K Business Group has been updating its shared growth model focusing on “teaching how to catch fish” instead of “giving fish.” The nation’s third largest conglomerate has decided to expand its shared growth management to three categories °™ education, technology, and funding °™ in order to help its secondary and tertiary cooperative SMEs strengthen their competitive edge and pursue sustainable growth this year.

SK Group Chairman Chey Tae-won’s focus on corporate responsibility in society is becoming the subject of public attention. The group was quick in pulling out of its maintenance, repair, and operation (MRO) business last August as government and social pressure on large companies heated up to dispose of such affiliates. At that time, SK decided to convert MRO Korea, a service provider that posts 100 billion won in annual sales by procuring expendable goods like stationary and tools for other group affiliates, into a social enterprise. 

SK Group has become the first Korean company to put shared growth into practice by strategizing a shared growth management system and codifying it.

In September 2008, the group inaugurated the SK Shared Growth Committee headed by SK Chemical Vice Chairman Kim Chang-keun. The committee has been committed to ensuring shared growth by adopting and implementing the top three guidelines recommended by the Fair Trade Commission for signing fair contracts, selecting fair cooperative companies and preventing unfair trading practices.

Chairman Chey has often emphasized that the development of its cooperative SMEs is one essential factor for his companies’ survival, and partnerships with SMEs are essential for SK’s continuous corporate development and the implementation of its “happiness management” strategy. 

SK Group believes that the group should commit itself to ensuring shared growth by providing support to help its cooperative companies secure a competitive edge rather than transiently offering a helping hand to them. This is the reason the business group continues to advance its technology, funding, and management assistance to its cooperative SMEs. In particular, SK Group is aggressive in offering educational programs to its cooperative SMEs’ executives and staff.

SK group affiliates have practical support programs for its cooperative SMEs in place. Ten SK subsidiaries, including SK Telecom and SK Energy, provide 100 percent cash payment in settlements. SK Telecom, SK Chemical, and SK E&C offers its prominent cooperative SMEs preferential procurement programs such as the exemption of guarantee insurance and priority for participation in competitive biddings. The group plans to develop a shared growth support system designed to ensure cash payments flowing from its primary cooperative SMEs to the secondary cooperative SMEs this year. The system will be test-operated by some SK subsidiaries in a pilot program before its group-wide implementation. 

SK Hynix plans to raise 10 billion won for shared-growth insurance during this year. The insurance is a safety net designed to prevent secondary cooperative companies from falling prey to bankruptcies by allowing them to borrow collateral-based loans if the primary cooperative companies go belly up.  

The group has already established a system in which its cooperative SMEs can suggest technological ideas, which will then be evaluated. SK plans to introduce an escrow system to protect its cooperative SMEs’ technology while expanding a sub-license system to help its cooperative SMEs develop their technologies for free. These are part of the group’s efforts to strategize its cooperative SME’s technological collaboration. The group decided to expand an escrow system, which has been put in place at SK Telecom and SK E&C, to SK Hynix. This year at least 10 patented technologies will be handed over to its cooperative SMEs, group officials said.

CHAIRMAN CHEY’S INITIATIVES 

Public attention is on a “social enterprise” into which SK Group has converted MRO Korea. The group has opted for the establishment of a social enterprise since the conventional wisdom of conducting social contribution activities solely through donations cannot efficiently solve social woes. 

A social enterprise is an organization that fits somewhere between for-profit companies and non-profit organizations, and is designed to pursue social purposes such as the enhancing of the quality of residents’ lives by creating jobs for the underprivileged and providing social services, rather than maximizing profits for external shareholders. 

Chey stressed that social enterprises could create scores more social and economic value, compared to the three-fold social and economic value for such conventional social activities such as donations. He also added that companies have to expand their social enterprise models so as to create social values by capitalizing on the corporate mechanism. 

SK Group has already established or provided support to 69 social enterprises, including “Happy Lunch Box,” “Happy School,” and “Happy Library.” Happy Lunch Box offers free food to the elderly and children of the underprivileged while creating jobs by hiring cooks and delivery persons from among the underprivileged. Happy School is a model for providing quality educational programs after primary school classes by hiring teachers who are qualified certificate holders, but cannot find jobs. 

SK Group has created 6,000 jobs through the provision of support to social enterprises since 2005. An additional 4,000 jobs are to be created by 2013, bringing to 10,000 the total number of new jobs being created through the provision of support to social enterprises. 

The business group is developing social enterprise models that cover diverse business arenas, but do not conflict with the territory of existing SMEs. This is the reason SK Group, in cooperation with the Ministry of Justice, has established the Happy New Life Foundation, a social enterprise designed to help former prisoners return to society. The group provides support to Mezzanine I-Pack, a social enterprise that produces paper boxes for the self-sufficiency of North Korean defectors and low-income households.

A group official said national and provincial government, business, local government, civic organizations, and other economic entities need to establish and nurture diverse forms of social enterprises to solve social issues.