TAKE ACTION FOR SUSTAINABILITY Kumho Tire Sustainability Report 2013/2014 ABOUT THIS REPORT Purpose of Report This report is intended to introduce the sustainability management achievements of Kumho Tire Co., Ltd. (‘Kumho Tire’ hereafter) for 2013 in fulfilling its economic, social, and environmental responsibilities. It has placed focus on critical issues in which its stakeholders showed keen interest during the year, together with the company’s unique approaches to sustainability management strategies. Reporting Period This report covers activities held for the year 2013 from January 1 to December 31. Note, however, that it partially touches on earlier periods only when necessary for readers to understand the larger trend. It also introduces some of the company’s activities and achievements in 2014 for the same reason. This is Kumho Tire’s third sustainability report following the first report submitted in 2006 and the second one prepared in September 2013. The company plans to issue its sustainability report every year. Reporting Scope and Boundaries This report largely addresses the company’s domestic operations in the economic, social, and environmental aspects – including those of the headquarters and various local manufacturing and business operation sites. Please note, however, that the environmental data are limited to the company’s performance in domestic and overseas sites. Whenever the reporting scope/extent for a certain area needs to differ from the principle, a special note follows the relevant description. Reporting Principles and Assurance Standards The financial information complies with the Korea International Financial Reporting Standards (K-IFRS) The procedures of and contents in this report have been reviewed by an independent external assurance organization, KMAR (Korea Management Association Registration, Inc.), as described in the enclosed Third-Party Assurance Statement. Major Changes This report highlights the company’s efforts to normalize operations in the economic, environmental, labor, social, and quality aspects while seeking to become a genuinely sustainable enterprise through second takeoff campaigns. Examples include, compared to the previous years, the increased number of labor-management council meetings and proactive measures to prepare for the country’s implementation of carbon emissions trading scheme in 2015. Report Distribution and Feedback This report is published in Korean and English. Both versions are available on the company website. The English version is registered with the GRI as well. Stakeholders’ feedback on the report will be made by email, surface mail, fax, company website. Additional Information For additional information or inquiries, please contact us at the following address. Cover Story G. Production Planning Team , Kumho Tire Kumho Tires' sustainabilityle 658 Eodeung-daero, Gwangsan-gu, Gwangju, Korea management is about infinite continuity and permanence. Envision a tire running on a Mobius Te l +82 - 62 - 940 - 2207 band - it represents constant Fax +82 - 62 - 950 - 4779 movement, boundless possibilities, and competitive edge unique to E-mail [email protected] Kumho CONTENTS Sustainability Overview 02 Kumho Tire at a Glance 04 Kumho Tire 2013-2014 Highlights 06 Message from the CEO 08 Company Profile 10 Global Network 12 Brand Portfolio 13 Kumho Asiana Value System 14 Kumho Tire Strategies 15 Stakeholder Engagement 16 Materiality Assessment 18 Implementation Tasks for Sustainability Management Strategies I. Take Action for Value / Sustainable Competitive Advantage 22 Enhancing Research and Technology Competitiveness 24 Boosting Product Competitiveness 25 Reinforcing Operational Competitiveness 26 Sales Turnaround 28 Building Sustainability Management Governance II. Take Action for People / Harmonious Personnel Management 32 Boosting Personnel Management Efficiency 33 Securing and Fostering Talented Personnel 36 Building Trust-based Labor/Management Relations 38 Improving Employee Welfare Benefits III. Take Action for Green & Safety / Management that Values Humans and Nature 42 Global Environmental Management 46 Using High-efficiency, Eco-friendly Energy 48 Climate Change Response System 50 Eco-Friendly Product Development and Market Expansion 54 Safety and Health Management IV. Take Action for Sharing / Operations of Fulfilling Responsibilities 58 Cultivating a Deep Sense of Ethics 60 Supply Chain Management for Competitiveness Enhancement 62 Fulfillment of Social Responsibilities (Social Contributions) 64 Enhancing External CSR Communication V. Take Action for Customer / Quality for Customer Value Enhancement 68 Proactive Quality Management 70 Upgrading to Advanced Quality 71 Improving Customer Satisfaction 74 Marketing Promotions APPENDIX 77 Consolidated Financial Statements 78 GRI G4 Index 82 Third Party’s Assurance Statement 84 Major Awards and Memberships in Associations 85 Stakeholder Survey Sustainability Overview KUMHO TIRE AT A GLANCE What impact does Kumho Tire have on society including its supply chain? Redistribution of Economic Values In pursuit of shared growth, Kumho Tire aims to redistribute all economic values it acquires through its business activities to its value chain - including its supply chain - and surrounding external environment. 02 Purchase of Raw Materials KRW 3.6985 TRILLION 2013 SALES Manufacturing MIXING SEMI-FINISHED BUILDING GOODS Sustainability Report 2013 / 2014 KRW 2.3292 TRILLION KRW 163.5 BILLION Disposal/Recycling Suppliers Creditors Total amount of raw materials and Total amount of interest paid to service contracts TOTAL KRW financial institutions 2.9557 TRILLION KRW 56.5 BILLION KRW 406.5 BILLION Government & local communities Employees Total amount of taxes and social Total amount of employee wages, contributions (including support for Pink benefits, and education & training Ribbon campaign and the Vietnamese expenses Expats Association) 03 Sales/Distribution CURING INSPECTION Sustainability Overview 2013 Jan. 2013 | Participation in the 2013 Tokyo Auto Salon Kumho Tire took part in the 2013 Tokyo Auto Salon, the largest auto parts exhibition in Japan held in Chiba Prefecture. Based on the ‘Eco-Friendly & Premium’ mantra, the company featured diverse products such as Ecsta V700, which applied the Formula technology, ecowing S, and Ecsta LE Sport, captivating many of the visitors to the fair. Feb. 2013 | OE Tire Supply for BMW Mini GP Kumho Tire supplied its Ecsta V700 for BMW Mini GP as OE tires in 2013. Ecsta V700 is focused on providing optimal grip force to either amateur racers or speed enthusiasts through the application of racing tire technology. We expect Ecsta V700 to run through all corners of the world together with Mini GP, the fastest Mini ever in history. 04 Sept. 2013 | Aug. 2013 | Opening the Kumho Tire R&D Center Waging a Pink Ribbon Campaign Kumho Tire established the Kumho Tire R&D In 2013, Kumho Tire held a Pink Ribbon Center in Yongin in central Korea with highly campaign for the second year in a row. The qualified researchers and cutting-edge systems event featured various programs aimed at and pledged to take off as a ‘Technology raising awareness of breast cancer. The Powerhouse‘. Banking on its geographical company donated the KRW 100 million advantage and highest-level research collected during the campaign to the Korea infrastructure, the center will become the Breast Cancer Foundation. Meanwhile, company’s hi-tech mecca through intensive Kumho Tire participated Pink Fitters Day, a efforts to develop new products and core fundraising event for breast cancer patients in technologies. Australia, for the fourth straight year in 2013. KUMHO TIRE 2013 Oct. 2013 | OE Tire Supply for Benz Nov. 2013 | G- and B- Classes Sponsoring KLPGA Golfer Ha Na Jang Kumho Tire supplied OE tires for Mercedes-Benz In 2013, Kumho Tire reinforced its golf marketing by G-Glass and B-Class. G-Class, a premium SUV, sponsoring KPLGA star player Ha Na Jang. A triple will be equipped with Solus KL21; B-Class, a crown holder during the 2013 season, Ha Na Jang will premium compact, will be fitted with Ecsta HM. wear uniforms and carry golf bags with Kumho Tire The Benz cars are expected to be sold logos. She will be offered air tickets for her golf worldwide. Through its enhanced partnership tournaments. In addition, the company will sign an with overseas premium car makers, Kumho Tire official sponsorship contract with KLPGA and hold the is boosting its global competitiveness most Kumho Tire Women’s Open in 2014 as well. effectively. Aug. 2014 | May 2014 | • Pink Ribbon campaign for three straight years • Launch of promotional event on the occasion of the 1st • Educational talent donation in motorsports anniversary of the company’s launch of mileage warranty Sep. 2014 | system • Sponsoring Spanish Primera Liga as part of its • Launch of emergency exit information video for the CGV aggressive marketing in Europe multiplex cinema chain • Kumho Tire R&D Center holding a special career fair • Participation in Reifen Essen Tire Fair in Germany Oct. 2014 | June 2014 | • Selection by the Renault Group as excellent supplier • Joint research with Yokohama, Japan on future-oriented tires in terms of quality July 2014 | • Development of tire with reduced noise for the first • Resumption of construction of the manufacturing plant in time in the Korean industry Georgia, USA Sustainability Report 2013 / 2014 Apr. 2013 | Implementation of Mileage Warranty / | Mar. 2013 EV tire supply contract Contracted for the supply of Kia