Climate Change Data

Environmental Metrics

ESG Focus Areas

• Ethical Management
• R&D
• Great Workplace
• Supply Chain Management
• Social Contribution
• Environmental Management
• Corporate Governance

Environmental Achievements

• Reduced GHG emissions (specific figures not clearly stated, but mentioned in relation to energy saving initiatives and eco-friendly product development)
• Saved 850 tons of aluminum per year through eco-friendly paper development
• Saved 1,500 tons of pulp per year through improved packaging materials
• Saved 400 tons of pulp per year by replacing vinyl cases with paper cases
• Reduced environmental impact by the burial of wasted vinyl
• Saved KRW 250 million per year and reduced 728 tons of greenhouse gas emissions by reusing steam energy

Social Achievements

• Achieved KRW 1.2 trillion in sales in the Ginseng business
• Launched new brands in the cosmetics business (Donginbi)
• Reached KRW 195 billion in sales in the Pharmaceuticals business
• Awarded the "USD 800 Million Export Tower"
• Various social contribution activities at home and abroad
• Established the KT&G Welfare Foundation and KT&G Scholarship Foundation
• Operated Sangsang Madang cultural centers
• Implemented Sangsang Fund for social contribution

Governance Achievements

• Established the Ethical Management & Audit Division
• Established KT&G Anti-Graft Act Compliance Guidelines
• Implemented a comprehensive compliance management system
• Operated the Audit Committee and Evaluation Committee for transparent management
• Maintained a high attendance rate of non-executive directors in BOD meetings (92.2%)
• Received excellent ratings in corporate governance for six consecutive years

Climate Goals & Targets

Environmental Challenges

• Challenging market conditions due to tightening regulations and economic uncertainties
• Increased competition in the ginseng and cosmetics markets
• THAAD issue impacting the cosmetics business
• Sluggish domestic economy
• Increased comprehensive regulatory requirements
• Rapid growth of the next-generation tobacco market
• Intense competition in the non-tobacco market

Mitigation Strategies

• Building a balanced business portfolio centered on growth and profitability
• Developing next-generation tobacco business as a new growth engine
• Investing in strengthening existing businesses, expanding related businesses, and creating new businesses
• Preemptive response to market changes through product differentiation and optimization of sales units
• Proactive entrance into global markets and sales growth of localized products
• Aggressive marketing activities, CRM for lessees, and cost reduction in real estate
• Expanding distribution channels in emerging markets
• Increasing investments in markets with high growth potential

Supply Chain Management

Supplier Audits: 74 of 75 companies certified (supplier certification system)

Responsible Procurement

• Revised internal policies for fair business practice
• Full cash payment within 5 business days
• Advanced payments during holidays
• Adjusting contract amounts to mitigate financial burdens for suppliers
• Shared growth agreement with IBK

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G4 Guideline’s Core Option, IIRC (International Integrated Reporting Council) Integrated Reporting Framework

Third-party Assurance: Deloitte

Sustainable Products & Innovation

• Eco-friendly paper
• Biodegradable film
• Low ignitable cigarette paper

Awards & Recognition

• Korea’s Top 100 Brand (ESSE)
• USD 800 Million Export Tower
• Various volunteer service awards
• Best Brand in the 2017 NBCI
• President Prize for the Labor-Management Culture of Merit
• USD 7 Million Export Tower
• Best Brand in the 2016 NBCI
• Grand Prize in the 2016 NCSI
• 2016 K-BPI

Environmental Metrics

ESG Focus Areas

• Social Contribution
• Environmental Responsibility
• Shared Growth
• Global CSR Activities

Environmental Achievements

• Planted approximately 2.5ha of forest in Mongolia and South Korea using 210 million won from employee donations.
• Donated 1,300 eco-friendly water purifiers to Tanzania to reduce fossil fuel consumption and provide clean water.
• Implemented a pilot project installing 147 cigarette butt disposal bins in six major cities, expanding nationwide in 2022.
• Conducted coastal and underwater cleanup activities in Busan and Gyeongnam regions.
• Launched the '2021 Pil(必)Green Campaign' to raise employee awareness of environmental issues.

Social Achievements

• Awarded the Presidential Award for the '2021 Social Economy Merit' for supporting youth entrepreneurship and underprivileged groups.
• Opened 'KT&G Sangsang Planet' in Seoul, a dedicated space for social ventures.
• Celebrated the 10th anniversary of the 'Sangsang Fund' with various initiatives supporting young artists.
• Launched 'Sangsang Univ Local Projects' in 13 regions, fostering community engagement and cultural activities.
• Continued the 'Flower Farm Support Relay Campaign' and 'Food Purchase (Sikgu) Campaign' to support local businesses and farmers.

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic and its impact on various sectors.
• Environmental issues such as cigarette butt littering and ocean plastic pollution.

Mitigation Strategies

• Implemented a three-stage COVID-19 contingency plan providing physical, customized, and psychological support.
• Installed cigarette butt disposal bins and conducted awareness campaigns ('Ssadam Ssadam' campaign).
• Supported local businesses and farmers through various initiatives.
• Donated medical supplies and equipment to Indonesia and Russia.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Purchasing all leaf tobacco from domestic farms to ensure stable production and shared growth.

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Goal 1 (No Poverty)
• Goal 2 (Zero Hunger)
• Goal 3 (Good Health and Well-being)
• Goal 4 (Quality Education)
• Goal 6 (Clean Water and Sanitation)
• Goal 8 (Decent Work and Economic Growth)
• Goal 9 (Industry, Innovation and Infrastructure)
• Goal 10 (Reduced Inequalities)
• Goal 11 (Sustainable Cities and Communities)
• Goal 14 (Life Below Water)
• Goal 15 (Life On Land)

KT&G's various initiatives contribute to these goals through social contribution, environmental responsibility, shared growth, and global CSR activities.

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Presidential Award for the '2021 Social Economy Merit'

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Increased renewable energy share to 15.6% in 2022 from 0.2% in 2020.
• Reduced Scope 1+2 greenhouse gas emissions to 114,595 tCO₂eq in 2022 from 123,908 tCO₂eq in 2021.
• Improved waste recycling rate to 83.7% in 2022 from 73.5% in 2019.

Social Achievements

• Increased female representation in management to 13.4% in 2022.
• Reduced employee turnover rate to 5.7% in 2022 from 7% in 2019.
• Maintained 100% rate of female employees returning from maternity leave.

Governance Achievements

• Maintained 100% attendance rate of outside directors in board meetings.

Climate Goals & Targets

Environmental Challenges

• Not disclosed

Mitigation Strategies

• Not disclosed

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: ISO 14001, ISO 45001, ISO 50001, ISO 27001, ISO 22301, ISO 9001

Third-party Assurance: Third-party assurance provided for various data points.

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity, Equity, and Inclusion (DEI)
• Governance
• Supply Chain Sustainability
• Development of Modified Risk Products

Environmental Achievements

• 9% reduction in GHG emissions compared to the 2020 baseline
• 19% increase in renewable energy consumption

Social Achievements

• Increased diverse representation, including roles for global local hires and female staff
• Received the Grand Prize in the Corporate Governance category from the Korea Institute of Corporate Governance and Sustainability (KCGS)

Governance Achievements

• Enhanced the independence and expertise of our board composition
• Increased transparency in all relevant processes
• Upgraded the director selection process and BSM
• Refined top management compensation policy
• Achieved 100% compliance rate with core indicators proposed by the Financial Services Commission

Climate Goals & Targets

Environmental Challenges

• Climate change impacts on raw material supply (tobacco leaves, ginseng)
• Rapidly changing consumer needs and scientific evidence in the tobacco industry
• Supply chain disruptions due to climate events
• Consumer demand and over-packaging regulations

Mitigation Strategies

• Established a carbon neutrality strategy that meets international standards
• Revised its 2050 carbon neutrality target to 2045
• Set more ambitious goals on its path to carbon neutrality
• Expanding its own solar power generation facilities
• Switching to high-efficiency equipment
• Utilizing power purchase agreements (PPAs)
• Introducing i-RECs
• Strengthening portfolio competitiveness based on an innovation platform
• Accelerating the NGP business through advanced PMI partnerships
• Securing world-class scientific R&D capabilities
• Identifying and implementing short-term actionable tasks to accelerate the improvement of product eco-friendliness
• Conducting life cycle assessments (LCA) for key products

Supply Chain Management

Supplier Audits: 100% for significant suppliers (KT&G, KGC, Yungjin Pharm)

Responsible Procurement

• Sustainable Tobacco Program (STP)

Climate-Related Risks & Opportunities

Physical Risks

• Cyclone, hurricane
• Heavy rainfall and flood
• Temperature change
• Water shortage

Transition Risks

• Carbon pricing system
• Rise in raw material costs
• Increased legislation and regulation to reduce GHG emissions

Opportunities

• Consumer preference for eco-friendly, low-carbon products
• Secure key competitiveness by strengthening the ability to respond to climate change risks
• Reduce operational costs by expanding low-carbon facilities and renewable energy facilities

Reporting Standards

Frameworks Used: GRI Standards 2021, SASB indicators, UN SDGs, TNFD, ISSB

Third-party Assurance: Third-party assurance conducted; assurance statement included in the 2023 Factbook

Sustainable Products & Innovation

• lil HYBRID 3.0
• lil ABLE
• lil SOLID Ez
• Red Ginseng Oil RXGIN CLEAN

Awards & Recognition

• Grand Prize in the Corporate Governance category from the KCGS
• Minister of Trade, Industry and Energy Commendation at the Climate Change Response and Greenhouse Gas Reduction Excellence Awards (Yeongju Plant)
• Minister of Trade, Industry and Energy Commendation at the 10th Korea Energy Engineer Award (Cheonan Plant)