healthy beautiful refreshing for people and the...

LG Household & Health Care2010 Sustainability Report

Healthy·Beautiful·Refreshing for People and the Planet

LG GwangHwaMoon Building, 92, Sinmunno 2-ga, Jongno-gu, Seoul

TEL +82.2.6924.6082~3 FAX +82.2.6924.6085 www.lgcare.com

The publication of this report aims at disclosing the performance of sustainability management activities conducted by LG Household & Health Care (hereinafter, “LG H&H”) to stakeholders in a transparent manner. Through the annual publication of the sustainability report, LG H&H continues its endeavors to communicate with stakeholders.

Reporting Scope and PeriodThis report includes information on major sustainable management ac-tivities and the performance of LG H&H’s subsidiaries, Coca-Cola Bever-age Company (hereinafter, “CCB”) and THEFACESHOP along with the economic, environmental and social performance of the head offi ce of LG H&H and its worksites. The period of this report is from January 1st, 2010 to December 31st, 2010. Performance information of some data from the previous 3 years has been included to facilitate the un-derstanding of trends. For important issues pertaining to management, current information at the time of this report was used. Reporting Principle and AvailabilityThis report was written according to GRI (Global Reporting Initiative) G3.1 guidelines, an international guideline for sustainability reports. This report is published in Korean and English, and is available on our company’s website (www.lgcare.com).

Report Publication ProcessMajor issues of sustainability management selected through in-depth interviews with a variety of stakeholders and materiality test processes were refl ected on the system of table of contents. Detailed information is shown on page 19 in this report. In addition, a Task Force Team (TFT) for sustainability reporting, composed of in-house staff from each department, planned the report layout, collected the data, wrote and reviewed this report.

AssuranceAssurance by a third party was conducted by the Korea Productivity Center to increase the reliability and accuracy of the contents. The assurance was performed on the basis of standards AA1000APS and AA1000AS (2008), and assurance statements are shown on page 84.

Report Overview

COVER STORYThe cover outlines the image of ‘LG Household & Health Care’, a compa-ny leading life style and culture which can be met everywhere in life. Also, it encompasses the philosophy of LG Household & Health Care, which is striving for sustainable development of society and harmony with stake-holders and environment.

LG H

ousehold & H

ealth Care 2010 Sustainability Report

This report is printed with soy ink on eco-friendly paper.

Integrated Reporting

Product Leadership

Operational Leadership

Social Responsibility Leadership

LG Household & Health Care can declare the year 2010 as the year of its best performance thanks to the stable growth of each business sector since the company was established. In addition, it has conducted a variety of activities to secure leadership in the four strategic directions of sustainability management: product, operation, social responsibility, and communication. Performance details are described below.

Economic Performance

* International Financial Reporting Standards (IFRS)

Communication Leadership

Profi tability

Stability

Contribution

R&D

Sales Performance

34.1 bil.

61

105.2 bil.

72.0 bil.

Basic unit of energy usage (GJ/product-ton)

Basic unit of water usage (ton/product-ton)

Usage of raw materials (ton)

Basic unit of GHG emission (ton CO2e/product-ton)

Basic unit of wastewater discharge (ton/product-ton)

Basic unit of waste production (kg/product-ton)

ESH performance evaluation (point)

Green purchase (KRW)

2.135

1.345

216,792

0.114

0.286

11.556

780

83mil.

2.011

1.209

208,978

0.108

0.267

12.221

820

166 mil.

Input

Emission

Operational Performance

Local Community

Employee

Business Partner

Customer

Employee

Publishing date Publisher

E-mailTELWebsite

23 June, 2011Sustainability Management Team, LG H&HLG Gwanghwamun Bldg., 92 Sinmunno 2-ga, Jongno-gu, Seoul, [email protected]+82.2.6924.6082~3 FAX +82.2.6924.6085http://www.lgcare.com

Please check on the LG H&H’s website for more information of this report.

Sales (KRW)*

Operating profit (KRW)*

Debt/Equity ratio (%)*

Credit rating (Bond)

Contribution of stakeholder (KRW)*

Ratio of local employees (%)

Ratio of local procurement (%)

2,216.5 bil.

228.1 bil.

98.5

AA

1,507.4 bil.

98.5

80.9

2,826.5 bil.

346.8 bil.

130.3

AA

1,796.4 bil.

98.6

77.7

ItemCategory 2009 2010

R&D expenses (KRW)

Number of environmental labeling products

Sales of sustainable products (KRW)

Sales of open innovation products (KRW)

32.1 bil.

34

74.4 bil.

30.3 bil.

Social Contribution (KRW)

Donation of goods (KRW)

Ratio of female employee (%)

Ratio of retirement (%)

Training hours per person (hr)

Ratio of industrial accidents (%)

‘Growing together’ fund support (KRW)

Diagnosis of business partners (partner)

2,350 mil.

220 mil.

47.1

4.2

76.7

0.10

-

30

3,380 mil.

400 mil.

48.8

4.0

81.6

0.16

7.5 bil.

54

Ratio of customer complaints (ppm)**ppm: the number of complaints per productsales volume is converted into parts per million.

Ratio of employee satisfaction (%)

Persistency rate after maternity leave

26.9

80

90.2

28.8

82

97.6

* Leadership of product, operation, social responsibility, and communication: Individual standards of LG Household & Health Care

Other

27.5% ▲

52.0% ▲

Acquisition of THEFACESHOP in 2010

Korea Investors Service, Korea Ratings, NICE Investors Service

19.2% ▲

On the basis of overseas subsidiaries of LG H&H

On the basis of overseas manufacturing subsidiaries of LG H&H

5.8% ▼

10.1% ▼

3.6% ▼

5.3% ▼

6.6% ▼

5.8% ▲ (Excluding construction waste)

40 point ▲(On the basis of 1,000 points)

100% ▲(On the basis of offi ce equipment and supplies)

43.8% ▲

180 mil. ▲(Foodbank, Beautiful Store, etc)

1.7%p ▲

0.2%p ▼

6.4% ▲

0.06%p ▲

New program from 2010

80% ▲

7.1% ▲

2%p ▲

7.4%p ▲(Working more than a year after return frommaternity leave)

6.2% ▲

79.4% ▲

41.4% ▲(see p.32)

137.6% ▲(see p.38)

07

IntroductionIntegrated Reporting

Message from the CEOCompany Overview Vision and Mid- to Long-Term Strategy

0000020406

Sustainability Management Strategy

Corporate Governance

“Jeong-Do” Management

Risk Management System

Stakeholder Engagement System

Sustainability Management System

08

101215

18

AppendixFinancial Statements

Environment, Safety & Health Index

Recognitions & Memberships

Verification of Greenhouse Gas Inventory

Assurance Statement

GRI Guideline Comparison

Glossary

Reader Feedback Survey

7980

81

82

83

84

86

90

92

Sustainability PerformanceCreation and Sharing of Economic PerformanceCreation of Economic PerformanceNew Business PerformanceOverseas BusinessSharing of Economic Performance

Product LeadershipDevelopment of Sustainable ProductsProduct SafetyOpen Innovation

Operational LeadershipResponding to Climate ChangeEnvironmental Management ActivitiesEco-Friendly Manufacturing and LogisticsSaving and Recycling of Resources

Social Responsibility LeadershipSocial Contribution ActivitiesWin-Win Partnership with Business PartnerImprovement of Employee ValueSafety and Health Activities

Communication LeadershipImprovement of Customer Value

Organizational Culture for Communication

2122

23262728

30313638

4041444549

525360

6570

727376

Contents

Message from the CEO

LG H&H will put sincere efforts into carrying out

our social responsibilities to the fullest and pursue

endless challenges to increase future value.

LG H&H will make it a principle to develop into

the most respected company rather than to become

the largest company in the world.

LG H&H will put sincere efforts into carrying out

our social responsibilities to the fullest and pursue

endless challenges to increase future value.

LG H&H will make it a principle to develop into

the most respected company rather than to become

the largest company in the world.

I appreciate your consistent interest and affection for LG H&H.

Recently, we have been experiencing the advent of an uncertain market environment that is changing unpredictably fast. Moreover, societal issues such as climate change, product safety and mutual development demand new roles from companies.

LG H&H established a sustainability management strategy system as a shock-resistant design to reduce the level of impact from those external changes. This strategic system allows LG H&H to facilitate a proactive response from a long-term point of view as opposed to a short-term and passive response. With this in mind, the performance for 2010, the year when the full-scale sustainability management strategy system was initiated, is covered in this report.

In 2010, in accordance with our constant efforts to strengthen the competitiveness of existing businesses, we incorpo-rated THEFACESHOP and successfully created synergy in the Beautiful business unit. In addition, we acquired HAITAI Beverage in the Refreshing business unit in order to build a stable business portfolio. As the result of these efforts, the sales increased by 28% to reach 2.8 trillion won, and the operating profit increased by 52%.

Furthermore, we promoted sustainability management activities under the following four strategies.

The first strategy is to secure sustainable product leadership. Through innovative product development, we released a variety of sustainable products, and took customer values, environmental and social responsibilities into consideration. Additionally, we promoted the development of products with new innovative packaging to maximize recycling and mini-mize waste production, as well as expanded eco-labeling products. Through these efforts, we are taking the initiative in spreading a sustainable spending culture among consumers.

Second, we have been conducting a long-term plan to reduce greenhouse gases and water. In order to do this, we es-tablished objectives for green management and created a greenhouse gas inventory to facilitate a change into a more sustainable system. In addition, we implemented initiatives to improve the efficiency of distribution with consideration of the impact on the environment in the supply chain perspective and increased the recycling of resources.

Third, to secure leadership in social responsibility, we contributed to the quality of community life by aligning our business directions to fulfill social values and increased the scope and scale of our community initiatives. Moreover, we continue to make efforts to advance corporate citizenship to its fullest by expanding technical cooperation and financial support for mutual growth with business partners.

Fourth, to enhance communication with stakeholders, we collected their opinions through various communication chan-nels and incorporated them in our decision-making process. Through these efforts, we were incorporated into the DJSI Asia Pacific Index in 2010.

LG H&H will put sincere efforts into carrying out our social responsibilities to the fullest and pursue endless challenges to increase future value. LG H&H will make it a principle to develop into the most respected company rather than to become the largest company in the world. We invite your constant encouragement and support.

Thank you.

Suk ChaLG Household & Health Care CEO

June 2011

R&D

Support

Audit CommitteeBOD

CEO

Business Healthy(Household)

Planning and Finance

Technology Re-search Center

Beautiful(Cosmetics)

Packaging Research

Personnel and Cooperation

Refreshing(Beverages)

Perfumery Research

Purchasing

Overseas Business

Product Quality Mgt.

“Jeong-Do”Mgt.

Design Center

Organization Chart

Company Overview

Beijing

Hangzhou

Taiwan

Vietnam

Shanghai

04 LG Household & Health Care 2010 Sustainability Report

Overseas Worksites

LG H&H Production Company (Beijing, Hangzhou, Vietnam)

LG H&H Sales Corporation (Shanghai, Taiwan, California)

THEFACESHOP Sales Corporation (Shanghai, California)

Logistics Center

• 11 centers for LG H&H• 28 centers for CCB• 1 center for THEFACESHOP

Domestic Worksites

LGHousehold & Health Care, Ltd

Coca-Cola Beverage Company

THEFACESHOP Co., Ltd.

In order to grow to the best company leading life style and culture, and realizing beauty and dream of customers, LG H&H is operating 4 domestic and 6 overseas subsidiaries focusing on 3 business categories; Healthy, Beautiful, Refreshing.

Status of Domestic and Overseas Operations

Company NameLocation

(Head Office)Equity

Ratio (%)

Coca-Cola Beverage Company Yangsan, Korea 90.00

HAITAI Beverage Co., Ltd. * Seoul, Korea 100.00

Diamond Pure Water Co., Ltd. Anyang, Korea 100.00

THEFACESHOP Co., Ltd. Seoul, Korea 100.00

Beijing LG Household Chemical Co., Ltd. Beijing, China 78.00

Hangzhou LG Cosmetics Co., Ltd. Hangzhou, China 81.71

LG Household & Health Care Trading (Shanghai) Co., Ltd.

Shanghai, China 100.00

LG Household & Health Care (Taiwan)., Ltd. Taipei, Taiwan 90.00

LG Vina Cosmetics Co., Ltd. Dong Nai, Vietnam 60.00

LG Household & Health Care America Inc. California, USA 100.00

* Incorporated as a subsidiary as of January 2011

Introduction Ⅰ Indicators 05

California

The Current Company Standings

Head Office LG Gwanghwamun Bldg., 92, Sinmunno 2-ga, Jongno-gu, Seoul, Korea

Establishment Date January 1947

Number of Employees 3,131 persons

Total Assets* KRW 1,945.0 billion

Total Shareholders’ Equity* KRW 844.7 billion

Sales*

KRW 2,826.5 billion∙ Household : KRW 1,088.8 billion∙ Cosmetics : KRW 1,021.4 billion ∙ Beverages : KRW 716.3 billion

Operating Income 346.8 billion

Credit Rating (Bond)

AA (Korea Investors Service, Korea Ratings, NICE Investors Service)

Credit Rating (Commercial Paper) A1 (Korea Investors Service, NICE Investors Service)

* As of the end of December 2010, based on consolidated accounting

Seoul Head Office

Yeoju Worksite

Daejeon R&D Center

Cheongju Worksite

Naju Worksite

Gwangju Worksite

Yangsan Worksite

Ulsan Worksite

Onsan Worksite

Incheon R&D Office


Vision and Mid-to Long-Term Strategy

Vision‘Beauty and dreams to consumers’, refers to a life ulti-mately pursued by mankind that embraces long-last-ing beauty, health, youth and attractiveness. ‘A Leader’ means that financial performance, such as profitability, growth, stability, market competitiveness and human resource development, is at the top of its class. ‘In Life-style’ describes a company which adds convenience and excitement as well as health and beauty to a cus-tomer’s life, upgrading their life style.

Mid-to Long-term StrategyStrengthening Portfolio Consumers should be at the center of design for all products to create customer value. LG H&H will respond to customers more rapidly than its competitors by constantly sensing new trends and caring for and assessing customer desires and in-conveniencies.

Expanding Distribution Coverage LG H&H will strengthen its competitiveness in logistics by diversify-

ing sales channels in order to help customers purchase what they want anytime and anywhere.

Establishing Sustainability LG H&H will be equipped with a management system to achieve sustainable growth through minimizing long term management risks.

�1. Consumer FocusCreating customer value through consumer-oriented thinking and acting

2. SimplificationSimplifying organization, business and internal communication for consumers

3. RepositioningDirecting positive changes through innovative improvements rather than improvement in numbers alone

4. GlobalizationPromoting phases towards globalization for sustainable growth

Key Tasks

Vision Structure

Slogan Healthy, Beautiful & Refreshing

Core Value

Vision A Leader in Lifestyle,Delivering Beauty and Dreams to Consumers

StrategyStrength-

ening Portfolio

Expanding Distribution

Coverage

Establishing Sustain-ability

•Consumer Focus

•Innovation

•Professionalism

•Speed

Sustainability Management System Ⅰ Corporate Governance 07Introduction Ⅰ 보고서 개요 및 특징 7

•�Sustainability Management Strategy •�Corporate Governance •�“Jeong-Do” Management

•�Risk Management System •�Stakeholder Participation System

A tree with strong roots is not shaken by tough winds and bears fruits at last. This saying holds true for companies, as well. A company with a firm foundation can create stable and constant outputs even in a rapidly changing environment. LG H&H fulfills its “Jeong-Do”management based on clear and transparent corporate governance, and protects its future value through thorough risk management and enhanced communication with stakeholders.


Sustainability Management VisionLG H&H’s vision is to be ‘The Best Sustainable Fast Moving Consumer Goods (FMCG) Company’. In addition, under the slogan: ‘Healthy, Beautiful, and Refreshing for People and the Planet’, we fulfill sustainability management by establishing a roadmap for the four strategic directions. Moving forward, we plan to be involved in refining our performance index by finely monitoring the execution of strategic tasks for sustainability management, setting more detailed goals, and reporting our performance to stakeholders through sustainability reports.To incorporate our vision into actual execution, we cur-

rently implement the second step (operations) while conducting systematic business using all four strategic directions combined. In addition, we continue to fulfill detail oriented tasks identified through the performance indexes of product responsibility, green management, social contribution, win-win cooperation, employee val-ue, and “Jeong-Do”management. These initiatives are expected to enhance sustainability of each organization and realize balanced growth.We will do our best to achieve the status of being the leading company in global sustainability by 2013.

Sustainability Management Strategy


Sustainability Management Vision

Slogan

Strategic Directions

Performance Index

Detailed Tasks

Securing leadership in sustainable

products

Shifting to sustainable operations

Improving quality of community life

through social responsibility

Enhancing com-munication with

stakeholders

• Response to Climate change

• Green worksite construction

• New green technology development

• Water management

• Sharing management

• Strategic promotion of social contribution

• Intensified partnership with business partners

• Increased sustainable purchase

• Work and life balance

• Fair assess-ment and reward

• Working principle compliance

• Ethic management

• Business diagnosis

• Fair trade compliance

Product Responsibility

• Sustainable products as-sessment and development support

• Intensified hazardous matrial management

VisionThe Best

Sustainable FMCG Company

Healthy, Beautiful & Refreshing

for People and the Planet

Social Contribution

Green Management

Win-win Cooperation

Employee Value

“Jeong-Do”Management

We implement sustainability management in four strategic directions - products, operations, social responsibilities and communication - to achieve the vision of be-ing ‘The Best Sustainable FMCG Company’.

Sustainability Management Organization Recently companies are facing climate change issues, accelerated changes in business environment, such as intensified regulations on hazardous materials in prod-ucts, and the relevant potential risks. To proactively respond to such changes, LG H&H established sustain-ability management strategies in 2009. To help fulfill these strategies, the sustainability management team, a dedicated organization, was launched to implement

the four strategic directions. In the past, sustainability-related work was separately managed and divided by function and department. Now the sustainability man-agement organization classifies the work into four cat-egories: products, operations, social responsibilities and communication. The organization is also responsible for the integration of processes from planning to imple-mentation.

Sustainability Management Organization

CEO

Sustainability Management Team

CFO

• Setting up strategies to develop sustainable products

• Setting up sustainable product guidelines

• Supporting product-related certification

Products Operations

• Responding to climate changes

• Promoting green manage-ment

• Setting up strategies for sustainable purchasing and logistics

Social Responsiblity

• Launching social contribu-tion initiatives

• Developing new social contribution programs

• Supporting win-win relationships with business partners

Communication

• Publishing sustainability reports

• Responding to external sustainability assessments

• Operating stakeholder councils

BOD

Sustainability Management System Ⅰ Sustainability Management Strategy 09

Award related to sustainability management

• Korea CSR Grand Prize (Hankyoreh)- Incorporation to Korea

CSR 30

• Korea Best Manage-ment Company Award (Asiamoney)

• Award of Excel-lent Worksite for Reduction of Packing Materials (Award from the Minister of Environment)

May September December

• Incorporation to DJSI Asia Pacific Index

• National Productivity Award‘Green Productivity Division’ (Commendation of the Minis-ter of Knowledge Economy)

Through transparent corporate governance, LG H&H tries to protect the BOD’s independence and our share-holders’ rights. Since the launch of the LG Corp. holding company in 2003, we founded a transparent gover-nance system, intensifying responsible management by professional managers. Additionally, we are maximizing managerial efficiency and enhancing corporate value by operating the BOD in an independent and special-ized manner. Moreover, we collect the opinions of vari-ous stakeholders and actively reflect them in the way our business is operated.

Shareholder CompositionAs of the end of December 2010, the total number of is-sued shares (including preferred shares) was 17,717,894. The largest shareholder was LG Corp., which held a 30.0% stake. At every annual general shareholder’s meeting, the CEO reports the company’s performance to shareholders and listens to their opinions related to major decision making and other managerial issues. The opinions submitted by shareholders are reflected on the overall management after in-depth reviews of management and the BOD. Additionally, key manage-ment issues related to investors’ profits are publicly announced via the electronic disclosure system of the Financial Supervisory Service, Korea Stock Exchange and the LG H&H’s homepage.

BOD Composition and its Operation The board of directors of LG H&H is comprised of three internal directors and four external directors. Their inde-pendence from the largest shareholder and manage-ment is secured. When a shareholder suggests the selec-tion of directors based on relevant regulations, the BOD can present the bill at the general shareholders’ meet-ings as long as it is legitimate. However, when a director nominee has a special relationship with key shareholders, his/her qualification to be selected is limited. The outside directors play a critical role in the decision-making pro-cess for management such as providing valued opinions on basic policies on the company’s operations and ex-ecution. Accordingly, the selection of external directors is mainly determined by the individual’s expertise in the economic, environmental and social areas. In addition, they monitor and check the company’s performance to enhance corporate value and improve stakeholders’ rights. Compensation for external and executive direc-tors comprises an annual basic salary and incentives. The annual salary is determined within the maximum compensation for directors as approved by the share-holders’ meeting, while incentives depend on the com-pany’s business performance. The BOD holds regular meetings according to the pre-set annual operations plan, and convenes temporary meetings whenever other key management issues urgently need to be discussed. To prevent conflict of interests during the BOD’s resolu-


Corporate Governance

BOD Meetings

Year Key ResolutionsNo.

of Meet-ings

Atten-dance Rate

2008Approving the establishment of a sales subsidiary in Taiwan

14 85%

2009

Approving the capital increase of Vietnam subsidiary

12 96%Approving the acquisition of Diamond Pure Water

Approving the acquisition of THEFACESHOP Korea

2010

Approving the acquisition of HAITAI Beverage

10 93%Approving the acquisition of resting shares of THEFACE-SHOP

Key Shareholders �� (Unit : %)

LG Corp.

Foreigners

Domestic Institutions and Individuals

Treasury Stock 30%

30.0

5.4

46.7

17.9

tions, the voting rights of stakeholders with interests in certain motions are limited in accordance to Commer-cial Law and the company’s own BOD regulations. On the other hand, to ensure that the BOD fulfills its role as the de facto highest decision-making body of the com-pany, an employee within the legal team is designated to support directors. The employee is responsible for pro-viding materials and explanations to outside directors. By providing sufficient time before general meetings, he/she should help the directors to carefully analyze and review bills for discussion based on sufficient infor-mation. In 2010, the BOD held a total of 10 meetings, 93% of which were attended by outside directors. The board made decisions on major bills such as approving the acquisition of HAITAI Beverage and approving the acquisition of remaining shares of THEFACESHOP. In addition, the meetings covered sustainability manage-ment issues through reports including operating per-formance and plans of fair trade compliance program, and operating conditions and assessment results of the Internal Accounting Management System *.

Activities of Audit CommitteeThe Audit Committee is operated according to sepa-rate operational regulations from those for the BOD. This separation helps to secure independency and transparency from the shareholders and management.

The Committee comprised of three outside directors, including the committee head, establishes and ex-ecutes an internal audit plan through an independent position. Furthermore, it approves quarterly audit re-sults reported by external auditors and plays a role as a supervisory organization for management. To effec-tively support its audit activities, LG H&H allows the Au-dit Committee to request external auditors, who review reports on the company’s sales and property status.

Gathering Opinions of Stakeholders and Re-flecting them on Management DecisionsLG H&H listens to the voices of internal and external stakeholders, who are customers, shareholders and em-ployees, and then reflect their opinions on the company’s decision-making process and management activities. Investment information on management, finances and stocks, and sustainability management are posted on the company’s website to be shared. In addition, sharehold-ers’ opinions on the company can be submitted through an online forum. Customers can also make various sug-gestions, and key comments are selected to be posted on our intranet system to be shared with all employees. Furthermore, after the quarterly public disclosure of the company’s performance, regular company meetings are held to share information on business performance, management strategies and visions with employees.

We are leading the maximization of business efficiency and shareholder value by improving corporate governance through management specialists’ and indepen-dent and professional board of directors (BOD) operations.

BOD Formation�

Classification Name Sex Key Positions Role

InsideDirectors

Suk Cha Male CEO of LG H&HChairman of

the Board

Keon O Kim Male CFO of LG H&H Director

Joo-hyung Kim Male President of LG Economic Research Institute Director

Outside Directors

Woon-oh Jung MaleFormer Member of Ministry of Strategy and Development Tax Review Committee

Current Professor at Dept. of Management, Seoul National University

Head of Audit Committee

Young-hye Lee FemaleFormer Visiting professor at Dongduk Women's University's School of Design

Current CEO of Design House Inc. Director

Sung-tae Hong MaleFormer Assistant Professor at Dept. of Marketing, University of Missouri

Current professor at Dept. of Business Administration, Hanyang University

Member of Audit

Committee

Yong-suk Yoon MaleFormer Member of Presidential Sec-retary Office of Science and Technol-ogy Policy Advisory Committee

Current Head of Attorney at Law Office, Kwangjang

Member of Audit

Committee

(As of end of March 2011)

* Internal Accounting Management System:

See p.16

93 % directors attended

Sustainability Management System Ⅰ Corporate Governance 11

“Jeong-Do” Management

“Jeong-Do” Management at LG H&HThrough “Jeong-Do” (the right way) management, LG H&H is engaged in open, fair and transparent competi-tion. This management principle enables us to earn the genuine confidence of customers and honestly fulfill our responsibility to business partners, shareholders, and employees so as to gain trust and reliability. LG’s unique “Jeong-Do” management practices enables competition with others through steadily building com-petences based on ethical management. This concept does not only encompass the compliance with related rules and corporate ethics but also encompasses ethi-cal management and fair transactions. Hence, it serves as a core value of our business activities to fulfill our re-sponsibilities and duties to customers and society and to build a grounding for sustainable growth. In 1994, LG established the ‘LG Code of Ethics’ and the ‘LG Guideline for Practice’, becoming the first private com-pany in Korea to take such measures in management. In 1995, the “Jeong-Do” management that detailed

our principles on ethical management in more active and specific way was declared publicly.

LG Code of Ethics The LG Code of Ethics serves as a standard of proper conduct and value judgments for all LG’s employees and all transaction stakeholders. It is comprised of six chap-ters which give detailed guidelines on the code of ethics.

LG Way and “Jeong-Do” ManagementLG Way is LG’s unique business culture to try to achieve our final goal of ‘No. 1 LG’. The goal can be realized through the management principles of ‘creating value for customers’ and ‘respecting human dignity’ based on LG’s “Jeong-Do” management. This form of man-agement is what guides our strong willingness to ac-complish substantial business performance through competences and gives us the necessary strength for LG to compete and win against rivals under any circum-stances.

Code of Ethics

•Chapter 1. Responsibilities and Obligations to Customers •Chapter 3. Fair Transaction •Chapter 5. Corporate Responsibilities

to Employees

Guideline for Practice Explains principles for judgment and conduct for each item on the Code of Ethics

Manual of LG Guideline for Practice

Explains basic principles, the Code of Ethics and criteria standards, behavioral guidelines in the Code of Ethics, and Guideline for Practice items that require detailed explanations

LG Code of Ethics

•Chapter 2. Fair Competition •Chapter 4. Basic Ethics for Employees •Chapter 6. Responsibilities

to Society and Country

LG WAY, Symbol of Strong Corporate Culture

Vision

Behavioral Method

Mgt. Principle

Creating Value for

Customers

Respecting Human Dignity

No. 1 LG

“Jeong-Do” Mangement

Becoming recognized as the leading company in the market

LG’s unique behavioral method of succeeding by constantly developing capabilities based on ethical management practices

Maximizing customer satisfaction by providing unrivalled value, Developing and displaying optimal capacities through creativity and respect for autonomy


Commitment of the CEO for “Jeong-Do” ManagementLG H&H shares the CEO’s firm commitment for “Jeong-Do” management with all employees through activi-ties, such as posting the message from the CEO on his commitment to “Jeong-Do” management, and manu-facturing and distributing a screensaver containing his request for practice of “Jeong-Do” management. Furthermore, subsidiaries acknowledge the CEO’s com-mitment to “Jeong-Do” management, recognizing it as a fundamental principle for all business activities, and, accordingly, act honorably no matter the circumstance. To further encourage the implementation of “Jeong-Do” management, the ‘”Jeong-Do” Management Evaluation System for the Head of Division’, a means to evaluate the results of actions of leaders for each division, was implemented at CCB and THEFACESHOP in 2010.

Launch of Ethics Bureau for "Jeong-Do" Management PracticeLG H&H promoted the "Jeong-Do" management team to the "Jeong-Do" management department and launched an Ethics Bureau to strengthen ethical man-agement practice. Furthermore, we have been con-

ducting "Jeong-Do" management as an organizational culture through corruption prevention activities. For example, we provide education and publicity for em-ployees and business partners, and run a report system against unfair business practices (reporting briberies and operating the Ethics Hotline).

“Jeong-Do”Management Practice Program“Jeong-Do” Management Education To keep “Jeong-Do” management culture in place, LG H&H con-tinues to educate current employees and new employ-ees of subsidiaries. This education highlights employee commitment to “Jeong-Do” management through sharing examples and Q&A on ethical conflicts along with “Jeong-Do” management theory. In addition, by constantly providing opportunities to learn “Jeong-Do” management, culture and commitment for employees of business partners in a win-win relationship, we help our partners to practice “Jeong-Do” management.

Operating Ethics Hotline The Ethics Hotline, a reporting center for violations of “Jeong-Do” man-agement, is operated to build a transparent organi-zational culture. The center receives reports of unfair work through abuse of authority and all other activities

We practice “Jeong-Do” management through transparent and honorable business activities. Through “Jeong-Do” management, we build a foundation for sustainable development by utilizing impressions of consumers and fulfilling our social respon-sibilities.

Current Status on “Jeong-Do” Education

(unit : No. of persons, companies)

Category 2008 2009 2010

Employee 2,098 1,734 1,825

Business Partner 60 129 147

* From 2008, the table above reflects the inclusion of CCB, a subsid-iary (all employees of CCB)

* In 2009, administrative employees from LG H&H and managers from CCB were targeted

* From 2010, the table above reflects the inclusion of THEFACESHOP, a subsidiary (all employees from THEFACESHOP, sales staff from CCB, and managers from LG H&H)

“Jeong-Do” Management System

System

Regulation

Operational System

• “Jeong-Do” Manage-men Education• Ethics Hotline• Gift Receipt Report-

ing System• Operating Ethics

Consultation Center• A Written Pledge for

Practice

Checking System

• Regular Auditing• Non-regular

Auditing• Business Check

“Jeong-Do” Management Division

LG Code of Ethics

Organization

Sustainability Management System Ⅰ “Jeong-Do” Management 13

violating the LG Code of Ethics, and deals with them ac-cordingly. The informant’s identify is strictly protected. Except for the submitted reports which are unable to be validated, when any violations are discovered, punitive measures are taken against the violators and improve-ments are made to business processes. A total of 12 reports against employees were received in 2010. After investigation, six violators were subject to heavy penal-ties, and two violators were subject to light penalties. Improvements were made to the violated processes. Furthermore, we listen to internal and external custom-ers’ voices via various channels. The Ethics Hotline is open to external stakeholders who may give reports on employee corruption through phone, fax or any other method of communication. ( http://ethics.lg.co.kr )

Bribery Reporting System The receiving of gifts, money and valuables from stakeholders is strictly for-bidden under any and all circumstances. If an employ-ee is offered a gift, he/she must politely decline the of-fer in accordance to the Code of Ethics. When gifts are sent by mail or parcel delivery, employees must return the package to the sender with a courteous letter that explains the company’s policy against receiving gifts. If gifts or money cannot be returned, they should be re-ported to the Ethics Bureau, which then donates them to charity groups. Otherwise, the Bureau sells the items in an internal auction from which the earnings are do-nated to charity as purchased goods. A total of 36 reports against bribery were submitted in 2010. In 1 case, the gift was returned to the previous

owner. In 27 out of 35 cases, it was not possible to re-turn the items, and consequently, they were donated to welfare facilities for the aged and children. 7 items that were perishable or too expensive to be donated were sold through internal auctions. The earnings, 570 thou-sand won, were used to purchase goods donated to a child welfare facility.

Operating Ethics Consultation Center An ‘Eth-ics Consultation Center’ on the intranet was opened in 2005 to help employees to resolve ethical dilemmas ex-perienced while performing their duties. The center pro-vides both open and private consultations. They allow employees to discuss various issues ranging from minor ethical issues to conflicts with superior or junior staff and sexual harassment. The Ethics Bureau not only suggests proper solutions in accordance to the Code of Ethics, but also actively supports resolution of difficulties. In addi-tion, examples of reported issues and predicted future issues are compiled into an easy-to-read Q&A booklet for employees. The booklet is distributed to all employ-ees every Monday morning and serves as a preventive measure against ethical conflicts.

“Jeong-Do” Management Pledge of Practice All existing and new employees are required to sign a copy of the “Jeong-Do” Management Pledge of Practice. Business partners also need to renew their pledges ev-ery year to ensure their commitment to fair competi-tion and transactions.

Measure on Cases Reported (Unit: Cases, Number of persons)

Category 2008 2009 2010

Report on Corrup-tion

No. of cases re-ported to Ethics Hotline

16 23 12

Following Measure

Light Penalty * - 1 2

Heavy Penalty * 11 3 6

* Light Penalty: Reprimand, Warning, Heavy Penalty: More than degradation (suspension, demotion, advice to resign, disciplinary dismissal, etc.)

Customer

Business Partner

Employee


Based on the CEO’s firm determination that risk man-agement serves as a shock-resistant design against predictable external impacts, all executive members acknowledge that LG H&H’s risk management is a critical area to maintain the company’s sustainability management. Accordingly, we establish an enterprise risk management system to handle a variety of risks threatening the company’s sustainability and operate programs to rapidly and effectively manage expected risks. Enterprise risks are divided into business risks and operating risks. Business risks can be subdivided into six risk categories: customers, competitors, distri-bution channels, suppliers, law and regulations, and replacements. Operating risks include risks related to marketing, sales, production, R&D, design, purchasing, logistics and administration (HR, general affairs, PR, accounting, management strategy, etc.) Each depart-

ment oversees risks on a regular basis, while enterprise risk management departments conduct monitoring. The CFO is responsible for managing overall risks and reports major risks to the BOD on a frequent basis. In 2010, we needed to cope with unclear economic circumstances such as the potential recurrence of do-mestic market stagnancy due to the uncertainty of the global economy and market polarization. Hence we launched a more economically priced line of goods that centered on household products and cosmetics. In addition, we looked into increasing consumer trends and interests in health foods. This put focus on an im-portant weak point: carbonated drinks. In response, we launched new non-carbonated products and acquired HAITAI Beverage, whose major products are non-car-bonated drinks. Furthermore, due to rapid changes in exchange rates and cost of raw materials, we took prior

Risk Management SystemLG H&H establishes an enterprise risk management system to handle a variety of risks threatening the company’s sustainability, and operates programs to rapidly and effectively manage expected risks.

Response System Classification of Risks and Managerial Items

Violation of advertisement display, fair trade, etc.

Poor production quality, Infringement of patent, Environmental safety accidents, etc.

Exchange rate, Interest rate, Information security, etc.

•Enterprise

•Operation

•�Others

Business Risk

Operation Risk

BODCEO

CFO

Overall management of risks

Department in charge of enterprise risk management

Marketing Sales R&DProduc-

tionStaff

Working-level Department

Regular management and response to practical risks

Sustainability Management System Ⅰ Risk Management System 15

•Customers

•Competitors

•Channels

•Suppliers

•Laws/Regulations

•Replacements

Diversification of consumption patterns due to changes in consumption trends, de-mographic changes, increase of consumer movement and participation

Entry of new competitors, development of new products and technology by competing companies

Changes in distribution channels, changes in strategies of distributors, increase of power of distributors

Increase of raw material cost, problems with supply and demand of raw materials

Management constraints due to enhanced monitoring functions of The Fair Trade Com-mission, intensified quality and safety regu-lations, strengthened environmental regula-tions, change of existing laws or launch of new laws regarding labor Emergence of alternative technologies in other areas

measures against cost increase risks by diversifying im-port channels for the products which have high reliance on import of raw materials. We also actively prepared for deterioration of profitability through enterprise cost reduction activities. For the administrative Division, we focused on risk management in financial close and a system of comprehensive management and account-ing based on the introduced IFRS (International Finan-cial Reporting Standards).

Internal Accounting Control System (IACS)�Taking into consideration growing demands for trans-parent disclosure of financial data of companies and reinforcement of related laws, LG H&H has been operat-ing an Internal Accounting Control System (IACS) since 2006. The IACS is a part of the company’s Internal Control System designed and implemented to provide rational convictions for achieving the company’s objec-tives. It is a series of processes executed constantly by the BOD, management and other company members. The IACS aims at enhancing operational transparency and soundness through efficiency in business opera-tions, reliability of financial data and compliance to rel-evant laws and policies. It includes programs that allow for the protection of company assets while preventing illegal activities. Consequently, we reduce distrust in the accuracy of the company’s financial statements and secure investors’ trust.

IACS Assessment System LG H&H conducts IACS activities in five areas: environment control, risk assessment, activity control, information and commu-

nication, and monitoring. We implement these controls in accordance to the IACS model criteria and applica-tion manual. The CFO is designated as the Internal Accounting Controller while the IACS department performs assessments on a frequent basis. The IACS activities allow the company to continue to discover weaknesses and risks, manage such discoveries, and utilize the management activities. Therefore, they help us to improve operations and minimize risks. The opera-tion and assessment results of the IACS are reported to the BOD and the Audit Committee annually, and are subject to review by external auditors. In 2010, an eval-uation was conducted on the design and operation of the IACS for LG H&H, CCB, and THEFACESHOP. These companies were approved by external auditors as no significant deficiency was found.

Future Operational Plan of IACS Due to the application of the International Financial Reporting Standards to listed companies in 2011, consolidated fi-nancial statements became main financial statements. Accordingly, much research claims that the Internal Ac-counting Control System also should be operated as a matter of consolidation. In line with this circumstance, LG H&H has been trying to find an operational method for consolidated IACS for domestic and overseas sub-sidiaries since 2009. Currently we have established an individual IACS for overseas subsidiaries and plan to set a process to operate the system efficiently. More-over, we will conduct a phased supplementation of the methods to operate the consolidated IACS in line with the methods to introduce the system, which is laid out in the table below.

IACS Assessment Process

Report to BOD & Audit Committee

* CSA (Control Self Assessment) : A document allowing each internal control item to be identified and assessed under the charge of the department head

Operation Evaluation

•�Assessing whether the system is operated according to designt

Design Evaluation

• Assessing whether the system is designed to prevent and expose distortions on financial statement

CSA* Completion

• Written by the department head on activities affecting financial statement

Report to / Approval of CEO

Report to / Approval of CFO (Internal Accounting Controller)

Report to / Approval of CFO

GAP Remediation (Improving weak points)


Security ManagementSecurity Management System Chief Security Of-ficer (CSO) System has been operated for systematic se-curity management since 2001. All activities related to security management are carried out under the approv-al and support of the CSO (position held concurrently by the CFO). Security management activities are systemati-cally executed based on our information protection poli-cies established according to not only Korea’s regula-tions but also the International Information Protection Standard. Through these activities, we will prepare to acquire ISO 27001 International Standard Information Protection Management System certification. In addi-tion, to intensify the roles and responsibilities of the de-partment in charge of information protection, we divide it into operational activities as policy making, technical provisions, education, support, etc and audit activities. This enables us to separately conduct monitoring on information security operations and compliance of poli-cies.Backed up by the acquisition of businesses (CCB in 2007, Diamond Pure Water in 2009 and THEFACESHOP in 2010), we have continued to perform standardiza-tions to enhance the security level of subsidiaries using our security system as a model.

In-house Security Management To set stan-dards for information protection, LG H&H outlined in-formation security policies, guidelines and processes in 2003. We regularly update such material according to changes in the security environment and related laws. We also educate new employees on security manage-ment to enhance their awareness of security.

To prevent the leak of company information, we oper-ate various programs such as a document security sys-tem, certification USB, print-out security system, and mail and web monitoring system. To prevent attacks and hackings by outside sources, a virus/worm block-ing system, coded telecommunication system, web firewall, DB firewall, and DB encryption have been in-stalled. Additionally, to improve operational efficiency and comply with regulations, we operate systems for blocking access to non-work related sites, filtering spam mail and monitoring illegal software.

Protection of Customer Information Complying with laws related to privacy protection, we strictly protect customers’ personal information collected for the pur-pose of company operations and service provisions. As a result of our multiple efforts for privacy protection, not one single incident related to the leak of personal infor-mation occurred in 2010. In compliance with enterprise principles and activity guidelines, and operation and management processes established in 2009, we are pro-tecting customer information safely. In 2010, we carried out a self-audit for incidents of violations and leaks ac-cording to the prior response system. This audit verified the actual conditions of privacy protection. As a result, there was no violation committed by internal employees and business partners. However, to manage more safely we improved system to monitor the history of changes in IDs used to access customer information. In addition, subsidiaries are expected to establish a protection sys-tem as effective as LG H&H’s system with regular inter-nal monitoring to protect their customer information.

Customer Information Protection SystemSecurity Management Organization

Information Security Personnel (Each dept.)

• Conducting working-level activities for information security

CSO• Generally managing

information protection

Information Security Manager (Each dept.)

• Supervising department activities

Informatization Acceleration Team

• Enterprise information protection, planning, mediation, support

• Policy establishment, tech-nology provision, education

• Identifying and auditing compliance of information protection

• Monitoring data leaks

“Jeong-Do” Management Division

Sustainability Management System Ⅰ Risk Management System 17

Zero Number of incidents

related to the leak of personal information

Objective

Legal Ground

System

Enhancing customer trust in company by preventing customer data leaks and

minimizing legal risks

•Act on the Protection of Personal Information• Act on the Promotion of Information and Communica-

tion Network Utilization and Information Protection, etc.•�Act on the Use and Protection of Credit Information

Management System

• Personal information protection organization• Personal information protection policy•Auditing & Assessment •Education & Publicity

Operation System

• Monitoring personal data leaks• Responding to data violations and leaks• Subcontracting to external/third parties• Lifecycle management of personal data

Technology System

• Operating personal data processing systems (Website, DB, etc.)• Applying technology to prevent personal data leaks (encoding, limiting access, firewall, etc.)

Stakeholder Engagement System

Stakeholder Communication ChannelLG H&H believes that the ground for sustainability man-agement involves listening to the voices of stakeholders, understanding their needs in advance, communicating with them and reflecting their opinions on the com-pany’s decision-making and management activities. To realize this belief, we open diverse communication chan-

nels for each stakeholder group and gather their major interests and opinions. For the future, we will strive to identify key management issues from the viewpoints of stakeholders rather than our own, perform our best, provide performance reports, and cooperate with them, contributing to sustainable social development.


Organizations of stakeholders participating in interviews and surveys

Business Partners

Cosmax, Seoul Perfumery, Jinhan, Jin Sung Moulds, Yuchang F.C., Korea Alcohol Industrial Co., Ltd., Samhwan Industry, Yulchon, etc.

EmployeesIn-house staffs(production, purchasing, sales, marketing, R&D, HR, Planning and Finance, etc), Managers(Each business sector)

NGOKorea Jubuclub, Green Consumer Network, Korea National Council of Consumer Organizations, etc.

Consumer Prosumer(Housewife monitors) etc.

Media Organi-zations

Hankyoreh Media Company, Kyunghyang Shin-mun, Money Today, etc.

Distributors Beautiplex store manager, agency head, etc.

InvestorsArisaig Partners, Deutsche Securities, Korea Invest-ment & Securities, CLSA Securities Korea Ltd., Morgan Stanley, Hanwha Securities, etc.

Government and Public agencies

Department of Economic Policy of Ulsan Metropol-itan City, Korea Testing & Research Institute, etc.

Dis

trib

utor

s

NGO

Consumer

LG H&H’s Communication Channel

• Working-level com-mittee

• Government tasks / Conference partici-pation

•Newsletters• Labor and manage-

ment conferences•Grievance committee• Surveying employee

satisfaction

•Subcommittee with business partners• Technical support for

business partners• “Jeong-Do”

management channel

•Press conference•Press launch events

•Shareholder meetings•Performance presentations•IR Roadshows

• Surveying brand satisfaction•Operating brand site• Receiving customer

complaints and giving feedback

•Prosumer activity• Social contribution

program

• Working-level committee of the association

•Discussion•Partnership

Business Partners

Media

Investors

Empl

oyee

s

Governm

ent•Joint Business Plan(JBP)•Top to Top meetings•Agency head meetings

and public agencies

Organizations

We strive to gather the main interests and opinions of stakeholders through com-munication channels, reflect them on our business activities, and report sustain-ability management performance in a transparent way, accomplishing sustainable social development.

Materiality Test ProcessThe core objective of sustainability reporting is to dis-close information related to the key issues and their impact on the company’s business. These issues are obtained by the understanding of the level of stake-holders’ interests in the company’s economic, environ-mental and social performance. Therefore, materiality testing involving stakeholder participation was con-ducted, prior to the publication of this report.

【1】 Selecting StakeholdersLG H&H created a set of selection criteria for stakehold-ers who are influenced by LG H&H's business activities, products, and services or have great influence in the company’s strategy implementation and goal achieve-ment. Internal and external stakeholders were select-ed. The chosen stakeholders were largely divided into customers, employees, business partners, distributors, investors, media organizations, government and public agencies, and NGOs.

【2】 Collecting Stakeholders’ OpinionsWe analyzed the media, benchmarked sustainability reports of other companies, interviewed experts, and reviewed internal strategies to outline business issues

that were of stakeholders' interest. Moreover, we evalu-ated the level of our sustainability management ac-tivities and determined the management issues that are of greatest significance based on interviews and surveys of pre-selected stakeholders. In particular, we tried to understand interesting issues of each stake-holder group to gather their opinions more sufficiently. For example, questions specific to certain stakeholder groups as well as a set of common questions for all stakeholder groups were used to evaluate their views on major issues.

【3】 Identifying Sustainability Management issuesThirty sustainability management issues addressing economic, environmental and social aspects of our busi-ness activities, products, and services were identified amongst a variety of issues voiced by stakeholders.

【4】 Analyzing Key Issues and Reflecting on ReportAfter analyzing the impact of main issues on the com-pany’s business and interest levels of stakeholders and then conducting a materiality test, we constructed 12 core issues from the report. The 12 issues are detailed in the next page.

Sustainability Management System Ⅰ Stakeholder Engagement System 19

Materiality Test Process

1 2 3 4Selecting stakeholders

Collecting opinions of stakeholders

Identifying sustainability management issues

Analyzing key issues and reflect-ing on report

• Making lists of stake-holders

• Understanding impact of stakeholders

• Determining key stakeholders

• Interview and survey

• Surveying opinions through existing com-munication channels

• In-depth interview with business department leaders

• Analyzing external guidelines

• Analyzing internal/external environments

• Materiality test to key stakeholders

• Analyzing issues of internal/external stakeholders within the direction of corporate strategies

• Reflecting key issues on report


◀ L

owH

igh ▶

Sustainability mgt. strategy

“Jeong-Do” mgt.

Sustainability prod-uct development

Environmental mgt. activity

Risk mgt. system

Eco-friendly manufactur-ing and logistics

Product safety insurance

Climate change response

Resource saving and recycling promotion

Social contribution activity

Customer value improvement

Win-win partnership with business partner

Impact on company’s business

Inte

rest

leve

l of s

take

hold

ers

Management leadership

Corporategovernance

Green Marketing

Safety and public health activities Water resource

protection

Waste mgt. Security mgt.

HR development

◀ Low High ▶

Materiality TestWe conducted interviews and surveys to stakeholders identified through materiality test processes and selected key issues by assessing sustainability management issues and analyzing their impact to business and the level of interest of stakeholders.

Area Key Report Issue Importance Page


•Sustainability management strategies•“Jeong-Do” mangement•Risk management system

★★★★★

★★★★☆

★★★★★

p.08p.12p.15

4 Strategic Tasks for Sustainability Management

Product Leadership •Developing sustainable product •Securing product safety

★★★★★

★★★★☆p.31p.36

Operational Leadership

•Responding to climate change•Environmental management activities•Eco-friendly manufacturing and logistics•Saving resources and recycling

★★★☆☆

★★★☆☆

★★★☆☆

★★★☆☆

p.41p.44p.45p.49

Social Responsibility Leadership

•Social contribution activities• Win-win partnership with business partners

★★★★★

★★★★☆p.53p.60

Communication Leadership

•Improving customer value ★★★★☆ p.73

Key Report Issue The importance of 12 key issues selected by materiality testing was identified, and LG H&H’s policies and activities related to those key issues were described in this report.

지속가능경영 시스템 Ⅰ 보고서 개요 및 특징 21

By fulfilling sustainability management based on products, operations, social responsibilities and communication leadership along with the maximization of economic performance, we hope to be remembered as an honorable company to our customers around the world.

Creation and sharing of economic performance • Product leadership • Operational leadership • Social responsibility leadership • Communication leadership

Sustainability Performance

22 LG생활건강 2010 지속가능경영보고서

Creation and Sharing of Economic Performance Creation of Economic Performance

New Business Performance

Overseas Business

Sharing of Economic Performance

Healthy

RefreshingBeautiful

Disclosure on Management Approach

Strategy DirectionBacked up by constant and fair growth in the three business areas of 'Healthy, Beautiful, Refreshing' through mutual complements and competitions, we could have stable busi-ness portfolio with a balanced sales scale and prepare a ground for sustainable growth. To achieve the top position in each business area, we gather our competencies and also maximize synergy effects through the acquisition of THEFACESHOP and HAITAI Bev-erage. As a result of such endeavors, the sales in 2010 increased 28% compared to the previous year to KRW 2.8 trillion and operating profit increased 52%. This has been the best performance since the company was established. For consistent growth in future, we also expand our business stage to overseas markets and plan gradual globalization with our clearly differentiated products based on the success in domestic market. LG H&H secures stability of managerial activities through practice of “Jeong-Do” man-agement and enterprise risk management under transparent governance system. In ad-dition, by contributing economic and social contribution to a variety of stakeholders, we are striving to fulfill our duties as a member of society.

Key Performance

Category Item 2009 2010 Other

Profitability

Sales (KRW) 2,216.5 bil. 2,826.5 bil. 27.5% ▲

Operating profit (KRW)

228.1 bil. 346.8 bil. 52.0%▲

Stability

Debt/Equity ratio (%) 98.5 130.3 Acquisition of THEFACE-

SHOP in 2010

Credit rating (Bond)

AA AAKorea Investors Service, Korea Ratings, NICE Investors Service

Contribu-tion

Economic contribu-

tion

Contribution of stakeholders (KRW)

1,507.4 bil. 1,796.4 bil. 19.2%▲

Social contribu-

tion

Ratio of local employees (%)

98.5 98.6 On the basis of overseas subsidiaries of LG H&H

Ratio of local procurement (%)

80.9 77.7On the basis of overseas manufacturing subsidiar-ies of LG H&H

Creation of Economic Performance

Enterprise Business PerformanceLG H&H is expanding and upgrading its product line which provides differentiated value to the consumer, imple-menting premiumization through emotional marketing in a consistent and constant manner. Backed up by con-stant and fair growth in three business areas through mu-tual complements and competitions, we could have stable business portfolio with a balanced sales scale.

In detail, we gained an enterprise sales of 2,826.5 billion won, which increased by 27.5% over the previous year, and an operation income of 346.8 billion won in 2010. Although our debt/equity ratio temporarily increased due to the acquisition of THEFACESHOP, the ratio is expected to decline as debt is repaid by using the constant inflow of cash from all the business units.

We have achieved our best performance ever through constant growth in three business areas and implementation of a stable business portfolio while corporate value also continues to grow.

2010

237.0

2008

123.5

2009

158.0

* Change of the account-ing standard (Year 2008:

K-GAAP Consolidated, Year 2009~2010: K-IFRS Consoli-

dated) caused differences in the report from 2009.

Net Income

50.0%

(Unit : KRW billion)

Overseas sales (Unit : KRW billion)

2010

245.7

2008

104.1

2009

217.8

Sales Component Ratio by Region �� (Unit : %)

China

Asia (except China)

North America

Europe

Others

41.8

9.8

6.82.5

39.1

Sales

27.5%


Healthy

Beautiful

Refreshing

2009

2,216.5

42.5%

30.2%

27.3%

2010

2,826.5

25.4%

36.1%

38.5%

2008

43.0%

1,987.6

30.1%

26.9%

Debt/Equity Ratio

2010

130.3

2008

114.6

2009

98.5

(Unit : %)

Healthy

Beautiful

Refreshing

Operationg Income and Margin

52.0%


2008

194.4

42.5%

38.1%

19.4%

2009

228.1

43.6%

32.1%

24.3%

346.8

2010

21.2%

42.9%

35.9%

Creation and Sharing of Economic Performance Ⅰ Creation of Economic Performance 23 Creation of Economic Performance Creation of Economic Performance Creation of Economic Performance Creation of Economic Performance Creation of Economic Performance Creation of Economic Performance Creation of Economic Performance Creation of Economic Performance

Corporate ValueAs of the end of 2010, the share price of LG H&H was KRW 390,000 (using common stock as a standard), which was a fourteen fold increase from the share price posted in early 2005. Market capitalization increased to more than KRW 5.8 trillion from KRW 479.1 billion in early 2005 to KRW 6,288 billion in the end of 2010.

Performance by BusinessHealthy Business Household goods were continu-ally premiumized through the launch of differentiated new types of products with a high level of function. For example, we introduced products leading market trends such as the ‘Elastine Ihee’ shampoo and ‘Bamboo Salt Tiger Herb’ toothpaste. The eco-friendly andconvenient ‘Saffron 10X’ fabric softener and the ‘Who pooped on my toothbrush’ toothpaste, products with differenti-ated concepts, were also introduced. In addition, to deal with consumer trends in preferred products with a reasonable quality and low price, we launched HEXA goods (a new type of product with a maintained quality and low price made possible through cost innovations.) Moreover, we conducted differentiated strategies for each distribution channel to strengthen our competi-

tiveness. Also, we achieved constant growth by concen-trating our competences on ‘Unicham’, ‘Beyond’ and ‘Danone’, new driving forces of growth.

Beautiful Business We strengthened the port-folio of our cosmetic business. In detail, we acquired ‘THEFACESHOP’, the leading cosmetic brand shop, and made its operations stable. In addition, using anti-aging ingredients from stem cells, differentiated traditional Korean medicine (Hanbang) and fermented ingredients, we tried to clarify brand concepts of the Prestige lines of O HUI, Whoo, and su:m. Additionally, to appeal to consumers in their twenties who focus on value, the ‘belif’ brand with the ‘True Quality and True Value’ motto was launched in department stores. The Prestige distribution channels expanded their coverage through the separation of O HUI and Whoo stores, the early introduction of ‘belif’ to department stores, and the constant increase of door-to-door sales organiza-tions. Furthermore, we changed our operational model and store layout of Beautiplex, our multi-cosmetics brand shop, to operate products more effectively and enhance consumer value.


Change in Market Capitalization and Stock Price�� (Unit: KRW billion, KRW)

Classification Early 2005 End of 2005 End of 2006 End of 2007 End of 2008 End of 2009 End of 2010

MarketCapitalization 479.1 927.0 2,034.7 3,172.7 3,054.7 4,715.8 6,288.0

Stock Price 28,000 55,000 123,500 194,000 190,000 291,000 390,000

* End of Year: Using the closing price as a standard

www.belifcosmetic.com

* 'belif', natural herbal cosmetic brand

* Using early 2005 as base of 100

Share Price Chart

KOSPI LG H&H

300

900

1,100

1,300

1,500

100

500

700

End of 2010End of 2007 End of 2008End of 2005 End of 2009End of 2006Early 2005

Refreshing Business We supplemented our cur-rent products with new beverages of various sizes and flavors to expand the width of selection for customers. ‘Glaceau’, a vitamin beverage, has grown successfully. To reinforce a portfolio of non-carbonated beverages, we acquired Hankook Beverage and normalized its busi-

ness. Additionally, we also acquired HAITAI Beverage in January 2011 and stabilized its business during the early stages of acquisition. This helped our beverage business by allowing constant growth through the creation of a synergy effect in sales, production and logistics.

www.glaceauvitaminwater.co.kr/

Creation and Sharing of Economic Performance Ⅰ Creation of Economic Performance 25

* 'Glaceau Vitamin Water', lifestyle beverage

* Consumer-oriented business area : We adopted the principle that “Strategies should be established based on critical consumer benefit rather than products to achieve sustainable growth,” (Ted Revitt). Accordingly, we redefined our business areas not as “Household goods, Cosmetics, and Beverages,” but as “Healthy, Beautiful, and Refreshing.”

Major Brands by Business

Healthy Business

Oral Care Personal Care Home CareFabric Care

Prestige Masstige THEFACESHOP

Beautiful Business

Carbonated beverage Non-Carbonated beverage

Refreshing Business

New Business Performance

Business Performance after the Acquisi-tion of THEFACESHOPTo efficiently enter the growing low- to mid-priced cos-metics market, a growth due to the polarization of con-sumption, LG H&H acquired THEFACESHOP in January 2010. Through this brand’s addition, we created a syn-ergistic effect, utilizing the business know-how of LG H&H and the sound distribution networks of THEFACE-SHOP. As a result, we firmed up the market dominance in the cosmetic industry based on the success in pre-mium cosmetics. New products of high quality, which utilize the natural fermentation technology of our cosmetic institute, posted a high sales performance. At the same time, the existing color make-up, Hanbang, and men’s cosmetics were renewed in full measure. In addition, focusing on the expansion of sales channels, we secured 881 shops, which increased by 160 shops compared to the previous year. Furthermore, we strived to increase sales through duty-free shops, online stores and by acquiring new customers. Consequently, our cosmetic business earned an 11.9% sales growth in 2010 to increase its value to KRW 287.7 billion, while operating income increased by 15.8% and increased its value to KRW 48.1 billion.

Acquisition of HAITAI BeverageThe acquisition of HAITAI Beverage in January 2011 aimed at narrowing a gap in sales and production in-frastructure between LG H&H and the top beverage company. Since we acquired CCB in December 2007, the sales of this subsidiary rose approximately 50% by 2010. Operational profit reached KRW 165 billion from 2008 to 2010, which allowed us to resolve operating losses that lasted for four consecutive years. This suc-cessful turnaround enabled LG H&H to secure its posi-tion as the second largest domestic beverage industry. The rate of operational profit was about 10% in 2010, which was the highest rate in the domestic beverage industry. It is expected, that by securing the supplemental in-frastructure in sales, production and logistics areas through this acquisition of HAITAI Beverage along with our performance in the beverage industry, the differen-tials between LG H&H and the largest firm in the indus-try will be significantly reduced. Furthermore, we expect to strengthen competences of existing brand goods of CCB and accelerate additional launches of competitive new brands at the same time.

50 % The growth rate in sales compared to 2007 of CCB

15.8 % The growth rate of operating income of THEFACESHOP

We strengthened market dominance thanks to the synergy effect driven by the acquisition of THEFACESHOP. In line with this, we will develop our competitiveness in the beverage market through the acquisition of HAITAI Beverage


Store image of THEFACESHOP Product image of HAITAI Beverage

Product image of THEFACESHOP

www.thefaceshop.com

15 countries

The number of exporters

Overseas Business

LG H&H is operating three manufacturing subsidiaries in China and Vietnam, and a sales subsidiary in China, the USA and Taiwan. We export key products to a total of 15 countries and currently maintain constant growth, showing annual growth rate of over 10% for the previ-ous five years. Furthermore, we are going to promote a step by step globalization process to increase future growth of our company.

Strategy In household goods, we are concentrating on competitive brands to promote premiumization. We also try to enter new markets through specialized products like sheet-type detergents, tooth whitener and bamboo salt toothpastes. As for cosmetics, we are constantly nur-turing Whoo, the Hanbang premium brand with clear dif-ferentiation, and are promoting masstige brands through diversified distribution channels. For this, oral marketing led by opinion leaders and systematic consumer manage-ment based on a global CRM IT system are carried out. For competition with multinational firms, we conduct af-filiate marketing with LG’s subsidiaries and independently operate locally specialized brands and SKU. Moreover, we actively employ local manpower to perform our strate-gies from the viewpoint of each country and also create employment. As of the end of 2010, the ratio of on-site versus off-site managers for each country reached ap-proximately 90%. In addition, the ratio of raw and sub-sidiary materials purchased by overseas manufacturing subsidiaries in local markets in 2010 marked 78%. Such trade with local business partners which are competitive in quality and raw cost also contributes to the sustainable development of the local economy.

Key Overseas Businesses by RegionChina In household goods, Bamboo Salt tooth-paste is firmly recognized as a valuable premium prod-uct and at the same time unique or competitive goods will be introduced in the market on a constant basis. Cosmetic brands like O HUI and Whoo are sold in the market along with locally manufactured brands includ-ing Hersina and Minerva. LG H&H plans to clearly posi-tion O HUI and Whoo brands in the prestige market.

Asia In Vietnam, O HUI has been positioned at the number one spot in the premium cosmetics mar-ket, and Essance is being intensively promoted as a masstige product. As for the household goods busi-ness, we plan to nurture Elastine as a premium brand and launch new products for hair and body care to in-crease sales. Seeking new growth opportunities in the overseas market, we established a local sales subsidiary in Taiwan in December 2008 and devoted its energies to the expansion of distribution channels in 2010. The Whoo brand and Bamboo Salt toothpaste grew in pop-ularity in particular, and their sales increased by about 60% compared to the previous year.

USA Backed up by the increased brand recogni-tion and the preference of Asian consumers, the USA has seen a significant growth in home premium brand purchases. Thusly, LG H&H is strengthening its position in the Korean and Asian market in the USA.

We plan to focus on products, which have potential to be differentiated, to first lay the foundation for growth and then begin phase growth strategies in global markets in the future.

Local purchase

KRW 26.4 bil.out of

total purchaseKRW 33.9 bil.

The ratio of local purchasing

78%

Total

1,225 out of 1,243

employees

Managers and superior

141 out of 157employees

Prior-employment of local people (As of the end of 2010)

The ratio of local purchasing “Essance”, a locally specialized brand in Vietnam

Creation and Sharing of Economic Performance Ⅰ Overseas Business 27

Sharing of Economic Performance

The added value created through our business activities are disclosed in a transparent way. A portion is submitted to the national and regional governments in the form of taxes. * Corporate tax, other taxes and public

utilities’ charge

KRW 77.1billion(KRW 10 billion ▲)

Government and Public Agencies

Local Communities and NGOs

We conduct sharing activities, including social contribution and local community support, to return a part of economic earnings to society. * Social contribution activity cost, institute/

academy support

KRW 5.3billion

(KRW 1.8 billion ▲)

Shareholders

Shareholder dividends have been con-sistently increasing thanks to the steady increase in net income. The dividend payout ratio is 25%, but if gains or losses on valuation using equity methods and extraordinary incomes are excluded, the adjusted ratio is 30%. * Shareholder dividends

KRW 44.5billion(KRW 2.5 billion ▲)

Employees

The total paid for employee wages, welfare benefits, and education programs continues to grow relative to the creation of economic value. * Wages and bonuses, welfare benefits, retirement-related benefits, expenses for education and training


Creditors

We try to maintain the ideal loan structure to secure smooth cash flow.* Net interest for bonds


* Standard: The total of distribution of economic earnings created by LG H&H, CCB and THEFACESHOP


Business Partners

Raw materials account for the majority of manufacturing costs. Accordingly, our relationship with business partners is crucial to our overall performance. * Equipment investment, raw and subsid-

iary materials costs, outsourcing costs, service fees, etc.

KRW 1,293 billion (KRW 221.9 billion ▲)

As a social member, LG H&H shares the results of its business activities with various stakeholders including business partners, employees, government and public agen-cies, shareholders, local communities, and NGOs.

Company Name Classification 2008 2009 2010Compared to the

previous year

LG H&H

Business Partners 553.2 584.6 697.8 +113.2

Employees 164.3 169.2 199.0 +31.8


48.8 46.2 55.1 +8.9

Shareholders 33.6 42.0 44.5 +2.5

Creditors 17.4 15.2 28.1 +12.9


2.1 2.9 4.1 +1.2

CCB

Business Partners 263.2 328.1 402.7 +74.6

Employees 119.2 126.6 138.0 +11.4


3.8 .41 4.2 +0.1

Creditors 3.1 0.4 0.2 -0.2


0.2 0.3 0.9 +0.6

THEFACESHOP

Business Partners - 158.4 192.5 +34.1

Employees - 19.1 17.1 -2.0


- 10.8 11.8 +1.0

Creditors - 1.2 0.1 -1.1


- 0.3 0.3 -

Total

Business Partners 816.4 1,071.1 1,293.0 +221.9

Employees 283.5 312.9 354.1 +41.2


52.6 61.1 71.1 +10.0

Shareholders 33.6 42.0 44.5 +2.5

Creditors 20.5 16.8 28.4 +11.6


2.3 3.5 5.3 +1.8

* Business Partners : Equipment investment, raw and subsidiary materials costs, outsourcing costs, service fees, etc.* Employees : Wages and bonuses, welfare benefits, retirement-related benefits, expenses for education and training, etc.* Government and Public agencies : Corporate tax, other taxes and public utilities charges* Shareholders : Shareholder dividends* Creditors : Net interest for bonds* Local Communities and NGOs : Social contribution activity cost, institute/academy support * No political donation was made.

(Unit: KRW billion)Sharing amount of economic performance by each company

Creation and Sharing of Economic Value Ⅰ Sharing of Economic Performance 29

Product LeadershipDevelopment of Sustainable Products

Product Safety

Open Innovation


Strategy DirectionSecuring leadership in sustainable products is one of the core strategic tasks for sus-tainability management at LG H&H. It encompasses security of stability of contents and packing materials, reduction of environmental loads and consideration of social impact across the life cycle of products from product development to R&D, selection of raw materials, manufacturing, logistics, use, and disposal. Accordingly, we have de-termined the definition of sustainable products, guidelines of R&D and package design for product development. With this strategy, we are expanding development of sus-tainable products. As a result, we launched more sustainable products which consider consumer value, environmental and social responsibilities in the representative brands of key product categories, and their sales increased. The number of products bearing environmental labelling such as the eco-label and the carbon-label is also consistently increasing. Moreover, LG H&H is actively pursuing technical open innovations, which incorporates external competencies, into our product development. Consumer trends are predicted in advance and lead a new paradigm of the market. We will continue to break away from existing business styles and move beyond solely the improvement of our products to secure the position as the market leader.

Key Performance


R&D

Expense on R&D (KRW) 32.1 bil. 34.1 bil. 6.2% ▲

Number of environmen-tal labeling products

Total 34 61 79.4% ▲

-Eco-label-Carbon-label

331

574 See p.35

Sales per-formance

Sales of sustainable products (KRW)

74.4 bil. 105.2 bil. 41.4% ▲(see p.32)

Sales of open innovation products (KRW)

30.3 bil. 72 bil. 137.6% ▲(see p.38)

Minimizing Environmental

Impact

Pursuing consumers' health and

safety

Improving customer value

and social value

Sustainable Products

Securing Product Stability

•�Managing through pre-manufacture to disposal after use

•�Monitoring hazardous materials by strict internal standards

Developing Innovative Product

•�Improving technology through open innovation

• Challenging invention beyond improvement

Development of Sustainable Products

Establishing Infrastructure for Developing Sustainable ProductsLG H&H has identified the security of leadership in sustainable products as one of the four strategies for sustainability management. As the first step, we con-centrated on establishing an infrastructure to develop sustainable products in 2010. As a result, we set a com-mon definition and direction of sustainable products, creating guidelines for sustainable product develop-ment. In addition, we developed the 'Detailed Check-list for Product Sustainability' to quantify the degree of compliance with the guidelines. This evaluation tool is composed of evaluation items and measures determined based on the guidelines. LG H&H defines sustainable products as 'products pursing consumers' health and safety and providing consistent value to so-ciety on the basis of implementation of environmental

and social responsibilities.'That is, sustainable products allow consumers to feel secure of their health and safety. They also help to minimize environmental influences from pre-manufac-turing to post-utilization and contribute to a constant and harmonious development of society. The ‘Guideline for Developing Sustainable Products’, which must be consulted before developing such prod-ucts, includes the ‘Package Design Guideline’ and the ‘R&D Guideline’. The former explains 10 guidelines on safety and reduction of environmental load related to the selection of the quality and the size of packing materials, spatial arrangements, packing methods, and design. The latter outlines 10 guidelines with regard to environmental load reduction technology, product safety, low-stimulation prescription to men, and social-ly responsible research.

We expanded the development of sustainable products by pursuing consumers’ health and safety and minimizing impact on the environment across the overall process from pre-manufacturing to disposal after use.

Infrastructure for Sustainable Product Development

Products pursing consumers’ health and safety and providing consistent value to society on the basis of implementation of environmental and social responsibilities

Package Design Guideline + R&D Guideline

Composed of a checklist related to the low utilization of resources and energies for package design and contents, recyclability, and human and environmental safety*

Definition

Guideline

Detailed Checklist for Products

Definition

* Applying different detailed items and standards accord-

ing to character-istics of product

categories

Product Development Process

Planning Development Evaluation and Improvement

Manufacturing and Release

Planning for Development

•Developing product concept•��Establishing product objectives

(Considering product quality and sustainability)

Internal and External Evaluation

•Evaluating prototype (Prosumer)•�Evaluating efficacy/effect or

eco-friendliness (Outsourcing/ Self-evaluation)

Manufacturing/Shipment

•Charging/Packaging•Transporting/Shipping

Diagnosis Development

•Reflecting product concept• Reflecting targeted quality and

sustainability•Testing safety and efficacy/effect

Design Development

•Reflecting product concept•Improving sustainability•Testing safety

Product Leadership Ⅰ Development of Sustainable Products 31

LG H&H launched ‘Saffron 10X Concentrate’ with its innovative 10-times concentrate technology in August 2010. This fabric softener comes in a light and compact bottle so as to provide consumers with convenience and economic efficiency.

▶� Factors to improve customer value•Increasing convenience by reducing the weight of fabric softener product•Saving cost as a small bottle can do laundry 87 times

▶ Factors to improve sustainability• The reduction of packing materials by utilizing 10-times concentrate technology

lessens energy use in product manufacturing and distribution, and reduces CO2 emissions.

• The increase of the number of uses and the duration of use per bottle reduces packaging waste after complete use.

• The bottle’s dispensing pump helps consumers to use right quantity of product and reduce environmental pollution.

•With no chemical antiseptic added, the skin is less irritated.

LG H&H launched ‘belif’, a natural herbal cosmetic brand, in August 2010. This brand’s formulation rarely irritates the skin and maximizes its efficacy through natural ingredients. In addition, to rationalize price, we simply packed the products without unnecessary components. Using this brand, we will create new trends in the premium cosmetics market.

▶�Factors to improve customer value• By extracting excellently working ingredients from natural materials, we help many people to

have a safe, healthy and beautiful life. • The minimization of packaging enables us to provide a valuable product and reasonable

price.

▶�Factors to improve sustainability• Skin is protected safely because products have few harmful and irritating ingredients such as

synthetic preservatives, colorants, flavors, mineral oil, and animal ingredients.

•Simplification of packaging enhances recycling and reduces environmental loads.

- Instead of dual quality material, single quality material is used, removing unnecessary coat-ings and decorations.

• ‘Biomass Plastic’*, an eco-friendly material, will be a component of packaging in the first half of 2011.

- Botanic ingredients will help to generate less CO2 emissions during manufacturing processes compared to petroleum-based raw material (plastic).

* Biomass Plastics: Plastics containing more than 25% Biomass which originates from worksites such as corn starch, etc.

Expansion of Sustainable Product DevelopmentBacked by the construction of an infrastructure to develop sustainable products, we expanded and diversified our sustainable products in 2010. According to the evaluation using the ‘Detailed Checklist for Product Sustainability’, the sales of sustainable products satisfying targeted goals was KRW 105.2 billion in 2010, an increase of approximately 41% compared to the previous year. Along with existing brands such as ‘Beyond’, an eco-beauty brand, and ‘Borrow-ing Earth’, a naturalistic household brand, a variety of sustainable products were newly developed and launched in 2010 such as 'Saffron 10X’, ‘belif’, and ‘Tech Eco-natural’.

1. Saffron 10X Concentrate

2. belif


LG H&H launched ‘PERIOE Safe Kids’ in August 2010. This toothpaste is made up of edible ingredients for little children who may swallow toothpaste.

▶�Factors to improve customer value• This safe toothpaste for kids contains food based materials and medical ingredients,

which are selected among ingredients enrolled in the Korean Food Additives Codex.

▶ Factors to improve customer value• None of the following seven materials are included: synthetic antiseptics, artificial

colors, flavors and sweeteners, alkyl sulfate, fluorine, and dental varnish.

- To pursue children’s health and safety, the company excluded ingredients that may cause body irritation and affect body development.

Jayeonpong Hand-Made X8’, a DIY dishwashing liquid, was launched in May 2010. This product enables consumers to conveniently adjust the detergency of their dishwashing solution as they so desire.

▶ Factors to improve customer value• Users can adjust detergency depending on water quantity added to

the highly concentrated liquid.

• A 500g bottle is equivalent to 8 bottles of regular dishwashing liquid (a weight totaling 4 kg). It is economically efficient as the price is half that of regular dishwashing liquid with the same cleaning capacity.

▶ Factors to improve sustainability• Super-concentrate technology can reduce usage of raw materials in

production. In addition, as consumers can recycle a container more than 8 times, the entire product lifecycle from production to distribu-tion and disposal is friendly to the environment.

• 100% worksite-derived surfactants are used, and unnecessary chemi-cal substances are excluded (no colorants, light fragrance).

3. PERIOE Safe Kids

4. Jayonpong Hand-Made X8

HEXA line products of key categories were launched for value-pursuing customers who seek core benefits and avoid a showy appearance.

While the quality of a product is maintained at the same level as one of the main brands, secondary functions which customers do not want are removed. In addition, packaging innovation which maximizes the degree of recycling and minimizes the amount of waste reduces the production cost, and accordingly allows LG H&H to offer price benefits to customers. In 2010, we launched an improved ‘Jayeonpong’ with more powerful washing ingredients, ‘Elastine’ in the HEXA line, the ‘PERIOE 365 set’ with lighter and slimmer product packaging, and ‘Tech Eco-Natural’, an eco-friendly laundry washing detergent without preservatives, phosphates and colorants. Furthermore, these HEXA products will continue to be introduced to the market in 2011.

5. HEXA Line



Eco-efficiency Assessment of ‘Tech Handy-Sheet’

Special page

Tech Handy-Sheet was tested in a national program of Ministry of Knowledge Econ-omy, which is a pilot project to evaluate eco-efficiency of products. It was approved through comparison with ‘Tech regular’(carton type), a powder detergent.

What is eco-efficiency assessment?Eco-efficiency assessment is an environmental management tool, which assesses the environmental impact across the entire life-

cycle of products as well as product value offered to stakeholders. This tool can help to improve the quality of eco-friendly products

and enhance environmental friendliness in overall industries and economy. In addition, provision of assessment results of products

enables customers to obtain right information for selecting eco-friendly goods.

•Environmental Impact As defined in other ISO standard, adopting greenhouse emissions quantified by Life Cycle Assessment (LCA) (System Bound: Production)

•Economic Value Quantifying economic value of a product such as added value and efficiency. Product value of a laundry detergent in this assessment was defined as detergency,which was calculated as the amount of laundry per manufacturing cost (KRW 1)

Improvement of economic efficiency and reduction in environmental impact of the new product (assessed product) compared to

the existing product can be identified through factor value calculated as the ratio of two eco-efficiency values of both products.

•Factor X = E.E of the new product (Assessed product) / E.E of the existing product

e.g) Factor 1: The same level of eco-friendliness and efficiency to existing products Factor 5: Five-times improved level of eco-friendliness and efficiency compared to the existing product

Assessment Result•Existing product: Tech regular (carton), Assessed product: Tech Handy-Sheet (carton)

• Manufacturing cost for 1kg of Tech Handy-Sheet is more expensive than the existing powder detergent by 6 times. However, economic efficiency increased and environmental impact reduced by more than 83%, which generated factor value at 6.37.

Eco-efficiency =

Economic Value of a Product

Environmental Impact of a Product

0.6

1.8

0.2

1.0

1.4

0.2 0.6 1.0 1.4 1.8

Assessed Product (F=6.37)

Control Product(F=1)

◀ Decrease in Environmental Impact

Incr

ease

in P

rodu

ct S

yste

m V

alue

▶

Trade-off areaDecrease in environmental impact as well as product value

Non Considered AreaIncrease in environmental impact as well as product value

Product Developmen Target Area

Increase in product value and decrease in environ-mental impact

Environmen-tal Impact

Product System Value

"Product Develop-ment Target Area"

Trade-off Area

Non Considered Area

vs.

Environmental Labeling ProductsCertificates like eco-label and carbon-label encourage LG H&H to be actively involved in relevant policies of government by providing products satisfying various environmental standards. In addition, these certificates are utilized as a communication tool to offer customers correct information which aids their selection of eco-friendly goods.

Eco-label Our endeavor lies in the continual im-provement of product eco-friendliness to preserve our environment and provide safe products. To realize these goals, we highlighted the use of less harmful substances to human body, the use of easily recyclable materials and recycled packaging, and the minimization of factors causing environmental pollution. In particular, for laun-dry detergents, dishwashing liquid, fabric softeners and body wash, which can impact water quality, we abide by government-set environmental standards for each prod-uct category and have received eco-label certifications.

Carbon-label The Carbon-label system is a sys-tem to reduce the impact of global warming, respond to climate change, and provide consumers with infor-mation on green products. This system converts GHG emitted across the life cycle of a product from manu-facturing to transportation, use, and disposal into CO2 emissions. Information of the converted CO2 emissions is labeled on the products. LG H&H established a pro-cess to measure CO2 emissions over the entire lifecycle of a product through the carbon-label certification of ‘Elastine Shampoo for Damage’ and prepared an in-house standard for calculation of GHG in 2009. Fur-thermore, more products including ‘Elastine Moisture Shampoo’, ‘Elastine Volume Shampoo’ and ‘Jayon-pong Pine’ dishwashing liquid, obtained carbon-label certificates in 2010. CCB also received the carbon-la-bel certificate for the Coca-Cola 500 ml plastic bottle in 2009. In 2010 the Coca-Cola Zero 250 ml can, Vio Soonsoo 500 ml plastic bottle, and Vio Soonsoo 2000 ml plastic bottle received the certificate.

Eco-Label Certified Products

Product Category2009 2010

Product NameNo. of Certi-fied Items

Product Name No. of Certi-fied Items

Power Laundry Detergent Tech Handy-Sheet, Hanspoon 9 Tech Handy-Sheet, Borrowing Earth 13

Liquid Laundry Detergent Borrowing Earth 1 Borrowing Earth 1

Fabric Softner Borrowing Earth 1 Borrowing Earth 2

Multi-Purpose Cleaners

Borrowing Earth (for bathroom/kitchen)

2Borrowing Earth (for bathroom/kitchen) 2

Dishwashing LiquidBorrowing Earth, PongPong, Sense, Safe Brown Rice, Jayonpong Rice Water, etc.

20

Borrowing Earth, PongPong, Sense, Safe Brown Rice, Jayonpong RiceWater, Jayonpong Fermented Yogurt, Jayonpong Hand-Made X8, etc.

27

Body Cleanser -Say (Lime Orange/ Lavender/ Angel Berry/ Chamomile) 12

No. of Certified Products 33 57

* The number of eco-label certified products increased by 73%, from 33 items in 2009 to 57 items in 2010.

(As of the end of December)

Carbon-Label Certified Products

Company Name2009 2010

Product NameNo. of Certi-fied Items

Product Name No. of Certi-fied Items

LG H&H Elastine Damage Control Shampoo 780g

1

•Elastine Damage Control Shampoo 780g•Elastine Moisture Control Shampoo 780g•Elastine Volume Control Shampoo 780g•Jayonpong Pine 1.4kg Refill

4

CCB Coca-Cola 500ml (plastic bottle)

1

•Coca-Cola 500ml (plastic bottle)•Coca-Cola Zero 250ml (can)•Vio Soonsoo 500ml (plastic bottle)•Vio Soonsoo 2000ml (plastic bottle)

4

No. of Certified Products 2 8

* The number of carbon-label certified products increased from 2 items in 2009 to 8 items in 2010.

(As of end of December)

* Elastine Moisture Shampoo


* Elastine Moisture Shampoo

Product Safety Management ProcessLG H&H is striving to secure safety for the human body and the environment by monitoring product safety from pre-development to manufacturing and, finally, to the use of the product. Hence, we carry out raw materi-al management and product development separately, and assess toxicity to and safety for the human body. As for raw material management, when we introduce new raw materials, we identify the function of the raw materials, the chemical characteristics, the correspond-ing material safety data sheet (MSDS), and the toxicity-related data. Then, we select materials which meet reg-ulations and self-standards, and conduct pre-tests on toxicity and skin allergy tests to ensure product safety. As for product development, a sting test, a patch test and an accumulated irritation test are conducted ac-cording to a variety of test standards during the prod-

uct development process. These tests help us to check skin irritation in various circumstances and the poten-tial induction of side effects in advance. Then, prod-ucts that have passed the safety tests undergo chemi-cal reaction tests with packing materials along with evaluations using standards of product safety, function and storage, and are finally manufactured into a final product. Moreover, as synthetic ingredients which can irritate the skin, such as preservatives, are replaced by natural substances, we set strict self-standards and perform safety assessments on these substances. Es-pecially, since cosmetic ingredients that may possibly harm the skin and animal testing conducted during the development process became social controversies in re-cent years, we are trying to replace controversial ingre-dients with natural substances or harmless ingredients, and substitute animal testing with cell testing.

Product Safety


Product Safety Management Process

R&DInitial/Subsidiary

Raw Materials Manufacturing Use Disposal

• Identifying characteristics of chemicals

• Reviewing relevant regulations

• Reviewing safety of raw materials

• Assessing safety of raw materials (toxicity, skin allergy)

• Assessing prototype

• Identifying potential amount of purchasing

• Assessing sustainability of business partners

• Checking storage capacity

• Assessing manufacturing risk

• Assessing product safety

•Educating handlers

• Monitoing customer complaints

• Establishing measures

• Minimizing residue

Managing Hazardous SubstanceLG H&H is making effort to proactively respond to envi-ronmental issues on hazardous substances and prevent environmental controversies. Hence, we are intensively monitoring and managing hazardous substances in ac-cordance to strict standards and verifying the safety of products and raw materials in advance.

To identify if hazardous materials to the human body such as heavy metals, formaldehyde, dioxanes, phtha-lates, methanol, asbestos and pesticides are present, we analyze these materials with precision instruments with a high sensitivity on a frequent and regular basis. Furthermore, we comply with legal standards on re-stricted materials which are limited or banned.

Managing Hazardous Material

Items Standard

Heavy Metals (lead, arsenic, mercury, chromium, cadmium)

•Testing the degree of pollution of raw materials and products•Using ICP/MS instruments with high sensitivity; Managing according to strict self-standards

Formaldehyde•Not using formaldehyde-based preservatives•Monitoring and managing to prevent formaldehyde from being naturally generated or accidently added

Dioxane• Analyzing with GC/MSD instruments with high sensitivity, monitoring and managing dioxanes especially in

cases where a small quantity can remain on materials

Phthalate •Monitoring and managing this forbidden material where a small quantity can contaminate other materials

Methanol •Monitoring and managing this forbidden material where a small quantity can contaminate other materials

Pesticides •Analyzing precisely with GC/MS, LC/MS/MS instruments and screening materials which may be polluted

Asbestos• Constantly monitoring and managing if a small quantity of this forbidden material can pollute other

materials

To ensure product safety for the human body and the environment, we systemati-cally manage phases of R&D, manufacturing, use and disposal. In addition, we mon-itor harmful materials according to internal strict standards.

Product Leadership Ⅰ Product Safety 37

CCB, acquiring HACCP Certificate across all worksites

The food safety problem is rising as a social issue due to hazardous substances in food. Ac-cordingly, standards for food safety are intensified as the government promotes the early settlement of the Hazard Analysis and Critical Control Point (HACCP). Since October 2010, CCB has secured food safety based on its preventive management system by acquiring the HACCP certificate at all worksites in Yeoju, Yangsan and Gwangju.

Customer Complaint Ratio (Unit : ppm)

20102008 2009

2.341.84

1.17

Effect

• Establishing a hygienic working environment by preventing cross-pollution during performing duties

• Establishing a hygienic working environment by hygienic management of facilities and equipment

• Securing food safety through a hygienic supply of initial/subsidiary raw materials

• Effectively performing activities for improvement by properly analyzing of customer complaints and poor processes

• Securing food safety by blocking of foreign substances and conducting pre-management of hazardous factors

Major Performance in Open Innovation

Products Cooperating Organization Detail

O HUI the FirstCha Bio & Diostech

Developing cosmetics for skin renewal and anti-aging with the R&D institutes holding stem cell and placenta technologies ISA KNOX TE’RVINA

Ihee Care for Style Ihee, hair artistDeveloping a premium hair care brand thanks to the experience and know-how of a beauty specialist

Beyond Repairganics AMSDeveloping cosmetics with natural fermentation preservative-free technology, applying antimicrobial peptides fermented by a specific lactic acid from Kimchi

Elastine Hair Care products

RejeronApplying ingredients of human growth hormone to the hair care products to prevent hair loss

Open Innovation

LG H&H has been actively promoting open innovation since 2006. Open innovation refers to a new paradigm for technological innovation. Through open innovation, we collect technologies and ideas needed for develop-ing new products from external sources, not being limited to only in-house systems. In addition, internal resources can be shared with the external. We are de-veloping a variety of products with external capabilities through constant exchange and networks with local and overseas research institutes, universities, venture companies, technology trade centers and raw mate-rial providers. On the i-CONNECT website ( http://iconnect.lgcare.com), which opened in 2009, about 100 proposals related to patent technology and busi-

ness cooperation are submitted annually and they are actively reviewed for their feasibility. Additionally, we try to consistently seek external innova-tion capabilities which can be applied to the company. For example, combining experience and know-how of Ms. Ihee, a famous hair stylist, with our technology, we developed ‘Ihee Care for Style’, which is a premium hair care brand. ‘O HUI the First Cell Revolution’ and ‘ISA KNOX TE’RVINA’ were also created by cooperation with the ‘Cha Bio & Diostech’ research organization to develop cosmetics for skin restoration and anti-aging. The organization holds clinically applicable stem cell technology and research technology related to amil.iotic fluid and the placenta.

By building networks with domestic/overseas research institutes, universities, ven-ture companies and so on to adopt external capabilities, we have introduced a variety of technically innovative products.

Ihee Care for Style


ISA KNOX TE’RVINA

Participation in Major National Projects��(Unit: KRW million)

Project NameOrganiza-

tion in Charge

Contribu-tion of Gov-

ernment

Development of Fermented Ingredi-ents with High Skin Stability

Ministry of Health and

Welfare135

Development of Specialized New Material for Facial Masks and formulations with improved ef-fectiveness


Welfare135

Establishment of skin sorting standards by gene type and devel-opment of customized effective ingredients


Welfare210

Development of bio-protection materials with new functions


Welfare70

Programs to nurture water industry, the leading industry in Jeju regional economies

Ministry of Knowledge Economy

120

2010

34.1

2008

32.3

2009

32.1

R&D Cost at LG H&H (Unit: KRW billion)

* Professor Park, Kyung-chan (Dermatology, Seoul National University), J. of Derm. Science, 2004.

‘O HUI the First Cell Revolution’, Premium Cosmetic Brand with High Effectiveness Based on Stem Cell Technology

LG H&H’s R&D center is striving to incorporate newly developed medical

technologies in cosmetics. As a part of our endeavor, we carried out joint

research with Cha Bio & Diostech in 2010. This R&D specialist is the only in-

stitute approved by the government to do research on embryonic stem cells.

Stem cells, which are undifferentiated cells highly capable of division, have

been utilized in regenerative medicine technology. Recently LG H&H has

identified that reduction in the number and the activity of skin stem cells may be a main cause of skin aging*.

Accordingly, we secured the treatment technology utilizing stem cells faster than competitors and applied it to

cosmetics. In addition, only bioactive ingredients, of which the efficacy and the safety were identified through

elemental analysis in a medium, were recombined to make raw materials. These skin regenerative materials

with high efficacy from stem cells are developed as the core ingredients of the cosmetic brand. Research for

stabilization of both heat-sensitive ingredients and reactive ingredient combinations were carried out. We

succeeded in the stabilization of the core ingredients by developing a process of polymer emulsification and

injection at low-temperatures. Finally, we formulated the ingredients in the actual cosmetics. Through our de-

votion across the entire process from developing the core ingredients to producing the actual product, ‘O HUI

the First Cell Revolution’ with maximized effectiveness was created. Furthermore, we are working to expand

the applications of stem cell technology to other brands.

Case Study of Product Development through Open Innovation. 1

* Patent: 10-2010-00390100

'Beyond Repairganics' created by 100% of Natural Ingredients, Natu-rally Fermented Preservatives and Organic Formulation

The research institute of LG H&H is consistently developing new technologies for

organic cosmetics. In May 2010, we succeeded in developing a technology to sta-

bilize organic cosmetics, which was originally mainly made up of instable organic

ingredients. This technology, which is a natural fermentation and preservative-

free technology*, is related to extraction of antimicrobial substances fermented

by a specific lactic acid in Kimchi. In addition, we developed an organic emulsi-

fication technology with the new concept of natural surfactant substances. This

development allowed us to secure the stability of emulsification and improve the

quality of products such as the feeling of moisturization. Moreover, utilizing our

own unique technology, we developed differentiated technologies in the efficacy,

quality and function of organic cosmetics. In addition, we newly discovered the organic functional materials

and maximized its effectiveness. We also created functional organic cosmetics for whitening by developing

natural whitening materials with low irritation. This was accomplished by overcoming the functional limits of

natural materials and improving the quality of organic cosmetics. ‘Beyond Repairganics’ is the very product

integrating these technologies. Furthermore, we are making efforts to expand 100% of the natural/organic

formulation technologies and improve natural preservation technologies.

Cast Study of Product Development through Open Innovation. 2

'Beyond Repairganics' created by 100% of Natural Ingredients, Natu-

Product Leadership Ⅰ Open Innovation 39


Operational LeadershipResponding to Climate Change

Environmental Management Activities

Eco-Friendly Manufacturing and Logistics

Saving and Recycling of Resources


Strategy DirectionLG H&H considers the impact of environment on the business through integrated management system, from the perspective of supply chain, and conducts activities enhancing environmental value. By defining the properties of sustainable products and developing those products, we try to enhance the sustainability of manufacturing, procurement, and logistics through green management. To reduce the environmental impact of package waste after product use, we evaluate the conservative utilization of packing materials across the life cycle of a product.To deal with climate change, which is becoming more of an issue recently, we built a greenhouse gas (GHG) inventory and made long-term plans for green management. Additionally, we share enterprise performance through internal councils and train the employees in charge.

Key Performance


Input

Basic unit of energy usage (GJ/product-ton)

2.135 2.011 5.8% ▼

Basic unit of water usage (ton/product-ton)

1.345 1.209 10.1% ▼

Usage of raw materials (ton)

216,792 208,978 3.6% ▼

Emission

Basic unit of GHG emissions (tCO2e/product-ton)

0.114 0.108 5.3% ▼

Basic unit of wastewater discharge (ton/product-ton)

0.286 0.267 6.6% ▼

Basic unit of waste production (kg/product-ton)

11.556 12.221 5.8% ▲

(Excluding construc-tion waste)

Opera-tional Per-formance

ESH performance evaluation (point)

780 82040 points ▲ (On the basis of 1,000 points)

Green procurement (KRW)

83 mil. 166 mil. 100% ▲ (On the ba-sis of office supplies)

R&D Procurement Manufacturing Logistics Use Disposal

· Developing sus-tainable products

· Technology to reduce packing materials

· Intensifying product safety

· Green procure-ment

· Assessing sustainability

·Green logistics-Backhauling- Increasing efficiency of logistics

· Minimizing impact to water system

· Improving rate of separation and collection of packing ma-terials through use of single materials

· Recycling of package

· Building green worksites- Reducing GHG- Increasing rate of resource recycling

Responding to Climate Change

LG H&H established a master plan for responding to cli-mate change based on a two-fold approach, ‘building a foundation’ and ‘managing demand’, on the issues derived from the analysis of risks and opportunities. To build a foundation, we plan to construct phased green house inventories for local and overseas subsidiaries and foster specialists, and introduce a performance manage-ment system. As for managing demand, we work to re-duce energy usage through substituting highly efficient facilities, introducing Renewable Energy and expanding the installation of LED light.We established annual plans for reducing energy us-age in the mid-to long-term future in accordance to LG Corp.’s “Green 2020” strategy of 2010. This strat-egy aims at offsetting GHG emissions increased as the company grows. By following this strategy, we will have reduced GHG emissions by 34% of production units through 228 investment plans from the 2009 (base year) to the year 2020. In addition, to prepare a stable supply of water resources and enhance the efficiency of resources, water usage will be controlled through 44 ad-ditional plans and cut back by 30% by 2020 compared to 2009. To review the validity of the initiatives reflected on invest-ment plans, Marginal Abatement Cost (MAC) was ana-lyzed. Also, some part of the implementation processes

were realigned according to the government’s Frame-work Act on Low Carbon, Green Growth and the GHG and Energy Target Scheme. Through these long-term projects, we expect to lower GHG emissions by 74,300 tons of CO2e, and water usage by 2,100,000 tons.

Plan of GHG ReductionGHG inventories were built up at worksites, logistics net-works and research centers. In addition, emissions from each Division were analyzed and the third verification was completed. We plan to construct a performance management system as well as evaluate the potential of reduction technologies which will be developed in future. Outputs of the initiatives will be disclosed to the Carbon Disclosure Project (CDP) and via sustainability reports.

Performance of GHG ReductionThe majority of GHG is being emitted at the Ulsan and Cheongju worksites. These worksites are associated with raw materials manufacturing with, for example, fatty acids, whose energy intensity is relatively high. Indirect emissions generated by electricity and steam take up 88% of the total emissions. Reduction of GHG emissions focuses on the increase of efficiency in pro-duction facilities, air conditioning, thermal temperature

We are actively responding to the climate change. We have finished analyzing GHG emissions through the GHG inventory and worked to reduce these emissions ac-cording to the mid-to long-term emission reduction scheme.

Product Leadership Ⅰ Responding to Climate Change 41

GHG Emissions (Unit: tCO2e, tCO2e/product-ton)

LG H&H CCB Basic unit

89,40082,796

2009 2020 Goal2020 BAU

42.6% 48.3%

51.7%50.3%

57.4%

49.7%

163,700

Water Usage (Unit: ×1,000 tons, ton/product-ton)

4,300

2,2001,981

2009 2020 Goal2020 BAU

0.092

0.060

34.3% 30.4%2.196

1.530

20.9% 22.7%

77.3%75.5%

79.1%

24.5%

LG H&H CCB Basic unit


management, and improvement of lighting equipment. Meanwhile, we implemented 26 projects to construct an automatic production system, substitute efficient facilities and optimize logistics for establishing green worksites. As a result, GHG emissions were reduced by 967 tons in 2010.Furthermore, at the same year, to develop and expand low-carbon products, we obtained the Carbon foot-print labeling Certificate on three products: 2 items of the Elastine brand and Jayonpong Pine. In 2011, we plan to reduce 1,600 tons of GHG emis-sions through 29 activities involving the improvement of productivity, installment of energy-saving facilities and expansion of natural lighting. In addition, we will

continue to expand the carbon footprint of key prod-ucts and work to accredit the Low Carbon Certificate on the existing carbon footprint labeling products.

Risk and Opportunity of Climate ChangeLG H&H identifies internal risks, external risks and op-portunities to minimize the impact of climate change made by its business activities. Though there was a price increase in beef tallow and palm oil due to un-usual weather phenomena, the overall cost has not been significantly influenced. According to the govern-ment’s GHG and Energy Target Scheme, it is expected that the Ulsan worksite will be designated as a directly controlled worksite in 2013, while all the corporate will

2010

832

2008

759

2.2642.011

2009

772

2.135� Basic unit

Energy Usage at LG H&H��(Unit: TJ, GJ/product-ton) Energy Usage at CCB (Unit: TJ, GJ/product-ton)

2010

519

2008

454

0.8490.835

2009

476

0.855

� Basic unit

GHG Reduction Examples of Main Reduction

•�Constructing a continuous manufacturing system of detergents and installing equipment to collect heating•�Utilizing high efficient motors

(Turbo Blower, Circulating Pump, etc.) •�Regularly checking heating facilities and improving light-

ing equipment•Improving a system to collect steam condensate

967tCO2e(Energy Reduction: ▼482 TOE)

Direct and Indirect Energy Usage at LG H&H �� (Unit: TJ)

2008 2009 2010

Direct 105 103 103

Indirect 654 669 729

Total 759 772 832

GHG Emissions of LG H&H ��(Unit: tCO2e)

Classification 2008 2009 2010

Direct emissions (Scope 1)

Stationary source 5,270 5,160 5,161

Mobile combustion 190 184 166

Fugitive sources 10 10 10

Physical and chemical processes

0 0 1

Indirect emissions (Scope 2)

Power 19,839 20,534 22,643

Steam 14,615 15,296 16,533

Total 39,924 41,184 44,514

Other indirect emissions (Scope 3)

Commute Bus 303 296 350

· Target: 4 worksites of LG H&H (Cheongju/Ulsan/Onsan/Naju), 11 logistics networks and R&D center

·Standard: IPCC 2006, GWP secondary factor, the govern-ment’s Integrated Guidelines (electricity emission factor) and external steam emission factors (Korea Zinc)

be directly controlled by 2016. Accordingly, we are striv-ing to reduce risk factors through trend analysis of GHG emissions and implementation of internal objectives for green management. On the other hand, we continue to fulfill R&D work, identifying that our accumulated capabilities such as high detergency technology and other assets that can

work as business opportunities derived from climate change. Thanks to such devotion, we entered into the solar battery cleaner market in 2008, and the sales grew 5.4 times in 2010. Recently we have developed an LED cleaner and will launch the product in 2011. Furthermore, we plan to expand the Carbon footprint labeling certification on household goods.

5.4Times

Rate of increase in sales of solar battery cleaner

compared to 2008

Special page

Participation in International Solar Energy Expo 2010We participated in the ‘International Solar Energy Expo

2010’ held at KINTEX, Korea from February 3rd to 5th in

2010. This event, which was held for the second time after

2009, was the biggest exhibition related to electricity gener-

ation using solar energy in Korea. At this expo, recent trends

and future prospects of the solar energy industry receives at-

tention as the next-generation eco-friendly energy and can

be viewed at a glance. LG H&H introduced the development

process for a solar battery cleaner, and promoted product

characteristics in this exhibition.

Change in Sales of Solar Cell Cleaner�� (Unit: KRW billion)

2008

0.9

2009

2.1

4.7

2010

GHG Emissions by Worksite��(Unit: tCO2e)

LG H&H CCB

Worksite A

Worksite C

Worksite D

Worksite B

Worksite C

⇣�Standard desig-nated in 2014

⇣ Standard desig-nated in 2012

Worksite B

Worksite A

Product Leadership Ⅰ Responding to Climate Change 43

Risk

•�Price increase in raw materials (beef tallow, palm oil, etc.) due to extreme weather

•�Potential intensification of regulations according to the Government’s GHG Target Scheme

•�Increase of demand for information disclosure of main stakeholders

Opportunity

•�Expansion of the solar cell cleaner market due to the explo-sive growth of regenerative energy

•�Securing cost competitiveness through voluntary strategy establishment

•�Increase of demand according to the expansion of the carbon-label product market

Environmental Management Activities

LG H&H integrated a management system in 2000 to minimize environmental impact of the overall pro-cess from purchase of raw materials to production, transportation and disposal, and to utilize resources efficiently and preserve environment. Based on the in-tegrated management system, respective objectives of each worksite are established and success of enterprise integration is examined on a regular basis. In addition, verification by a third party is conducted to secure the external credibility.

ESH Performance Evaluation The ESH performance assessment is engaged in a quantitative measurement using 20 indicators select-ed to make consistent improvements in environment, energy, safety and public health. The results are then analyzed and assessed. The process is carried out half-yearly to improve the Divisions having weak points, and the results are transparently disclosed to stakeholders. Since 2010, LG H&H has reflected the result of the KPI assessment by department in relation to environment, energy, safety and health items.

ESH AuditLG H&H integrates and operates the environment, safety and quality management systems, and an in-ternal specialist conducts audit every year to secure ef-ficient operation of the system. This audit is offered to worksites, research centers and logistics centers as well as subsidiaries. This process allows us to reduce opera-tional risks by checking for compliance of environmen-tal safety regulations and determining the existence of

other risks. The system also includes an actual exami-nation of facilities. CCB introduced TCCMS (The Coca-Cola Management System), a management system for environment, safety, public health and quality conducted by Coca-Cola Corp., USA. Through operation of the system, all worksites in Korea have been approved to E3, the high-est certificate. As all worksites of LG H&H are located in industrial parks, direct influence on the natural en-vironment and biodiversity may be low. However, we pay attention to preservation of living organisms in our communities through natural purification and monitor-ing activities on environment.

Green ProcurementTo promote purchase of eco-friendly products, we con-cluded a voluntary agreement on green procurement with the Ministry of Environment in 2005. In line with this, we prepared purchasing regulations and improved relevant systematic foundations. In addition, we are trying to activate green procure-ment through a variety of activities. As a part of our endeavor, to substitute eco-friendly raw materials and consumption goods, we frequently explain a trend of eco-friendly products and certified goods to employees along with a system change. For example, a chemical (Hi-Pax) used in the wastewater treatment worksites at Cheongju worksite was replaced with an eco-friendly item in 2010. In addition, as each worksite purchased remanufactured cartridges and high efficient products, the amount of green procurement increased two times more than the previous year.

E3Certificate

CCB, All the domestic worksites certified


ESH Audit Result & Implementation Rate

The rate of improvements

98%out of 136 indications

The Amount of Green Procurement by LG H&H �� (Unit: KRW million)

2010

166

2008

60

2009

83

(On the basis of office supplies/ consumption goods)

ESH Performance Evaluation Result *��(on the basis of 1,000 points)

20102006 2007 2008 2009

820

690740 780

560

* Assessment indicators are composed of MPI (Manage-rial Performance Indicators) and OPI (Operational Perfor-mance Indicators).∙ MPI : ESH managerial sys-

tem, regulatory compliance, production/consumption of eco-friendly products, edu-cation and training, etc.

∙ OPI : Toxic materials, waste, air, water quality, energy

We consistently think of methods to improve and minimize environmental load potentially lying in business activities, responding to diverse environmental issues in a systematic manner.

Eco-Friendly Manufacturing and Logistics

Water

2010

500500500

2008

427

2009

486

1.2741.209

1.345� Basic unit

(Unit: ×1,000 tons, ton/product-ton)

Wastewater

2010

110110110

2008

99

2009

103

296267

286

� Basic unit

(Unit: ×1,000 tons tons, kg/product-ton)

Flow of Input and Output at LG H&H

Disposal after Usage

Research

Transportation

Purchasing and Manufacturing

Energy

•Electricity

•Fuel

36.3 TJ23.9 TJ12.4 TJ

Water (Water Supply) 15,431.0 ton

Recycled Water (2,076.0) ton

Energy

•Electricity

•Fuel

764.0 TJ408.9 TJ355.1 TJ

Water

•Water Supply

•Underground Water

•Stream

476,330.0 ton179,799.0 ton231,677.0 ton64,854.0 ton

Recycled Water (117,652.0) ton

Initial Raw Material 208,978 ton

Hazardous Waste (7,164.0) ton

Energy

•Electricity

•Fuel

31.5 TJ28.1 TJ

3.4 TJ

Water (Water Supply) 8,183.0 ton

Input Output

GHG Emissions

20102008

39,924

2009

41,184

119108

114

� Basic unit

(Unit: tCO2e, kg CO2e/product-ton)

44,514

Product Leadership Ⅰ Eco-Friendly Manufacturing and Logistics 45

* LG H&H

GHG

Sewage Amount* 15,431.0 ton

Waste

•Hazardous

•Non-hazardous

81.0 ton

24.0 ton

57.0 ton

GHG

Product 413,580.0 ton

Wastewater 110,334.0 ton

Waste•Non-hazardous•Hazardous

4,973.0 ton

3,732.0 ton

1,241.0 ton

Recycled Waste (2,185.0) ton

CODMn 11.3 ton

Dust 6.7 ton

Sewage 104,307.0 ton

GHG

Sewage Amount* 8,183.0 ton

* Sewage amount is the same to water amount used.

Container Recycling 12,713 ton

* Recycling of plastic, glass bottle, etc.

1,884.0 tCO2e

40,937.0 tCO2e

1,693.0 tCO2e

Environmentally Friendly ManufacturingManaging Chemical Materials To prevent disas-ters impacting on safety and health, we operate a pro-cess to identify information of materials and provide it to stakeholders. A material safety data sheet (MSDS) acquired is enrolled in the website for the knowledge management system (KMS) in our intranet to provide information regarding chemical materials. Hence, em-ployees can always check the information. In addition, complying with the REACH system of EU, in 2008, we completed prior the enrollment of 7 kinds of chemical materials of which more than 1 ton are exported to EU annually. EBS (Amides, C16-18,N,N’-ethylenebis) chemicals, of which more than 1,000 tons are exported, were finally enrolled in 2010. Six materi-als which have exports of between 100 tons and 1,000 tons will have been enrolled by 2013. CCB is gradually replacing CFC-based refrigerant gas, an ozone-destroying material contained in vending machines and coolers, with HFC-based refrigerant of low destruction index.

Water Pollutant Management Water pollutants are mainly generated during a washing process. Con-sequently, it is required to make a constant effort to reduce wastewater usage as frequency of washing pro-cess increases due to small quantity batch production. Each worksite is reducing its basic unit through con-stant improvement of emission sources and processing facilities, establishment of its own goals and reflection on the KPI of the department. The Cheongju worksite used to waste excessive water to wash residues in pipes from body goods manufacturing locations to packing rooms. However, it manufactured a pig and an air picker to remove residues in advance. As a result, production of wastewater decreased by 100

tons and emission density was also decreased. In addi-tion, a Membrane Bio-Reactor (MBR) facility combined with a new technology was installed in the wastewater treatment worksite to enhance the capacity of waste-water treatment taking into consideration the facilities to be expanded in future. Yeoju and Yangsan worksites of CCB constructed a TMS (tele-monitoring system) for water quality, and conduct a real-time monitoring of the quality of wastewater. As a result, the two worksites abide by a legal permissible level of water quality.

Managing Waste Through replacement and im-provement of a dehydrator, the Cheongju worksite has reduced sludge moisture content from 74% to less than 68% since 2009. As a result, the amount of waste fell by more than 30%, while production rose by more than 20% compared to 2008. Moreover, after the recycling center used as LG Chem was separated, the worksite operates its own waste management center. This helped the worksite to increase the rate of recycling by improving the sorting ability of recycling. The Onsan worksite is transferring waste alcohol, pro-duced in the manufacturing process of Alkyl polyg-lycoside (AG) based products, to waste treatment facility. As the worksite manufactured more products, not only the COD load in wastewater but also produc-tion of waste sludge and chemical expenses for waste treatment increased. To reduce such an environ-mental burden, the worksite reduced waste loading amount and saved about KRW 90 million of raw cost. Furthermore, it carried out systematic operations and process improvements for the fundamental reduction of waste. Consequently, the Onsan worksite cut the amount of designated waste by 57%, from 241 tons in 2007 to 104 tons in 2009. The worksite’s endeavor

57 % The rate of reduction in specified waste generated at Onsan worksite com-pared to 2007

30 % The rate of reduction in waste generated at Cheongju worksite compared to 2008


Environmental Investment of LG H&H (Unit: KRW million)


Air 401 112 147

Water 644 247 3,359

Waste 25 0 229

Other 659 813 633

Total 1,729 1,172 4,368

Environmental Cost of LG H&H� (Unit: KRW million)


Air 3 3 2

Water 1,050 921 1,071

Waste 428 505 611

Other 0 149 124

Total 1,481 1,578 1,808

��*�Main detail in 2010· Installation of MBR system in waste treatment facility at Cheongju

worksite; Manufacturing a metered pump system for Saffron·�Plumbing for an aerator of a water tank to collect the wastewater of

a manufacturing room at the Ulsan worksite ·�Replacing FRP of outdoor product tanks with SUS at the Onsan

worksite (prevention of soil pollution)

* Wastewater/waste treatment cost, Consignment management cost, etc.

was recognized by the government and awarded the Prime Ministers Award in September 2010 as leading company on resource recycling. The majority of waste produced in CCB’s worksites is waste sludge and crushed glass bottles which are not able to be recycled. The crushed waste glass is col-lected to be recycled while waste sludge is used for organic fertilizer and earthworm feed.

Expanding Efficiency in logistics and Eco-Friendly Logistics of LG H&HLG H&H is operating a total of 11 logistics centers: 1 main logistics center, 2 metropolitan logistics centers, 7 shipping centers and 1 refrigerated logistics base. We consider characteristics of customers by distribution channels and the amount of shipment to operate an intensive system for differentiated inventory manage-ment. In addition, we improve logistics efficiency, con-struct environmental logistics, rationalize logistics op-eration and optimize the supply chain to enhance our competitiveness in logistics activities. As a result, the ratio of logistics cost to the sales decreased from 3.2% in 2006 to 2.4% in 2010, which shows that we are oper-ating an efficient and competitive logistics system.

Construction Shipment Routing System LG H&H built up shipment routing system in November 2010, to make an efficient response to the continuous increase in the number of outlets and customers, and demands on better shipping services to customers. Efficiency in operating hours through early shipment and optimi-zation of delivery routes helped us to shorten vehicle operation durations and provide customers with ship-ping information in advance. Accordingly, we not only improved logistics service but also enhanced shipping efficiency.

Increasing Size of Transport Vehicle The size of delivery vehicles at the main logistics center is getting larger. The ratio of 11-ton trucks, the main vehicle used, decreased from 57% in 2009 to 38% in 2010, while the ratio of 14-ton trucks increased from 16% in 2009 to 35% in 2010. As a result, the number of vehicles op-erated fell by 704 times in a year (base of 11-ton truck), and 32㎘ of diesel oil were saved and 82 tons of CO2

was cut.

Backhauling Backhauling refers to a delivery sys-tem in which vehicles that completed a delivery for a distribution company make a return trip carrying prod-ucts of a nearby business partner. Being engaged in the joint use of backhauling vehicles with distribution firms, LG H&H is enhancing the eco-efficiency of backhaul-ing. Currently, it is carrying out the backhauling pro-gram with E-mart and Home plus.

Optimizing Supply Chain To optimize the supply chain, we established an efficient production request system. The S&OP (Sales & Operation Planning) pro-cess supports us to improve accuracy in expecting the demand, managing targeted stocks, and managing the production standardization by combing the vol-ume and mix of monthly demand plans. In addition, we strived to prepare an efficient production process and maintain a proper level of stock by receiving production requests on a weekly base and readjusting plans every three days. As a result, our customers showed more satisfaction through stabilization of the supply system and decrease in the rate of nonpayment.

Building up GHG Management System To re-spond to the rise of attention in eco-friendly logistics, LG H&H established and operates a GHG management

2.4 % The ratio of logistics cost

to the sales

Increasing Size of Transport Vehicle of LG H&H (Unit: %)

Below 8tons 11tons 14tons Over 22tons

2009

57

24

3

16 2010

38

243

35

The Ratio of Logistics Cost to the Sales of LG H&H (Unit: %)

3.22.9

2.72.4 2.4

20102006 2007 2008 2009

Product Leadership Ⅰ Eco-Friendly Manufacturing and Logistics 47

system. Identifying the causes and emissions of GHG in relation to logistics, we established management practices to be conducted by logistics centers and busi-ness partners by each factor. By designating a person in charge at each center and evaluating the results of reduction, we are striving to reduce GHG emission ef-fectively. Installing Anti-Idling Device to Transport Vehicle

As a part of construction of eco-friendly logistics system, we installed and are operating an anti-idling device. When a vehicle stops, its engine is automati-cally turned off by the control device. Then, when a clutch is stepped on, the engine is turned on. The anti-idling device helps to reduce the GHG emissions of idling of vehicles. Currently the device is promoted to be installed in the vehicles of the Gyeonggi Prov-ince through a project supported by the Ministry of Environment. In 2011, the program will be expanded nationwide.

Expanding Efficiency in logistics and Eco-Friendly Logistics of CCBIncreasing Logistics Efficiency CCB is striving to continue to increase transport efficiency. In 2010, it cut the ratio of 14-ton trucks and increased the ratio of 26-ton trucks, which resulted in 22% increase in the volume of transport.Accordingly, the number of operation by 14-ton trucks decreased 1,286 times and 43㎘ of fuel were saved.

Eco-Friendly Logistics We conduct programs to reduce air pollutants and GHG emissions generated in logistics activities. For example, the replacement of old

trucks with 110 new trucks and diesel forklifts with 18 battery-powered forklifts helped us to reduce gas emis-sions in 2010. In addition, 142 transport trucks were equipped with a Diesel Particulate Filter (DPF) device for reduction of exhaust gas emissions. The DFP, a de-vice for post-processing exhaust, does not emit exhaust gas directly, but sifts out dust through an internal filter. Then, the filtered dust is oxidized with a catalyst and emitted out of vehicle. Consequently exhaust gas emis-sions are reduced. In 2011, 28 additional battery forklift trucks will be in-troduced to decrease gas emissions in logistics.

Expanding Efficiency in logistics and Eco-Friendly Logistics of THEFACESHOPCreating Synergy Effect with Logistics of LG H&H

To create a synergy effect in logistics of LG H&H and THEFACESHOP, joint shipments in Busan and Jeju province are being carried out. Utilizing local logistics centers of LG H&H as a shipment base, we enhanced the efficiency of vehicle operation as well as upgraded the logistics service. In 2011, the joint shipment will be expanded to other regions including Daegu, Daejeon and Gwangju, and create more synergy effect.

Efficiency Use of Resources We constructed a logistics processing facility on the second floor of the Yongin THEFACESHOP logistics center. Within the facil-ity, a cooling and heating system is operated targeting only the necessary space so as to increase energy effi-ciency and improve the work environment. In addition, for product packaging, plastic container boxes are used instead of disposable paper boxes and are reused to save packing boxes, tape and so on.


Installing anti-idling device (Left, Upper) Screen for display, (Right, Upper) Main hardware, (Lower) Harness

Backhauling

LG H&H makes careful decisions on the selection of materials and forms of packaging, as we understand that packaging materials may greatly influence environ-ment. We select materials which are easy to be recycled after use and also try to reduce the amount of packag-ing materials. Simplification of containers will result in a reduction of waste. We are implementing a variety of work to save resources, reduce wastes and enhance re-cycling rates. For example, we have developed a plastic reduction technology, created packing forms to save re-sources and changed packaging styles, minimizing the use of composite materials and post-processing.

Packaging Material Reduction PerformanceWeight Reduction of Gift Set Tray Based on Devel-opment of High-Strength Structure In order to hold the contents in place and secure stability during distribution, a tray supporting the components of a gift set needs a certain thickness according to the size of the tray. To secure stability of the gift set by maintaining the strength of the tray and simultaneously reduce thick-ness, we developed a special rib-installed tray frame. As a result, the thickness of the tray reduced by 15% in aver-age, and 84 tons of annual plastic usage were saved.

Weight Reduction of Large-Sized Commercial Con-tainer Large-sized commercial containers which consume a lot of plastic were slimmed. By studying proper materials for large-scaled containers and then manufacturing a plastic-saving container, we saved 45 tons of annual plastic consumption.

Weight Reduction of Cap and Container of Vio Soonsoo We developed a technology to maintain strength for the manufacturing, distribution and stor-age of ‘Vio Soonsoo’ goods, and at the same time re-duce the thickness of the container and cap, and short-en the length of the container neck. Consequently, we reduced plastic consumptions by 22% compared to existing products, and created the lightest pure water goods in Korea.

Gift Set Packaging without Shopping Bags To minimize usage of polypropylene non-woven shopping bags, we developed a package structure, which enables us to handle and transport a gift set, without a shop-ping bag. As a result, we reduced 66 tons of annual plastic usage.

Saving and Recycling of ResourcesWe take the lead to save resources, reduce waste and improve the rate of recycling. In particular, we are striving to develop a plastic reduction technology, create pack-aging forms and change packaging styles to save resources and minimize the use of post-processing and composite materials.

Thickness of Tray�

Small Size�0.6mm�⇨�0.5mm

Large Size�0.7mm�⇨�0.6mm

84tons

Weight Reduction of Gift Set Tray Based on Devel-opment of High-Strength Structure

Weight of Container�

900g�⇨�850g

45tons��

Weight Reduction of Large-Sized Commercial Container

66tons�

Gift Set Packaging without Shopping Bags

Weight of Cap�

2 Cap��2.45g�⇨�2g

500㎖Cap�2.45g�⇨�2g

22tons

Weight of Container

2 Empty Bottle 45g �⇨�38.9g

500㎖ Empty Bottle�18g�⇨�14.4g

244tons

Weight Reduction of Cap and Container of Vio Soonsoo

461tons��Achievement on Plastic Reduction

Product Leadership Ⅰ Saving and Recycling of Resources 49

Developing Refill Container of Cosmetics By putting together an inner container for the cosmetic product with an outer container for the initial purchase, consumers can reuse the outer container and help to reduce plastic waste (O HUI Cell Power No.1 Essence).

Change of Packaging Material Type Replacing PET-based containers with tube type containers, we re-duced energy and waste consumed during production (ReEn Boyangjin Shampoo and Conditioner Set). In addition, a packaging material type of gift items was simplified with a pouch bag instead of a PS-based foam-ing & paper package so that the amount of waste was decreased (Whoo Gongjinhyang).

Improving Recycling of Packaging Material Avoiding Composite Material Composite materi-als such as glass and plastic, and plastic and metal make products look more luxurious, but also difficult to be re-cycled. Hence, to improve recycling of packaging materi-als, containers made up with such composite materials are being replaced with single-material-made contain-ers (ISA KNOX Multi Moist. container, VONIN the Style, Beyond Skinny S, etc.).

Minimizing Vacuum Evaporation and Coating on Sample Cosmetic Containers Post-processing techniques such as giving an appearance of metal or pearl to plastic containers or caps have been com-monly used to amplify the appeal of cosmetic contain-ers. However, we identified that solvents and fugitive pigments, which are unavoidably produced during the post-processing cause water and air pollution respec-tively. Hence, to minimize the production of such sub-stances, we determined not to apply post-processing on most cosmetic containers and caps and shared our decision with stakeholders. Instead, adding pearl pig-

ments to plastic molding, we created a similar effect with the own color of the plastic molding without post-processing. Through such efforts, we will continue to minimize environmental pollution by post-processing techniques like coating and Vacuum Evaporation.

Water Reduction PerformanceLG H&H is striving to improve sustainability through pro-tection of water resources and reduction of wastewater usage. To cut water usage, a variety of programs have been conducted including regular inspection of main facilities, standardization of washing methods and en-hancement of operational efficiency of purified water manufacturing facilities. Consequently, 60,960 tons of water was saved in 2010. Furthermore, we are going to reduce 227,300 tons of water usage in 2011 through increased resource efficiency (e.g. reusing concentrated water from purified water manufacturing processes) and intensified inspection of facilities. CCB is fulfilling diverse activities to preserve and save wa-ter, which is not only the critical component in beverage production but also an essential resource to mankind. In 2010, due to increase in production of non-carbonated beverages, more water including cooling water injected after sterilization treatment was used. As a result, wa-ter usage per 1 ton of product manufacturing increased from 2.65 tons in 2009 to 3.02 tons in 2010. However, a TFT activity initiated from the second half of 2010 re-duced water usage to 2.63 tons in the first quarter of 2011. The Gwangju worksite installed a pre-washer (fa-cility to wash empty bottles in advance) so as to reduce water usage, and also recycles water effluent. The Yeoju worksite discharges wastewater treated by a UV steril-izer during the dry season or seedtime, and contributes to the stable procurement of agricultural water around the worksite (Supply in 2010: 38,748 tons).

Water Reduction Performance Main Examples in Water Reduction��•�Enhancing efficiency in purified water manufacturing

facilities (improving reverse osmosis facility)•�Standardizing the washing method of reactors• Introducing automatic washing equipment for aging tanks•Improving facility to reuse water used in process

60,960tons


227,300tons

Targeted Water Reduction in 2011

O HUI Cell Power No.1 Essence(Left) Outer container of original product (Right) Inner container of refill product

‘Vio Soonsoo’ Eco-Friendly Plastic Bottle Art Exhibition hosted by the Green Peace-corps

of the Asian Human Sciences Association was held at the Korea Art Center in Insa-dong

for two days from June 30th to July 1st, 2010. This exhibition introduced about 30 works

made with ultra-light eco-friendly plastic bottles of ‘Vio Soonsoo’ by members of Green

Peace-corps who have conducted a variety of environmental protection activities. An ul-

tra ultra-light plastic bottle (500㎖) of ‘Vio Soonoo’ weighs 14g while its plastic usage is

reduced by 22% compared to other existing products of our company. Consequently,

the environmentally friendly container was the lightest purified water package in Korea in

2010. In this exhibition, Eco-sumers (customers who actively purchase eco-friendly prod-

ucts) had a chance to experience the 3Rs: Reduce, Reuse and Recycle.

‘Vio Soonsoo’ Eco-Friendly Plastic Bottle Art Exhibition

Special page

Pictures taken at ‘Vio Soonsoo’ Eco-Friendly Plastic Bottle Art Exhibition

Product Leadership Ⅰ Saving and Recycling of Resources 51


Social Responsibility LeadershipSocial Contribution Activities

Win-Win Partnership with Business Partner

Improvement of Employee Value

Safety and Health Activities


Strategy DirectionWe fulfill our social contribution activities which correspond with our business direc-tion to enhance health, beauty and refreshment in customer life. These social contri-bution activities mainly target women, children and youths, who are our key custom-ers. Our sustainability management team takes full responsibility in enterprise social contribution activities, classifying them into four areas of health, education, welfare, and local community to distribute overall resources efficiently and promote those ac-tivities systematically.We recognize our business partners as those whom we go forward together for sus-tainable growth, and we support them across various areas including fund, training, and management innovation to strengthen their actual competencies. In addition, we are building cooperative relationship based on mutual trust through diverse commu-nication channels. We satisfy our employees in recruitment, training, evaluation, and reward. We also support them systematically to enhance employees’ value based on firm principles on protection of human dignity and prohibition of unfairness. In addition, complying with detailed practice guidelines and standards of safety and health policies, we are implementing relevant training and diagnosis programs for preventing accidents, and health promotion programs.

Key Performance


Local Commu-

nity

Social Contribution (KRW)

2,350 mil. 3,380 mil. 43.8% ▲

Donation of goods (KRW)

220 mil. 400 mil. 180 mil.▲ (Foodbank, Beautiful Store, etc)

Em-ployee

Ratio of female employee (%)

47.1 48.8 1.7%p▲

Ratio of retirement (%) 4.2 4.0 0.2%p▼

Training hour per person (hr)

76.7 81.6 6.4% ▲

Ratio of industrial ac-cidents (%)

0.10 0.16 0.06%p▲

Business Partner

‘Growing together’ fund support (KRW)

- 7.5 bil. New program from 2010

Diagnosis of partnership (partner)

30 54 80% ▲

LG H&H’s social contribution activities are mainly aimed at women and youths, who are our main customers. These activities focus on a healthier, more beautiful and more refreshing life of consumers. We categorize our social contribution activities into the four areas of health, education, welfare and local communities. As a result, improving distribution of all resources effectively, we carry out systematic and practical social contribution activities. Our social contribution projects are composed of a va-riety of forms, including employee volunteer programs like matching funds and article donations, partnership

programs with specialized organizations, brand-based programs by business characteristics, and cause-related marketing with distributors. In particular, we selected our youth orchestra academy as a representative social contribution business and de-veloped it to Korea’s major music education program for youths in 2010. Even in the future, our sustainabil-ity management team, which takes responsibility of the social contribution activities, will establish a mid- to long-term roadmap for social contribution and expand voluntary participation of employees.

Social Contribution Activities Aiming at women and youths, we fulfill strategic social contribution activities cat-egorized with four areas: health, education, welfare and local community.

Social Responsibility Leadership Ⅰ Social Contribution Activities 53

Annual Investment for Social Contribution

(Unit: KRW billion)

2008 2009 2010

LG H&H 1.6 2.4 3.4

CCB 0.2 0.2 0.9

THEFACESHOP - - 0.2

Total* 1.8 2.6 4.5

��*��Performance in 2008 and 2009: Performance of THEFACESHOP taken over in 2010 was not included.

Social Contribution Area

Welfare

•Beautiful Saturday

•Beautiful Sharing Package

•Foodbank

•The ‘Happy N’ Campaign

•�Beautiful World Campaign

Health

•Happy Smile Fund

•Smile Together

•�O HUI Beautiful Face Campaign

Education

•�LG H&H Youth Orchestra Academy

•PERIOE Kids' School

Local Community

• Nature cleaning activities

•�Nanumi Volunteer Corps activities

Main Target Women and Youths


Social Contribution Activities of LG H&H

Program Activity TargetDonation Method

Starting Year

Indicator (Unit)

Accu-mulated Perfor-mance

Performance for Recent 3 Years

2008 2009 2010

Happy Smile Fund

Health check and Disease treatment support

Female heads of single parent households with

low income

1:1 match-ing fund of the com-pany and

employees

2005

Number of ben-

eficiaries (persons)

1,586 357 154 187

Smile Together

Dental support for 4- to 13 year-old beneficiaries from the National Basic Livelihood Security and the next higher tier of children

Children of low income families

Donation of cash 2007

Number of ben-


761 256 144 107

O HUI Beautiful Face Campaign

Plastic surgery support for children with congenital facial deformities, Donation with proceeds of O HUI

ChildrenDonation of

cash 2007

Number of ben-

eficiaries (person)

66 19 5 24

LG H&H Youth Orchestra Academy

Program to educate classic music to youths of low income families (provision of musical instruments, payment for lesson)

Children and youths


Number of ben-


66 - 66

PERIOE Kids' School

Dental health education by our dental hygienists visiting schools, nurseries, and child welfare facilities.

ChildrenFree educa-tion by our employees

2004

Number of ben-


107,104 16,723 15,861 12,598

Beautiful Store Donation and

Voluntary Service

1. Donation of products by quarter

2. Voluntary service of employees

• Beautiful Saturday: Voluntary service of sales in the Beautiful Store, Sales activity of our products or items con-tributed by employees, once in a year

• Sharing Package: Visiting the needy families right before New Year’s day every year and delivering basic goods

Needy neighbor

Donation of goods,

employees’ donations and volun-tary service

2004

Donated amount (KRW)

300 mil. 120 mil. 60 mil. 120 mil.

Number of par-

ticipators (persons)

379 123 128 128

Foodbank Regular donation of basic goods Needy neighborDonation of

goods 2007Donated amount (KRW)

700 mil. 260 mil. 160 mil. 280 mil.

Beautiful World Campaign

Donation of proceeds made through joint events with discount stores

Children and needy neighbor



160 mil. 40 mil. 30 mil. 40 mil.

The ‘Happy N’ Campaign

Donation of a portion of proceeds of products with N mark

Children with environmental

disease



50 mil. (2011)

- - -

Nature cleaning activities

Cleaning and protection activities for natural environment in the districts where worksites are located

-Voluntary

service-

Number of con-duction

69 times 21 times 24 times 24 times

Hea

lthEd

ucat

ion

Wel

fare

Loca

l Co

mm

unity

Clas

sific

atio

n

The ‘Happy N’ Campaign The ‘Happy N’ Cam-paign is a pan-societal donation campaign, through which companies donate a portion of proceeds from the sales of their products with ‘N’ mark attached. Our environmentally friendly brands, ‘Borrowing Earth’ and ‘Beyond Phytoganic’ are engaged in this campaign to be a supporter of a program named ‘Sponsoring Chil-dren in Low Income Family Suffering from Environmen-tal Diseases’. From March to December in 2011, we will have conducted the program jointly with an operating organization selected through a public contest.

Donation Campaign with Distribution Company and Public Utility Foundation To share a portion of proceeds from the sales of products with the under-privileged and the needy, we hold an annual joint pro-gram with our main customers, E-mart and Lotte Mart. The profits are donated to ‘Beautiful Foundation’ and ‘Save the Children’. In 2010, LG Unicharm initiated a joint program with Homeplus, and donated to UNICEF a portion of the profits of ‘Bodyfit’, a sanitary product for women. The charity organization used the donation to help poor countries in Africa and children in Haiti.

Partnership Regular Donation LG H&H has regularly donated basic goods to the Foodbank of Ko-rea National Council on Social Welfare, and Beautiful Store. We concluded an agreement with ‘Foodbank’ in March 2010 and have donated KRW 25 million worth of basic goods every month. Additionally, we have donated basic goods to ‘Beautiful Store’ every quarter since 2005. Moreover, our employees participate in the ‘Beautiful Sharing Package’ and ‘Beautiful Saturday’ every year as volunteers. Through ‘Beautiful Sharing Package’, we deliver packages of rice and basic goods to needy neighbors including the elderly living alone, children head of household, single-parent families, etc. ‘Beau-tiful Saturday’ is a voluntary charity event where em-ployees sell items donated by the employees and the company to make funds to help the needy. We will go forward to expand such donation activities to encourage our employees and business partners to participate in charity events and increase the efficacy of resources.

The ‘Happy N’ Campaign Donation Campaign with Distribution Company

Beautiful Sharing PackageFoodbank event


‘Whoo’, Hanbang Cosmetic Product, Conduct-ing Mecenat Activity Since LG H&H joined the Korean Business Council for the Arts in 2006, it has actively been conducting Arts and Business activities. In particular, we support junior composers instead of sponsoring famous artists or performances and review the value of forgotten traditional musical instruments. As such, we conduct activities of public interest which is the value of Mecenat, supporting art activities without economic self-sufficiency. ‘Whoo’, the traditional Korean medicine (Hanbang) cosmetic product, supported a traditional music con-cert, ‘Dadam’ in 2010. ‘Dadam’, composed of tradi-tional cultural materials, is a brunch concert starting at 11 a.m. and targets mainly housewives in their thirties to fifties. The audiences can join the concert, drink a cup of tea and have a chat. The concert had a variety of stories: Start, Journey, Food and Health, Beauty, Picture and Art, and so on. LG H&H tried to promote traditional culture by supporting all performances at ‘Dadam’ which was held 7 times.

In addition, ‘Whoo’ is contributing to the populariza-tion of Haegum, a Korean traditional fiddle, which has been reinterpreted from a modern perspective. Since it formed a relationship with the Seoul Metropolitan Traditional Music Orchestra three years ago, it has sup-ported the activities of Haegum players and craftsmen. Last year, we invited 200 VIP customers of Whoo to a ‘Praising Haegum with Whoo’ concert supporting ‘Kkot-byeol (Flower Star)’, a Haegum player. The response to the concert was very positive.

‘ReEn’ Hanbang Shampoo, A strand of Hair Dona-tion Campaign ’ReEn’, a shampoo brand for hair loss prevention opened ‘A Strand of Hair Donation’ campaign in December 2010. This campaign aimed at helping those who suffer from diseases and lose their hair by giving beauty of life back to them. When 1,000 comments on a SNS comment event are gathered, ‘ReEn’ gave a cancer patient a wig. In addition, hair styl-ist Ihee made a hair style for those who were selected.


‘ReEn’, a Strand of Hair Donation Campaign

‘Whoo’ Haegeum Concert (photo 1) (photo 2)

Photo with hair stylist Ihee

66 The number of

students supported by LG H&H Youth Orchestra

Academy

‘LG H&H Youth Orchestra Academy’ Founding Memorial Concert

A concert to celebrate the founding of ‘LG H&H Youth Orchestra Academy’ was held in the auditorium of

LG Twin Tower in July 2010. Representative works of Mozart were performed by ‘LG H&H Youth Orchestra

Academy’ and ‘Seoul Royal Symphony Orchestra’, a partner of this social contribution program. The music

was interpreted from a youth orchestra’s fresh and progressive perspective, giving a strong impression to

the audience. Members of the orchestra included students whose performance skill had improved through

orchestra classes. In preparing for the concert, they improved performance skills, built up musical sensibility

and collaboration, and had a valuable opportunity to show their improved skill.

Special page

�Major Activities and Performance in 2010

• Improving skills through man-to-man customized lessons and monitoring achievements

• Developing cooperative performance ability and building character through orchestra performances

•�Identifying personal achievements and the level of skill through a special program

• Changed to an orchestra-centered program after orchestra concert

•�Increasing awareness of the program through program

logo and brochure

• Reporting relevant articles on LG Group’s broadcasting station and homepage, daily newspaper, in-house magazine, etc

�Operational Plan in 2011

•�Expanding orchestra class : 22 lessons ⇨30 lessons, Increasing participating students : 22 students

⇨ All students

• Expanding composition parts : Operating a total of 7 parts-composition, piano, violin, viola, cello, flute and clarinet

•�Intensifying special program : Improving orchestra performance by inviting the world’s leading conductor and holding music concert

• Intensifying public relations activities : Settled as a representative social contribution activity of LG H&H and the only youth orchestra training program in Korea


LG H&H Youth Orchestra Academy Through LG H&H Youth Orchestra Academy, we provide musically talented children with a specialized and systematic ed-ucation in classical music. The academy is open to el-ementary, middle and high school students who do not have financial support for musical education. ‘LG H&H Music Academy' was renamed ‘LG H&H Youth Orches-tra Academy’ in 2011.

In December 2010, a survey on the satisfaction of pro-gram operation including operational systems, class contents and teachers was conducted by parents of 66 students. The survey result was reflected on the opera-tional plan of year 2011 as basic information for operat-ing more effective social contribution programs.

Social Contribution Activity of CCB ‘Health Class’ of Korea Foundation for Adolescent Health ‘Health Class’ is a major program of the Korea Foundation for Adolescent Health, which was es-tablished in 2004 to support youths’ healthy and hap-py lives. This program aims at students in elementary, middle and high schools with a poor health condition due to studies. Through the program, students’ health conditions were checked, health-related information was provided, and instructions for exercise methods were given to help to enhance their physical strength. ‘Health Class’, which was initiated in Seoul, Gyeonggi and Incheon areas in 2008, was expanded to the Busan province as a part of the ‘Up School’ project of the Busan Metropolitan Office of Education in 2010. As a result, a total of 26,000 students had their health condi-tions evaluated through this program for the past three years. In addition, they had a chance to improve their physical strength through activities like soccer, healthro-bics and home training. In particular, CCB launched their ‘Coca-Cola Scholarship’ to support physically and mentally healthy students, help them to identify their possibilities and raise hope in life through a variety of experiences. The scholarship targets students attending

the schools which participated in the ‘Health Class’ and were outstanding in the following areas: ‘Good School Scores and Attitude’, ‘Voluntary Service Activity’, ‘Ex-cellence in Art, Sports and Skill’, ‘Excellence in Club and Extracurricular Activities’ and ‘Leadership’. A total of 12 students were selected for a scholarship award through recommendations from the principal of their school and evaluations by a judging committee composed of inter-nal and external examiners of the Foundation.

Clean Water, Hope Campaign Outdoor expe-riential education can capture youths’ attention and interests for the environment as well as help them to practice environmental protection in real life. Therefore, we implemented purifying stream programs such as a natural stream reach survey (inspection of water qual-ity and surrounding animals and worksites), a semi- and fully-opened stream reach survey (inspection of water quality and surrounding animals and worksites) and waste collection with the Korea Green Foundation.

Water Guardian Program LG H&H is providing on-the-spot education by visiting schools. We educate youths on the importance of water and easy ways to


26,000 The number of students who participated in the 'Health Class' for 3 years

Annual Participators to Health Class ��(Unit: persons)

2010

26,674

2008

11,400

2009

20,400

Image of Health Class Activity

Image of Water Guardian Program Activity

Number of Participators to Water Stewardship Program ��(Unit: persons)

Water Guardian Program

(Year 2009-2010)Clean Water

Hope Campaign (Year 2008-2009)

500students

910students

save water in daily life, helping them to practice water conservation. With regard to ‘water Stewardship’, prac-tical activities like providing instruction, having a dis-cussion after watching a film, making a water controller with a cola PET container and making an eco-friendly gargling cup were carried out. In addition, students had an opportunity to record their own water-saving activi-ties on the program’s website.

THEFACESHOP Social Contribution ActivityHIMANGO Campaign THEFACESHOP, as a main supporter of the HIMANGO (mango tree of hope) campaign, worksiteed a total of 3,000 mango trees in Sudan, Africa. THEFACESHOP promoted the HIMANGO campaign to

customers in April 2010, while it visited the local com-munities where the mango trees were worksiteed and provided them mango seedlings in July. In addition, by delivering THEFACESHOP products, it worksiteed a seed of hope in Africa. Moreover, THEFACESHOP hosted a charity concert to raise funds for the HIMANGO campaign at the Na-tional Theater of Korea in November. Artists in various fields such as music, dance, video and fashion offered colorful and unique performances, helping to promote HIMANGO and encourage audiences to participate in the campaign.THEFACESHOP will be constantly engaged in support-ing the HIMANGO campaign through in-store promo-tions, customer participation programs, etc.

3,000trees

Number of mango trees worksiteed by

THEFACESHOP in Africa

HIMANGO campaign of THEFACESHOP – Worksiteing a seedling of mango tree

HIMANGO campaign of THEFACESHOPIn-store promotion on HIMANGO, ‘Eco-bag and tumbler’


Win-Win Partnership with Business Partners

LG H&H is helping business partners to strengthen their actual competences by supporting activities in various fields including funding, education and business innova-tions in order to build a win-win partnership. In addition, we select business partners through a fair and transpar-ent evaluation process to form cooperative ties based on mutual trust. Furthermore we are contributing to the partners’ business improvement.

Fair and Transparent Selection of Busi-ness PartnersTo select business partners in a fair and transparent way, an evaluation team (purchase, production, prod-uct quality, marketing, R&D, etc.) is organized to com-prehensively assess the quality, technology, business condition and sustainability management of business partners. In particular, the team evaluates various per-formances of business partners. For example, the pro-tection of human rights against unfair labor practices, safety management by regular examinations of safety, environmental management including legal treatment of waste and practice of environmental preservation are included. Companies which receive a mark of over 70 points are registered as regular trading partners. Those which do not satisfy the standard are included

in our vendor pool for potential partners. Additionally, to prevent risks that can happen during transactions, we conduct an annual evaluation based on objective data from each related department. The eval-uation is conducted on 47 items in a total of six catego-ries that include overall management, process capacity, IGS (Idea Generation Session) activity contribution, en-vironmental indicators and labor indicators. The output data is then utilized to strengthen competitiveness and the internal system of business partners. Consequently, we also enhance our competitiveness and build up a foundation for a stronger partnership.

Win-Win Cooperative Activities of LG H&H

On September 9th, 2010, LG H&H held a joint ceremo-ny with nine subsidiary companies of LG Corp., declar-ing our commitment to win-win cooperation and fair trade with subcontractors. In the ceremony, the CEO of LG H&H and the representatives of business partners signed a written agreement and pledged compliance in striving for fair trade and mutual development. In accordance to this agreement, we improved payment terms and funding support, and helped business part-ners to strengthen business capacity. Main cooperative practices and results of 2010 are as follows:

Direction of Win-Win Cooperation of LG H&H


A ceremony to agree on mutual cooperation and fair trade

Bu

ildin

g co

mpetiti

ve

LG c

oope

ratio

n network Making smooth

comm

unications

and fair trades

secure long-term viability

Supporting business partn

ers to

LG ‘Growing Together’ Fund LG H&H launched the LG ‘Growing Together’ Fund to contribute to devel-opment of the country through cooperative develop-ment of big and midsized to small companies. In this program, LG H&H deposits funds in a bank, and the special funds are used to support business partners. Through this program, we provided a total of KRW 7.5 billion for our 14 business partners from September 9th, 2010 to the end of December.

TPM Course for Practice LG H&H conducted pro-grams to help business partners to strengthen their quality competitiveness, utilizing the Cheongju work-site’s innovation activity knowhow and innovation specialists. We opened the ‘TPM Practice Course to educate 21 employees from 10 partner companies on innovative activities (general, 3R 5S, pneumatic, driving gear, etc.) on October 12th and 14th, 2010. This pro-gram aimed at improving business partners’ technol-ogy and cost competitiveness.

Subsidiary Material Provider CoP LG H&H holds CoP activities with subsidiary material providers twice in a year. This program intends to help the providers to improve the quality of products by sharing the current condition of the quality of their products and future plans. In these CoP activities, we check each firm’s ca-pabilities of managing various practices such as ware-housing, complaints, and customer claims. Additionally

LG ‘Growing Together’ Cooperative Fund

We build cooperative relationship with business partners based on fair selection and evaluation process. In addition, we help business partners to strengthen their competitiveness through funding, education and managerial innovation so as to prepare the foundation to grow together.

KRW7.5billion The amount of capital

support for business partners

Supportive Activities for Environment and Safety

•�Guiding legal treatment procedures on the renewal, recycling, incineration, and final disposal of waste

•�Suggesting an investigation for waste recycling methods and observing the storage and handling of hazardous materials

• Providing environmental protection, accident prevention, and general safety training

• Providing safety evaluations and health monitoring for haz-ardous processes and suggesting methods of improvement

• Educating technologies to reduce wastewater and waste and suggesting an investigation on change to clean fuel

Cooperative Practice

Performance in 2010

Improving pay-ment condition and funding support

•100% cash payment maintained

• Continuing support of existing family loans and network loans

• Building and supporting KRW 7.5 billion for LG ‘Growing Together’ fund

Intensively monitoring difficul-ties of business partners

• Designating a department in full charge of ‘Growing Together’

• Visiting 20 partners and listening to their difficulties

Supporting development of managerial competences of business partners

• Supporting technological development of subsidiary material providers

• Opening a meeting to share quality among business partners (once per every quarter)

• Supporting benchmarking of excellent business partners

• Supporting quality innovation and monitoring by pharmacists on non-drug products (once per every quarter)

• Educating process inspectors of partner firms on practical business (regularly)

• Supporting TPM training (once in a year)

• Supporting training of industry-academy cooperation on quality management of cosmetics (Hoseo Univ., three times in a year)

Supporting mana-gerial improve-ment of business partners

• Supporting security of initial raw materials

• Conducting performance sharing system- Dividing performance with business

partners depending on their contribution to suggested ideas

Social Responsibility Leadership Ⅰ Win-Win Partnership with Business Partner 61

Guiding legal treatment procedures on the renewal, Guiding legal treatment procedures on the renewal,

we identify subsidiary materials which may become a main issue and share opinions. Furthermore, par-ticipant companies can benchmark selected business partners because of their excellent performance, and have an opportunity to learn their technologies.

Diagnosis of Business Partners LG H&H encourages initial/subsidiary raw material providers, construction companies, original equipment manufacturers (OEMs) and waste treatment compa-nies to independently be responsible for environmental management by offering legal compliance evaluations, supporting pollutant treatment and providing technical guidance. Additionally, we regularly provide trends on le-gal revisions, government policies and employee health management via partners’ management sites.

Diverse Communication with Business PartnersDiverse communication channels with business partners are utilized for voicing any difficulties, providing encour-agement and building up mutual trust. For example, we participate in a council of consigned companies. Repre-sentatives from 34 main businesses, who have a high

number of transactions, comprise this council and their meetings are known as ‘LG H&H Cooperative Meetings’. A general meeting is held once a year while the officer’s meetings are held once per quarter. The purpose of the meetings is to communicate our vision and purchase policies, and listen to partners’ opinions. In 2010, a former director of Small and Medium Business Admin-istration was invited by the Cooperative Meeting, and he gave a talk on ‘mutual development through win-win cooperation’. In addition, we hold a meeting for major business partners once a year and they participate in surveys to identify various practices where transactions need to be improved. The previous meeting was attended by 147 business partners. At that time, we also shared detailed plans to achieve win-win cooperation such as LG H&H’s “Jeong-Do” management, monitoring systems for long-term inventories of business partners, and IGS (Idea Generation Session) activities.

Supportive Programs for SalespersonSalespersons are people who directly meet customers and help them to create value. LG H&H provides support to help their salespersons to achieve economic stability

Business partner CoP in the first half of 2010 (Cheongju worksite)CoP activity of a business partner (benchmarking excellent business partner)

Discussion of business partnersRegular meeting of business partners


and self-realization. Our new organization, the Business Partner Support (BPS) division, implements their sup-portive activities in a systematic and consistent manner.

Competency Development Program Operation

We recognize salespersons as our companions who di-rectly deliver value to customers. Therefore, we support them and aid their development to become the best consultants. We focus on reinforcing their competency in all fields of sales including distribution, display, mer-chandizing and pricing. By operating business special-ized education programs with assistance of business partners, we systematically develop the qualifications and competencies of salespersons. As the training itself is important as well, we try to improve the qual-ity of our educational contents through support of the professional education department. Additionally, we strengthen field managers’ coaching and on-the-job-training (OJT), and provide them with product knowl-edge through e-learning. In the case of THEFACESHOP, we actively support the salespersons working in duty free shops or other stores where there are many foreign visitors to enhance their foreign language skills. We also motivate them by giving them extra rewards when they promote products to foreigners in the shop.

Fair Performance Distribution according to the con-tribution in sales We have incentive programs to encourage salespersons to be conscious of achiev-ing their aimed performance. The programs give them the option to voluntarily participate in improvement activities and establish a closer relationship with their company and coworkers. In addition, by providing our salespersons with the Best Performance and Ideas Award each quarter, we induce their devotion to create value for customers.

Various Communication Activities for a Creating Pleasant Workplace The AMTS system, devel-oped to manage the human resources department for salespersons, plays an important role in increasing their performance and improving the exchange of a variety of information and communications. When inconveniences and difficulties in the sales field are posted on the 'Information Nanum' bulletin, sales or other relevant departments instantly provide feedback and make improvements to create an environment for salespersons to focus on their own business. LG H&H actively encourages sales personnel to com-municate consistently with salespersons, resolve their difficulties and create familiarity through on-site visits.

Main Training Contents in 2010

Target Details

Number of par-

ticipants (persons)

Training Course

•Partnership•Manager/Supervisor workshop

5073

Shop Manager

•Entry course for shop manager•Course of pre-shop manager

4480

Sales Persons

•Training on sales promotion•Entry course for new recruit

1,77990

Common•Make-up training•e-Learning

95-*

* Targeted to all employees

Number of postings on a system to share information�� (Unit: times)

2009

16,569

2010

34,914

salespersons

Business Group Household Goods Cosmetics Beyond Beverages THEFACESHOP

Main Brands Elastine, Tech, BodyfitISA KNOX,

Sooryehan, O HUI, Whoo, VONIN

BeyondCoca-Cola, Glaceau,

Minute Made, DanoneTHEFACESHOP

No. of Persons 1,770 13,517 444 568 480

(as of end of December 2010)16,799The number of salespersons

Social Responsibility Leadership Ⅰ Win-Win Partnership with Business Partner 63

Such face-to-face meetings will help salespersons to feel a sense of kinship with their company. Apart from the basic activities of sales personnel, the BPS division conducts an annual survey in accordance with the LG Way on satisfaction of salespersons and consistently listens to their difficulties and complaints in order to make improvements. Actually, results of the surveys were reflected on practical improvement ac-tivities including improvement in incentive programs, operation of discount online shop for salepersons, pro-vision of commemorative presents for numerous years of service, change of titles of cosmetics/Beyond sales-persons (to beauty artist/eco-planner) and plans to in-crease training participation of salespersons.

Moreover, meetings of each bracket (such as regular meetings of shop managers, shop chief/ managers meeting, etc) are held to give an opportunity to the employees of similar work to communicate with each other and voluntarily discuss resolutions of difficulties. In addition, excursions are held once or twice annually to unify the employees. In case of the cosmetics sales department, we support the staff working in the same shop to have meeting once a month.Furthermore, LG H&H tries to create a safe work place through education on safety practices, musculoskeletal disease prevention, sexual harassment, injury insur-ance policy application processes for major sales busi-ness partners, etc.

Convention of sales partners

Outing of salespersons


Outing of salespersonsOuting of salespersonsOuting of salespersons

Convention of sales partners

LG’s core management philosophy is ‘Creating Value for Customers’ and ‘Respecting Human Dignity’. LG H&H respects the creativity and independence of each employee. All employees are recognized as resources of value creation. We establish human resources prin-ciples for the operational standards for HR and the remainder of the organization. Consequently, our per-formance-based HR management system encourages individual employees to develop competencies and reach their full potential. Based on our HR principles and systematic HR programs that guide the hiring pro-cess, development, assessment and reward practices, we are working to create a satisfying workplace for em-ployees. Seeking a healthy balance of work and life for our employees, we try to enhance employee value on the basis of firm policies to protect human rights and non discrimination. In particular, we are committed to providing our employees with the opportunities that not only improve their competencies and careers but also to develop our business. Moreover, we will continue to improve the performance-based evaluation system to offer competitive employee benefit packages, and ultimately attract outstanding individuals.

Human Rights ProtectionLG H&H supports the international proclamation on protection of human rights for workers and is working to create free, fair and safe workplace to protect hu-man dignity.

Non Discrimination In accordance to the man-agement principle of ‘Respecting Human Dignity’ and the International Labor Organizations’ Convention on ‘Discrimination in Employment and Occupation,’ we respect the human rights of each employee and pro-hibit unfair treatment. No employee is discriminated against based on their gender, religion, race or age in the process of hiring, promotion, training, and retire-ment. They also receive equal opportunities depending on their competency. The wage for new employees is equal to 315% of the minimum wage. An employee who feels discriminated against can express his/her view through the labor union or the ombudsman pro-gram. No single incident related to workplace discrimi-nation was made in 2010.

Ban on Child/Youth and Forced Labor LG H&H bans labor by children aged 15 or younger and limits the employment of those aged 18 or under at all work-sites. Restriction of physical freedom, forced labor, and intermediary exploitation are also strictly prohibited. LG H&H abides by the ILO’s Treaty on ‘Prohibition of Child Labor’, the convention on ‘Abolition of Forced La-bor’ and supports the labor principles of the UN Global Compact. In addition, we adhere to international and domestic laws and regulations designed to protect the human rights of workers and strictly monitor their implementation.

Improvement of Employee ValueWe respect individual employees’ creativity and discretion and support them so that they can maximize their competencies. In addition, we pursue a work and life balance and abide by principles of human rights.

Employee Value Proposition (EVP)

Work and life balance

Providing self-development opportunities

Free thinking and conversation

Fair reward

ZeroOccurrence of incidents

regarding unfairness

Employee Value Proposition (EVP)

Consumer marketing company where work and life are balanced

and ideas are growing

Social Responsibility Leadership Ⅰ Improvement of Employee Value 65

Human Rights Training To create a safe and non discrimination workplace, we conduct education to pre-vent sexual harassment more than once in a year, and provide a related video training at the team level. We will continue to expand education to better protect our employees’ human rights.

Recruitment LG H&H operates a variety of recruitment programs. In particular, when we recruit new employees for market-ing, R&D and sales, we conduct a recruitment program tailored to each job function by defining the required capabilities and job characteristics. Such recruitment programs adapted to job functions will be expanded to other staff divisions.


Sales academyMarketing seminar

Design competitionR&D seminar

Required Competencies and Recruitment Method by Function

Market-ing

• Creativity, Marketing mindset, Trend leading ability, Work leadership

•Entry-level: Marketing seminars•Experienced: Year round

Staff• Knowledge, Skills, and Attitudes according

to function (finance, strategy, purchase, HR, etc)

•Entry-level: Management academy (introduced in 2011)

•Experienced: Year round

Sales• Ability to lead field sales activities,

Communication skills•Entry-level: Sales academy•Experienced: Year round

R&D• Product development/Researching

ability (R&D)•Creative skills (design)

•Entry-level: R&D seminars, Industry-academia cooperation, Design competition

•Experienced: Year round

Required Competencies Recruitment Method

Composition of Workforce (as of end of 2010)

Technical Clerical

Male Female

LG H&H ��(Unit: %, persons)

Clerical Sales/Production

Male Female

CCB ��(Unit: %, persons)

Male Female

THEFACESHOP��(Unit: %, persons)

21.8%(681) 48

.8%

(1

,529)

51.2%(1

,602

)

3,131

78.2%(2,450)

77.4%(1

,842

)

22.6

%(538)

94.5%(2,250)

5.5%

(130)(

2,380

57.0%(174)

43.0

%(1

31)

305

The ratio of female employees at LG H&H ��(Unit: %)

11.1

5.9

13.0

6.3

2007 2009 2010

10.0

14.0

48.847.144.8

Total

Managers

Executives

Status of the Disabled•Foreign Nationals•Patriots and Veterans �� (Unit: persons)

CategoryWorkers with

disabilityForeign

nationalsPatriots &

veterans

LG H&H 19 10 47

CCB 59 2 46

THEFACE-SHOP 4 4 4

1) Including contract workers 2) Non-voluntary retirement: Contract termination, death, dismissal, early retirement, etc. 3) Retirement ratio: Retirees ÷ Total employees, including regular & contract workers

Status of Retirees and Retirement Rate 1)

CategoryLG H&H CCB

2008 2009 2010 2010

Voluntary retirement 88 85 93 171

Non-voluntary retirement 2) 34 24 19 80

Regular retirement 9 13 12 11

Subtotal 131 122 124 262

Retirement ratio (%)3) 4.8 4.2 4.0 11.0

(Unit: persons)


LG H&H strictly prohibits all kinds of unfair treatment including sex, religion, race, and age, and is striving to respect employees’ diversity and their human rights. 48.8% of all employees are women and the ratio increases every year. The ratio of female managers and executives also consistently increases.

Human Resource DevelopmentOur direction to develop human resources lies in de-veloping specialists through on-the-job training for entry level personnel. We believe that this is the best way for talent training and to actively respond to the drastically changing business environment. With this philosophy, we operate a variety of training methods and procedures for effective talent training.

On-the-job Training The ultimate purpose of training in an organization is to create outstanding performance by maximizing the competencies of in-dividuals and the organization. To achieve this goal, LG H&H operates ‘on-the-job training’ in the practical field. Experts from each field identify main issues to creating performance in relation to task processes and develop training programs with those issues. By con-necting this with their own experiences, knowledge, and knowhow and letting new or existing employees learn and practice, they maximize the effect of the training programs. The main subjects are related to marketing practice processes and sales manuals. Participants can build their skills through team-work experiences. In addition, we actively encourage each Division or team to conduct innovation activities (mid-dle up down activities) in connection with theories and campaigns. This practice aims at implementing training programs highlighting an innovative culture in organizations through on-the-job training. Practical ideas derived from innovation activities are utilized

through the improvement in real business.

Entry-Level Employee Training We offer ex-tensive training programs to help young and talented recruits to grow into global business leaders. The main training course is ‘Entry-level Training for New Re-cruits’. This entry-level training to nurture strategically new employees starts from the recruitment program tailored to each job function. An internship program to help employees adapt to a new job and organiza-tion, placement of new employees in a department of their choice, entry-level training on value chains to understand the organization, as well as on-the-job programs to provide opportunities to learn basic tasks are carried out throughout the year.

Expert Development To apply the training to real-world business, training focusing on generalized theories or external instructors should be avoided, and self-developed programs highlighting field training is important. Hence, internal experts from each field are required in the organizations and their competencies also need to be developed and supported in a system-atic way. When LG H&H develops on-the-job training programs, it operates a TTT (Train the Trainer) pro-gram to develop experts from each function. Conse-quently, we maintain the rate of internal instructors in each training course. We encourage potential employ-ees to be developed as internal instructors through a supportive program.


Human Resource Development System

Cat-egory

Common training Position training Selec-

tion

Job function training

Market-ing Sales R&D Staff Production

Executive

Director/Team leader

Part leader

Assistant manager

Teammember

Onl

ine·

Lear

ning

by

Read

ing

1:1

Engl

ish

coac

hing

Intr

oduc

tion

for e

xper

ienc

ed w

orke

rs

Cour

se fo

r mar

ketin

g ex

pert

s

In-h

ouse

sem

inar

Dom

estic

/inte

rnat

iona

l sem

inar·

Conf

eren

ce·

Spec

ializ

ed tr

aini

ng

Inte

rnal

/ext

erna

l tra

inin

g (f

inan

ce, H

R, lo

gist

ics,

desi

gn)

Production workers

∙ Leadership training∙ Training of executives of labor unions∙ Training chief/foreman∙ Organization activation

Team leader TTT

Team leader labor-man-agement

Executive workshop

Director entry

Team leader Oasis

Introduction for entry-level

Introduction of worksite

S-OJT Training

Training for strengthening job function

∙ Managing agencies∙ Managing stores∙ Caring for customers∙ Sales promotion, etc.

Team leader competency

Basic statistics

Introduction of R&D center

Spec

ial i

ssue

lect

ure

LG

WAY

· “J

eong

-Do” m

anag

emen

t·Pr

even

tion

of s

exua

l har

assm

ent

Job function training

∙ Purchase ∙ Finance and accounting∙ Regarding wage bargaining∙ Organizational culture∙ Environment/safety∙ Facility management∙ Quality ∙ Labor∙ Labor-management committee Workshop

Trai

ning

regi

onal

exp

erts·

Disp

atch

ing

core

tale

nts (

Glo

bal M

BA, e

tc.)

Strengthening Global Competency In order to foster world-class employees, we need to develop glob-al competencies. LG H&H is operating diverse training programs to strengthen employees’ global competen-cies. For example, we operate a foreign language edu-cation program for core talents and resident employee candidates. In particular, we recruit full-time foreign instructors to create an atmosphere where our employ-ees can voluntarily study English. For our representa-tives who work in China, we offer courses to nurture their expertise, secure a successful entry into China and establish a foundation for stable growth in that region. The course is composed of a domestic assembly course and an overseas dispatch course. The domestic course is a Chinese language course while the overseas course focuses on regional culture, characteristics of China and building social networks.

Assessment and RewardsLG H&H conducts performance assessments based on the goals employees made annually, by job category biannually or quarterly. The assessments measure in-dividuals’ performance according to their own objec-tives and competencies. The assessment allows us to aid employees in aligning their individual goals with organization objectives and business strategies. And, by measuring and utilizing their performance, we can provide beneficial coaching and feedback. As criterion for rewarding outstanding performance is important, employee evaluation is guided by three basic prin-

ciples: 1)The assessment should be fair and objective. 2)The assessment should evaluate the integrity of the employee and their organization. 3)The assessment should be evaluated from the perspective of talent de-velopment. Meanwhile, taking into account both orga-nizational and individual performances, compensation packages are rewarded in the form of profit sharing, individual incentives and base salary.

Welfare BenefitsLG H&H abides by legal standards for welfare benefits and provides additional welfare programs for employ-ees to secure their quality of life. Four different insuranc-es (national pension, health insurance, unemployment insurance, and disaster unemployment insurance) are provided to all employees. An additional welfare sys-tem offers support in four other areas: financial liveli-hood and security, health promotion and retirement planning, company lifestyle support and leisure activi-ties. Additionally, a retirement pension program was in-troduced for retired employees. Employees can receive retirement grants in a lump sum when they retire, or they can receive the grants in pension or a lump sum when they reach the age of 55. LG H&H deposits retire-ment grants in financial institutions every year. Since 2010, we have operated a fixed payment system so that grants are fixed when employees retire, and a fixed contribution system so that employees can manage re-tirement assets. Furthermore, we operate a program to support those who change their occupation.

Welfare Programs

Supporting Company Life

• Long-term employment rewards

•Employee cafeteria•Souvenirs•Work uniform

Supporting Financial and Livelihood Security

•Housing loans• Congratulatory/

condolence money• Child School expenses • Discounts on LG product

purchases

Supporting Health Promotion and

Retirement Planning

• Medical expenses (for employee and family)

• Comprehensive medical check-ups (for employee and spouse)

• Regular medical check-ups• Regular group insurance• Pension system• Job-changing support

program

Supporting Leisure Activity

•Vacation leave policy•Operating resort

facilities*• Support of informal

groups• Provision of tickets to

sporting events• Supporting activities to

promote health(Refresh club activities)

*�Operating resort facilities: Baegam Training Center, Gon-jiam Resort, Elysian Gangchon

Training Hours and Expenses


Training Expenses (KRW million) 3,041 3,975 3,715

Training Hours (hr) 231,553 221,824 255,518

Training Hours per person (hr) 84.4 76.7 81.6

Performance Evaluation

Competency Evaluation

Company-wide Performance

DivisionalPerformance

Rewarding System

Organiza-tional

Performance

Individual Performance

Profit Sharing

Incentive

Base Salary

81.6hrTraining hours per

employee


Safety and Health Activities

Management System for Safety and Public HealthSafety and health management is a key activity to greatly impact local communities as well as employees and the company. Under our management philosophy, LG H&H incorporated safety and health-related policies into our management principles, established detailed action plans and standards such as industrial working safety management regulation, and introduced OH-SAS 18001, a safety and health management system. The Industry Safety and Health Committee, which is held quarterly by the same number of participants from labor and management, is a meeting to discuss safety and health–related issues. Those issues encom-pass plans to prevent industrial disasters, research of causes of disasters, measures to prevent their reoccur-rence and health diagnosis for employees involved in disasters. The committee rulings are applied to all em-ployees. In 2010, we also created a safety and health evaluation program and incentive system for each de-partment, introduced safety management procedures, revised internal regulations and strengthened regula-tions of the Safety and Health Act.

Health ActivitiesUnder the philosophy of ‘Respecting Human Dignity’, LG H&H prioritizes the health and happiness of employ-ees. Hence, we operate a variety of health promotion programs to create an accident-free and disease-free workplace. In 2010, we conducted a campaign to pro-

mote smoking cessation and drinking in moderation (in connection with a public health center), provided in-dividual consultation on illness, offered regular health check-ups with a health evaluation and consultation, offered physical fitness check-ups with a prescribed exercise regime, and conducted a survey on musculo-skeletal symptoms and risk factors. We also provided various health educations on topics such as first aid and prevention of musculoskeletal disorders and stretching. A health center at worksites is operated to help employ-ees to voluntarily promote their health.

Safety Activities To create a safe and accident-free working environ-ment, a variety of education, training and inspection are conducted at each worksite.

Safety and Health Education In accordance with the Occupational Safety and Health Act, em-ployees from all worksites must attend a safety and health training session for more than two hours each month. New employees take safety and health educa-tion courses for more than 8 hours before they officially start work in their position.

Pre-Evaluation of Risk for New Facilities or Facilities Tranferred to a New Worksite To identify and evaluate potential risk factors in manufacturing and supportive activities, we conduct regular evaluations of risk on selected processes with high risk. In addi-


Industrial Accident Rate (Unit: %)

Category 2008 2009 2010

LG H&H 0.22 (6 persons)

0.10 (3 persons)

0.16(5 persons)

CCB 1.14(26 persons)

0.77(18 persons)

1.09(2 persons)

Average rate at domestic industries

0.71 0.70 0.69

Average rate at domestic manufacturing industries

1.15 1.04 - *

��*��The data for the average rate of domestic manufacturing industry accidents in 2010 will be announced in June

Health Promotion Program “Fitness Club”

The Cheongju worksite offers a ‘Fitness Club’, a health promotion program in cooperation with the National Health Insurance Corporation.

The program provides one-on-one coaching with a per-sonal trainer and cutting-edge sports medical equip-ment. A doctor and dietitian who can provide consulta-tion and nutritional guidance are also available.

Exercise ability evaluation

Basic physical strength checkup and physical examination

Nutritional consulting

Medical diagnosis

To meet our social responsibilities and build up a disease-free and accident-free working environment, we incorporate safety and health policies into management principles and conduct improvement activities based on detailed guidance and standards.

tion, we are operating a system to prevent accidents in advance. For example, we conduct safety evaluations on site when facilities are renewed, operation condi-tions are changed and new equipment is introduced. In 2010, we conducted a pre-evaluation on a liquid de-tergent manufacturing process and a sheet-type deter-gent manufacturing process. During the pre-evalution, inadequate ventilation at the worksite was discovered and a new ventilation system was installed.

Emergency Response To prevent accidents such as fire and gas leaks, fire and gas detectors are installed throughout LG H&H worksites, and the accident pre-vention center conducts monitoring. To swiftly respond to environment-related accidents, emergency response training is conducted on a regular basis. Since 2010, we have reflected assessment items like safety and fire accidents, training, safety inspection and countermea-sures on the KPI of each department. As a result of our

efforts, the rate of industrial accidents of LG H&H in 2010 was 0.16%, and there was no violation of laws, nor penalties imposed due to safety accidents.

Process Safety Management (PSM) Investigation

At the Cheongju worksite, the facility manufactur-ing Saffron and basic cosmetic products where they use inflammables in the processes, underwent the investigation of the Korea Occupational Safety and Health Agency and received the S grade. Facilities at Ulsan worksite that manufacture fatty acids and de-rivatives, which are enlarged for handling high pressure gases and dangerous articles, also received the S grade. To ensure safety, we established safety plans to discov-er potential risks through pre-inspections on hazardous and dangerous facilities, prevent leaks of hazardous and dangerous materials, and minimize accidents such as fire, damage of facilities, human injury and environ-mental pollution.

Response to Emergency

Type Target facility Impact Response

Blackout High voltage facility, cabinet panelDefective process, safety accident

Over current relay, emergency generator, crisis response training

Fire Worksites, gas supply facility, etcHazardous gas, water pollution

Fire prevention system, crisis response training

ExplosionCompressor facility, gas supply facility

Building damage, hazardous gas

Pressure adjustment equipment, crisis response training

LeakChemical storage unit, transfer pipeline

Water pollution, soil pollution

Installing leak prevention equipment, crisis response training

Natural disasterBuildings, storage unit, pipelines,etc Fire, water pollution, soil

pollution, etc.Earthquake-proof construction, crisis response training

0.16%Industrial Accident Rate

of LG H&H

Emergency response training (first aid) Emergency response training (fire extinguishing)

ZeroNumber of violation of

laws due to safety accidents

Social Responsibility Leadership Ⅰ Safety and Health Activities 71


Communica-tion LeadershipImprovement of Customer Value



Strategy DirectionLG H&H is striving to listen to voices of internal and external stakeholders and reflect those opinions on management activities. We actively collect customer complaints and suggestions through various channels such as VOC management system, prosumer activities to incorporate consumer opinions into product development, manufacturing, and sales. In addition, we are engaged in social movement to improve consumer rights by faithfully reflecting opinions suggested by governmental agencies, NGOs related to consumer rights, and so on. To make filed customer complaints instantly be reflected on product improvements after identify-ing causes and establishing fundamental measures for improvement, we are operating company-wide meetings, a VOC automatic mailing system, and a system to share per-formance of improvement activities. Moreover, we operate a variety of interactive communication channels to encourage employees to create corporate culture of fellowship through active communication. Various programs to enhance employees’ satisfaction and to pursuit their balance in work and life are also operated. Furthermore, we are preparing an environment where female employees can have comfortable and pleasant work life.

Key Performance


CustomerRatio of customer complaints (ppm)* 26.9 28.8 7.1% ▲

Employee

Ratio of employee satisfaction (%) 80 82 2%p▲

Ratio of return after maternity leave (%) 90.2 97.6

7.4%p▲ (Working more than a year after return from maternity leave)

*ppm: The number of complaints per product sales volume is converted into parts per million.

Improvement of Customer Value

Consistent creation of customer value, which is essen-tial for sustainable business of the company, starts from customer satisfaction through active communi-cations with customers. All LG H&H’s employees recog-nize that as its main products are consumer goods, the most important factors for value creation are listening to the voices of customers (VOC) and reflecting them on product development, manufacturing, promotional activities and so on. Using the VOC system, we listen to the complaints of customers and improve our products to enhance customer satisfaction. The customer-cen-tric processes such as prosumer activities and customer suggestions via the homepage facilitate offer differen-tiated value to our customers.

Listening to CustomersVoice of Customer Every VOC received through the phone, website or fax is checked by related depart-ments through the system on a real-time basis. Every VOC, including customer complaints/praises, sugges-tions, reports of defects in product labeling and re-quests for information regarding distribution orders are sent to the employees in charge of the marketing, R&D, manufacturing and sales departments through an automatic mailing system. Each department resolves the complaints without delay and applies their ideas to product/service improvements to enhance custom-er satisfaction. In particular, when a new product is launched, we conduct quality monitoring for the initial three months and use the collected opinions as a basic material for improving the product.

We are striving to improve customer satisfaction by proactively reflecting custom-ers’ needs through a variety of methods such as prosumer1) activities and utilizing customer complaints as an opportunity for product improvement.

HomeStar for water bottlesTo search for a method to utilize the oxygen-based tablet technology for

cleaning fur, we listened to the opinions of coffee shop workers and house-

wife monitors. As a result, there were great needs for washing detergents

for tableware and cooking utensils rather than cleaning purposes. In par-

ticular, there was a high level of need for an effective cleaning product for

narrow-necked bottles, tumblers, mugs and other containers which are dif-

ficult to clean. Hence, we developed a foam-generating dishwasher tablet,

which has the main function of removing strong stains of coffee or tea.

Example of product development through prosumer

VOC management system

•Quality management Division•External

cooperation Division

Customer

•Customer•Consumer group/NGO•Business partners•Agencies

Customer Support Part

☎ +82-80-023-7007(key phone number)

www.lgcare.com

•Production•R&D•Marketing•Sales

Relevant departments· Complain consultation·Suggestion·Compliment

· Consultation · Feedback on

identified causes

· Establishing counter-measure

· Improving quality

CEO

1) Prosumer: Active consumers who participate in manufacturing and distribution of products and exercise consumer rights

Communication Leadership Ⅰ Improvement of Customer Value 73

Prosumer Activity The operations division of household goods and cosmetics and the R&D center recruit prosumers to gain their detailed opinions in developing new products and improving existing prod-ucts. The fundamental purpose of the prosumer sys-tem is not only simply monitoring customers but also proactively considering and understanding consumers’ needs in the development of every product. Prosumers are selected by field such as household goods monitoring by housewives or cosmetics monitor-ing by users. Through participation in regular discus-sions (twice a month) and online surveys, they review a product’s marketability through evaluations of product concepts and suggest improvements on the quality and convenience after use of the prototype. In addi-tion, they conduct various activities as ‘participating consumers’. To reflect more diverse views of housewives on product and brand operations, we invite monitors whose terms have ended to work on online panels and participate in online polls. The R&D center is operating a wikisumer program in which housewife monitors can participate. Wikisumers encompass consumers of diverse backgrounds from bioengineers to Internet beauty café operators. We en-

courage them to discover new ideas and to voice their opinions about product research-related tasks. The Housewife Monitor Group is comprised of 600 women between the age of 20 and 50. The panels were chosen depending on the product characteristics or that best represent a target consumer population, and they par-ticipate in establishing and improving the direction of product marketing.

Cooperation with Related Organizations for Protec-tion of Consumer Right We pay close attention to the voices of governmental organization, NGOs related to consumer rights and opinion leaders with regards to consumer rights, and reflect their opinions in manage-ment. We abide by regulations related to consumer safety, protection of the consumer’s right to know and prevention of customer dissatisfaction. We also proac-tively respond to social issues to meet community-wide efforts to improve consumer rights. In addition, to relay accurate information to consumers, we educate our marketing and R&D departments on the proper display and informational content of advertisements in accor-dance to relevant laws such as the Cosmetics Act, Phar-maceutical Affairs Act and Food Sanitation Act.


Example of management incorporation for protection of consumer rights

Time of occurrence

Organization/Group Detail Our measurement and

establishment of response system

October 2010

Food and Drug Administration

Mouthwash products violating the Pharmaceutical Affairs Law (A case that fine fabric particles were mixed in the OEM products was reported and administrative action was taken.)

•�Changing the business partner to improve quality management issues prior to occur-rence of problems

•�Developing a process to completely wash the container of the product, which was the original source of product contamination

•�Planning regular quality guidance and sup-portive activities every month

1. Quality improvement through the government’s administrative action

Time of occurrence

Organization/Group Detail Our measurement and

establishment of response system

December 2010

ConsumersKorea

Requesting Food and Drug Administration to legislate a bill to prevent the use of some para-bens in children’s cosmetics

• Completing of review on alternative materi-als to the parabens and applying them to children’s cosmetics gradually

•�Reviewing a variety of alternative materials to prepare expansion of the ban of parabens in general cosmetics

•�Researching alternative methods using the rapid collection of initial information on EU regulations and our global network

2. Change of raw materials according to the voice of NGO

Handling Customer Complaints Customer complaints filed to the company are instant-ly identified for their reasons and actively incorporated into improving our products and services. For this pro-cess, we operate an enterprise customer complaint improvement counsel, VOC automatic mailing system and bi-weekly programs to share the results of the VOC system. To secure objectivity in the level of quality man-agement, we started to measure consumer complaints not in simple counting but in ppm (parts per million) in 2006 and implemented a warning system that can carry out statistical analysis for repeated complaints. Through this system, when a specific type of complaint is reported several times, a warning mail is sent to the staff or manager in charge to analyze the cause and devise a solution. The customer complaint ratio in 2010 slightly increased compared to the previous year. Com-mon complaints for the previous year included com-

plaints on a faulty cosmetics pump and an insecticide machine’s inability to disperse its contents. Hence, a TFT organized to settle those complaints analyzed the problems carefully and established management prac-tices to prevent reoccurrences. Before launching new or renewal products, employ-ees in charge across all departments of marketing, R&D, manufacturing, quality control, environment and customer service have meetings for flexible manage-ment in an early stage. Through the meetings, they take actions to prevent product defects and customer complaints. We created a quality management depart-ment in 2011. This department establishes the level of quality in each phase of new product development, inspects product quality in advance and removes fun-damental causes of customer complaints to reduce customer dissatisfaction.

Case Study of product improvement through customer complaints

Warning Standard

Increased more than twofold compared to the previous year's monthly average

Increased more than twofold compared to the previous quarter's monthly average

Increased more than twofold compared to the previous quarter or previous year's monthly average

Yellow Orange Red

1. Powder Sunblock Complaints on the loose lid of the sunblock product were repeatedly re-ported. Hence, the faulty cap was replaced with one that had a similar structure to caps used for creams.

2. Toothpaste A complaint of finger cutting due to the hinge joint of the toothpaste cap was reported. Hence, to prevent fingers from being inserted into the cap, the gap around external border of the cap was removed.

3. Household detergent A com-plaint of a spray gun trigger falling off was reported so that the product was improved by changing the material of the valve body.

Customer Complaint Ratio�� (Unit: ppm)

28.830.1

20102006 2007 2008 2009

27.3 26.6 26.9

28.8ppmCustomer Complaint

Ratio

Communication Leadership Ⅰ Improvement of Customer Value 75


LG H&H understands that creating a corporate culture of fellowship through inter-organizational communi-cations is a key ingredient to strengthening corporate competitiveness as well as smooth operations within an organization. Hence, we have implemented various inter-active communication channels between the company and employees, the management and employees, and between employees themselves. Through these open dialogues, we are working to build a collaborative labor-management relation backed by employee participation and cooperation. In addition, we are building environ-ments where female employees can have a comfortable and pleasant work life.

Labor-Management CultureVision To achieve the vision of ‘pursuing the com-mon good based on participation and cooperation’, we are building unique performance-driven labor-man-agement culture based on field-oriented labor man-agement relations.

Labor-management Council The labor-man-agement council was established to expand joint value through mutual cooperation and participation. It com-prises of an equal number of labor and management representatives and operates on a quarterly basis. The

council not only discusses the resolution of workers’ grievances, enhancement of welfare regime, and sup-port for balance of work and life, but also shares discus-sions on business performance, HR plans and impor-tant policies of the company. Therefore, it contributes to improving mutual trust between labor and manage-ment. To stabilize employment, a collective agreement says that the company should inform the labor union of relevant information two months in advance before an emergent decision is made. In 2010, a total of 16 items were discussed. They included discussion topics such as overseas training of long-term workers or ex-emplary employees, the environmental betterment of welfare facilities and the improvement of a supportive system for clubs.

Grievance Handling Program We try to make an environment where employees can concentrate on their work by operating various programs to handle their grievances. Interactive communications allow employ-ees to express work-related concerns and have relevant departments respond to them. Then, we incorporate the solutions to such concerns in policies and system im-provements. Work-site leaders listen to employees’ griev-ances through regular meetings and frequent personal meetings. Relevant departments collect the grievances

Membership of Labor Union��(Unit: persons)

Subject Member Ratio

LG H&H 1,620 480 29.6%

CCB 1,869 1,731 92.6%

Vision and Practice Direction

Vision Pursuing the Common Good Based on Participation and Cooperation

Field-centered labor-management

Building mutual trust centered on field leadership

Labor-management culture based on performance

Settling labor-management culture that drives performance growth

Building independent labor-management relations

Implementing LG H&H’s uniquely different labor-management practices

Practice


Labor-management council

For production employees

Process of Grievance Treatment

Relevant department· Establishing

policies· Improving

system

Management

· Reflecting on bills of BOD

and handling

Team/department leader discussionFor all organizations

Employee consultative group

For clerical employees

We are operating a variety of interactive communication programs to create a cor-porate culture of fellowship through participation and cooperation of diverse tiers within the company and improve the satisfaction of internal stakeholders.

and suggestions through a labor-management commit-tee and listen to voices of each position and function via employee committees. The collected information is used to provide feedback.

Various Communication Channels Talks be-tween the CEO and employees help all employees to understand the company’s strategic direction and poli-cies so that smooth business operations are promoted. In addition, a variety of internal communication chan-nels are operated to activate communications between the company and its members and between organiza-tions as well as internal communications.

Work and Life Balance LG H&H is realizing its vision of ‘Respecting Human Dignity’ by seeking the balance of work and personal life. For this, we are oper-

ating many systems and programs to help employees create performance within the regular working hours.

Employee Satisfaction LG Group conducts the LG Way Survey to measure employees’ awareness and satisfaction every year. Results are given to each orga-nization to facilitate future improvements. The survey consists of three categories: ‘“Jeong-Do” manage-ment,’ ‘Creating value for customers’ and ‘Respect-ing human dignity’. Survey results are utilized by the research division and used to increase awareness of employee views. Detailed items include satisfaction levels regarding the company, work, the department leader, the department, and work and life balance. 82 percent of 2,526 employees (2,065 employees) partici-pated in a survey in July 2010. The result showed that employee satisfaction level is increasing every year.

Internal Communication Channel

Category Details Communication Method

Company MeetingCorporate vision, business direction and management perfor-mance directly delivered by CEO

Quarterly meeting

CEO message CEO’s management philosophy, messages to employeesBulletin boards, restrooms bulletins, conference rooms, website

‘Keeping original resolution' campaign

Reconstitution of CEO messages shared in the past and that need to be highlighted again

Bulletin boards, restrooms bulletins, conference rooms, website

Company magazine Management policies , corporate value, employee stories Bi-monthly magazine

Conversation with director

Program to activate horizontal communications and enhance mutual understanding in an organization

Frequently conducted by organization

Employee consultative group

Delivering various opinions of members on activation of organi-zational culture, personal development, welfare programs, etc.

Collected by organization culture team and delivered to the top man-agement

82%Satisfaction of

employees on the company

Programs and Activities Related to Work and Life Balance

Category Details

Flexible timeThe 8am/5pm or 9am/6pm commute system has been changed. Now all employees can choose their commute time between 7am and 9am/4pm and 6pm by units of 30 minutes. Hence, they can utilize the commute system suitable for their life style.

Focused work & leaving office on the dot

Guaranteeing employees personal time to have a rest or develop skills after work

Enterprise day offDesignated third Monday of every month as an company-wide off-day to use it as an opportunity for refreshment

Smoking cessation campaign

During the smoking cessation campaign operated under the title of ‘Stay Healthy’, 75% of participants of the head office succeeded in giving up smoking.

Communication Leadership Ⅰ Organizational Culture for Communication 77

The satisfaction level for the company increased 2%p from the previous year to 82%, and the work and life balance index also rose by 2%p to 72% compared to the previous year.

Female Fellowship Culture

LG H&H has a high rate of female employees as an outcome of being in the household goods and cosmet-ics industry. Hence, we help female employees to have

comfortable and pleasant work life through a variety of supportive programs. In addition, recognizing the problem of Korea’s low birthrate and participating in the resolution of the problem, we actively encourage female employees to utilize maternity leave and pa-rental leave. By reducing the burden that comes with childbirth and childcare and creating the conditions for female employees to lead a stable work life, we have become a female friendly company.

Oasis Program for Female Team LeadersThe Oasis Program for female team leaders was operated to create an ideal

leadership and reignite passion for a second take-off among female lead-

ers, catering to women’s sensibilities and concerns. The program consists

of personal development, financial planning, and mediation. It is designed

to help leaders to clearly understand their personal identity and balance

key factors of life such as work, family and economic strength.

Case Study of Female Fellowship Culture

Subjects : Female team leadersContents : •Personal development: Establishing relations for work and life balance • Financial planning: Understanding philosophy of sound financial planning• Mediation: Deepening understanding about personal goals established through

personal development and financial planning

System Regarding Female Fellowship Culture

Classification Program

Female Fellowship

System

Operation of lounge for female employees

Operation of Oasis Program for female Leaders

Maternity Support System

Operation of breastfeeding room

Maternity leave and parental leave

Support of pregnancy-related medical expenses

Maternity leave and Parental leave��(Unit: persons)��


Ma-ternity Leave

Users 108 96 97

Ratio of use 100% 100% 100%

Ratio of reinstatement 98.1% 95.8% 97.9%

Ratio of maintenance* 91.7% 87.5% 96.9%

Pa-rental Leave

Users 38 41 42

Ratio of reinstatement 92.1% 90.2% 97.6%

* Ratio of employees who work for more than a year after return from maternity leave

��Result of ‘Work and Life Balance’��(Unit: %)Result of ‘Satisfaction on the Company’ �(Unit: %)

2010

82

2008

68

2009

80

2010

72

2008

62

2009

70


AppendixFinancial statements•Environment, safety & health index•

Recognitions & memberships•Verification of greenhouse gas inventory•

Assurance statement•GRI guideline comparison•Glossary •

Reader feedback survey


Financial Statements

(Unit: KRW million)Summarized Statements of Financial Position

Category

LG Household & Health Care [Consolidated]

LG Household & Health Care [Non-consolidated]

Coca-Cola Beverage Company [Non-consolidated]

2009 2010 2009 2010 2009 2010

Ⅰ. Current Assets 437,970 579,003 320,776 372,256 84,989 93,367

·Quick Assets 276,772 346,021 197,229 213,562 61,688 65,157

·Inventories 161,198 232,982 123,547 158,694 23,301 28,210

Ⅱ. Non-Current Assets 860,774 1,366,000 736,503 1,118,232 323,551 377,126

·Investments 136,007 366,921 477,296 849,872 42,535 43,140

·Property, Worksite and Equipment 518,949 606,511 223,460 236,896 279,843 332,646

·Intangibles 197,361 387,878 27,298 28,466 1,173 1,231

·Other 8,457 4,690 8,449 2,998 0 109

Total Assets 1,298,744 1,945,003 1,057,279 1,490,488 408,540 470,492

Ⅰ. Current Liabilities 539,970 617,525 442,747 464,606 73,365 76,839

Ⅱ. Non-Current Liabilities 104,393 482,797 60,476 367,798 39,960 44,823

Total Liabilities 644,363 1,100,322 503,223 832,404 113,325 121,661

Ⅰ. Paid-in-Capital 88,589 88,589 88,589 88,589 100,000 100,000

Ⅱ. Capital Surplus 97,326 97,326 97,326 97,326 301,572 163,072

Ⅲ. Capital Adjustment -20,862 -15,363 -71,375 -71,375 0 0

Ⅳ. Accumulated Other Com-prehensive Income -1,740 -1,258 -228 -139 38,050 38,050

Ⅴ. Retained Earnings 491,068 675,387 439,743 543,682 -144,407 47,709

Total Shareholders' Equity 654,381 844,681 554,056 658,083 295,215 348,831

Income Statement Summary

Category

LG Household & Health Care [Consolidated]

LG Household & Health Care[Non-consolidated]

CCB[Non-consolidated]

2009 2010 2009 2010 2009 2010

Ⅰ. Sales 2,216,465 2,826,483 1,521,051 1,747,660 604,520 700,520

Ⅱ. Cost of Sales 1,087,354 1,333,774 734,890 849,150 323,303 378,553

Ⅲ. Gross Profit 1,129,111 1,492,709 786,161 889,510 281,217 321,968

Ⅳ. Selling and Administrative Expenses 900,967 1,145,892 606,093 664,268 225,356 250,481

Ⅴ. Operating Income 228,144 346,817 180,068 225,242 55,861 71,487

Ⅵ. Other Income and Expenses 15,336 28,213 14,794 29,687 669 1,139

Ⅶ. Earnings Before Taxes 212,808 318,604 165,274 195,555 55,192 70,348

Ⅷ. Income Tax Expense 54,833 81,652 38,548 46,465 10,735 15,377

Ⅸ. Net Income 157,974 236,952 126,726 149,090 44,457 54,971

* IFRS (International Financial Reporting Standards)

(Unit: KRW million)

Environment, Safety & Health Index

LG Household & Health Care

Indicator Unit 2008 2009 2010

Production volume tons 335,431 361,551 413,580

GHG emission1)tCO2e

Basic unit (tCO2e/product-ton)Basic unit (tCO2e/KRW million)

39,9240.1190.029

41,1840.1140.027

44,5140.1080.025

Energy usage1) TJBasic unit (GJ/product-ton)

7592.264

7722.135

8322.011

Water usage2) tonsBasic unit (tons/product-ton)

427,4141.274

486,2721.345

499,9441.209

Water recycled tons 104,350 103,806 119,728

Water recycling rate % 24.4 21.3 23.9

Wastewater dischargetons

Basic unit (tons/product-ton)99,1610.296

103,2670.286

110,3340.267

CODMntons

Basic unit (kg/product-ton)6.36

0.0198.81

0.02411.340.027

Harmful chemical usagetons

Basic unit (tons/product-ton)6,0770.018

6,8400.019

7,1640.017

Waste generated (excluding construction waste)

tonsBasic unit (kg/product-ton)

4,23412.623

4,17811.556

5,05412.221

Recycling rate % 48.80 38.62 43.23

Air emissionDust emission (tons)


0.0206.49

0.0186.69

0.016

Green procurement KRW million 60 83 166

Industrial accident rate Injured persons÷total employees (%) 0.22 0.10 0.16

1) GHG Emission, Energy Usage: Performance of 2008 and 2009 is adjusted through the verification of GHG inventory by the third party.2) Water Usage: Performance of 2008 and 2009 is adjusted with the same scope of GHG inventory.

Coca-Cola Beverage Company

Indicator Unit 2008 2009 2010

Production volume tons 534,504 557,004 621,351

GHG emissiontCO2e

Basic unit (tCO2e/product-ton)40,045

0.07541,6120.075

43,2380.070

Energy usageTJ

Basic unit (GJ/product-ton)454

0.849476

0.855519

0.835

Water usagetons

Basic unit (tons/product-ton)1,369,802

2.5631,474,917

2.6481,899,798

3.058

Wastewater dischargetons

Basic unit (tons/product-ton)851,453

1.593 936,337

1.681 1,037,115

1.669

CODMil.tons


0.018 11.10 0.020

15.97 0.026

Harmful chemical usagetons

Basic unit (kg/product-ton)683

1.278 677

1.215 751

1.209

Waste generated (excluding construction waste)

tonsBasic unit (kg/product-ton)

12,468 23.326

11,047 19.833

12,186 19.612

Recycling rate % 68 76 75

Green procurement KRW million 16 25 23

Industrial accident rate Injured persons÷total employees (%) 1.14 0.77 1.09

*�GHG Emission, Energy Usage: Performance of 2008 and 2009 is adjusted through the verification of GHG inventory by the third party (2010, not verified).

Appendix Ⅰ Financial Statements 81


Recognitions & Memberships

2010 Recognitions & Awards

Name Details Sponsor

DJSI Asia-PacificIncorporation to index in Personal & Household category

Dow Jones/SAM/ Korea Productivity Center

34th National Productivity AwardAward from the Minister of Knowledge Economy (Green Productivity)

Ministry of Knowledge Economy

Award of Leading Company of Resource Renewal Circulation 2010

Award from the Prime Minister (Onsan Worksite of LG H&H)

Ministry of EnvironmentAward from Minister of Environment (Yeoju worksite of CCB)

Excellent Worksite for Reduction of Packing Materials Award from Minister of Environment Ministry of Environment

Corporate Champions, Outstanding ExecutivesBest CEO in 2010

AsiamoneyBest Management Company 2010

The Korea Economic Daily 11th IR Grand Prize Grand Prize The Korea Economic Daily

Good Design Prize2010 Good Design (THEFACESHOP, Neoclassic Homme)

The Ministry of Knowledge Economy/Korea Institute of Design Promotion

2010 Maeil Business Newspaper Hit Product THEFACESHOP Myunghan Miindo Yul Maeil Business Newspaper

2010 The Korea Economic Daily Consumer Prize THEFACESHOP Myunghan Miindo Yul The Korea Economic Daily

Membership in Associations and Groups

Kisanhyup The Korea Fair Competition Federation Korea Fire Safety Association

The Organization of Consumer Affairs Professionals in Business Korean Business Council for the Arts Korea Chemicals Management Association

Green Company Council Korea International Trade Association Korea Environmental Engineers Federation

Korea Industrial Safety Association Korean Association of Occupational Health Nurses Korea Environmental Industry & Technology Institute

Korea Cosmetic Association Korea Industrial Technology Association Korea Environmental Preservation Association

Federation of Korean Industries Korea Occupational Safety & Health Agency KOSHA Voluntary Safety Club

Korea Economic Research Institute Korea Listed Companies Association LG Technology Council

ESH Certification

Category ISO 14001 certified worksites OHSAS18001 certified worksites Green Company

LG Household & Health Care Cheongju /Ulsan/Onsan Cheongju /Ulsan Cheongju /Ulsan/Onsan

Coca-Cola Beverage Company Yeoju/Yangsan/Gwangju Yeoju/Yangsan/Gwangju Yeoju/Gwangju

Verification of GHG Inventory

Emission Source tCO2e (2005Year)

tCO2e (2006Year)

tCO2e (2007Year)

tCO2e (2008Year)

tCO2e (2009Year)

tCO2e (2010Year)

Scope 1 Direct

Emission

Stationary 4,776.89 5,029.39 4,897.72 5,270.44 5,159.48 5,161.45

Transportation 163.55 181.82 194.84 189.79 184.14 165.75

Fugitive 9.52 9.74 9.72 9.67 9.88 9.77

Process 0.22 0.74

Scope 2In-direct Emission

Electricity 17,116.97 8,029.66 20,322.49 9,839.27 20,534.41 22,642.86

Steam 14,989.95 14,534.01 15,729.36 14,614.64 15,295.69 16,533.34

Total 37,056.88 37,784.62 41,154.13 39,923.81 41,183.82 44,513.91

LG Household & Health Care, Ltd.Four manufacturing worksites in Cheongju, Ulsan, Onsan & Naju, Daejeon R & D Centre and 11 logistic centres located in Korea.

Scope: •The annual GHG emission for 2010 year and adjusted annual GHG emissions for 2005, 2006, 2007, 2008 and 2009 calendar years inclusive.

•The physical scope is within the boundary of the 16 sites mentioned above.

•�GHG emissions for SCOPE 1(Direct-emissions from the worksite), SCOPE 2(Indirect-energy related) and partially SCOPE 3(Indirect- emissions from commuting

etc.) as defined in WBCSD/WRI GHG protocol Chapter 4 “Setting Operational Boundaries”

Data Verified:

(1) The Scope 1 and Scope 2 GHG Emissions for the periods of 2005, 2006, 2007, 2008, 2009 and 2010 calendar years

GHG Criteria & Protocols used for Verification:�

The verification was carried out at the request of the LG Household & Health Care, Ltd. using •The Kyoto Protocol to the United Nations Framework Convention on Climate Change - 11December 1997

•The GHG Protocol of the WBCSD/WRI - Revised March 2004

•IPCC Guideline for National GHG Inventories - Revised 2006

•ISO14064 Part 1 & 3 - Issued 2006

•BSI GHGEV Global Best Practice - Issued September 2003

Verification Opinion: As a result of carrying out verification in accordance with the protocols and the best practice mentioned above and the principles of

ISO/IEC Guides 65, EA-6/01 and Guide 66, it is the opinion of BSI that

•No material misstatement in the calculations was revealed, good record keeping was demonstrated and

•Data quality was considered acceptable in meeting the key international principles for GHG emissions verification.

Emission Source tCO2e (2005Year)

tCO2e (2006Year)

tCO2e (2007Year)

tCO2e (2008Year)

tCO2e (2009Year)

tCO2e (2010Year)

Commuting Bus 249.30 248.61 274.22 302.59 295.56 350.24

(2) The SCOPE 3 GHG emission from commuting bus for the periods of 2005, 2006, 2007, 2008, 2009 and 2010 calendar years

Appendix Ⅰ Verification of GHG Inventory 83

Signed :J K Cheon / BSI Group Korea, Managing Director Date : 8 April 2011


Assurance Statement by the Third Party

To LG H&H StakeholdersThe Korea Productivity Center (hereinafter, ‘Inspector’) was commissioned by LG H&H to review its 2010 Sustainability Report.

Accountability and IndependenceLG H&H takes full responsibility on information and comments contained in this report. We are responsible for providing assurance statements. As an independent agency we are not engaged in producing this report and have no relationship with LG H&H, which can hinder our independency.

Assurance StandardOur assurance was moderate in accordance with the Type 1 assurance engagement as defined by AA1000AS(2008). Also, we identified if the report was in conformity with principles of inclusivity, materiality, and responsiveness in accordance to AA1000APS(2008) Assurance Standards. Furthermore, we validated if reported materials comply with GRI (Global Reporting Initiative) G3.1 Guidelines.

ScopeThe scope of our responsibility did not include assuring the reliability of provided materials. Our onsite visits were restrictively conducted at the LG H&H Seoul head office, Cheongju worksite, and Yeoju worksite, excluding logistics centers and overseas worksites. Therefore, additional assurance procedures can change the result of our assurance.

ApproachOur assurance procedures included the following work:1. Inspecting selection of key issues and propriety of described contents in this report through media research and benchmarking analysis

2. Inspecting the frequency of report and description method of each indicator of GRI G3.1 Guidelines to check if requirements of GRI Application

level A are satisfied

3. Identifying if the contents and quality comply with principles of GRI G3.1 Guidelines

4. Inspecting propriety of the details and errors in expression through comparative analysis with other sources

5. Conducting onsite visits to the Seoul head office and domestic worksites in Cheongju and Yeoju, identifying the grounding of key data and

information and reviewing internal processes and systems

ConclusionsWe confirmed that LG H&H’s sustainability activities and performance were well reflected in this Report. We also confirmed that the Report satisfied requirements of GRI application level A, which LG H&H independently declared.

1. Inclusivity: Participation of stakeholdersThrough this assurance procedure, we confirmed that LG H&H actively communicates with a variety of stakeholders. Especially, LG H&H clearly

divides stakeholders to customers, NGO, government and public agencies, employees, business partners, distributors, and investors, inducing their

participation through diverse communication channels. The company communicates with employees through a grievance handling system and

employee discussion council, and also listens to opinions of business partners through meetings and discussions to intensify support for win-win

cooperation. In addition, consumers’ voices are actively collected through the VOC management system and prosumer activities and reflected

in product development and overall management. This effort to realize customer value is highly appreciated. We recommend building up a more

systematic participation channel of stakeholders and consistently reporting their participation process and performance.

2. Materiality: Selection and report of key issuesLG H&H has expanded its business areas to cosmetics and beverage business along with household product business and made a ground for

export based on domestic competitiveness. Accordingly, it selected various issues related to sustainability management through survey, media

analysis, sustainability issues in same industry, global sustainability standards and so on. The company conducted material tests and identified

material issues such as the development of sustainable products, security of product safety, and improvement of customer satisfaction. Then, it

reflected those core issues in each business on the Report. We recommend building a management system of stakeholders to draw more detailed

and diversified issues considering characteristics of each business area along with company-wide issues.

3. Responsiveness: Organization’ response to issues We confirmed that LG H&H has been conducting various activities to well respond to sustainability management-related issues. The company

established the sustainability management team in 2009. Then, it divided the issues into four categories of strategies for sustainability manage-

ment and responded to the issues through setting a phased roadmap for each strategy, establishing objectives, and managing performance. Such

efforts were identified through the Report which focused on key issues derived from communications with stakeholders. We highly appreciate that

the company built a process and infrastructure to develop new sustainable products with eco-friendliness and safety, and achieved eco-label and

carbon-label certificates. We recommend reporting mid- to long-term response strategies and plans as well as response performance to various

issues in each business area in the future.

RecommendationWe greatly value LG H&H’s efforts and performance to enhance sustainability, and recommend the following to improve the future report and the level of sustainability management.

1. We recommend establishing systematic plans and objectives to fulfill sustainability management to consistently develop a sustainability man-

agement system.

2. We recommend establishing more systematic channels for stakeholder participation and developing them in connection with LG H&H’s sustain-

ability management.

3. We recommend managing various indicators developed to measure performance of sustainability management in connection to financial

performance. This helps the company to manage those indicators on the enterprise level in more systematic manner and enhance the level of

sustainability management.

4. We recommend establishing an enterprise integration system and utilizing it in future reports to manage more diverse performance indicators

regarding sustainability management as well as environmental indicators.

Korea Productivity Center, which was established in 1957, is a professional training organization and consulting agency which has played a leading role in training human resources with its vast knowledge and experience. In particular, the center established a Sustainability Management Center to support companies to fulfill sustainability management and further facilitate the overall improvement of sustainability of domestic industries. Since 2009, the center has announced DJSI Korea (Dow Jones Sustainability Index Korea) in partnership with Dow Jones Indexes of the U.S., and SAM of Switzerland. Accordingly, domestic companies can compare the level of sustainability with overseas advanced companies from an objective perspective, and encourage themselves to improve their level. Korea Productivity Center’s Sustainability Management Center is qualified to conduct independent assurance work as an assurance agency officially certified by Accountability, which established AA1000, an international standard related to stakeholder participation and assurance. Moreover, the assurance committee consists of professionals who have experiences in consulting and assurance of sustainability management and complete a professional education.

May 2011President of Korea Productivity Center Choi, Don-gyu

Head of CenterKim, Dong-soo

ResearcherPark, Joo-mi

ResearcherKim, Tae-min

ResearcherKim, Yong-hwan

Member of Professional Committee Park, Tae-ho

Appendix Ⅰ Assurance Statement 85

GRI Guideline Comparison


INDEX Details ISO26000 Page Application Level

1. Vision and Strategy 1.1

Statement from the most senior decision-maker of the organization on relationship of reporting organiza-tions and strategies, and sustainability

6.2 2-3

1.2 Description of key impacts, risks, and opportunities influencing organization and sustainability 6.2 3, 15, 43

2. Organiza-tional Profile

2.1 Name of the organization 5

2.2 Primary brands, products, and/or services 24-26

2.3Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures

6.2 4-5

2.4 Location of organization's headquarters 4-5

2.5Number of countries where the organization operates, and names of countries with either major opera-tions or that are specifically relevant to the sustainability issues covered in the report

4-5, 27

2.6 Nature of ownership and legal form 10-11

2.7 Markets served (including geographic breakdown, business areas and types of customers/beneficiaries) 24-25, 27

2.8 Scale of the reporting organization 5, 10, 23-25, 67

2.9 Significant changes during the reporting period regarding size, structure, or ownership 5, 26

2.10 Awards received in the reporting period 82

3. Report Parameters

3.1 Reporting period (e.g., fiscal/calendar year) 0

3.2 Date of most recent previous report 0

3.3 Reporting cycle (annual, biennial, etc.) 0

3.4 Contact point for questions regarding the report or its contents 93

3.5 Process for defining report content 19-20

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers) 0

3.7 Any specific limitations on the scope or boundary of the report 0

3.8Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other enti-ties that can significantly affect comparability from period to period and/or between organizations

0

3.9Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report.

Details per indicator

3.10Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement

23, 41-43, 81

3.11Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report

0

3.12 Table identifying the location of the Standard Disclosures in the report 86-89

3.13 Policy and current practice with regard to external assurance for the report 7.5.3 0, 84-85

4. Governance, Commitments, and Engage-ment

4.1 Governance structure of the organization

6.2

10-11

4.2Indicating whether the Chair of the BOD is also an executive officer (Explaining the role in management and the reason why he/she is entitled to the chair of the BOD)

11

4.3For organizations that have a unitary board structure, state the number of members of the BOD that are independent and/or non-executive members

10-11

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the BOD 11

4.5Linkage between compensation for members of the BOD, senior managers, and organization's perfor-mance (including social and environmental performance)

10

4.6 Processes in place for the BOD to ensure conflicts of interest are avoided 10-11

4.7Process for determining the qualifications and expertise of the members of the BOD for guiding the organization's strategy on economic, environmental, and social topics

10

4.8Internally developed statements of mission or values, codes of conduct, and principles relevant to eco-nomic, environmental, and social performance and the status of their implementation

6, 8-9

4.9Procedures of the BOD for overseeing identification and management of economic, environmental, and social performance

11

4.10Processes for evaluating the BOD's own performance, particularly with respect to economic, environmen-tal, and social performance.

10-11

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization 15-17, 31, 36-37

4.12Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses.

48, 65, 70, 71, 82

4.13 Memberships in industry associations and/or national/international policy organizations 82

Core performance indicator, * N/A(Not Applicable)



4.14 List of stakeholder groups engaged by the organization

6.2

18-19

4.15 Basis for identification and selection of stakeholders with whom to engage 19

4.16Approaches to stakeholder engagement, including frequency of engagement by type and by stake-holder group

18-19

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organiza-tion has responded to those key topics and concerns

19-20

EC Disclosure on Management Approach 6.2, 6.8 22

EconomyEC1

Direct economic value generated and distributed (revenues, operating costs, employee compensation, donations, local community investments, retained earnings and payments to capital providers and tax)

6.8, 6.8.3, 6.8.7, 6.8.9

23-29

EC2Financial implications and other risks and opportunities for the organization's activities due to climate change

6.5.5 41-43

EC3 Coverage of pension assistance 28-29, 69

EC4 Financial assistance received from government 38

EC5Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation

6.4.4, 6.8 65

EC6Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation

6.6.6, 6.8, 6.8.5,6.8.7

27

EC7Procedures for local hiring and proportion of senior management hired from the local The reporting scope is community at significant locations of operation

6.8, 6.8.5, 6.8.7 27

EC8Development and impact of infrastructure investments and services provided primarily for public benefit (including classification of support type)

6.3.9, 6.8, 6.8.3, 6.8.4, 6.8.5, 6.8.6,

6.8.7, 6.8.953-59

EC9 Understanding and describing significant indirect economic impacts (including the extent of impacts)6.3.9, 6.6.6, 6.6.7,

6.7.8, 6.8, 6.8.5, 6.8.6, 6.8.7, 6.8.9

29

EN Disclosure on Management Approach 6.2, 6.5 40

Environment EN1 Materials used by weight or volume

6.5, 6.5.4

45, 81

EN2 Percentage of recycled raw materials 49

EN3 Direct energy consumption by primary energy source 42

EN4 Indirect energy consumption by primary source 42

EN5 Energy saved due to conservation and efficiency improvements 42

EN6Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives

32-35

EN7 Initiatives to reduce indirect energy consumption and reductions achieved 42

EN8 Total water withdrawal by source. 45

EN9 Water sources significantly affected by withdrawal of water N/A

EN10 Percentage and total volume of water recycled and reused 50

EN11Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value

6.5, 6.5.6

44

EN12Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value

44

EN13 Habitats protected or restored N/A

EN14 Strategies, current actions, and future plans for managing impacts on biodiversity N/A

EN15Number of IUCN (International Union for Conservation of Nature and Natural Resources) Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk

N/A

EN16 Total direct and indirect GHG emissions

6.5, 6.5.5

42

EN17 Other relevant indirect GHG emissions 42

EN18 Initiatives to reduce GHG emissions and reductions achieved 41-42

EN19 Emissions of ozone-depleting substances6.5, 6.5.3

46

EN20 NOx, SOx, and other significant air emissionsN/A (No emission of

NOx, SOx)

Appendix Ⅰ GRI Guideline Comparison 87



EN21 Total water discharge and quality by final destination

6.5, 6.5.3

45, 81

EN22 Total weight of waste by type and disposal method 45, 46, 81

EN23 Total number and volume of spills of significant hazardous materials 71

EN24Weight of transported, imported, exported, or treated waste of hazardous materials under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally

N/A(No case)

EN25Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization's discharges of water and runoff

6.5, 6.5.4, 6.5.6 50

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation6.5, 6.5.4, 6.6.6,

6.7.532-25, 49-51

EN27 Percentage of recycling of products sold and their packaging materials 6.5, 6.5.4, 6.7.5 45, 50

EN28Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

6.5 71

EN29Significant environmental impacts of transporting products and other goods and materials used for the organization's operations, and transporting members of the workforce.

6.5, 6.5.4, 6.6.6 47-48

EN30 Total environmental protection expenditures and investments 6.5 46

Labor Practices and Decent Work

LA Disclosure on Management Approach 6.2, 6.4, 6.3.10 52, 76

LA1 Disclosure on Management Approach6.4, 6.4.3

67

LA2 Workforce by employment type, employment contract, and region 67

LA3 Total number and rate of employee turnover (by age group, gender, and region) 6.4, 6.4.3, 6.4.4 69

LA4Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations

6.4, 6.4.3, 6.4.4, 6.4.5, 6.3.10

76

LA5 Percentage of employees covered by collective bargaining agreements6.4, 6.4.3, 6.4.4,

6.4.576

LA6Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements

6.4, 6.4.667, 70

LA7Percentage of total workforce represented in formal joint management-worker LA6 health and safety committees

70

LA8Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases

6.4, 6.4.6, 6.8, 6.8.3, 6.8.4, 6.8.8

69-71

LA9 Health and safety topics covered in formal agreements with trade unions 6.4, 6.4.6 70

LA10 Average hours of training per year per employee by employee category 6.4, 6.4.7 69

LA11Programs for skills management and lifelong learning that support the continued employability of employ-ees and assist them in managing career endings

6.4, 6.4.7, 6.8.5 69

LA12 Percentage of employees receiving regular performance and career development reviews 6.4, 6.4.7 69

LA13Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity

6.3.7, 6.3.10, 6.4, 6.4.3

10-11, 67

LA14 Ratio of basic salary of men to women by employee category6.3.7, 6.3.10, 6.4,

6.4.3, 6.4.465

LA15 Ratio of reinstatement and maintenance after maternity leave by gender 78

Human Rights

HR Disclosure on Management Approach 6.2, 6.3 52, 65

HR1Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening

6.3, 6.3.3, 6.3.5, 6.6.6

60

HR2Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken

6.3, 6.3.3, 6.3.5, 6.4.3, 6.6.6

60

HR3Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations (including the percentage of employees trained)

6.3, 6.3.5 66

HR4 Total number of incidents of discrimination and actions taken6.3, 6.3.6, 6.3.7,

6.3.10, 6.4.365

HR5Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights

6.3, 6.3.3, 6.3.4, 6.3.5, 6.3.8, 6.3.10,

6.4.3, 6.4.576

HR6Operations identified as having significant risk for incidents of child labor, and measures taken to contrib-ute to the elimination of child labor 6.3, 6.3.3, 6.3.4,

6.3.5, 6.3.7, 6.3.10

65

HR7Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of forced or compulsory labor

65

HR8Percentage of security personnel trained in the organization's policies or procedures concerning aspects of human rights that are relevant to operations

6.3, 6.3.5, 6.4.3, 6.6.6

13


Report Application Levels C C+ B B+ A A+ A+

●��G3 profile disclosure

Disclosure items :1.1, 2.1-2.10, 3.1-3.8, 3.10-3.12, 4.1-4.4, 4.14-4.15

Disclosure items :All standard 'C' Items & 1.2,3.9, 3.13, 4.5-4.13, 4.16-4.17

Disclosure items :Similar to Standard 'B' requestitems

●�G3 managementapproach disclosure

Output Not requiredDisclosure in managementapproach for each indicator

Disclosure in managementapproach for each indicator

●�G3performance indicator & addi-tional industrial indicators

At least 10 performanceindicators have to be reported(At least one or more economic,environmental and socialindicators should be included)

Must only report 20 or moreperformance indicators (More thanone indicator must be includedrelated to the economy,environment, human rights, labor,society and product responsibility)

Based on importance principles,the reason for all G3 coreperformance indicators &industrial guideline indicatorsshould be explained for eithera) Reporting or b) Not reporting.


HR9 Total number of incidents of violations involving rights of indigenous people and actions taken6.3, 6.3.6, 6.3.7,

6.3.8, 6.6.7N/A

(No case)

HR10 Total number and percentage of worksites receiving inspection and assessment of human rights 65

HR11Total number of complaints regarding human rights received and settled through official complaint settle-ment system

65

Society SO Disclosure on Management Approach 6.2, 6.6, 6.8 12, 52

SO1 Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting

6.3.9, 6.8, 6.8.5, 6.8.7, 6.6.7

53

SO2 Total number and percentage of business units analyzed for risks related to corruption

6.6, 6.6.3

13, 14

SO3 Percentage of employees trained in organization's anti-corruption policies and procedures 13

SO4 Actions taken in response to incidents of corruption 14

SO5 Public policy positions and participation in public policy development and lobbying

6.6, 6.6.4, 6.8.3

34, 35, 74

SO6Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country

29

SO7Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes

6.6, 6.6.5, 6.6.7

SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

6.6, 6.6.7, 6.8.7 71, 74

SO9 Worksites negatively influencing local communities potentially or actually 46, 50

SO10 Actions to prevent and reduce impact, conducted by worksites negatively influencing local communities potentially or actually

46, 50

Product Respon-sibility

PR Disclosure on Management Approach 6.2, 6.6, 6.7 30

PR1Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures. 6.3.9, 6.6.6, 6.7,

6.7.4, 6.7.5

31-37

PR2Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle (by type of outcomes)

36, 74

PR3Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements 6.7, 6.7.3, 6.7.4,

6.7.5, 6.7.6, 6.7.9

32-35

PR4Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling (by type of outcomes)

74

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction6.7, 6.7.4, 6.7.5,

6.7.6, 6.7.8, 6.7.973-75

PR6Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship 6.7, 6.7.3, 6.7.6,

6.7.9

74

PR7Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes

PR8Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

6.7, 6.7.7 17

PR9Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

6.7, 6.7.6 74

GRI Application Levels Table

LG H&H self-declares that this report has been prepared in accordance to the GRI G3 Guideline and meets ‘A' level of GRI Application Level. A third party institute, Korea Productivity Center, has also verified that this report conforms to the 'A+' level of GRI G3 Guideline Application Level.

Stan

dard

Dis

clos

ures

Out

side

Rep

ort

Ver

ific

atio

n

Out

side

Rep

ort

Ver

ific

atio

n

Out

side

Rep

ort

Ver

ific

atio

n

Appendix Ⅰ GRI Guideline Comparison 89


Glossary

Terms Description

Accumulated Irritation Test Tests to measure the degree of skin irritation by using products repeatedly within a short period.

Backhauling Transportation system in which a vehicle that has completed its delivery collects other cargo for the return trip.

BAU (Business As Usual) Estimated emissions under conditions where no other special measures were taken.

CDP (Carbon Disclosure Project)A global project disclosing carbon-based information regarding response of major companies in the world to climate change. The project was introduced to Korea in 2008 and targets the 200 largest companies in terms of market capitalization.

COD (Chemical Oxygen Demand)Chemical oxygen demand. It refers to the amount of oxygen consumed to purify pollutants oxidized and analyzed by oxidants. It is utilized as a standard to represent the degree of water pollution.

Consolidated Financial StatementFinancial statements integrating individual financial statements regarding two or more companies in a dominant-subordinate relationship as a single corporate group.

CoP (Communities of Practice) Communities of practice. It refers to activities sharing knowledge and experience to achieve common objectives.

CRM (Customer Relationship Management)This term means methodology or software required for a company to manage customer relationships. This is a consumer-centered managerial technique with which the company analyzes data of current and potential customers and creates an index of purchasing behaviors. Based on this index, marketing programs are developed.

DB (Defined Benefit Retirement Pension) A retirement pension system in which the benefit is predetermined.

DC (Defined Contribution Retirement Pension) A retirement pension system in which a user's share is predetermined, and the amount of benefit depends on the investment performance of a reserve fund.

Delivery Routing System An integrated logistics information management system controlling shipping schedule and destinations.

DJSI (Dow Jones Sustainability Index)A technique to assess sustainability of large companies in terms of market capitalization. This index, which was developed by Dow Jones of the U.S., and SAM, conduct integrated evaluation of social/environmental performance and value as well as the financial value of a company.

EVP (Employee Value Proposition) Differentiated benefits provided or to be provided for existing employees and future members of a company.

Fair Trade Compliance Program Legal system and code of conduct to provide a clear standard of action for employees to voluntarily comply with regulations regarding fair trade.

FMCG (Fast Moving Consumer Goods) Products consumed at a fast rate with their relatively affordable price in daily life.

Green ProcurementAcquisition of products and services that most effectively minimize depletion of natural resources and negative environmental impact, or lesson impact to environment and human body compared to other goods.

GHG InventoryData on sources and the amount of GHG emitted in an organizational unit. These are the most basic data to identify opportunities and risk factors of the company related to the convention of climate change.

Hinge A joint to connect pieces which move each other around a central axis of rotation. An object like a pin is used to connect them.

IPCC (Intergovernmental Panelon Climate Change)

An abbreviation of an intergovernmental panel regarding climate change. The panel is co-hosted by the United Nations Environment Program (UNEP) and the World Meteorological Organization (WMO) and joined by governments.

ISO14001An international standard certificate regarding an environmental management system. It was established by the International Organization for Standardization (ISO).

ISO27001An international standard certificate regarding an information protection management system. It was established by the International Organization for Standardization (ISO).

JBP (Joint Business Plan) An alliance practice for distributors and manufactures to analyze consumer environments and share information from the stage of product development.

K-IFRS (Korea-InternationalFinancial Reporting Standards)

International accounting standards adopted by Korea.

Life Cycle Assessment (LCA)A technique to quantify the amount of materials used or produced across life cycle of products or services (raw material procurement, manufacturing, use and disposal), and utilize the assessment result to promote environmental improvement.

Masstige Brand A cosmetic product category of mid-price to satisfy customers' emotional value as well as functional value of products.

Material Safety Data Sheets (MSDS) Globally used form that details chemical properties.

MBR (Membrane Bio-Reactor) A wastewater treatment method combining traditional biological pretreatment and a process using micro filtration membrane

Mecenat Companies' social contribution activities by providing funds and facilities for culture and art.

Multi Brand Shop Distribution channel to handle product lines of various products among road shops.

Musculoskeletal Disorder Disorder of cumulative fatigue in the areas of muscle and skeletal system by simple repetitive tasks.

NGO (Non Governmental Organization) Non-governmental organizations created by natural or legal persons with no participation or representation of any government.

OHSAS 18001 International Standard for occupational health and safety management system.

OJT (On-the-Job Training) In OJT activities, trainees are educated with real tasks in real world and improve job performance abilities.

Patch Test A skin adherence test method to measure if a sample produces side-effect like erythema after a small quantity of the sample is put on the skin

Pig, Air pickerA device that recovers products and by-products that remaining in the piping by discharging them through pressure. It replaces the cleansing process or manual work.


Terms Description

ppm The number of complaints per product sales volume converted into parts per million. This unit aims at managing the ratio of customer dissatisfaction

Prestige Cosmetics High-end products that are recognized for their high quality and sold to consumers who pursue a luxury lifestyle.

Prosumer An active consumer who takes part in product development and distribution and exerts rights of consumer.

PSM (Process Safety Management)Ratings of activities to prevent material industrial accidents, which can damage workers in workplaces due to leaks of hazardous/dangerous materials, fire and explosion: P, S, M+, M-

REACHAn abbreviation of Registration, Evaluation, Authorization and Restriction of chemicals. This is a regulation in the EU to manage one ton or more manufactured or imported chemicals for registration, evaluation, authorization and restriction depending on the amount manufactured/imported and their degree of harm.

Rib Frame added to reinforce thin parts of package.

S&OP ProcessA process to implement a balance of supply and demand through procedures to establish integrated plans for enterprise sales and operations, and maximize management efficiency of a company by integrating and adjusting plans of each Division into enterprise plans.

SKU (Stock Keeping Unit) Minimum classification unit for product sales and inventory management.

Sludge Moisture Content An indicator to display the degree of reduction by the ratio of moisture contained in by-products generated in the process of waste treatment

Sting Test A test method to measure the degree of stinging or itching when products are applied to the skin.

TMS (Tele-monitoring System)An automatic measuring device set up to measure exhaust gases at the point of emission. The data can be collected to prevent accidents and as a basis for various fines imposed.

TOE (Ton of Oil Equivalent) Unit of different energy source converted on the basis of calorific value generated from 1 ton of crude oil.

TPM (Total Productive Maintenance)Effective maintenance activities performed by a team of maintenance personnel and operators for the purpose of minimization of waste like down-time, enhancement of product quality and improvement of equipment efficiency.

Tray Package to support components of a set of products.

Trigger A part in a spray container pulled out to spray contents in the container.

TTT (Train The Trainer) ProgramA program to nurture team leaders through which they develop training programs accumulated with their knowledge, skills and knowhow by themselves, and become in-house instructors combined with teaching skills.

Waste Sludge By-products composed of organic matters and medical precipitate, produced in process of waste treatment.

Cut o

n th

e do

tted

line.

Reader Feedback2010 Sustainability Report of LG H&H

Sustainability Management Team, LG H&HLG Gwanghwamun Bldg., 92 Sinmunno 2-ga, Jongno-gu, Seoul, KoreaTEL +82.2.6924.6082~3 FAX +82.2.6924.6085 E-MAIL [email protected]

Please send this feedback to us to the following address or fax.

Healthy·Beautiful·Refreshing for People and the Planet

Appendix Ⅰ Glossary 91

We welcome your feedback on LG H&H's Sustainability Report. Your views and suggestions will help us improve future editions of this report. Complet-ing the review of this report, please take part in the online survey (http://www.lgcare.com) or fill out the following feedback questionnaire and send it to us by mail or fax. Thank you.

1. Which of the following groups do you belong to?�5. How would you rate the overall quality of this report in the following aspects?

(Very low ①�②�③�④�⑤�Very high)□ Investor/Shareholder □ Consumer □ Financial agency A. The design and layout are helpful in understanding the contents (Readability).

□ Business Partner □ NGO □ Local community ① ② ③ ④ ⑤

□ Academia □ Government □ Press B. The contents are credible (Reliability).

□ Employee □ Other( ) ① ② ③ ④ ⑤

2. What is your purpose in using this report? ① ② ③ ④ ⑤

D. The sentence structure and terminology are appropriate (Clarity).

① ② ③ ④ ⑤

3. What areas were you interested in and found meaningful in this report? (Multiple answers possible)

6. Please feel free to state any comments or suggestions regarding this report.

□ Message from the CEO □ Sustainable manage-ment system

□ Economic Performance creation and contribution

□ Product leadership □ Operational leadership □ Social responsibility leadership

□ Communication leadership

4. What issues need to be addressed or further explained in this report?

Cut o

n th

e do

tted

line.

healthy beautiful refreshing for people and the...

Documents