THE ROAD TO SUSTAINABILITY HYUNDAI MOTOR COMPANY 2005 Sustainability Report Table of Contents Before You Read
2 Letter from Chairman & CEO In line with our corporate transparent management objectives, the Hyundai Motor Company (hereinafter, HMC) 4 Letter from Vice Chairman & CEO sustainability report is published annually to communicate HMC’s sustainability initiatives as a responsible global corporate citizen to interested parties and associated stakeholders. Based on HMC’s intentions, 6 Hyundai Motor Company Profile activities and performance related to the sustainability aspects affecting our stakeholders and the company, Corporate Philosophy 8 HMC strives to support stakeholders in making sound decisions regarding their involvement with HMC. 10 Interview of President The 2005 sustainability report is written in line with the 2002 Global Reporting Initiative’s (GRI) sustainability Management reporting guidelines. All information presented this year is reported in accordance with the principles of good reporting practice (i.e. relevance, reliability and comparability), however, readers may recognize some 13 Environment Management limitations as there exists a lack of generally accepted reporting standards. As a result, readers, may not be Ethics Management 14 able to accurately compare HMC’s performance to that of other companies without further data, analysis and 16 Global Management interpretation. 32 Quality Management 34 Brand Management The scope of this year’s report is expanded towards a more extensive global coverage of domestic and overseas operations. Detailed information pertaining to the domestic operations, namely HMC Headquarters, domestic manufacturing plants (the Ulsan, Asan and Jeonju plants), the Namyang R&D center and domestic Environmentally Friendly Product service centers including quantitative and qualitative data sets from overseas manufacturing plants (the Turkey 39 Environmentally Friendly Vehicles plant-HAOS, India plant-HMI, and the China plant-BHMC) are presented throughout the report. 42 Fuel Economy & Emissions Qualitative information on the environmental and social aspects of overseas R&D facilities located in the U.S., 48 Recycling Japan and Europe, overseas dealerships and the Alabama manufacturing plant (HMMA) completed in 2005 is also referred to in the report.
Cleaner Production The report includes HMC’s sustainability activities from January 1st, 2004 until June 30th, 2005. 53 Energy / Greenhouse Gas Performance related data in the report are retrieved from data sets gathered from the period encompassing 54 Raw Materials / Waste January 1st, 2004 to December 31st, 2004, HMC’s fiscal year. For the collection of environmental and social 56 VOCs / Air Emissions / Wastewater Discharge data sets, HMC utilized AUTOWAY, a corporate intranet database system used for data collection and classification. In addition, HMC developed the 2005 HMC Sustainability Reporting Guidelines in February 59 Environmental Audits / Environmental Expenditure 2005 to standardize internal data collection and reporting procedures. For the purpose of the report, HMC has adhered to the sustainability reporting guidelines indicated above. Contents from the report are based on Communication with Stakeholders input from stakeholders as well as from HMC’s business performance. The report was written by an internal 61 Customer team of the HMC Environmental Management Strategy Planning Team, Corporate Planning Office of it’s 70 Employee Headquarters. The information presented follows HMC’s internal reporting guidelines and is based on official HMC documents. Contents are reviewed by managers and employees of related departments and approved 76 Supplier by the executive upper management before finalization and publishing. 80 Social Contribution As this is our third sustainability report, it focuses extensively on intents, business processes and structure, and performance, however, future reports will focus more heavily on performance analysis. 86 GRI Index 88 Internal Process Ensuring the Reliability of the Report 89 Independent Assurance Letter from Chairman & CEO 2 3 Hyundai Motor Company / 2005 Sustainability Report
As a responsible corporate citizen, the sustainability management initiatives of HMC include efforts to protect and sustain the current and future environment and to enhance the overall welfare of human life. We have achieved lasting economic success by maintaining continued growth in profits and by providing employment security thus becoming one of the leading economic engines driving the Republic of Korea’s development and rise to prosperity. Perhaps the most visible proof of our success can be seen in the fulfillment of our social responsibilities. We have established an Ethics Charter and have come full circle in realizing the social and ecological responsibilities of our transparent management initiatives. This goes beyond monetary donations to communities in need. We are also giving back to society through proactive efforts and our joint involvement with stakeholders and employees to resolve social issues. As we are aware of the social ramifications of our vehicles and activities, ensuring sustainable mobility through the provision of environmentally compatible vehicles remains the cornerstone of our corporate social responsibility.
Despite the depressed economic state of the domestic market, vehicle exports increased 11.4 percent year-on- year to 1.13 million units through our active expansion into new foreign markets. Since HMC’s first vehicle export in 1976, it has taken an astonishingly short 28 years to surpass the 10 million cumulative total export mark, a new record in the automotive industry. We have enhanced profitability and growth potential by improving product quality and by raising overall brand image. Such achievements have enabled us to be a significant contributor to the advancement of the Korean automobile industry.
The environmental ramifications of the automobile are of paramount importance when considering the future of the automobile. In these changing economic times, HMC’s foremost sustainability issue revolves around the dual issues of developing an automobile which is both profitable and environmentally sustainable. Today, achieving sustainability incorporates the balancing of economic, social and environment issues not only for HMC, but for the rest of the automotive industry. From this perspective, we have established effective policies and strategies to actively tackle the environmental issues confronting us. At the same time, we are drawing on the input of stakeholders in the overall management practice that we at HMC undertake.
Finally, HMC will not compromise the quality of the environment bequeathed to future generations merely for the sake of increasing current consumption. The foundation for the future is linked inextricably to the sustainable efforts of present stakeholders. As Korea’s most visible and best known multinational, we aim to perform future oriented sustainability management practice that takes intergenerational equality into consideration; we look to build upon existing trust-based relationships with stakeholders as a model automotive company; and we strive to become a global company that sets world class standards to be followed. Through our continuing efforts, we request your continuous participation and suggestions regarding our everyday activities.
October 2005
Mong-koo Chung Chairman & CEO Letter from Vice Chairman & CEO 4 5 Hyundai Motor Company / 2005 Sustainability Report
cleaner forms of energy take center stage, HMC has concentrated its efforts on the development of sustainable fuel technologies and on efforts to commercialize environmentally compatible vehicles based on Hybrid Electric Vehicle technology and Fuel Cell Electric Vehicle technology which promise to help reduce
CO2 emissions.
If environment management, a practice which fulfills social responsibility through cleaner production and environmentally friendly vehicles is action-oriented, then the implementation of ethics management initiatives, which promotes ethical awareness and conduct among our employees provides a moral foundation to overcome the difficulties in implementing sustainability management particularly when confronting a harsh business environment or a dilemma in the course of decision making. Since the implementation of its Ethics Charter in 2001, HMC has established a broad set of ethical policies and organizations; ethics management practice guidelines, ethics charter for the procurement office, employee ethics guidelines, ethics committee, cyber audit office and compliance program for fair trade.
One of our key goals is to provide a balance between economic growth, social responsibility and environmental stewardship for the future. As a responsible corporate citizen that has always been at the forefront of environmental protection and national economic growth, HMC is actively involved in various philanthropic programs that contribute to social welfare. HMC's programs are designed to promote education, academic research, the arts, sports, international exchanges, and environmental protection. In addition, we actively support and encourage our employees to volunteer in the assistance of natural disaster victims and the socially disadvantaged. Recognizing that long-term support is as important as one-time donations or volunteer work, we are changing our volunteer programs so that they can provide more As the undisputed leader of the domestic automotive industry and the flagship corporation of Korea, HMC practical assistance in helping people overcome hardships. As the monetary donations and provision of relief has established manufacturing plants, research and development facilities and regional corporate offices in supplies represent only one dimension of social contributions, HMC has undertaken a role to improve the key overseas markets. Perhaps the most visible proof of our success has been our rapid growth into a global quality of life of all communities through the operation of wide ranging social partnership programs in company exporting over 1.1 million vehicles annually to over 190 countries. But as a global corporate citizen, cooperation with NGOs. we realize the need to fulfill social responsibilities. As a result, HMC has actively engaged in key areas of sustainability management practice, such as environment management, ethics management and social As a global corporate citizen, one of our principle tasks is to create a sustainable balance in our activities contribution initiatives. reflecting our economic, environmental and social responsibilities. With this third edition of the HMC sustainability report, HMC has done its best to convey our intentions, expectations, achievements and Respecting human values and fulfilling social responsibilities are two aspects of our corporate environmental performance as transparently as possible. Finally, I would like to pledge once again that HMC will continue to philosophy. As a global automobile manufacturer, our activities span the entire value chain of industrial be a leading automaker that guides society toward a sustainable future by ensuring the prosperity lives of the activity from R&D and procurement to production, distribution, marketing and after-sales service. And with current and future generations to come. growing environmental awareness centering largely on the emissions of greenhouse gases and more specifically CO2 emissions, HMC is taking various proactive steps to provide environmentally compatible October 2005 solutions in step with our peers in the automotive industry. As an initial measure towards preventing global warming, HMC is actively complying with domestic and international environmental regulations, voluntary agreements and conventions. In addition, HMC has begun to aggressively participate in multilateral efforts to curb greenhouse gases by working closely together with governmental offices, international agencies and non-governmental organizations. As energy conservation measures and the expansion of the usage of
Dong-jin Kim, Ph.D. Vice Chairman & CEO 6 7 Hyundai Motor Company / 2005 Sustainability Report
Hyundai Motor Company Profile
Established in 1967, HMC launched its “Pony” model in 1976, which was the first Korean-made automobile to be exported. Since the Pony, HMC has continued to expand its export volume and overseas market to North America, Europe, China, Japan and other parts of the world. In 1984, HMC exported 500 thousand automobiles; last year we exported 1 million automobiles and received the “Ten Billion Dollar Export Award” from the Korean government. In 1991, HMC built Korea’s first engine and transmission parts. By doing so, we greatly contributed to the Korean auto industry by localizing the production of key components. HMC produces passenger vehicles, light trucks, dump trucks, commercial buses, vans and other specialty vehicles including fire engines, petrol cars, ambulances and armored vehicles. HMC has long been a key player in Korea’s economic miracle and has become a symbolic leader in the Korean economy. In order to assure our business competitiveness, we focus our efforts not only on quality and technological advancement, but also on the enhancement of our corporate image. As such, the preservation of our natural environment is a critical issue for our business, leading us to make substantial investments in improving the environmental performance of our vehicles.
Corporate Profile Corporate History
Hyundai Motor Company 1967 - Establishment of Hyundai Motor Company 1999 - Naming of Hyundai Motor as official sponsor 2003 - Announcement of OLV, concept car 2004 - Launch of new concept car HCD-8 TM 1976 - First export of Hyundai Pony to Guatemala of 2002 FIFA World Cup - First development of ultra high-pressure hydrogen - Sponsorship with Wheelchairs Funds(donates Headquarters: Seoul, Republic of Korea (231, Yangjae-Dong, Seocho-Gu) and El Salvador 2000 - Official supporter of Euro 2000 tank system for fuel cell electric vehicles wheelchairs) Industry Sector: Manufacturing 1983 - Establishment of Hyundai Auto Canada Inc. - Introduction of Hyundai HCD-V concept car - Commencement of construction of design center - Hyundai unveils the concept car E3(E-Cubed) at 2004 1984 - Completion of the first Korean proving ground - Introduction of Korea’s first passenger car diesel and proving ground in North America Geneva Motor Show Major Product: Automobiles in Ulsan Plant engine - Official partner of EURO 2004 - Hyundai Elantra & XG receive good marks(FSST) 1985 - Establishment of the Hyundai Motor America - Participation in the California Fuel Cell Partnership - Formally proclaimed the first auto company to from safety programs (NCAP) Production: 1,677,818 units per year (CKD Excluded) 1991 - Hyundai becomes the first in Korea to develop - Launch of Korea’s first automobile business group implement Global Environment Management - Hyundai opens R&D center for next generation Sales: 27,472 billion Korean Won the engine (Alpha Engine) independently - Development of Korea’s first heavy-duty truck engine - Supply of environment-friendly Santa Fe Electric vehicles at Seoul National University - Development of Electric Vehicles - Development of Korea’s first fuel cell electric vehicle vehicle to Athens Olympic Games - ‘Hyundai Football World Championship’ 40 countries Assets: 24,700 billion Korean Won 1992 - The first in Korea to develop a concept car HCD-1 2001 - Honoring of Chairman Mong-koo Chung with - Testing of Fuel Cell Electric Vehicles for commercial participate 1993 - Development of the HCD-II Automotive Hall of Fame’s DSC use in partnership with UTC Fuel Cells begins - Hyundai Motor passes major milestone with export Net Income: 1,804 billion Korean Won 1994 - Development of Hydrogen Powered - Introduction of Hyundai’s concept car HCD-VI - Begins construction of the Auto industry’s first of 10 millionth vehicle Chairman & CEO: Mong-koo Chung Fuel Cell Electric Vehicles - Introduction of prototype Hyundai Santa Environmental Technology Research Center - HMC establishes joint venture commercial vehicle - Development of solar car Fe fuel cell vehicle - Sponsorship to Wheelchairs Funds of production facility in China Date of Establishment: Dec. 29, 1967 - Breaking of the 1 million units production mark - Honoring of Hyundai Motor America with Hyundai Motor Group - Hyundai (Tucson) wins ‘Good Design’ Award in Japan for the year J.D. Power Chairman Award - First-rate in consumer’s satisfaction survey - Hyundai ranks high in ‘Strategic Vision's’ 2004 Total * Production: production total from domestic (Ulsan/Asan/Jeonju) and overseas manufacturing plants (India/Turkey/China) in 2004 1995 - Development of the HCD-III - Honoring of Hyundai Santa Fe with first place in of Korea Industry for 10 successive years Value * Sales, Assets and Net income: Hyundai Motor’s Independent Financial Standard for fiscal year 2004 - Unveiling of the energy efficient Gas Beta Engine AutoPacific satisfaction survey - Commencement of construction of R&D - Development of the Tucson Fuel Cell Electric Vehicle - Completion of the commercial vehicle factory 2002 - Completion of the Hyundai-Kia California Design & Center Europe - BusinessWeek names Chairman Mong-koo 1996 - Completion of the NamYang Research & Technical center - Sonata and Sante Fe chosen as number 1 and 2 in Chung among the best CEOs of 2004 Development Center - Introduction of Hyundai HCD-7 concept car J.D. Power’s consumer satisfaction study 2005 - Unveiling of Grandeur(Azera) and HED-1 concept car - Breaking of the 10 million total units mark for production - Launch of joint venture between Hyundai Motor and - Introduction of Hyundai NEOS II concept car at Geneva Motor Show 1997 - Development of the Epsilon Engine Beijing Automotive Industry Holding Company in - Announcement of new environmentally friendly - Launching of new global brand management strategy - Completion of the Turkey plant China diesel engine technology - $60 million US California based proving ground opened 1998 - Development of aluminum-block V-6 Delta engine - Consumer Report chooses Hyundai as number - Official sponsor of 2004 FIFA World Youth - HND-1 (Portico), the new concept unveiled at - Development of European concept car Hyundai Euro-I 2 along with Honda in a reliability study Championship (UAE) Chicago Auto Show - Development of Hyundai’s second generation solar car - Hyundai Motor Company’s Sonata receives highly - Yearly exports break 1 million units barrier - Hyundai unveils first Hydrogen-Powered Tucson SUV - Completion of Indian plant favorable reviews from J.D. Power for its performance at Los Angeles Auto Show - Acquisition of Kia Motors and design - Car book 2005 names five Hyundai models a ‘Best Bet’ - Hyundai Motor Company receives gold level PBEC - Chairman Mong-koo Chung declares vision Environmental Award ‘Innovation for Humanity’ - Completion of Alabama Plant 8 9 Hyundai Motor Company / 2005 Sustainability Report
Corporate Philosophy
The spirit of creative challenge, which has paved the way for its growth, is the core value at HMC. HMC aims for creativity and innovation to actively respond to changes in the business environment. Based on this philosophy, HMC aims to provide automobiles and related support services to enrich the overall quality of life for both domestic and overseas stakeholders. In addition, HMC has taken the necessary steps forward along with shareholders, customers, employees, suppliers, dealers and local communities, all on the basis of mutual trust. Interview of President 10 11 Hyundai Motor Company / 2005 Sustainability Report
Jae-kook Choi Interview President
Q: In order for a corporation to attain higher sustainability management standards and to keep the process moving forward, it must see continual improvement in its bottom line. From a financial growth standpoint, how did HMC perform in 2004? A: HMC recorded total sales of 27.5 trillion Korean won based on worldwide sales of 1.67 million units, which resulted in 1.8 trillion Korean Won in net-income. Although the domestic market experienced a contraction in “We will continuously strive sales to 550 thousand units, down 12.6 percent year-on-year, HMC’s market share rose by 2.6 percent from the previous year to maintain a 50.3 percent total market share on the back of strong new vehicle sales most to further sustainability notably the all-new Sonata and Tucson, vehicle exports totaled 1.12 million units for 2004, an 11.1 percent increase management with continued year-on-year on the strength of improved quality and brand value. Despite the unfavorable market conditions of development based on 2004, HMC posted financial gains across the board supported by strong employee effort and on the heels of customer-based management designed to elevate customer satisfaction levels, social partnerships and enterprising and the creative charitable initiatives. Hyundai Spirit.” Q: With regard to environment management, what were the most important issues confronting HMC in 2004? A: HMC has been continuing the development of environmentally friendly vehicle technologies and on establishing a more environmentally benign manufacturing system. Working in partnership with the Ministry of Q: What are some of the special characteristics of this year’s sustainability report? Environment, HMC has been participating in a long-term fleet field testing 50 Getz Hybrid Electric Vehicles in the A: This year’s edition of HMC’s sustainability report, the third of its kind, is composed of qualitative and Seoul metropolitan area. The data obtained from the project will be applied to improve reliability and quantitative data represented throughout the value-chain of environment management initiatives encompassing performance in the preparation for mass-production of HEVs. Furthermore, with the outstanding performance R&D, procurement, production, sales and after-service with emphasis on employee ethics, transparent improvements in the Tuscon Fuel Cell Electric Vehicle over the first generation SanteFe FCEV, HMC is presently management and social partnership activities. For the first time, the report includes quantitative and qualitative participating in the U.S. Department of Energy demonstration project on FCEVs and hydrogen re-fueling data sets from HMC’s overseas manufacturing plants, Hyundai Motor India, Hyundai Assan Otmotiv Sanayi and infrastructure in partnership with other leading automotive and energy companies. And in the pursuit of cleaner Beijing Hyundai Motor Co. Information regarding HMC’s quality management, brand management and global manufacturing standards, HMC has been extending environment management support to its suppliers through management initiatives are included for the first time ever to enhance the readability of this year’s issue in an active participation alongside the Korea National Cleaner Production Center, which operates under the auspices attempt to reach out to a wider network aside from the primary investors, stockholders and other stakeholders. of the Korea Institute of Industrial Technology. since June 2003. Also, the report has undergone reporting assurance by an independent auditing firm as in past years in order to maximize transparency and credibility. Q: Would you please inform us in greater detail of HMC’s role in expanding social partnerships and charitable donations? Q: How has the role of stakeholders and communication been addressed in this year’s sustainability A: HMC has supported a wide variety of charitable causes donating more than 7 billion Korean Won in 2004 to report? domestic social welfare organizations which serve the underprivileged and by providing volunteer services and A: Last year’s report, which was presented in Korean and English, was distributed to over 1,500 organizations and one billion Korean Won worth of supplies to underprivileged groups. Aside from these donations, HMC opinion leaders representing domestic and international government organizations, business partners, NGOs, media, employees initiated and actively participated in blood donation campaigns, fund-raising bazaars and rice-sharing academic and financial institutions. This report, one of several reports distributed along with the annual report and events. Starting in 2005, HMC has been placing greater emphasis on social contributions and partnership the corporate brochure, explains management and financial activities with the aim of improving the channels of activities through its 107 employee based social-service voluntary groups and has been working together with communication with stakeholders. This year’s edition is special in that it provides detailed qualitative and stakeholders to support 22 external social-welfare organizations. HMC aims to continue widening the avenues of quantitative information regarding HMC’s environment management and social partnerships thus helping play a key communication to strengthen trust and promote interactive partnerships encompassing all members of society. role in meeting the information needs of various stakeholders while at the same time serving as a platform to As a requisite to furthering this goal, HMC plans on continuing to carry out social welfare activities and programs educate employees and broaden their understanding of key sustainability issues. needed most by communities where we conduct our business. 13 Hyundai Motor Company / 2005 Sustainability Report
Environment Management HMC announced its Environmental Philosophy and Global Environmental Policy in 2003. Since then HMC has arranged key ideas for systematic environment management. In addition, HMC has also established and is implementing environment management strategy within the automobile industry’s value-chain encompassing R&D, purchasing, production, logistics, marketing & sales and A/S.
■ Environment Environmental Philosophy & Policy Management Strategy The Chairman and CEO, Mong-koo Chung outlined HMC’s Environmental Philosophy & Policy in June 2003. The initiatives called for HMC to respond diligently to global environmental issues and to transform itself into a model sustainable company. The accomplishment demonstrated HMC’s desire to fulfill corporate social responsibility and it is expected Management to enhance the confidence of stakeholders.
Harnessing technological innovation and conserving resources to make safer and more environmentally friendly vehicles has always been at the center of HMC’s commitment to sustainability. HMC commits to excel further to build a Environmental Philosophy sustainable future between humans and cars. Mobility is now a necessity so the automobile industry has a major impact on our lives. It is clear therefore that HMC needs to meet its economic, environment, and social responsibilities as a For the harmony of humankind, the environment and society, Hyundai Motor Company respects human value corporate citizen. This is the key to our sustainable management initiative. and fulfills corporate social responsibility through environment preservation.
Global Environmental Policy Environmental Committee Based on corporate citizenship, Hyundai Motor Company For successful implementation of the environmental is dedicated to respecting human value and preserving the strategy, HMC organized a corporate-level global environment. We, thereby proclaim this Global environmental committee. The committee, chaired Environmental Policy for sustainable society. by the Chairman & CEO, is comprised of three Recognize the environment as a core element of independent committees; the Environmental business and create corporate value by proactively Product Committee, the Environmental Production pursuing environment management. Committee and the Environmental Management Promote the development and distribution of Committee. The committees work together with the environmentally friendly products. support of 12 subcommittees to establish corporate-wide and department-specific targets and Dedicate to reducing pollutants and to preserving resources and energy for sustainable use at all stages of action plans based on our environmental policy. our products’ life cycle, from development to production, sales, use and disposal. Environmental Committee Endeavor to provide all employees with environmental training programs, support suppliers in environment Environmental Environmental Environmental Production Product Management management and contribute to public welfare. Committee Committee Committee