Samsung Heavy Industries SR 2012

Samsung Heavy Industries
Sustainability Report 2012
Global
Leader in
Ocean &
Power
About this report
Contents
Samsung Heavy Industries has published sustainability report
on an annual basis since 2011. The company aims to inform
04 2012 Highlights
internal/external stakeholders on its sustainability manage-
06 Message from the CEO
ment practices and to better understand the needs and ex-
pectations of our stakeholders.
Overview
This report covers the period from January 1, 2012 to Decem-
10 Company Profile
ber 31, 2012, and quantitative performance was calculated
12 Business Introduction
based on the data of recent 3 years. The settling day (Decem-
ber 31) was used as basis for data with annual variability, and 14 Eco-friendly Technologies
specified information on term period of data collection were

included when considered necessary. this report covers SHI Management
headquarters, Shipbuilding&Offshore, Energy&Infra solution,
20 Vision & Strategy
Power&control systems, wind energy.
22 Board of Directors
This report was prepared in accordance with the ‘GRI G3.1 24 Compliance Management
Guideline’, with the primary goal to publicize performances 26 Risk Management
and plans on each indicator with utmost transparency. Items
28 SHI Stakeholder Engagement
recommended on GRI Guideline can be found on GRI Guide-
line index on page 72. In order to ensure the reliability of this
report, we received third party assurance on contents and data Corporate Social Responsibility
credibility. For detailed assurance results, refer to page 70. 32 Employee
37 Client
SHI sustainability report can be viewed and downloaded
42 Partner Companies
through SHI website (www.shi.samsung.co.kr). For more in-
46 Local Community
formation, please contact the communication team at the fol-
lowing address. Feedback is always welcome. 52 Health, Safety and Environment
58 Green Management
Cover story 64 Relevant Data on Sustainability Management
The shape of circle stands for earth
and ocean and embodies our dream
of becoming a global leader in off- Appendix
shore industry. 68 Awards and Membership
70 Third Party Assurance Statement
72 GRI G3.1 Guideline Index
76 Report of Independent Auditors
77 Financial Statement
communication team 33th FL, Samsung Life Insurance Seocho

Tower, 1321-15 Seocho-Dong, Seocho-Gu, 137-955, Seoul, Korea
Tel: +82-2-3458-6312 Fax: +82-2-3458-6398
2012 Highlights Samsung Heavy Industries 2012 Sustainability Report
4 5
2012 Highlights
01 Signed a contract with INPEX of Australia to build the world’s 06 Established an offshore engineering joint venture with AMEC of the U.K
largest offshore gas disposal facility A joint investment among Samsung Heavy Industries, Samsung Engineering and AMEC of the U.K | As part of the efforts to
The largest investment (KRW 3.48 trillion) & scale among plants of the enhance our business capacity in line with the rapid growth of the offshore plant market, SHI will establish the joint venture
same kind | CPF is a type of floating offshore facility that produces and in Houston, U.S, to be fully utilized in designing offshore facilities.
processes gas from gas fields. SHI has been once again recognized for
its excellence in constructing offshore facilities by taking responsibility 07 Received an order for coal handling system ‘Samcheok Green Power’
for the entire production process, including design, purchase, An order for Samcheok Green Power 1 & 2 from Korea Southern Power | Samcheok Thermal Power Plant, which is to
manufacturing and shipping. be completed by June 2016, will have a coal handling system ranging from loading and unloading at dock to storing and
delivery.
02 Delivered the world’s first arctic drillship
The world’s first & most expensive (USD 1,207 million) arctic drill 08 Shipped the 1000th SSAS
ship | SHI has successfully constructed and delivered ‘STENA ICEMAX’, Control of a variety of equipment on ship through monitor-
the world’s most expensive drill ship for polar regions, to the ship owner. ing | SHI has celebrated the shipment of the 1000th au-
The drill ship has ice-resistant structure which allows drilling operation even tomatic system SSAS to the 105K shuttle tanker of the
at 30 degrees below zero Celsius. 1967.
09 D elivered the world’s largest

03 Introduced the world’s first exclusive floating dock for offshore facilities wind turbine installation vessel
Initiation of enlargement trend in the offshore facility market | The cooperation between the world’s first exclusive floating Simultaneous transportation and installa-
dock for offshore facilities and an 8,000 ton offshore crane has contributed to cost competitiveness by shortening the tion of 12 units of 3.6MW-class wind farms
construction schedule and reducing the cost of loading and unloading. | SHI has successfully delivered ‘Pacific
Orca’, the world’s largest wind turbine in-
stallation vessel, to SPO in Singapore. This
04 Undertook the construction of FLNG for Shell vessel allows the installation of wind farms
to a depth of 60m under water as well as
LNG-FPSO at the world’s largest scale | SHI received an order from Royal Dutch Shell
of ultra-large wind farms with a capacity of
to construct a LNG-FPSO, the world's largest floating dock for offshore facilities
10MW or higher, which are currently under
that has the dead load of 0.2 million tons, and began the construction with a steel
development.
cutting ceremony in the Geoje Shipyard on October.
05 Advanced into the offshore wind power market in Scotland 10 R eceived an order for 12 units of 7MW-class
wind farms
A MOU on offshore wind development project with the Scottish Development The world’s largest capacity and high efficiency | The order
International and Fife Regional Council | SHI will base its offshore wind project was made by Daejeong Offshore Wind Power, and the wind farms
at Methil, Fife, for pilot production and test of 7MW-class wind farms, and build a will be completed by the end of 2014 and operated from 2015
transmission network within the region to sell electricity from 2014. for commercial service.
Message from the CEO Samsung Heavy Industries 2012 Sustainability Report
6 7
SHI aspires to be a global leader,

enriching the future with the best products and
technologies and seeking harmonious co-existence
with nature.
Respected stakeholders of Samsung Heavy Industries,
I extend my sincere gratitude for your continuous interest and support for us.
I am very glad to see the publication of the SHI Sustainability Report 2012 which
discusses SHI's performance in sustainable management and shares the meaning
with stakeholders. Last year SHI witnessed continuous growth based on the expansion
of high value-added products, such as offshore facilities and special-purpose vessels,
despite the lingering global economic crisis. In addition, SHI has become the first
among industry competitors to achieve the ISO 50001 energy management standard,
solidifying its position as the leader in the standardization of shipbuilding industry in
areas ranging from quality and environment management to energy management.
In an effort to promote shared growth, a variety of social contribution activities have
been conducted; for instance, supporting local communities and the underprivileged.
In 2013, the company will continue its commitment to sustainable management
through ceaseless efforts for change and fundamental improvement.
First of all, SHI will focus on expanding future growth engines, consolidating the
foundation to grow into a world-class global shipbuilder. To that end, we will maximize
profits by differentiating SHI offshore plants and special-purpose vessels from its
competitors, while diversifying the business portfolio, which currently focuses on
shipbuilding and offshore plant only, to include deep sea offshore and wind power
facilities, and shipbuilding and offshore key equipment. Furthermore, we will strive
to develop industry-pioneering eco-friendly products and conduct environment
preservation activities, which include GHG emissions reduction, resource-cycling
workplace set-up and energy conservation. Based on basics and principles,
we will stress safety and quality management and promote compliance management
and shared growth to meet the expectations of our stakeholders.
Samsung Heavy Industries will contribute to establishing an affluent future society

with its best products and technologies and will fulfill its responsibility as a global
leader to achieve a peaceful harmonization with nature. I ask for your unwavering trust
and support for us. Thank you.
Samsung Heavy Industries President & CEO

Dae Young Park
Overview
SHI pursues to be the best in all business
divisions ranging from shipbuilding & offshore,
E&I, power&control systems, wind energy.
Operating facilities across the globe, the company
seeks customer satisfaction and spurs the development
of various eco-friendly technologies to realize
ICEMAX
>>> STENA
SHI delivered the world’s first and most
the best performance and quality. expensive arctic drillship ‘STENA ICEMAX’ to its
ship owner in April 2012. Worth around USD1.2
billion, the drillship allows operation even at 30
degrees below zero Celsius.
Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report
10 11
Company Profile
Samsung Heavy Industries aims to be the world's best
in Shipbuilding & Offshore, E&I, Wind energy and Power&Control systems.
Oslo
Moscow
Hamburg
London
Rongcheng Co., Ltd.

Athens
Shanghai Tokyo Houston
Ningbo Co., Ltd.
Dubai
India
Head Office/E&I Division

Lagos
Suwon Power & Control

Systems Division
Singapore
Daeduk Research Center

Rio de janeiro
Geoje Shipyard ,
Wind energy Division
Company Name Samsung Heavy Industries Co., Ltd.

Business Areas Shipbuilding&offshore, E&I, Power&Control systems, wind energy
Date of Establishment August 5, 1974
Location of Headquarters Samsung Life Insurance Seocho Tower, 1321-15 Seocho2-Dong, Seocho-Gu, Seoul, Korea
President and CEO Dae Young Park
Domestic Operation Geoje Shipyard, E&I Division, Suwon Power & Control Business Division,
Gross Asset Capital Stock Number of Employees wind energy Division, Daeduk Research Center
1,154.9 billion 13,504 persons

Overseas Operation Ningbo/Rongcheng Co., Ltd., Houston, RioDe Janeiro, Athens, Oslo, London,
KRW 16,635 billion KRW Moscow, Dubai, Singapore, Tokyo, Shanghai, India, Hamburg, Lagos
12 13
Business Introduction
Shipbuilding & Offshore E&I

Since the launch of business, SHI has received The E&I(Energy & Infra solution) business seeks
orders for about 1,030 ships from the world’s customer satisfaction based on its best-quality
renowned shippers and successfully delivered manpower, equipment and system. Establish-
890 among them (as of late December 2012). In ment of the nation’s first waterproofing academy
particular, the company boasts the largest global and introduction of quality assurance system
market share in LNG carriers, leading high tech- complying with the international standards and
nology and value-added vessel market, while se- lifetime quality assurance system for building
curing the competitive edge in the new concept framework are part of our competitive quality
& eco-friendly vessel area with the development and safety management which puts safety be-
of the world’s first arctic shuttle tanker and LNG- fore profits. The company is currently working
SRV. Our technological prowess in the shipbuild- on business restructuring which focuses on new
ing business has led to high performance of businesses that can create synergy with other
the offshore business which includes drillship, divisions such as offshore wind farm.
LNG-FPSO and floating offshore structure. Hav-
ing the largest global market share in drillships
and winning a turn-key order for the world’s
largest floating offshore production facility are
all representative of our customers’ trust in us.
Furthermore, SHI is leading the exploration into
new product markets with the development of
the world’s first LNG-FPSO and delivery of wind
turbine installation vessel.
Power & Control systems Wind energy

The Power & Control systems business of SHI Based on the advanced technologies in existing
applies digital technologies to various industry businesses, SHI has successfully entered the
fields. Our representative products include bal- wind power facility market. The company’s wind
last water treatment system ‘PURIMAR’, fuel power facilities have 10 percent higher generat-
supply system for LNG-propulsion ship ‘FuGaS’, ing efficiency and 5 year longer durability than
navigation controlling system ‘SSAS-Master’ and those of their counterparts. Participating in the
integrated ship network system ‘XailorStar’. SHI Scottish offshore wind development project and
aims to provide a Total Electric Power Solution winning an order for 7MW-class offshore wind
for existing businesses, such as navigation & generators from Daejeong Offshore Wind Power
communication and automation system, as well are part of our efforts to provide a total solution
as for vessels and onshore fields. for offshore wind power generation including
production, installation to operation.
14 15
Eco-friendly Technologies Research & Development

SHI conducts R&D activities on highly profitable businesses that offer high quality products
Development of Eco-friendly Products and services by applying digital technologies specialized for value-added vessels and offshore
facilities. Based on proactive development of next generation products and core technolo-
Branding of gies, we focus on developing industry-leading products, differentiating the performance and
High Oil Prices •Technology Development Status Eco-friendly quality of existing products from the competition, and enhancing R&D competitiveness to
– Develop ships that exceed EEDI
requirements Products develop cost-cutting technologies, while making continuous efforts to secure technological
– Increase fuel efficiency by 10~22% competitiveness.
– Apply to various ships including •Find ways to differentiate
CO2 Emissions Regulations
commercial ships and special-purpose our green technologies from the 2012 R&D Performance
vessels competition
•Promote sales in new markets 1 Development of 2 Energy harvest/ 3 Development 4 Commercialization
•Improvement of hull and structure
which emphasize fuel efficiency floatation control Commercialization offshore floating of TCS(Track
Demands for Fuel-efficient Vessels •Development of energy saving devices
•Apply existing technologies to system to enhance of recycling dock management Control System)
offshore products the propulsion system system
performance of
navy vessels Technology System Technology
development development development
More new orders
In 2010, SHI declared its commitment to green management for the first time in the industry expected
and pledged the development of eco-friendly vessels and the establishment of green work-
places as well as green network. In order to fulfill its responsibility as a green company, it has
* EEDI
set up and implemented a mid- and long-term strategy for developing eco-friendly technolo- Ship Fuel Efficiency Improvement
In an attempt to curb GHG emis-
gies, 'Green Future 7090(to reduce CO2 by 70% and NOx/SOx/dust by 90%)'. Such efforts laid sions from ships under opera- Besides developing technologies to mitigate GHG emissions, SHI strives to improve ship fuel
the foundation for the company to preemptively respond to more rigorous sets of regulations tion, IMO has developed the EEDI efficiency through energy-saving equipment development, hull form optimization and propel-
(Energy Efficiency Design Index)
for various vessels/ offshore facilities by the IMO. SHI’s eco-friendly technologies boast excel- ler performance improvement. The key to fuel efficiency improvement lies in hull form opti-
which indicates the amount of CO2
lence in reducing GHG emissions from oil tankers by 27~33% and container ships by 35~46% emissions from ships considering mization, and our continuous development of fuel-saving equipment has allowed more im-
compared to the IMO’s EEDI*. Moreover, SHI-developed GF drillship has achieved fuel saving the technologies applied to ship provement of fuel efficiency. This is a result of our element technology and design experience
design. The EEDI applies to all new
up to 45% under operation, thanks to the improvement of hull form and application of new from the water tank model experiment at research institute, as well as design know-how
ships built from 1 January 2013.
thruster. Recently, ship owners have shown an increasing demand for eco-friendly vessels which reflects the feedback from testing operation. Our eco-friendly vessels are equipped
that reduce GHG emissions by more than 20% compared to the EEDI owing to energy-efficient with a variety of technologies: upgrading hull forms, enhancing propulsion efficiency, install-
hulls and appendages. As a result of their growing interest in high efficiency fuel, SHI has so ing energy-saving appendages as well as air & water pollution prevention equipment, intro-
far received orders for 67 eco-friendly vessels in total: 31 including a containership of Ever ducing ballaster water treatment system, calculating optimal routes and managing operation
Green in 2010, 26 including a LNG carrier of Golar LNG in 2011 and 10 including a GF drillship system.
of ENSCO in 2012, respectively.
Special Case
Performance of SHI’s Eco-friendly Containership EEDI certificate
A simulation of the technologies
(compared to IMO’s EEDI)/ IMO Guide Line SHI Efforts to Construct Eco-friendly Smartships
under development at a 13,000TEU
25 As of 2025(-30%) Samsung Heavy Industries and Hanjin Shipping concluded on December 27 a ‘Joint Research Agreement on Ship Energy
container ship resulted in a total of
Efficiency & Fleet Management’. The system will optimize sailing route and trim, integrate functions of monitoring and
EEDI_COT(g-CO2/ton mile)
30% reduction of greenhouse gas

20 analyzing energy efficiency operation indicator (EEDI), and provide Vessel Portal Service (VPS). The sailing route optimization
emissions. The amount of green-
program can find optimal routes to destinations based on ship performance data and weather information, saving fuel by up
house gas reduction is tantamount
15 to 6%. The trim optimization program can also predict optimal trims according to ship speed and cargo weight and adjust
to what one thousand three hun-
the positioning of ballast water so that ships can maximize propulsion efficiency under any circumstance and save fuel cost
dred of thirty year old pine trees
10 8000TEU by up to 5%. In addition, the system will include energy efficiency management program that monitors the EEDI in real time
can absorb for a year.
[-35.1%] 13,000TEU and also vessel performance evaluation and analysis program that optimizes ship’s speed and revolution per minute (RPM).
16,000TEU
5 [-46.1%] [-46.0%] Moreover, SHI will help shipping companies manage the energy efficiency of fleets from the ground by introducing its VPS
that can monitor and check the operational status of vessels from the ground.
0
20000 50000 80000 110000 140000 170000 200000
DWT
16 17
Development of Eco-friendly LNG-related Technologies Eco-friendly Technology Differentiation

‘EcoNuri’, the Asia’s first LNG-fueled ship equipped with the SHI-developed FuGaS (Fuel Gas Furthermore, SHI strives to lead the future market based on the development of differentiated
Supply & Storage System), was granted the award of “Green Technology of the Year” at the green technologies. The company plans to develop Vai-Fi and air lubrication system by 2014
<4th National Green Tech Award> in December 2012. The award is organized by Presidential and secure and commercialize technologies such as CO2 transport and fuel cell system in the
Committee on Green Growth and is intended to recognize green technologies with outstanding mid and long term.
technological performance and economic effect. Our FuGaS has enabled EcoNuri to reduce
NOx and SOx by more than 95%, dust by 100% and CO2 by 23%. Besides, we have developed Vai-Fi(Vibration Free Air Injector) System Vai-Fi(Vibration Free Air Injector) System The Vai-
the technology that maintains the BOR(Boil Off Rate) of LNG cargo containment at 0.1% per Fi System refers to a technology that significantly reduces hull vibration caused by propeller
day. Our current focus is on the development of relevant technologies including LNG-fueled cavitation. We expect to reduce hull vibration by more than 80% and fuel consumption by 1%
tugboat as well as system, storage and design for 30k class LNG bunkering ship. with less than 10 percent of existing power supply injecting air into the top of propeller. This
system will be first applied to Ro-Pax of STENA delivered by SHI in 2011.
Air Lubrication System The Air Lubrication System increases fuel efficiency by decreasing
frictional resistance which takes up around 70% of ship resistance. The system creates an
air layer that covers the surface of hull by injecting air into the bottom area, which saves
low-speed vessels fuel by more than 5%. Currently, we are working on system design and
performance optimization with the target of reducing fuel consumption by 5% for container-
ships and 10% for low-speed vessels.
Green Technologies Applied to Offshore Facilities
The 2010 Gulf of Mexico oil spill has caused increasing demand for eco-friendly technologies Participation in National Project SHI engages in a national project led by the Ministry of
in offshore oil field development as well as a possibility the introduction of new environmental Trade, Industry and Energy to research and develop CO2 transport and fuel cell system. The
regulations for offshore facilities sooner or later. We have reduced ship fuel consumption (by company aims at receiving an order for CO2 transport after 2016 by securing relevant key
40% under operation and 10% on average during the entire operation period) with hull form technologies including CO2 tank & cargo management system and CO2 boil-off gas control
optimization and new thruster development. Also, we developed eco-friendly GF drillships system. In addition, design technology of fuel cell system for ship application will be secured
using the technology to reduce water pollution and exhaust emissions, and received an order through the partnership with fuel cell developers, and a demonstration project for LNG fueled
for two 78k class GF drillships from ENSCO as a result. ships will be implemented in the near future.
Eco-friendly Technologies Applied to GF Drillship
1) Apply operability-maximizing specifications > Reduce operational cost

ㆍForklifts have easier access to the total deck area
ㆍMMC(Multi Machine Control) function to control risers
2) Apply eco-friendly specifications > Promote green management and
prepare for future environment
ㆍFacilities to treat wastewater from drilling
ㆍFacilities to reduce SCR NOx
3) Load in-hold risers > Enhance drilling efficiency
2 Special Case
ㆍService deck area increased 3
ㆍEquipment to control dual-risers
4) Improve efficiency of thruster maintenance > Reduce operational cost Vessels to Enjoy Higher Fuel Efficiency through Satellite-controlled Navigation System
ㆍMaintenance of the ship 2 Drillships, in which SHI holds the largest global market share, refer to floating offshore structures. They must maintain their
ㆍReduce fuel consumption during a port call position against heavy seas. Even a few centimeters of error on the surface of the water can lead to increase in geometric
progression thousands meters below sea level, and thus cutting-edge IT technologies, such as Dynamic Positioning System
5) Optimize hull form > Minimize fuel consumption
and Computer Controlled Propulsion System, are applied to drillships.
ㆍV-shaped stern
ㆍBulb-shaped stem 4
ㆍMoon pool/headbox optimized
5
>>> M ARS-B OLYMPUS TLP Hull
The semi-submersible platform ‘MARS-B
OLYMPUS TLP Hull’ was delivered to Shell
in November 2012. The platform with the total
weight of 32,800 tons was applied with a 50 year
design life for the first time in the world.
Management
SHI pursues new future growth engine business
based on its core competence in the shipbuilding
& offshore industry. The company will strive to realize
the vision ‘To Become a Global Leader in offshore
industry by 2020’ with stakeholders based on its strict
compliance management.
20 21
Vision & Strategy
Business Structure and Growth Strategy for 2020

SHI aspires to be the best in the world at implementing a variety of projects. The world’s first arctic shuttle tanker and LNG-
FPSO are on our development list, which also includes LNG-FSRU and arctic containership. The Power & Control Systems
KRW 3.1 trillion in sales
Division has been recognized for its digital technology combined with the company’s expertise in shipbuilding & offshore busi-
ness. More recently, we have expanded our business into wind power generation and made a splendid achievement of making 50% 30% 20%
the nation's first export in wind power generation.
Offshore business Shipbuilding business Heavy electrical
equipment business
•Enhance competence in offshore •Focus on special- •Power converter
engineering purpose vessels with •Automated robot
Vision & Strategy •Diversify offshore business including high added-value by for special
subsea system using eco-friendly and purposes
innovative technologies
•Offshore wind
•Establish optimal power generation
production system
Global Leader of
Ocean & Power in 2020
Contribute to enhancing customer satisfaction and quality

Business Growth Strategy
of life by providing safe and eco-friendly ships and Based on its firm grip on the global shipbuilding & offshore market, SHI secured world-class
Vision
facilities with high economic value and convenience. core competence in ship & offshore facility construction, electronics system and automated
production system. We will strive for business sustainability and develop new businesses to
solidify our status as a global leader.
Mission
Talent-first Best in Lead Ethics Shared SHI Core Competency and Business Opportunity
policy heavy change manage- growth
industry ment
Core value
Shipbuilding
& offshore Design/
Sales Purchase Production
process R&D
Core •Network with major •Offshore facilities, topside design •Large offshore facility
Business structure Goal competency petroleum companies construction
•Outfitting, electro-mechanical
Sales •Network with global •High-voltage substation
device design
KRW 3.1trillion shipping companies •S
tructure/frequency/fluid analysis construction
Shipbuilding Offshore Heavy electrical equipment •Brand power in ship •Welding, painting tech-
•Production system automation(robot)
•LNG-fueled ship •Floating production •Offshore wind power & offshore facility nology
•Offshore facility interface design
•Electric system generation Operating profit margin construction •Power distribution
•Power system design(Ship power
10 %
propulsion ship •Subsea business •Power generator & motor
board, wind energy con-
•Foundation •Core growth •Future growth engine system, power distribution board)
verter construction
business business business •Robot
control device development
Foundation for Shipbuilding value chain Offshore value Equipment based machinery &
new business expansion chain expansion electricity business expansion
22 23
Board of Directors
Shareholder Structure BoD Committee Structure

As of the end-2012, the total number of SHI outstanding shares was 230,990,231(230,875,386 SHI operates a sub-committee of the BoD to raise the efficiency of decision-making on busi-
common stocks and 114,845 preferred stocks), with the largest shareholder being Samsung ness management and strengthen the expertise of the BoD.
Electronics which held 17.61% (40,675,641 stocks) of the total. At the annual shareholders
meeting, the CEO reports the company’s business performance and current status to the
shareholders, and exchanges opinions on major business issues. Opinions presented in the
Executive Committee Committee on Internal Transaction
meetings are reflected on SHI management policy after thorough review by the management
and the BoD. The executive committee consists of The committee on internal transaction
two full-time directors appointed by consists of three directors appointed by
Shareholder Structure Status As of December 31, 2012 the BoD, and the CEO of SHI holds the BoD, including more than two out-
the position of committee chairman. side directors. The committee mainly
Samsung
Electronics 17.6% Its major tasks include deliberation of
and decision on issues commissioned
conducts pre-deliberation of major in-
ternal transactions to enhance trans-
National by the BoD and other general issues, parency and strengthen the trust of
Pension Service
4.8%
excluding resolutions of the BoD, as shareholders.
Mirae Asset 4.7% stipulated by corporate regulations.
Management
Korea Investment
Management 3.6%
Samsung Life
Insurance Co., Ltd 3.5%
BoD Structure and Operation BoD Expertise

SHI board of directors consists of two inside directors and four outside directors to make a SHI carries out company-wide expertise training programs to enhance economic, environ-
total of six directors. As a professional manager, the CEO holds the position of BoD Chairman mental, social and global capacity of its executives. SHI appoints outside directors through
to ensure responsible management, while the outside directors also actively take part as the outside director candidate nomination committee, in order to examine the expertise and
independent entities, thereby maintaining operational balance. integrity of candidates. Current outside directors are experts from a variety of fields, including
In 2012, SHI BoD held a total of ten meetings with about 100% attendance of outside direc- civil engineering, law, politics and accounting. They are appointed after a transparent process
tors. Major agendas derived from the meetings were managerial issues, including approval of approval. Each outside director engages in offering advice on corporate management and
for transactions with affiliates and internal accounting management system operation. Along policy making process of the BoD.
with the issues regarding corporate organization and management, the company plans to
discuss social responsibility issues in future BoD meetings. BoD Performance Assessment
Director compensation is decided at the general meeting of shareholders and paid out based
BoD Structure Status As of June 15, 2013 on each director’s business performance within the approved limit. Executives conduct per-
formance assessments on each business and strategy execution, and the results decide the
Director Status Name of Member Position Role
amount of compensations. Criteria for performance assessment are applied not only to fi-
Full-time Dae-Young Park President and CEO President
nance, but to risk management, such as safety, environment, labor-management relation-
Won-Tae Jeong Executive director Chief of Management Support Team
Part-time Hang-Shoon Choi Outside director Auditor
ship, anti-corruption and security.
Chan-Soon Nam Outside director Auditor

Dong-Hyo Kwak Outside director -
In-Man Song Outside director Auditor
24 25
Compliance Management Raising Employee Awareness of Compliance Management

Since the introduction of Compliance Program in 2010, SHI has provided employees with reg-
ular compliance training programs for each position and division. These training programs
Operational Structure are carried out based on the annual CP training plan, which is renewed at the beginning
Compliance Management Organization
Increasing demands for corporate social responsibility, fre- of each year. The programs are composed of General CP Course on general concepts and
quent legal disputes and more rigorous sets of regulations guidelines; Compliance Performer Course for performers to improve their CP operation ca-
are being witnessed around the globe. Hence, SHI has in- CEO pacity; and In-depth CP Course for divisions with possible risk factors regarding regulations
troduced the Compliance Program (CP) to protect itself and on competition and anti-corruption.
CCO Committee
its employees from legal risks, and seek sustainable growth
as the leader in the shipbuilding & offshore industry. Our 2012 CP Training Program Overview
Compliance team
CP activity follows a cycle of CP standards/process setup Course 2011 2012
→training & execution → examination & monitoring → as- Number of Training hour Number of Training hour
course-takers per person course-takers per person
sessment & reporting, which is reflected throughout the Shipbuilding E&I Power&Control Wind Overseas
&offshore systems energy General New employee 344 1.6 574 1.3
management process. The Compliance Support Team sup- CP course Assistant manager 552 1.1 690 1
ports daily compliance of employees by preparing CP prin- Compliance performer (newly promoted)
ciples & guidelines, codes of conduct and manuals, and also CL : Compliance leader/CM : Compliance manager
Regular employee 327 1.3 297 1
offering regular training sessions. In addition, an exclusive Compliance CL 68 1 137 0.3
system is operated to respond to employees on their inqui- Sustainable management through compliance management performer course CM 847 1.6 479 1
ries, complaints, and compliance concerns. In-depth Cartel Prevention 73 4 519 1.5
CP course Contract with Subcontractors 268 3.3 424 1.5
2012 Compliance Activity
Corruption Prevention 55 1.4 188 1.3
item Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Internal transaction 401 1
Organizational alignment Appoint compliance supporters and carry out a reshuffle Send information or proposal on
Customs and clearance 107 2.5
and compliance standards SHI compliance management to:
setup according to com- Labor relationship 34 2.5
Establish compliance control standards Compliance team 23th FL,
mercial law amendments Personnel and labor relations 107 2 Samsung Life Insurance Seocho
Response to investigation 136 0.7 Tower, 1321-15 Seocho-Dong,
Compliance training General training
Seocho-Gu, Seoul, Korea
and PR activity Intensive training Contract management 80 1.1
E-mail [email protected]
Online course on fair trade International finance 40 2.0 Tel +82-2-3458-6385
Produce and distribute regular PR materials

Examination Special examination on fair trade 2013 Compliance Control Activity Plan
Special examination on personal information
Regular examination in the first half
Raise compliance awareness and
Regular examination in the second half Improve compliance capability Identify and deal with legal risks
tighten compliance control
Monitoring and Execute employee protection program
CP process setup to prevent collusion Strengthen compliance-related teams Examine CP status Raise employee awareness of
Establish internal transaction process •Establish Biz Compliance Team •Regular examination (quarterly) and compliance
(operating a compliance center within non-regular examination •Declare the CEO’s commitment to
Add anti-corruption provision to employee contracts
shipyard) (at the occurrence of issues) compliance management (through an-
SHI CP on major projects nual letters and company-wide events)
Form and manage a consortium Enhance the performance of compliance Respond to issues and trends •Offer customized compliance training
performers (CL: executives and team •Follow up and respond to issues sessions (general, intensive, special
Introduce ‘Compliance Sheriff’ system leaders, CM: department heads) related to competitive authorities and and online)
The management’s com- Make announcements on compliance management and •Regular training program concerned bodies
mitment to compliance hold compliance committee meetings (CL: quarterly, CM: half-yearly) Report compliance control activities
•Reflect CP performance to the •Hold compliance committee meetings
CP performance Establish CP assessment standards for CLs
assessment of executives and team (half-yearly) and report to the BoD
assessment Achieve level “A” for CP assessment from Fair leaders
and others Trade Commission
26 27
Risk Management Non-financial Risk Prevention

SHI carries out preventive measures in the fields of safety, environment and compliance to effectively respond to unanticipated
non-financial risks. Recently, the company has established a series of preventive measures in diverse fields such as raising
Financial Risk Management employee safety awareness, preventing accidents and environmental pollution, and complying with regulations and social
Our financial risk management is focused on minimizing the risks of market, credit and li- norms.
quidity deriving from sales activities, and conducted by the central finance department ac-
cording to the policies approved by the BoD. The finance team of SHI closely works with sales Pirate Control Program In January 2011, SHI developed the industry's first 'Integrated Pirate Control System' to enable ships
departments to identify, evaluate and avoid financial risks, while the BoD provides document- to manage all processes, ranging from identification, tracking to control of pirates in the wheel house. We expect this system
ed policies of overall risk management as well as of specific risk management on exchange to effectively protect vessels and crew members from pirates, and significantly contribute to enhancing our competitiveness.
risk, interest rate risk, credit risk, investment in financial and non-financial derivatives, and
investment with excess liquidity. Risk Assessment System SHI established its own risk assessment system to constantly identify risk factors of the Geoje
Shipyard’s shipbuilding process, assess risk levels, develop countermeasures, and eliminate or minimize such risk factors.
Principles to minimize earnings volatility Through this effective and practical safety management, the company can reduce accident rates and minimize potential dam-
Hedge, order Execute, deliver age.

Shipbuilding
process
Emergency Response Manual The Geoje Shipyard categorizes emergency situation into four types: environmental accident,
safety-related accident, natural disaster and ocean pollution. The shipyard has developed emergency response manuals for
Steel Keel
Contract Launching Delivery
cutting laying each of the four situations and conducts regular training and drills. According to the organizational structure, head of ship-
yard, head of environment & safety team, and heads of each team have separate roles, and the situation room is on 24/7 alert
for potential accidents. SHI is paying special attention to preventing ocean pollution. The Geoje Shipyard aims at preventing
Interval(month) 12 5 3 10 any ocean pollution by operating a 24/7 monitoring system with ocean control ship, which is fully equipped with various disas-
ter prevention facilities and emergency response measures.
Exchange rate
change
type of mergency case
Incomings Environmental accident •Oil leakage at fueling ships

•Accident due to malfunction of prevention facility
•Severe leakage of toxic substances
Outgoings Safety-related accident •Safety-related accident (injuries of employees)

•Blocks on the dock : fall accident from top of blocks
•Dock, roads : accident when moving large tools or driving
•Fire/explosion accident (property damage)
•Engine room of ship : fire accident
•Airtight tank : fire/explosion accident when using paint or thinner
•Foreign exchange risks are com- •Paint shop, shot shop, woodshop : fire/explosion accident
pletely hedged through forward Raw •Welfare facilities : Gas leakage and explosion accident during repair work
materials
exchange contract at the time of •Utility center : explosion accident
contract conclusion Engine •Common duct : fire and explosion accident
•Main engine and key materials
and equipment shall be ordered Natural disaster •Area with potential of collapse: retaining wall for falling stones near 3Dock area, and behind passenger
within 1-2 months after contract Key materials ship plant
inception to hedge against price and equipment •Area with potential of being affected by typhoons: plant building, moving shelter roof
change risks •Area with potential of being affected by flood: underground power substation, underground common duct
•The possibility of price hike shall •Area with potential of fall accident: moving shelter, crane
be thoroughly considered at cost Plate •Environmental accident: environmental risk due to natural disaster
assessment since there is no
Ocean pollution •Leakage of oil/paint from ships moored alongside pier and through drainage system, scattering dust pol-
hedge against steel price change
lution from painting/grinding process
risks Others
28 29
SHI Stakeholder Engagement

Page for
Material Issues Reflection on management policy
reference
Stakeholders SHI shares the quarterly performance Manage •Appoint compliance supporters and P.24~27
and Financial reports with global shareholders and incompliance risks conduct a reshuffle
Institutions stitutional investors through active com- •Establish compliance control standards
Stakeholder Engagement munication with them, while holding a •Form internal transaction committe
series of offline meetings separately on and establish operation regulations
Sustainability report works as a communication channel for internal/external stakeholders to share vital information. Thus, the company’s CSR policies and activity
SHI defined its employees, clients (ship owners), partners, shareholders, local communities, NGOs, financial institutions, gov- results. Major agendas include compli- Make continuous •Promote new business policies P.12~13
ance risk management. profits •Develop exclusive new technologies P.14~17
ernmental bodies and media as its major stakeholders who affect the company’s business directly or indirectly. The company
reflects stakeholder opinions and requirements in this report, as an effort to analyze their level of interest and concerns over
Clients SHI holds regular monthly meetings be- Strengthen •Introduce A/S service to realize 3S & 3A P.41
the issue of sustainability.
tween clients and employees. Moreover, customer •Develop shipbuilding & offshore A/S
annual customer satisfaction surveys are support services application ‘M-Focus’
conducted for ship owners at the Geoje
Shipyard and also for owners of ships Make efforts for •Introduce LPM (Lifetime Preventive P.41
built by SHI to identify their perspectives quality Maintenance) service
and requests regarding the quality and enhancement •Establish 3D ship model inquiry system
The Process of Defining Report Content services of our products. ‘SEVAS’
Partners We have a variety of communicatio chan- Support ecosystem •Introduce performance sharing system P.44~45
nels through which we listen to the opin- promotion •Hold consultations with partners
Stakeholder Inclusiveness ions of our partners. Their difficulties are
managed in a systematic way from reg- Reinforce partner •Support technology development and P.44~45
Sustainability Context istration to follow-up monitoring, while competence protection
Identification
their opinions are continuously collected •Support education/training and
•Media review
through training sessions and seminars. workforce
-Review of all reports from domestic or international media
by Communication Team
Executives SHI operates ‘SORISAEM’, a system for encouraging open communication among employees, through which they can freely
•Peer review exchange opinions on major issues and the management writes replies to those postings. ‘SORISAEM’ helps the management
and
-Review of major sustainability issues of competitors in the industry and Employees collect employee opinions and reflect them on the company’s policies or decisions.
Review
global leading companies
•Sustainability trend analysis Governmental SHI declared the commitment to fair Promote •Establish management policies for P.52~57
- Analysis of mega trend in sustainability management bodies trade as part of the efforts for shared environmental environment, health and safety
- Analysis of global guidelines and initiatives (GRI G3.1, ISO26000, CDP) growth and development and also an- safety •Tighten the control of areas surrounding
nounced R&D support plans to reinforce workplaces and toxic chemicals
•Internal sustainability management strategies and KPI analysis the competence of its partners.
-Analysis of goals and targets reported through the previous report Spread the culture •Make reasonable adjustments to unit price P.42~45
-Interviews with responsible TFT members of shared growth •Purchase raw or subsidiary materials for
based on fair trade partner companies
•Promote a culture of written contracts
Prioritization Materiality
Local We are growing together with local com- Strengthen the •Develop a profit model for Dadae Village in P.48
•Social concern
community munities by giving back some of our prof- competitiveness of Geoje through talent donation
-Collecting concerns and needs through periodical
its. local communities
communication with external stakeholders
-Exposure to the media Give some of •Introduce a policy on purchasing ‘Geoje Love P.49~51
-Perception of benchmark companies profits back to Gift Card’
local communities •Provide local schools with development fund
•Business impact
-Evaluation by the sustainability TFT and employees NGO A large number of global NGOs are turn- Strengthen •Promote green partnerships P.43, 56
about connectivity with corporate strategies ing their focus from public announce- environmental between large companies and SMEs
ments and press releases to on-site preservation •Organize an event marking
visits and employee interviews for infor- efforts ‘World Water Day’
mation collection. SHI has faithfully and
Sustainability Reduce energy •Improve vessel testing process– shorten P.62~63
Validation Completeness actively responded to the issues raised by
Report NGOs and will continue to have interac- consumption the testing period by 8 days to significantly
•Determining material issues based on stakeholders’ concern
tive communication with them. reduce fuel consumption
and business impact •Substitute obsolete equipment and
•Disclosing material issues introduce high-efficiency facilities
Media SHI conducts media research on a regular basis, through which it proactively responds to the public demand and reflects on
corporate policies.
>>> P ACIFIC ORCA
SHI successfully delivered ‘Pacific Orca’, Corporate Social
Responsibility
the world’s largest wind turbine installation
vessel, to SPO of Singapore in July 2012.
This vessel allows simultaneous transportation
and installation of 12 units of 3.6MW-class
wind farms to a depth of 60m underwater.
SHI provides employees with a variety of

talent-nurturing programs and welfare system to
enhance each individual’s competency and quality of life.
Based on active communication with external/internal
stakeholders, the company strives for shared growth with
partner companies and local communities.
32 33
Employee Labor Council

SHI closely works with Labor Council to promote win-win labor-management culture. We
believe the company and employees must enjoy shared growth, and corporate competitive-
Employee Status ness can be enhanced only through communication, trust and harmony between labor and
SHI contributes to the improvement of local communities, the national economy and youth management. The labor council is composed of employee representatives, and the two sides
employment. The total number of SHI employees stands at 13,504 as of late 2012. have the same number of members. When the council is held, labor conditions and labor-
management issues are discussed.
Category Unit 2010 2011 2012
Total Person 13,393 13,350 13,504 Regular Business Briefing Session
Type of Regular Person 12,821 12,776 12,933 SHI holds quarterly business briefing sessions to share information on business status such
employment Non-regular Person 572 574 571 as orders received, profit and loss, performance, and also our new businesses such as wind
Turnover % 3.7 3.6 3.8 power and sub-sea. Prior to sessions, we collect employee opinions through interviews so as
to effectively communicate with employees at a Q&A session.
Employee Communication Contract Briefing Session

SHI strives to build a flexible and dynamic organizational culture. Contract briefing sessions are held to share the project details, when the company receives
orders for new types of ships, such as LNG-FPSO, and for large-scale offshore projects.
3 Steps for 2012 Creative Organizational Culture
Website Disclosure
We disclose major business operational changes according to the Securities Exchange Act.
01 02 03 Business information on finance, investment and project progress are disclosed through our
website in a transparent manner.
Think creatively,
Trans- Healthy
Loyalty work smart,
parency mind Complaint Resolution for Employees
and be warm-
hearted SHI has its intranet and portal systems open to all employees to share difficulties and feed-
back. In order to deal with such difficulties, relevant departments such as general affairs
and human resources set up and run adequate sets of measures. As a result, the number of
complaints resolved in 2012 alone reached 543, way up from 137 in 2011.
Current Status of Complaint Resolution through Sorisaem Unit: Number of cases (ratio)
Special Case NO. Description 2011 2012

1 Automoblie 35(26%) 147(27%)
In-house Reporters 2 Restaurant/Dormitory/Restroom 18(13%) 99(18%)

We have maintained a group of in-house report- 3 Security/Parking 17(12%) 37(7%)
ers since 2010. Employees who are appointed
4 Transportation safety 16(12%) 39(7%)
as in-house reporters engage in planning,
reporting and producing news to be delivered 5 Sports facility/Lighting 6(4%) 34(6%)
through various media channels such as com- 6 Lighting/Heating/Plumbing/ 6(4%) 43(8%)
pany newsletter, in-house broadcasting and
7 Database system, SW 6(4%) 54(10%)
blog. The reporters contribute to stimulating
internal communication and enhancing em- 8 Village fund, services for employees 5(4%) 32(6%)
ployee loyalty and pride. 9 Social contribution, community service 3(2%) 10(2%)
10 Miscellaneous (i.e.in-house broadcasting and landscaping) 25(18%) 48(9%)
34 35
Talent Training System

Number of Trainees, Training Expenses
The talents we seek for are those who challenge the future with passion, change the world with creativ-
Item Unit 2010 2011 2012
ity, and communicate and cooperate with others with open mind. Our talent training system is designed
All employees Hour/Number of 84.3 68.4 28.9
to nurture the best job performers with global competence and leadership; to foster high performance
Executives trainees 18.0 17.3 16.0
technicians with creativity and innovative mind; and to establish organizational culture where employees
Managers 74.1 82.0 72.1
can communicate through learning. We are working hard to grow our talents into the world’s best ex-
Office workers 119.4 137.8 71.1
perts with job proficiency, global competence, leadership ability and general capacity.
Technicians 27.5 18.2 5.5
Number of internal training courses Number of courses 711 594 526
Gross expenses KRW million 331 314 352
Employee Competence Enhancement on external training support
We encourage our employees to fully exhibit their competence through a variety of customized training
programs.
Localization Strategy
Program Objective Course description
For overseas operation, we employee locals rather than dispatched workers as part of the efforts to con-
Top Talent Nurture top talents Regional expert course, Techno-MBA course,
tribute to the local economy and gain support from the local community. The annual local employment
Training who will lead the 21C leader course, and 21C CEO course
Program future of Samsung of over 98 percent clearly shows our extensive efforts for localization.
Globalization Cultivate global CEOs • Globalization training:

Program with international courses for overseas business managers, for employees Overseas Local Employees Unit: person(ratio)
mindset returning from or assigned to overseas branch offices,
as well as on regional studies 9,690 (98.6%)
2010
• Foreign language training:
8 courses on foreign languages including English, 2011 11,041(98.9%)
Chinese and Japanese
Leadership Foster a sense of mis- • Basic training:

2012
11,289(99.3%)
Program sion as 21C leaders For newly hired employees and newly promoted
and build employee managers & executives
responsibility, initiative • Capacity training:
and expertise For employees to build capacity for the upper position Welfare
Professional Nurture talents to Offer various programs on new business management In order to ensure employee welfare, SHI has been subsidizing monthly payment of their pension pro-
Job Training create an innovative and organizational culture through benchmarking of grams by financing identical amount that they pay every month. The volume thus far is reaching approxi-
Program organizational culture advanced companies at home and abroad, and exchange
mately 3% (as of 2012) of the entire gross income and this calculates into KRW 146,700 per month (the
through professional with universities and other educational institutions
job training average in 2012). In addition, the retirement pension program has been gradually introduced since 2008
and all employees are now entitled to the benefit. Both DB type and DC type are currently managed. In
Cyber Foster talents for Provide more than 40 cyber education programs on
Education our company, for our e-business success strategy, global management, addition to subsidizing for pension programs, various other perks are offered as part of the company’s
Program country, and ultimately business manners, current affairs & economy and welfare program, including provision of medical fees, housing fees and medical check-ups; subsidy
for the global human presentation English.
society of school expenses; and operation of child care programs. In this way, SHI strives to provide care-free
working environment for all employees and earn trust from their family members. In particular, in order
Overseas Cultivate global Assign around 15 qualified employees to overseas regions
Regional talents for localization, to grow them into overseas regional experts. Those to be to help employees deal with childcare and child birth related issues, the company has built its in-house
Expert Pro- informatization and assigned are selected among recommendees for each childcare facility.SHI has been running after-school programs to resolve issues of private education ex-
gram specialization region through interviews and spend 12-21months in the
penses. The company ensures resting time for on-site staff, for instance, by guaranteeing longer hours
region free from work
of lunch break during summer time (120 days) to relieve their fatigue and prevent accidents (Extension
Corporate Allow employees to ac- Our Corporate University signed a comprehensive
of lunch hours: 30 minutes when the temperature goes above 28.5 degrees Celsius at 11:50 AM, and one
University quire Associate/Bach- agreement on business and academic cooperation with
elor/Master degrees Pusan University in 2007, and gained official approval hour when the temperature goes above 32.5 degrees Celsius). In addition, healthy foods, salts and iced
from the Ministry of Education, Science and Technology, water are provided to ensure the wellness of employees during summer time.
providing applicable knowledge to actual business tasks.
36 37
Support for Sustainable Post-retirement Life Client

Considering that most of SHI employees are willing to work until retirement age and put the
most emphasis on job security, the company has established the Career Development Center
to provide services and programs that help retiring employees find new jobs or start their own Communication with Clients
businesses. Consultants are hired to advise them for various purposes including job place- In order to build flawless ships to maximize customer satisfaction, SHI organizes monthly
ment, self-examination and aptitude test, and job training. The company is partnering with job meetings between its clients and employees. The process where shipowners themselves can
placement agencies as well to help employees open their new chapter of life. check how their ships are being built is currently under discussion. After implementation of
improvements requested by shipowners, progress report is shared with them, and best efforts
Key Programs and Outcomes are made to respond to their requests for safety, quality and environment management.
Education program for the soon-to-be-retired Job placement for retiring employees Customer Satisfaction Survey among Clientele
• Counseling and consulting services SHI conducts annual survey among shipowners at the Geoje Shipyard as well as owners of
2010 44 • Job matching and job search SHI-built ships to identify their perspectives and requests concerning the quality and services
• Resume writing, consulting service
2011 44 of its products. The average scored 77.9 among twenty one shipowners as of 2012. Based on
for job interviews
2012 48 • Follow-up activities after employment the results of the survey, the company analyzes major unsatisfactory issues to find improve-
ments for each business unit. The customer satisfaction survey has been improved through
PI tasks as part of the efforts to make improvements in survey method and thus ensure ac-
curacy in survey.
Support for female employees

Special Case
SHI strives to create a working environment favorable to female employees by introducing
various programs including infant child care center, nursery school, after-school learning
Fun Communication with Foreign Ship Owners and Employees
class and adjustment of commuting time.
SHI provides shipowners and classification societies as well as foreign employees at the
Geoje Shipyard with an opportunity to build unforgettable memories and grow close with SHI
executives and employees through various events. At this year’s event, around 100 employ-
Item 2010 2011 2012 ees participated to show unity while dancing in group to the music ‘Gangnam Style’ by the
Number of females (ratio) 923(7.0%) 919(7.0%) 928(6.9%) Korean singer PSY during lunch time. They had a great moment while dancing in souvenir
On child-care leave 42 63 81 T-shirt together with a number of spectators.
Special Case
The 1st Korean Speaking Contest

for Foreign Employees
‘The 1st Korean Speaking Contest for Foreign
Employees’ was held in the Geoje Shipyard on
September 19. The contenders showed all
different levels of Korean proficiency but with
love and affection for Korea as well as SHI.
38 39
Customer Satisfaction Activities Fortifying Safety and Environment Protection Standards

For employees who stay at the Geoje Shipyard for at least 4-5 years, we provide support to Customers consider safety as the most important factor in ship contract and delivery, and
help them overcome their homesickness. We also encourage them to enjoy leisure activities safety is directly related to the reputation of the business. SHI maintains its safety standards
and have better understanding of Korean culture through a variety of activities. In addition, more rigorously than the industry average. As environmental impacts on ship operation di-
our customized services allow them to select sports and voluntary activities to be offered by rectly affect operation costs, the company fully abides by environmental standards that its
shipowner and country. customers present before contracts. For customer safety, an exclusive taskforce was estab-
lished to hold monthly HSE Alliance Meeting, manage Alliance Focus Group (AFG), and orga-
Sports Festival nize safety workshops/forums for each project.
•Friendly bowling match(3.8) / Evergreen, Euronav
•Friendly foot volleyball match(3.23) / QGOG •Friendly softball match(5.24) / SPO “Stop for Safety” Program
•Friendly table tennis match(5.14) / CSCL •Friendly bowling match(7.13) / GASLOG SHI has established twelve safety regulations for all employees, including those of its con-
•Friendly softball match(5.24) / OCR, ABS •Friendly softball match(7.16) / OCR tractors. In case of emergency, the so-called “stop for safety” program will be executed. In
case immediate response is not available, managers will inspect the site to analyze causes
and take safety measures to later resume work process. Leaflets in Korean have been distrib-
VG(Volunteering Geoje) Activity Under the slogan ‘Volunteer activities with shipowners and uted and English, Russian and Chinese versions are to be provided later.
classification societies’, our voluntary group ‘VG (Volunteering Geoje)’ has been working with
shipowners, classification societies and foreign engineers since 2006. VG engages in commu- Stop for Safety Program Map
nity services including after-school English camp and voluntary activities for rural communi-
ties, and also builds bridges for better understanding between different cultures. Stage1 C
ase of Immediate
Measures Available
Shell FLNG S/C Commemorative Event SHI held a large-scale S/C commemorative event Identification of Identification of incompliance with twelve major
Emergency Situation safety rules and of emergency situation
organized by the head of the Geoje Shipyard with the participation of VVIPs from Shell and
Technip who visited the shipyard for Super Sponsor meeting on October 8. Special Case
Measures
Taken Stop for Safety Securing safety of workers as the top priority ‘Be Safe,
Geoje Honorary Citizenship Conferment A ceremony was held to confer Geoje Honorary Citi- (stopping for safety to conduct communication) Employees’
zenship to Mr. Alex, the supervisor of Stena Drill shipowner, on November 3. Campaign
Process Explanation of the reason for stopping for safety The last page of our
Resumed and request for safety measures monthly newsletter
Communication among
Hat Knitting Campaign SHI joined with shipowners and supervisors of classification societ- Personnel(Using BBS+) (using BBS+) introduces a feature
ies to participate in Save the Children's Knit Newborn's Hat campaign, which was initiated to Program - Issues of safety/condition of individual workers article titled ‘Be Safe,
Terminated - Safety measures Employees’, which
prevent newborn babies from dying of hyperthermia. (resume the process after communication)
yes Agreement upon Safety Measures contributes to enhanc-
no ing employee safety
awareness with one
Stage2 C
ase of Immediate specific theme for the
FLNG Event VG(Volunteering Geoje) Activity Measures Unavailable Difficulty in on-site decision making, issues month.
concerning facilities management, disagreement
Communication with Managers among personnel (Detector: handing over point
(or HSE) of contact, mission accomplished)
Sight Inspection by Managers Identification of incompliance with twelve major

safety rules and decision upon stopping for safety
(or HSE)
Modification of operation standard/

Cause Analysis/ Safety Measures development of jigs
safety education/ Feedback upon safety measures
(work resumed after assessment of relevance of
Process Resumption safety measures)
40 41
BBS+ Quality Assurance

BBS+ refers to voluntary safety measures for employees to take safety responsibility for not In order to secure competitive advantage based on unparalleled quality, SHI encourages all
only themselves but also their co-workers. Behavior observation centric BBS(Behavior Based employees to pursue system improvement and innovations, and thus to create a solid cor-
Safety) has been added with sincere camaraderie to encourage employees to take safety is- porate culture and enhance technological competence. Furthermore, to ensure sustainable
sues in sincere manners and secure safety for co-workers as well as themselves. BBS+ is a business growth and customer satisfaction, the company has implemented ISO Quality Man-
process for tangible improvement in safety which involves trained workers monitoring unsafe agement System. As part of such efficient management, SHI aspires to achieve the goal of
activities and registering the results of measures taken to make substantial improvements "3-Free Shipyard": flaw-free quality, supervisor-free building vessels and stop-free delivery.
*3S, 3A Service?
through reviews, operation committee and leadership meetings. In order to realize this goal, SHI has set up the "Three Major Quality Assurance Policies"
SHI provides Speedy, Satisfactory
which includes customer satisfaction in quality, first-class technical skills and executive and Steady services to meet the re-
BBS+ Map quality, and optimal quality management system in every corner of its business. In addition, quests of shipowners at Anywhere,
Anytime and for Anything through a
systematic and well-structured preemptive measures are rooting out potentials of quality
web-based system. We enjoy high
issues to achieve perfection in quality and customer satisfaction. SHI puts its aspiration into reputation for our customer sat-
action as follows. isfaction management by offering
such prompt and customized ser-
BBS+ After Service Policy As part of the efforts for shared growth with shipowners, SHI promotes
vices based on three-way commu-
3S and 3A services* based on interactive communication by operating a web-based FOCUS
Activities nication among itself, shipowners
Sup
por
System, through which it deals with the requests of shipowners made after ship delivery and partners.
tin
g
rt
for
ac
within 24 hours.
po tiv
re iti
of es
n k s
ac
io
‘M-Focus’ Application For the first time in the industry, SHI developed ‘M-Focus’, a smartphone application to provide after-
uc
db
iss
h
bm
as
Training for Workers

e
Fe
sales services to ships and offshore plants. M-Focus allows users to register, inquire and manage problems with ships and
Su
es
tab
(Annual, BBS+ Lecturer)

lis
offshore facilities under operation at anytime and anywhere by using their smarthphones. M-Focus has realized the real-time
hm
ent
Training for Supervisors communication between shipyard and customers to enhance customer satisfaction and improve our non-price competitive-
of p
(Annual, BBS+ Lecturer)

ness. The application will be provided gradually to all shipowners in time.
rom
otion
BBS+ Training
plans
SEVAS System SHI established the industry’s first 3D system to inquire ship models for production site use, SEVAS (SHI En-
terprise 3D Visualization and Stimulation).The SEVAS system allows users to check 3D images of products at site in advance
Sharing progress of
Feedback BBS+ Leadership Team-led activities BBS+ by using PC and mobile devices. We expect the 3D design drawing, upgraded from the existing 2D, to shorten the read time
BBS+
Operation Leadership
Review Sharing progress
Committee Observation and sharing and prevent malfunction.
in supervisory Team
major safety-related issues
activities
Weekly, Hosted by Biweekly, Hosted Monthly, Quality Incentive Awards Ceremony in 2012 The Quality Incentive Awards Ceremony is designed to make a comprehensive
team leader by team leader Hosted by leader of
manufacturing team
evaluation on quality performance, quality assistance and thank-you letters from shipowners in order to spread the culture
of quality assurance.
Special Case
Special Case
LPM Service
LPM Service (Lifetime Preventive Maintenance Service) is designed to prevent claims in advance.
BG Group Holds Gold Safety Cap Awards Ceremony Technicians from SHI and its equipment suppliers make a visit to ships delivered to clients and
On October 15, our key client BG Group held ‘Gold Safety Gap Awards Ceremony’ check if there is any problem with key equipment or ship operation. They prevent any potential
at the Geoje Shipyard. Gold Safety Gap is awarded for an outstanding contribution defects in those ships, contributing to reducing the number of claims and enhancing the safety of
to workplace safety among employees of BG Group’s partners across the world. ship operation.
Moon Seok Gang, Leader of Outfitting Team 1 of Doeun Corporation, received the
first Gold Safety Cap among SHI employees, and his case will be introduced to BG
Quality Song Contest
workplaces all over the world.
Our Quality Management Team organizes a variety of events for customer satisfaction and quality
assurance. For this year, they selected 10 pieces of ‘Quality Song’ through employee contest.
42 43
Partner Companies Fortifying Grounds for Sustainable Growth

The company has formed a consultative body with its partner companies to help them with
networking, provide support for secondary subcontractors and promote win-win growth cul-
System of Fair Trade and Shared Growth ture to thereby establish “win-win growth system.”
Fair trade and shared growth are essential in securing sustainable business competency, and
now being more emphasized for their importance. In order to maintain fair business practices Encouraging Agreements with Secondary Subcontractors Based upon our recommenda-
and enhance the competitiveness of partner companies, we are reinforcing the partnership tion, 171 of our primary suppliers made a voluntary agreement on shared growth with 340
with our partners, mainly led by the Win-Win Growth Office. secondary suppliers. SHI strives to ensure the delivery of support to secondary subcontrac-
tors through continuous education/training and PR activities.
Promotion 01
Reasonable Adjustment of Unit Cost For the stable management of partner companies, SHI Providing Financial Support for Secondary Subcontractors Some parts of the funds raised
of Fair actively considers their opinions in adjusting unit price. In case raw materials significantly with Woori Bank(totaling KRW 12 billion) were designated to secondary subcontractors, re-
Trade affect unit price, the company reflects their increase/decrease on unit price to lessen the sulting in management stability of four companies which used funds worth KRW 4.5 billion
burden of partner companies. in 2012.
02
Purchase of Raw (Subsidiary) Materials When it comes to raw (subsidiary) materials with Encouraging Support for Secondary Subcontractors SHI has carried out a PR campaign to
scarcity or low bargaining power of suppliers, SHI purchases and provides those materials ensure the delivery of support and benefits, regarding technology, training and workforce,
to partner companies with charge or for free to support their stable production. from primary suppliers to secondary ones. The result was that 20 of our primary subcontrac-
tors provided a variety of support activities for about 50 secondary subcontractors. In addition,
03
Promotion of Written Contracts We are promoting the culture of written contracts through- we selected the best primary subcontractors for ‘Fair Trade and Shared Growth’ to confer
out the shipbuilding industry by eradicating oral contracts with primary suppliers and also the ‘Best Partner Award’ at the regular general meeting of Seong Jo Hoi(consultative body of
recommending written contracts to secondary suppliers. major SHI partners) and ‘Achievement Award’ at the SHI Foundation Day Ceremony.
04
Establishment of Fair and Transparent Trade SHI conducts a campaign to root out unfair Communication with CEOs of Secondary Subcontractors The CEOs of secondary subcon-
trade practices through partner meetings and outsourced information system, and also tractors were invited to the Geoje Shipyard to check the status of their supplies and ships
operates a system through which employees can voluntarily report activities against fair under construction, and the event deepened their understanding of SHI while boosting their
trade. confidence in their own products. Furthermore, SHI had an in-depth communication session
with them, listening and responding to their management status and difficulties regarding
contract culture and technological environment.
Special Case
Special Case
Special Case
Promoting Green Partnership between Large Corporations and SMEs
2012 Best Partner Awards Ceremony SHI made a ‘Voluntary Agreement to Ensure Shared Growth between Large Cor-
porations and SMEs’ with the Ministry of Trade, Industry and Energy at the ‘Large-
SHI selects the best partner companies based on the evaluation of their safety,
Medium-Small Enterprise Green Partnership Launch Briefing 2012’ on December
quality, production and business performance of the previous year. In 2012, a
7. Green partnership refers to a shared growth strategy: providing partner compa-
total of 5 companies, including Gyeahrin Industry of Production Team 1, were
nies with the parent company’s techniques and know-how of green management
granted the Best Partner Award after going through the evaluation of process
and production. In this agreement, SHI pledged to establish an energy and resource
compliance, per capita productivity, quality and safety. The awardees are entitled
circulation network by sharing its energy saving technology as well as know-how of
to receive plaques and send more of their employees to overseas infrastructure
harmful substance management and greenhouse gas reduction with 40 shipbuild-
training.
ing partners for the coming two years.
44 45
Local Unit: billion Support for Welfare Programs (136 companies) Unit: million in KRW
Activities for Shared Growth Procurement in KRW
Financial Support SHI makes payments entirely in cash while introducing 'Shared Growth Item Cost
Fund' worth KRW 296.4 billion by depositing KRW 79 billion. Thanks to the fund, partnering Incentives 104,193
companies can take out loans with interest rates lower than the standard interest rate as the 856.9 Cash gifts for family events 113
total interests of the deposit are used to slash the interest rate of their loans. In addition, the Subsidies for school expenses 6331
840
company has contributed to improving the management conditions of its partners by making Subsidies for housing loans 398
payment to them three times a month. Subsidies for safety outfitting 13,927
Dormitory for foreign employees 6,046
2011 2012
Miscellaneous 40,964
Support for Technology Development and Protection To enhance the competency of our
Total 171,971
partnering companies, a series of technical support programs are run to expand the scope
of partnership in the development of technologies and core components, and also to support
for their patent application. In addition, the company shares its technologies by dispatching Partner Consultative Body (Seong Jo Hoi) | “Seong Jo Hoi” is a consultative body of major SHI
its relevant personnel to partner companies and facilitates technology protection measures partners, and most of its 69 members are located in Busan and Gyeongnam Province. Busi-
through Technology Escrow. ness volume with these member companies is increasing every year. SHI is fostering win-win
partnership with the consultative body by giving it priority for winning orders with the condi-
Support for Training and Human Resource Samsung Heavy Industries is offering a variety of tion that price, quality and supply schedule are all in similarity.
training programs to partnering companies and helping trainees land a job at those compa-
nies after completion of the programs in SHI Technology Institute. The company has provided Support for Sales Increase of Partners | Due to the recent paradigm shift in the shipbuilding
the employees of its partners with educational programs on business innovation and labor- industry, SHI provides a variety of support activities for its partner companies to increase their
management culture for four months. Various other programs are also provided to help them sales, such as support for entry into overseas markets.
become licensed in tower wagon operation and painting quality assurance. SHI also supplies
its partners with safety training programs participated by more than 43,000 employees every
year to enhance their safety awareness. Partner Sales Status Unit: billion in KRW
Performance in Training and Support Activities
Number of participants(person) Expenses(million won)

2011 1,515.3 Increase
Competitiveness Reinforcement 5,558 576.8
2012 1,780.8 17.5%
Productivity Enhancement Attendee 516 846.5
Completion 473
Employment 427
Early Payment to Subcontractors for Holidays | SHI makes early payments to subcontractors
Quality Competitiveness
176 (137 Companies) 1.9 before major holidays so that its primary subcontractors ensure management stability and
Improvement
secondary subcontractors enjoy the subsequent benefits.
Support for Recruitment SHI organized a series of job fairs for its partner companies strug-
gling with labor shortage, and dispatched its employees to those companies for quality and Outsourcing Quality Assurance Testing | The company outsourced quality assurance testing
process improvement through various innovative activities. to its partners to cut down their expenses on quality test.
Other Support Activities for Partner Companies Outsourcing of Quality Assurance Testing to Partners
Profit Sharing System | SHI runs its own deliberation committee to assess improvement in Total Number of Number of Ratio of Partner Expense
Testing Outsourcing Outsourcing Reduction
specification and technology proposed by partner companies. Once proposals are passed,
12,469 1,596 12.8% 63.8 million won
the company holds its policy of paying back fifty percent of revenue increase incurred by the
implementation.
46 47
Local Community
Basic Policy of Social Contribution Activities Modeling of Major Social Contribution Projects
SHI launched its first Community Service Group in 1995, and since then has been at the fore-
front in embracing the underprivileged, based on its principle of “win-win and sharing”. As
of 2013 the Community Service Group includes two hundred fifty six in-house service groups
comprised of employees from across the organization. The group is leading the establish-
Leading Changes
ment of sustainable community by offering services to local communities, environment sec-
and Innovations
tor, welfare facilities, households with the vulnerable, youth facilities and schools in the form
of scholarship. In addition, we have a variety of service programs tailored for each community
and beneficiary group as follows: opening and maintaining halls for senior citizens and chil-
dren’s playgrounds, cleaning up the environment, guiding juvenile delinquents in the right
direction, helping the disabled with rehabilitation exercise, granting scholarship to under-
privileged children, supporting food banks, sending books to child headed families, providing
Resolving Issues of Sustainable Business Strategic Forward-looking
voluntary services to remote areas, participating in blood donation, making kimchi for the Local Communities Activities Business Business
needy and offering helping hands to rural communities. SHI provides these service programs
Revitalization of Eco-friendly & Green Developing Specialties Activities to Support
to not only the local communities close to its workplaces but to further areas for disaster
Rural Areas Business Activities of Local Communities Youths
recovery activities. The company will strive to fulfill its social responsibility through various
• Generating profits via • Establishment of • Business customized • Scholarship programs
social contribution activities, and make the world a happier place to live. community enterprises “RE-BORN” for local communities for outstanding stu-
(marine tourist attrac- dents, subsidies for
• Revitalizing relation- • Promoting recycling
tion): Painting on the school lunch programs
ship and support in and eco-friendly vol-
human resources and unteering activities: wall at tourist villages • After-school programs
Sustainable and Shared Growth materials Reuse of bicycles, • Activities to help the for middle school stu-
collection of used cel- underprivileged: Home dents in remote rural
with Local Community for Innovations and Changes areas
lular phones and riding coming programs for
bicycles multi-cultural families, • Mentoring programs
invitational events to for middle school stu-
work sites for the un- dents in rural areas
derprivileged
Establish
Partnership
Special Case
SHI with Expo 2012 Yeosu Korea

OCBPA(Ocean & Coast Best Practice Area) was opened at Expo
Local 2012 Yeosu Korea held under the theme ‘The Living Ocean and
Corporation Employees
Community Coast’. OCBPA mainly presented human efforts for the future
of ocean, and also the world’s best policies, technologies,
know-how and products in the ocean and coast area, accord-
ing to four categories of ocean observation, ocean technology,
• Resolve Local Issues • Establish the Foundation for • Fun & Price ocean biodiversity and ocean conservancy. SHI displayed the
• Promote Local Specialties Sustainable Management • Internal Communication nation’s first LNG-FPSO model developed in 2008 to introduce
• Integrate and • Secure Corporate • Spread the Culture the world-class technologies.
Communicate with Locals Competitiveness of Sharing
• Form a Consensus with
Local Community
48 49
Reviving Fishery Tourism – Dadae Village in Geoje Supporting Schools in India

A poor fishing village Dadae has been reborn as a ‘strong medium enterprise’ with annual net SHI supports IT and science education for public school students in Delhi, India. The com-
profit of KRW 200 million. Such change was possible due to talent donation, through which pany had a groundbreaking ceremony on September 13, for education facilities improvement
the small village achieved Samsung’s business know-how and turned itself into a luxurious at Sarvodaya Public School located in Dwarka, Delhi, including IT center establishment and
tourist attraction. Under the sisterhood relationship established in 2008, SHI has provided science lab renovation. Sarvodaya Public School is currently not capable of providing its 6,000
a variety of support to Dadae Village, including talent donation by four affiliates. With the students with proper computer education facilities or science labs. Thus, SHI decided to do-
business know-how of Samsung, the village residents began to develop business models by nate a variety of experimental instruments after establishing an IT center with 50 PCs and
themselves and even purchased a cruise ship worth KRW 1 billion by adding their own fund internet equipment and renovating science labs. This project will be implemented together
to the government subsidy. As a result, the village saw 100 percent of increase in its annual with Plan Korea, an international child support organization, and the fund is expected to reach
sales and expects its net income to reach KRW 200 million this year. KRW 150 million by combining the employee collection of KRW 75 million with the matching
grant. With the opening of IT center, IT training courses will be offered to 11th to 12th students
as a regular curriculum. Furthermore, 30 SHI employees including those from SHI India De-
CAP Agreement to Prevent Child Assault sign Center visited this school to draw paintings on the wall, distribute school supplies, have
SHI made a CAP (Child Assault Prevention) agreement to promote child rights and prevent a field day and make miniature ship models with students. Those activities were joined by
child assault with ChildFund Korea and the Geoje Office of Education on May 2. Through the employees of Shell India, which is located close to the school and ordered the world’s largest
CAP programs at ChildFund Korea, SHI has provided training programs for a total of 3,120 LNG-FPSO to SHI, and considered all the more meaningful given that they were a joint vol-
parents, teachers and students at eight elementary schools in Geoje City during the year unteer work between shipbuilder and shipyard employees in a third country. As a member of
2012, and also participated in nurturing CAP experts among employees’ family members. global Samsung, SHI will make all-out efforts to help the needy across the world.
In-house Service Group to Participate

in the 7th Geoje Social Welfare Regional Conference
About 50 SHI employees belonging to in-house service groups participated at the 7th Geoje
Social Welfare Regional Conference on August 25. The conference was organized to share
welfare information under the private-government cooperation and to upgrade the welfare
services of local communities.
Special Case
Supporting Multi-Cultural Families Considering Local Characteristics

Contributing to Local Economy Revitalization Multidimensional programs have been introduced to resolve social conflicts caused by in-
with Bulk Purchase of Gift Cards creasing number of marriage-based immigrants and their cultural and linguistic differences.
SHI purchased a massive amount of Geoje Love Gift Card worth KRW
The programs will be expanded to the children of such marriage-based immigrants in the
6.5 billion as part of the efforts to revitalize the local economy suf-
fering from the industry recession and lower number of tourists. Our near future.
purchase amount exceeds 13 percent of the total sales of the gift card
worth KRW 43 billion from the launch in 2006 to late June in 2012. We
expect the purchase to boost the domestic economic recovery from a
Drawing Paintings on the Wall
prolonged recession. In order to promote the sales of the gift card, SHI at Parangpo Village
opened an exclusive sales counter in the Geoje Shipyard, resulting in On June 12, a total of 20 SHI employees together with Wall Art
sales of KRW 385 million in 2010 and KRW 825 million in 2011 includ-
ing KRW 400 million for donation. Such high sales could be achieved by Voluntary Group turned a grey-colored long wall at Parangpo
replacing the company’s incentives and subsidies in cash or kind with Village into a beautifully colored piece of work.
Geoje Love Gift Card.
50 51
Eco-friendly Green Business SHI to Publish Textbooks to Cover Entire Subjects of Shipbuilding and
As part of SHI’s strategic community service activities, eco-friendly programs are run to pro- Provide Development Fund for Specialty High Schools
mote sustainable management. The most notable examples include support for starting a (Meister High Schools)
flea market for employees “REBRON,” and a bicycle recycling business “ECO Bicycle”. SHI is making the headline as it is introducing a set of textbooks covering all the subjects
under the category of shipbuilding, thereby targeting specialty high schools, the so-called
Launching the 6th Samsung Youth Volunteer Group Meister high schools in shipbuilding, which are under academic-industrial partnership with
Samsung Youth Volunteer Group was launched in 2007 to help the youth in Geoje build sound the company. SHI has been in academic-industrial partnership with Geoje Technical High
characters and spread the culture of volunteering. In 2012, a total of 40 middle school stu- School since 2008 and come up with detailed plans for publication of textbooks to cover sev-
dents participated in voluntary activities including visit to welfare facilities and environmental enteen subjects. Sixty field experts from the Geoje Shipyard with master or doctorate degrees
clean-up aligned with other environmental organizations. and more than five years of experience have participated and so have thirty school faculties.
As a result, six textbooks in 2009, five in 2010 and six in 2011 have been published after the ap-
proval from the education authority of Gyungnam Province and have been used in classrooms
Holding ‘Welcome Mentee Day’ since. The authors of the textbooks gave their support for aspiring engineers by donating fund
In 2012, Samsung Group conducted a mentoring program for college students, ‘Gift for You: to school authority. In 2009 and 2010, the authors raised a fund worth of KRW 30 million and
Samsung Mentoring Service Season 2’, and as a part of the program, SHI invited the attend- in 2011, the authors donated all of their copy money, which is worth KRW 90 million. SHI has
ees to the Geoje Shipyard to hold ‘Welcome Mentee Day’ event. The event saw around 320 been providing Geoje Technical High school with textbooks as well as lecture programs since
participants including 70 employee mentors and 250 college student mentees from across before the school was designated to be a Meister high school.
the nation. The students enhanced their understanding of shipbuilding industry through on-
site visits and executive lectures, and had quality time with mentors who gave them tips on
job preparation and worklife.
After-school Program
In order to resolve the education gap between urban areas
Talent Donation for the Youth and rural areas, SHI has offered its after-school programs
During the period of ‘Samsung Global Volunteering Festival 2012’, employees at the Geoje for one hundred and eighty students in three middle schools
Shipyard provided after-school programs for local students: magic show and Yut game at since 2006. The company’s researchers are volunteering to
the Geoje Shipyard on October 17, quiz contest at Dongbu middle school on 19 and facility help students with their school work in subjects such as
improvement at Doondeok Study Room on 20. English and Mathematics. As a result, the program is receiv-
ing warm welcome from the community members, with the
result of receiving the grand prize at the 1st Korea Donation
for Education and the Prize of the Minister of Education, Sci-
ence and Technology at the 4th After-school Contents Fair.
52 53
Health, Safety and Environment The World’s Healthiest Shipyard –

The Best Health and Environment Facilities for Workers
HSE Management Policy In-house Clinic Physical Therapy Department Health Care Center
Under the management philosophy of human respect, SHI maintains Health, Safety, Envi- Services including medical Rehabilitation treatment is The center provides employ-
ronment and Green Management as its core values and strives to make its business free checkup, consultation and provided for workers suf- ees with a variety of health
from diseases, accidents and pollution. The company saves resources and energy, minimizes treatment as well as health fering from backache and improvement programs in-
emissions of GHGs and fulfills its social and ethical responsibilities. improvement activities are muscular skeletal diseases cluding yoga and Chi prac-
provided so that workers can to relieve pain and improve tice along with medical fa-
Diagram of HSE Management prevent general or work-re- functions. cilities. In addition, regular
lated diseases. Emergency lectures on major diseases
medical services are also such as muscular skeletal
The safest and cleanest shipyard in the world offered in the event of ac- disease and cardiovascu-
Disease- Accident- Pollution- cident. lar disease are provided at
World-class Shipyard free free free health lecture room.
Health Management Environment Management

•Improvement of working environment •Maintaining and improvement of ISO 14001
•Examination of working environment •Development of eco-friendly technologies
•Management of component duality and products
•Management of MSDS •Zero environmental risk
•Operation of Committee for Improvement of •Improvement of environmental infrastructure
Working Environment •Preservation of local community environment
Safety Management
•Maintaining and implementation of OHSAS 18001
•Well-organized activities to enhance safety and prevent accidents Health Improvement Programs
•Rapid response to accidents and accident prevention
Happy Well-being Center SHI opened its Happy Well-being Center in November 2008 with its
•Preemptive assessment of risk factors throughout working process
•Continuous education and promotion own set of goals: enhancing each employee’s mental health and capability in stress manage-
ment and thus increasing work efficiency by sharing difficulties at home and work and giving
tips to overcome them. Visits to Happy Well-being Center help employees find answers to
problems that they cannot handle by themselves, as clinical counselors and psychiatrists give
For efficient HSE management, SHI does as follows: out helping hands with their expertise. The program offers not only helps to resolve issues of
1 All SHI employees, partner companies and customers understand the principle and goal of HSE management and volun- interpersonal relationship, work-related stress, marital conflicts and child-raising but also
tarily participate in relevant activities based on effective communication. various forms of psychological exams such as personality test, stress test and interpersonal
2 Identify potential risks throughout the entire process from order-receiving, design, purchase, production and delivery of skill test. In 2012, medication programs were newly introduced to offer medication classes
ships and offshore plants, establish measures for improvement and reduce the adverse effects on workers and environ- during lunch break and Wednesday Medication Class after work. Moreover, various other
ments. programs are offered for psychological wellness of employees including family counseling
3 Analyze major risk factors and effects and provide financial and technical support to keep the risk at acceptable level. programs, stress level measurement and psychological relaxation using five sense therapy
4 Comply with domestic and foreign regulations on HSE management and accept the standards and demands presented by treatments.
the group, company and stakeholders.
5 Provide continuous education and training for all employees and partner companies to establish self-control safety & Mobile Well-being Clinic SHI provided employees with mobile well-being clinic services dur-
management system as well as safety culture. ing lunch break for consultation on smoking, drinking and diet at cafeterias in the shipyard on
6 Promote sustainable use of resources and energy and reduce discharge of pollutants throughout production process. every Wednesday from March 14 to April 18. This event was organized by Geoje Public Health
7 Enhance HSE and green management system through regular examination and improvement. Center and hosted by Organizational Culture Department for employee health promotion.
8 Share the principle and goal of HSE and green management with stakeholders and make regular examinations.
54 55
Shipyard with Lowest Accident Rate Waste Generation and Management

SHI is equipped with the system that prioritizes safety throughout the work process and SHI complies with the government’s environmental policy by implementing waste reduc-
spares all effort to make the workplace the safest in the world by making massive invest- tion initiatives such as legitimate disposal of general/designated waste, promoting in-house
ment in safety and health management. In 2001, the company acquired OHSAS18001 for the waste treatment, maintaining recycling rate at over 80% and reducing the volume of gener-
first time in the shipbuilding industry and since then has maintained the lowest accident rate. ated waste. The company built facilities for waste incineration and food waste treatment in
In addition, as part of employee safety education, introductory programs are offered to new, 1996. The results are in-house waste incineration of 7,000 tons and food waste treatment of
three-month, first-year and temporary employees. 200 tons per year, abiding by the government policy and preventing ocean and soil pollution
caused by liquid wastes.
Issues Discussed concerning Safety and Health
2012 Waste Treatment Unit: ton

Provision of safety items
for individuals Establishment of principles in education training Rate (Amount) of Wastes Recycled
92.1%
•Provision of safety equipment Safety education in general
certified by Korea Occupational •A variety of programs are provided to meet the needs of each class/department 92.2% (174,046) (170,987)
Safety and Health Agency to - Introductory level: new, three-month and first-year employees, as well as online
education
88.7% (147,083)
ensure health and safety of
employees - Awareness: six classes including team leaders, managers and department heads
Waste Disposal
•Safety caps, safety glasses, - Special class: in-house instructors, security guards, female workers, foreign work- 188,740
ers and employees at overseas workplaces
165,729 Designated Waste 185,631
masks, safety belts and safety
Designated Waste 6,065 Designated Waste
shoes are included •Job criteria: fifty two including scaffolding, painting and toxic gas treatment
5,472 General Waste 5,363
•For the first time in the ship- •License in heavy equipment: flagger, tower wagon, electric forklift, remote control
General Waste 182,675 General Waste
building industry, swing-type crane, gondola and skid steer loader
160,257 180,267
safety belts are provided across
the company Training for new employees
•Since new employees are relatively less aware of risk factors, training programs are 2010 2011 2012
offered as part of preventive measures.
- Introductory program (8 hours), programs for three-month employees (2 hours) /
first-year employees (2 hours)
-S ME(Safety Management Experience) is offered to raise the safety awareness of Recycling Used Packaging Materials SHI is systematically carrying out its activities to reduce Volume of Packaging
new employees before sending them to worksites. A total of 15,299 employees waste of resources and costs by setting up its own target of recycling packaging materials and Materials Recycled unit : m2
completed the program as of 2012.
managing relevant outcomes. In the past, the activities mostly dwelt on tailoring covers for
large-sized equipment such as propellers and discarding the remaining, but since 2011, all
covers have been cut by standards and then stored and reused to minimize waste generation 5,475
Accident and severity rate Unit: %
and maximize the effect of cost reduction. In 2012, out of the entire volume of the packaging 4,684
Item 2010 2011 2012
materials of 1,562,484m2, 5,475 m2 or 3.5% has been reused. 3,582
Shipbuilding Accident rate 0.24 0.20 0.24
and Offshore Severity rate 0.04 0.03 0.05
Reuse of Welding Drum In case of shipbuilding and offshore business, welding is frequently 2010 2011 2012
conducted but the remains after the process are 100 percent reused.
Operation of Facility to Encourage Employees to Experience
Safety-Related Circumstances Amount of Welding Drum Reused Unit : ton
For the first time in the industry, SHI established a facility to encourage employees to experi-
ence safety-related circumstances in 2003. The facility has an exact reproduction of worksites
at the shipyard where employees can experience possible safety-related accidents. Employ-
ees are given a series of lectures on safety, environment and firefighting as well as human Recycling Rate
engineering, such as right working posture, before going to practice rooms where they learn
314 376 399 100%
how to carry materials, how to handle electricity and gas and how to work at blocks and scaf-
folds, which are most vulnerable to safety-related accidents.
2010 2011 2012
56 57
Waste Water and Sewage Treatment Environmental Standards at the Shipyard

Under the goal of discharging wasterwater without harm to the ecosystem, SHI conducts a To further carry out the action plans for green management, SHI conducts a regular inspec-
regular analysis of water quality once a day and maximizes the reduction of wastewater vol- tion on the quality of air, water and soil of areas surrounding the Geoje Shipyard. The atmo-
ume and recycling. The wastewater from incineration facilities is recycled into process water spheric conditions including concentrations of PM10 (minute particulates), SO2 and NO2 have
thanks to zero discharge system, and pollutants in wastewater from laundries(such as cod been checked at two points in the shipyard and three points outside of it, and the seawater
and ss) are subject to strict internal regulations(10% compared to laws) to prevent secondary conditions including COD and DO levels have been monitored at six points around Jukdo area.
environmental pollution. In order to fulfill the responsibility for local community, an exclusive Concentrations of soil pollutants such as BTEX and TPH have been also measured.SHI pledg-
task force is operated to manage wastewater in day and night shifts. es for clean work sites and community by constantly monitoring the environment of areas
surrounding shipyard.
Current Status of Water Treatment Unit : ton
Item 2010 2011 2012 Status of Pollutants around the Shipyard

COD 0.053 0.063 0.066 Item Regulatory Criteria Regulatory Criteria 2010 2011 2012
SS 0.028 0.033 0.037 PM10 100 μg/m3 46 46.5 42.1

SO2 0.05 0.004 0.005 0.005
mg/m3
NO2 0.06 0.015 0.015 0.015
COD Below 2.0 1.7 1.7 2.1
Treatment of Air Pollutants mg/l
DO Above 5 9.2 7.9 8.4
The discharge concentration of air pollutants is thoroughly managed to meet the internal
standards which are more rigorous than legal ones. Our efforts to prevent air pollution in-
clude a regular checkup of facilities more than once a day, replacement of filter and activated Management of Toxic Substances
carbon on time, and measurement of air pollutants on a regular basis. In addition, refriger- SHI is aware that even a small amount of toxic substance poses harm to humanity and the
ants for packaged air conditioning system at workplace are being replaced from R-22(CFC) to environment, and thus makes utmost efforts for flawless management and control. The in-
R-401A(HFC) and for vehicle air conditioning system from R-22(CFC) to R-134A(HFC) as part ternational society is becoming growing more interested in production, use and disposal of
of the efforts to minimize the discharge of ozone layer-depleting substances. chemical products and is witnessing the establishment of more rigorous sets of regulations.
Accordingly, the Geoje Shipyard has established its own process on use and management
Current Status of Air Pollutants Unit : ton
of chemical substances in line with environmental policy and targets. The process not only
Item 2010 2011 2012 fulfills legal compliance but also prevents environmental pollution and manages toxic sub-
dust 112 97.9 66.2 stances to prevent fatal accidents. So far caustic soda is the only substance used by SHI for
SOx 0.0008 0.0004 0.03 water treatment and incineration, and thanks to its rigorous management policy, no case of
leakage has been reported during reporting period.
Special Case Use of Toxic Substances Unit : ton
Item 2010 2011 2012

Caustic soda 44 77 65
The World Water Day Event "Volunteering to Clean up Yeoncho Dam"
SHI organized a volunteer activity to clean up Yeoncho Dam in Geoje as part of the events to celebrate the World Water Day
with Korea Water Resources Corporation.
Special Case
Shipbuilding VOC Reduction Agreement Signing Ceremony

A signing ceremony for ‘The Second Voluntary Environmental Agreement on VOC Reduction
in Shipbuilding Industry’ was held at Hotel Samsung, Geoje, on September 21. The agree-
ment, which will be effective until 2016, was signed by six companies including SHI and HHI,
and the worksite will be granted a budget of over KRW 230 billion for VOC emissions reduc-
tion. Moreover, the Ministry of Environment plans to offer incentives to worksites under the
agreement, including technical support, tax reduction and official commendation.
58 59
Green Management SHI has set up its plans with three stages for each year to conduct company-wide green busi-
ness activities and thus emerge as a leading global company by 2015.
Introduction of Green Management Green Management Roadmap

Since the declaration of its commitment to green management in 1996, SHI has established
and implemented a management system corresponding to the international standards for
Green Future
environment preservation and pollution-free worksite. In particular, through the maintenance
and improvement of ISO 14001 certification, the company focuses on worksite environment World Leader
•Realization of 2015 vision
management, local environment clean-up as well as new technology development to mini-
•Systemization of green
Green Master
mize environmental pollution. In addition, SHI applies its own management standards, which management/ Period
•Sharing performance of
are more rigorous than legal standards set for ISO 14001 environmental management system of Stabilization
green management
certification, to all environmental sectors including wastewater, dust and air pollutants, so • Acquisition of green
Challenger
certificate/Period of
that the company can solidify its position as the cleanest shipyard in the world. •Establishment of green
Growth
management strategy
•Establishment of green
Vision and Strategy for Green Management management infrastruc-
SHI aspires to be a leading company in green business by making contributions to humanity ture/Period of Endeavor
and protection of environment based on its business activities with respect for humanity and
environment. 2010 ~ 2011 2012 ~ 2013 2014 ~ 2015
Vision and Strategy for Green Management
SHI operates CEO-led Green Management Office and Green Management Organization com-
prised of three subdivisions: manufacturing, product and heavy construction to enhance
green management efficiency and business performance.
Green Future
Vision
Transform into green company
by practicing green management Structure of Green Management Acquisition of International Certifications
2012 •ISO 50001(Energy Management)
Chairperson (CEO)
Goal 2015 Global leader in green business •ISO/TS 29001(Petrochemical,
2011 Chemical, Natural Gas)
•ISO 27001(Information Security)
Establishment of green Establishment of green Development of eco- •OHSAS 18001

2001
workplace network friendly product (Safety and Health Management)
Strategy •Reduce GHG emissions •Share performance in green •Enhance fuel efficiency
•Save energy consumption management •Develop energy-saving •ISO 14001
•Manage pollutants •Implement comprehensive technology Subdivision 1996
Subdivision of Subdivision (Environment Management)
•Use renewable energy data system •Establish product LCA of Green
Green Product of E&I
•Execute green campaign •Offer training on green •Manage toxic substances Manufacturing
management
1993 •ISO 9001(Quality Management)
•Establish green partnership
•Operate green management
organization
60 61
Performance of Green Management Establishment of Green Workplace

SHI saw its green management activities bear fruits in 2012. The company acquired ISO 50001 SHI is making all-out efforts to minimize GHG emissions at workplaces through a variety of
for the first time in the shipbuilding industry, and was selected as ‘Climate Change Competi- energy saving activities such as using waste heat, introducing highly efficient lighting and
tiveness Outstanding Company' by the Korea Chamber of Commerce & Industry. Moreover, installing LED lighting.
SHI established an image of green workplace through various green management activities,
and offered online training programs to promote the company’s commitment to green man- Shipbuilding Business E&I Business
agement across the organization.
Energy Conservation Electricity
•Improve the operation of cafeterias on •Install automatic lighting system at underground parking lot
non-business days •Introduce highly efficient electrical goods
SHI has been added to DJSI(Dow Jones Sustainability Indexes) Asia Pacific and awarded •Save the power of electricity facilities •Establish plans to minimize electricity use
the best company in industrial engineering by DJSI Korea for two consecutive years. at yard (turning off outdoor lamps and •Apply to the relevant sites first
lighting tower on non-business days/
unnecessary lighting after sunset) Construction Equipment
Acquiring ISO 50001(Energy Management Standard) •Install LED lighting •Make it compulsory to submit plans for equipment introduction
•Complying with the government’s GHG and energy target management policy •Use new and renewable energy such as •Deter the introduction of unnecessary equipment
•Establishing an integrated IT system for energy management wind power •Ban idling vehicles during standby time
•Building mid- and long-term measurement equipment and integrated management system •Make it compulsory to train equipment operators in advance
Energy Efficiency
•Change the heat source at heating, Heating/Vehicle
Selected as ‘Climate Change Competitiveness Outstanding Company' ventilation and air conditioning system •Establish standards for temporary eco-friendly office
•Assessing the company’s capability to cope with GHG emissions regulations and from LPG to electricity •Keep the temperature of temporary office at 26℃ in summer and 18℃ in winter
market changes •Improve the pressure of air supply •Conduct ‘Green Drive Campaign’ (to prevent sudden acceleration syndrome,
•Winning “The Best Shipbuilding Company of the Year’ award from the Korea •Use waste heat rapid acceleration and idling)
Chamber of Commerce & Industry •Install highly efficient lighting
•Reduce GHG emissions through boiler
associated control
Establishing an image of green workplace through various green management activities
•Acquiring ISO 50001 for the first time in the global shipbuilding industry
•Cooperating with 56 energy-related departments
Establishment of Green Network

Designated as ‘Green Technology of the Year’ at the 4th National Green Tech Award
SHI will share the principle and vision of green management with all employees and contrib-
ute to the establishment of sustainable society by making company-wide efforts for environ-
Added to 2012 Korea CSR 30 ment conservation and improvement.
•Support for green manage- •Disclosure of green

ment of partner companies performance
t of Gre Disc
•Support for green tech- en ation en lo •Participation in CDP
m
e per Pe
Online Education Program on Green Management nology development o r •Environmental report
su orm
en rc
re anc
Gre info
•Expansion of green & Sustainability
Co
f
Green Management Office is overseeing online education programs to help employees iden-
of
purchase/ report
Re
tify changes in the business environment due to global warming and climate change and raise logistics
e
company-wide awareness of green management to thereby reach consensus on transform- GREEN
ing SHI into a global leading company in green business. The online programs are designed
Network
to enable effective learning by balancing theory and case studies. In order to keep learners •Launching Green •Operation of inte-
m
Gre
O p Or
ste
Management Office grated information
on ted
motivated, so called self-directed learning is encouraged. Pop quizzes and a section called
en
er g
tio
Sy
system for green man-
ra
•Fostering green eg
a
“Check Tip” to share tips are added to give a humorous twist on the program. Carbon emis- an n of I nt at i
experts iz a agement linked with
ti o n rm
sion calculators, learning map and other additional applications are provided to enhance •Providing employees with Info existing ERP system
environmental education
learning efficiency.
62 63
Management of Water Consumption GHG emissions have enormous impact on climate change. Because of the very nature of its
In the Geoje Shipyard, industrial water is used across all manufacturing process, and the total business, SHI sees limited amount of GHG emissions. The company, nevertheless, makes its
consumption in 2012 reached 2,391kton. utmost efforts to minimize GHGs at workplace through various activities including introduc-
tion of high efficiency facilities and improvement of testing process.
Amount of Water Consumption and Reuse unit : ton
Item 2010 2011 2012 Amount of GHG Emissions unit : tCo2e

Amount of use 2,154,427 2,221,274 2,391,364
Item 2010 2011 2012
Amount of reuse 102,118 102,259 102,012
Direct GHG 202,935 268,194 225,909
Rate of reuse 4.74 4.60 4.27
Indirect GHG 223,036 239,853 228,659
total 425,971 508,047 454,568
Activities for Reduction of Energy Consumption
In response to climate change and regulations both at home and abroad, SHI is proactively
2012 Performance of Tasks for GHG Reduction
managing activities on energy saving and efficiency, and also improving facilities and equip-
ment for energy conservation. We also maintain per unit consumption at certain levels by Item 2012 goal Amount of Amount of
Reduction estment
making continuous efforts to reduce energy consumption. Particularly, the shipbuilding & (unit : CO2 ton) (unit : billion in KRW)
offshore business engages in energy conservation through substitution of equipment and
Modification in testing method and reduction of testing period for eco-friendly vessels 30,623 0
improvement of facilities at paint shop, procurement of high efficiency products and enhance- – delivered ship: HN1878~1883 containership of UASC
ment of power efficiency. Fuel reduction through diversification of gas terminals of LNG vessels 685 0
Substitution – delivered ship: HN1813 LNG vessels of Teekay
of obsolete
Energy Consumption unit : TJ Management of lighting at docks and ships (electricity) 474.4 0
facilities and
enhancement Replacement of lighting at ships under construction (electricity) 601 0.138
Direct Energy Indirect Energy Total of operation Management and allocation of heavy equipment(diesel) 93.7 0
2,673 4,536 efficiency
2010 7,209 Improvement of LPG supply pressure 2079.8 0
3,188 4,630 Improvement of ethylene supply pressure 327.5 0

2011 7,794 Efficient operation of motor bikes for business use 32.1 0
2,590 4,708 total 34,917 0.138
2012 7,298
Volume of Energy Saved in Shipbuilding & Offshore unit : TJ 2013 Plan for Tasks for GHG Reduction
Item 2011 2012 The major tasks include substitution of obsolete facilities and enhancement of operation ef-
Process Redesign 10 426 ficiency. SHI plans to reduce GHG emissions amounting to 15,868 tons by investing KRW 2.16
Substitution and Remodeling of Equipment 23 47 billion in tasks as follows: replacing obsolete heating, ventilation and air conditioning system
Procurement of High Efficiency Product 0.5 12 at office and lighting as well as skylights at plant, introducing air economizer for painting-
drying, minimizing the number of power generators at docks of drillships and containerships,
and optimizing the schedule for testing drillships and LNG carriers.
Special Case
Energy Saving Idea Contest Special Case

The contest was designed to proactively respond to increasing energy
costs and more rigorous regulations, and has contributed to promot-
ing energy savings such as electricity, gas and oil, improving process Introduction of Highly Efficient Facilities
and facilities, and reducing energy waste at workplaces. Installing highly efficient lighting at workplaces can contribute to reducing GHG emissions. Thus, SHI will invest a total of KRW
32.4 billion by 2015 in replacing and upgrading its old facilities.
64 65
Relevant Data on Sustainability Management
Volume of Raw Materials Used Current Employment Status Unit : person
item unit 2010 2011 2012 item 2010 2011 2012

Shipbuilding Steel ton 1,415,000 1,720,000 1,560,000 Total 13,204 13,185 13,504
& Offshore Male 12,281 12,266 12,576
Gender
Construction Rebar ton 21,273 30,250 25,429 Female 923 919 928
RMC m3 580,134 295,040 384,229 Regular 12,735 12,689 12,933
Type of Employment
Cement ton 13,659 9,156 7,562 Non-regular 469 496 571
Ready Mixed Dry Mortar ton 1,774 710 2,012
Sand m3 2 3,727 21,182
Aggregate m 3
62,175 128 65,633 Number of Retirees unit : person Turnover unit : person
Asphalt Concrete ton 20,241 25,711 136,192
Male Female Total
2010
291 56
347
517
Per Unit Conversion Data 492
312 59 489
*A
nnual Production Volume
item unit 2010 2011 2012 2011 371
(unit : ton)
Amount of Water COD kg/thousand ton 0.037 0.042 0.043 2010 : 1,419,500 453 64
Pollutants SS kg/thousand ton 0.020 0.023 0.023 2011 : 1,667,367 2012 517 2010 2011 2012
2012 : 1,543,959
Emission of Air Dust ton/thousand ton 0.079 0.059 0.046
Pollutants SOx g/thousand ton 0.56 0.24 19.43
Number of Employees Subject to Collective Bargaining (As of December 2011) unit : person
Use of Toxic Caustic ton/thousand ton 0.040 0.026 0.044
Substances Soda item 2010 2011 2012
Water Consumption ton/ton 1.518 1.399 1.548 Number of Employees Subject 6,091 5,982 5,819
to Collective Bargaining
Energy Consumption TJ/ton 0.005 0.004 0.005
GHG Emissions tCO2e/ ton 0.29 0.30 0.29
Number of Employees Subject to Performance

Performance of Social Contribution Activities unit : thousands in KRW Assessment and Career Development unit : person
item 2011 2012 item 2010 2011 2012

Expenditure on Social Contribution Activities 1,410,000 238,098 Total Number of Employees (regular workers) 12,735 12,689 12,933
Matching Grant 160,200 75,512 Number of Employees Subject to Performance 12,735 12,689 12,933
Subsidies for Local Schools 225,000 380,000 Assessment
Expenditure on Community Service 178,920 214,539

Contribution by Employees 732,000 831,755 Education Programs on Ethics/Human Rights
Incentives for Shipowners 130,00 10,000
Number of Employees Completed (person) 12,250 19,963 23,668
Average Hours of Training per Person 1.07 1.37 1.82
Number of Education Programs

on Human Rights
9 8 10
2010 2011 2012
Appendix
Awards and Membership
Third Party Assurance statement
GRI G3.1 Guideline Index
Report of Independent Auditors
Financial Statement
68 69
Awards and Membership
01 Received the IR52 Jang Young Sil Award for Integrated 05 Achieved ISO 50001 for the first time in the global ship- Minister’s Commendation, and Director Mahn Woo Lee and nized by Korea Industrial Technology Association, the NET
Pirate Control System | SHI was granted the 66th IR52 Jang building industry | For the first in the industry, SHI achieved Head Seong Ihn Jo received a Commendation from the Min- certification is designed to discover new technologies devel-
Young Sil Award, which was co-organized by Korea Industrial the International Standard for Energy Management Systems, ister of Employment and Labor. The company also received oped by domestic companies and research institutes and to
Technology Association and Maeil Business Newspaper, for ISO 50001 from Lloyd's Register Quality Assurance (LRQA). the Prime Minister’s Citation for its producing outstanding promote their commercialization and trade.
its Integrated Pirate Control System developed by the Power The achievement of ISO 50001 has recognized the company’s employees of merit.
& Control Systems division. Named after Jang Young Sil, the efforts of establishing an energy management T/F and con- 10 Received Industrial Service Medal at the 9th Shipbuild-
greatest scientist of the Joseon Dynasty, the award is conducting research on energy conservation since the declara- 07 Ranked high in climate change index |
SHI was selected ing Korea | The 9th Shipbuilding & Offshore Korea ceremony
ferred to those who contribute to industrial technology in- tion of its commitment to green management. as ‘Climate Change Competitiveness Outstanding Company' saw Hyo Seop Kim, Executive Director of Outfitting Team 1,
novation through new technology development. in the shipbuilding industry by the Korea Chamber of Com- receiving Industrial Service Medal for his contribution to the
merce and Industry.The certification is granted based on a development of shipbuilding & offshore industry. Jeong Chil
company’s response to GHG emissions regulations and mar- Nah, Head of Offshore Construction Team 2, and Gahp Joon
02 Achieved New Excellent Technology (NET) certification
ket changes. Ahn, Head of Offshore Outfitting Team 1, received medals
for design technology of LNG cargo containment | At the New
from the Minister of Trade, Industry and Energy, while Ihn
Excellent Technology Awards 2011, SHI received the NET cer-
Tae Lee, Head of Shipping Division, received Special Contri-
tification for its ‘Design Technology of Floating Structure to 08 Wang Geun Lee, Change Soo Sohn and Soon Gi Hong,
bution Award.
Prevent Sloshing in LNG Cargo Containment’. The NET certi- the company’s team leaders to be selected as the Korean
fication is granted by the Korean Agency for Technology and Master of 2012 | Announced by Human Resources Develop-
Standards to technologies that create a significant economic ment Service of Korea, the Korean Master of 2012 selected 11 Selected as Excellent Technician of 2012 | Co-hosted by
ripple effect and contribute to national competitiveness. Wang Geun Lee, the head of Industrial Research Institute as Ministry of Employment and Labor and Human Resources
the master of production automation in machinery; Chang Development Service of Korea, the Excellent Technician
03 Jin Hyeong Park, the company’s division head to be se- 06 Medals and prizes of merit in the 41st International Vo- Soo Sohn, the leader of production technology team as the Awards 2012 selected Gyeong Hyeon Lee, Section Chief of
lected as a man of merit for industrial technology promo- cational Training Competition Hyun Woo Kim of Offshore
|
master of sheet metal and boiler making in materials; and Technology Institute, as an excellent welding technician.
tion | The Korea Technology Awards 2011 selected Jin Hyeong Production Team and Hee Jae Yoo of Pilot Operation Group Soon Gi Hong, the leader of quality management team as the The award highly recognized our efforts to nurture excellent
Park, the head of System Software R&D Division at Industrial received Bronze Tower Order of Industrial Service Merit for master of quality management in industrial application. technicians including the winners of International Vocational
Research Institute, as the man of merit for industrial tech- their winning gold medals in the International Vocational Training Competition.
nology and granted him the prize of the Minister of Trade, Training Competition, while Sun Jeong Hwang and Min Ki
Industry and Energy. The award recognized Mr. Park’s con- Jang were awarded Tin Tower Order of Industrial Service 12 Received excellence award at the After-school Contents
tribution to enhancing the competitiveness of shipbuilding Merit for their winning bronze medals. Meanwhile, Section Fair | At the 4th After-school Contents Fair hosted by the Min-
industry through the development of a state-of-the-art au- Chief Gyeong Hyeon Lee and employee Seon Chak Yoo from istry of Education, Science and Technology, Choong Young
tomated system. the company’s Technology Institute were awarded Prime Choi, Senior Researcher of Core Technology Research Cen-
ter, won excellence award in the category of guest lecturer
04 Received Ministerial Citation |
Director of Outfitting De- (volunteer). Senior Research Choi was credited for helping
sign Team 1, Jeong Geun Kim, and Head of Industrial Re- students develop an adventurous spirit and positive thinking
search Institute, Seong Gil Nam, received ministerial citation attitude as after-school teacher since 2009.
from the Minister of Education, Science and Technology at
the ‘11th Technician’s Day’ ceremony. The award ceremony 09 Achieved the NET certification for new technologies |
is organized by Korea Professional Engineer Association Our new developments ‘Slip stream generator for fuel reduc-
(KPEA) to support the government’s science and technology tion’ and ‘Stainless steel pipe narrow gap orbital TIG weld-
policy and discover technicians who contribute to the devel- ing technique by using pulse-controlling rotating torch’ were
opment and application of new technologies. certified at the 2nd New Excellent Technology Awards. Orga-
70 71
Third Party Assurance Statement
Assurance Statement related to Samsung Heavy Industries’ Sustainability Report 2012, Level of Assurance and Materiality
for the calendar year ending 31st December 2012 The opinion expressed in this Assurance Statement has been formed on the basis of a moderate level of assurance and at the
Terms of Engagement materiality of the ‘professional judgement of the Verifier’.
This Assurance Statement has been prepared for Samsung Heavy Industries.
LRQA’s Opinion
Lloyd’s Register Quality Assurance Ltd. (LRQA) was commissioned by Samsung Heavy Industries to assure its Sustainability
Based on LRQA’s approach nothing has come to our attention that would cause us to believe that the Report has not been
Report 2012 for the calendar year ending 31st December 2012 (“the Report”). The Report relates to the sustainability per-
produced based on AA1000AS’s Principles. It should be noted that for the Principle of:
formance data and information for Samsung Heavy Industries’ activities in Korea. The geographical scope includes the head
•Inclusivity - Samsung Heavy Industries has processes in place for identifying and engaging with its stakeholders across its
office, Shipbuilding and Offshore, Energy and Infra solution division, Power and Control systems division, Wind Energy division
various operations and we are not aware of any key stakeholder groups that have been excluded from this process. Sam-
in Korea.
sung Heavy Industries also demonstrated that they have incorporated these stakeholder concerns into their management
Management Responsibility approach and decision-making processes in order to develop a structured engagement approach and response to sustain-
Samsung Heavy Industries’ management was responsible for preparing the Report and for maintaining effective internal con- ability issues.
trols over the data and information disclosed. LRQA’s responsibility was to carry out an assurance engagement on the Report •Materiality - Samsung Heavy Industries has a process in place for identifying and evaluating material issues in the materi-
in accordance with our contract with Samsung Heavy Industries. ality assessment. The Report provides a balanced reflection of Samsung Heavy Industries’ material issues and we are not
Ultimately, the Report has been approved by, and remains the responsibility of Samsung Heavy Industries. aware of any material issues that have been excluded.
•Responsiveness - Samsung Heavy Industries has processes in place to respond to government authorities, employees,
LRQA’s Approach
communities and the public, partners and suppliers, shareholders and investors, etc.
Our verification has been conducted against:
•AA1000 Assurance Standard 2008 (AA1000AS), where the scope was a Type II engagement It is also our opinion that nothing has come to our attention that would cause us to believe that the specified performance data
•Global Reporting Initiative Sustainability Reporting Guidelines (GRI G3.1, 2011) and information is not reliable.
Based on LRQA’s approach nothing has come to our attention that would cause us to believe that the Report does not meet
The objectives of the assurance engagement were to:
GRI’s application level A+ as we found nothing that would cause us to contradict this conclusion.
•Review adherence to the AA1000AS Accountability Principles of Inclusivity, Materiality and Responsiveness and evaluate the
reliability of specified sustainability performance data and information LRQA’s Recommendations
•Confirm that the Report meets the requirements of GRI G3.1’s application level A Samsung Heavy Industries should consider:
•Validate Samsung Heavy Industries’ self-declaration for GRI’s application level A+ •Establishing sustainability targets and periodically monitor progress against those
•Establishing an internal data and information verification process to ensure the accuracy and completeness of data and
To form our conclusions the assurance was undertaken as a sampling exercise and covered the following activities:
information disclosed in the Report.
• Reviewing the stakeholder engagement process and related information
•B
enchmarking Samsung Heavy Industries’ material issues against our own independent analysis of stakeholder issues by
5th July 2013
reviewing other sustainability reports written by Samsung Heavy Industries’ peers in comparable industries
Hee-Jeong Yim LRQA Lead Verifier
•Understanding how Samsung Heavy Industries determine, respond and report on their material issues
•Interviewing management of Samsung Heavy Industries to understand Samsung Heavy Industries’ reporting processes and
use of sustainability performance data within their business decision-making processes
•Interviewing key personnel to understand processes of Samsung Heavy Industries for setting performance indicators and
On behalf of Lloyd’s Register Quality Assurance 17th Floor,
for monitoring progress made during the reporting period Sinsong Building, 67 Yeouinaru-ro, Yeongdeungpo-gu, Seoul, Korea
LRQA Reference: SEO6017930
•Verifying Samsung Heavy Industries’ data and information management processes and reviewing supporting evidence
made available by Samsung Heavy Industries at their head office in Samsung Life Insurance Seocho Tower 1321-15,
- LRQA's Competence and Independence
Seocho-Dong, Seocho-Gu, Seoul, Korea and at their Geoje Shipyard in 530, Jangpyeong-Dong, Geoje-Si, Geongsang- - LRQA ensures the selection of appropriately qualified individuals based on a rigorous appraisal of their training, qualifications and experience. The team
nam-Do, Korea in accordance with our contract for the verification of data and information disclosed in the Report. conducting the assurance of the Report was multi-disciplinary and has been involved in numerous assurance engagements. LRQA's internal systems have
Note 1: No source data was sampled for its accuracy and completeness. been designed to manage and review verification and certification assessments. This involves independent review by senior management of the outcome
derived from the process applied to the assurance of sustainability reports.
Note 2: Economic performance data was taken direct from the audited financial accounts.
- Independence of LRQA from Samsung Heavy Industries
•Checking that the GRI index allows stakeholders to access sustainability performance indicators.
72 73
G3.1 Indicators Reporting Page Remarks

GRI G3.1 Guideline Index status
Governance, 4.8 Internally developed statements of mission or values, codes of conduct, and ● 6,7
Commitments principles relevant to economic, environmental, and social performance and the
●Reported ◐ Partially reported N/A Not applicable and status of their implementation.
Engagement 4.9 Procedures of the highest governance body for overseeing the organization's ● 22,23
G3.1 Indicators Reporting Page Remarks identification and management of economic, environmental, and social
status performance, including relevant risks and opportunities, and adherence or
Official Notice on Profiles compliance with internationally agreed standards, codes of conduct, and principles.
Strategy and 1.1 Statement from the most senior decision-maker of the organization. ● 6,7 4.10 Processes for evaluating the highest governance body's own performance, ● 22,23
Analysis particularly with respect to economic, environmental, and social performance.
1.2 Description of key impacts, risks, and opportunities. ● 6,7
4.11 Explanation of whether and how the precautionary approach or principle is ● 22,23
Organizational 2.1 Name of the organization. ● 10,11 addressed by the organization.
Profile 2.2 Primary brands, products, and/or services. ● 10,11 4.12 Externally developed economic, environmental, and social charters, principles, or ● 68,69
2.3 Operational structure of the organization, includingmain divisions, ● 10,11 other initiatives to which the organization subscribes or endorses.
operating companies, subsidiaries, and joint ventures. 4.13 Memberships in associations (such as industry associations) and/or national/ ● 68,69
2.4 Location of organization's headquarters. ● 10,11 international advocacy organizations in which the organization: *Has positions in
governance bodies; * Participates in projects or committees; *Provides substantive
2.5 Number of countrieswhere the organization operates, and names of countries with ● 10,11 funding beyond routine membership dues; or *Viewsmembership as strategic.
eithermajor operations or that are specifically relevant to the sustainability issues
covered in the report. 4.14 List of stakeholder groups engaged by the organization. ● 28,29
2.6 Nature of ownership and legal form. ● 10,11 4.15 Basis for identification and selection of stakeholders with whom to engage. ● 28,29
2.7 Markets served (including geographic breakdown, sectors served, and types of ● 10,11 4.16 Approaches to stakeholder engagement, including frequency of engagement by type ● 28,29
customers/beneficiaries). and by stakeholder group.
2.8 Scale of the reporting organization. ● 10,11 4.17 Key topics and concerns that have been raised through stakeholder engagement, ● 28,29
and how the organization has responded to those key topics and concerns, including
2.9 Significant changes during the reporting period regarding size, structure, ● 10,11 through its reporting.
or ownership.
Economic 20-21
2.10 Awards received in the reporting period. ● 68,69
Economic EC1 Direct economic value generated and distributed, including revenues, operating ● 77-81
Report 3.1 Reporting period (e.g., fiscal/calendar year) for information provided. ● 2 Performance costs, employee compensation, donations and other community investments,
Parameters 3.2 Date ofmost recent previous report (if any). ● 2 retained earnings, and payments to capital providers and governments.
3.3 Reporting cycle (annual, biennial, etc.) ● 2 EC2 Financial implications and other risks and opportunities for the organization's ● 14,15
activities due to climate change.
3.4 Contact point for questions regarding the report or its contents. ● 2
EC3 Coverage of the organization's defined benefit plan obligations. ● 36
3.5 Process for defining report content. ● 2
EC4 Significant financial assistance received fromgovernment. ● - zero
3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ● 2
ventures, suppliers). See GRI Boundary Protocol for urther guidance. Market EC5 Range of ratios of standard entry level wage by gender compared to local N/A - We do not report on by
Presence minimum wage at significant locations of operation. region yet as we have
3.7 State any specific limitations on the scope or boundary of the report ● 2 thus far been unable to
(see completeness principle for explanation of scope). gather the data about
3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced ● 2 minimum wage
operations, and other entities that can significantly affect comparability fromperiod EC6 Policy, practices, and proportion of spending on locally-based suppliers ● 44-45
to period and/or between organizations. at significant locations of operation.
3.9 Data measurement techniques and the bases of calculations, including ◐ 2,64,65 EC7 Procedures for local hiring and proportion of senior management hired from the ◐ 35
assumptions and techniques underlying estimations applied to the compilation local community at significant locations of operation.*
of the Indicators and other information in the report. Explain any decisions not to
apply, or to substantially diverge from, the GRI Indicator Protocols. Indirect EC8 Development and impact of infrastructure investments and services provided ● 46-51
Economic primarily for public benefit through commercial, in-kind, or pro bono engagement.
3.10 Explanation of the effect of any re-statements of information provided in earlier ● 2 Impacts
reports, and the reasons for such re-statement (e.g.,mergers/acquisitions, change EC9 Understanding and describing significant indirect economic impacts, including the ● 46-51
of base years/periods, nature of business,measure mentmethods). extent of impacts.
Environmental 58-60
3.11 Significant changes fromprevious reporting periods in the scope, boundary, ● 2
or measurement methods applied in the report. Materials EN1 Materials used byweight or volume. ● 64
3.12 Table identifying the location of the Standard Disclosures in the report. ● 72-75 EN2 Percentage of materials used that are recycled inputmaterials. ● 64
3.13 Policy and current practicewith regard to seeking external assurance for the report. ● 70,71 Energy EN3 Direct energy consumption by primary energy source. ● 62
Governance, 4.1 Governance structure of the organization, including committees under the highest ● 22,23 EN4 Indirect energy consumption by primary source. ● 62
Commitments governance body responsible for specific tasks, such as setting strategy or
EN5 Energy saved due to conservation and efficiency improvements. ● 60,61
and organizational oversight.
Engagement EN6 Initiatives to provide energy-efficient or renewable energy based products and ser- ● 60,61
4.2 Indicatewhether the Chair of the highest governance body is also an executive ● 22,23
vices, and reductions in energy requirements as a result of these initiatives.
officer.
EN7 Initiatives to reduce indirect energy consumption and reductions achieved. ● 60,61
4.3 For organizations that have a unitary board structure, state the number and gender ● 22,23
of members of the highest governance body that are independent and/or Water EN8 Total water withdrawal by source. ● 62
non-executivemembers. EN9 Water sources significantly affected bywithdrawal ofwater. ◐ 56
4.4 Mechanisms for shareholders and employees to provide recommendations or ● 22,23 EN10 Percentage and total volume ofwater recycled and reused. ● 56
direction to the highest governance body.
Biodiversity EN11 Location and size of land owned, leased,managed in, or adjacent to, protected areas ● 56
4.5 Linkage between compensation for members of the highest governance body, senior ● 22,23 and areas of high biodiversity value outside protected areas.
managers, and executives (including departure arrangements), and the organiza-
tion's performance (including social and environmental performance). EN12 Description of significant impacts of activities, products, and services on biodiversity ● 56
in protected areas and areas of high biodiversity value outside protected areas.
4.6 Processes in place for the highest governance body to ensure conflicts of interest ● 22,23
are avoided. EN13 Habitats protected or restored. ● 56
4.7 Process for determining the composition, qualifications, and expertise of ● 22,23 EN14 Strategies, current actions, and future plans formanaging impacts on biodiversity. ● 47
the members of the highest governance body and its committees, including any EN15 Number of IUCN Red List species and national conservation list species with N/A - operations where are no
consideration of gender and other indicators of diversity. habitats in areas affected by operations, by level of extinction risk. conservation list species
74 75
G3.1 Indicators Reporting Page Remarks G3.1 Indicators Reporting Page Remarks
status status
Emissions, EN16 Total direct and indirect greenhouse gas emissions by weight. ● 63-64 Freedom of HR5 Operations and significant suppliers identified in which the right to exercise ● 33
effluents EN17 Other relevant indirect greenhouse gas emissions by weight. ● 63-64 association freedom of association and collective bargaining may be violated or at significant
and waste and collective risk, and actions taken to support these rights.
EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. ● 60-63 bargaining
EN19 Emissions of ozone-depleting substances by weight.* ◐ - no emissions Child labor HR6 Operations and significant suppliers identified as having significant risk for ● - No child labor or forced
incidents of child labor, andmeasures taken to contribute to the effective abolition labor in compliance with
EN20 NOx, SOx, and other significant air emissions by type and weight. ● 56 labor laws
of child labor.
EN21 Total water discharge by quality and destination. ● 56
Prevention of HR7 Operations and significant suppliers identified as having significant risk for ● -
EN22 Total weight of waste by type and disposal method. ● 55 forced and incidents of forced or compulsory labor, andmeasures to contribute to the elimina-
EN23 Total number and volume of significant spills. ● - zero compulsory tion of all forms of forced or compulsory labor.
labor
EN24 Weight of transported, imported, exported, or treated waste deemed hazardous N/A - We do not report on this
under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of issue as the disclosure of Security HR8 Percentage of security personnel trained in the organization's policies or proce- ● - All security managers
transported waste shipped internationally. impact is not material to practices dures concerning aspects of human rights that are relevant to operations. completed HR8
our business
Indigenous HR9 Total number of incidents of violations involving rights of indigenous people and ● - zero
EN25 Identity, size, protected status, and biodiversity value of water bodies and related N/A - We do not report on this rights actions taken.
habitats significantly affected by the reporting organization's discharges of water issue as the disclosure of
impact is not material to Assessment HR10 Percentage and total number of operations that have been subject to human rights N/A - We do not have related
and runoff. evaluation
our business reviews and/or impact assessments.
Products and EN26 Initiatives to mitigate environmental impacts of products and services, and extent ● 14,15 Remediation HR11 Number of grievances related to human rights filed, addressed and resolved ● - zero
service of impact mitigation. through formal grievancemechanisms.
EN27 Percentage of products sold and their packaging materials that are reclaimed by ● 55 Society 46-47
category. Local SO1 Percentage of operations with implemented local community engagement, impact ● 46-51
Compliance EN28 Monetary value of significant fines and total number of non-monetary sanctions for ● - zero communities assessments, and development programs.
noncompliance with environmental laws and regulations. SO9 Operationswith significant potential or actual negative impacts ● - zero
Transport EN29 Significant environmental impacts of transporting products and other goods and ◐ 58-61 on local communities.
materials used for the organization's operations, and transporting members of the SO10 Prevention and mitigation measures implemented in operations with significant ● 46-51
workforce. potential or actual negative impacts on local communities.
Overall EN30 Total environmental protection expenditures and investments by type. ● 63 Corruption SO2 Percentage and total number of business units analyzed for risks related to ● - zero
Labor Practices and Decent Work 32-35 corruption.
Employment LA1 Total workforce by employment type, employment contract, and region, broken ● 35-36,65 SO3 Percentage of employees trained in organization's anti-corruption policies and ● 24,25
down by gender. procedures.
LA2 Total number and rate of new employee hires and employee turnover by age group, ● 25,65 SO4 Actions taken in response to incidents of corruption. ● - zero
gender, and region. Public policy SO5 Public policy positions and participation in public policy development and lobbying. ● - zero
LA3 Benefits provided to full-time employees that are not provided to temporary or ● 35 SO6 Total value of financial and in-kind contributions to political parties, politicians, ● - zero
part-time employees, bymajor operations. and related institutions by country.
LA15 Return towork and retention rates after parental leave, by gender.* ◐ 36 Anti-competi- SO7 Total number of legal actions for anti-competitive behavior, anti-trust, andmonopoly ● - zero
Labor/ LA4 Percentage of employees covered by collective bargaining agreements. ● 65 tive behavior practices and their outcomes.
management LA5 Minimumnotice period(s) regarding significant operational changes, ● 32,33 Compliance Monetary value of significant fines and total number of non-monetary sanctions for ● - zero
relations SO8
including whether it is specified in collective agreements. non-compliance with laws and regulations.
Occupational LA6 Percentage of total workforce represented in formal joint management-worker ● 65 Product responsibility 14-15
health and health and safety committees that help monitor and advise on occupational health Customer PR1 Life cycle stages in which health and safety impacts of products and services are ● 27
safety and safety programs. health and assessed for improvement, and percentage of significant products and services
LA7 Rates of injury, occupational diseases, lost days, and absenteeism, ● 52-54 safety categories subject to such procedures.
and number of work-related fatalities by region and by gender. PR2 Total number of incidents of non-compliancewith regulations and voluntary codes ● - zero
LA8 Education, training, counseling, prevention, and risk-control programs in place to ● 52-54 concerning health and safety impacts of products and services during their life
assist workforce members, their families, or community members regarding seri- cycle, by type of outcomes.
ous diseases. Product and PR3 Type of product and service information required by procedures, and percentage of ● - 100%
LA9 Health and safety topics covered in formal agreements with trade unions. ● 52-54 service significant products and services subject to such information requirements.
labeling PR4 Total number of incidents of non-compliance with regulations and voluntary codes ● - zero
Training and LA10 Average hours of training per year per employee by gender, and by employee ● 65
education category. concerning product and service information and labeling, by type of outcomes.
LA11 Programs for skills management and lifelong learning that support the continued ● 35,36 PR5 Practices related to customer satisfaction, including results of surveysmeasuring ● 37-39
employability of employees and assist them inmanaging career endings. customer satisfaction.
LA12 Percentage of employees receiving regular performance and career development ● 65 Marketing PR6 Programs for adherence to laws, standards, and voluntary codes related tomarket- ● - zero
reviews, by gender. communica- ing communications, including advertising, promotion, and sponsorship. Programs
tions for adherence to laws, standards, and voluntary codes related tomarketing com-
Diversity and LA13 Composition of governance bodies and breakdown of employees per employee ● 22,23 munications, including advertising, promotion, and sponsorship.
equal category according to gender, age group,minority group membership, and other
opportunity indicators of diversity. PR7 Total number of incidents of non-compliancewith regulations and voluntary codes ● - zero
concerningmarketing communications, including advertising, promotion, and spon-
LA14 Ratio of basic salary and remuneration of women to men by employee category, by ● - Equal remuneration for
women and men
sorship by type of outcomes.
significant locations of operation.
Customer PR8 Total number of substantiated complaints regarding breaches of customer privacy ● - no case of relevant
Human Rights complaints
privacy and losses of customer data.
Investment and HR1 Percentage and total number of significant investment agreements and contracts ● - zero Compliance PR9 Monetary value of significant fines for non-compliancewith laws and regulations ● - no case of relevant
procurement that include clauses incorporating human rights concerns, or that have undergone concerning the provision and use of products and services. complaints
practices human rights screening.
HR2 Percentage of significant suppliers, contractors and other business partners that ● 42-45
have undergone human rights screening, and actions taken. * Reasons for partially reporting
HR3 Total hours of employee training on policies and procedures concerning aspects of ● 65 - 3.9 : data measurement and calculation methods will be specified only if deemed necessary.
human rights that are relevant to operations, including the percentage of employees - EC7, LA15 : Not material issues for SHI.
trained.
zero
- EN19 : SHI creates minuscule ozone layer-depleting substance.
Non- HR4 Total number of incidents of discrimination and corrective actions taken. ● -
discrimination
76 77
Report of Independent Auditors Financial Statement
Samsung Heavy Industries Co., Ltd. and Subsidiaries

Consolidated Statements of Financial Position
To the Board of Directors and Shareholders of December 31, 2012 and 2011 unit : thousands in KRW
Samsung Heavy Industries Co., Ltd. 2012 2011

Assets
We have audited the accompanying consolidated statements of financial position of Samsung Current assets 10,275,893,574,371 9,424,201,877,074
Heavy Industries Co., Ltd. and its subsidiaries (collectively the “Group”) as of December 31, Cash and cash equivalents 928,919,869,752 805,572,644,011
2012 and 2011, and the related consolidated statements of income, comprehensive income, Short-term financial instruments 235,015,126,124 483,461,589,473
changes in equity and cash flows for the years then ended, expressed in Korean won. These Trade accounts and notes receivable 536,333,681,485 534,508,035,506
financial statements are the responsibility of the Group's management. Our responsibility is Due from customers for contract work 4,412,295,493,362 3,351,284,206,914
to express an opinion on these financial statements based on our audits. Other accounts receivable 71,883,036,809 53,909,186,460
We conducted our audits in accordance with auditing standards generally accepted in the Re- Advance payments 1,500,473,767,424 1,674,530,475,398
public of Korea. Those standards require that we plan and perform the audit to obtain reason- Prepaid expenses 83,021,196,234 62,212,187,959
able assurance about whether the financial statements are free of material misstatement. An Current derivative financial instruments 695,153,959,673 379,806,110,123
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in Current firm commitment assets 914,150,821,358 1,290,817,823,584
the financial statements. An audit also includes assessing the accounting principles used and Inventories 699,224,302,870 540,402,632,739
significant estimates made by management, as well as evaluating the overall financial state- Other current financial assets 70,686,474,774 128,112,214,248
ment presentation. We believe that our audits provide a reasonable basis for our opinion. Other current assets 128,735,844,506 119,584,770,659
In our opinion, the consolidated financial statements, referred to above, present fairly, in all Non-current assets 6,359,073,001,166 6,989,737,126,115
material respects, the financial position of Samsung Heavy Industries Co., Ltd. and its sub- Long-term available-for-sale financial assets 144,905,326,115 169,605,818,462
sidiaries as of December 31, 2012 and 2011, and their financial performance and cash flows Investments in associates and joint ventures 5,784,826,171 291,959,991
for the years then ended, in accordance with International Financial Reporting Standards as Property, plant and equipment 5,277,951,297,276 5,408,259,478,617
adopted by the Republic of Korea (“Korean IFRS”). Investment properties 108,941,577,642 88,477,741,163
Auditing standards and their application in practice vary among countries. The procedures Intangible assets 37,953,560,896 86,303,388,432
and practices used in the Republic of Korea to audit such financial statements may differ from Long-term prepaid expenses 66,468,251,150 67,007,181,266
those generally accepted and applied in other countries. Accordingly, this report is for use by Derivative financial instruments 338,635,829,053 260,881,309,959
those who are informed about Korean auditing standards and their application in practice. Firm commitment assets 116,279,257,295 660,403,451,778
Non-current accounts receivable 142,131,901,844 192,360,756,828
Seoul, Korea
Other financial assets 119,888,468,897 56,146,039,619
March 7, 2013
Deferred income tax assets 132,704,827 0
Total assets 16,634,966,575,537 16,413,939,003,189
This report is effective as of March 7, 2013, the audit report date. Certain subsequent events or circumstances, which
may occur between the audit report date and the time of reading this report, could have a material impact on the ac-
companying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should
understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such
subsequent events or circumstances, if any.
78 79
Samsung Heavy Industries Co., Ltd. and Subsidiaries

Consolidated Statements of Income
Years Ended December 31, 2012 and 2011 unit: thousand in KRW, except per share amounts
2012 2011 2012 2011

Liabilities Revenue 14,489,473,629,478 13,391,764,073,457
Current liabilities 8,918,667,483,656 10,538,969,962,586 Cost of sales 12,554,345,285,475 11,628,385,019,054
Trade accounts and notes payable 1,436,067,207,979 829,668,790,435 Gross profit 1,935,128,344,003 1,763,379,054,403
Short-term borrowings 1,246,910,609,025 584,833,913,020 Selling and administrative expenses 729,471,513,511 680,769,013,988
Other accounts payable 125,166,887,807 111,286,447,044 Operating profit 1,205,656,830,492 1,082,610,040,415
Advance receipts 1,237,302,397,514 2,117,994,148,150 Other income 4,221,835,849,295 4,188,451,852,859
Due to customers for contract work 2,729,780,614,735 3,483,768,926,133 Other expenses 4,418,558,382,292 4,111,082,822,674
Accrued expenses 575,214,149,394 556,797,933,547 Financial income 312,148,482,270 204,812,915,680
Income tax payable 113,195,286,805 91,439,276,589 Financial costs 275,692,989,567 182,027,896,449
Current derivative financial instruments 407,645,606,706 835,558,558,406 Share of losses of associates and joint ventures 348,611,702 32,449,704,960
Current firm commitment liabilities 595,777,530,690 711,837,833,458 Profit before income tax 1,045,041,178,496 1,150,314,384,871
Current portion of long-term debts 205,737,033,336 1,099,433,009,780 Income tax expense 248,652,840,345 299,199,290,553
Provisions 134,106,278,942 10,849,777,057 Profit for the year 796,388,338,151 851,115,094,318
Other current liabilities 111,763,880,723 105,501,348,967 Profit attributable to: Equity holders of the Company 796,396,684,256 851,241,109,153
Non-current liabilities 2,433,350,028,307 1,230,980,306,282 Non-controlling interest (8,346,105) (126,014,835)
Debentures 1,196,289,548,087 0 Earnings per share for profit attributable to the equity - -
Long-term debts 544,293,746,697 99,650,991,883 holders of the company during the year
Retirement benefit obligations 97,649,798,678 139,305,601,855 Basic earnings per share 3,673 3,930
Other provisions 44,043,300,000 31,521,357,000 Diluted earnings per share 3,670 3,923
Derivative financial instruments 117,592,176,691 639,098,872,059

Firm commitment liabilities 336,939,070,472 265,197,264,546
Other financial liabilities 19,839,010,455 26,846,253,207
Deferred income tax liabilities 76,703,377,227 29,359,965,732
Total liabilities 11,352,017,511,963 11,769,950,268,868 Samsung Heavy Industries Co., Ltd. and Subsidiaries
Equity attributable to owners of the Parent Consolidated Statements of Comprehensive Income
Capital stock 5,282,602,141,651 4,643,619,759,092 Years Ended December 31, 2012 and 2011 Unit : thousand in KRW
Common stock 1,154,951,155,000 1,154,951,155,000 2012 2011

Common stock 1,154,376,930,000 1,154,376,930,000 Profit for the year 796,388,338,151 851,115,094,318
Preferred stock 574,225,000 574,225,000 Other comprehensive income (50,866,446,836) (234,890,423,158)
Capital surplus 417,172,244,393 417,172,244,393 Change in value of available-for-sale financial assets (23,745,786,912) (137,492,543,859)
Accumulated other comprehensive income 62,847,747,664 114,473,488,931 Gains and losses from derivative valuation 5,540,641,173 1,202,901,685
Other components of equity (650,927,722,273) (652,732,153,460) Actuarial gain and loss on post employment benefit bliga- 1,019,791,072 (133,757,697,483)
Retained earnings 4,298,558,716,867 3,609,755,024,228 tions
Non-controlling interest 346,921,923 368,975,229 Currency translation differences (38,894,412,274) 15,442,560,132
Total equity 5,282,949,063,574 4,643,988,734,321 Tax effects of other comprehensive Income(loss) 5,213,320,105 19,714,356,367
Total liabilities and equity 16,634,966,575,537 16,413,939,003,189 Other comprehensive income(loss) for the year, net of tax (50,866,447) (234,890,423)
Total comprehensive income for the year 745,521,891,315 616,224,671,160
Attributable to: Equity holders of the Company 745,543,944,621 616,370,171,645
Non-controlling interest (22,053,306) (145,500,485)
Total comprehensive income for the year 745,521,891 616,224,671
80 81
Samsung Heavy Industries Co., Ltd. and Subsidiaries Samsung Heavy Industries Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows
Years Ended December 31, 2012 and 2011 unit : thousand in KRW Years Ended December 31, 2012 and 2011 unit : thousand in KRW
Attributable to equity holders of the company Non- Total equity 2012 2011
controlling
Capital stock Capital surplus Accumulated Other Retained Total interest Cash flows from operating activities
Other Components earnings
Comprehensive of Equity Cash generated from(used in) operations (1,003,641,615,223 ) 1,880,259,527,725
income
Interest received 69,222,695,636 214,675,861,370
Balance at January 1, 2011 1,154,951,155,000 417,172,244,393 208,911,777,799 (656,270,563,969) 3,007,188,606,965 4,131,953,220,188 502,175,714 4,132,455,395,902
Interest paid (87,168,544,480) (108,856,302,636)
Comprehensive income
Dividends received 1,216,364,340 1,395,712,600
Profit for the year - - - - 851,241,109,153 851,241,109,153 (126,014,83 5) 851,115,094,31 8
Income tax paid (173,068,001,038) (547,711,004,644)
Change in value of vailable- - - (110,960,492,070) - - (110,960,492,070 ) - (110,960,492,07 0)
for-sale financial assets Net cash generated from (used in) operating activities (1,193,439,100,765 ) 1,439,763,794,415
Gains and losses from - - 1,060,157,420 - - 1,060,157,420 - 1,060,157,420 Cash flows from investing activities
derivative valuation
Disposal of short-term financial instruments 248,445,705,241 324,879,319,558
Currency translation dif- - - 15,462,045,782 - - 15,462,045,782 (19,485,650 ) 15,442,560,132
ferences Acquisition of long-term available- (364,777,443) (4,907,422,642)
for-sale financial assets
Actuarial loss on post em- - - - - (140,432,648,64 0) (140,432,648,640 ) - (140,432,648,64 0)
ployment benefit bligations 610,500,000 49,988,005,033
Disposal of long-term available-
Transactions with equity for-sale financial assets
holders of the Company
Acquisition of associates and joint ventures (39,710,459,709) (5,645,696,879)
Dividends relating to 2010 - - - - (108,242,043,25 0) (108,242,043,250 ) - (108,242,043,25 0)
Disposal of associates and joint ventures 59,763,598,555 -
Gain on of disposal - - - 328,504,943 - 328,504,943 - 328,504,943
treasury stock Acquisition of property, plant and equipment (245,019,098,921) (305,914,973,708)
Disposal of property, plant and equipment 14,999,210,038 64,186,073,965
Treasury stock - - - 3,367,697,766 - 3,367,697,766 - 3,367,697,766
Disposal of investment properties 29,169,790,398 53,782,168,447
Stock purchase options - - - (157,792,200) - (157,792,200) - (157,792,200)
Acquisition of intangible assets (1,981,077,673) (4,656,719,526)
Proceeds from shares - - - - - 12,300,000 12,300,000
issued Disposal of intangible assets 3,772,727,273 3,818,417,223
Balance at December 31, 1,154,951,155,000 417,172,244,393 114,473,488,931 (652,732,153,460) 3,609,755,024,228 4,643,619,759,092 368,975,229 4,643,988,734,321 Disposal of other current financial assets 22,655,308,357 5,712,406,550
2011
Acquisition of other current financial assets (4,611,333,705) (43,647,885,270)
Balance at January 1, 2012 1,154,951,155,000 417,172,244,393 114,473,488,931 (652,732,153,460) 3,609,755,024,228 4,643,619,759,092 368,975,229 4,643,988,734,3 21
Disposal of other non-current financial assets 283,499,076 7,676,635,516
Comprehensive income
Acquisition of other non-current financial assets (96,516,207,736) (31,019,738,597)
Profit for the year - - - - 796,396,684,256 796,396,684,256 (8,346,105) 796,388,338,15 1
Disposal of other non-current assets - 933,917,406
Change in value of - - (16,944,842,204) - - (16,944,842,204) - (16,944,842,204 )
available-for-sale financial Net cash provided by (used in) investing activities (8,502,616,249) 115,184,507,076
assets
Cash flows from financing activities
Gains and losses from - - 4,199,806,010 - - 4,199,806,010 - 4,199,806,010
derivative valuation Proceeds(Repayments) of short-term borrowings 683,767,170,888 (989,695,128,801)
Repayments of current portion of long-term debts (1,095,058,734,295 ) (166,136,229,150)
Currency translation dif- - - (38,880,705,073) - (38,880,705,073) (13,707,201 ) (38,894,412,274 )
ferences Proceeds from long-term borrowings 658,282,493,881 74,402,466,422
Actuarial gain on post - - - - 773,001,633 773,001,633 - 773,001,633 Issue of bonds 1,195,585,000,000 -
employment
benefit obligations Disposal of treasury stock 637,340,000 1,268,140,000
Transactions with equity Dividends paid (108,365,993,250) (108,242,043,250)

holders of the Company
Net cash provided by (used in) financing activities 1,334,847,277,224 (1,188,402,794,779 )
Dividends relating to 2011 - - - - (108,365,993,25 0) (108,365,993,250 ) - (108,365,993,25 0)
Exchange losses on cash and cash equivalents (9,558,334,469) (7,716,929,799)
Gain on disposal of treasury - - - 140,683,358 - 140,683,358 - 140,683,358
stock
Net increase in cash and cash equivalents 123,347,225,741 358,828,576,913
Cash and cash equivalents at beginning of year 805,572,644,011 446,744,067,098
Treasury stock - - - 1,726,641,329 - 1,726,641,329 - 1,726,641,329
Cash and cash equivalents at the end of year 928,919,869,752 805,572,644,011
Stock purchase options - - - (62,893,500) - (62,893,500) - (62,893,500)
Balance at December 31, 2012 1,154,951,155,00 417,172,244,393 62,847,747,664 (650,927,722,273) 4,298,558,716,8 5,282,602,141,65 346,921,92 5,282,949,063,5
Samsung Heavy Industries Sustainability Report 2012
This report can be downloaded in PDF format from our website: http://www.shi.samsung.co.kr
communication team 33th FL, Samsung Life Insurance Seocho Tower, 1321-15 Seocho-Dong,
Seocho-Gu, 137-955, Seoul, Korea Tel: +82-2-3458-6312 Fax: +82-2-3458-6298
This report is printed on FSCTM (Forest Stewardship Council)
C111531 Certified paper with soy ink.

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Samsung Heavy Industries

Sustainability Report 2012

specified information on term period of data collection were

credibility. For detailed assurance results, refer to page 70. 32 Employee

shore industry. 68 Awards and Membership

70 Third Party Assurance Statement

72 GRI G3.1 Guideline Index

76 Report of Independent Auditors

communication team 33th FL, Samsung Life Insurance Seocho

09 D elivered the world’s largest

SHI aspires to be a global leader,

Samsung Heavy Industries will contribute to establishing an affluent future society

Samsung Heavy Industries President & CEO

Rongcheng Co., Ltd.

Head Office/E&I Division

Suwon Power & Control

Daeduk Research Center

Company Name Samsung Heavy Industries Co., Ltd.

1,154.9 billion 13,504 persons

Shipbuilding & Offshore E&I

Power & Control systems Wind energy

Eco-friendly Technologies Research & Development

30% reduction of greenhouse gas

Development of Eco-friendly LNG-related Technologies Eco-friendly Technology Differentiation

Eco-friendly Technologies Applied to GF Drillship

1) Apply operability-maximizing specifications > Reduce operational cost

Vision & Strategy

Business Structure and Growth Strategy for 2020

Contribute to enhancing customer satisfaction and quality

Shareholder Structure BoD Committee Structure

BoD Structure and Operation BoD Expertise

Chan-Soon Nam Outside director Auditor

Compliance Management Raising Employee Awareness of Compliance Management

Produce and distribute regular PR materials

Risk Management Non-financial Risk Prevention

Hedge, order Execute, deliver age.

type of mergency case

Incomings Environmental accident •Oil leakage at fueling ships

Outgoings Safety-related accident •Safety-related accident (injuries of employees)

SHI Stakeholder Engagement

SHI provides employees with a variety of

Employee Labor Council

Employee Communication Contract Briefing Session

Special Case NO. Description 2011 2012

In-house Reporters 2 Restaurant/Dormitory/Restroom 18(13%) 99(18%)

Talent Training System

Globalization Cultivate global CEOs • Globalization training:

Leadership Foster a sense of mis- • Basic training:

Support for Sustainable Post-retirement Life Client

Support for female employees

The 1st Korean Speaking Contest

Customer Satisfaction Activities Fortifying Safety and Environment Protection Standards

Sight Inspection by Managers Identification of incompliance with twelve major

Modification of operation standard/

BBS+ Quality Assurance

Training for Workers

(Annual, BBS+ Lecturer)

(Annual, BBS+ Lecturer)

Partner Companies Fortifying Grounds for Sustainable Growth

09 D elivered the world’s largest

1) Apply operability-maximizing specifications > Reduce operational cost

Globalization Cultivate global CEOs • Globalization training:

Leadership Foster a sense of mis- • Basic training:

2012 •ISO 50001(Energy Management)

Establishment of green Establishment of green Development of eco- •OHSAS 18001

•Support for green manage- •Disclosure of green