NORDEA ASSET MANAGEMENT
Samsung SDI performs complete verifications on safety factors from the product development phase - including the selection of raw materials - through the whole manu- facturing process. ENGAGEMENT: NAM has engaged with the company on this issue since 2017. We have required that the company invests in improved quality control mechanisms and gives transparency around this to its shareholders. Our assessment concludes that Samsung SDI has improved its quality control system and continues to improve the system. This has increased our conviction in the invest- ment case as the quality improvements reduce the risk of future recalls and provisions, which can be very costly for Samsung SDI, and therefore impact the valuation of the company. Human Capital Human capital is an important topic that we considered in our analysis and engagement with Samsung SDI. The SASB Materiality Map’s focus within the hardware industry is on the employee diversity & inclusion topic is mainly related to workforce diversity of gender and minority groups, and the company reports on these issues in their sustainability report. However, NAM has chosen to focus on a different topic within the issue of human capital. NAM sees unionisation as an unaddressed issue in Samsung SDI as well as in the wider Samsung Group, thus we have focused our engagement on this topic. ISSUE: NAM supports the core ILO conventions, which include employees’ right to organise and have collective bargaining. While Samsung Group has not had an offi - cial anti-union policy, historically there have been several cases of anti-union activities throughout the group, some of which have resulted in legal cases against senior management. PERFORMANCE: Samsung SDI has for many years sup- ported freedom of association in its supply chain through its supplier code of conduct, but these rights have never been officially applicable for its own employees. However in 2019, Samsung SDI officially announced in a policy that it supported and would respect its employees’ freedom of association. ENGAGEMENT: NAM has engaged with the flagship company of the Samsung Group on the issue of labour
rights within the group. The group has established an independent global compliance committee, which has the mandate to review and monitor the group’s compliance. Since its establishment, the committee has selected three issues -- the group’s union, management succes- sion and communication with civic organisations -- as key points on its agenda to improve the conglomerate’s business compliance. NAM will continue to review and engage to ensure that the corporate culture is changed to be more accepting of employees’ union activities. It is very positive that the company now has an official policy on the topic. NAM believes that a balanced and harmo- nious relationship between workers and the company is likely to increase the attractiveness of Samsung SDI as an employer and strengthen its brand and standing in South Korea, ultimately increasing the longevity and value of the company. Product Lifecycle Management NAM’s view and engagement on this topic is aligned with and follows the issues identified by SASB Materiality Map. ISSUE: Samsung SDI’s products are used in various tech products, some of which get obsolete and replaced by consumers after only a few years. While the collec- tion and recycling of smaller batteries can be complex because the end users discard batteries in many various ways, the move towards larger batteries in electric vehicles and energy storage systems will make it more efficient to create a recycling process for used batteries. PERFORMANCE: The company ensures that scraps from the manufacturing process are collected and sent to a recycling company which can then send it back in the value chain. It also works with battery recovery companies, which can send the batteries for recycling. The company is looking for potential partnerships with car manufacturers to develop a closed-looped battery recovery system. ENGAGEMENT: NAM has engaged with the company on the issue of recycling. While it is already addressing the issue of recycling scrap material from its production process, there is room for improvement in relation to the end-of-life recycling. Samsung SDI could build recy- cling considerations into the design of its products and
6 | SASB STANDARDS INTEGRATION CASE STUDY
SASB.ORG/INVESTOR-USE
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