Cooperative Labor-Management
Relations
Cooperative Labor-Management
Relations
Supply Chain
Management and
Shared Growth
Hanwha Ocean pursues shared growth with our suppliers to achieve the goal of sustainable development and creating a fair society. We support our suppliers in various aspects, including finance, education, and technology, so as to establish a sound transaction practices and boost their competitiveness. Based on our support, we aim to develop a healthy corporate ecosystem that grows together with our suppliers.
Hanwha Ocean intends to create a sustainable supply chain with the vision of “building a competitive corporate ecosystem.”In line with this, we operate a supply chain management system to identify key suppliers and manage suppliers with high risks. To manage the supply chain in consideration of business characteristics, we have procurement departments in each business division to promote efficient supply chain management, and the Labor-Management Cooperation Office (executive-level executives) in Geoje Shipyard is committed to forming fair and reasonable business partnerships with internal and external block manufacturing suppliers.
Strategy
Hanwha Ocean aims to reinforce the competitiveness and win-win management of our suppliers for sustainable supply chain management. In terms of win-win management, we encourage our suppliers to actively participate in ESG activities. Our goal is to increase the ESG assessment rate for our key suppliers to 100% by 2030. We plan to formulate a new ESG Code of Conduct encompassing human rights, safety and health, environment, ethics, and business management so that all suppliers can agree to and comply with it.
Boosting the competitiveness of suppliers and strengthening
win-win management
Win-win management,
shared growth, and enhanced competitiveness of suppliers
win-win management
- Establish a new ESG Code of Conduct for
suppliers and operate compliance guidelines in 2024 - Manage supply chain risks through semi-annual internal and external supplier assessments
- Support win-win cooperation by signing agreements with tier 1 and 2 suppliers and tier 2 and 3 suppliers, encouraging them to improve payment terms, and using standard subcontract agreement
- Protect supplier’s technology through technical support and support for patent applications
- Provide education for technology
improvement - Provide financial guarantees linked to local governments (e.g. Geoje, Busan) and financial institutions
Hanwha Ocean carries out regular evaluations of our major internal and external suppliers at least once each year. The evaluation is conducted in four areas of production, quality, safety, and finance to assist their voluntary effort to improve their competitiveness. The implementation of supplier ESG assessment is also covered in the periodic evaluation.
Process compliance rate, Contribution to output,
Production target achievement rate, Volume transfer management, etc.
On-site frequent inspections, quality re-inspection rate, certification (ISO 9001), zero tolerance (critical quality incident management), quality improvement activities
Safety accident management,
on-site safety activities of supervisors, TBM risk assessment, safety inspection, safety training, self-improvement activities, etc.
Credit ratings, cash flow ratings, ESG management activities (additional points for conducting ESG assessment through an external agency), loans and allowances for doubtful
accounts, etc.
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1)Additional points are given in “finance” for companies that conducted ESG assessment on our own.
According to the assessment result, Hanwha Ocean categorizes suppliers from S to D for incentives and penalties, etc. We award outstanding suppliers and offer them with ESG consulting services such as ESG level diagnosis and on-site due diligence. To ensure that our supply chain is managed with high quality, we impose a penalty of terminating transactions with suppliers recording poor performance and are rated D more than two times.
| Indicator | Unit | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Total suppliers |
Total suppliers | companies | 172 | 178 | 194 | 191 |
| Internal suppliers | companies | 111 | 108 | 118 | 127 | |
| External suppliers | companies | 61 | 70 | 76 | 64 | |
| Newly registered suppliers |
Newly registered suppliers | companies | 5 | 13 | 46 | 31 |
| Internal suppliers | companies | 5 | 6 | 19 | 10 | |
| External suppliers | companies | 0 | 7 | 27 | 21 | |
| Key suppliers identified | Y/N | Y | Y | Y | Y | |
| Suppliers with high risks |
Suppliers subject to management | companies | 17 | 24 | 28 | 27 |
| Internal suppliers | companies | 16 | 21 | 25 | 23 | |
| External suppliers | companies | 1 | 3 | 3 | 4 | |
| Percentage of suppliers subject to management |
% | 10 | 13 | 14 | 14 | |
| Internal suppliers | % | 14 | 19 | 21 | 18 | |
| External suppliers | % | 2 | 4 | 4 | 6 | |
Hanwha Ocean reviews the qualifications of new suppliers before engaging in
business transactions with them. We evaluate them in the same four areas (quality,
safety, management, and production) as the regular evaluation of existing suppliers.
During document screening, we consider basic requirements such as corporate credit rating, financial soundness, existence of unethical practices, and ISO 9001
certification. In the second round of evaluation, we review their business
qualifications by evaluating related organizations in safety, quality, production, and management. We also require new suppliers to submit the ISO 14001 certificate for environmental management systems, and we carry out an assessment of ESG factors in consideration of environmental criteria as well as quality and production standards.
Hanwha Ocean selects outstanding suppliers each year after supplier regular
evaluation and provides free ESG consulting services to help them establish ESG management practices and mitigate ESG risks in our supply chain. In 2023,
we selected two outstanding suppliers (one internal and one external) and conducted a basic ESG assessment and consulting on environmental, social, and governance issues.
we plan to connect the consultation results to an advanced assessment.
Shared Growth Programs
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Special fund for shared growth
Hanwha Ocean joined hands with the Gyeongsangnam-do Provincial Government and Busan Metropolitan Government to raise a special fund worth KRW 5 billion for shared growth with the shipbuilding industry. We delivered the fund to shipbuilding and offshore equipment suppliers facing a shortage of work and financial difficulties to help them overcome the challenges and restore their activities in the industry.
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Creation of a specialized complex for root (ppuri) industries
At Hanwha Ocean, we provide information and encourage our suppliers to register for a specialized complex for root (ppuri) industries (Okpo Industrial Complex for Root Industries) to ensure shared growth between large companies and small and medium-sized enterprises (SMEs). A total of 54 companies belonged to the six major root processes including welding, surface treatment, casting, molding, plastic processing, and heat treatment among our internal suppliers registered as of 2023. We aim to enhance their competitiveness and develop local industries in parallel through the establishment of the HSE training center, renovation of shared amenities, and implementation of industry-academia R&D projects.
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Support for joint labor welfare fund for suppliers
From 2020, Hanwha Ocean signed an MoU with the Gyeongsangnam-do Provincial Office, declaring active cooperation for the welfare of internal suppliers’ employees engaging in the shipbuilding industry. Since then, we have been taking the lead for shared growth for shipbuilding suppliers through the Joint Labor Welfare Fund. The fund lays the foundation for implementing various welfare schemes such as housing subsidies for suppliers’ employees, financial assistance for children’s tuition fees, scholarships, and livelihood funds. In 2023, we contributed KRW 2 billion to the Joint Labor Welfare Fund and raised KRW 5.4 billion in total. We decided to contribute another KRW 2 billion to the Fund in 2024, which was approved by the board in April 2024.
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New technology patent applications of suppliers
Hanwha Ocean provides financial support for patent applications regarding technologies jointly developed with its suppliers. We provided KRW 27.41 million for 25 patents in 2023, and we plan to expand the support to KRW 30 million for 30 patents in 2024.
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Supplier open recruitment system
Hanwha Ocean ensures fairness and transparency in the selection of outstanding suppliers. Accordingly, we implement a pooling system of pre-qualified suppliers through open recruitment each year. For our 2023 open recruitment, we added 23 new internal suppliers and four external suppliers to the pool.
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Employee retention support for suppliers
From 2021,Hanwha Ocean established an employee retention support policy for suppliers to prevent employee attrition. Since then, we have provided training venues, supported their institutional responses, and shared the suppliers’ contributions for employment retention. In 2023, we saw an increase in the number of employees from about 11,700 to 18,000 (approximately 6,300 increased ), demonstrating our competitive edge in achieving shared growth with our suppliers.
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Localization of equipment
Hanwha Ocean collaborates with local equipment providers in an effort to produce equipment with our own technology and reduce supply chain risks
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Supplier ESG support
Hanwha Ocean provides support for basic ESG assessments to our internal and external suppliers selected with their outstanding performance after a comprehensive supplier evaluation to help them achieve ESG management independence. We plan to support them in conducting an in-depth diagnosis in 2024.
Supplier ESG support Indicator Unit 2020 2021 2022 2023 Support amount Financing and funding KRW 100
million172 178 194 191 Support
projectHuman rights & ethical
management guidelinesY/N 5 13 46 31 Technology development support and technology protection
programY/N 5 6 19 10 Employee job competency development training Y/N 0 7 27 21