Hanon : 2022Corporate Sustainability Report

Report Overview

Hanon Systems is publishing the 2022 Sustainability Report to transparently communicate not only financial value creation, but also non-financial value creation by fulfilling environmental and social responsibilities as a corporate citizen. Published annually, it is the sixth consecutive report. With this report, the company shares the activities and achievements in the areas of business, environment, society, and governance for ESG management with stakeholders.

Reporting Scope and Boundaries

The scope of this report covers the sustainability practices of Hanon Systems, including its headquarters in Korea and global sites. It provides Korea-based data for some criteria. Financial information is based on the consolidated financial statements in accordance with the Korean International Financial Reporting Standards (K-IFRS). When data has different reporting ranges, these are specified as a footnote or in the legend.

This report was published in an interactive PDF format, which enables viewers to follow links to related pages within the report.

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Reporting Standards

This report was prepared in accordance with the Global Reporting Initiative Standards (GRI Standards), which are the global guidelines for sustainability reporting. Guidelines from the Task Force on Climate- related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB) and the United Nations Sustainable Development Goals (UN SDGs) also were taken into consideration. This report satisfies the principles of inclusivity, materiality, impact and responsiveness, in accordance with the AA1000 AP assurance standard.

Reporting Period

The reporting period for this report pertains to calendar year 2022 (Jan. 1 to Dec. 31). It also includes some relevant items and achievements from the first-half of 2023. Qualitative data presented in this report primarily reflects a 3-year trend (2020 to 2022) for analytical purposes.

Report Verification

This report has been verified by BSI, an independent external organization, and its contents deemed to secure accuracy, objectivity and reliability. The assurance statement can be found in the Appendix section of this report. Financial statements has been filled out through audit of the independent auditor Samil PwC.

Disclaimer

This report contains "forward-looking statements" - such as the anticipated future business conditions and financial performance - based on management's current expectations, plans, and assumptions. It is subject to change due to economic trends, changes on business strategies, and other significant changes in the business environment without prior notice. Actual future results may differ from the information stated in the forward-looking statements, and have potential risks and uncertainties. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

Letter from the Representative Executive Officers

Management Messages

Focus

The company remains sharply focused following a process-driven approach to the basic business fundamentals of safety, quality and delivery. This discipline also applies in the progress made toward the company's goal to be carbon neutral by 2040 where initiatives to reduce carbon emissions are ongoing across the global footprint. One such action includes steps taken in late 2022 to join the Business Ambition for 1.5°C campaign of the Science-Based Targets Initiative (SBTi). This action publicly declares the company's commitment to set science- based emissions targets within 24 months that aligns with the target- setting criteria of SBTi. Another milestone achievement surrounds the establishment of the ESG committee of the Board of Directors, which enables a greater focus on the strategies that prioritize the sustainability agenda of Hanon Systems.

Execution

To the stakeholders of Hanon Systems:

We are pleased to present the 2022 Sustainability Report, which combines the company's financial performance with achievements that advance the ESG framework that surround environmental (E), social (S) and governance (G) factors. 2022 was a busy year for Hanon Systems with numerous accomplishments to acclaim as points of pride, which further positions the company as a leading supplier of automotive thermal solutions supporting the industry shift toward electrification. In 2022, Hanon Systems faced obstacles such as cost increases in materials, logistics, and utilities, geopolitical challenges, and disruptions in the supply chain.

Growth

Again, we demonstrated outstanding new business win performance by securing significant orders, primarily on future electric vehicle (EV) mega platforms. Not only does this new business signal technology leadership and strong customer relationships, it also supports the demand of more electrified vehicles and global effort to reduce carbon emissions.

To support these future EV platforms we are preparing to execute plans that will invest in the company's future by expanding our North America footprint to manufacture and supply solutions that will help grow the local economy.

We also continue to grow our intellectual property portfolio, which protects our innovative designs and helps secure our competitive position as one of the global top two suppliers in the automotive thermal market.

There is unified alignment among the executive leadership team that recognizes the strong effort to deliver results in 2022. It was a milestone year for Hanon Systems in delivery execution, with an impressive record of 107 flawless launches spanning all regions to a diverse customer base. In parallel, the company worked to control costs across all facets of the business, which included plans to mitigate material and logistics issues.

The company believes responsible business practices, such as reducing environmental impact, promoting a corporate culture respecting diversity, and maintaining high ethical standards and governance, are key to achieving our mission to contribute creating better future. We are committed to improve our practices and processes to meet the requirements of all stakeholders. This includes listening to stakeholder feedback and engaging in open and transparent conversation to incorporate into our decision-making process.

We invite you to read this report to learn more about the progress. Hanon Systems is continually delivering to add value for all its stakeholders. We thank you for the ongoing support as we continue to dedicate efforts to drive sustainable growth and operate as a good corporate citizen.