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Double Materiality Assessment
Double Materiality Assessment
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Double Materiality Assessment

LX Semicon implements an annual materiality assessment to identify key 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 on the company’s financial condition and the impact of the company’s business activities on environmental and social sustainability. 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. The final material issues derived from this process are not limited to internal matters within the company. Instead, they are structured to enable analysis across the entire value chain - from upstream to downstream - including the company’s own operations. By doing so, the company aims to further enhance the effectiveness of ESG management and reinforce its strategic responsiveness.

  • STEP 1 Formulate Initial Issue Pool and Derive Short-List
    The ESG issue pool (long-list) 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. Subsequently, duplicate items were removed, and global disclosure frameworks, evaluation metrics, key initiatives, investor expectations, and material issues identified in peer industries were reflected to capture overall ESG trends. During this process, the structure and topic classifications of the ESRS were also taken into account to refine the indicators and adjust issue definitions. As a result, LX Semicon derived a final short-list of ESG issues across the environmental, social, and governance domains, optimized for use in the preparation of its sustainability report.
  • STEP 2 Identify Impacts, Risks, and Opportunities
    For each material issue identified in the short-list, LX Semicon assessed the corresponding impacts, risks, and opportunities. The company conducted a preliminary diagnosis of the nature and degree of influence each issue has on the business through internal data review and cross-analysis. This assessment included an evaluation of factors such as positive vs. negative impact, actual vs. potential occurrences, time frame (short-term vs. mid-to-long-term), and whether the issue represents a risk or an opportunity. In particular, for identifying whether impacts were positive or negative, and actual or potential, LX Semicon referenced ESG evaluation results provided by external customers regarding their suppliers. This allowed the company to incorporate a more objective and quantitative perspective into the analysis.
    • Positive / Negative

      Definition: Identification of positive or negative impacts based on the company’s response in the previous year

      Basis: Qualitative analysis of LX Semicon’s exposure to the impact, referencing the nature of the issue (Impact) and considering the company’s response during the previous year

    • Time Frame

      Definition: The expected timing of future impact occurrence or the duration over which the actual impact response is sustained (Short-term: 1–3 years / Mid-term: 1–5 years / Long-term: beyond 5 years)

      Basis: Qualitative assessment of temporal impact based on IRO (Impact–Risk–Opportunity) analysis conducted by headquarters

    • Actual / Potential

      Definition: Actual (already confirmed impacts); Potential (expected future impacts)

      Basis: Issues are analyzed based on their perceived impact across six stakeholder groups. If a high level of stakeholder impact is identified, the issue is classified as Actual

    • Risk / Opportunity

      Definition: Identification of risks and opportunities associated with each issue for LX Semicon

      Basis: The risk and opportunity impact of each issue was analyzed across six stakeholder groups. Issues with high measured impact were recorded accordingly as either a risk or an opportunity

  • STEP 3 Conduct Materiality Assessment
    LX Semicon conducted an impact assessment of the material issues included in the short-list based on analyses of impacts, risks, and opportunities. For each issue, the identified impact, risk, and opportunity were quantified in terms of severity and likelihood of occurrence. Using this data, the materiality of each issue was numerically evaluated and prioritized accordingly. This analysis will serve as a foundational reference for establishing and executing LX Semicon’s sustainability strategy.
    • Assessment of Financial Impact

      ESG Indicator Analysis (SASB, MSCI), Stakeholder Surveys, Benchmarking of Peer Industries, Current ESG Management Status, Regulatory and Policy Trend Analysis Related to ESG

    • Assessment of Social and Environmental Impact

      Analysis of ESG Indicators (GRI, ESRS, UNGC, ISO 26000, UN SDGs, KCGS, WEF, K-ESG, RBA), Stakeholder Surveys and ESG Evaluation Results from Partner Companies, Media Analysis

  • STEP 4 Derive Material Issues
    LX Semicon conducted a double materiality assessment on the short-listed issues by comprehensively analyzing both their social and environmental impacts and financial impacts. The results of this assessment were reviewed and discussed with relevant departments, and based on this process, key material issues were selected. For each selected material issue, LX Semicon strengthens its response framework and discloses corresponding management measures in its Sustainability Report.

Double Materiality Assessment Results

LX Semicon conducted a double materiality assessment by comprehensively analyzing both the social and environmental impacts and the financial impacts of each issue. Based on the results, and following review and consultation with relevant departments, LX Semicon finalized the selection of its material issues as outlined below.

Cate
gory		 Issue Social-Environmental Impact Financial Impact Double Materiality Results
Inside-out (Social-Environmental Impact) Impact
Score		 Outside-in (Financial Impact) Impact
Score		 Final
Score*		 Changes
Compared
to Previous
Year's
Material
Issues
Environ
ment		 Environmen
tal Management Strategy		 Environmental pollution and resource consumption arising during product manufacturing and use were identified as key impact factors. Accordingly, LX Semicon is securing sustainability through environmental certifications and gaining trust from customers and investors. The company is also responding to stakeholder expectations through transparent environmental disclosures and strengthened governance.
If environmental management is insufficient, there is a risk of losing trust from global clients and weakening partnerships. In addition, violations of environmental regulations may lead to legal risks, reputational damage, and reduced competitiveness in key markets. Conversely, actively obtaining environmental certifications can enhance market credibility and create opportunities for long-term contracts.
New
Social Talent Management and Capability Development Talent development and management are viewed as key opportunity factors for technological innovation and competitiveness. LX Semicon is fostering a positive organizational culture through fair recruitment and compensation practices, thereby supporting the long-term qualitative enhancement of human capital.
Continuous outflow of core talent may pose a financial threat by weakening technological competitiveness and decreasing market share. It may also negatively affect corporate reputation and hinder long-term workforce stability. Conversely, strategic investment in human capital could drive growth and innovation in the semiconductor industry.
New
Strengthen
ing Occupational Health and Safety		 Creating a healthy and safe working environment is recognized as a key factor in ensuring operational stability and employee satisfaction. The company improves stakeholder trust by protecting worker health, preventing accidents, and complying with relevant regulations.
Accidents in industrial settings can result in financial losses from legal disputes and penalties, along with operational disruptions and reputational harm. On the other hand, proactive safety systems improve employee satisfaction, help retain talent, and enhance the company’s ESG leadership and reputation.
Maintained
Enhancing Information Security Information leakage is identified as a serious risk that could undermine corporate credibility and business continuity. To mitigate this, the company is strengthening its information security systems to ensure long-term operational stability.
Data breaches involving customer information represent a critical risk to trust and can lead to reputational damage, legal sanctions, and fines. However, by adopting advanced security technologies and enhancing information protection practices, LX Semicon can boost competitiveness and secure customer trust.
New

  • *

    Final Score: Sum of the total score for “Social and Environmental Impact” and the total score for “Financial Impact”.

Material Issue Management Measures

Based on the results of the double materiality assessment, LX Semicon identified four top-priority issues as material issues. The company analyzed their business impacts from a sustainability perspective and outlined corresponding response activities, which are disclosed in this report. Going forward, LX Semicon will continue to proactively identify and respond to timely material issues while communicating both the process and outcomes transparently with stakeholders.

Issue Impacts Risks Opportunities Response
Activities
Environmen
tal Management Strategy

Environmental pollution and resource consumption during production and use can have both positive and negative social impacts.

The company secures sustainability through environmental certifications (e.g., ISO 14001), meets stakeholder expectations through enhanced governance and transparent environmental disclosures, and gains trust from customers and investors.

Lack of an environmental management strategy could lead to loss of trust from global clients and weakened partnerships

Insufficient certifications and disclosures may result in legal risks and reputational damage

Failure to build a sustainable environmental management system may weaken competitiveness in key markets.

Strengthening sustainable competitiveness through structured environmental strategies.

Enhancing market credibility and securing long-term contracts through environmental certifications.

Improving transparency for customers and investors through enhanced environmental disclosures.
Talent Management and Capability Development

Employee development contributes to technological innovation and competitiveness.

A positive organizational culture is fostered through fair recruitment and compensation, and human capital investments support ESG evaluations.

Continued loss of core talent can reduce competitiveness and market share.

Lack of diversity and unfair systems can lead to dissatisfaction, turnover, and reputational harm

Inadequate talent development may weaken innovation and competitiveness in the long term.

Strengthening competitiveness by addressing workforce shortages in the semiconductor industry.

Enhancing sustainability through ESG-aligned investment in human capital.

Gaining leadership in growth and innovation in advanced semiconductor design.
Strengthen
ing Occupational Health and Safety

A safe and healthy working environment increases employee satisfaction and operational stability, while reducing the risk of industrial accidents.

Strengthened safety policies protect employee well-being and build trust through regulatory compliance and accident prevention.

Industrial accidents can lead to lawsuits, fines, operational disruptions, and reputational damage.

Frequent incidents may cause staff turnover and lower organizational trust.

Lack of safety education and legal violations could result in sanctions and public criticism.

Building proactive safety management systems improves satisfaction and talent retention.

Safety certifications and performance disclosures can enhance ESG leadership and reputation.
Enhancing Information Security

Preventing data breaches preserves trust and supports business continuity.

Security education for employees enhances overall protection of digital assets.

Customer data leaks due to cyberattacks can lead to reputational harm, legal actions, and fines.

Breach of confidential information may result in contract cancellations and financial losses.

Failure to comply with international regulations may lead to business restrictions and loss of trust globally.

Enhancing data protection and trust by adopting advanced security technologies.

Gaining competitiveness through certification and advanced information protection systems.