficiency Promote workplace energy efficiency (eco-friendly building design, certification, etc.)

Indicators and Goals

GHG Emissions and Net Zero Objective Response

SK bioscience aims to reduce greenhouse gas emissions by expanding the use of renewable energy through Power Purchase Agreement(PPA). By gradually reducing GHG emissions at its business sites, such as through the staged conversion of LNG fuel to hydrogen for the Andong L HOUSE multitube-through boiler, SK bioscience plans to achieve its Net Zero goal by 2031.

Net Zero Goal Response

2022~2031년까지의 LNG 보일러 연료 비중, 수소 연료비중, 재생에너지 전환률, Scope 1&2 감축률 목표
	Unit	2022	2023	2024	2025	2026	2027	2028	2029	2030	2031	Goal	Target Year
Percentage of LNG Boiler Fuel	%	100	100	100	100	90	90	90	90	50	0	0%	2031
Percentage of Hydrogen Fuel	%	0	0	0	0	20	20	30	30	50	100	100% achievement	2031
Renewable Energy Coversion Rate	%	38	58	100	100	100	100	100	100	100	100	100% achievement	2024
Scope 1&2 Reduction Rate	%	29	42	73	73	76	76	76	76	87	100	100% achievement	2031

사업장 온실가스 감축, Scope 3 온실가스 감축의 목표를 나타낸표
	Item	Goal	Target Year
Business Site GHG Reduction	Renewable Energy Usage	27,594 MWh	2024
Business Site GHG Reduction	Renewable Energy Usage Ratio	100%	2024
Scope 3 GHG Reduction	Scope 3 GHG Emissions	11,030tCO₂eq	2050

2023년까지 에너지 총사용량 목표
Energy Usage		Unit	2020	2021	2022 Goal	2022	2023 Goal
Total Energy Usage	Total Consumption	TJ	311.9	347.5	332.9	383.7	395.2

Scope 3 Calculation Results and Management Plan

SK bioscience calculates and continuously manages its Scope 3 GHG emissions in order to reduce greenhouse gas emissions not only from its own business sites but also throughout the entire value chain. To calculate our Scope 3 GHG emissions, we have selected the main categories and methodologies necessary for the calculation. We have identified and collected data such as the cost and quantity of raw materials purchased, fuel usage, and emission factors. Moving forward, we will continuously manage our Scope 3 GHG emissions by improving the template and methodology for data collection and analysis. The majority of SK bioscience’s Scope 3 GHG emissions come from categories(purchased products and services) and 3(energy). Therefore, to reduce GHG emissions in both categories simultaneously, we will continue to work with key stakeholders to reduce our value chain GHG emissions, including intensively managing our partners.

Scope 3 Emission Status

배출량, 비율을 나타낸 표
	Category	Emissions(tCO2eq)	Ratio(%)(%)
1	Purchased Products & Services	77,271.60	69
2	Capital Goods	10,361.92	9
3	Energy	14,618.68	13
4	Upstream Transportation	3,008.96	3
5	Waste	746.79	1
6	Business Trip	445.22	-
7	Commute	821.65	1
8	Lease In	-	-
9	Downstream Transportation	-	-
10	Processing	-	-
11	Product Use	4,739.89	4
12	Product Disposal	366.10	-
13	Lease Out	-	-
14	Franchise	-	-
15	Investment	-	-
	Total	112,380.81	100

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Action on Climate Change