Case study: How KDHC promotes ethical business conduct
Korea District Heating Corporation (KDHC) is Korea’s leading eco-friendly energy corporation, supplying economic and eco-friendly energy for 1.62 million households. KDHC is committed to fulfilling its ethical and social responsibility with its stakeholders Tweet This!, strengthening ethical management activities.
This case study is based on the 2020 Corporate Social Responsibility Report by KDHC published on the Global Reporting Initiative Sustainability Disclosure Database that can be found at this link. Through all case studies we aim to demonstrate what CSR/ ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.
Abstract
In 2019, KDHC expanded its employee ethics training programmes to raise employee awareness of ethical management. In order to promote ethical business conduct KDHC took action to:
- promote integrity
- provide training
- promote fair competition
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With this case study you will see:
- Which are the most important impacts (material issues) KDHC has identified;
- How KDHC proceeded with stakeholder engagement, and
- What actions were taken by KDHC to promote ethical business conduct
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What are the material issues the company has identified?
In its 2020 Corporate Social Responsibility Report KDHC identified a range of material issues, such as increasing the use of efficient energy, reducing work-related accidents and disasters, contributing to local job creation and increase in income, reducing energy consumption. Among these, promoting ethical business conduct stands out as a key material issue for KDHC.
Stakeholder engagement in accordance with the GRI Standards
The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:
Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.
Key stakeholder groups KDHC engages with:
To identify and prioritise material topics KDHC engaged with its stakeholders through the following channels:
| Stakeholder Group | Method of engagement |
| •Employee •Labour Union
| · Labour-Management Workshop · Labour-Management Council · Internal Forum · Employee Workshop · Newsletter · In-house Broadcast · Innovation Talk |
| •Public/Shareholders/Investors •Government/Local Government/ National Assembly •Industry-Academy/Research Institutes | · CES Research Association · Policy Debate Group · Government Working Group · General Meeting of Shareholder · IR/Public Disclosure · Innovation Network
|
| •Power Plants •Suppliers •Subsidiaries
| · Supplier Seminar · SME Council · e-Contract System · Joint Project · Technology Exchange · Subsidiary Seminar |
| •Customers/Local Community •Korea Power Exchange
| · CS Management Committee · Homepage · Customer Satisfaction Survey · Local Council · Press Release · Public Service Design Group · Public Safety Inspection Group |
What actions were taken by KDHC to promote ethical business conduct?
In its 2020 Corporate Social Responsibility Report KDHC reports that it took the following actions for promoting ethical business conduct:
- Promoting integrity
- KDHC introduced the Integrity Governance to each branch office under the direction of the Integrity Audit Office in 2013, in order to promote an integrity culture. In line with this commitment, KDHC mandated the operation of the Integrity Governance and implemented an “Integrity Certification System” to support engagement and various integrity practices in 2019. Integrity Governance is a council body organised to promote the culture and campaigns of distributing promotional materials related to the policies and prevent corrupt practices. It is mainly divided into Integrity Cluster and Integrity Friends. While the Integrity Cluster is led by collaboration between local governments and other public institutions, the Integrity Friends are implemented through collaboration among stakeholders, including customers and contract parties, to promote the culture of integrity. In the future, KDHC will continue to increase the engagement of external stakeholders and implement effective policies to spread the culture by reflecting feedback through the Anti-corruption Practice Group.
- Providing training
- KDHC continues to strengthen its training programmes on ethics and integrity in line with the nature of individual jobs and responsibilities, from executive officers to new employees. While carrying out training for executive officers to establish ethical leadership, employees working in the field with a high risk of corruptive practice such as budget, HR, finance, contracts, or those who are directly interacting with suppliers are subject to specialised training. KDHC also provided personalised ethics training programmes by life cycle for new employees and executives, deputy managers, and new assistant managers. The number of employees who participated in the training programme increased by 200% from 406 in 2018 to 815 in 2019.
- Promoting fair competition
- KDHC promotes fair competition by improving contract systems. By enhancing the method of determining the existing preliminary price base amount, KDHC prevented a low-price bid, and as of the end of December 2019, managed to increase the contract price by KRW 10.2 billion. KDHC also mandated the use of an electronic payment system when requesting and receiving payments from suppliers, and as a result, the direct payment to second-tier suppliers was improved, which led to securing cash flow of SMEs and stable operation. In addition, KDHC increased the points for CSR for suppliers, limited participation in bidding in case of violating the working conditions implementation plan, and created extra points for job creation as part of its efforts to promote fair competition. Meanwhile, KDHC proactively established a system based on fair contracts, such as improving unfair process conditions for heat transfer and pre-self-inspection on unfair contracts, in order to protect the rights of suppliers and create a win-win ecosystem.
Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?
The GRI Standards addressed in this case are:
1) Disclosure 205-1 Operations assessed for risks related to corruption
2) Disclosure 205-2 Communication and training about anti-corruption policies and procedures
Disclosure 205-1 Operations assessed for risks related to corruption corresponds to:
- Sustainable Development Goal (SDG) 16: Peace, Justice and Strong Institutions
- Targets: 16.5
Disclosure 205-2 Communication and training about anti-corruption policies and procedures corresponds to:
- Sustainable Development Goal (SDG) 16: Peace, Justice and Strong Institutions
- Targets: 16.5
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References:
1) This case study is based on published information by KDHC, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original, please revert to the original on the Global Reporting Initiative’s Sustainability Disclosure Database at the link:
http://database.globalreporting.org/
2) https://www.globalreporting.org/standards/gri-standards-download-center/
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