Social Contribution

Vision and Strategic System for Win-Win Growth

Vision & Slogan, Four Major Strategic Tasks, Initiatives

Strengthened communication with Suppliers

Win-win growth
community

LG H&H strives to build strong partnership within the culture of fair trade. We set the four approaches for win-win growth, related to contracts, selection, document issuance, and the Subcontractor Reveiw Committee for the basis of fair trade. We also regularly conduct communication activities with suppliers through the Collaboration Council, Win-Win Growth Seminar, and Win-Win Growth Workshop.

Win-Win Growth Review Committee Structure

Visiting Suppliers for On-site Communication

LG H&H offers various opportunities to share ideas, targeting each level of employees. Such efforts include general meetings and seminars with the CEOs of suppliers and working-level discussions for win-win growth. We have listened opinions from suppliers, identified difficulties, and taken proper actions to swiftly resolve the issues.
In 2015, we enacted more direct and quicker change by increasing the number of visits to suppliers for on-site communication, arranged by the executive purchasing director to identify their problems in the field. We share ideas to find effective solutions for the issues that frequently emerge in actual transactions, including new technology proposals, minimum units for orders, relocating business sites, and inventory management.
Furthermore, we expanded the existing communication channels and provided insight lectures presented by prominent figures in the fields of free discussion, management philosophy, state-of-the-art technology trends, and next-generation leadership, thereby broadening the common ground we share with suppliers.

Reinforcing Supplier Competitiveness

Supplier Technology Proposal

Supplier Technology Proposals are held regularly so that the suppliers can introduce their technology to the decision makers in Marketing, Business, R&D, and Overseas Divisions of LG H&H. We offer budget worth KRW 500 million annually if a supplier requires additional support for its technology development.

Support for International Exhibitions

As means for new entry into and benchmarking of global cosmetics market and trends, LG H&H encourages its SME suppliers to attend international technology exhibits. We offer all supports and costs for registrations and displays for the exhibits, thereby leading them to focus on preparing for the exhibits.

Joint R&D

We not only protect suppliers' technologies with the technology data escrow system, but also support issuance of co-ownership of patents. Also, we publish patents of SMEs through the Creative Economic Innovation Center, thereby strengthening the cosmetics industry in Korea.

Consultation

We provide our suppliers technology consulting for their competitiveness building. Our experts aid the primary and secondary suppliers in improving productivity and quality. Moreover, we also support our cosmetics suppliers to obtain CGMP certification so that they can build capacity that satisfies potential customers' needs for quality, thereby also increasing trust in LG H&H.

Expanding Financial Support

Win-Win Growth Fund

We help suppliers in making decisions for new technology development, processing capacity building, and new market entry. Furthermore, in collaboration with financial institutions, we established the Win-Win Growth Fund to offer loans at low interest rates.

Investment Financing

Our investment financing program is a financial support for suppliers when they require budget for R&D, productivity building, and overseas market entry. Since 2014, we have run a total of KRW 2 billion for financing investment in suppliers.

Cash Payment to Subcontractors

LG H&H processes cash payments, within 10 days, three times a month for any payments to all of its suppliers. Since 2016, we will create shared culture of payments in our supply chain through the shared growth payment system.

Improved Fairness and Transparency in Supplier Management

Purchasing and CSR Diagnostic Processes

Our supplier selection and registration process ensures transparency and fairness in selecting suppliers. In selecting new suppliers, application reviews and credit assessments are made in the 1st phase, which is followed by the 2nd phase assessment where candidates are assessed by our in-house assessment team, made up of at least three departments among purchasing, material management, quality, production, design, R&D and marketing departments. Such assessments target suppliers whose transaction period is more than 1 year and annual transactions amount to over KRW 100 million while assessment categories include quality, deadline, credit ratings, technology, and CSR. In 2012, sustainability management assessment categories was further segmented into 64 items in the seven areas of governance, Jeong-Do management, labor & human rights, environment, safety, consumers and local communities.

Pilot assessments were also made of six raw and subsidiary material suppliers and OEM companies. In 2013, our plan is to perform CSR assessments of 250 major suppliers to reflect the outcomes in our comprehensive purchasing assessments as well as incentive criteria covering the allocation of product volume, the selection of beneficiaries of the Growing Together fund and technological support.

Sangsaenggo and Open Space

We created “Open Space” within our convergent purchasing system to gather feedback from suppliers. Our supplier dialogue channels enable our suppliers to freely communicate their grievances and suggestions regarding business transactions to our purchasing employees.

Operation of Sangsaenggo and Open Space

Request to review grievances and suggestions, Review requests, Feed back review outcome, Take follow-up measures

Evaluation of business partners And CSR management

LG H&H strives to select a business partner fairly and transparently through a business partner selection and registration process. To select a new business partner, we first conduct document examination and a credit test. We then conduct a due diligence test with a test team made up of the people in charge of purchase, materials, quality, production, design, the research center, and marketing. Our company reflects the ESR evaluation results to overall purchase assessment and uses these assessment results as criteria for giving incentives such as quantity allocation, the Win-win growth fund, and technical support.

Tier 1 Suppliers’ Support for Tier 2 Suppliers

Support Contents

To establish autonomous principles of fair trade and promote mutual competitiveness and win-win growth, we assisted our tier 1 and tier 2 suppliers in signing the fair trade/win-win growth agreement. Shared growth seminars were held in attendance of both tier 1 and tier 2 suppliers for them to be aware of win-win growth plans and to encourage tier 1 suppliers to provide the assistance they received from large companies to their tier 2 suppliers.

In addition, win-win growthrelated postings are made available at our CPS supplier portal in order to announce our commitment to win-win growth to our tier 1 suppliers and to encourage and assist them to sincerely comply with the winwin growth agreement.

Suppliers’ Support for Tier 2 Suppliers
Category Description
Procedures 1.Letters are sent to encourage the signing of the agreement under the name of our CEO in charge of purchasing and production
2. The written agreement is signed and submitted to us
Major Details of the Agreement
  • When delivery unit prices are raised, cash (cash equivalent) payments are made, payment due dates are made more favorable and funding support is given, tier 1 suppliers notify tier 2 suppliers of such improvements
  • Concerned agreement parties (tier 1 suppliers) disclose information on adjusted delivery unit prices to their suppliers through internal cooperation channels.
  • Large companies operate programs to offer assistance or transaction-related incentives to those tier 1 suppliers who sincerely adhere to the above menti1d requirements.
Status of the Agreement Signing
2014
  • Suppliers who signed the agreement: 80 suppliers
  • Tier 1 suppliers who signed the agreement with tier 2 suppliers: 109 suppliers
  • Tier 2 suppliers who signed the agreement with tier 1 suppliers: 350 suppliers