Social Contribution

Vision and Strategic System for Win-Win Growth

vision & slogan, Four major strategic tasks, Specific direction of strategies, six initiatives
Vision & Slogan ‘Win-win growth, happy together’
Four major
strategic tasks		 Performance sharing Competitiveness reinforcement Shared growth payment Communication strengthening
Specific direction
of strategies		 · Expansion of the use of the Shared Growth Cooperation Fund
· Simplification of procedures for joint tasks
· Exploration and distribution of exemplary cases		 · Support with technologies and know-how
· Support with consulting to increase productivity
· Support with professional on-the-job training
· New market pioneering activities		 · Expansion of the shared growth payment system
· Payment in cash for subcontractors
· Enhancement of utilization of the Shared growth Cooperation Fund
· Support with operational fund		 · Fair and transparent transactions through CPS
· Operation of communication channels for each class
· Support for the social contribution activities of suppliers
· Activities of PR channels (media, company newsletter)
Six initiatives Fair opportunity, Sales growth, Technical and human resource support,
Financial support, Welfare and benefits, Open communication

Strengthened communication with Suppliers

Win-win growth
community

LG H&H strives to build strong partnership within the culture of fair trade. We set the four approaches for win-win growth, related to contracts, selection, document issuance, and the Subcontractor Reveiw Committee for the basis of fair trade. We also regularly conduct communication activities with suppliers through the Collaboration Council, Win-Win Growth Seminar, and Win-Win Growth Workshop.

Win-Win Growth Review Committee Structure

Visiting Suppliers for On-site Communication

LG H&H offers various opportunities to share ideas, targeting each level of employees. Such efforts include general meetings and seminars with the CEOs of suppliers and working-level discussions for win-win growth. We have listened opinions from suppliers, identified difficulties, and taken proper actions to swiftly resolve the issues.
In 2015, we enacted more direct and quicker change by increasing the number of visits to suppliers for on-site communication, arranged by the executive purchasing director to identify their problems in the field. We share ideas to find effective solutions for the issues that frequently emerge in actual transactions, including new technology proposals, minimum units for orders, relocating business sites, and inventory management.
Furthermore, we expanded the existing communication channels and provided insight lectures presented by prominent figures in the fields of free discussion, management philosophy, state-of-the-art technology trends, and next-generation leadership, thereby broadening the common ground we share with suppliers.

Open Communication

Based on the LG H&H Cooperation Committee founded in 1985, we organized the CEO Academy and the Competitiveness Reinforcement Workshop, as well as the Win-Win Growth Review Committee consisting of directors, the representatives of suppliers, eminent figures in the industry, and LG H&H’s internal subcontract committee members. Classifying them into three subcommittees depending on the type of agenda, we discuss the win-win growth support system and other subcontract issues and make decisions with the representatives of suppliers. Committees and discussion bodies for each class serve as our open communication channels for practical identification and reflection of the field workers’ opinions.

Supplier communication channels
Category Shared Growth Deliberation Committee
with Partner Companies		 CEO Academy Competitiveness Reinforcement
Workshop
Session Quarterly Annually Annually
Content Deliberate subcontracts and win-win growth issues Share win-win growth issues and the procurement policy Shared growth and purchasing policy sharing Share win-win growth issues and the procurement policy Shared growth and purchasing policy sharing
Members 2 non-executive personnel
5 representatives of suppliers
3 LGHH internal committee members		 Approximately 130 representatives of partner companies Approximately 130 employees of partner companies

Reinforcing Supplier Competitiveness

Technology
Proposal Fair

Supplier Technology Proposals are held regularly so that the suppliers can introduce their technology to the decision makers in Marketing, Business, R&D, and Overseas Divisions of LG H&H. We offer budget if a supplier requires additional support for its technology development.

Support for International Exhibitions

As means for new entry into and benchmarking of global cosmetics market and trends, LG H&H encourages its SME suppliers to attend international technology exhibits. We offer all supports and costs for registrations and displays for the exhibits, thereby leading them to focus on preparing for the exhibits.

Protection of Technologies
Developed by Suppliers

For cooperative development business with suppliers, LG H&H proactively utilizes the technology escrow system to protect the unique technology of SMEs. When it comes to technical materials created in the development process, we determine such materials with the principle of application of joint patent depending on the level of contribution. Under the management system, we prohibit requiring their technical materials in principle to protect their intellectual properties. Requesting their technical materials is allowed by making an official request only when there is an unavoidable reason.

Consultation

We provide our suppliers technology consulting for their competitiveness building. Our experts aid the primary and secondary suppliers in improving productivity and quality. Moreover, we also support our cosmetics suppliers to obtain CGMP certification so that they can build capacity that satisfies potential customers' needs for quality, thereby also increasing trust in LG H&H.

Expanding Financial Support

Win-Win Growth Fund

We help suppliers in making decisions for new technology development, processing capacity building, and new market entry. Furthermore, in collaboration with financial institutions, we established the Win-Win Growth Fund to offer loans at low interest rates.

Investment Financing

Our investment financing program is a financial support for suppliers when they require budget for R&D, productivity building, and overseas market entry. Since 2014, we have run a total of KRW 2 billion for financing investment in suppliers.

Cash Payment to Subcontractors

LG H&H processes cash payments, within 10 days, three times a month for any payments to all of its suppliers.

Shared Growth
Payment System

LG H&H has introduced and expanded the Shared Growth Payment System, in which secondary, tertiary and quaternary suppliers can also be paid under the same conditions. This system offers advantages of not having any burden of security or risk of bankruptcy in series for suppliers because they do not have the right of resource

Improved Fairness and Transparency in Supplier Management

Purchasing and CSR Diagnostic Processes

Our supplier selection and registration process ensures transparency and fairness in selecting suppliers. In selecting new suppliers, application reviews and credit assessments are made in the 1st phase, which is followed by the 2nd phase assessment where candidates are assessed by our in-house assessment team, made up of at least three departments among purchasing, material management, quality, production, design, R&D and marketing departments. Such assessments target suppliers whose transaction period is more than 1 year and annual transactions amount to over KRW 100 million while assessment categories include quality, deadline, credit ratings, technology, and CSR. In 2012, sustainability management assessment categories was further segmented into 64 items in the seven areas of governance, Jeong-Do management, labor & human rights, environment, safety, consumers and local communities.

Pilot assessments were also made of six raw and subsidiary material suppliers and OEM companies. In 2013, our plan is to perform CSR assessments of 250 major suppliers to reflect the outcomes in our comprehensive purchasing assessments as well as incentive criteria covering the allocation of product volume, the selection of beneficiaries of the Growing Together fund and technological support.

Sangsaenggo and Open Space

We created “Open Space” within our convergent purchasing system to gather feedback from suppliers. Our supplier dialogue channels enable our suppliers to freely communicate their grievances and suggestions regarding business transactions to our purchasing employees.

Operation of Sangsaenggo and Open Space

Request to review grievances and suggestions, Review requests, Feed back review outcome, Take follow-up measures

Evaluation of business partners And CSR management

LG H&H strives to select a business partner fairly and transparently through a business partner selection and registration process.To select a new business partner, we first conduct document examination and a credit test. We then conduct a due diligence test with a test team made up of the people in charge of purchase, materials, quality, production, design, the research center, and marketing. Our company reflects the ESR evaluation results to overall purchase assessment and uses these assessment results as criteria for giving incentives such as quantity allocation, the Win-win growth fund, and technical support.

Welfare and Benefit

Education Support for
Suppliers Employees

We provide free online education (e-learning, book learning) to employees of suppliers.

Welfaremall Support

The welfare mall used by LG employees is open and operated so that employees of partner companies can use the same welfare mall as LG employees.

Support for rest breaks
for Suppliers

We provide support to suppliers for expenses necessary to expand welfare facilities such as rest areas.