Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance
• Customer Value

Environmental Achievements

• Reduced greenhouse gas emissions by 18%, electricity by 26%, gas by 48%, and water by 39% compared to 2020 due to office relocation to a green building.
• Reduced paper use by 39% compared to the previous year through a paperless campaign.
• Produced eco-friendly albums using FSC certified paper, bean-oil ink, and eco-friendly UV coating.

Social Achievements

• Converted most contract employees to full-time employees in June 2021.
• Hired 8 athletes with severe disabilities.
• Operates various training programs for job competency enhancement and compliance and ethics management.
• Operates various welfare programs for work-life balance (hybrid working system, labor-management council, etc.).
• Conducted Smile Music Festival, providing music education to youths nationwide.
• Implemented Smile for U project, supporting music education for Vietnamese children.

Governance Achievements

• Established ESG Working Group to implement sustainable development goals and strategies.
• Enacted 'SM Entertainment’s Ethics Regulation' in May 2020.
• Provided ethics & compliance training to all employees.
• Established annual audit plans implementing daily and special audits.

Climate Goals & Targets

Environmental Challenges

• Maintaining album quality while using eco-friendly resources.
• Difficulty in conducting face-to-face volunteer activities due to Covid-19.

Mitigation Strategies

• Conducted numerous trials and sample making to balance album quality and eco-friendly materials.
• Switched Smile Music Festival online, expanding participation nationwide.
• Conducted small-scale volunteer activities and online non-face-to-face activities.

Supply Chain Management

Responsible Procurement

• Fair trade practices
• Use of eco-friendly materials for album production

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards, ISO 26000, UN Global Compact 10 Principles, UN SDGs

Certifications: ISO 14001 (target 2023)

Third-party Assurance: Econine

UN Sustainable Development Goals

• Goal 4 (Quality Education)
• Goal 7 (Affordable and Clean Energy)
• Goal 8 (Decent Work and Economic Growth)
• Goal 12 (Responsible Consumption and Production)
• Goal 13 (Climate Action)
• Goal 15 (Life on Land)
• Goal 16 (Peace, Justice and Strong Institutions)

SM Entertainment's initiatives contribute to these goals through various programs and activities related to education, environmental protection, fair labor practices, waste reduction, climate action, biodiversity conservation, and ethical governance.

Sustainable Products & Innovation

• Eco-friendly albums
• SSAMBEAR blanket

Environmental Metrics

ESG Focus Areas

• Enhancing sustainable shareholder value
• Transparent and professional board operations
• Creating a great place to work & safety and health management
• Practicing human rights management
• Incorporating environmental management, resource conservation, and waste reduction
• Protection of natural ecosystems

Environmental Achievements

• Obtained ISO 14001 certification for environmental management in December 2022.
• Reduced electricity consumption by 988.1 MWh compared to the previous year (due in part to office relocation).
• Reduced waste generated from 310.6 tons to 98.6 tons.
• Expanded the use of FSC-certified paper in album and merchandise production.

Social Achievements

• Increased the proportion of female employees to 65.9%.
• Implemented a hybrid working system.
• Conducted human rights impact assessment and established human rights management principles.
• Provided various employee welfare programs.

Governance Achievements

• Restructured the Board of Directors, separating the CEO and Chairman, and increasing the proportion of outside directors to 50%.
• Established four committees under the Board of Directors (Nominating, Insider Trading, Compensation, and Governance).
• Paid a cash dividend of 1,200 won per share in 2023 (highest in the industry).

Climate Goals & Targets

Environmental Challenges

• Management rights issues leading to increased shareholder demands for shareholder value enhancement.
• ESG global guidelines and evaluations increasing the demand for ethics, responsibility, professionalism, and operational transparency.
• Emphasis on environmental management through ESG global guidelines, laws/regulations, and increasing demands from environmental groups for improvement in album waste issues.
• Emphasis on human rights management through ESG global guidelines and laws, and expansion of human rights management demands for the entertainment industry.

Mitigation Strategies

• Implemented SM 3.0 strategy to enhance shareholder value, including advanced capital allocation and shareholder return policies.
• Reorganized the Board of Directors to enhance independence and transparency.
• Established a systematic environmental management system and obtained ISO 14001 certification.
• Conducted a human rights impact assessment and established human rights management principles.

Supply Chain Management

Supplier Audits: 1 supplier assessed

Responsible Procurement

• Use of FSC-certified paper.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards, UN Global Compact, UN SDGs

Certifications: ISO 14001, FSC

Third-party Assurance: ECONINE

UN Sustainable Development Goals

• Goal 7
• Goal 12
• Goal 13
• Goal 15
• Goal 8
• Goal 16
• Goal 4
• Goal 17

Initiatives contribute to these goals through environmental management, resource conservation, waste reduction, biodiversity protection, human rights management, fair labor practices, education, and global partnerships.

Sustainable Products & Innovation

• Platform albums; albums using FSC-certified paper and soy-based ink; merchandise using FSC-certified paper and soy-based ink.

Environmental Metrics

ESG Focus Areas

• Climate Change Response & Greenhouse Gas Emissions Management
• Eco-friendly MD and Service & Waste Management
• Protection of Nature and Ecosystem
• Human Rights Management
• Talent Management
• Supply Chain Management And Joint Growth
• Contribution to Local Community and Social Impact
• Ethics and Compliance Management
• Fair Trade and Intellectual Property Protection
• Board Effectiveness, Independence, Expertise, Diversity & Evaluation and Relevance of Remuneration

Environmental Achievements

• Created the KWANGYA Forest to preserve biodiversity, winning the grand prize at the Seoul Metropolitan City's Green City Award.
• Increased the use of eco-friendly materials in album and MD production.
• Used upcycled materials for New Year's kits and some MD.
• Removed album advertisement inserts starting April 2024.

Social Achievements

• Launched the 'KWANGYA 119' website to protect artists' rights and communicate with fans (over 180,000 posts received, 95% response rate).
• Published the Human Rights Management Declaration.
• Increased shareholder value through cash dividends and treasury stock sales (KRW 1,200 dividend per share in 2023).
• Implemented various in-house welfare systems.

Governance Achievements

• Increased the number of external and female directors, fostering a board with independence, expertise, and diversity.
• Formed four subcommittees under the board of directors, including a Governance Committee to supervise sustainable management agendas.
• Established a detailed implementation plan for the sustainable management strategy.

Climate Goals & Targets

Environmental Challenges

• Concerns about loss of promising talent and decline in content quality due to decline in employee job satisfaction.
• Possible violation of human rights of stakeholders due to lack of preemptive response to human rights risks.
• Various legal compliance issues due to unfair trade and resulting in financial and non-financial losses.
• Sales decrease due to negative corporate image spread caused by greenwashing issues with MD and etc.
• Reduced artist competitiveness due to content quality and limitations in developing fan markets.
• Costs incurred due to failure to manage waste discharge.
• Risks that unexpected accidents may occur, such as non-compliance with safety laws, disasters, and safety accidents.

Mitigation Strategies

• Create a work environment where members can fully display their talents and work happily, we introduce various systems and improve existing systems.
• Conduct human rights education for employees to establish a culture of respect for human rights.
• Establishing a consultation stage to conclude fair contracts with partners to establish a fair trade order.
• Securing an environmentally friendly corporate image and increasing fan favorability through eco-friendly MD production, content production, etc.
• Establish a multi-production center and label system to accumulate IPs with high potential for success and foster capable talents.
• Minimize waste discharge through the practice of separating waste in office spaces and stores, promoting recycling, and saving paper.
• Established a safety and health organization by operating an Industrial Safety and Health Committee and a Safety and Health Council.

Supply Chain Management

Responsible Procurement

• Integrity compliance agreement with partners
• Selection of qualified suppliers based on safety and health management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards 2021, UN SDGs

Certifications: ISO 14001, AA1000AS (v3)

Third-party Assurance: Korea Foundation for Quality (KFQ)

UN Sustainable Development Goals

• Goal 4 (Quality Education)
• Goal 7 (Affordable and Clean Energy)
• Goal 8 (Decent Work and Economic Growth)
• Goal 12 (Responsible Consumption and Production)
• Goal 13 (Climate Action)
• Goal 17 (Partnerships for the Goals)

Initiatives such as SMile Music Festival, KWANGYA Forest, eco-friendly practices, human rights management, and community engagement contribute to these goals.

Sustainable Products & Innovation

• Upcycled products from waste banners and artist costumes
• Eco-friendly MD using FSC certified paper and soy ink
• New Year's kits with recycled materials

Awards & Recognition

• 2023 Seoul Metropolitan City's Green City Award
• Various music awards for affiliated artists