Order 927929: Research Report on Samsung

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SamSung ElEctronicS SuStainability RepoRt 2017

At Samsung Electronics, we publish annual sustainability reports with an

aim to transparently communicate our diverse achievements in creating

economic, social and environmental values to a wide array of stakehold-

ers. 2017 actually marks our 10th annual report.

Reporting Period

This report illustrates our economic, social and environmental activities

and achievements between January 1st and December 31st of 2016. For

a portion of the qualitative achievements, data until May 2017 are includ-

ed. As for quantitative achievements, this report provides numerical data

over the past three years to allow for trend analysis overtime.

Reporting Scope

This report spans all our worksites and supply chains in domestic and

global sites. Financial performance data are based on the consolidated

K-IFRS basis. Quantitative environmental performance of worksites is

based on the data collected from 38 production subsidiaries in domestic

and global sites.

Reporting Standards

This report was prepared in accordance with the Core Option of the GRI

(Global Reporting Initiative) G4 Guidelines.

For Further Details on This Report

Samsung Electronics Website

http://www.samsung.com

Sustainability Website

http://www.samsung.com/us/aboutsamsung/sustainability/sustainablemanagement/

IR Website

http://www.samsung.com/global/ir/

Samsung Electronics Newsroom

http://news.samsung.com/kr

http://news.samsung.com/global

This report was prepared by: Corporate Sustainability Management Office, Corporate Communications Team, Samsung Electronics

Address: 67, Sejong-daero, Jung-gu, Seoul, 04514, Korea

E-mail: [email protected]

About this RepoRt

Ceo MessAge

Dear Stakeholders,

We are living through challenging times.

Global economic recovery has been slow and uneven. Geo-political risk, previously con-

fined to the developing world, has also increased uncertainty in the developed world.

In parallel, we are seeing a paradigm shift in both economic and social terms as we ex-

perience a fourth industrial revolution, sweeping away old assumptions and subjecting

us all - both as individuals and businesses - to a new intensity of competition. Given the

current rhythm of change, sustainability has never been more vital to us all. As we set

out in this report, sound sustainability policy and execution are therefore top priorities

for Samsung.

First, as a major actor on the business scene worldwide, Samsung is particularly aware

of its responsibility for showing strong leadership in the era of the fourth industrial revo-

lution. We are acutely conscious of the need for ever-greater focus on adding value and

ensuring synergies across all our activities, thus enabling us to build the foundations for

future growth and tomorrow’s competitive edge. Indeed we will relentlessly push for-

ward our R&D and open innovation efforts - be this in artificial intelligence, big data, 5G,

high-performance semiconductors or any other area - because only through continued

innovation and excellence can we be of service to society at large.

Second, we fully endorse the UN Sustainable Development Goals (UN SDGs) that aim

to achieve a balanced development of economy, society and environment through busi-

ness’ engagement and value creation. Specifically, we are establishing in-house poli-

cies to promote the circular economy and hone our supply-chain management. Both of

these initiatives will favorably influence our operations going forward and hence boost

our contribution to key public policy priorities. We are also stepping up our corporate

citizenship programs. In April 2017, we established the Governance Committee on

CoMpAny oVeRView

Core Values

People

Quite simply, a company is its people. At Samsung, we are dedicated to giving our people a wealth of opportuni- ties to reach their full poten- tial.

Change

Change is constant and innovation is critical to the company’s survival.

Excellence

The entirety of our endeavors at Samsung is driven by an unyielding passion for ex- cellence and an unfaltering commitment to develop the best possible products and services in the market.

Integrity

Operating in an ethical man- ner is the foundation of our business. The sum of our every action is guided by a moral compass that ensures fairness, respect for all stake- holders and complete trans- parency.

Co-prosperity

Our business cannot be successful unless it creates prosperity and opportunity for people in every local and global community in which we operate.

Management Philosophy

At Samsung Electronics, we devote our human resources and technology to cre-

ate superior products and services, thereby contributing to a better global soci-

ety. This commitment is guided by our set of values that consist of ‘Management

Philosophy, Core Values, and Business Principles’. To this end, we translated our

five management principles into detailed action plan guidelines to establish the

Samsung Global Code of Conduct that all of our employees are guided by. To

drive our sustainable growth and define our way forward, we are guided by the

following core values, which are instrumental to the way our employees conduct

business.

1. We comply with laws and ethical standards.

2. We maintain a clean organizational culture with high integrity.

3. We respect customers, shareholders and employees.

4. We care for the environment, health and safety of all.

5. We are a socially responsible corporate citizens.

We devote our human resources and technology to create su-

perior products and services, thereby contributing to a greater

global society.

Business Principles

Philosophy

COMPANY OvERvIEw

QLED TV 65Q8C

Consumer electronics divisionCEbusiness diVisions

CES 2017 BEST OF INNOVATION AWARDS

the FRAMe In 2016, our Visual Display Business released quantum dot TV and was globally recognized

for its best-in-class picture quality, and our Serif

TV ushered in a new design paradigm in the TV

industry and elevated our position as an industry

leader.

The year 2017 is forecast to experience rapid

growth in UHD TVs and curved TVs thanks to an

increasing consumer awareness of high resolu-

tion and high picture quality. With an aim to pro-

vide the best-possible viewing experience to our

consumers, we will launch the world’s first and

only QLED TV that delivers the perfect 100%

color resolution, a newly emerging standard of

picture quality measurement that can strengthen

our leadership position in the premium TV mar-

ket. Moreover, ‘The Frame’ which transforms

any living room into an aesthetically-pleasing

gallery, along with other diverse accessories

equipped for each product line-up will enable us

to cater diverse consumer preferences. Further-

more, more developed version of our Smart Hub

will allow customers to enjoy a wide spectrum

of content on a single screen and feel the out-

Visual Display Business

standing user experience by controlling their set-

top box, game consoles, and all other peripheral

devices on a single remote control.

COMPANY OvERvIEw

it & Mobile Communications division

IM We rose to the top in the global smartphone mar-ket in 2016 by providing an enriched user experi- ence and smarter product capabilities, thereby

solidifying our market leadership. In addition to

our premium smartphone models, our mid-/low-

priced product line-ups allowed us to benefit

from positive consumer feedback in even broader

markets around the globe. We strengthened our

product ecosystem with wearables, IoT (Internet

of Things), and accessories while strengthening

our market competitiveness by broadening our

service offerings and B2B business portfolio into

mobile payment, security solutions, etc.

In 2017, we plan to bring meaningful and life-en-

riching innovation to deliver an enhanced consum-

er experience while thoroughly analyzing market

conditions to implement our global product line-up

strategy and pursue profitability. We will use our

top-notch R&D capabilities to introduce innova-

tive products that push the boundary of today’s

smartphone market and ensure unrivaled quality

management to increase consumer benefits. Fur-

thermore, our investment and R&D will continue

in the areas of IoT, artificial intelligence, conver-

gence-driven services, and in the B2B, which will

drive the momentum for the future growth.

Mobile Communications Business

Mobile phone Market Share in 2016

no.1

no.2

no.2 (Based on sales volume, Source: Strategy Analytics)

Smartphone Market Share in 2016

20.8%

Tablet Market Share in 2016

13.4%

Smartwatch Market Share in 2016

11.4%

Gear 360

Galaxy S8

COMPANY OvERvIEw

19.2%

device solutions division

DS Since 1993, we have firmly maintained our No.1

leadership in the global memory semiconductor

market while contributing to the overall growth

of the global IT market and building an unrivaled

competitive edge. In 2016, we pushed the limit of

memory semiconductor technology even further

by introducing a host of industry-first products:

the 10-nanometer class 16Gb LPDDR4 DRAM

chips enable an 8GB mobile DRAM package

for high-end smartphones and tablets, and the

15.36TB SAS SSD based on 48-layer 256Gb V-

NAND technology delivers the industry’s highest

storage capacity for leading enterprise customers.

Also, we have further accelerated the growth of

the advanced memory segment by bringing lead-

ing-edge DRAM and NAND flash based solutions

to the market. Among those, the 8GB HBM2

DRAM and the 8GB LPDDR4/4X mobile DRAM

offer exceptionally high speed and bandwidth

which are required for next-generation graphics

and mobile applications. In the NAND flash sector,

consumer SSDs such as the 2TB 960 PRO (M.2

NVMe SSD) and the 2TB T3 (portable SSD) helped

the market move toward higher density consumer

storage solutions. The 512GB BGA NVMe SSD in-

tegrates all essential SSD components in a single,

one-gram package, allowing maximized flexibility

when designing computing devices.

In 2017, we have been proactively responding

to broader market needs from mobile, PC, enter-

prise, and cloud services to Augmented Reality

(AR), Virtual Reality (VR), and automotive applica-

tions. To this end, we plan to introduce a more

extensive lineup of advanced memory products

that deliver unparalleled levels of performance

and capacity, including the latest 64-layer V-

NAND-based SSDs for consumer and enterprise

applications, ultra-compact eUFS and high-speed

Z-SSD. We will also continue our advancements

in the 10-nanometer process technology for

DRAM solutions and next-generation V-NAND

technologies to maintain our leadership and

contribute to the growth of the global memory

market.

Memory Business

COMPANY OvERvIEw

512GB BGA NVMe SSD 8GB LPDDR4 Mobile DRAM

960 PRO 2TB

DRAM Market Share in 2016

NAND flash Market Share in 2016

SSD Market Share in 2016

47.1%

35.2%

34.7% (Based on 2016 sales, Source: IHS)

12Mp Dual Pixel Image Sensor

no.1

B u I L D I N G A FA I r E r A N D G r E E N E r F u t u r E tO G E t H E r

• Strengthen the quality and safety management system

• Provide product information by launching country-specific websites

• Gather and address the Voice of Customers

• Identify and consult on customer reputations through the Reputation Institute (Europe/Central and Latin America)

• Customer satisfaction surveys conducted by external organizations

• Call centers, service centers

• Prosumer programs

• Samsung Electronics Newsroom

• Samsung Semicon Story

• YoungSamsung Community

• Product/service quality

• Safe product use

• Correct product information

• Transparent communication

Customers

• Stable profit generation

• Strengthen shareholder return policy

• Set up the Governance Committee under the BOD

• Reinforce transparency in operating external sponsorships

• Host the Investors Forum (June 2016)

- Attended by key institutional investors, analysts, and IT industry experts in domestic and global sites

- Brief ‘ARTIK’, quantum dot’, ‘PLP’ and other leading next-generation technologies

• Investor Relations meetings

• General shareholder meetings

• One-on-one meetings

• Analyst Day

• Samsung Electronics’ Corporate Films

YouTube URL: https://www.youtube.com/samsungelectronics

• Economic outcomes

• Risk management

• Information sharing

• Environmental, Social and Governance factors

• Manage work environment

• Build a creative organizational culture

• Declare the three-year Diversity & Inclusion Plan (North America)

• Operate a customized career life cycle program

• Host business briefings

• Work Council

• Counseling centers

• Satisfaction surveys

• Samsung LiVE

• Newsletters

• Reporting systems (compliance, ethics)

• Workplace health and safety

• Diversity and equal opportunity

• Training and career development

• Employment and benefits

• Labor relations

• Promote fair trade and shared growth

• Assist suppliers with their innovation initiatives

• Host the Tech Trans Fair

• Operate supplier support fund

• Ensure responsible management of the supplier work environment

• Hotline, Cyber Shinmungo, etc.

• Supplier meetings, Partner Collaboration Day, etc.

• Shared Growth Academy

• Management counseling group for suppliers

• Fair trade

• Shared growth

• Employees’ human rights protection

• Supplier assessment for their impacts on society

• Support local SMEs through the Smart Factory program

• Preserve the ecosystem of streams in the vicinity of our worksites

• Implement educational and recruitment corporate citizenship programs

• Operate employee volunteer groups

• Local volunteer centers

• Local community council

• Samsung Nanum Village

• Local Community Blog (Suwon, Gumi, and Gwangju sites)

• Yongin·Hwaseong community Blog (http://www.sotongsamsung.com/)

• Local recruitment, local economy revitalization, and other indirect economic effects

• Local environmental protection

• Donation, volunteering, and other social- giving initiatives

Shareholders & Investors

Employees

Suppliers

Local Communities

• Gather feedback from global NGOs

• Engage in the work of EICC (Electronic Industry Citizenship Coalition) and GeSI (Global e-Sustainability Initiative)

• Develop human rights policies in cooperation with BSR (Business for Social Responsibility)

• Business networking events

• Open and transparent engagement with NGOs

• Social responsibility for local communities and the environment

• Contribution to the UN SDGs

• Transparent and prompt information disclosure

• Operate SME support programs with government agencies

• Comply with laws and regulations on fair trade, workplace health & safety, and the environment

• Develop and operate a venture investment window in collaboration with governments

• Attend policy debates

• Attend council meetings

• Participate in policy consultative bodies

• Indirect economic effects

• Fair trade

• Health and safety

• Compliance

• Support their news coverage

• Host Media Day

• Press releases

• Samsung Electronics Newsroom

• Transparent and prompt information disclosure

NGOs, CSR Councils, Special- ized Institutions

Media

Governments

StAKEHOLDEr ENGAGEMENt

Our Strategy* Communication ChannelKey Concerns of Stakeholders Stakeholder

Key Stakeholders

SUSTAINABILITY STRATEGY

* For details of the major activity and impact that stakeholders have interest in, please refer to the chapter titled Key Impacts (page 40)

SuStAINABILIty MANAGEMENt VALuE CrEAtION

At Samsung, we strive to create social and environmental value as well as economic value through our sustainability management so as to contribute to the

development of the global society. Since such social and environmental values are difficult to quantify, we have taken a ‘quality over quantity’ approach in setting

and managing our sustainability management goals. Since 2016, we have adopted the ‘True Value’ method of KPMG that quantifies social and environmental in-

dicators in order to visualize the values that we create. In 2017, we reexamined and supplemented our value calculation methodology and added detailed imple-

mentation guides to further improve the reliability of the data.

We identified any positive/negative impacts our business operations had on the society or the environment and chose quantitative indicators that best represent

such impacts. We also studied global research outcomes that analyzed the economic value created by social and environmental issues in order to calculate the

unit-based monetary value of respective indicators. Such monetary value is presented in either positive (+) or negative (-) numbers, and they represent the total

social value (benefits and costs) that we either created or reduced at Samsung over the past year by December 31st of 2016. This approach identifies our True

Value that integrates socio-economic and environmental values, as well as financial ones, created through our business operation.

Since it is not viable to measure the value of all our sustainability management initiatives through the use of currently available indicators, we are constantly

monitoring the research activities conducted in measuring such value in order to expand our management indicators. We will strive to measure and manage our

social and environmental impact through the most diverse perspectives. In 2016, our financial value was approximately KRW 22.7 trillion, and our True Value, that

includes socio-economic and environmental values, amounted to nearly KRW 26 trillion. This means that our True Value rose by approximately 14.4% compared

to the current Financial Value and also rose by approximately 14.0% compared to 2015 True Value.

Value Measurement Methodology

Socio- Economic Value

Environmental Value

Measurement Methodology1)

• Dividends and interest payments to investors and creditors

• Investments made in the Partner Collaboration Fund

• Return on investment made in educational projects (118%)2)

• Return on investment made in infrastructure development projects (250%)3)

• Return on investment made in sanitary facility development projects (550%)4)

• Social costs that incur due to GHG emissions5)

• Social costs that incur due to the emission of air pollutants (NOx, SOx, PM)6)

• Social costs that incur due to water consumption based on severe water shortages in the area where our worksites are located7)

• Social costs that incur due to waste landfilling, incineration, and recycling respectively8)

Type

Investor value

Supplier support

Local community development

GHG emissions in the workplace

Atmospheric environmental impact

Aquatic environmental impact

Environmental impact of waste

Category

1) The above benefits and costs are adjusted in consideration of price fluctuations, and the currency rate was KRW 1,205/USD and KRW 1,270.19/Euro as of December 31st of 2016.

2) G.Psacharopoulos and H.A. Patrinos, Returns to investment in education: a further update (2004)

3) BCG, The cement sector: a strategic contributor to Europe’s future (2013)

4) G. Hutton, Global costs and benefits of drinking-water supply and sanitation interventions to reach the MDG target and universal coverage (2012)

5) EPA, Technical update of the social cost of carbon for regulatory impact analysis (2013)

6) EEA, Revealing the cost of air pollution from industrial facilities in Europe (2011)

7) TruCost PLC, Natural capital at risk: the top 100 externalities of business (2013)

8) A. Rabl, J. V. Spadaro and A. Zoughaib, Environmental impacts and costs of solid waste: a comparison of landfill and incineration (2009)

SUSTAINABILITY STRATEGY

• Investments made in corporate citizenship

programs

• Environmental discharge data

• Support for suppliers

Business Activity Investment

Value of Socio-Economic & Environmental mpact

Smart School support

Return on investment made in

school education in terms of

social benefits :118%

Calculation

Method

Example

• Research outcomes from global research

institutes

• Carbon price of the concerned country, etc.

Monetary Value

billion 28.6KRW billion 337KRW Social Value of Smart Schools:

Earnings

Financial Value

Socio-economic

Investor value Supplier support Local community development

Environmental

GHG emissions Atmospheric environmental

impact

Aquatic environmental

impact

Environmental impact of waste

True Earnings

True Value

22,726,092

3,558,580 823,200 88,295

-587,885 -14,556

-600,200 -4,761

25,988,765

(Unit: KRW million)

* The 2015 True Value figure was modified to KRW 22,787,178 million due to our use of renewable energy, integration of GHG emissions, and change in aquatic environmental impact value.

Supplier1)

69.2%

Local Community2)

0.2%

Shareholder & Investor3)

2.2%

Creditor4)

0.3%

Employee5)

13.1%

Government6)

4.8%

Ratio of Economic Value Distributed in 2016 (excluding 10.2% in retained earnings)

1) Cost of all products and services purchased by Samsung for its business operations, 2) Sum of all social contributions made through donations and other expense accounts, 3) Dividends paid, 4) Interest ex-

penses paid, 5) Sum of salaries, severance payments, and welfare benefits included in the cost of sales, R&D costs and SG&A costs, 6) Sum of consolidated income taxes, other taxes, and dues calculated on an

accrued basis

Key Financial Performance1)

Sales

Operating profit

Net income

Sales by Business Division2) /Region

Consumer Electronics

IT & Mobile Communications

Device Solutions_Semiconductor

Device Solutions_Display

Americas

Europe/CIS

China

Korea

Asia/Africa

Economic Value Distribution 　

[Supplier] Procurement costs

[Local Community] Social contributions

[Shareholder/Investor] Dividends

[Shareholder/Investor] Pay-out ratio

[Creditor] Interest expenses

[Employee] Remuneration

[Government] Taxes and dues by region

Asia

Korea

Americas/Europe

Others

Unit

KRW trillion

KRW trillion (%)

KRW trillion

KRW billion

KRW trillion

2014

206.2

25.0

23.4

50.2(22)

111.8(49)

39.7(18)

25.7(11)

68.7(33)

43.0(21)

33.0(16)

20.7(10)

40.8(20)

139.5

523

3,000

13.0

593

22.5

5.5

2015

200.7

26.4

19.1

46.9(21)

103.6(46)

47.6(21)

27.5(12)

68.9(34)

38.6(19)

31.0(15)

20.8(10)

41.3(22)

128.8

523

3,069

16.4

777

23.5

7.8

2016

201.9

29.2

22.7

47.0(21)

100.3(44)

51.2(23)

26.9(12)

68.7(34)

38.3(19)

35.6(18)

20.2(10)

39.1(19)

127.0

445

3,992

17.8

588

24.0

8.9

1) Based on the consolidated financial statement, 2) Based on net sales

Economy

PErFOrMANCE SuMMAry

SUSTAINABILITY STRATEGY

Customer Value Enhancement

Ratio of CS Career Path (in-house certification program)-certified employees 1)

Customer Satisfaction

An Eco-friendly and Safe Workplace

Workplace health and safety

Frequency rate2) 3)

Injury rate2) 4)

Sustainable Supply Chain

Securing suppliers’ sustainable competitiveness _ Comprehensive supplier evaluation

Suppliers evaluated5)

Suppliers rated excellent

Ratio of ISO 14001-certified suppliers6)

Ratio of OSHAS 18001-certified suppliers

Securing suppliers’ sustainable competitiveness _ Partner Collaboration Programs

Investment in the Partner Collaboration Fund

1st-tier suppliers

2nd-tier suppliers

Benefit shared in monetary value7)

Attendees at supplier training

1st-tier suppliers

2nd-tier suppliers

Trainees at supplier training8)

1st-tier suppliers

2nd-tier suppliers

1st-tier suppliers supported for their innovation initiatives

Korea

Overseas

Beneficiaries of the Industry Innovation Campaign9)

2nd-tier suppliers

SMEs without business transactions with Samsung

Beneficiaries of the Smart Factory program10)

Samsung suppliers

SMEs without business transactions with Samsung

2014

84.1

0.289

0.054

7,952

5,567

2,385

123

577

460

117

11,927

10,796

1,131

428

345

2015

83.7

0.240

0.045

8,649

6,121

2,528

173

615

517

12,694

11,002

1,692

433

310

123

120

2016

84.0

0.227

0.044

8,232

6,015

2,217

162

759

664

13,089

12,673

416

562

436

126

479

448

Society

Unit

Point

KRW 100 million

No. of suppliers

No. of persons

No. of suppliers

No. of companies

No. of suppliers

No. of companies

No. of suppliers

No. of companies

Page

1) Among all CS staff, 2) Based on all domestic employees and employees at the overseas manufacturing subsidiaries, 3) (No. of injuries ÷ No. of annual work hours) x 1,000,000, 4) (No. of injured workers ÷ No.

of workers) x 100, 5) All suppliers excluding those registered less than two years ago (annual registration) are subject to evaluations conducted in eight categories, 6) Demand that suppliers comply with ISO 14001

or other corresponding standards in the standard contract form, 7) Supported a total of 92 suppliers in 2016, 8) Including redundancies, a portion of the 2nd-tier suppliers became 1st-tier suppliers between 2015 and

2016, 9) 2014: 2nd year (Aug. 2014~Jul. 2015), 2015: 3rd year (Aug. 2015~Jul. 2016), 2016: 4th year (Aug. 2016~Jul. 2017), 10) Aim to support more than 1,000 companies by 2017

People First

Total employees1)

Korea

Overseas

Employees on permanent contracts

Employees on fixed-term contracts2)

Under 30

30’s

40 and older

Product development

Manufacturing

Sales/Marketing

Others

Staff3)

Managers

Executives

Korea

Southeast Asia/Southwest Asia/Japan

China

North America/Central & Latin America

Europe/CIS

Middle East

Africa

Domestic turnover5)

Overseas turnover5)

Human rights _ diversity and inclusion

Employees who took childcare leave6) 7)

Employees who return to work after childcare leave6) 7)

Daycare center capacity6)

No. of daycare centers6)

No. of mentally/physically-challenged employees6)

Ratio of mentally/physically-challenged employees6)

Unit

No. of persons

No. of centers

No. of persons

2014

319,208

99,386

219,822

310,036

9,172

187,052

92,874

39,282

70,398

188,235

31,785

28,790

263,0934)

54,4204)

1,6954)

99,386

112,041

56,492

27,996

18,602

3,565

1,126

3.1

19.1

3,376

2,551

1,668

1.68

2015

325,677

96,902

228,775

318,965

6,712

191,986

92,701

40,990

65,602

204,943

27,788

27,344

265,944

58,105

1,628

96,902

140,437

44,948

23,947

15,487

2,998

958

15.9

3,816

93.3

2,551

1,649

1.7

2016

308,745

93,204

215,541

304,715

4,030

172,272

93,348

43,125

62,546

194,669

25,836

25,694

248,415

59,014

1,316

93,204

134,386

37,070

25,988

14,445

2,810

842

5.5

16.9

3,818

93.8

2,905

1,550

1.7

Page

1) As of the end of the year, excluding supplier employees stationed in Samsung, those who are taking leave, interns, and those who are taking full-time degree courses, 2) Korea: Non-regular + part-time,

Overseas: Contractor + apprentice, 3) Including those working flexible work hours and other positions, 4) Numerical errors corrected, 5) As for employees on permanent contracts, ratio of employees who

resigned against the average No. of employees during the concerned fiscal year, 6) Scope of data collection: Domestic employees, 7) As for employees on permanent contracts

SUSTAINABILITY STRATEGY

1) Scope of data collection: Domestic worksites, 2) Calculated in accordance with nation-specific GHG management guidelines, IPCC guidelines, and ISO 14064 standards, 3) (total emissions/total consumption/total

generation) ÷ consolidated global sales, excluding sales of the Display Business Division, Price index: Producer price index as disclosed by the Bank of Korea for the concerned year (Base: 2005 = 1),

4) Concerns all 1st-tier suppliers, their consumption of power, fuel, or water during the previous year was examined in 2015 and 2016 respectively, and then calculations were made in consideration of their respec-

tive share of business conducted with Samsung, 5) Not applicable, 6) Based on global worksites, the 2014 and 2015 numbers were modified due to the change in reporting unit from TJ to GWh,

7) Total consumption ÷ consolidated global sales, excluding the sales of the Display Business Division

Eco-friendly and Safe Workplace

Environment and safety Investment1)

Violation of environmental regulations

Climate change

Use of renewable energy

GHE emissions generated in the workplace2)

Scope 1

Scope 2

CO2

CH4

N2O

HFCs

PFCs

SF6

GHG emissions intensity3)

Scope 3 emissions

Emissions from suppliers4)

Emissions from logistics

Emissions from business trips1)

Energy consumption in the workplace6)

Power

Others

Energy consumption intensity3)

Environmental resource management _ Water resource management

Water consumption

Industrial water

Municipal water (tap water)

Underground water

Intensity of water consumption7)

Wastewater discharge

Reuse of water

Rate of water reused

Supply of ultra-pure water for reuse 　

Recovery of ultra-pure water for reuse 　

Rate of recovery of ultra-pure water

Suppliers’ water consumption4)

KRW 100 million

No. of violations

GWh

1,000tCO2e

tCO2e/KRW 100 million

1,000tCO2e

GWh

MWh/KRW 100 million

1,000 ton

t/KRW 100 million

1,000 ton

Unit

6,883

31.6

9,290

2,620

6,670

7,366

290

207

1,271

153

2.72

23,470

12,741

10,608

121

17,082

13,315

3,767

4,5

74,684

49,806

23,659

1,219

55,428

37,594

50.3

31,782

14,067

44.3

327,638

2014

6,590

92.06

10,192

2,445

7,747

8,524

305

218

1,018

124

2.64

18,528

7,942

10,478

108

19,478

15,368

4,110

4.8　

92,414

58,444

32,830

1,140

72,583

46,200

34,397

14,632

42.5

134,733

2015

9,334

181.77

11,600

2,554

9,046

9,909

264

218

1,115

3.04

7,649

N/A5)

7,562

21,073

16,587

4,486

5.0

104,253

62,986

40,147

1,120

81,716

48,602

46.6

37,770

15,529

41.1

N/A5)

2016

Page

SUSTAINABILITY STRATEGY

S H OW I N G L E A D E r S H I P A N D S E t t I N G I N D u S t ry B E N C H M A r K S

Improved Business transparency

BOD’s Commitment to Strengthening Management Supervision

Our Board of Directors (BOD) strives to create an institutionalized structure

that can ensure transparency and reinforce risk supervision function.

To reinforce risk monitoring on the BOD level, the CSR Committee held three

meetings in 2016 to review our current risk monitoring practice, which result-

ed in the creation of the CSR Risk Management Council under the umbrella

of the CSR Committee. With participation by all five independent directors

and representatives of relevant departments, the council is responsible for

supervising our in-house CSR risk management system, discussing solutions

to CSR issues, and implementing them in our operations.

We have also supplemented our institutional devices to improve transpar-

ency. In 2016, we revised our Articles of Incorporation and BOD regulations

so that the BOD chairmanship, which previously held by the CEO, could be

held by any one of our directors, elected by a BOD resolution. Furthermore,

our BOD regulations were revised to restrict directors with potential conflicts

of interest from exercising their voting rights on matters presented in BOD

meetings.

As a way to strengthen our communication with external stakeholders, our di-

rectors consulted with the Asia Corporate Governance Association (ACGA) in

2016 on best practices concerning corporate governance and corporate social

responsibility. As part of our commitment announced through our BOD reso-

lution in November 2016 to improve mid-/long-term shareholder value, the

CSR Committee was expanded in April 2017 and reorganized into the Gov-

ernance Committee, and the committee is currently performing an extended

role in relation to increasing shareholder value (e.g. shareholder return).

Since 2016, Samsung Electronincs has promoted its commitment to reforming its business operations to stakeholders as well as to shareholders: this

includes improving its governance system and sponsorship programs.

Improved Transparency in Operating External Sponsorship Funds

BOD Decision-Making

All sponsorships and CSR (corporate social responsibility) funds

• Sponsorships: Donations, sponsorships, or offerings made

at the request of external organizations or institutions

• CSR funds: Samsung’s volunteer initiatives, spontaneous

support for industries and academia, donations made

through foundations

Make disclosures through the electronic disclosures systems of the Financial Supervisory Service and the Korea Exchange (DART, KIND), quarterly business reports, and annual sustainability reports

Created a review council attended by the heads of legal affairs, finance, HR, and communications departments, to screen all sponsorships and CSR funds over KRW 10 million

The review meeting, top management, and the Audit Committee perform quarterly reviews of the status and outcomes of all sponsorships and CSR funds.

BOD resolution required for all sponsorships and CSR funds over KRW 1 billion

• Previously, the Management Committee

approved sponsorships over KRW 50 billion

while the BOD approved those worth over

0.5% of the equity (approx. KRW 680

billion) or those over KRW 5 billion in case

of related-party transactions.

Preliminary Evaluation

Follow-up Review

Target

Disclosure of Executional Details

Protecting Human rights

Key Impacts

Policy and Guideline Development

Our policies and guidelines designed to protect socially vulnerable populations

were developed in consideration of local specificities through collaboration with

external stakeholders with expertise in this field. We increasingly extend the

scope of such policies and guidelines across our global worksites and through-

out our whole supply chain.

Policy and Guideline Implementation Management

• Education and Training _ We educate the top management and HR of-

ficers of our worksites, suppliers and labor supply agencies on the intention

and details of our policies and guidelines while sharing the EICC Code of

Conduct, region-specific labor regulations and newly enacted/revised regula-

tions, along with best practices on the management of work environments.

In doing so, we support working-level capacity building to protect the human

rights of vulnerable individuals. Furthermore, we require that our suppliers

sign a pledge to implement such policies and guidelines to confirm their

commitment to voluntary compliance.

• Risk Assessment Tool Development _ In addition to providing policies and

guidelines, we developed self-assessment checklists and on-site inspection

manuals to verify the violation of human rights – forced labor, discrimination,

and unreasonable treatment – and distribute these checklists and manuals to

respective worksites and suppliers. We educated the compliance manage-

ment officers of respective worksites on such on-site inspection manuals. In

January 2017, we translated our migrant worker survey questionnaire into ten

languages including Bangladesh, Cambodian, Indonesian, Nepali, Vietnamese,

and Myanmar and distributed these questionnaires across all our worksites to

help them identify and mitigate the risks these workers face.

• On-site Inspection and Monitoring _ We performed on-site inspections

of our worksites, suppliers, and labor supply agencies based on our on-site

inspection manuals and self-assessment checklist. If any issues are identi-

fied, their causes are analyzed, short-/mid-/long-term countermeasures are

developed, and improvement progress is tracked down through continous

monitoring. In doing so, we make sure that we abide by relevant policies.

We defined a key vulnerable group including children, apprentices, and migrant workers whose human rights are often violated. We have dedicated spe-

cial care and attention to this group with human rights protection, and we developed various policies to protect the rights of such individuals. To ensure

that such policies are duly implemented at all our worksites as well as throughout the supply chain, we provide awareness improvement training, de-

velop risk assessment tools, and conduct regular on-site inspections and monitoring. As a member of the Electronic Industry Citizenship Coalition (EICC),

we strive to fulfill our responsibility in respecting human rights as requested by broad-ranging stakeholders and the international community.

On-Site Inspections Conducted

Category

Chinese subsidiary’s patrol preventing child labor (2016)

Adherence to the Guidelines for Apprenticeship Training (2016)

Adherence to the Guidelines for Migrant Workers

Description

Conducted more than four times a year on 179 suppliers (intensive inspections during school vacation periods)

Conducted at Indian worksites and suppliers to identify 19 improvement tasks, out of which 100% of them were completed

Conducted on Thai suppliers, Malaysian subsidiary and suppliers and labor supply agencies in H1 of 2017

Guidelines for Migrant Workers

(Dec. 2016)

Collaboration with the BSR2) • Ban the collection of recruitment fees, provide labor

contracts in respective language to guarantee their

freedom in job seeking

• Eliminate inhumane and discriminatory treatment

Child Labor Prohibition Policy

(Jun. 2014)

Collaboration with the CCR CSR1) • Zero-tolerance for child labor, ex ante/post measures

• Set criteria to protect teenage workers and employ

apprentices

Guidelines for Apprenticeship Training

(Apr. 2016)

Collaboration with the BSR2)/PIC3)

• Comply with local regulations on apprentice employment

– recruitment size, and apprentice hours and expenses

• Offer expertise improvement training and develop

grievance handling systems to protect their rights

1) Center for Child Rights and Corporate Social Responsibility, 2) Business for Social Responsibility, 3) Partners in Change

D r I V I N G I N N OVAt I O N F O r t H E C O M M O N G O O D

Customer satisfaction constitutes one of the most important funda-

mental factors in securing a company’s competitive edge in today’s

era of global competition. Driven by the vision to deliver customer

satisfaction through product quality and service innovation, Sam-

sung aims to maximize customer value and improve people’s quality

of life to ultimately contribute to the enhancement of human soci-

ety. The quality control issues that Samsung suffered in 2016 rather

served as an opportunity to take a second look at the Company’s

quality management. It not only prompted Samsung to prevent the

recurrence of such issues and deliver sustained improvement in

quality and service, but also provided the impetus to ultimately pur-

sue and move closer to perfection in quality.

trENDS & CHALLENGES Product Liability Reinforcement _ Facing with unfortunate Prod-

uct Liability (PL) incident that threatened the health and safety of

customers, stakeholders (international organizations, governments,

customers, NGOs, and others) are increasingly voicing their con-

cerns and demand that manufacturers be held accountable for the

quality and safety of their products (UN SDGs 3). For the manufac-

turing industry to maintain its credibility, it needs to develop a strin-

gent product verification system to ensure that such products will

never compromise the health and/or safety of customers, and for

the unfortunate case that any accidents could occur, to respond in a

swift and transparent manner through authentic communication and

offering effective remedies.

Inclusive Innovation _ UN SDGs aim to deploy ICT and other tech-

nologies to bring improved access to information to the vulnerables

so as to bring them closer to economic wellbeing, eliminate income

inequality and promote social development (UN SDGs 5, 8, and 10).

Businesses can contribute to reaching these goals by identifying

the needs of such consumers who previously had limited access

to products and services and by providing products and services

with improved accessibility for people with disabilities and all social

groups.

Customized After-Sales Service _ When a product targets a wide

spectrum of customers who span across diverse income levels and

cultural/geographical regions, its sales should be followed by local-

ized and customized after-sales services. If a business provides such

services to the vulnerable groups in local regions, it can assist local

communities to develop their economy and present direct solutions

to local social issues.

Customer Data Privacy _ The emergence of a global network

and the advancement of information and communication technol-

ogy increase the risk of hacker attacks and personal data leaks. As

businesses that have large amounts of personal information (online

shopping malls and financial institutions) are likely to face risks of

privacy violations of customer data, consumers are paying more

attention to data security. Businesses should develop systematic

protection and management processes for the personal data col-

lected during purchase and using products. For Samsung’s personal

information protection system, please refer to the page 98 of this

report.

Our COMMItMENt Samsung places utmost priority in delivering quality products and

services and ensuring customers’ health and safety to deliver truly

compelling customer experiences. Even following product sales,

Samsung engages in constant customer communication to gather

consumer voice and to reflect it back into its product design, dis-

tribution and service. All Samsung employees perform in-depth

analysis of customer needs, their lifestyle, and changing behaviors

to understand product and service issues and seek solutions from

the customers’ point of view. Samsung aims to continuously pursue

technology and product innovation and to deliver unparalleled ser-

vice to our consumers.

What We aChIeVeD In 2016-2017 • [Product Quality and Safety] Created the Global Quality Innova-

tion Division; Developed a smart quality management system;

Strengthened quality standards; Created a dedicated organization

to support suppliers with quality operations; Reinforced the verifi-

cation of product safety (Adopting double safety designs, reflecting

customers’ abnormal and inappropriate usage, conducting inten-

sive safety for components).

• [Customer Service] Expand the service line of the Galaxy Con-

sultants who provide support service to customers at retail stores

; Offer friendly and useful customer services (Sign language guid-

ance for the hearing-impaired, Female Engineers to the Home of

Female Customers in the Middle East.

FuturE PLANS 1. Continued Innovation of the Quality Assurance System _

Samsung plans to establish a smart quality management system

to align and analyze the quality data gained through the entire life

cycle of products. It will begin with product planning and going

beyond product launching while constantly raising the bar for its

product quality and safety assurance in the development phase.

2. Localized and Customer-oriented Service _ Samsung’s regional

subsidiaries will identify services that cater to their specific local

characteristics and conditions and share best practices in order to

improve the quality of service across the board.

O u r V I S I O N F O r VA Lu E

Customer Value Enhancement

Re-evaluation

Product Quality and Customer Health & Safety

Quality Assurance System Samsung operates a quality assurance system to manage product quality

throughout the entire process of planning, development, manufacturing, and

sales while offering quality training to all its employees. In 2017, Samsung is

realigning its general quality assurance system to reinforce quality manage-

ment through innovation.

• Quality Information System _ We compile, analyze, and process all qual-

ity data from across the globe for input into our database while operating a

smart quality management system to identify mechanisms of causing de-

fects and pre-emptively manage defect factors. Specifically, we analyze qual-

ity data and customer after-sales service data in order to take emergency

improvement measures (early warning, suspension of manufacturing), when

quality issues arise during product development. Presently, we are work-

ing to integrate and optimize our system and database to further align and

analyze quality-related data obtained from the respective stages of develop-

ment, manufacturing, shipment, sales and etc.

• Quality Work Standards _ We established documented standards for all

quality-related processes and imposed penalties in accordance with the set

criteria when quality rules and processes are violated. Recently, we have

significantly raised the bar on our quality work standards: effective actions

are going to be taken when quality standards are not met, and business will

be discontinued when our suppliers fail to abide by our quality standards and

processes.

• CS Certification _ Under this quality pre-validation system, departments

working in quality-related areas cooperate to select review items for the

CS certification and conduct tests and evaluations in each of the develop-

ment stages. The executive council attended by the top management is

responsible for performing final quality verification prior to the initiation of

manufacturing. To ensure these evaluation items are constantly up to date,

we develop and conduct new verification methods for new products and

functions as well as testing techniques under their usage situation including

customers’ abnormal use or/and extreme use.

Code of Conduct in Quality Management

Category

Customer-

Oriented

Focus on the

Basics

Professionalism

Masterpiece

Quality

Lifetime Value

for Customers

Description

We appreciate even the unspecified requirements of customers and fully reflect

them in our products so as to enhance customer value.

Since quality is our conscience and can never be compromised, we strictly abide

by quality rules and processes.

We hold ourselves accountable for quality: we do not tolerate any defects and

every employee has a sense of ownership in achieving zero-defect quality.

We deliver masterpiece quality with the determination that the can

only be used for products with outstanding quality.

We respond to the Voice of Customers with agility and accuracy as our custom-

ers’ trust and loyalty is our greatest asset.

SQCI Evaluation Process

Supplier Samsung

Quality Assurance System

Development Purchasing Component Manufacturing Sales

Evaluate quality at each of the

development phases (CS Certification)

Manage the quality of components from

suppliers (SQCI system)

Innovate in process/shipment quality at

production subsidiaries (SQA system, etc.)

Gather defect data from the market –

analyze and improve (Quality information

system – market quality)

[Policy] Quality process standards

[System] Quality information system (Alignment among development-production-market)

Supplier selection

Quality training for suppliers

Documentation of supplier

quality management

plans

Supplier evaluation

SQCI certification

Follow-up management

Defect-free quality

CREATING vALUE

Service Quality Management • Operation of Service Standards _ We develop guides that define the stan-

dards of service and call centers as well as processes while sharing them

with all global subsidiaries through our company-wide work standard system

with an aim to provide standardized services. Each of our regional subsidiar-

ies uses our global guides to localize their manuals in consideration of local

market specificities including offering training accordingly and shares such

manuals through our in-house ‘knowledge portal’ system.

• Service Quality Inspection _ We conduct regular evaluations on our service

centers for their adoption of service standards, technological capabilities,

equipment repair, infrastructure, resource management, and financial stabil-

ity. Depending on their size and incentives, service centers set improvement

targets, and incentives, such as commission increase or awards for top-

performers, are offered according to their levels of achievement.

• Service Technical Training _ Our service center managers and repair en-

gineers are provided with training programs on how to repair new products

and handle customer concerns. We provide either remote video or collec-

tive training depending on the country and product characteristics, and our

accessible in-house system allows employees to learn from training videos

and technical materials anytime. Every December, our CS Strategy Work-

shop is hosted under the supervision of the Head Office and joined by

service expatriates from respective subsidiaries with an aim to review past

year’s achievements and set our service strategy for the following year. In

North America, China, Europe and other regions, our Regional Offices also

host their own workshop to develop differentiated region-specific service

strategy.

Customer Communication • Integrated Global VOC Management System _ We gather VOC (Voice of

Customers) data on product purchases, repairs, and use guidance through

our call center and our website as a way to handle complaints and use our

integrated global VOC management system to analyze customer needs and

share them across the company to improve our products and services.

• Customer Service Satisfaction Survey _ We conduct periodical customer

satisfaction surveys on customers who have experienced our service. Sur-

vey outcomes are shared with relevant departments to improve service

areas where customer satisfaction was relatively low or found to be less

competitive. Such endeavors attribute to the constant increase in satisfac-

tion with our services since 1994 when these surveys were first initiated.

Sign Language Service

In September 2015, Samsung Electronics Poland installed booths and

tablets at Samsung brand stores and service centers across the nation

so that sign language interpreters, through video connections, could

assist the hearing-impaired in accessing customer services more con-

veniently. Such a caring service for the physically-challenged who often

face hardships in using customer services was warmly welcomed by

the nation: Samsung was honored with a plaque of appreciation from

the Polish Association of the Deaf and major Polish TV stations allo-

cated airtime to this heart-felt story.

Female Engineers to the Home of Female Customers

Our Lady Service evolved from the discomfort that many women in

the Middle East had trouble with communicating with and letting male

repair service engineers into their homes. To address this, we created

the ‘Lady Service’. When a female customer submits a request for a

home visit for repair services, we send female engineers to her home.

In this way, our Lady Service can repair products and provide female

service workers to communicate with her. The two-month pilot project

initiated in Qatar from March 2016 demonstrated high customer satis-

faction, and our Lady Service has broadened its scope to Dubai of UAE

and Amman in Jordan.

Service Standards

Operational Manual

In-Store Service Guide

Technical Guide

Details

• Operational manual for respective service processes

- Customer contact center, technical counseling, acceptance of ser-

vice requests, technical training, repair, outcome report, customer

satisfaction call, expense settlement, claim management, etc.

• Add service functions within the store

- In-store service definitions, service functions, layouts, etc.

• Technical guide for product repair

CREATING vALUE

Cas e

Samsung pursue creative management to inspire innovation in

technology, products, and solutions. We deeply understand that the

generation of economic benefits matters only when it delivers value

for society and the environment and thus we are fully committed to

delivering innovative products that improve the world with the belief

that the global community and the planet constitute our ultimate

stakeholders.

trENDS & CHALLENGES Innovation in Cutting-Edge Technology _ Rapidly-evolving infor-

mation and communication technology is serving as an enabler for

connection and convergence technologies that help build a complex

network among people, objects, and business. The commercial-

ization of 5G technology, the advancement of machine learning-

based artificial intelligence, and the wider adoption of cloud and

big data are further accelerating our transition into a new industrial

era, dubbed the 4th industrial revolution. This urges businesses to

develop their competitive edge and secure their leadership in the

upcoming super-connected society, not only in manufacturing and

systems, but also in such services and content sectors as robotics,

the IoT, virtual reality, and augmented reality.

Open Innovation _ Developing innovative products and services

demands that we create synergy between our own resources –

knowledge and experience accumulated internally – and third-party

resources that we can access through openness and cooperation.

As a corporate business entity, we build an ecosystem of product

innovation through partnerships with external parties that span from

collaboration with business partners and the collection of creative

ideas through crowd sourcing, to technology transfer and open

source initiatives.

Innovation that Contributes to Meeting Social Needs _ Through

the UN Sustainable Development Goals, the international commu-

nity involves businesses to take a step forward in addressing the

social and environmental challenges that we face today. We need to

guarantee access to technology and service for vulnerable popula-

tions, support their economic independence and address inequali-

ties (UN SDGs 1, 4, 8, and 10) while responding to depleting natural

resources and preserving the environment by seeking sustainable

consumption and production (UN SDGs 7 and 12). This implies that

businesses may go beyond the pursuit of innovation for innovation’s

own sake – becoming the ‘industry’s first’ and setting new records

– and rather focus on technological development and innovation

that helps solve global social and environmental issues. In doing so,

business has the capacity to contribute to both a safer and a more

convenient environment and society.

Our COMMItMENt At Samsung, our innovation has never been confined merely to the

pursuit of top-notch technology; rather, it has been driven by the

philosophy that innovation should always accompany sustainable

development of the entire society. With our design strategy ‘Making

It Meaningful,’ we strive to deliver products that are truly necessary

for both Samsung and the society’s wide-ranging stakeholders. We

tirelessly develop innovative products that offer solutions to today’s

social and environmental challenges through openness, cooperation,

and continuous R&D on new technology. We believe that our efforts

will help disseminate collective positive impacts and reduce our en-

vironmental footprint throughout the whole product lifecycle.

What We aChIeVeD In 2016-2017 • [Technology Innovation] Developed future-proof products

through open innovation – collaboration with and M&A of global

companies in diverse industries.

• [Social Innovation] Nurtured that product development endeavors

and in-house start-ups that improve equal access for all customers

to products and services could commercialize their ideas outside

the boundary of Samsung in order to share innovative outcomes

across society.

• [Environmental Innovation] 86% of products exceeded the level

of Good Eco-Products (as defined by our in-house eco-product

rating system); Reduced 188 million tons in accumulated GHG

emissions in the product use phase; Reached 2.64 million tons

in the accumulated global collection of waste electronics through

Samsung Re+ program.

FuturE PLANS 1. Creating a Product Innovation Ecosystem _ We aim to fully

implement ideas from both inside and outside Samsung and

deploy external resources in diverse ways so that we adopt new

technology and develop innovative products accordingly.

2. Meeting Social Needs _ We develop product features and ser-

vices that improve access to the digital inclusion by the vulnerable

so as to create social value and contribute to the achievement of

the UN SDGs.

3. Eco-Management 2020 _ We set an aggressive goal to reach

90% of eco products developed, reducing 250 million tons in

accumulated GHG emissions in the product use phase, and

reaching 3.8 million tons in the accumulated collection of waste

electronics by 2020.

O u r V I S I O N F O r VA Lu E

Product Innovation

Dissemination of Innovative Technology C-Lab program provides our employees with an opportunity to focus on

translating their creative ideas into reality and to establish a start-up and dis-

seminate our technological capabilities throughout society. The ideas and

technologies developed through the product innovation processes pave the

way to build more proactive solutions to social issues. In 2016, 11 C-Lab proj-

ects spun off as start-ups (25 start-ups created since August 2015).

As a response to the 21st Century Communications and Video Accessibility

Act of the U.S. (CVAA) and other regulations concerning accessibility for chal-

lenged individuals, our Compliance Team established an accessibility process

to verify whether we comply with relevant regulations throughout our entire

product development process while taking a more stringent preventive action

for compliance purposes. We take accessibility requirements into account,

from the product planning phase, and perform validity testing on such require-

ments prior to product launching. Furthermore, we designated a dedicated

organization to be responsible for tracking country-specific accessibility regu-

lations and reviewing our regulatory compliance.

Our 4C Principles for Accessibility Experience Design

Empathetically designed

with attention to detail

for all our users

Balanced and equally

designed for all

CONSIDErAtION

COMPrEHENSIVENESS

Consistent design experience

for all products

Designed together

COHErENCE

Co-CReatIon

idea of Re!umino first originated from the fact that 86% of the visually-

impaired people can still sense light. Chosen as an outstanding idea

under our C-Lab program, Re!umino made its debut at the Mobile

World Congress 2017. Re!umino helps improve the symptoms of

wide-ranging visual impairments – ultra low vision caused by corneal/

vitreous clouding, field defect disorder, and refraction disorder – and it

improves the vision of those with under 0.1 vision to a 0.8-0.9 vision

level. In the future, we plan to expand the scope of our research to

provide a more natural and seamless user experience (similar to that of

simply wearing glasses), without the need for VR devices.

Services Developed for the People with Disabilities

Disaster Safety Communications Network Technology _ In 2017,

we became the world’s first to successfully demonstrate uninter-

rupted video communication technology that remains steady even in

disaster situations. We used the Mission Critical Push To Talk (MCPTT)

technology, an international standard that supports individual/group/

emergency calls through the disaster safety communications network

(PS-LTE: Public Safety-LTE), to demonstrate high-quality video commu-

nication among multiple speakers. By establishing an integrated com-

munications system and allowing for a quick sharing of information, it

is expected to contribute to disaster rescue operations.

Re!umino_Re!umino is the name of the Gear VR-enabled visual

aid solution: it assists people with visual impairments in enjoying

a clearer and brighter view of the world by processing the images

shown through a VR device. Meaning ‘give back light’ in Latin, the

Support for Independent Start-Ups That Evolved from C-Lab Projects

Spin-off Business

WELT

MANGOSLAB

Likely

EzInno Lab

AIMT

COOLJAMM Company

Jaikin

RocketView

analogue+

LINKFLOW

Kidsoft

Description

Smart belt that helps manage obesity and overeating

Small-sized smart printer that enables users to print their ideas or

memos in a sticky note format

Smart photo management/sharing service

Intelligent service that recommends the optimal power use plans in

the U.S. or Japan

Vacuum insulation materials with the world’s highest insulation ef-

ficiency

App that makes music composition easier just by humming

New type of social network service that allows up to 25 people to

scribble or paint on the posting uploaded

Smartphone-based solution to easily operate IoT devices

Communication device that ensures the safety of helmet users

Wearable 360-degree camera in neck band shape

Smart watch for infants that helps develop the right habits

CREATING vALUE

Cas e

• Cadmium-free quantum dot technology

• Graded A+ in EU Energy Label

• Energy-saving mode applied

• Screw-less design (higher productivity and recyclability)

led tV (SUHD UE65KS9000)

• High-efficiency charger

(charging efficiency 89%, standby power 0.08W)

• Lightweight design (Weight 850g)

• EPEAT Silver-certified

• Uni-body design, easier to recycle

notebook (NP900X3L)

• TCO2) saving effect improved by 800%

(Compared to 15K/10K HDD)

• World’s first 15.36TB (ultra high-capacity) developed

• Bulk capacity distribution system technology applied

(Highest performance/reliability secured)

• Zero noise/vibration, ultra power saving

ssd (15.36TB SAS SSD,3D V-NAND-based, 2.5” Type)

• ENERGY STAR Most Efficient of U.S.

• Super Speed (30-minute washing)

• DD inverter motor equipped

• Add a garment function designed to reduce water

consumption (no need to drain the filled water)

washer (WF50K7500A)

• World’s first wind-free air conditioner (save power

costs by up to 85% against the wind mode)

• Ultra power saving inverter applied

• High-efficiency and low-noise outdoor fan

• Power consumption target

management program

• Automatic cleaning/drying

Air Conditioner (Wind-FreeTM, AF18K9970WFK)

• Annual power consumption down by 36% (against the

model LS27C65UDS)

• Eco-saving function

• 30% Use of recycled plastic

• 20% Use of sugar cane for the accessory bag

• Intertek Greenleaf-certified

Monitor (LS27E65UDS)

• High-efficiency charger

(charging efficiency 86%, standby power 0.02W)

• Ultra power-saving mode

• Charger PCM1) 20%, ear-phone

case PCM1) 60%

smartphone (Galaxy S7 edge)

• US ENERGY STAR-certified

• Twin cooling+ technology

• Flex temperature alteration (freezing – cold storage)

• Environmentally-friendly refrigerant (R600a)

• Honored with the 2017 Emerging Technology Award

granted by the U.S. EPA

Refrigerator (RT21M6215SG)

• Power consumption efficiency doubled

(Compared to : 20-nanometer 4GB DRAM)

• Power consumption reduced by 30%

(designed to reduce I/O power consumption)

• Mobile DRAM speed increased by 1.3 times (4.2Gbps)

(World’s first to adopt the LPDDR4X technology)

Memory (10-nanometer 8GB LPDDR4/4X, 16Gb DRAM-based)

1) Post Consumer Material, 2) Total Cost of Ownership

CREATING vALUE

Products Highlights in 2016

At Samsung, green management forms a vital part of our manage-

ment principles, and we strive to contribute to the betterment of hu-

manity and preservation of the environment by conducting business

in a way that respects both people and nature. It is under the Green

Management vision of ‘Providing a Green Experience, Creating a

Sustainable Future,’ and the ‘PlanetFirst’ slogans that we advance

green management to minimize our environmental footprint across

all our production sites throughout the entire product life cycle, from

the procurement of raw materials, development, and production to

distribution, use, and disposal.

trENDS & CHALLENGES A New Climate Change Regime _ In line with the Paris Agreement

adopted in December 2015, stakeholders expect businesses to un-

dertake ambitious efforts in keeping a global temperature rise well

below two degrees Celsius This not only prompts us to set a strat-

egy to reduce GHG emissions based on scientific evidence and to

respond to natural disasters and other climate change risks but also

paves the way to create business opportunities in order to enhance

our corporate value.

Sustainability of Natural Resources _ The United Nations defined

the goals of reducing air/soil/water pollution, minimizing the use of

chemicals and adequately disposing of such substances, improving

energy efficiency, and preserving bio-diversity and ecosystems in

order to ensure the sustainable use of natural resources and the de-

velopment of human society (UN SDGs 3, 6, 7, 12, and 15). By shift-

ing to a circular economy, businesses can contribute to reaching UN

SDGs by minimizing any negative impact they may have on people’s

health and the environment and creating environmental value every

step of the way – from products and services to their consumption

and disposal.

Safety Culture _ A safe workplace is created not only by building

safety facilities and management systems but also by enhancing a

safety-driven culture. Effective training & campaigns, in addition to

scenario-based regular emergency drills can help raise employee

awareness of safety. From long term perspective, building such a

safety-driven culture can assist businesses in improving employee

productivity and morale internally and in creating their brand image

as a safe workplace externally.

Our COMMItMENt Samsung undertakes environmental preservation initiatives that

span across all our domestic/overseas worksites, suppliers, and

local communities. We also abide by our ‘Environmental Health &

Safety (EHS) policies’ in addressing environmental issues that are

closely related to our business operations. In developing and manu-

facturing our products and services, we always put the safety of our

customers and employees and the protection of our environment

first. We vow to consistently strive to create a pleasant workplace

and prevent safety accidents.

What We aChIeVeD In 2016-2017 • [Climate Change] Analyzed risks and opportunities from the as-

pects of climate change mitigation and adatation; Set correspond-

ing strategies and targets; Undertook pilot projects that align cli-

mate change adaptation and corporate citizenship; Fully undertook

GHG emissions reduction projects by worksite

• [Environmental Resource Management] Used the water

resource management methodology adopted by the Food and

Agriculture Organization (FAO) and World Council For Sustainable

Development (WBCSD) to review and address the water resource

risks of worksites

• [Biodiversity] Cooperated with local communities to identify the

impact on aquatic ecosystems in the vicinity of our worksites and

the habitats of endangered species while making necessary im-

provements

• [Workplace Safety] Ensured the integrated management of work-

place heath & safety through the Safety Culture Office and devel-

oped eco-friendly coolants to be used at each supplier

FuturE PLANS 1. Reach the mid-/long-term EHS management goals _ We will

ceaselessly endeavor to reach the mid-term Eco-Management

2020 (EM2020) goals (four key indicators of certification of EHS

management systems, reduction in GHG emissions, reduction

of water resource consumption, and recycling of waste) and will

analyze key EHS indicators to define broader long-term EM2030

goals (GHG, energy, water resources, waste, pollutants, health &

safety, etc.).

2. Enhance our safety culture level _ By advancing systemic EHS

management and evaluating our level of safety-driven culture

on the basis of the OHSAS 18001, we aim to reach Grade A* in

safety culture by 2020.

O u r V I S I O N F O r VA Lu E

* Samsung Institute of Safety & Environment, Safety Culture Assessment Guideline

Eco-Friendly and Safe Workplace

• Climate Change Mitigation _ GHG Emissions Reduction _ While the total

amount of our GHG emissions is increasing as we expand our production

sites and introduce new facilities each year, the GHG emission reduction

projects undertaken by respective worksites (a total of 2,305 projects to

install F-Gas reduction facilities, switch to highly efficient facilities and opti-

mize facility operations) have enabled us to cut by a total of 2.2 MtonCO2e.

• Climate Change Mitigation _ Adoption of Renewable Energy _ We

made it mandatory for renewable energy facilities to reach a predetermined

ratio of the total in constructing new buildings. We are also gradually shift-

ing to renewable energy for worksite infrastructures such as street lighting,

transportation, and cafeterias. In countries where green electric power or

renewable energy certificate purchase is possible, we continue to increase

our purchases and in 2016, we replaced a total of 181.77 GWh energy with

renewable sources.

• Research on Climate Change Adaptation _ In 2015, we jointly conducted

research on ‘Corporate Social Responsibility Activities for Climate Change Ad-

aptation’ with the Graduate School of Environmental Studies at Seoul National

University and have since been undertaking following three pilot projects.

The G-EHS system allows us to verify targets and manage outcomes concern-

ing our GHG emissions (Scope 1 and 2) across all our worksites on a monthly

basis. In 2016, we set reduction targets for respective worksites and strength-

ened our execution of reduction projects, which ultimately enabled us to ex-

ceed the annual GHG emissions target by nearly 1%.

For Scope 3 emissions that represent emissions generated outside of the

worksites, we trace the emissions generated through product logistics and

business trips, as well as the emissions from our suppliers, to manage our

environmental impact additionally generated in our business conduct.

Concerning GHG emissions generated from logistics, we launched 39 emis-

sion reduction projects in Korea – changing transport routes, improving loading

efficiency, and increasing the efficiency of transport management – to reduce

by a total of 2,583 tCO2e in 2016. For 2017, we set the goal of a 2% emission

cut from the 2016 base year. Meanwhile, we introduced a video conferencing

system to minimize business trips: a total of 153,738 video-based meetings

were held in 2016, which reduced overseas business trips by 12% from 2015.

To reduce GHG emissions generated by our suppliers, we identify and calcu-

late the energy consumption (power, fuel, etc.) of all our suppliers on an annual

basis and assist suppliers whose energy management system is substandard

in conducting on-site consulting and identifying energy saving projects. In

2016, 62 such projects were identified at a total of 10 suppliers, which reduced

approximately 4,920 tCO2e.

GHG Emissions Management

The energy consumption at our worksites is constantly rising as we introduce

new production facilities and increase our production volume each year. This

prompted our worksites to identify energy-saving/conservation projects, set

annual action plans and manage their monthly progress. In 2016, we exceed-

ed our annual energy consumption target by 7%, i.e., consumed 93% of the

target.

Energy Management

Pilot Corporate Citizenship Projects for Climate Change Adaptation

CREATING vALUE

Collaborating with Scientists and Engineers with-

out Borders, we are installing semi-permanent

drinking water facilities in 10 Vietnamese edu-

cational institutions that are exposed to climate

change risks. This project was completed in May

2017, and we plan to expand such projects fol-

lowing outcome monitoring.

Support for drinking wa-

ter facilities in countries

most vulnerable to climate

change

While we were engaged in housing renovation

projects for the underprivileged in Korea as part

of our corporate citizenship activities, we trans-

formed such endeavors into constructing residen-

tial area with improved energy efficiency with the

Environmental Energy Foundation. As a result of

this pilot project undertaken on 10 households

in 2016, the annual energy consumption was re-

duced by 57% per household and reduced a total

of 8.6 tonCO2e. Since 2017, we have switched all

our housing-related social-giving projects in Korea

into construction projects aimed to increase en-

ergy efficiency and expand them further.

Improvement of the

residential environment for

low-carbon climate change

adaptation

To increase awareness regarding climate change

throughout the entire society, we are developing

educational content specifically designed for cli-

mate change issues for instructors, teachers and

students in cooperation with the Korea Environ-

mental Education Center. In 2017, we plan to use

the educational materials and tools developed to

launch pilot educational projects for elementary

schools in Korea.

Development of climate

change adaptation

courses for Samsung

Smart Schools

2014

2015

2016

GHG Emissions

9,290

10,192

11,600

2016 Target

11,667

2017 Forecast

13,416

2016 Target

Attainment

2016 Target

22,735

2017 Forecast

23,603

2014

2015

2016

Energy Consumption

17,082

19,478

21,073

2016 Target

Attainment

Cas e

(Unit: GWh)

(Unit: KtonCO2e)

• Conduct emergency drills in preparation for safety accidents _ By con-

ducting regular drills under diverse emergency scenarios by accident type,

we verify the effectiveness of our emergency response system. Such drills

span evaluations in the case of fire, earthquake, chemical leaks, and hands-on

firefighting preparedness. In 2016, emergency drills were undertaken on 537

occasions, and each of our employees attended an average of 1.15 drills.

• Environment & Safety Innovation Day _ In 2016, we celebrated Environ-

ment & Safety Innovation Day for three days from October 19th to 21st of

2016 at our Seoul R&D Campus under the supervision of the CFO. Nearly

1,200 Samsung employees, more than 300 employees from 163 suppliers,

and advisory professors attended this event.

• Strengthen employee EHS capacity _ We provide differentiated and special-

ized training curriculum in relation to workplace EHS. In 2016, our average per

capita training hours amounted to 13 hours.

EHS Education for Employees

Target

All employees

EHS staff

Employees at

overseas

production sites

Description

Introductory courses, legally-mandated

standard courses, safety leadership

courses for executives

In-house examiner courses,

professional licensing courses

(master craftsmen, engineers, etc.)

Global EHS Conference, key leader

courses, sewage/wastewater treatment

specialist courses, etc.

2016 Achievement

3,682,408 hours of training were of-

fered in total, completed by 635,039

employees

29,657 hours of training were offered

in total, completed by 1,077

employees

5,130 hours of training were offered

in total, completed by 147

employees

Environment & Safety Innovation Day Programs

Category

Innovation Practice

Exhibition

Excellent Worksite

Benchmarking

Special Lectures on

Safety Culture

Presentation of Best

Practices

Description

Select best practices from the on-site improvements made by Korean

and overseas production subsidiaries and suppliers over the past year and

exhibit them with actual innovation outcomes

Provide diverse safety experience opportunities each year to allow employ-

ees to benchmark their areas of interest and adopt best practices in their

own sites

Invite lecturers from companies with advanced EHS management to

introduce their best practices in overcoming EHS risks and to highlight the

importance of safety culture

Host an annual open competition to collect worksite best practices and

present the finalists so that employees can learn from them Accident Prevention and Response Process

1. Identify risk factors

• Old facilities

• Non-compliance with safety regulations

• Lack of proper on- site management

2. Set countermeasures

• Estimate the life span of facilities

• Set measures to comply with safety regulations

• Reexamine on-site management system

3. Make improvements

• Monitor facilities

• Offer safety training

• Perform on-site audits

4. Monitor

• Evaluate performance

• Rules & processes

Accident Response Process

1. Accidents occurrence

• Brief the situation

• Identify the type and risk level of the accident

2. Emergency response

• Organize an emergency management committee

• Take emergency evacuation/first aid action

3. Accident investigation

• Analyze the cause of the accident through investigation

• Take action to prevent secondary accidents

4. Recovery action

• Set and implement recovery plans

• Execute business continuity plans

5. Reoccurrence prevention

• Set plans to prevent reoccurrence

• Review the effectiveness of the accident response system

Employee Health Management

Employee Health Management System

• Measure risk factors in the work environment

• Study harmful musculoskeletal factors

• Undertake No Noise/Dust/Noise initiatives

• Provide health check-ups

• Operate in-house fitness facilities: Fitness gyms, musculoskeletal fitness centers

• Health care programs: Anti-smoking/ moderate drinking campaigns, taking the

stairs campaign, healthy meals

• Monitor infectious diseases and explain prevention rules

• Operate in-house health clinics: Vaccination against influenza, hepatitis, and others

• Health care for employees taking business trips: Manage the list of countries where

travel is restricted or prohibited, and offer

household medicines

Health Care

Disease Prevention

Work Environment

Health Management

System

• Preservation of coastal sand dunes _ Our Onyang site has been work-

ing with the Geum River Basin Environmental Office to clean up the sea,

eliminate ecosystem-disturbing plants, protect the Sohwang sand dune in

Boryeong, and create a silvergrass habitat in Asan as a way to help preserve

coastal sand dunes – a habitat for such endangered species as Chinese

egrets and Mongolian racerunners.

• Eradication of foreign fish species/plants _ Our Giheung and Hwaseong

sites collaborate with local communities each year to eliminate foreign fish

species/plants near the Osan and Woncheonri Streams, feed wild animals

and launch environmental protection campaigns as part of their ecosystem

preservation initiatives. In 2016, such activities were undertaken on a total

of eight occasions.

Workplace Health & Safety

Building a Safe work Environment

CREATING vALUE

At Samsung, we pursue co-prosperity with local communities, na-

tions, and the whole of human society in line with our business

philosophy to fulfill our role as a global corporate citizen. In particular,

we recognize that our suppliers as strategic business partners with

whom we form mutually-beneficial, trust-based relationships. Driven

by our supply chain vision ‘We Buy Value, We Pay Trust’, we assist

our suppliers in securing a stronger competitive edge through our

support and cooperation with an aim to build a sound and healthy

corporate ecosystem and sustainable supply chain.

trENDS & CHALLENGES Human Rights and Working Environments along the Global

Supply Chain _ As a global corporate citizen, today’s corporations

are expected to take on increasingly broader responsibilities as they

exert economic, social, and environmental impacts along the supply

chain as well as on their customers and employees. We reinforce

the principles that any and all forms of child labor and forced labor

be eliminated, all workers be entitled to a safe work environment,

and the growth of microenterprises, the growth of small and me-

dium enterprises be promoted (UN SDGs 8). As demonstrated in

the U.K.’s Modern Slavery Act, governments across the globe are

introducing regulations that demand business take responsibility for

managing labor and human rights issues along their supply chain.

Responsible Sourcing of Minerals _ The global community contin-

ues to keep a watchful eye on the negative impact of mineral mining

on society and the environment such as potential human rights vio-

lation and environmental destruction. In 2016, Amnesty International

shed light on the issue of children working in cobalt mines in the

Democratic Republic of Congo and demanded corporate interven-

tion to address this issue. Investors are also urging companies to

make their supply chain more transparent. The U.S. Stock Exchange

made it mandatory for companies to disclose information on the use

of conflict minerals. The EU has adopted a Regulation laying down

supply chain due diligence obligations for importers of tin, tantalum,

tungsten, and gold - which sometimes finance armed conflict or are

mined using forced labor in conflict-affected and high risk areas.

Our COMMItMENt We review our suppliers and help them with making necessary

improvements to ensure that all our suppliers comply with the

‘Samsung Supplier Code of Conduct’ and operate in accordance

with local regulations and international standards. We assess the

work environment of our suppliers as a way to manage risks in con-

sideration of the environment, human rights, and other sustainability

aspects. Furthermore, we continuously support our suppliers to

build mutual competitive edge and growth. We strive to ban the use

of unethically-mined minerals and take actions to that end.

What We aChIeVeD In 2016-2017 • [Sustainable Competitive Edge of Suppliers] 70% of the sup-

pliers rated excellent in the annual comprehensive evaluation;

Expanded partner collaboration programs targeting overseas sup-

pliers

• [Responsible Management of the Supplier Work Environment]

Reached 95% in on-site audit compliance rates among priority sup-

pliers

• [Transparency in Mineral Management] 100% participation of

the suppliers in Conflict Free Smelter Program (CFSP) along the

supply chain

FuturE PLANS 1. Supply Chain Competitiveness Improvement _ We will focus

on competitive suppliers to constantly strengthen the sustainabil-

ity of our supply chain through comprehensive risk management

and wide-ranging partner collaboration programs.

2. Supplier Work Environment Management _ We will conduct

more stringent audits on labor and human rights, health & safety,

environmental protection, ethics management, and business sys-

tems while expanding our support to make improvements so as

to build a sound work environment within our entire supply chain.

3. Management of Issue Mineral _ We will partner with local gov-

ernments, smelters, companies, NGOs, and many other stake-

holders and join relevant initiatives to spearhead the resolution of

issues concerning cobalt, and 3TG (tantalum, tin, tungsten, gold).

O u r V I S I O N F O r VA Lu E

Sustainable Supply Chain

• Establish the Global Procurement Code of Conduct _ This Code of Con-

duct consists of standards & principles, work ethics, and business practices

that our procurement staff should abide by, and nearly 3,000 global procure-

ment staff were trained (both online and offline) on the Code.

• Supplier Code of Conduct _ To promote the responsible management of

suppliers’ work environment, we established our Supplier Code of Conduct

in 2013 on the basis of the EICC Code of Conduct by including even its most

recent changes, and this has been widely shared among our suppliers since

then. From 2015 onwards, we have distributed the ‘Supplier Code of Con-

duct Guide’ to suppliers to help them comply with the conduct.

• G-SRM, an Integrated Procurement System _ Our G-SRM system is

used to perform multi-dimensional analysis of the all procured components

(detailed cost, cost efficiency, region-specific supplier procurement status).

Included in the application of this system are the interactive sharing of infor-

mation, supplier evaluations & registration management, risk management,

the integrated management of supplier compliance management, and work

environments, and the sharing of the Code of Conduct and the self-initiated

evaluation checklist.

• Dedicated organization _ In 2012, we created a dedicated organization

responsible for managing suppliers’ work environments to examine and sup-

port our suppliers. From 2013 onwards, we have operated a training center

solely responsible for supplier training as well as a consulting center that is

dedicated to offering on-site support for supplier innovation initiatives.

Supply Chain Risk Management System We classify risk factors that may occur along the supply chain into external

supplier factors and internal procurement process factors, in addition to natu-

ral disaster risks related to business continuity. We ensure that vulnerabilities

related to supply chain risks are constantly monitored and managed through

our G-SRM system and our on-site inspections. Specifically, supplier risks are

managed by performing new suppliers’ registration evaluation and incumbent

suppliers’ annual comprehensive evaluation.

Since 2016, we have established and operated an emergency response

process against threats of natural disasters posed to our business continu-

ity, such as earthquakes, volcanoes, typhoons, and floods. We rapidly detect

natural disasters in alignment with the systems operated by major global

disaster information providers, analyze disaster impacts through supplier loca-

tion information available on our G-SRM system and notify our staff in charge

via e-mails or text messages on the status of disasters, along with the list of

our suppliers regarding their products within the influence of such disasters.

In 2016, nearly 20 earthquakes and typhoons impacted our supply chain.

However, we were able to promptly detect and respond to them, resulting in

only minimal business loss caused by supply materials disconnection.

Securing Suppliers’ Sustainable Competitive Edge

Registration of New Suppliers We evaluate new suppliers upon selection based on five criteria: procurement

& quality, environment & safety, labor and human rights, Eco-Partner, and

financial status. Only those, who score 80 points or higher in all five criteria,

can be registered as our suppliers. In the environment & safety, labor and

human rights, and Eco-Partner domains, we use EICC’s checklist to perform

intensive reviews. To identify the actual condition of candidate suppliers, our

in-house evaluators dedicated to each domain make on-site visits and evalu-

ate suppliers based on the checklist while their financial status (credit rating)

is reviewed with the help of professional external agencies.

• Environment & Safety _ Our suppliers should satisfy the criteria set in 22

articles spanning occupational safety, fire prevention facilities, occupational

health, hazardous substance handling, and environmental facilities. Specifi-

cally, full compliance is required in the eight mandatory items that include

fire prevention facilities and the handling of hazardous and waste substanc-

es, sewage and wastewater.

• Labor and Human Rights _ Mandatory on-site audits are performed on 20

clauses including voluntary work, compliance with work hour regulations, and

ban on discrimination. Particularly, ban on child labor, guarantee of minimum

wages, and ban on inhumane treatment contain mandatory requirements.

• Eco-Partner _ The Eco-Partner certification reviews such items as the prod-

uct environment policy, education & training, and hazardous materials in

components, and we only work with Eco-Partner-certified suppliers.

Our standard supplier contract signed with 1st-tier suppliers stipulate our En-

vironmental Standards, international human rights standards and labor prac-

tices, compliance with our Supplier Code of Conduct and other ESG-related

details in order to manage the quality of products from suppliers and their

social and environmental impact.

The IPC (International Procurement Center), our procurement base located in

strategically-important areas across the globe, enables us to monitor techno-

logical trends in relevant regions and identify new suppliers. Our Open Sourc-

ing System allows suppliers who wish to do business with us to present their

business ideas through the procurement portal site (www.secbuy.com) of the

G-SRM system. In 2016, a total of 520 suggestions were reviewed, out of

which 58 suggestions were chosen for product application.

Supply Chain Risk Management

Category

Supplier Risk

(External)

Financial status, labor and human rights, environment & safety,

conflict minerals, hazardous substances, etc.

Detect risks only on that may occur from the economic, social,

and environmental aspects and take timely measures

• Financial : Monitor credit ratings and relevant changes through

external credit rating agencies

• Compliance/Environment : Adopt a three-stage process of self-

assessment, on-site audits and third-party audits

Items related to compliance with domestic/overseas regulations

as well as procurement processes/principles

Prevent corruption and/or regulatory violations in relation to

procurement operations

• Fundamentally control abnormal business processes within the

system

• Preemptively detect risk indicators in accordance with sce-

narios and perform on-site audits

Item

Purpose

Monitoring

Method

Item

Purpose

Monitoring

Method

Procurement

Process Risk

(Internal)

CREATING vALUE

Management Plans

developed and distributed guides for safe handling and use while defining

and sharing criteria for 1st-tier suppliers to examine the environment & safety

performance of 2nd-tier/lower-tier suppliers.

• Promotion of Fair Trade Policy _ Furthermore, we support wide-ranging

programs to promote fair trade between 1st-tier and 2nd-tier suppliers. With

the help of ‘Hyeopseonghoe’, a council made up of our 1st- tier suppliers and

the ‘Council of Trustees’ (consisting of 2nd-tier suppliers), we are able to es-

tablish a culture of mutual growth.

To help improve the work environment of 2nd-tier suppliers, we stipulate in the

standard contract form signed with global 1st-tier suppliers that they are respon-

sible for managing the work environment of lower-tier suppliers as a way to

monitor whether 1st-tier suppliers check on their 2nd-tier suppliers and to ascer-

tain their level of management. Furthermore, we require our suppliers to join

the responsible business conduct initiatives as suggested in our Supplier Code

of Conduct and fulfill their responsibility for supporting and supervising 2nd-tier

suppliers.

Partner Collaboration Programs To live by our business philosophy that ‘Samsung Electronics’ competitive

edge comes from the competitive edge of its suppliers’, we further push the

boundary of our win-win management initiatives to include both domestic

and overseas suppliers. We provide a wide array of programs to support with

funding, education, and innovation to ensure that our suppliers become glob-

ally competitive.

We assist our 1st-tier and 2nd-tier suppliers in voicing their grievances through

our direct phone line (+82-80-200-3300), via e-mail ([email protected]),

through an online whistle-blowing system on the partner collaboration Portal

(www.secbuy.com), with on-site supplier consultations, and through various

workshops.

Partner Collaboration Programs for Our Suppliers

Support for 1st-tier Suppliers’ Innovation Initiatives

Since 2016, we have extended the scope of our innovation initia-

tives for domestic suppliers to include overseas suppliers. SI FLEX, a Vietnam-based supplier of Flexible PCBs (FPCB) used for camera mod-

ules, called for help at our consulting center to address its difficulties in

improving productivity and quality. We responded by supporting with

our manufacturing and quality experts to the company to offer their

management expertise, including analyses of manufacturing process,

and helped the company in modifying its production process to per-

form automated final visual inspections of the FPCBs that it produces.

Our consulting service assisted the company in increasing its testing

productivity by 160% while reducing the defects experienced by cus-

tomers by 83%.

Gold Sun, a local Vietnamese business, is our supplier of mobile phone boxes and manuals, and its overall manufacturing competitive

edge was behind our Korean domestic suppliers. We assisted the

company in changing the layout of its facilities and doing a consulting

of production plan management, which improved its quantitative pro-

duction rate by 94% and reduced its inventory level by 65%.

Improve testing productivity by

160% Reduce customers’ defect experience by

83%

Support for 2nd-tier Suppliers’ Innovation Initiatives

In conjunction with the Ministry of Trade, Industry and Energy, we

support the innovation initiatives undertaken by our domestic 2nd-tier

suppliers as well as suppliers we do not have any business relation-

ship with. HEADLINE is our supplier of gasket pads that we equip our clothes dryers with. Given the characteristics of the sewing process, a

large portion of the manufacturing cost lies in labor costs, and its ratio

is increasingly rising. It was against this backdrop that the company ap-

plied for Industry Innovation program with a belief that its own capacity

would be insufficient in pursuing innovation. Under the guidance of

consultants, the company developed automation equipment to inte-

grate the previously separated cutting and connecting processes into

a single line. This improved its productivity by 23% and made KRW 9

million available for installing high-performance metal detectors to ad-

dress process delays and saved KRW 24 million in losses caused by

defects per year. Since participating in the Industry Innovation program

facilitated its innovation initiatives and helped generate tangible out-

comes, the company continued to join the 2nd, 3rd, and 4th programs. In

doing so, HEADLINE is able to integrate innovation into the fabric of its

corporate culture. Furthermore, its sales rose 1.5 times from KRW 2.5

billion in 2014 to KRW 3.7 billion in 2016, and its production doubled

from 2.1 million units in 2014 to 4.2 million in 2016.

Improve productivity by

23% Increase sales by

150%

CREATING vALUE

Funding Support

Employee Capacity- Building

Support for Innovation Initiatives

• Support suppliers in extending loans (Mutual Growth Fund, Mutual Growth

Guarantee Program, Funding Program with the Korea Exim bank, etc.)

• Support 2nd-tier suppliers with receiving payments (Win-Win Payment

System)

• Assist young job seekers in receiving job training and on-site training at

our suppliers

• Offer tailor-made support in recruiting employees and nurturing future

executives

• Offer tailor-made on-site consulting for our suppliers’ innovation initiatives1)

(technology, cost, manufacturing, process)

• Share benefits when reaching the goal jointly set by Samsung and

suppliers (benefit sharing programs)

• Provide consulting and funding to 2nd-tier suppliers and SMEs who don’t

even have any business ties to us (Industry Innovation Campaign2))

• Enable suppliers and SMEs who don’t have any business ties to us to make

their manufacturing sites smart (Smart Factory support2))

• Share Samsung’s patents to help SMEs strengthen their technological

competitiveness (patent sharing)

1) Tailor-made on-site consulting for suppliers’ innovation initiatives are offered primarily on the shop

floor and are also provided to overseas suppliers.

2) These programs are implemented by the Korean Ministry of Trade, Industry, and Energy.

Cas e

G r OW I N G S u S tA I N A B I L I t y P O L I Cy F r O M O u r C O r E B u S I N E S S P r I N C I P L E S

This section highlights our company’s core values that are also the baseline of our sustainability.

Our COrE VALuES

Our management philosophy originates from our people. Since our

establishment, we have always believed that ’business is defined as

its people (People First)’ and thus have provided a creative and self-

initiated work environment that encourages outstanding people to

reach their highest potential.

As a global corporate citizen, we are also aware that one of our

most important and fundamental responsibilities lies in respecting

and protecting the human rights of all employees. And we are com-

mitted to abiding by the agreements and recommendations made

by international organizations in the human rights field.

trENDS & CHALLENGES • Economic Downturn and Youth Employment _ The increasing

youth unemployment caused by the slower-than-expected recov-

ery of the global economy is a daunting challenge that countries

across the globe are presently facing. The International Labor Or-

ganization (ILO), under the UN forecast that youth unemployment

among those aged 15 and 24 would amount to 13.1% in 2017, set

a new record while the UN SDGs also pursued the increase of de-

cent jobs to ensure sustainable economic growth (UN SDGs 8). As

such, human resource management is a critical issue not only in

building a company’s competitive edge and creating jobs, but also

in fulfilling our social responsibility as a global corporate citizen.

• Support for Growth and Realization of Potential _ Businesses

today face growing expectations from society and stakeholders to

help their employees (both current and retired) pursue individual

growth and build capacity. Businesses should fulfill such expecta-

tions by providing individual career management and career con-

sulting services and by creating working conditions and an organi-

zational culture conducive to gathering creative and diverse ideas

from employees. For businesses with global a presence, there is a

need to increase the recruitment of local staff in order to embrace

diversity and a lifestyle and to facilitate internal/external communi-

cation.

• Growing Importance of Labor and Human Rights _ Human

rights protection in the field of labor conditions, race or gender

discrimination, living conditions of local populations and privacy

infringement is of utmost importance to Samsung. Among the 169

targets of the UN SDGs, 92% of them are related to human rights.

Notably, the introduction of regulations that urges businesses to

be responsible for human rights management and the growing

demand from civil society that businesses should provide fair work

environments/employment opportunities. Also, diversity issues

have gained importance in business management.

Our COMMItMENt We encourage the autonomy and creativity of our employees

and recognize their diversity, while constantly striving to provide

performance-based compensation to assist them in reaching their

full potential. We respect the diversity of our employees and thus

ban any discrimination on the grounds of nationality, race, gender,

education, age, and religion etc.. We also fully abide by the laws and

regulations of countries and local communities where we are based

as well as international standards. We do not tolerate forced/child

labor and wage exploitation under any circumstance..

What We aChIeVeD In 2016-2017 • [Human Rights] Established corporate policies to protect the

rights of vulnerable workers; Identified and manage work environ-

ment risks; Operated systems to respect the diversity of employ-

ees and building a conducive organizational culture

• [Career Development] Switched into a job function-based HR

system; Reinforced life cycle-based career development programs

• [Organizational culture] Top Management’s declaration to elimi-

nate authoritarianism; Monitored employee satisfaction

FuturE PLANS 1. To be a Company that Attracts Top-Notch Talent _ One of the

qualitative goals of our Vision 2020 is to become a ‘company that

top-notch talent wants to work for’. To reach this goal, we aim

to build a creative organizational culture through innovative HR

practices and to monitor our performance in human resources

management through employee satisfaction surveys.

2. Workplace Labor/Human Rights Management _ We will con-

stantly make reviews and improvements so as to maintain a safe

and sound work environment in global scale.

3. Respect for Diversity _ Gender equality and respect for diversity

will further take their deep root in our corporate culture to encour-

age talented individuals with diverse backgrounds to fully unleash

their potential and evolve into global leaders.

O u r V I S I O N F O r VA Lu E

People First

– while offering intensive consulting services on necessary improvements.

In 2016, a total of nine worksites in Americas, Europe, and South East/West

Asia underwent such special diagnoses to enhance their managerial capacity.

In conducting third-party reviews, EICC criteria, and other industry standards

are adopted to objectively analyze risks and take efficient improvement mea-

sures. In 2016, these external third-party reviews have been performed on a

total of 6 worksites in domestic and global sites on 7 occasions.

1) R&D, marketing, sales, service, distribution, procurement, manufacturing, management

2) Samsung Advanced Institute of Technology(SAIT) (R&D), Samsung Marketing Academy (sales/marketing), Global CS Center (service), Partner Collaboration Center (procurement), Design Management Center (design)

HR Development System

Internal External

Goal

Share Samsung’s Vision, Value,

and Culture

Training Course

Offer introductory training to

new recruits, share our annual

strategic directions (for all global

employees)

CoRe pRogRAM

Goal

Nurture global key leaders

Training Course

Training based on the Samsung

Leadership Framework

Aligned with the succession plan

leAdeRship pRogRAM

Goal

Nurture top-notch experts by job

function

Training Course

Offer training on eight job

functions1) by specialized and

dedicated training units2)

expeRtise pRogRAM

• Samsung MBA

• Academia training

• Academia - Industry cooperation

• In-house graduate school

Mentoring, Coaching, QJT (On the Job Training)woRK plACe leARning l&d open innoVAtion

Key AReAs

STaR Session

Human rights

Labor and Human Rights Policy It was back in 2013 that we created a dedicated organization for the work

environment management of our overseas worksites, which led to the intro-

duction of a monitoring system applicable to respective sites. In 2014, we de-

veloped a risk analysis system to understand broad range of factors that could

possibly affect the management of human rights at our worksites and identify

high-risk sites. Furthermore, the legal compliance of our domestic sites is

reviewed to identify their work environment management level and to make

any necessary improvements.

Each year, we conduct ‘Samsung Expert Diagnoses’ on our worksites whose

managerial performance is found to be substandard or at high risk in the labor

and human rights field on the basis of the data registered at our worksite

monitoring system and risk analysis system. In 2016, 11 high-risk worksites

– four in the Americas, two in South East/West Asia and others – conducted

such diagnoses, and a total of 227 improvement tasks were identified. Out of

these worksites, three of them fully completed their improvement tasks, and

211 tasks have been completed within all these worksites (93%).

To supplement these expert diagnoses, special quarterly diagnoses are per-

formed under the supervision of respective business divisions while third-par-

ty reviews are made at the request of our customers and on other occasions.

Special diagnoses aim to review risk factors in specific areas – work hour

management, protection of vulnerable employees, improved usage proficien-

cy with the monitoring system, and the improvement of organizational culture

Risk Monitoring

1 Worksite Monitoring System

• Conduct monthly assessments on compliance management and

improvement implementations

• Conduct assessments on 55 items in 7 areas in 12 languages

(English, Chinese, Vietnamese, Spanish, etc.)

2 Worksite Risk Analysis System

• Perform quarterly risk assessments

• Analyze a total of 57 indicators: 32 internal management

indicators (work environment, labor conditions, HR operation,

relevant systems, etc.) and 25 external/internal environmental

indicators in countries where we operate

3 Employee Communication • Operate in-house grievance-handling channels • Host regular discussions and interviews under the supervision of executives, managers and employee representative bodies

4 Networking with External Stakeholders

• Use our network with governments, NGOs, and academia to

identify diverse risk factors and issues that may occur at our

global worksites

• myCoach

• Smart LearningKnowledge netwoRK (Web 3.0, Social Network, Mobile-based) • Collective intelligence (MOSAIC)

• Knowledge Contents

• S/W Expert Academy

OUR CORE vALUES

Grievance Handling Procedures

Global Grievance Handling Standard Procedures

Grievance Gathering

Four channels are used by

employees to raise complaints they

experience in their daily work

Dealing with Grievance

Facts are checked within 24 hours

– three days by issue, and then

grievances are classified, transferred

to, and treated by the responsible

department through agreements with

the HR

Feedback

Outcomes are notified within three

to seven days via the same channel

through which the grievance was

submitted

Grievance Reviewing/Closing

If those who raised the grievance

are unsatisfied with the outcome,

they can raise their objection within

five days following the notification

of handling outcomes

step 1 step 2 step 3 step 4

Work Council by Region (As of the end of Dec. 2016)

Category

Korea

China

Southeast/Southwest

Asia and Others

Europe, North America,

Central/Latin America

Total

No. of Work Councils

No. of Employee Representatives

162

164

288

117

731

No. of Members (Employees)

88,238

32,143

122,549

21,939

264,868*

Data on Grievance Submission (2016)

Grievance Channel

Hot Line

Online

Offline

Employee

Representative Body

Total

No. of Grievances

2,214

1,378

3,496

2,190

9,278

Type of Grievance

Work environment

Labor conditions

Personal relationships

Health & safety

Change in business

practice

Organizational change

Discrimination

Harassment

Others

Total

No. of Grievances

3,213

1,951

1,309

1,199

271

161

1,049

9,278 Work Council Agenda in work sites (2016)

Category

Wage & benefits

Institution &

system

Organizational

culture

Work hours

Infrastructure

Environment &

Safety

Others

Total

Agenda

411

212

209

734

194

282

2,101

Ratio (%)

100

Note

Adjust increases and welfare & benefits

Improve the HR framework including its

systems/processes

Organizational revitalization, awareness

improvement, campaigns, etc.

Adjust overtime/extra work, taking over col-

league’s job duties and compensatory leave

Cafeteria, bus, dormitory, fitness center,

parking lot, etc.

Workplace safety, health check-ups, preven-

tion of musculoskeletal diseases

Our Work Councils are under operation at 46 worksites in domestic and global

sites in compliance with their country-specific regulations and individual char-

acteristics. Employees can vote for their representatives under the principles

of direct and secret votes, and employee representatives hold discussions or

interviews with shop floor employees once a week or more. In 2016, 1,671

discussions were held and joined by a total of 20,950 employees. Our Work

Councils at respective worksites host regular meetings to consult on such

wide-ranging agenda items as wages, labor conditions, welfare, and other

diverse items related to the promotion of employee rights. The consultation

outcomes are then disclosed throughout the company through the bulletin

and other channels. In 2016, a total of 2,101 agenda items were brought to

the table globally, out of which 1,921 items or 91% were handled.

(Unit: No. of Items, %)

(Unit: No. of Councils and Persons)

* 86% of total employees

(Unit: No. of Grievances)(Unit: No. of Grievances)

OUR CORE vALUES

Grievance Handling Channels

Hot Line

Phone or e-mail, Available 24/7

Online

In-house intranet

Offline

Opinion boxes placed in

undisclosed areas devoid of

CCTVs

Work Council and other diverse employee committees

Voluntary employee committees,

regular weekly discussions

Complying with legal and ethical standards* is our top priority in

business conduct, and we are fully committed to eliminating any

unlawful or corruption practices and building an ethical organizational

culture.

trENDS & CHALLENGES • Compliance and Anti-Corruption _ The UN SDGs aims to pro-

mote just, peaceful, and effective institutions defined in UN SDGs

16 and to reduce corruption and bribery in all their forms. Notably,

multinational companies with global presence need to ensure con-

sistency in implementing globally-acceptable regulations in order

to respond to any violations of anti-corruption/anti-trust regulations

that occur in countries whose regulations are substandard. Thus,

we need to respond to increasingly globalized business conditions

and a diversified business structure by establishing an organization-

al culture driven by compliance and fair trade as a global company.

• Diversifying Business Conditions _ We are increasingly exposed

to diverse risks caused by unpredictable changes in the business

environment. These changes include intellectual property rights

(IPR) risks due to new technology developments, fierce competi-

tion in the global market, and an increasing share of developing

countries in our supply chain.

• Protection of Personal Information _ Personal information

serves as a core element in fulfilling social functions in terms of

e-commerce, customer management, and financial transactions.

If the management approaches to database or network protec-

tion and personal information security are inappropriate, they may

increase the risk of privacy breaches or the misuse of personal

data. By developing and implementing a comprehensive personal

information protection policy that governs our entire business, we,

as a company, can prevent legal/reputational risks, safeguard the

invaluable personal data of our customers and employees, and

even protect their human rights and safety.

Our COMMItMENt As our business is actively engaged in numerous countries around

the globe, we recognize and analyze differences in laws, regulations,

and practices in respective countries while conducting business in

a lawful and ethical manner. We also develop and implement global

personal data security policies to respect the privacy of our custom-

ers and employees and by protecting their personal data.

What We aChIeVeD In 2016-2017 • [Compliance and Anti-Corruption] Applied our Code of Conduct

and Employee Business Conduct Guidelines to systematically

manage compliance and ethical risks; Trained employees to raise

their compliance awareness

• [Personal Data Security] Strengthened the operation and audit-

ing of the data privacy protection management systems; Offered

on/offline personal data security training in consideration of job-

specific characteristics

FuturE PLANS 1. Enhance Employee Awareness of Compliance Management _

We will continue to provide company-wide training, and conduct

periodical surveys on employees’ awareness of compliance man-

agement to monitor our status quo.

2. Reinforce Compliance Monitoring _ We will ensure that our

legal compliance in business conduct is monitored more inten-

sively, and will pursue fundamental improvements once issues

are identified.

3. More Stringent Management of Overseas Offices _ We will

build dedicated organizations in our key emerging markets to

strengthen our internal control and management performance as

a way to prevent any legal violations that may occur in our busi-

ness conduct overseas.

4. Increase Personal Data Protection _ We will design our training

curriculum to include the latest issues and cases on personal data

security as well as real-life scenarios while continuously reviewing

our personal data management.

O u r V I S I O N F O r VA Lu E

Compliance

* At Samsung, compliance management is defined as conducting business in accordance with the Code of Conduct in the areas of regulatory compliance, information protec-

tion, asset management, fair competition, anti-corruption, prevention of conflict of interest, etc.

1) Compliance Program Management System

2) Privacy Legal Management System

3) Global Environment, Health & Safety System

4) Trade Compliance System

5) Global Policy & Procedure Manuals

Compliance

Compliance Management System Our compliance program aims to establish compliance-driven corporate

culture, minimizing the business risks from various issues, such as cartel,

IPR(Intellectual Property Right), etc. This program also promotes stronger cor-

porate responsibility, in particular, in the area of human rights, health & safety,

and environment. Key areas within the management scope are illustrated as

follows.

Management System by Compliance Management Area Compliance Management Process

The Compliance Program Management System (CPMS), an IT system

developed to manage compliance-related risks, provides our area-specific

policies, and the details of regional issue monitoring. Our help desk is

in operation to assist employees in making one-on-one inquiries to ex-

perts whenever they have work-related questions or when they find our

guidelines insufficient to determine illegality. The number of inquiries

submitted to the help desk has consistently risen since April 2011 when

we announced the Compliance Declaration. Our whistle-blowing system,

designed under the CPMS for our employees, firmly guarantees the confi-

dentiality of whistle-blowers.

Prevention

Monitoring

Follow-up Management

Offer employee training, provide area-specific

guides, make system-based self-reviews,

operate a help desk, sense and manage new

and revised regulations

Conduct regular/ad-hoc monitoring through

dedicated organizations or staff

Identify the root causes of issues through

process/result analysis, make improvements,

prevent the reoccurrence of the same issue

(e.g. introduce actual cases as part of training)

Category

Compliance

Anti-

corruption

Personal

Information

Security

Intellectual

Property

Rights

Labor

Relations

Environment

Trade

Others

Mandate

Reporting of compliance violations,

help desk, self-initiated reviews,

posting of manuals and guides

Posting of the Management

Principles and Code of Conduct,

reporting of corrupt practices

Personal data protection

management of products and

services

Ban on the illegal use of software

Compliance with labor standards,

posting of HR regulations

Environment & Safety of

workplaces and products

Strategic resources,

management of conflict

minerals use

Standardization of global

business processes

Responsible Unit

Compliance Team,

Global Privacy Office

Audit Team

Global Privacy Office

IT Strategy Group

HR Team

Global EHS Center

Corporate

Compliance Team

Administration Team

Global Legal Affairs

Team, Corporate

Legal Team

Management System

Compliance Program

Management System

(CPMS1))

Ethics Management

System

Privacy Legal Manage-

ment System (PLMS2))

IT4U

HR-Partner

Integrated absenteeism

and tardiness record

system (My Portal)

Global Environment,

Health and Safety

System (G-EHS3))

Conflict Minerals

Management

System(TCS4))

Global Policy & Procedure

Manuals (GPPM5))

management

Contract management

system

Anti-trust Intellectual

property rights Anti-corruption

Consumer

protection

Trade Labor relations Environment

& Safety Subcontracting

key management areas

Help Desk Inquiry Status

(Unit: No. of Inquiry)

2014 2,567

2015 3,053

2016 3,640

As a global corporate citizen, we contribute to the benefit of all and

create shared value on the basis of our technology and innovation.

In doing so, we aspire to help each member of the global society

reach their full potential and take the lead in creating fundamental

solutions to the social issues we face.

trENDS & CHALLENGES • Change in Awareness of Social Contribution _ We witness in-

creasing expectations on sustainable social contribution programs

that help solve social issues while creating corporate value. This

implies that businesses need to be directly engaged in addressing

social issues through the alignment of Creating Shared Value (CSV)

and the UN SDGs.

• Equal Opportunity in Education and Employment _ The 2016

UN SDGs report revealed that 124 million children and teenagers

were unable to receive education due to costs and accessibility is-

sues as of 2013. Since high-quality education is the key to securing

decent jobs and determining one’s quality of life, the UN SDGs pur-

sue education for all (UN SDGs 4). By ensuring improved access

to education and providing employment training for the vulnerable,

businesses can contribute to reaching the UN SDGs in general.

• Women’s Economic Independence _ The UN SDGs seek the

economic independence of women to ensure gender equality (UN

SDGs 5). All around the world, women’s economic activity time is

only a half of that of men, and this can be partly resolved by provid-

ing educational opportunities to female students. In particular, pro-

viding vocational training to women in developing countries whose

national educational system is often not well established can

provide an opportunity for businesses to secure a much-needed

workforce and to pursue social development.

• Technology Transfer, Dissemination, and Diffusion _ To ensure

the entire global community could reach the sustainable develop-

ment, partnership-based cooperation and the dissemination of ap-

propriate technology from the developed nation are necessary (UN

SDGs 17). Notably, Information and Communication Technology

(ICT) is widely recognized as a means of securing a better quality

of life by helping the vulnerable overcome the physical limita-

tions of distance and the economic costs of implementation, and

through the strengthening of connectivity (UN SDGs 1).

Our COMMItMENt We are fully dedicated to serving our social responsibility towards

sustainable social development and the betterment of human soci-

ety. We take a proactive approach in our social-giving initiatives: we

share our cutting-edge technology that constitutes our core compe-

tency to address diverse social issues (education, health, employ-

ment, and environment) and facilitates employees’ talent-sharing.

What We aChIeVeD In 2016-2017 • [Reaching One’s Potential] Increased educational accessibility

and provide employment opportunities through Samsung Smart

School and Samsung Tech Institute among our global strategic cor-

porate citizenship programs.

• [Sharing Innovative Technology] Assisted the development of

social issue solutions through the use of state-of-the-art ICT

• [PlanetFirst] Joined the Global Earth Hour initiative to conserve

energy; Collected used mobile phones and use them for educa-

tional purposes; Operated green schools, etc.

FuturE PLANS 1. Focus on Top Priority Issues _ We will broaden our environ-

mental programs and educational accessibility improvement pro-

grams for women and vulnerable people as they address globally-

important issues and allow us to effectively use our capabilities to

create value.

2. Strengthen External Cooperation/Partnership _ We plan to

develop customized programs for local communities through

cooperation with external/internal stakeholders – global research

institutes and NGOs that deal with specific local conditions or

specific social-giving areas – and to expand our partnership with

outstanding institutions so as to generate collective impact.

3. Performance Measurement Methods _ We will collaborate

with academia and global research institutes to study the educa-

tional effectiveness of our corporate citizenship programs (Smart

School) to develop a system to measure their substantial contri-

butions (value and impact). Furthermore, we plan to improve the

operational transparency of all our sponsorship and social contri-

bution funds. Please refer to page 44 for further details.

O u r V I S I O N F O r VA Lu E

Corporate Citizenship

102

Culture exchange between Smart Schools in Portugal and Korea

Vidigueira Elementary School in the southern state of Alentejo, Portugal, and

Dyanam Elementary School in Gunsan, Korea are working together to close

the educational gap through our Smart School program. We have launched

this program at seven schools located in the poorest regions of Portugal since

2014, and since then, student failure rates have dropped to 0% from 15% be-

fore the program’s initiation. In 2016, video calls were made between Smart

Schools in Portugal and Korea to promote cultural exchanges: Taekwondo

demonstrations were made and students shared in Korea’s traditional food

and games, Portuguese folk songs and Korean children’s songs. This was

broadcast by the national Portuguese TV channel and Korea’s network TV

channels as a best practice in educational and cultural exchange.

Samsung emPOWER Tomorrow, coding education for female students

Our North American Regional Head Office has been working with Discovery

Education, an NGO dedicated for coding education since 2015 to provide 4th

and 5th grade girls (aged 9-11) with computer programming and electric/elec-

tronic training. This three-month extra-curricular program offers a wide-range

of hands-on experience to help girls develop interest in science, technology,

and coding for six hours a week. In addition, we allow these students to meet

our female scientists working at Samsung to explore their career options in

the science and technology fields.

Mobile Smart Schools in Colombia

Students living in the remote village of Tarapoto along the Amazon River

in Colombia had to commute through highly dangerous routes to school.

This prompted us to develop ‘NOMAD’, our first ever mobile Smart School

program. The NOMAD package was designed in the form of huts used by

nomad natives of Colombia to make it easy for teachers to carry around,

and was made up of tablets and portable desks. Since June 2016 when the

program was initiated until the end of that year, 5,100 students in 40 regions

were educated through NOMAD, and its outstanding quality was recognized

by the Colombian government and educational organizations. Presently, eight

NOMAD schools are under operation in the country at the request of the gov-

ernment. In 2017, we plan to launch six additional Smart Schools in Colombia

as well as nine more in El Salvador, Costa Rica, Nicaragua, Dominican Repub-

lic, Panama, and Chile.

Smart Library support enabled by information technology

As part of our Smart Library 2.0 project, our Vietnamese subsidiary assisted

the renovation of National Library of Vietnam in terms of repairing its old of-

ficial residence and installing touch screen monitors, tablet PCs, and other

cutting-edge devices, which ultimately resulted in the opening of the S. Hub

Smart Library. Following the S. Hub opening in Ho Chi Minh in 2015 and the

S. Hub Hanoi in 2016, this Smart Library initiative will continue to expand

across the nation. In addition to Vietnam, we also provide Indonesian librar-

ies with digital books and digital library application facilities while establishing

the ‘Dream Library’ at a children’s hospital located in the outskirts of Tel Aviv,

Israel as part of our Smart Library program.

OUR CORE vALUES

106

Live Pages that supports readers in appreciating classical literature

Our Russian subsidiary developed an application that helps readers better

appreciate Russian classical literature in its e-book format. It includes the

relationships among characters in literature, historical backgrounds, and an

event map relevant to the different pieces of literature. These are shown as

pop-ups, and readers can play word games to learn old Russian and difficult

words. Readers can further enjoy reading literature through this application. In

2017, its English version will be developed and released.

Dytective application for dyslexia diagnoses

Our Spanish subsidiary developed a tablet application to diagnose dyslexia in

cooperation with the dyslexia research institute ‘Change Dyslexia’. This ap-

plication was designed to help more than 600,000 Spanish students demon-

strating symptoms of dyslexia: a simple test 15 minute or so test is enough

to diagnose the risk level of dyslexia. The test consists of several simple

challenges – hearing a sound and answering with its syllables, answering in

words, distinguishing one word apart from others, and answering in the cor-

rect letters. Its accuracy is approximately 90%.

Smart education support for refugee children

Our Samsung Discovery Lab is located within the Haya Cultural Center (HCC)

established under the vision presented by Princess Haya in Jordan. In 2016,

we offered digital device-enabled education to young students in the Zaatari

refugee camp in Jordan through our partnership with the UN Refugee Agen-

cy, and the HCC.

Smart AAC communication solution to help people with speech disorders

Augmentative and Alternative Communication (AAC) devices help people who

have difficulties in spoken or written languages when communicating with

others. When users press icons or type in sentences through these devices,

they are produced as voice outputs. In 2015, our researchers at C-Lab devel-

oped and released an AAC device with improved usability, through its coop-

eration with the Gyeonggi Assistive Technology Research & Assistive Center

and the Community Chest of Korea. This Smart AAC solution has diversified

its input methods including character, picture, and keyboard, reproduction

navigation, and 13 different voice tones. We donate tablets with this embed-

ded application along with auxiliary input devices, and this application has

been downloadable free-of-charge in the Android Market since January 2017.

OUR CORE vALUES

108

A P P E N D I x

110

CONSOLIDAtED StAtEMENtS OF FINANCIAL POSItION (In millions of Korean won, in thousands of US dollars)

December31,2016 (KRW) December31,2015 (KRW) December31,2016 (USD) December31,2015 (USD)

Assets

Current assets

Cash and cash equivalents

Short-term financial instruments

Short-term available-for-sale financial assets

Trade receivables

Non-tradereceivables

Advances

Prepaid expenses

Inventories

Other current assets

Assets held-for-sale

Total current assets

Non-current assets

Long-term available-for-sale financial assets

Investment in associates and joint ventures

Property, plant and equipment

Intangible assets

Long-term prepaid expenses

Net defined benefit assets

Deferred income tax assets

Other non-current assets

Total asset

Liabilities and Equity

Current liabilities

Trade payables

Short-term borrowings

Other payables

Advances received

Withholdings

Accrued expenses

Income tax payable

Current portion of long-term liabilities

Provisions

Other current liabilities

Liabilities held-for-sale

Total current liabilities

Non-current liabilities

Debentures

Long-term borrowings

Long-term other payables

Net defined benefit liabilities

Deferred income tax liabilities

Provisions

Other non-current liabilities

Total liabilities

Equity attributable to owners of the parent

Preferred stock

Common stock

Share premium

Retained earnings

Other components of equity

Accumulated other comprehensive income attributable to assets held-for-sale-for-sale

Non-controlling interests

Total equity

Total liabilities and equity

32,111,442

52,432,411

3,638,460

24,279,211

3,521,197

1,439,938

3,502,083

18,353,503

1,315,653

835,806

141,429,704

6,804,276

5,837,884

91,473,041

5,344,020

3,834,831

557,091

5,321,450

1,572,027

262,174,324

6,485,039

12,746,789

11,525,910

1,358,878

685,028

12,527,300

2,837,353

1,232,817

4,597,417

351,176

356,388

54,704,095

58,542

1,244,238

3,317,054

173,656

7,293,514

358,126

2,062,066

69,211,291

119,467

778,047

4,403,893

193,086,317

-11,934,586

-28,810

186,424,328

6,538,705

192,963,033

262,174,324

22,636,744

44,228,800

4,627,530

25,168,026

3,352,663

1,706,003

3,170,632

18,811,794

1,035,460

77,073

124,814,725

8,332,480

5,276,348

86,477,110

5,396,311

4,294,401

5,589,108

1,999,038

242,179,521

6,187,291

11,155,425

8,864,378

1,343,432

992,733

11,628,739

3,401,625

221,548

6,420,603

287,135

50,502,909

1,230,448

266,542

3,041,687

358,820

5,154,792

522,378

2,042,140

63,119,716

119,467

778,047

4,403,893

185,132,014

-17,580,451

23,797

172,876,767

6,183,038

179,059,805

242,179,521

27,686,236

45,206,818

3,137,052

20,933,347

3,035,949

1,241,503

3,019,469

15,824,248

1,134,346

720,625

121,939,593

5,866,594

5,033,378

78,867,346

4,607,573

3,306,362

480,320

4,588,113

1,355,388

26,044,667

5,591,350

10,990,183

9,937,550

1,171,614

590,626

10,800,941

2,446,344

1,062,925

3,963,857

302,781

307,275

47,165,446

50,474

1,072,772

2,859,938

149,725

6,288,411

308,773

1,777,899

59,673,438

103,004

670,826

3,797,002

166,477,524

-10,289,907

-24,841

160,733,608

5,637,621

166,371,229

226,044,667

19,517,225

38,133,728

3,989,820

21,699,677

2,890,640

1,470,903

2,733,694

16,219,383

892,765

66,452

107,614,287

7,184,200

4,549,226

74,559,893

4,652,657

3,702,599

4,818,886

1,723,555

208,805,303

5,334,634

9,618,121

7,642,798

1,158,297

855,927

10,026,208

2,932,855

191,017

5,535,794

247,565

43,543,216

1,060,883

229,810

2,622,519

309,372

4,444,422

450,390

1,760,717

54,421,329

103,004

670,826

3,797,002

159,619,385

-15,157,728

20,517

149,053,006

5,330,968

154,383,974

208,805,303

APPENDIx

112

CONSOLIDAtED StAtEMENtS OF CHANGES IN EQuIty (In millions of Korean won)

Balance as of January 1, 2015

Profit for the year

Changes in value of available-for-sale financial assets, net of tax

Share of other comprehensive income (loss) of associates and joint ventures, net of tax

Foreign currency translation, net of tax

Remeasurement of net defined benefit liabili- ties, net of tax

Classified as held-for-sale

Total comprehensive income (loss)

Dividends

Capital transaction under common control

Changes in consolidated entities

Acquisition of treasury stock

Disposal of treasury stock

Stock option activities

Others

Total transactions with owners

Balance as of December 31, 2015

Balance as of January 1, 2016

Profit for the year

Changes in value of available-for-sale financial assets, net of tax

Share of other comprehensive income (loss) of associates and joint ventures, net of tax

Foreign currency translation, net of tax

Remeasurement of net defined benefit liabili- ties, net of tax

Classified as held-for-sale

Total comprehensive income (loss)

Dividends

Capital transaction under common control

Changes in consolidated entities

Acquisition of treasury stock

Retirement of treasury stock

Others

Total transactions with owners

Balance as of December 31, 2016

Preferred stock

Common stock

Share premium

Retained earnings

Other components

of equity

Equity attributable to owners of the

parent

Non- controlling

interests

Total

Accumulated other compre-

hensive income attributable

to asset sheld-for-sale

119,467

778,047

4,403,893

169,529,604

18,694,628

(3,073,481)

(18,737)

(3,092,218)

185,132,014

22,415,655

(3,061,361)

(11,399,991)

(14,461,352)

193,086,317

(12,729,387)

(348,068)

12,686

266,061

258,983

(23,797)

165,865

(5,314)

(5,015,112)

3,406

(806)

897

(5,016,929)

(17,580,451)

(87,706)

(80,146)

1,160,316

926,280

29,022

1,947,766

(37)

(7,707,938)

11,399,991

6,083

3,698,099

(11,934,586)

162,181,725

18,694,628

(372,818)

(41,432)

264,828

258,983

18,804,189

(3,073,481)

(5,314)

(5,015,112)

3,406

(806)

(17,840)

(8,109,147)

172,876,767

22,415,655

(111,503)

(79,934)

1,160,316

926,280

24,310,814

(3,061,361)

(37)

(7,707,938)

6,083

(10,763,253)

186,424,328

5,906,463

365,516

(42,143)

171

3,487

4,995

332,026

(54,603)

423

(152)

(1,119)

(55,451)

6,183,038

310,437

87,664

(28,780)

37,322

406,678

(65,161)

12,272

1,790

(51,011)

6,538,705

168,088,188

19,060,144

(414,961)

(41,261)

268,315

263,978

19,136,215

(3,128,084)

(4,891)

(152)

(5,015,112)

3,406

(806)

(18,959)

(8,164,598)

179,059,805

22,726,092

(23,839)

(79,899)

1,131,536

963,602

24,717,492

(3,126,522)

12,235

1,790

(7,707,938)

6,171

(10,814,264)

192,963,033

80,101

(24,750)

(54,118)

(1,233)

23,797

(56,304)

23,797

(23,797)

212

(29,022)

(52,607)

(28,810)

APPENDIx

114

CONSOLIDAtED StAtEMENtS OF CASH FLOWS (In millions of Korean won, in thousands of US dollars)

December31,2016 (KRW) December31,2015 (KRW) December31,2016 (USD) December31,2015 (USD)

Cash flows from operating activities

Profit for the period

Adjustments

Changes in assets and liabilities arising from operating activities

Cash generated from operations

Interest received

Interest paid

Dividend received

Income tax paid

Net cash generated from operating activities

Cash flows from investing activities

Net increase in short-term financial instruments

Proceeds from disposal of short-term available-for-sale financial assets

Acquisition of short-term available-for-sale financial assets

Proceeds from disposal of long-term financial instruments

Acquisition of long-term financial instruments

Proceeds from disposal of long-term available-for-sale financial assets

Acquisition of long-term available-for-sale financial assets

Proceeds from disposal of investment in associates and joint ventures

Acquisition of investment in associates and joint ventures

Disposal of property, plant and equipment

Purchases of property, plant and equipment

Disposal of intangible assets

Purchases of intangible assets

Cash outflows from business combinations

Others

Net cash used in investing activities

Cash flows from operating activities

Net increase in short-term borrowings

Acquisition of treasury stock

Disposal of treasury stock

Proceeds from long-term borrowings and debentures

Repayment of long-term borrowings and debentures

Payment of dividends

Net increase in non-controlling interests

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents Beginning of the period

End of the period

22,726,092

30,754,471

(1,180,953)

52,299,610

1,405,085

(443,838)

256,851

(6,132,064)

47,385,644

(6,780,610)

3,010,003

(2,129,551)

789,862

(1,741,547)

2,010,356

(1,498,148)

2,280,203

(84,306)

270,874

(24,142,973)

6,944

(1,047,668)

(622,050)

19,936

(29,658,675)

1,351,037

(7,707,938)

1,041,743

(252,846)

(3,114,742)

13,232

(8,669,514)

417,243

9,474,698

22,636,744

32,111,442

19,060,144

29,610,971

(4,682,032)

43,989,083

2,151,741

(748,256)

266,369

(5,597,176)

40,061,761

(5,762,783)

2,143,384

(509,349)

3,999,710

(132,733)

200,502

(232,530)

278,009

(137,917)

357,154

(25,880,222)

1,083

(1,501,881)

(411,445)

421,231

(27,167,787)

3,202,416

(5,015,112)

3,034

192,474

(1,801,465)

(3,129,544)

(25,312)

(6,573,509)

(524,487)

5,795,978

16,840,766

22,636,744

19,594,260

26,516,267

(1,018,209)

45,092,318

1,211,453

(382,674)

221,455

(5,287,018)

40,855,534

(5,846,189)

2,595,201

(1,836,082)

681,013

(1,501,548)

1,733,313

(1,291,692)

1,965,973

(72,688)

233,545

(20,815,884)

5,987

(903,291)

(536,327)

17,190

(25,571,479)

1,164,854

(6,645,724)

898,183

(218,002)

(2,685,506)

11,407

(7,474,788)

359,744

8,169,011

19,517,225

27,686,236

16,433,508

25,530,350

(4,036,812)

37,927,046

1,855,215

(645,141)

229,661

(4,825,842)

34,540,939

(4,968,627)

1,848,009

(439,157)

3,448,519

(114,441)

172,871

(200,486)

239,697

(118,911)

307,935

(22,313,726)

934

(1,294,910)

(354,745)

363,183

(23,423,855)

2,761,098

(4,323,991)

2,616

165,950

(1,553,209)

(2,698,269)

(21,823)

(5,667,628)

(452,209)

4,997,247

14,519,978

19,517,225

APPENDIx

116

ACCurACy

• Whether the Selected Data collected from each appropriate sources have been complied with the reporting criteria of the Company.

• Whether supporting information are maintained at a global level when the Selected Data is collected from each appropriate sources.

SuMMAry OF WOrK PErFOrMED

The procedures we performed were based on our professional judgment and included the steps outlined below:

In order to form our conclusions we undertook the steps outlined below:

1. Interviews with management responsible for the collection and maintaining accuracy of the Selected Data.

2. A confirmation of whether methodologies, guidance documents and processes for reporting the Selected Data exists.

3. Reviewed the Report for the appropriate presentation of the Selected Data, including the discussion of limitations and assumptions relating to the

Selected Data presented.

4. A confirmation of the Company’s online collection tool for the Selected Data, including sample of collected data within the tool.

5. Reviewed underlying documentation for a sample of site level data points.

LIMItAtIONS OF Our rEVIEW

We conducted our work to express a Limited Assurance conclusion. The procedures performed in a Limited Assurance engage-

ment vary in nature and timing from, and are less in extent than for a Reasonable Assurance engagement. Consequently, the level

of assurance obtained in a Limited Assurance engagement is substantially lower than the assurance that would have been obtained

had we performed a Reasonable Assurance engagement and we do not therefore express a Reasonable Assurance opinion.

The scope of our engagement was limited to the reporting period, and therefore 2016 performance only.

Our review did not address the accuracy of information within the financial figures disclosed in the Report and we have not sought

any supporting evidence for data that has been sourced from the Company’s Annual Report and Accounts.

The responsibility for the prevention and detection of fraud, error and non-compliance with laws or regulations rests with the Com-

pany’s management. Our work should not be relied upon to disclose all such material misstatements, frauds, errors or instances of

non-compliance that may exist.

CONCLuSION

Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes

us to believe that the Selected Data was not prepared in accordance with the criteria of completeness, consistency, and accuracy.

Our INDEPENDENCE

With the exception of this work, we have provided no other services relating to the Report. Also, we comply with the Ethical Stan-

dard issued by IFAC (International Federation of Accountants).

Our COMPEtENCE

The assurance engagement was performed by the engagement team with a long history of experience and expertise in sustainabil-

ity area.

Jin-Sug Suh

Regional Managing Partner

EY Han Young

Seoul, Korea

June 2017

APPENDIx

Date of Publication June 30. 2017

Publisher Oh-Hyun Kwon

Published by Samsung Electronics

Report Prepared by Corporate Sustainability Management Office

Samsung Electronics Sustainablility Report 2017 uses FSCTM (Forest

Stewardship CouncilTM)-certifiec paper, bearing the logo carried only by

products made using timber from environmentally developed and managed

forests. The reprot was printed at a FS-certified print shop using soy ink

which drastically reduces the emissions of air pollutants.