Environment < Sustainable Profitable Growth < Sustainability

Company

S-OIL is actively engaged in environmental management to fulfill its environmental responsibility. S-OIL endeavors to minimize its environmental footprint by strengthening research and development, while improving operational efficiency to reduce carbon and pollutant emissions from its energy use. The Company also spare no effort in analyzing the risks and opportunities arising from climate change and integrating them into its management activities, for example, by investing in and venturing into new businesses.

R&D Enhancement

Not complacent with its current technologies, S-OIL carries out various R&D projects not only in-house but also in partnership with leading domestic and overseas universities and research institutes to develop new products, improve product quality, and upgrade production facilities. In particular, its Technical Service & Development Center (TS&D Center) in the Magok Industrial Complex in Seoul is dedicated to the sustainable growth of the company through the development of high-quality, eco-friendly, and high value-added products.

Enhancement of R&D capabilities

S-OIL has established the TS&D Center in the Magok Industrial Complex in Seoul to strengthen its R&D and technology capabilities and utilize it as the infrastructure for product and technology development related to petrochemical and lube businesses, in its efforts to achieve sustainable growth through the development of eco-friendly and high value-added products.
The TS&D Center focuses on R&D on polymerizing, processing, and analyzing polypropylene (PP) to develop high-quality and high-value-added products. As a result, the Company developed four new PP products and filed 15 patent applications in 2022. In addition, in order to provide differentiated technical services to customers in the highly competitive PP market, S-OIL puts continuous efforts into strengthening relationships with customers by providing technical seminars, and products and material analysis support upon customer requests. Especially from the second half of 2022, with the COVID-19 pandemic waning gradually, the Company is also actively leveraging face-to-face channels to provide the best technical support to customers.
Meanwhile, S-OIL is constructing a New Lab & Office Building in Magok Industrial Complex on a site with a gross floor area of approximately 27,000m2, with completion scheduled for the second half of 2023. In this regard, S-OIL is also preparing technical support and product development for High Density Polyethylene (HDPE) and Linear Low Density Polyethylene (LLDPE) products that will be produced through the Shaheen Project in the future. S-OIL will also continuously engage in R&D in the field of low carbon and new energy as well as cooperative projects with its parent company, Saudi Aramco.

Regarding the lube business, S-OIL delivered a number of achievements in 2022, including the development of 58 new lubricants. S-OIL developed a long-life gasoline engine oil that holds a domestic patent, and the Company is currently developing automatic transmission fluid through continuous joint research with the Hyundai Motor Research Institute.
S-OIL is also focusing its capabilities on developing lubricants for EVs in line with the rapidly changing market environment, and has also produced various industrial lubricants such as hydraulic oil, gear oil, and compressor oil to meet the needs of various customers. In addition to general troubleshooting technical support, the Company offers differentiated and customized technical support to its customers, such as evaluating processability, supporting product and material analysis, providing production process optimization guides, and supporting product development. At the same time, S-OIL strives to build trust with customers by conducting customer seminars on products and processing technologies.
Looking ahead, S-OIL will continue to enhance R&D and technology capabilities while developing marketable products through communication with customers.

New Business Investment

S-OIL is continuously seeking investment opportunities in areas where synergies can be created with existing businesses and areas where the Company already have resources and capabilities, and emerging areas that have great potential to become new growth engines. S-OIL is also actively identifying and realizing investment opportunities to strengthen ESG management and respond to climate change with the aim of sustainable growth.

Shaheen Project

In November 2022, S-OIL's Board of Directors made a final investment decision on the Shaheen Project, a second-phase petrochemical expansion project. The total project size is KRW 9.256 trillion, with an expected completion period of 2026.
Through the Shaheen Project, S-OIL expects to add a total of 3.15 million tons of petrochemical production capacity, including approximately 1.8 million tons of ethylene per year, enabling the Company to shift from a fuel -centric business portfolio to a more stable one. In particular, the Project will more than double the annual ethylene production capacity in the Ulsan area, enabling the Company to supply products to nearby olefin downstream facilities through pipelines, reducing transportation costs while significantly increasing the stability of domestic petrochemical feedstock supply.
The Project also marks the world's first commercialization of Saudi Aramco's Thermal Crude to Chemicals (TC2CTM) technology, which converts crude oil into petrochemical feedstock. The innovative new process is expected to optimize energy efficiency, thereby contributing to higher cost competitiveness and carbon emissions reduction.
Supported by the active cooperation of various stakeholders including the governments of Korea and Saudi Arabia, major shareholders, and local communities, S-OIL will make full use of its capabilities including its successful experience in large-scale projects, outstanding competence, and passion of its employees to successfully deliver the new investment.

New Business Investments

To ensure successful new business investments, S-OIL maintains active communication with a wide range of industries through various channels and continuously scrutinizes investment opportunities identified in the process. From 2019 to date, S-OIL has made direct investments in areas such as smart factories, engineering materials, secondary batteries, fuel cells, carbon emissions reduction projects at home and abroad, hydrogen refueling stations for commercial vehicles, and waste oil collection platforms, as well as indirect investments through specialized investment institutions to cover a wider range of industries.
In light of the recent business trends of the Fourth Industrial Revolution, ESG management enhancement, and the transition to low-carbon and eco-friendly energy, S-OIL plans to make active investments and R&D activities in areas such as new energy sources including clean ammonia/hydrogen, biomass-based raw materials, and fuel cells.

S-OIL's New Business Investment History

S-OIL's New Business Investment History
2019	IPITECH (Polyimide), ONEPREDICT (AI-based facility forecasting and preservation solutions), LiBEST (Flexible batteries), Glory & Tech (Overseas CDM projects)
2020	Beomjun E&C (Specialty building materials using sulfur-based polymers)
2021	FCI Korea (Fuel cell), KOHYGEN (Hydrogen fueling stations for commercial vehicles)
2021	Allsu (Waste oil collection platform)

Operational Efficiency Improvement

S-OIL engages in various profitability-enhancing activities to continuously improve operational efficiency. The Company is striving to increase its competitiveness by creating new value using the core technologies of the Fourth Industrial Revolution, as well as reducing GHG emissions, expanding its petrochemical business, and entering the green energy business in accordance with its Investment Roadmap and Green Initiatives to achieve Vision 2030 and realize sustainable growth.

Activities for Profitability Enhancement

To enhance efficiency and competitiveness throughout the entire processes from crude oil import to product distribution, S-OIL continues to carry out various profit improvement activities in a systematic manner. Through diverse channels including Employee Suggestion Program (ESP), S-OIL develops creative profit improvement ideas such as upgrading facilities, adopting latest technologies, optimizing the operational conditions of production facilities, expanding production capacity of high value-added products, reducing fuel consumption, and adjusting blending ratios of products.
For the profit improvement tasks identified, S-OIL operates S-RICH (S-OIL Refinery Improvement Communication Hub) system to efficiently manage them and share best practices among employees, profit improvement reward system and ESP additional reward system to continuously engage employees and discover effective ideas.
This effort resulted in an unplanned profit maximization worth about KRW 444 billion in 2022 by increasing production of high-value-added products, improving product yields, saving energy, and optimizing product shipment.
In 2022, the Company is actively benchmarking the best practices overseas companies, including Saudi Aramco, and selecting profit improvement items that can be applied across all of its business areas as Transformation Initiatives and implementing them as priorities.

Increasing Investment Decision-Making Efficiency

S-OIL continuously improves its investment efficiency through objective and strategic reviews through external consulting and benchmarking. The Company increases the accuracy of estimated investment costs through rigorous verification, and review investment priorities based on economic feasibility to reflect them in its management plan. S-OIL carries out feasibility checks to prevent unnecessary use of resources at the beginning of the review, and following the completion of a new investment, and conducts structured analysis to improve the efficiency and performance of the investment when the process is completed.
In particular, in 2022, the Company endeavored to improve investment efficiency and performance by further enhancing the accuracy of investment budget assessments and economic analysis, through prior deliberations by the top management on major new investments when establishing the next fiscal year's business plan.
Through this investment decision-making, S-OIL have been working on the heater improvement project since 2018, capitalizing fuel transition of the Refinery following the start-up of the RUC/ODC project as an opportunity to improve operational efficiency. S-OIL plans to complete enhancements of large-capacity heaters during the 2023 turnaround cycle, and the Company is considering extending it to small-capacity heaters as well.

Energy Consumption Reduction

S-OIL is continuously pursuing energy savings and efficiency improvements through its own energy-saving ideas discovered by its engineers and energy consulting from external experts. In 2022, the Company identified energy-saving ideas equivalent to an annual EII improvement of 0.39, achieving more than 95% of the target. The activity will be continued in 2023 to reduce production variable costs.
As one of major ESG initiatives, S-OIL is considering an installation of a gas turbine generator, for which the Company completed a feasibility study in 2022. The Company will proceed with basic design and environmental impact assessment in 2023 to prepare for the rapidly changing energy market in the future. In parallel, S-OIL is also installing solar power generation facilities on idle sites such as S/Ss and terminals, and is promoting the introduction of hydrogen fuel cell power generation facilities at TS&D Center.
In 2023, S-OIL will execute a number of energy efficiency investments in major processes with large energy consumption through large-scale T&I. To seize new energy efficiency opportunities, the Company will carry out new energy consulting and contribute to reducing carbon emissions from its plants.

Digital Transformation

As one of its strategic tasks to achieve Vision 2030, S-OIL is undertaking the Digital Transformation (DT) innovation tasks with the goal of increasing work efficiency and reducing costs by utilizing the core technologies of the Fourth Industrial Revolution. Accordingly, S-OIL is systematically moving forward with the first phase of DT in the three areas - Digital Refinery, Digital Marketing, and Smart Work - by 2023. Through this, the Company aims to digitize work processes in response to future market changes and create new business models using digital technologies to secure competitiveness.

In the Digital Refinery area, S-OIL started working on the detailed design of the S-OIL Integrated Manufacturing Operations Management System (S-IMOMS), which integrates the 11 innovation tasks discovered in 2022 and the existing systems in operation at the Refinery. Once the system is ready, the Company will be able to comprehensively monitor plant conditions using big data and artificial intelligence, and further improve operational efficiency through data-driven decision-making. Also, through the 4IRT (4th Industrial Revolution Technology) initiative, S-OIL aims to improve safety and efficiency through digital solutions such as wireless patrol robots and location-based safety control systems.

As for Digital Marketing, S-OIL expanded the application of a blockchain-based electronic contract system with enhanced transparency from 2022, upgraded Customer Relationship Management (CRM) system and bonus card mobile application to improve customer convenience, and further enhanced marketing capabilities based on data analytics.

In the field of Smart Work, S-OIL has upgraded its internal email system to a more advanced one with enhanced performance and stability in order to improve employees' work productivity, while expanding the application of Robotic Process Automation (RPA) for simple repetitive tasks to further improve work efficiency. The Company has upgraded the functions of its e-procurement system and applied new technologies to enhance efficiency and visibility in procurement, and introduced a comprehensive chemicals management system to comply with laws and regulations related to the manufacture, import, and sale of chemicals.

With the first phase of DT tasks to be completed by 2023, S-OIL will again formulate a DT roadmap for the next three years (2024-2026), analyzing the latest technology trends and researching advanced practices at home and abroad to select the most effective tasks, and then drive continuous efficiency improvement such as increasing productivity and reducing costs.

Building Data Analytics and Visualization Capabilities for Employees

To successfully achieve this mid- to long-term DT roadmaps and meet new changes, it is essential to secure the digital competences of employees. Starting with entry-level data analysis training and various analytical theories in 2021, S-OIL launched an intermediate course in 2022 to develop analytical capabilities based on problem-solving utilizing data used in actual work, thereby fostering Citizen Data Scientists with analytical expertise and problem-solving capabilities.
Building on this S-OIL plans to offer a Data Visualization course to help derive business insights through data visualization in 2023, as well as an Advanced Data Analytics course to nurture talented individuals who can lead data analytics projects.

Response to Climate Change

S-OIL acknowledges climate change as an urgent challenge, and is establishing a mid- to long-term response strategy by incorporating internal and external uncertainties related to investment and production facility operations. By implementing a company-wide carbon management system, the Company is able to meet its GHG emission reduction obligations and make investment decisions that take into account carbon costs.
S-OIL is also actively participating in global efforts and government's policy aimed at carbon neutrality through continuous improvement of process and environmental facilities, international GHG reduction projects, and development of low-carbon eco-friendly businesses.

Advanced Carbon Managements System

S-OIL operates an IT-based carbon inventory system to identify, record, calculate, and report GHG emission generated by its business activities for systematic GHG management. New and revised regulations of the government are frequently reflected in the system to maintain the accuracy and reliability of data through internal verification and independent external assessment. S-OIL also regularly maintains and calibrates the measurement and analysis equipment to maintain the highest level of GHG monitoring in the industry. The Company is revamping internal procedures on carbon management and expanding GHG emission cost estimation scope to small-and-medium-sized process improvements and energy savings in all business areas and investment projects, as well as large-scale new investments, thereby inducing investment decisions into green businesses. S-OIL incentivizes employees to actively participate in energy and GHG reduction efforts by returning some of the economic benefits from excellent proposals to them. In the meantime, the Company is in the process of establishing a comprehensive emission allowances management plan in line with its mid- to long-term operational plans and national emissions reduction roadmaps by predicting future emissions and emissions quota.

GHG Reduction Performance)

GHG emissions reduction is one of the key KPI indicators for achieving Vision 2030 at S-OIL. The Company monitors GHG emission status and facility investment for reduction periodically, and the results are incorporated into performance evaluation of all executives and team leaders. Tapping onto the Energy Conservation & Operation System (ECOS), S-OIL performs energy diagnosis activities to discover improvement areas and apply them to the process to reduce actual energy consumption and GHG emissions. In 2022, GHG emissions worth 80,000 tons were reduced through active energy efficiency improvements. The Company is making every effort to reduce GHGs by optimizing operating conditions to reduce heat and fuel consumption, adopting high-efficiency equipment, improving process control systems, utilizing waste heat from nearby plants, and expanding the use of low-carbon fuels. S-OIL is also strengthening the monitoring of indirect emissions from crude oil procurement to product distribution.

GHG Reduction Initiatives

To raise awareness and build consensus on GHG reduction among consumers, S-OIL conducts environmental campaigns every year, which captures drivers' interest with novel ideas, including No Idling and Car Diet. In 2015, the Company established an initiative to boost energy efficiency by 15 percent by 2030 in collaboration with Korea's leading companies and are making relentless efforts to meet the target. S-OIL also set GHG reduction as one of its strategic targets in response to the global trend of carbon neutrality, and the government's 2050 carbon neutrality declaration. Since 2016, as part of its efforts to directly reduce GHGs, the Company has been engaged in a waste heat power generation business with KD Powertech, constructing a 16.4MW waste heat recycling steam turbine generator on the site of the Refinery and reducing 61,000 tons of GHG annually by selling the electricity generated with the facility to KEPCO.

Minimizing Direct and Indirect Carbon Emissions (SDGs #13)

Aiming to minimize direct and indirect carbon emissions generated during the production, S-OIL continues investments in adopting high-efficiency heat exchangers, recovering waste heat, improving process efficiency, and introducing low-carbon external steam to achieve energy-efficient plants. The Company is also working to introduce solar power generation facilities utilizing idle rooftop sites of buildings on its premises, and gas turbine cogeneration using clean gas fuel to minimize indirect emissions from electricity use. In addition, S-OIL has been capturing and utilizing approximately 100,000 tons of CO2 generated in its hydrogen generation process, in cooperation with Dongkwang Chemical to produce carbonated products such as liquid CO2 and dry ice for beverages. The Company plans to scale up its operations to increase CO2 capture capacity to 200,000 tons per year by the second half of 2023.
These short-term carbon emission reduction activities are incorporated into KPIs to closely manage their implementations and performances, while the mid- and long-term carbon emissions reduction plans are updated in the ESG Roadmap every year to reflect changes in global carbon emission policies and implement them gradually.

Carbon Emission Reduction Projects at Home and Abroad

Not only reducing direct GHG emissions through upgrading existing facilities and new investments, S-OIL also strives to keep pace with global efforts to tackle climate change through participating in the Clean Development Mechanism (CDM), a global GHG reduction project led by developed and developing countries alike.
Since 2019, S-OIL has been implementing a project to distribute free high-efficiency cookstoves in Myanmar. These cookstoves are more energy-efficient than wood-fired cookstoves, reducing carbon dioxide emissions. Moreover, they improve the quality of life for Myanmar people suffering from droughts, floods, typhoons, and severe air pollution that led to many deaths each year.
In 2020, S-OIL participated in another CDM project in Bangladesh to build drinking water facilities to ensure safe drinking water for the villagers who have no public water supply and have to boil water by burning wood. Since 2021, the Company has completed a total of 20 drinking water facilities (10 completed in 2022), thereby reducing GHG emissions through reducing the amount of wood would otherwise be used to purify water and improving human rights and health conditions of women and children who have provided labor to collect and purify water.
Going forward, S-OIL plans to promote various carbon emission reduction projects at home and abroad to obtain additional carbon credits, as well as continue to diversify into low-carbon eco-friendly businesses as a way to reduce the carbon intensity of its overall sales and mitigate climate change risks.

Business Diversification to Meet Changes in Demand

Global efforts to tackle climate change are expected to have an impact on the demand for fuel products in the mid- to long-term. Recognizing the importance of proactive response to the change, S-OIL is making continuous investments to increase the share of the petrochemical business in its business portfolio, as seen in the completion of the KRW 4.8 trillion RUC/ODC Project in 2018, followed by the Shaheen Project in 2023, the largest in the history of domestic refining and petrochemicals with a total investment of KRW 9 trillion. The Company is also continuously diversifying its low carbon business by investing in the fuel cell industry in preparation for the hydrogen economy and signing an MOU with Saudi Aramco for the domestic supply of blue hydrogen and blue ammonia. In addition, S-OIL aims to proactively meet the evolving needs associated with climate change through new products and businesses in the low-carbon, eco-friendly, and circular economy sectors, such as utilizing waste plastic-based pyrolysis oil and biomass-based fuels. In the future, the Company plans to explore other opportunities in low carbon area to create synergy with existing businesses and enter new business areas by carefully analyzing the impact of climate change on business environment.

Association Memberships for Climate Change Response

As part of its efforts to minimize impact on climate change, S-OIL is committed to engaging in association activities that comply with the Paris Agreement. For major business-related associations of which S-OIL is a member, the Company reviews associations' activities on an annual basis and determines whether to maintain its membership in consideration of their positive impact on the environment in the long term.
In cases where an association that S-OIL is a member of does not comply with the Paris Agreement or engages in activities that may adversely affect the environment, the Company reconsiders its membership in that association and works to achieve goal of minimizing carbon footprint. Through these associations, S-OIL actively participates in industry efforts to address climate changes.

Systematic Response to Climate Change reflecting TCFD Framework

S-OIL proactively responds to climate change and participating in global efforts to reduce GHG emissions through systematic risk management integrating recommendations of the Financial Stability Board (FSB)'s Task-force on Climate-related Financial Disclosures (TCFD).

Recommendations of TCFD

Recommendations of TCFD
Governance	Disclose the organization's governance around climate-related risks and opportunities.
Strategy	Disclose the actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning where such information is material.
Risk Management	Disclose how the organization identifies, assesses, and manages climate-related risks.
Metrics and Targets	Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

Governance

S-OIL set response to climate change as one of strategic goals to achieve its Vision 2030 and its top decision-making body, the BOD, checks its progress and outcomes every quarter. The BOD determines specific action tasks, which are incorporated into the Company's sustainability management scheme and mid- and long-term management plans and budgets. S-OIL inspects and analyzes differences between climate change goals and actual performance periodically, thereby establishing detailed measures to meet the goals.
S-OIL is promoting climate change responses as a major task of ESG management, and has established an ESG Steering Committee to manage it more systematically and integrally. The ESG Steering Committee consists of executives from each organization of the Company, including production, marketing, finance, planning, HR, and compliance. It holds regular meetings every quarter to review, evaluate, and deliberate the Company's ESG management activities, including response to climate change. And in 2023, the ESG Committee was established under the Board of Directors, which conducts regular meetings every half year to holistically oversee the Company's strategies, policies, and achievements on issues related to ESG.

Strategy

S-OIL operates the Enterprise Risk Management (ERM) system to conduct a systematic and periodic analysis of countless potential risks in the fast-changing business. Among them, the Company recognizes climate change related risks as core ones and responds to them by injecting company-wide capabilities through the ERM system.

Short-term risk (1~2 years) : Occurrence of abnormal climate due to rising temperatures on the Korean Peninsula

According to the Korea Meteorological Administration, Korea's annual average temperature rose by 1.2℃ over the past 30 years. If GHG emissions continue at this rate just as shown in the RCP 8.5¹⁾ scenario, the speed at which temperatures rise is expected to increase 1.6 times. Precipitation is also projected to triple compared to the global average. In particular, Ulsan where S-OIL's refinery is located is forecast to see a surge in rainfall intensity and the number of heavy precipitation days, which directly affect refinery operations, even in the RCP 6.0¹⁾ scenario. If global warming persists, there is a high likelihood that super-strong typhoons could occur due to a spike in the sea surface temperature. Heavy rain or typhoons that are beyond a predictable scope can disrupt crude oil supply and refinery operations, and a temperature rise in summer could lead to a delay in T&I, causing massive losses. As such, S-OIL beefed up its risk response manual in preparation for typhoons and heavy rain, designed new facilities in a way that production will continue uninterrupted in spite of precipitation exceeding the highest level since observations first began, and overhauled the sewage discharge system of the Refinery in 2019. Also, S-OIL installed an additional Single Point Mooring (SPM) in 2020, a facility for unloading crude oil, to ensure a prompt response when crude oil unloading can be impeded for a long period due to a typhoon, etc. Other than the above, S-OIL set up facilities to prevent health risks for outside workers and work speed slowdowns under scorching heat in summer.

Mid-term risks (3~5 years): Rising GHG emission allowance price and growing pressure of GHG reductions

The emission allowances allotted by the government are expected to decrease down the road in line with Korea's Nationally Determined Contribution (NDC) and the GHG reduction roadmap. The resulting growing GHG reduction pressure and an increase in GHG emission allowance price will lead to a spike in raw material prices and an increase in production costs, ultimately eroding the Company's profitability. Conversely, the sale of spare GHG emission allowances created by its direct GHG reduction efforts can present opportunities to S-OIL.

Long-term risk (6~10 years) : Decrease in fuel demand resulting from an energy paradigm shift

Global efforts to combat climate change are expected to bring change to the energy paradigm and, in the long term, cause a sharp decline in fuel demand. On the other hand, endeavors to develop and expand low-carbon products in preparation for such change can create new business opportunities.

¹⁾ RCP (Representative Concentration Pathways) are climate change scenarios introduced in the Intergovernmental Panel on Climate Change (IPCC) 5th report. RCP 8.5 refers to a scenario that GHG emissions at current emission trends leading to atmospheric CO₂ concentrations of 940 ppm in the atmosphere, while RCP 6.0 refers to a case that some level of GHG emission mitigated policies is implemented, and CO2 concentrations reach 670 ppm.

S-OIL looked into various scenarios on climate change when establishing mid- and long-term strategies, and put primary consideration on Korea's Nationally Determined Contribution (NDC) scenario aimed at limiting global warming to 2℃ above pre-industrial levels. Based on this, S-OIL predicted mid- and long-term emissions and required emission reductions and is implementing a comprehensive operational plan that includes cost-effective countermeasures. Furthermore, S-OIL is developing business models that can become its new growth engine while addressing climate changes through its mid- and long-term investment roadmap to achieve 'Carbon reduction by 35% compared to 2030 BAU'.

Risk Management

S-OIL has integrated climate change risk identification and assessment processes into the ERM system for systematic management. ERM environmental change analysis tools are made up of political, economic, market, technological, social, and legal items, and the relative importance of risk is assessed based on the Risk Assessment Matrix, which has been drawn up according to the possibility of the occurrence of each item and its impact. In 2020, S-OIL upgraded the importance of climate change risk by reflecting the globally accelerating carbon neutrality trend and established more rigorous risk identification, assessment, monitoring, and response processes. The Sustainability Management Team, the risk owner of climate change, conducts quantitative assessments of climate change issues every quarter. S-OIL built a process within the ERM that enables prompt and effective control activity to mitigate risk at the corporate level when a risk with a critical impact on the Company arises. In addition, the ERM Committee, comprised of top management including the CEO, conducts the final review of activities to control risk that includes climate change every quarter, prepares necessary response activities, and makes decisions on corporate-wide risk control policy.

Metrics and Targets

S-OIL uses as indicators energy usage and GHG emissions calculated according to the Guidelines for Reporting and Certification of Emissions of Emission Trading Scheme in order to assess climate change risk and opportunity, and discloses such along with water usage and waste discharge volumes. In parallel, S-OIL quantified and developed Carbon Intensity as a KPI by considering the complexity of each process rather than absolute carbon emissions, and incorporated it in each organization's performance management programs to effectively manage climate change efforts, thereby bolstering management's accountability. S-OIL discloses Scope I, II, and III GHG emissions every year, and sets 'Carbon reduction by 35% compared to 2030 BAU' as its target responding to climate change in 2021.

Environmental Emissions Management

Based on its strong commitment to environmental preservation and green management, S-OIL is actively carrying out eco-friendly policies and continuous environmental investment as well as complying with environmental laws and regulations. Environment Team at the Refinery and General Affairs Team at the Head Office operate a systematic environment management system to minimize pollutant discharges and adverse environmental impacts. Through continuous improvement of processes and environmental facilities, S-OIL produces eco-friendly products, manages environmental pollutants and preemptively responds to environmental regulations.

Environmental Management System

S-OIL has set the establishment of proactive green management as the top priority of its first environmental policy, and is not only producing high-quality eco-friendly products by continuously revamping production processes and introducing new technologies, but also securing environmental facilities to reduce emissions of environmental pollutants, such as desulfurization, denitrification, and wastewater treatment, and dust collection. Since 1996, S-OIL has been practicing the highest level of environmental management by obtaining ISO 14001 certification for all production processes, and has expanded the scope of certification to terminals to apply and manage the environmental management system throughout the process until the final product is shipped. In 2022, environmental training was conducted for 1,880 employees to familiarize them with environmental laws and regulations as well as the Company's environmental management strategies and systems.

ISO 14001 Certification: PDF Download

Environmental Policy

S-OIL has established and operates an advanced environmental management system under the principle of preventive green management that prevents environmental hazards and risk factors at every stage of business operation. In addition, the Company complies with the following environmental policies with the cooperation of stakeholders such as customers, suppliers and employees.

The Company shall comply with the environmental laws and regulations of the region in which the Company operates its business, establish strict internal standards that are above legal standards, and adhere to the standards.
The Company shall minimize the environmental pollutants (air pollutants, water pollutants, soil pollutants, hazardous chemicals, etc.) created in the production processes or business facilities through the improvement of efficiency, etc. and prevent potential environmental accidents including oil spill.
The Company shall develop, manufacture and sell highly efficient products that minimize environmental impact on consumers.
The Company shall minimize greenhouse gas emissions from the distribution process through efficient logistics system operation and prevent environmental accidents such as leakage.
The Company shall treat wastes safely and environmentally, and improve waste reuse.
The Company shall consider environmental factors when selecting suppliers and do not receive products and services from suppliers that can cause severe environmental pollution while expanding green purchasing.
The Company shall improve the environmental performance of affiliated companies such as JVs and subsidiaries, and also consider environmental factors in capital investments such as mergers and acquisitions.
The Company shall actively support and participate in environmental protection activities such as biodiversity conservation.

Integrated Environment Permit System Approved by MOE

Following the Act on the Integration of Environmental Pollution Management, S-OIL obtained the 'Integrated Environmental Permit' from the Ministry of Environment in December 2022. The Integrated Environmental Permit is a system introduced to resolve the problems of environmental permits under individual laws and regulations. It consolidates about 10 environment-related permits into one integrated permit, while applying customized emissions standards that take into account the impact on the surrounding area of the business site to conduct integrated and systematic environmental management.
S-OIL has improved various environmental facilities and compliance with the enhanced emissions permit and management standards under the Integrated Environmental Permit. The Company plans to implement additional facility improvements to stay in compliance with laws and regulations and minimize pollutant generation.

Environmental Pollutant Emissions Control

Starting from 2021, S-OIL operated the Environmental Dashboard system designed to cope with preemptively strengthening environmental regulations and increase operational efficiency. The system visualizes various environmental indices such as pollutant concentration, emission volume, and waste treatment status, and provides real-time data, thus improving accessibility to environmental data for users. The system is also updated with major regulations and legal inspection schedules in real time, enabling proactive response to environmental regulations.

Air Quality Control

S-OIL has in place stricter internal emissions standards than legally required in order to improve the atmospheric environment in local communities. In 2018, the Company switched all of its heater and boiler fuels from bunker-crude oil to LNG to minimize fine dust and SOx emissions, and is continuously investing in facilities to reduce air pollutant emissions, such as operating an electric dust collector, installing an Ultra Low NOx Burner (ULNB), and a Selective Catalytic Reduction (SCR) system. In addition, a Vapor Combustion Unit (VCU) has been installed to fundamentally reduce volatile organic compound gases emitted from storage facilities. Leak Detection and Repair (LDAR) system is in operation to systematically control the fugitive emission of Hazardous Air Pollutants (HAPs) throughout the entire process of storage and shipping, which are fugitive emission facilities. In 2022, fugitive emissions were thoroughly managed, with a leakage of 0.05% against the Company's internal leakage standard of 500 ppm.
S-OIL proactively responded to the revised Clean Air Conservation Act to strengthen fugitive emission control of HAPs by improving related facilities. The Company is reducing environmental pollutants by making environmental investments such as switching to eco-friendly fuels and improving facilities to increase energy efficiency, and by efficiently operating pollution control facilities.
In addition, S-OIL signed a voluntary air pollutant reduction agreement to participate in the government's particulate matter reduction policy. Accordingly, the Company set a specific reduction target with the government to reduce air pollutant emissions, including particulate matter, by 40% compared to 2014 by 2022, and exceeded the government's target by 62.3% through eco-friendly fuel conversion and continuous environmental investments.
Building on the above, S-OIL has set a target of reducing air pollutant emissions by 40% compared to 2016 by 2024 through the signing of additional voluntary agreements, and is working hard to steadily achieve this target through continuous environmental investments and the operation of emission management facilities.
As for the Total Emission Volume Control System established in 2020, S-OIL stably complied with the 2022 quota granted by the Ministry of Environment, and will continue to comply with the quota granted each year until 2024 through additional environmental investments.

비산배출 : 굴뚝이나 Vent와 같은 통상적인 배출구가 아닌 장치, 이송배관, Seal, 밸브 등에서 오염물질이 대기로 누출되는 것

Water Quality Control

S-OIL stably operates a wastewater treatment plant to minimize the impact of its business operation on the nearby sea and comply with water pollutant legal emission standards. The plant treats wastewater using physical, chemical, and biological methods to ensure removal of pollutants. It also transmits water quality data to administrative agencies in real time through the Tele-Metering System (TMS) to maintain emergency preparedness. S-OIL also expanded rainfall storage tank capacity for the heavy rainy season and strengthened monitoring of 32 specific substances harmful to water quality, such as copper (Cu) and lead (Pb), in addition to general water pollutants.
In the Company's efforts to reduce water pollutant emissions and conserve water resources, S-OIL strives to minimize its water usage increase despite recent plant expansions and large-scale investments. In particular, the Company achieves this by reusing water after removing hydrogen sulfide (H2S) and ammonia (NH3) from acidic water generated during production, utilizing it as backwash water for the production process. S-OIL regularly monitors and manages the amount of water used and reused. The Company plans to continue its efforts to protect water resources through increased water reuse in the future.

Marine Oil Spill Control

To prevent marine pollution accidents, S-OIL has established work standards and procedures and is strengthening on-site monitoring. The Company conducts regular emergency response drills and training. In particular, S-OIL focuses on enabling timely response to crises or emergencies by providing quarterly accident prevention training based on various marine pollution scenarios.
To avoid marine pollution accidents caused by vessels transporting its products, S-OIL operates the Vetting System. The system assesses the risk of all vessels entering and leaving the Company's port facilities in advance and fundamentally blocks vessels that do not meet safety standards. Additionally, for Single Point Mooring (SPM), an offshore marine facility for very large crude oil carriers that can cause significant damage from marine pollution in the event of an accident, S-OIL has implemented a protection system. The system includes radar, tidal current measurement, and mooring tension measurement systems, as well as the Automatic Identification System (AIS) to prevent dock collision accidents. Since 2020, S-OIL has been operating multiple offshore crude oil unloading facilities with the completion of No. 2 SPM, enabling more stable operations. The Company significantly reduced the possibility of environmental problems by conducting regular inspections of areas with a higher risk of marine oil spills in the event of a pipe failure during liquid product transfer due to the dolphin structure of the pier. The main facility of SPM, the buoy located approximately 3 kilometers from the shore, is remotely monitored using CCTV. The fixed oil boom section has been expanded to minimize offshore dispersion in case of marine pollution in the pier area. S-OIL is also continuing to invest in introducing an improved oil spill response equipment, such as inflatable oil containment boom, which are more effective in offshore weather conditions at sea.

Soil Quality Control

S-OIL periodically conducts self-checks, as well as legally mandatory inspections, to prevent soil pollution in the Refinery and terminals, including oil storage facilities. The Company also continues to improve facilities systematically by installing pipes on the ground instead of underground, among other measures. By signing the Voluntary Agreement on Soil Environmental Protection with the Ministry of Environment, S-OIL not only carries out self-inspections on terminals and service stations (S/Ss) for soil pollution but also voluntarily initiate soil restoration activities upon discovering soil pollution. To fulfill the agreement, the Company conducts legal inspections as necessary to monitor soil pollution while performing self-inspections every three years to prevent soil pollution. Moreover, S-OIL constructs new and remodeled S/Ss with the concept of Clean S/S, incorporating eco-friendly facilities to prevent the leakage of pollutants. These facilities feature double-walled tanks and pipelines. In the event of pollutant leakage, instant leakage sensors and alarms are activated to swiftly prevent the spread of pollution.

Hazardous Chemical Control

S-OIL complies with the standards for handling hazardous chemicals and associated facilities in accordance with the Chemical Substances Control Act. The Company also enhances its response capability in the event of a chemical accident through regular emergency drills. Additionally, S-OIL prepares accident scenarios for the hazardous chemicals it handles, estimates the scope of impact, and develops a summary of chemical accident risks and emergency response information through the Off-site Risk Assessment and the Risk Management Plan. The summary is then notified to local communities once a year to ensure comprehensive accident prevention and response activities. In line with the amendment to the Chemical Substances Control Act, in 2022, S-OIL prepared a chemical accident prevention and management plan that integrates the existing off-site impact assessment and risk management plan. The plan obtained approval from the Ministry of Environment. S-OL will fully implement the approved plan to strengthen its chemical accident prevention and response capabilities.

Land Leakage Control

S-OIL has implemented systematic response procedures to prevent oil and hazardous chemicals leakage in the Refinery and to respond effectively to accidents. Significant areas of the Refinery are equipped with 32 oil detectors and block valves to enhance the Company's ability to promptly respond and contain oil spills. Additionally, S-OIL plans to install more detectors for comprehensive monitoring. The Company also conducts annual factory emergency response drills based on hazardous chemicals and oil spill scenarios.

Waste Control

S-OIL has consistently reduced waste discharge and increased waste recycling through strict separation and storage practices to create a virtuous circle of eco-friendly resources. Fire detectors and water spray sprinklers have been installed in the waste and waste catalyst storage facilities to prevent potential fire accidents and contamination during the waste storage process.

Biodiversity Policyy

S-OIL recognizes the critical importance of preserving biodiversity and is committed to minimizing our impact on the environment and biodiversity. We aim to achieve Net Positive Impact (NPI) on biodiversity by 2050 and have developed the following commitments to guide our efforts.

Net Positive Impact by 2050

S-OIL is dedicated to achieving Net Positive Impact (NPI) on biodiversity by the year 2050. We will implement actions that go beyond mitigating negative impacts, actively contributing to the restoration and enhancement of biodiversity.
Priority Area Targets

S-OIL is committed to avoiding potential adverse impacts on sites containing globally or nationally important biodiversity. We will exercise precautionary measures and refrain from conducting operational activities in proximity to such areas to prevent any potential harm.
Value Chain Responsibility

S-OIL will hold ourselves and our value chain partners accountable for minimizing biodiversity impacts. We will actively engage with our partners, encouraging them to avoid operational activities near sites with significant biodiversity value.
Mitigation Hierarchy

S-OIL strictly follows a mitigation hierarchy to manage our biodiversity impact effectively.

Avoidance

We will prioritize avoiding impacts on nature and biodiversity whenever possible in our operations and projects.

Reduction

In cases where avoidance is not feasible, we will take all necessary measures to limit and reduce our impact on ecosystems and biodiversity.

Restoration

We are committed to restoring areas and ecosystems adversely impacted by our business operations, fostering their recovery and resilience.

Offset and Compensation

As a last resort, if any residual, adverse impacts remain after full implementation of the mitigation hierarchy, we will explore offsetting and compensatory measures to balance the biodiversity loss.
Biodiversity Risk Assessment

S-OIL will conduct comprehensive biodiversity risk assessments for our projects. These assessments enable us to identify potential impacts on biodiversity and implement appropriate measures to prevent or mitigate such impacts.
Stakeholder Engagement

S-OIL actively engages with stakeholders to foster collaboration and collective action for biodiversity conservation. We believe that collaboration is essential to address biodiversity challenges effectively.

No-deforestation Policy

S-OIL will take the lead in preventing forest destruction to protect forests, which are part of the environment and the home of life, and will continue to promote policies to protect forests and the earth by reducing industrial waste and expanding investment in greenhouse gas emission reduction.
S-OIL will not create a business site that destroys forests in the future, and try to restore the forests when the company withdraw from the existing business sites.
S-OIL will establish procedures to check the risk of forest destruction in the supply chain such as suppliers, and will make efforts to manage supplier ESG management and prevent forest destruction through an eco-friendly management system.
Through sustainable environmental policies, S-OIL intends to implement "Zero Net Deforestation" by 2050, a promise of compensation through reforestation.

Policy Compliance

Within the workplace, S-OIL will reduce emissions and expand investment in reducing greenhouse gas emissions through industrial waste recycling.
S-OIL will make efforts to create forests and green areas in cooperation with related organizations near the workplace.
Through the inspection of forest destruction risk of subcontractors and the eco-friendly management system, S-OIL will make efforts to expand forest creation and greening activities to subcontractors.
S-OIL prepares internal procedures to check the risk of forest destruction when reviewing the expansion of business establishments and the operation of new business establishments.
S-OIL secures a budget for cooperation with related agencies and strengthens its internal capabilities.
S-OIL will make efforts to establish an evaluation process and conduct improvement activities to prevent environmental risks such as forest destruction of suppliers.

Environmental Impact Evaluation and Response to Environmental Regulations

S-OIL has been recognized as an eco-friendly company that faithfully complies with the Environmental Impact Assessment Act and fully considers possible environmental impact on neighboring areas.
When undertaking new projects and large-scale constructions, S-OIL evaluates the impact on the company's plant and surrounding areas through an environmental impact assessment company. This evaluation helps to incorporate pollutant reduction measures into the design, and periodic measurements of air, water, biodiversity, and soil quality are conducted for follow-up management. The results of the environmental impact evaluation are submitted to administrative agencies before the project begins, and follow-up environmental impact assessments are carried out during and after the project to minimize any environmental impact.
S-OIL proactively responds to environmental policies and regulations in accordance with its environmental policy of Proactive Green Management. The Company considers environmental management from the initial plant construction stage by introducing optimized pollution prevention facilities.
S-OIL has made efforts to minimize environmental impact through strict compliance with regulations and internal standards. The Company further solidifies its voluntary environmental management system by conducting proactive daily self-inspections and promptly initiating corrective actions for any deficiencies. S-OIL strives to improve its environmental management by closely monitoring changing environmental policies and laws on a monthly basis. In addition, S-OIL reviews and share revisions to environmental regulations through the Legal Compliance System and self-inspection checklists. Periodic self-assessments are conducted using the Environmental Compliance Assessment List, and implementation is verified through internal audits.