Social Contribution

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.

Chairman Former
Chairman of
the Cooperative
Council

Audit Outside
Auditor

Collab-
ration
Council

• Chair
• 3 Vice-Chairs
• Secretary-General

Dept. Win-Win
Growth
Team

Subcon-
tractor
Review
Committee

• Head of Public
  Relations Div.
• Head of Purchase Div.
• Head of Quality
  Management Div.

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 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.

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.

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.

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.

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.

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

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

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.

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 Regular suppliers

• Review
  requests
• Feed back
  review
  outcome
• Take
  follow-up
  measures

Purchasing employees / win-win growth
promotion organizaion

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.

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

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.

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