Double Materiality Assessment
LX Semicon implements annual materiality assessment to identify key issues related to sustainability issues and transparently communicate with stakeholders. Therefore, we introduced double materiality assessment to identify material issues by considering both the impact of ESG issues related to business activities on the financial condition of the company and the impact of the company’s business activities on the sustainability of the environment and society. In particular, the double materiality assessment factors include severity and likelihood of occurrence of each issue to check the impact on the company and the extent of the impact on LX Semicon's business activities.
Materiality Assessment Process
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STEP 1 Create ESG Issue PoolThe ESG issue pool was composed based on a comprehensive analysis of global ESG disclosure and evaluation standards (GRI Standards 2021, ESRS, TCFD, SASB, DJSI, MSCI, KCGS), global initiatives (UNGC, UN SDGs, WEF-IBC, etc.), and ESG evaluation indicators of domestic and international pension funds. After excluding duplicate issues, 19 issues in four areas were finally selected.
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STEP 2 Conduct Issue Impact Assessment
Double Materiality Assessment
To assess double materiality, we conducted ‘financial materiality (Outside-In)’ and ‘environmental/social materiality (Inside-Out)’ analyses. Financial materiality analyzed the impact of each issue on the financial value of the company, focusing on the likelihood of the magnitude of the financial impact of each issue, and environmental/social materiality analyzed the impact of each issue on the environment and society (human rights) inside and outside the company, focusing on the severity and likelihood of the environmental/social impact of each issue.-
Analyze financial materiality (Outside-In)
Analyze domestic and international ESG disclosure/assessment guidance and initiatives
Analyze the latest global regulatory and ESG policy trends
Analyze ESG management status Analyze LX Semicon's internal status Review ESG reports/resolutions
Peer benchmarking Leading domestic and international companies of the industry
Stakeholder surveys Identify the positive and negative impacts of issues from a financial perspective based on surveys of internal stakeholders
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Analyze environmental and social materiality (Inside-Out)
Analyze domestic and international ESG disclosure/assessment guidance and initiatives
Media analysis
Stakeholder surveys Identify the positive and negative impacts of issues from a social and environmental perspective based on surveys of external stakeholders, such as clients, suppliers, community organizations, NGOs, ESG experts, and government institutions or associations
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Analyze financial materiality (Outside-In)
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STEP 3 Select and Verify Material IssuesBased on the results of the materiality assessment, four issues with significant environmental, social, and financial impacts were selected as material issues out of a total of 19 issues and prioritized through internal and external stakeholder and expert participation. Related information was verified by a third-party organization to ensure credibility and transparency.
Double Materiality Assessment Results
According to the results of assessing the financial and environmental·social impacts of each issue, ‘Responding to Climate Change’, ‘Expanding Human Rights Management’, ‘Sustainable Supply Chain Management’, and ‘Strengthening Occupational Safety and Health’ were selected as LX Semicon’s four material issues. Compared to the previous year, the importance of sustainable supply chain management, climate change response, and strengthening occupational safety and health increased, and expanding human rights management was newly included as a material issue. LX Semicon’s sustainability management activities and performance related to each issue are transparently disclosed throughout the report.
| Changes in priority over a year | Priority | Issues | Impact Materiality | Financial Materiality | ||||||||
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| Environmental-Social Impact (Inside-out) |
Positive / Negative |
Results of Impact Materiality Assessment |
Financial Impact (Outside-in) |
Opportunity / Risk |
Results of Financial Materiality Assessment | |||||||
| Severity | Likelihood | Final Result | Severity | Likelihood | Final Result | |||||||
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1 | Sustainable Supply Chain Management | Proactively responding to potential ESG risks within the value chain through sustainable supply chain management | Positive |
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Positive/Preventing financial losses by identifying and managing potential ESG risks within the value chain | Opportunity |
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3
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2 | Responding to Climate Change | Achieving carbon neutrality and accelerating transition to low-carbon economy | Negative |
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Increase in external demand to manage violation risks and relevant performance in accordance with strengthened regulations on GHG emissions and climate response related disclosures | Risk |
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| New | 3 | Expanding Human Rights Management | Implementing corporate social responsibility by practicing human rights management | Positive |
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Loss of corporate credibility and possible financial penalties for regulatory violations, such as stakeholder human rights abuses | Risk |
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5
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4 | Strengthening Occupational Safety and Health | Poor health and safety management can lead to potential negative impacts in safety and health of employees and other various stakeholders | Negative |
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Avoiding financial losses by preventing potential accidents and regulatory violations due to poor health and safety management | Opportunity |
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| Material Issue | Implication | Implementation Status | Reported Page |
|---|---|---|---|
Sustainable Supply Chain Management
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Stable partnerships with suppliers are crucial for a company's growth and global competitiveness. Therefore, the need to manage ESG risks in the value chain through proactive supply chain ESG management is increasing, and the obligations of such management are expanding under international laws and regulations. |
Establishment of LX Semicon supply chain ESG management policy and Supplier Code of Conduct Operation of policy-based management process for conflict minerals Enforcement of supplier financial and non-financial risk management Implementation of supplier ESG assessments and on-site due diligence (pilot) |
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Responding to Climate Change
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To fulfill the 1.5°C agreement of the Paris Climate Agreement, social responsibility is required for companies that are responsible for carbon emissions and reduction. Additionally, global countries are striving to declare and achieve the 2050 carbon neutrality goal in response to the global climate crisis. Institutional efforts based on regulations such as carbon taxes and carbon credits are underway, and the semiconductor industry also needs to take an active role in this response. |
Creation of a 2050 net-zero roadmap and implementation plan Participation in the K-RE100 initiative Introduction of a solar self-generation facility at the Daejeon campus Eco-friendly activities (the introduction of EVs for corporate fleet and the establishment of charging stations, employee awareness campaigns, replacement of LED lighting, establishment of a centralized control system for air conditioning and heating, and participation in the DR market etc.) Identification of climate change risks and opportunities |
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Expanding Human Rights Management
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In recent years, institutional and social demands for corporate human rights management have been increasing, exemplified by the active discussion of the Basic Act on Human Rights Policy. The importance of systematic human rights management is growing alongside efforts to protect the human rights of employees and various stakeholders throughout the supply chain. In response, leading companies are implementing systematic human rights impact assessments and human rights risk identification and management, including with their suppliers. |
Establishment of human rights management policies based on international standards and guidelines related to human rights and labor Conducting a human rights management diagnosis to upgrade the human rights management system Operation of multiple human rights grievance handling channels |
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Strengthening Occupational Safety and Health
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There is a growing social demand for companies to strengthen their safety management and disaster prevention efforts in the workplace. In Korea, companies are required to fulfill their obligations related to occupational safety and health through the enforcement of the Serious Accident Punishment Act and the announcement of the Comprehensive Plan for Industrial Safety and Health Supervision. This includes self-diagnosis and improvement of risk factors based on the establishment of an occupational safety and health system. Furthermore, it requires to prevent potential industrial accidents and establish a regular monitoring system. |
Establishment of a “Safety Environment Team” for systematic safety and health management Achievement of ISO 45001 (Health and Safety Management System) certification and establishment of a safety and health policy based on relevant standards Conducting a safety and health culture campaign to instill safety and health activities in employees Operation of an employee health care program Identification of safety and health risks (workplace risk assessment and lab safety audits) Operation of regular supplier safety and health meetings |
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