Sustainability Management Strategy

Dear Valued LG H&H Stakeholders,

I would like to express our sincere gratitude for your warm affection and generous support.

The COVID-19 pandemic and strict lockdown have caused
severe economic contraction of economic activity and
an economic recession whose scale has surpassed the global financial crisis.
The shock on the real economy continues to this day.
Despite the unfavorable business environment,
we have minimized the crisis by striving to comply with
all principles in our cosmetics business, and made
great progress in major markets such as China and
the U.S. In household goods and beverages business,
we have quickly responded to new demands and
focused on digital capabilities to achieve growth.
Experts predict that this year's global economy will be
a “Long and Winding Road.” The uncertain global eco -
nomic outlook and consumer sentiment appear to worsen as the
COVID-19 pandemic is prolonged. I believe, however, that we can overcome this
unprecedented crisis when we face the challenges head on and work together.
We will create more value based on what we learn from our customers,
as well as on LG H&H’s potential accumulated so far.
We are now facing the demands of a new era. Despite finding ourselves
amidst i an uncertain environment that changes every moment,
this will be a year in which we carefully prepare for the future and boldly challenge ourselves.

We will speed up our global business expansion by responding swiftly to rapidly changing trends.

Despite the unprecedented hardships due to the COVID-19 pandemic, it is also true that new opportunities amidst this crisis. Interest in health and immunity in the U.S. and Europe has never been higher, while, with the advent of the “Untact” era, changes in the existing distribution paradigm are also accelerating. In line with these trends, we will kick off the overseas expansion of our major brands with global trends such as Clean Beauty and Derma Cosmetics. In the field of color cosmetics, we will utilize the assets of our representative luxury line while launching a new brand to strengthen our competitiveness. In addition, we will strengthen our overseas business by increasing the proportion of nonface-to-face business in China, Japan, and the U.S. In China, we will further bolster our competitiveness in online channels that account for more than 50% of the cosmetics market. In Japan, which focuses on mailorder sales, we will accelerate our business growth through expansion of our cosmetics business. In the U.S., following the turnaround of our AVON business performance, we will do our best to gain market share by expanding our cosmetics products.

We will build a strong foundation as our company grows

In 2017, LG H&H launched the Consumer Reassurance Center, which integrates organizations such as quality, environment/safety, purchasing, supply chain management (SCM), customer service (CS), and logistics for the first time in Korea, Since its establishment, the Center has played a role as a control tower for customer value activities so far. This year, we will build and expand our RQM (Reassurance Quality Management System) to enable our products to achieve consistent quality levels at domestic and overseas manufacturing sites. By doing so, we will improve product quality, the foundation of customer trust, to a global level. To reinforce the response to customer pain points, we will expand the management scope to the customer contact points of distributors. We will further expand the Pain Point management process at a global level, not only in Korea but also in China, Japan, and the U.S.

We will secure LG H&H’s competitiveness in order to identify evolving customers accurately and preemptively respond to changes in the market.

The big trends currently shaping the market make it difficult to predict small changes and movements also taking place. At first glance, smart consumption by consumers may seem unstable and irregular. However, it is constantly evolving with its own order and regularity. Through continuous communication and research on the external environment, we will further enhance our own capabilities and competitiveness to identify the signs of various environmental changes and respond to them. While strengthening the execution power of live commerce familiar to the MZ generation and upgrading digital marketing capabilities through active collaboration with Naver, we will strive to maximize customer value and advance business methods. To accomplish this, we will steadily prepare, following our concrete and feasible vision for digitization.

In the face of crisis, the pace of change must increase.

In today's rapidly changing environment, a sense of complacency based on the belief that yesterday's correct answers and perspective will continue to remain valid, is the starting point of a company's downfall. As opposed to an outdated organization that has stopped evolving, we will become one capable of spontaneous regeneration and overcoming crisis in the midst of rapid changes. We are striving to become a dynamic company that seeks change by breaking away from the familiar in order to gain a competitive advantage over those who try to maintain the status quo.

Recently, investors have demanded environmental, social and governance initiatives to be integrated into management strategies and those efforts to be disclosed. LG H&H, as a global leader in sustainability, will continue to comply with the 10 principles set forth by the UN Global Compact, and create a better future by pursuing corporate social responsibility with unparalleled vigor.

The current times have shown us health is more important than ever. We wish all of LG H&H's stakeholders peace and good health, and ask for your continued support and encouragement.

Thank you.

August 2021
CEO & Vice Chairman Suk Cha
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