Kumho Tire has established a governance system for addressing climate change, extending from the Board of Directors to the organizations responsible for actual environmental operations.

Board’s Oversight of Climate Change-Related Risks and Opportunities

The Board of Directors, Kumho Tire’s highest decision-making body, deliberates and decides on the company’s overall ESG management strategy, including responses to climate change and environmental management, considering environmental risks in major decisions. The ESG Committee, a subsidiary body of the Board, was established to strengthen the oversight system. It deliberates on major environmental risks and opportunities, managing and supervising tasks related to climate change response.

Management’s role in assessing and Managing Climate Change-Related Risks and Opportunities

The ESG Management Committee comprises the CEO and heads of various divisions. It discusses key ESG issues, including climate change, comprehensively assessing business activities and reviewing performance. Additionally, key climate change initiatives are implemented through the Working Group, led by responsible executives. In 2023, the Working Group advanced tasks such as refining Scope 1-3 calculations, declaring support for the TCFD, and incorporating climate change response into the investment decision-making process. To ensure the effective achievement of these tasks, the Working Group’s activities are linked with the KPIs of practical departments and management at the corporate level. Particularly for production plants with high power and fuel usage, KPIs have been established to implement annual energy and carbon reduction tasks.

Expansion of the Energy and Carbon Management Committee

Kumho Tire expanded the existing Energy Committee into the Energy and Carbon Management Committee to manage the carbon and environmental management agenda under C-level leadership and extend it to global business sites.

Climate Change Management Incentives

KPIs have been set for executives of key departments to achieve ESG management goals. The ESG Management Committee regularly monitors these KPIs to ensure effective goal attainment. Executives of the Production Technology Division set annual goals to reduce electricity and city gas usage to lower greenhouse gas emissions and review the achievement of these goals. The achievement of energy-saving goals is linked to the KPIs of the management, motivating each responsible person to strive for energy reduction.

ESG Management Committee Climate Change Discussion Agenda

Kumho Tire has developed a ‘2045 Net-Zero Roadmap’ to actively respond to climate change. We identify risks and opportunities related to climate change and establish response strategies, particularly for major risks, through scenario analysis. Based on scenarios aiming to limit global temperature rise to within 1.5°C as per the Paris Climate Agreement and the 5th IPCC report, we have refined specific response plans for each risk.

Establishing Targets Based on SBTi

In 2022, Kumho Tire joined the Science Based Targets initiative(SBTi). We have set Net-Zero targets aligned with the 1.5°C scenario and are developing detailed plans and reduction measures to gain SBTi approval.

Declaration of Support for TCFD

In March 2023, Kumho Tire became the first in the domestic tire industry to declare support for the TCFD (Task Force on Climate-Related Financial Disclosures). Currently, around 3,400 companies and institutions across 95 countries support the TCFD. Kumho Tire will transparently disclose climate-related financial information and incorporate its financial impacts into management to achieve Net-Zero targets.

Net-Zero Investment Review

Kumho Tire has added a climate change-related review stage to the major investment process to consider climate change issues in decision-making. For ESG investments exceeding KRW 500 million, a preliminary review process is conducted before the Investment Review Committee meeting, and approval decisions are made through committee discussions. We are actively promoting investments needed for renewable energy transition, high-efficiency equipment conversion and emissions trading scheme responses. The ESG Committee and ESG Management Committee are dedicated to ensuring that climate change response is considered in investment decision-making.

Internal Carbon Pricing

To enhance the momentum towards Net-Zero, Kumho Tire has introduced and applied internal carbon pricing during ESG investment reviews. In 2022, Kumho Tire applied an internal carbon price range of KRW 12,050/tCO2eq to KRW 32,700/tCO2eq based on the average price of carbon emission permits in the domestic emissions trading scheme. In the future, internal carbon prices will be set based on the prices of international carbon emission permits and renewable energy certificates (RECs), and will be updated annually. Internal carbon pricing will be applied to all investments to comprehensively evaluate economic risks and opportunity costs.

Introducing internal carbon pricing in the investment review process to estimate expected cost savings is crucial for evaluating the appropriateness of investments from a carbon perspective, supporting the implementation of Net-Zero plans. In 2023, for four ESG investments, internal carbon pricing was applied to the annual expected carbon reduction amounts, resulting in approximately a 10% reduction in the payback period, which was considered in investment decisions.

Scenario Analysis

Kumho Tire has identified and analyzed scenarios for major risks due to the climate crisis, including transitional risks and physical risks. Based on scenario analysis, Kumho Tire aims to establish response strategies to minimize the impacts of climate change risks.

Analysis of Climate Change Resilience Through Scenario Analysis

* IEA (International Energy Agency)

* IPCC (Intergovernmental Panel on Climate Change)

Risk Identification, Assessment, and Management Process

Kumho Tire operates a process for managing climate change risks. Key risks are identified, discussed, and action plans are developed. Relevant departments monitor risk management status by regulation and issue. Significant matters are reported to the ESG Committee to ensure that decision-making reflects risk response measures.

Climate Change Response Strategy

Analysis of Climate Change Risks and Opportunities

Kumho Tire strives to proactively identify and systematically manage the risks and opportunities related to climate change. To achieve this, we identify the potential financial impacts of climate-related risks and opportunities both in the short and long term. Through appropriate response activities, we aim to minimize the impact of climate change on the corporate management environment.

Metrics & Target

Net-Zero Roadmap

Based on the ‘2045 Net-Zero Roadmap,’ Kumho Tire aims to reduce greenhouse gases by approximately 30% by 2030 compared to 2022 levels, 70% by 2040, and achieve Net-Zero by 2045. Specifically, for Scope 3, Kumho Tire plans to reduce emissions in the transportation stage by using low-carbon transportation methods and decrease greenhouse gas emissions during the tire usage stage by improving rolling resistance coefficient and relative load. Additionally, based on annual procurement plans to achieve RE100 goals, we plan to continuously procure renewable energy through various channels such as power purchase agreements (PPA), renewable energy certificates (REC), and green premium purchases.

Net-Zero Implementation Roadmap

Greenhouse Gas Emission Management

Efforts to Reduce Scope 1 and 2 Emissions

Kumho Tire sets reduction targets for direct emissions (Scope 1) and indirect emissions (Scope 2) for each plant and incorporates these targets into performance evaluations to manage greenhouse gas emissions. The SHE Planning Team oversees the entire process of calculating and reporting greenhouse gas emissions and is responsible for budget planning to participate in the third phase of the emissions trading scheme. Through this management process for direct (Scope 1) and indirect (Scope 2) emissions, we strive to reduce emissions.

Scope 3 Emissions Management

Kumho Tire manages Scope 3 greenhouse gas emissions across its entire supply chain. In 2023, 12 out of 15 categories were selected, and third-party verification was conducted to enhance the reliability of the data calculation methods. As part of efforts to reduce Scope 3 greenhouse gas emissions, certificates are issued for cargo transported by ships using low-carbon (LNG) fuel. We plan to increase the proportion of transportation using low-carbon fuel sources in the future.

Energy Management

Utilization of Process Energy Management System

Kumho Tire utilizes the Factory Energy Management System(FEMS) at its domestic plants to systematically manage energy and greenhouse gases. Through FEMS, energy consumption and efficiency are analyzed in real-time and on a monthly basis to optimize energy use and manage equipment efficiency.

Waste Heat Recycling

Turbines are operated using the pressure differential generated during decompressing the steam from boiler to heating and cooling for the manufacturing plants, with an additional unit installed in 2023 to be operational in 2024. This is expected to reduce greenhouse gases by approximately 700 tCO2eq. In February 2024, a facility was installed to recycle re-evaporated steam from tanks for hot water heating. Future plans include reviewing the reuse of thermal energy generated in production processes for hot water and heating purposes and promoting related activities.

Capital Investment for Energy Saving

Transition to Renewable Energy

Solar Power Implementation

Kumho Tire is establishing solar power facilities at domestic and international sites to transition to renewable energy, prioritizing overseas sites with relatively well-developed renewable energy infrastructure.

The Nanjing plant in China has been receiving power from solar power facilities on its factory roof through an On-Site PPA since July 2023, and it is expected to secure 12,856 MWh of power in 2024 when fully operational. 

The Tianjin plant has been receiving power from solar power facilities on its factory roof through an On-Site PPA since October 2023, and it is expected to secure up to 9,931 MWh of power in 2025 when fully operational. Additionally, in 2023, 24,819 MWh of Green Electricity Certificates (GEC), similar to Korea’s REC, were purchased.

The Changchun plant began installing solar power facilities on its factory roof through an On-Site PPA in March 2024, and it is expected to secure up to 6,386 MWh of power in 2025 when fully operational.

The Vietnam plant has been receiving power from solar power facilities on its factory roof through an On-Site PPA since January 2023, and it is expected to secure up to 15,010 MWh of power in 2025 when fully operational.

In 2025, the three plants in China and the plant in Vietnam are expected to secure 11.32% of their expected power usage for 2025, and the three domestic sites are also scheduled to complete the installation of self-generation facilities by 2024.