LG Electronics going green?

Abbreviations

TU Delft SSPM Environmental Management Systems

Sanne de Groot, 30 December 2011
st. nr. Leiden: 1190431, Delft: 1188313
This report investigates the environmental policy of
LG Electronics in its context and with other
electronics companies in particular. The main
sources of information are environmental reports
from LGE. As in the period from 2006 to 2008 there
are only sustainability reports available and no
environmental reports, the environmental reports
from 2002, 2004, 2005, 2009 and 2010 are studied.
All information about LGE is from these reports.

CSR
EESH
EICC
EPR
EuP
LCA
LGE
REACH

Corporate Social Responsibility

Energy, Environment, Safety and Health
Electronic Industry Citizenship Coalition
Extended Producer Responsibility
Enterprise unified Process directive
Life Cycle Assessment
LG Electronics
Registration, Evaluation, Authorisation and
restriction of CHemical substances
RoHS Restriction of Hazardous Substances
directive
SCM Supply Chain Management
WEEE Waste Electrical and Electronic Equipment

A) strategic position

The framework from the book Creating Ecological

Value (Boons 2009) is used to structure the
information.

Market

The mobile phone market is influenced by telecom

providers that let their customers replace their
In addition we have set criteria that we handle under phone every two years. An other development of the
last few years is the popularity of smart phones that
strategies as indicators of ecological value:
have fast development in fashion and software.
supply chain
Upcoming markets like India are asking for simple
material scarcity
phones. LGE is successful with refrigerators and air
hazardous
conditioning units. Consumer awareness is mostly
recycling
aimed at labour conditions and political aspects of
energy & emissions
cobalt mining. CSR and human rights aspects are
product use phase
These criteria are assessed in the chapter Strategies. outside the boundary of this report. Global warming
They will help to answer the research question: How is put on the agenda with An Inconvenient Truth.
can the changes in the ecological strategy of LGE be
Government regulations are increasingly important
understood by looking at internal dynamics and
from 2003. The Kyoto protocol is ratified by the
contextual events?
Republic of Korea. Achieving the greenhouse gas
targets from Korea is done in cooperation with
Contents
companies. Korea also made regulations about
Abbreviations
1 recyclability with EPR regulations. European
A) strategic position
1 regulations like EESH, EuP, RoHS and REACH have to
Market
1 be obeyed in order to produce for the European
Operations
1
market.
B) definition of ecological value
2
Reduction of environmental effects
Legitimate business

C) routines

Formative
Cordinative
Operative

D) strategies
Cost reduction and compliance
Good governance and stakeholders
New *green* markets

Conclusions
References

2
2

Operations

3 Technology of LG Electronics consists of the design,

3 manufacture and distribution of electronic devices.
3 Some parts will be bought from suppliers but the
3 final assembly is done in factories owned by LGE.
4 Most of these factories are located in China. This is
4 unlike most electronics companies who outsource
4 the manufacturing. LGE has a relative large influence
4 on the production chain and is more vulnerable to
4 negative publicity on its factories. Also the recycling
5 of used appliances is done worldwide by LGE.
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B) definition of ecological value

Legitimate business

Reduction of environmental effects

The environmental efforts from LG Electronics are
aimed at reducing the environmental impacts from
its products during the entire life cycle. The first
environmental reports from 2002 to 2004 have put
the water and energy use during the production
central. This is decoupled from the economic
growth. This sounds like a reduction of
environmental effects but it is only relative to the
production, not in absolute sense. Also safety and
health are being addressed as part of the EESH
policy.
More topics are defined from 2005. Korean and
European regulations are putting product recycling,
health and energy use on the agenda. And
environmental aspects are becoming more complex.
This greater complexity is a result of both internal as
external stakeholder involvement (Blecker, Kersten
and Meyer 2005). Internal and external
environmental awareness is pushing this
involvement.

To be accepted as a major player and be an attractive

employer, every company needs to act legitimate.
Even if environmental concern is not the core
business, a company will try to give itself a green
image. Criticism on the mobile phone industry is
mostly because of illegal mining practices in Congo
by rebels (Raj 2011). From 2009 on this is mentioned
in the reports and that illegal mining will not be
allowed. Labour conditions in factories are following
local regulations like a minimum age of 15 years in
Korea. LGE is not maintaining extra strict labour
conditions.
External audits like the Guide to Greener Electronics
(Greenpeace 2010) can determine the companies
reputation. Banning of PVC and BFRs caused the
score of LGE to improve the 2009 score. Awards for
its products and production methods are highlighted
as a distinctive feature in the reports. In 2002 awards
are about safety and health during production, in
2010 more about the products themselves.

It is dangerous to draw conclusions from the word

count below. Firstly the number of pages differs for
In 2010 there is a tendency to products with an
each report. Secondly a word like green can be used
environmental benefit like energy production and
in different contexts like greenhouse. And thirdly
water purification. LGE is jumping in new market
systematic deviations can occur. All the reports
opportunities like efficient air conditioning units. The studied have the word 'green' in their name and
underlying technology is still conventional and aimed none use page headers. The use of 'green' seems to
at reducing the environmental impact.
be rising over the years. This might mean that LGE
thinks a green image is more important now. Or the
vocabulary has chained from precise (EESH, SCM) to
more general (green, CSR).
350

300

Figure 1, word count for EESH, Supply Chain

Management, green and Corporate Social
Responsibility including abbreviations. Solid
lines are in environmental reports and dashed
lines in sustainability reports. See above for an
evaluation.

250

200

150

EESH

100

50

Supply Chain Management (SCM)

green
Corporate Social Responsibility (CSR)
2002

0
2003

2004

2005

2006

2007

2008

2009

2010

2/5

C) routines
Formative
Formative routines are getting more transformative.
This comes from a changing definition of ecological
value. The company is not visibly trying to influence
public policy. If this is the case than formative
routines are stable as formulated by Boons (2009).
The Korean government on the other hand has
ambitions that influence many Korean companies
(EMDP 2010). LGE's changes are mostly driven by
regulations but some environmental measures are
called 'voluntary' in the reports. Formative routines
are managed by the Environmental Committee from
1992 and later more specialized committees.
Next to regulations, imitation (Boons 2009) of other
electronics manufacturers could be a driver behind
environmental development. Other companies like
Nokia (Schoon 2011), HP (Schipper 2011) and Sony
Ericsson (Makkink 2011) earlier adopted
transformative strategies.
'With a goal of Global Top 3 by 2010 in electronic
and IT industries, LG Electronics makes every effort
to be a world class company, which achieves
environmentally friendly and sustainable
development and meets its social responsibility.'
(LGE 2004). CSM is a tool to reach and secure this
goal. This higher ambition is a point when formative
routines are getting more transformative.

Cordinative
Life cycle thinking is deeply integrated so
cordinative routines are dynamic. Implementation
of guidelines is done in a time frame of Korean
products/plants first, to a larger application the years
after. For example ISO14001 certification is asked
from suppliers from 2006. The greenhouse gas policy
also sets targets for its suppliers for the year 2020.
The 2010 report addresses stakeholders as the key
for improvement of ecological value. Supply chains
are being assessed upstream to prevent illegal
mining and bad working conditions. Also
downstream there are initiatives for product labeling
to have a distinctive feature in the market with less
harmful substances and lower energy use.

Operative
Operative routines of LGE are mostly dynamic in the
sense that the environmental impact of products are
taken into account. Material scarcity has been
addressed since the 2002 report in the form of LCA's.
However these issues are not being transformed into
collaborative system with other companies. So a
transformative step seems missing. Making
demountable and recyclable products is developing
from 1996 with the ATROiD program. The collection
and recycling program is set up in 2003 to comply
with EPR and WEEE regulations. CO2 reduction
targets from 2005 are realized in 2008 and 2009.

Figure 2, external dynamics and routines LGE adding up to the right

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Figure 3, strategies LGE adding up to the right

D) strategies

New *green* markets

LED lights, thin film solar cells, smart grids and water
treatment are the latest products of LG Electronics
that have a green image. This is going in the
direction of a transformative strategy. Part of this
could be related to image building and so called
Cost reduction and compliance
greenwashing. The scale of these activities is small in
Reduction of energy and water use is mainly being
comparison with other products but has a potential
done from cost efficiency. This only affects the
to grow if governments keep promoting them.
companies own activities so it is a stable strategy.
Because they are creating new production and
consumption systems they have transformative
Government regulations are leading for most change
aspects. However transmission to other companies is
processes. Labour conditions, safety and health are
missing.
following local regulations. From 2005 there is an
increased activity of voluntarily initiatives and
Conclusions
targets. Hazardous materials are voluntarily being
replaced for certain applications or totally banned.
The strategic position of LGE has had a growing
Voluntary reductions could be a result from
governmental and stakeholder influence in the last
deregulation and to prevent more regulations. The
ten years. To remain legitimate LGE has adjusted its
2010 report mentions stricter regulations on energy definition of ecological value. The strategy is getting
efficiency as a risk. This is also stable strategy.
more dynamic as a result of this. Routines are
changing less visible. This could be because the focus
Good governance and stakeholders
of the reports is on results and best practices.
Collaboration with suppliers is already done in 2004
when LGE was giving technical assistance to adopt
The diverse measures can be explained with the
the EESH policy.
complexity. It is impossible to predict how measures
will contribute to a green image. Strategies that
Materials are in the first place made lighter. This
make activities look transformative are then lurking.
makes them also more cost effective which is a
For LGE this might also be the case with PV and
stable strategy. Recycled and bio content is used with water purification activities. However if there is
environmental reasons so it is getting more dynamic. enough demand these niches could grow.
Strategies are the execution of routines but some go
further than the overall vision and react on certain
circumstances.

Energy and water savings are firstly done in cost

effective order. Later emission reductions are
promoted by the Korean government. From 2009 the
emission reduction targets extend to the suppliers
which is a more dynamic strategy.

In comparison with other electronics manufacturers

LGE is a bit late to develop a dynamic strategy. This
could be a result of focusing on low cost products.
With the goal of being a major player it is logical to
adopt a dynamic or even transformative strategy.
4/5

References
Blecker, T., Kersten, W. and Meyer, C. (2005). Development
of an Approach for Analyzing Supply Chain
Complexity. Hamburg University of Technology.
(http://mpra.ub.uni-muenchen.de/5284/)
Boons, F. (2009). Creating Ecological Value. An
evolutionary approach to business strategies
and the natural environment. Cheltenham:
Edward Elgar.
EMDP (2010). Unlocking Investment Potential: ESG
Disclosure in Korean Companies. Emerging
Market Disclosure Project, Korea Team.
Greenpeace (2010). Guide to Greener Electronics.
(http://www.greenpeace.org)
LGE (2002). Environmental Report 2002 LG Loves Green.
(http://www.corporateregister.com)
LGE (2004). Environmental Report 2004 LG Loves Green.
(http://www.corporateregister.com)
LGE (2005). Environmental Report 2005 LG Loves Green.
(http://www.corporateregister.com)
LGE (2009). Environmental Report 2009 Life's good...
when it's green.
(http://www.corporateregister.com)
LGE (2011). Environmental Report 2010 Life's good.
(http://www.corporateregister.com)
Makkink, H. (2011). Analyzing the strategic perspective of
Sony-Ericsson. Internal report TU Delft.
Raj, S. (2011). Blood electronics: Congo's conflict minerals
and the legislation that could cleanse the trade.
Southern California Law Review, 84, 981-1034.
Schipper, M. (2011). Hewlett-Packard. Internal report TU
Delft.
Schoon, N. (2011). Nokia.Internal report TU Delft.

5/5