SK Innovation announced its “Financial Story,” a strategy to completely change the corporate identity “from carbon to green” today. 

SK Innovation made this announcement at the “SK Innovation Story Day” held at the Conrad Hotel in Yeouido, Seoul, South Korea on July 2. The event was attended by all the executives of SK Innovation including CEO & President Kim Jun, Chairman of SK Innovation’s Board of Directors Kim Jong-hoon, and more than 200 domestic and foreign market participants and media officials online and offline. 

This year’s “SK Innovation Story Day” is the third event to present to the market a specific plan for completing innovation following the announcement of innovation direction in 2017 and the innovation execution strategy in 2019. Based on its ability to win orders for “1 terawatt +α” in the battery business, a core business in the global eco-friendly industry, the company has a strategy to choose green business as a new growth axis.

 

<> 'Carbon to Green,' a complete shift in the central axis of business

The key highlight of the Financial Story unveiled by SK Innovation can be summarized as “Carbon to Green Strategy.” This means that the company plans to move from carbon business to green business. 

SK Innovation had previously announced its new identity as “green energy & materials company” in its New Year’s management policy earlier this year and the announcement on the Story Day has unveiled detailed completion strategies. 

The key strategies presented by CEO & President Kim and SK Innovation’s management on this day are summarized into three major areas: ❶ “Green Anchoring”: Reinforcing a green business such as batteries, battery separators and battery metal recycle ❷ “Green Transformation”: Transformation to a circular economy such as 100% recycling of waste plastics ❸ Early achievement of “Net-zero” greenhouse gas emissions.
 

<> Aiming to become global No. 1 with '1 terawatt +α' battery backorder and separator business

At the briefing session, SK Innovation officially announced for the first time that its current battery order backlog is “1 Terawatt + α.” It is known that there are two companies have won orders for more than a terawatt level in the battery industry. However, with the SK Innovation’s announcement today, a total of three companies including SK Innovation are now having “1 Terawatt + α” battery order backlogs. Therefore, SK Innovation is now able to raise its goal to global top from global top 3 battery manufacturer. 

1 Terawatt is about 17 times larger than 60GWh in May 2017 when the battery business was presented as the direction for innovation. When converted into monetary terms, it is close to 130 trillion won. The company explained that the order balance will significantly increase when the ongoing projects are finalized. 

Jee Dong-Seob, President of SK Innovation’s Battery Business, mentioned that the company will become the world’s No. 3 in terms of monthly sales by the end of 2022 as well as in order backlogs. In other words, it will become a global top 3 in terms of orders and sales.

SK Innovation will also significantly increase its production scale. President Jee said, “From the current 40GWh level, it is expected to reach 85GWh in 2023, 200GWh in 2025 and more than 500GWh in 2030, and in terms of EBITDA, after marking a turnaround this year, we will be able to generate 1 trillion won in 2023 and 2.5 trillion won in 2025. 

In addition, with the success of being listed the lithium-ion battery separator (LiBS) business, which is also SK Innovation’s subsidiary, SK Innovation will increase the production scale from the current 1.4 billion square meters to 2.1 billion square meters in 2023 and expand to 4 billion square meters, which is about the three times the current production size to become the world’s No. 1 battery maker.

For the waste battery recycling business, the Battery Metal Recycling (BMR) project has developed a lithium recovery technology based on accumulated refinery technologies and applied 54 patents related with the technology, under the slogan of “picking batteries out of batteries.” It is a groundbreaking project that can reduce carbon generated from lithium mining by 40 to 70% using the new technology. 

SK Innovation plans to start trial production sometime in 2022 and its goal is to operate a plant for commercial production at home and abroad in 2024. The company is expected to recycle 30GWh of batteries in 2025 and generate an EBITDA of about 300 billion won in the battery recycling business. 

In addition to electric vehicles, SK Innovation has also decided to expand its business areas to Energy Storage System (ESS), flying cars, and robots, while also intensively developing new businesses based on battery business. That includes a BaaS (Battery as a Service) platform for efficient management of the life cycle of batteries.
 

<> Moving toward circular economy by recycling plastic wastes 100% and pursuing eco-friendly production

CEO & President Kim Jun said, “The ultimate goal of SK Innovation’s green strategy is to leave no trace of fossil fuel use (“No Footprint Left Behind”) and we will recycle 100% of plastic we produce domestically in order to build a circular economy model.” 

Accordingly, SK Global Chemical, SK Innovation’s subsidiary for chemical business, has decided to introduce a business model of “Urban Oil Field” that seeks to produce oil from waste plastic. Making plastic with raw materials from waste plastic, it plans to completely transform itself into a so-called chemical recycling company. 

 

“Plastic is eco-friendly in the production process compared to glass and steel, but the problem is that the recycling rate is low,” said Na Kyung-soo, CEO of SK Global Chemical. He added that “We will view the plastic issue as a growth opportunity rather than a crisis, and become a recycling and eco-friendly material company.” 

CEO Na also said, “Based on our own technologies and capabilities secured through global M&As, we aim to recycle 100% of plastics produced at home and abroad, or more than 2.5 million tons per year as of 2027 and reduce usage and increase the proportion of eco-friendly products to 100%,” and he emphasized, saying “SK Global Chemical will generate more than 600 billion won in EBITDA with green business in 2025 alone, exceeding half of the total 1.1 trillion won from the existing business. 

The company also plans to expand its energy solution business that produces and sells eco-friendly electricity and hydrogen by converting gas stations into a “green platform” and attracting customers of the oil business to a subscription model for eco-friendly vehicles.
 

<> Presenting the goal of achieving “Net Zero” greenhouse gas emissions across the enterprise before 2050 

SK Innovation also announced its goal of achieving “Net Zero” greenhouse gas emissions from all its business sites before 2050. The company explained that the core of ESG management is Environmental (E), and the core of E is net-zero emissions, and therefore the net-zero agenda is a key strategy that symbolizes the company’s responsibility towards and true commitment to ESG management. 

SK Innovation announced its net zero roadmap, which is a differentiated de-carbon strategy in three ways. 

First, SK Innovation sets a goal that includes Scopes 1, 2 & 3 for “Net Zero” which define the degree of greenhouse gas emissions as the first Korean major company. 

Second, the goal is to reduce emissions faster than the 1.5 degrees Celsius scenario of the Paris Climate Agreement, achieving net-zero before 2050 across all SK Innovation subsidiaries. Especially the battery business, the company plans to achieve net-zero by 2035, earlier than other business. 

Lastly, it is not just a way to sell off the petrochemical business, but rather a direction to achieve net-zero through investment in eco-friendly business. SK Innovation will implement eco-friendly processes, switch to low-carbon products, and develop carbon reduction technologies such as carbon capture technology. 

Accordingly, SK Innovation has decided to reduce carbon emissions generated from the existing businesses by 50% by 2030, achieve net-zero emissions before 2050, earlier than planned, introduce.

 

<> Securing governance with the Board of Directors through adoption of new measures including CEO assessment and ESG committee Establishment 

SK Innovation announced its plan to improve business management governance centering around the Board of Directors (BOD). The key changes include 1) the BOD having decision-making power in terms of CEO assessment/renumeration/succession plans 2) making it mandatory to review ESG risks in advance on all agendas of the BOD and 3) strengthening the control tower function of global compliance and business risks. 

ESG committee will be established under the BOD to review the strategic direction and monitor ESG performance, and to preemptively review risks from an ESG standpoint. This means that the BOD will practically lead the ESG management efforts including development and investment of promising businesses, and implementation of mid- to long-term strategies, as well as Net-zero. 

 

On the day, Kim Jong-hoon, Chairman of the Board, said “Establishing an advanced governance structure is essential in order to successfully execute SK Innovation’s Financial Story and accelerate its ESG management.” He added that “With this new governance structure in place to set the company’s strategic direction and properly supervise the execution, utmost efforts will be made so that SK Innovation’s Financial Story can successfully reach its final conclusion.”

In addition, the company also separately announced “SK Innovation’s Vision.” CEO & President Kim Jun said “SK Innovation will focus on its role as a holding company specializing in Green Portfolio Designer & Developer to pursue R&D and new business opportunities in green business, and also seek M&A chances to identify new batteries and LiBS business opportunities.” 

CEO & President Kim also said “We are now at the point in time in which the Deep Change and innovation we started from 2017 must be completed and produce meaningful results. Building on our ESG competitiveness which we secured through stringent efforts, we will complete our Financial Story together with the BOD and stakeholders.” He added “We are planning to invest a total of 30 trillion won until 2025 for green growth, which is more than twice the size of investment over the past 5 years. As a result, we aim to increase the proportion of our green assets to 70% from the current level of 30%.”