SHI SUSTAINABILITY REPORT 2015
SAMSUNG HEAVY INDUSTRIES
OVERVIEW
Message from the CEO Company Profile Management Philosophy Business Introduction Business Operation Process Governance Stakeholder Communication Aspect Boundary Materiality Test 1 Overview
Message from the CEO Samsung Heavy Industries, which has shown continuous growth and remarkable development through turning countless adversities into valuable opportunities, now prepares for an even bigger leap forward on the basis of its decisive innovations.
Dear Stakeholders, who trust and value Samsung Heavy Industries,
Samsung Heavy Industries (hereinafter referred to as SHI), which has successfully executed various projects in shipbuilding and offshore fields since its foundation in 1974, consistently endeavors to reflect the voices of its stakeholders, including clients, subcontractors, employees, and local communities. Moreover, as a global industry leader, SHI is investing much effort in building reliable and eco-friendly ships and offshore production facilities.
2015 has been by far the most difficult business year for SHI due to significant challenges, such as the global economic recession, low oil prices, and a series of trials & errors in executing offshore projects. Despite such difficult conditions, however, SHI employees endeavored to maintain safety and quality as well as comply with delivery schedule by showing concerted commitment and dedication, thereby transforming the crisis into opportunities.
th Not only has SHI promoted the importance of safety awareness by announcing January 19 as the official Safety Awareness Day, but it has also received the highest level of recognition in the Safety Assessment Evaluation, conducted by ExxonMobil, for 6 consecutive years. Moreover, SHI significantly improved quality by enforcing its 10 Quality Rule Implementation Check on a weekly basis for flawless delivery. In the meantime, the Production Sector has succeeded in utilizing the Dual Lifting Method, which enables a 8,000 tons and a 3,600 tons floating cranes to lift and load a 11,600 tons terra block, thereby enhancing the overall production efficiency.
SHI acutely realizes that the company’s survival depends on the commitment of its employees and is firmly determined to overcome the current crisis. The company plans to set this experience as a valuable stepping stone for greater progress in the future. Waiting for the optimal time to arrive, SHI will not only stay committed to basics, but also try to attain fundamental competitiveness required to effectively respond to any harsh external environment. In closing, SHI sincerely asks for the unwavering support and trust of its stakeholders.
Thank you.
President and CEO of Samsung Heavy Industries Dae Young, Park 1 Overview Company Profile
Message from the CEO Company Profile Samsung Heavy Industries Global Network Management Philosophy SHI directs its ambitions towards becoming the world’s best corporation in the shipbuilding · SHI is maximizing its efficiency with a network of 10 global branch offices and worksites. Business Introduction offshore industries. On the basis of its experience in successfully managing a broad range of Business Operation Process projects along with its exceptional technology, SHI has succeeded in becoming a top-tier global Governance Stakeholder Communication company in the fields of shipbuilding, offshore drilling, production facility construction, and digital Aspect Boundary system development. As of 2015, SHI ranked No.1 in its global market share for LNG carriers and Materiality Test mega containerships. SHI built the world’s first two-way ice breaking tanker, thereby opening a new chapter in oil transportation to arctic areas. Moreover, SHI has constructed the highest number of drillships and FPSOs respectively. SHI has also attained global recognition for the excellence in designing and building topside of offshore plants, such as fixed offshore platform, TLPs, and floating offshore structure, which require high stability and advanced technology.
Overview (Based on 2015 Business Report) Total equity Non-consolidated Consolidated (Unit: 1,000 KRW)
Company Samsung Heavy 4,096,823,434 Name Industries Co., Ltd. 4,265,745,759 th Date of 5 August, 1974 Europe 03 Foundation Sales President Dae Young, Park 9,332,927,411 No. of 13,974* 9,714,441,844 Korea 04 Employees China 02 America 01 Headquarters Gyeonggi-do Seongnam-si Operating profits Bundang-gu Pangyoro 227-23** (1,664,576,446) Contact +82 31 5171 6104 Africa 01 Middle East 01 Website www.samsungshi.com (1,501,905,499) * Includes temporary employees ** Headquarters relocated in March, 2016 Asia 02 Credit Rating Pangyo (HQ) Hwaseong Particulars of Stock Issuance Corporate Bond CP Daejeon Total No. of Issued Stocks Common 230,875,386 A+ A2+ Preferred 114,845 Total Asset Geoje Total 230,990,231 Treasury 25,964,429 st As of 31 December 2015, the total number of stocks trillion hundred million issued by SHI amounts to 230,990,231. A total of 205,025,802 stocks are outstanding and 25,964,429 17 3,016 (common stocks) are owned by SHI as treasury.
Domestic Network Overseas Network
Pangyo (HQ) Geoje Overseas Subsidiaries Overseas Office Pangyo R&D Gyeonggi-do Seongnam-si Geoje Gyeongsangnam-do Geoje-si China ㆍNINGBO Co., Ltd. America ㆍHouston Office Europe ㆍLondon Office Center Bundang-gu Pangyro 227-23 Shipyard Jangpyeong 3no 80 ㆍRONGCHENG Co., Ltd. ㆍOslo Office Daejeon (Jangpyeong-dong) ㆍAthens Office Daedeok Daejeon Gwangyeok-si Hwaseong Middle ㆍDubai Office Asia ㆍSingapore Office R&D Yuseong-gu Munji-dong 217 Hwaseong Gyeonggi-do Hwaseong-si East· ㆍLagos Office ㆍTokyo Office Center Plant Hyohaengno 1339 (Banwol-dong) Africa
8 SAMSUNG HEAVY INDUSTRIES 9 SUSTAINABILITY REPORT 2015 1 Overview Management Philosophy Business Introduction
Message from the CEO SHI was established in 1974, has been the leading corporation in shipbuilding and offshore Company Profile Management Philosophy and Corporate Mission industries, and advanced technology. Under its distinguished products and superb technology, Management Philosophy Under its management philosophy of “making contribution to humanity by creating the best SHI is currently ranked No.1 globally for its high added-value special ships production and it holds Business Introduction products and services based on human talents and technology”, SHI endeavors to fulfill its much competence in the fields of offshore drilling and production facility. Moreover, SHI is taking Business Operation Process corporate mission of “satisfying customers and enhancing the quality of life by providing reliable, the lead in modernizing the industry by incorporating its cutting-edge automated systems to its Governance Stakeholder Communication eco-friendly, economical and convenient ships and facilities”, and consolidate its status as the products. Aspect Boundary world’s leading EPCI company. Materiality Test Field Operation Major Products Management Making contribution to humanity by creating the best products and Philosophy services on based on human talents and technology. Shipbuilding SHI’s shipbuilding operation that incorporates hull construction, ㆍTanker block assembly and outfitting, has made notable achievements. ㆍArctic Shuttle Tanker Corporate Satisfying customers and enhancing the quality of life by providing reliable, In 2008, SHI succeeded in building the world’s biggest 266,000 ㆍContainership Mission eco-friendly, economical and convenient ships and facilities. ㎥ LNG Carrier. In 2014, SHI won the order of the world’s first ㆍLNG Carrier Very Large Ethanol Carrier (VLEC). In 2015, SHI won the contract ㆍLNG-SRV for the world’s biggest, 211,000 TEU Container ship. Likewise, ㆍLNG-FSRU Committed to the SHI is leading its industry with its advanced technology and Core Values belief that talents high-added value. are crucial for the management of a People corporation, SHI places Offshore Drilling & Based on its accumulated shipbuilding expertise, SHI has ㆍDrillship With its consistent heavy value on human Production made significant achievements in the offshore development ㆍLNG-FPSO passion and unbeatable resources. facility market that includes FPSO, drill ships, fixed offshore ㆍCrude Oil Production & challenging spirit, platforms, TLP, and floating offshore platforms. Moreover, Storage Facility SHI strives to become Excellence the company is maintaining an unrivalled competitiveness ㆍFixed Platform the world’s best. SHI proceeds in offshore drilling and production facilities, based on its ㆍFloating Offshore Structure with unyielding distinguished technology in designing and constructing ㆍFloating Production Unit transformation as well topside, a integral part of offshore development facility. ㆍOffshore Development Ship as innovation on the ㆍJack-up Rig Change basis of its awareness of a possible crisis. Under commitment and proper behavior, Power and Control SHI’s Power and Control Systems Division, which strives to ㆍBallast Water Processing SHI strictly complies to Systems establish a technological standard for unmanned ships and System Integrity the laws and ethics. on-land automation, is strengthening its competence by ㆍLNG Propulsion Vessel Fuel SHI strives to add developing and supplying total solutions for categories, such Supply System positive values to as ballast water treatment, automated navigation, LNG storage ㆍVessel Switchboards its local community, & supply, and regasification. ㆍCruise Control, Integrated Co-prosperity nation, and mankind. Navigation System ㆍPower, Offshore SI, Regasification Solutions Management Principles
SHI establishes a set of management rules and educates its employees on them regularly in efforts Content of Technology Development Location to fulfill its ethical and social responsibilities. With the products of best quality and advanced Technology SHI is investing much effort in attaining an excellence in ㆍDaeduk in Daejeon technology, SHI further strives to perform the management activities that will contribute to the Development product performance and quality by consistently engaging ㆍGeoje Shipyard mutual growth of humanity and nature. in research development and expanding its base facilities. ㆍPangyo in Gyeonggi-do SHI further strives to achieve high added value and attain advanced technology by engaging in a variety of research projects, under the objectives: “achieving business-related R&D, improving performance and cost competitiveness to Principle Principle Principle Principle Principle Principle enhance product competitiveness, maximizing the efficiency SHI adheres 1to the SHI maintains2 a SHI respects its3 clients, SHI values4 HSE SHI fulfills its5 CSR SHI strives6 to of engineering and production through convergence with IT” laws and codes transparent shareholders, (Health, Safety and (Corporate Social become a global top of ethics. organizational and employees. Environment). Responsibility) as a tier corporation. * Effective since 2015, the 2015 Sustainability Report adopts the term “technology development” in place of “Research & culture. global corporate Development.” citizen.
10 SAMSUNG HEAVY INDUSTRIES 11 SUSTAINABILITY REPORT 2015 1 Overview Business Operation Process
Message from the CEO Naming Company Profile Internal Plan Steel Cut Assembly Assembly Paint Load Launch Quay Work Test Drive Ceremony Management Philosophy 1 2 3 4 5 6 7 8 9 10 Business Introduction A graphical Structural steel Structural steel Internal Eco-friendly The blocks are The dock is filled A variety of A test drive is A ceremony is Business Operation Process design of is accumulated is weld together assembly, paint substances relocated to the with water in equipment and conducted to held by which the the vessel as and cut, to construct such as piping are applied to dock and loaded order to set the interior is applied assess the quality client visits the Governance Shipbuilding required by according to the blocks, which or wiring, is the blocks so to form the completed vessel to the vessel’s and performance shipyard to name Stakeholder Communication the client is outlined design. are parts of the executed on the as to prevent structure of the afloat. cabin. of the vessel. the vessel. Aspect Boundary formulated. vessel. vessel. rusting. vessel. Materiality Test
Engineering Internal Hinge Loading Equipment Launching Lower Load & Connect Test Drive 1 Design 2 Steel Cut 3 Assembly 4 Assembly 5 Paint 6 Turnover 7 onto the Dock 8 Substructures 9 Dock Module 10 & Delivery An engineering Structural steel Structural steel Various internal Eco-friendly A large crane A variety of The substructures Loading and Offshore of the offshore is accumulated is weld together assembly is paint substances prepares facilities equipment is that support the connecting performance plant as required and cut, to construct installed into the are applied to installment by installed on top of upper body of operations assessments Offshore by the client is according to offshore plants. offshore plant. the offshore flipping over the the offshore plant. the offshore plant are conducted are conducted formulated. the outlined plants so as to offshore plant deck are set afloat. onto the deck on shore and engineering. prevent rusting. deck. module of the delivered to the substructures. client.
Geoje Automated Production Daedeok R&D Center Pangyo R&D Center Research Center ECO Solution Navigation Control Solution Power Solution
This center heavily focuses on This center heavily focuses on the This center heavily focuses on The Eco Solution endeavors to The Navigation Control System The Power Solution provides technology developments related technology development related the technology development of provide a safe and eco-friendly strives to provide various switchboards, panel boards, to shipbuilding, offshore plants, to smart shipbuilding, offshore independent offshore engineering ballast water treatment system. optimized solutions for navigation and electricity propulsion plants Technology platform construction, automated plant performance improvements, technologies and internalization of Power and Control It also endeavors to provide an control to induce improved that satisfy the environmental Development production, and IT integration. and shipbuilding performance equipment. Systems effective system to minimize fuel efficiency onto the operation of and safety requirements for improvements. use. ships and offshore plants. shipbuilding and offshore construction.
12 SAMSUNG HEAVY INDUSTRIES 13 SUSTAINABILITY REPORT 2015 1 Overview Governance
Message from the CEO Company Profile Board of Directors Operation of the BoD Management Philosophy st As of 31 December 2015, the Board of Directors, the highest decision making body of SHI, SHI held a total of 12 rounds of BoD meetings in 2015, where 34 resolutions for topics, such as Business Introduction consists of 5 committees; Audit, Executive, External Director Candidate Nomination, Internal Trade, approval of transaction limit, execution of BoD compensation limits, and approval of financial Business Operation Process and Compensation. In March, 2015, the Compensation Committee was established and operation statement. The participation rate for 2015’s BoD Meeting was 93.8%. Governance Stakeholder Communication provisions enacted. The Board of Directors consists of 7 persons, 3 internal directors and 4 Aspect Boundary external directors. Directors are appointed by External Director Nomination Committee and the Specifics of BoD Operation Materiality Test appointment is decided on the grounds of professionalism and fairness. 2013 2014 2015 Rounds 9 14 12 Subcommittees Number of Resolutions 30 40 34 Participation Rate 94.4 96.7 93.8 Deliberation of and decision on issues commissioned by the BoD in accordance Executive with the articles of association, BoD rules, and corporate regulations in order Committee to enhance professionalism and efficiency in business practice Compensation System Internal Trade Pre-deliberation of major internal transactions to strengthen business Committee transparency and trust of stakeholders The annual salary limit for a BoD member, decided in the 2015 BoD Meeting, has been set at 12 billion KRW and 2.38 billion KRW has actually been executed. Such compensation amounts Compensation Securing objectivity and transparency of the remuneration decision making Committee process are decided by the BoD resolution, and long term performance incentives are decided based on factors, such as ROE, R/E, and pre-tax profit. Specific Details regarding BoD compensation are External Director Nomination of External director candidates in a fair and independent described in the 2015 SHI Business Report. Candidate Nomination manner Committee
Supervisory and supportive activities to help the management maximize Share Ownership Audit Committee corporate value through check and balance st As of December, 31 the total number of issued stocks amounted to 230,990,231 and 205,025,802 shares are outstanding. The greatest shareholder is Samsung Electronics, which holds 17.6%. BoD Members Samsung life Insurance, National Pension and Samsung Electro-Mechanics also hold more than 2% of SHI’s shares. Consisting 99.99% of the total shareholders, small amount shareholders Name Gender Director Status Date of Appointment Term Internal Dae Young Park CEO (BoD Chairman) Mar. 15, 2015 amount to 156,783 and own 62.5% of SHI’s shares. To realize shareholder values, SHI not only Director Tae Heung Chun Vice President Oct. 27, 2015 publishes business reports, quarterly reports, and semiannual reports, but also uses a variety of Hyo Seoup Kim Executive Director Mar. 13, 2015 communication channels to immediately and precisely inform domestic, as well as international External In Man Song President of Korea Accounting Mar. 13, 2015 investors of SHI’s business achievements and strategies. Director Association Male 3 years Dong Hyo Kwak Former Chief of Patent Court Mar. 15, 2015 Jong Gye Shin Professor at Seoul National University, Mar. 14, 2015 Major Shareholders (As of December 31, 2015) School of Marine Engineering Name Number of Stocks Owned (Unit: shares) Share (Unit: %) Jae Han Ryu Former President of Korea Finance Mar. 13, 2015 Corporation Samsung Electronics 40,675,641 17.6 Samsung Life Insurance Subcommittee Members 7,814,326 3.4 National Pension Name Executive Internal Compensation External Director Audit 6,906,299 3.0 Committee Trade Committee Candidate Nomination Committee Samsung Electro-Mechanics Committee Committee 5,508,563 2.4 Internal Dae Young Park ● ● Director Tae Heung Chun ● ● ● Hyo Seoup Kim ● External In Man Song ● ● ● ● Director Dong Hyo Kwak ● ● ● Jong Gye Shin ● ● ● Jae Han Ryu ●
14 SAMSUNG HEAVY INDUSTRIES 15 SUSTAINABILITY REPORT 2015 1 Overview Stakeholder Communication Aspect Boundary
Message from the CEO Company Profile Stakeholder Communication Principle Standards for Setting Aspect Boundary Management Philosophy In efforts to systematically communicate with stakeholders, who have direct and indirect influence Business Introduction SHI has constructed its 2015 Sustainability Report according to the CRI G4 Guideline and on SHI business activities, SHI classified stakeholders into different categories in 2015. Through Business Operation Process structured each aspect according to the company’s 5 core values. SHI further set the its diverse communication channels, SHI is engaging in active talks with its stakeholders and Governance businesses that were highly related to each aspect as the internal boundary. Stakeholders it sharing its major sustainability management related issues with them as well. SHI further Stakeholder Communication groups who were affected by a certain standard, according to different characteristics of Aspect Boundary endeavors to realize sustainable development and healthy growth by reflecting the stakeholders’ each aspect, were set as the external boundary. Materiality Test interest to SHI’s business operations.
2015 Aspect Boundary SHI Stakeholder Engagement and Communication System Aspect Boundary 2015 Issues GRI G4 Guideline Aspect Internal Boundary External Boundary People Training and education ● ● ● ● ● Business Partners Customers Government ㆍStrengthen Employees’ Capacity ● ● ● ● ● ㆍEmployees’ Quality of Life Grievance Mechanisms - ㆍHealthy labor-management relationship Employment ● ● ● ● ● -
Excellence Product and service labeling ● ● ● ● ● Customers Shareholders ㆍTechnology Development
Employees
Core & Investors General ㆍCustomer Satisfaction Market Presence ● ● ● ● ● - Stakeholder Media Stakeholder NGOs ㆍProducts & Services Groups Groups Change Occupational safety and health ● ● ● ● ● ㆍEmployees’ Health & Safety ● ● ● ● ● ㆍGreen Management Energy Business Partners ㆍOrganization Culture Emission ● ● ● ● ● Local Partners Associated Waste ● ● ● ● ● Local Communities Communities Institutions Integrity Anti-Corruption ● ● ● ● ● Business Partners ㆍEthical Management ㆍCompliance ● ● ● ● ● ㆍInformation Management Compliance Government
Co-prosperity Labor Practices ● ● ● ● ● Business Partners Stakeholder Communication Channels ㆍMutual Growth ● ● ● ● ● ㆍSharing Management Indirect Economic Impacts Local Communities SHI puts much efforts into accommodating the opinions of its various stakeholders through Business Review Economic Performance ● ● ● ● ● Shareholders and Investors operating a diversified communication channel. Moreover, from the opinions obtained through Management Support (Finance, Planning, HR, Administration, etc.) R&D Production Engineering Sales such channels, SHI strives to reflect such voices into its business strategy. Lastly, the selection of major topics addressed in its sustainability reports are also derived from analyzing stakeholders’ opinions. Report Scope and Stakeholder Division
Independent from the aspect boundaries as provided by the GRI G4 Guideline, SHI has classified Stakeholders Activities Major Interests different aspects in its Sustainability Report to reflect stakeholders’ interest. Shareholders Regularly sharing sustainability management activities and Operating results, management and Investors performances with shareholders and investors through online strategies, business ethics, and offline channels and compliance Customers Regularly communicating with customers through a wide range Customer satisfaction activities Core Stakeholder Interest Scope of communication channels and responsible organizations & product and service quality Shareholder & Partner Local Employees Operating various programs such as presentations on Education programs, Customer Employees Investors Companies Communties management status and Sorisaem in order to boost fair evaluation & compensation, ㆍPeople communication with employees quality of life Business Operating various communication channels for effective shared Shared growth programs & ㆍExcellence Partners growth with business partners fair transactions ㆍChange Local Carrying out various social contribution activities to help local Social contribution activities & Communities communities grow stably protection and preservation of ㆍIntegrity environment ㆍCo-prosperity
16 SAMSUNG HEAVY INDUSTRIES 17 SUSTAINABILITY REPORT 2015 1 Overview Materiality Test
Message from the CEO Company Profile Materiality Test Process Materiality Test Framework Management Philosophy SHI conducts its materiality test to identify factors introduced in its Sustainability Report, which SHI conducted its materiality Test by adapting the integrated international standard guideline, Business Introduction may significantly affect the company’s short, mid, and long term value creation capability. The the
People Excellence Change Integrity Co-prosperity Mutual Growth with Partner Companies Environment Ethical Protection Management ㆍStrengthen Employee ㆍAdvancement of quality ㆍDistinctive Display of ㆍEnhancement of Ethical ㆍMutual Growth with Business and Strengthen Preservation Capability management system Organization Culture Management Partner Employee ㆍImprovement of Employee’s ㆍImprovement of product and ㆍEnhancement of Productivity ㆍCompliance ㆍSocial Commitment Practices Capacity Work-Life Balance services and Competence ㆍStabilization of Fair Trade ㆍInvigoration of Local Employees’ Strategic Social Distinguished ㆍFair Evaluation and ㆍTechnology Development ㆍRisk Management Culture Community Quality of Life Commitment Based on Organization Industrial Characteristics Compensation ㆍInnovation for Survival ㆍCreation of New Businesses ㆍUprightness of Governance ㆍSupport for Future Culture ㆍEmployee Safety ㆍEnhancement of Customer ㆍResponse to Global CSR ㆍEstablishment of Information Generations ㆍActivation of internal Satisfaction Issues Protection System ㆍEnvironment Protection and Communication Preservation Influence
People Excellence Change Integrity Co-prosperity
2015 Materiality Test Process
STEP 1. STEP 2. STEP 3. STEP 4. 2015, Establishment Acceptance of Materiality Test Derivation of of Sustainable Management Task Force Team Perspectives Result Analysis Core Issues Issue Pool
ㆍMedia analysis ㆍBenchmarking of similar industries ㆍEvaluation of 25 Issues ㆍCategorization into 5 different ㆍMeasurement of relevance and influence of each issue to ㆍConfirmation of the 5 issues derived from the relevance / influence ㆍIndustrial trend analysis ㆍAnalysis of international standards categories sustainable management. measurement and attainment of approval from related divisions.
18 SAMSUNG HEAVY INDUSTRIES 19 SUSTAINABILITY REPORT 2015