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CorporateResponsibility

Report2018

A Leader In Innovative Thermal and Energy Management Solutions

Contents2018 Corporate Responsibility Report

01 Corporate 01 – Representative Executive Officers Message 02 – About Hanon Systems 03 – Delivering Eco-Friendly Solutions

04 Approach and Philosophy 04 – Approach and Philosophy 05 – Guiding Principles 06 – Sustainability in Automotive 08 – Quality 09 – Supplier Partnerships

10 Hanon Systems Citizen 10 – About Hanon Systems Citizen 11 – Corporate Responsibility in India 12 – Activities in 2018

13 Approach to Environmental, Health and Safety 13 – Continuous Learning and IMS 14 – EH&S Policy 15 – Environmental Compliance and Disclosures 16 – Korea Disclosure: Overview 17 – Korea Disclosure: History 18 – Korea Disclosure: Audit and Training 19 – Environmental Areas of Focus 20 – Korea Disclosure: Climate Change 21 – 2018 Environmental Performance

About this ReportThis Corporate Sustainability Report is a declaration of the company’s commitment to operate with transparency and determination to achieve sustainable growth, and to actively engage in environmental stewardship as a good corporate citizen.

This report intends to inform interested parties who are directly or indirectly affected by the business activities of Hanon Systems including, but not limited to its customers, current and prospective employees, business partners, governments and local municipalities and NGOs.

Information within this report pertains to calendar year 2018 (Jan. 1 to Dec. 31). Preparation of the environmental content is informed by the Ministry of Environment of Korea, and includes specific data related to environmental performance of the company’s manufacturing and business sites located in Korea.

22 – Health and Safety Mindset 23 – Health and Safety Tools 24 – Korea Disclosure: Health and Safety Management 25 – Korea Disclosure: Environmental Management

26 Corporate Governance 26 – Ethics Management 27 – Integrated Risk Management 28 – Framework and Operating Cadence 29 – Leadership – 2018

2018 Corporate Responsibility Report

Representative Executive Officers (shown left to right): Min Sung, Jay Son and Nurdal Kücükkaya

01 – Hanon Systems

We commit to act as a good corporate citizen and recognize the efforts we make today will have a positive impact that will improve the world for future generations.

Jay Son, Nurdal Kücükkaya and Min SungRepresentative Executive Officers

To our stakeholders,

Hanon Systems is committed to delivering value to all its stakeholders, which includes proactively taking action to drive positive change that will create long-term sustainability, and to operate with honesty, transparency and fair business practices at all times. We recognize we also must make a concerted effort to listen to stakeholder concerns, and to act upon such inputs to the betterment of our workforce and operations, business relationships, shareholders and the communities where we operate.

We are a valued business partner to vehicle manufacturers in the supply of innovative automotive solutions, and take pride in our vision to be a leader in innovative thermal and energy management solutions. Our global workforce is aligned in our corporate direction across all levels of the company. We use this direction as a guidepost to design and deliver eco-friendly solutions that address the needs of new energy vehicles, and enhance the driving experience by improving occupant comfort and cabin air quality. We also recognize there is more to our business than producing innovative automotive solutions that fight against climate change and global warming. There must be a corporate focus beyond what is produced to include how it is manufactured with a lens on the impact of our operations on the earth’s climate, resources and its people.

With every Hanon Systems manufacturing site accredited to ISO 14001 standards, we are making a public declaration of our company’s commitment to robust environmental management, improvements in the conservation of natural resources, and the reduction of air emissions and pollution. We also encourage continuous learning to drive enterprise excellence and operational efficiency, and take pride in the company’s actions to improve performance and to lessen the environmental impact in our facilities, particularly through energy-savings initiatives.

At Hanon Systems, our employees are our greatest asset, and the health and safety of our workforce is a top priority and we continue to operate at world-class levels in terms of safety performance. The company maintains an ISO 45001 accreditation covering all global locations. Through our robust health and safety management system, and global awareness campaigns, we are nurturing a corporate culture of compliance with all safety rules and regulations, and avoidance of any unsafe acts or conditions.

In closing, we confirm Hanon Systems is taking actions that will strengthen our commitment to corporate responsibility, and to investing in technologies and practices that bring a positive impact to our communities, employees, customers, shareholders and the planet. We commit to act as a good corporate citizen and recognize the efforts we make today will have a positive impact that will improve the world for future generations.

A Message from the Representative Executive Officers of Hanon Systems

Jay SonRepresentative Executive Officer

Nurdal KücükkayaRepresentative Executive Officer

Min SungRepresentative Executive Officer



Hanon Systems is a global leader specializing in the development and integration of automotive thermal and energy management solutions for e-mobility and conventional vehicles.

It was founded in 1986 in South Korea, and has grown in size and scope in its journey that spans more than three decades. Today, Hanon Systems is a leading multinational enterprise.

CorporateAbout Hanon Systems

At year-end 2018, the company’s footprint included 40 manufacturing, three regional innovation centers, one technical center and 18 engineering sites in 20 countries. Powered by more than 16,500 people, the company’s global network offers a well-balanced footprint in locations that are in close proximity to vehicle manufacturers.

The company’s innovation comes from engineering know-how located in key markets with the expertise, capabilities and local acumen to address the various needs of automakers where they operate.

Global Network

Daejeon, South Korea

Americas Innovation Center

Novi, Michigan

Asia Pacific Innovation Center

Kerpen, Germany

Europe Innovation Center

ExpediteInnovativeTechnology

DriveEnterpriseExcellence

AccelerateGrowth

Customers Employees ShareholdersSuccess is driven by

customer satisfactionSuperior execution

delivers profitable growth

Vision

Strategies

Values

Leader in Innovative Thermal and Energy Management Solutions

Hanon Systems aspires to be a:

People are the strength of our company

Corporate DirectionThe corporate direction is composed of three integral elements that guides the organization and serves as a public declaration of the company’s steadfast commitment to create sustainable long-term success.

The Hanon Systems e-compressor (left) and heat pump system (right) are among the suite of eco-friendly solutions designed to support the growth of new energy vehicles



2018 Key Achievements Customer and Industry Recognition

– GM: Named a Supplier of the Year for 2017

– Ford: Designated to the Aligned Business Framework (ABF) strategic network of suppliers

– Hyundai Kia Motors: awarded for outstanding engineering achievements for excellent new technology and patent capability

– New Excellent Technology (NET) certificate for compressor oil

– IR52 Jang Young-Shil Award for centrifugal air compressor for hydrogen fuel cell electric vehicle

[The IR52 Jang Young-Shil Award is presented to companies in Korea with technologically outstanding and innovative new products. Jointly sponsored by Korea Industrial Technology Association and Maeil Business Newspaper, a leading Korean business publication, the award is presented in the name of the Minister of Science and Technology.]

Delivering Eco-Friendly SolutionsAutomotive manufacturers are the customers of Hanon Systems. As important stakeholders, the company’s success is driven by customer satisfaction and noted as a core value in the corporate direction.

Driven by this customer-first mentality, the “voice of the customer” (VOC) is an important factor in the company’s decision-making, particularly in the development of innovative solutions.

The company values stakeholder feedback, and actively engages, listens and interprets customer requirements and needs. This feedback is an important element in the company’s effort to continuously improve its level of customer service and it serves as an input to guide the company’s product development roadmap.

One common thread across today’s global automakers is introducing new energy vehicles into the marketplace and a continued focus on improving the efficiency of conventional vehicles.

Improving fuel efficiency in conventional vehicles offers the promise of reducing the reliance on oil consumption, which results in less tailpipe pollution; thereby, minimizing the negative impact on the environment. Global legislation continues to impose stringent standards on automakers to reduce emissions and improve fuel economy in order to sell vehicles in certain markets.

Hanon Systems offers and is continually developing solutions that are specifically designed to help automakers meet these legislative challenges with conventional powertrains, while also supporting the growing need for alternative powertrain solutions.

This rate of change in today’s automotive market is accelerating as the era of hybrid and electric vehicles converge. Based on consumer demand, automakers are concentrating efforts with new concepts in electrified and eco-friendly vehicles that are equipped with high performance and high efficiency parts.

As more electrical and electronic componentry is introduced, Hanon Systems is well-positioned to lead this effort to meet customer requirements with a suite of innovative and eco-friendly thermal and energy management solutions that can maintain the optimal operating temperatures of this componentry, and also deliver comfort and improve cabin air quality, and enhance powertrain efficiency.

Corporate

Hanon SystemsGuiding Principles of Social Responsibility

Accountabilityand

Transparency

ContinuousImprovement

EthicalBehavior

Compliance

Respect forStakeholder

Interests

Respect forInternational

Norms ofBehavior

Focus onRelevant Issues

Respect forHuman Rights

Feedback Loop

IntegratedManagement

System


Process

Sustainable Growthand Development

Workplace Marketplace Environment Community

Finance

CorporatePlanning

Supply ChainManagement

Sales andMarketing

InformationTechnology Legal

OperationalExcellence and

Program ExecutionResearch and DevelopmentManufacturingCommunications

and IR

HR and EH&S

Impact Areas

Functions

Principles

Eight Guiding Corporate Responsibility Principles(informed by ISO 26000 Principles of Social Responsibility)

Hanon Systems Corporate Responsibility

Hanon Systems has developed its corporate responsibility strategy and approach based on eight guiding principles and four key areas of performance: marketplace, workplace, environment and community.

Informed by the international standard (ISO 26000) for social responsibility, the company’s eight guiding principles intend to establish a strong foundation for the organization to further develop its corporate responsibility efforts.

This approach is intrinsically tied to the company’s corporate strategies and the expectations of stakeholders. It provides a structure that facilitates the effective management of company issues related to environmental, social and economic factors. In giving corporate responsibility this platform, Hanon Systems is committed to act as a proactive corporate citizen.

Approach and Philosophy2018 Corporate Responsibility Report


Approach and Philosophy

The company recognizes that social, economic and environmental responsibility is by no means absolute, with no beginning or end. It is a process of continuous reflection with an active drive to always improve and avoid complacency. Through the deployment of leading practices in the journey toward

operational excellence, Hanon Systems can continue to advance its corporate responsibility agenda and bring a positive impact to stakeholders.

Hanon Systems fosters an environment built on honesty, equality and respect. It is recognized that every effort and every success in business must come from ethical decisions and ethical activities. This is made possible by educating employees on the company’s values, ethics policies and code

of conduct to ensure ethical behavior is embedded throughout the organization. The company also aims to use open and transparent dialogue with stakeholders to continuously improve this approach in the hope of inspiring others, external to the company, to do the same.

While compliance is generally associated with financial reporting, Hanon Systems recognizes how a business is managed is a fundamental aspect of corporate responsibility. The company complies with all applicable laws and regulations internationally and locally. Whether it is complying with

environmental regulations, international health and safety standards or financial reporting laws, adhering to all aspects related to compliance contribute to the sustainability of the company and its stakeholders.

As a concept, corporate responsibility has a large scope, which is why it is critical to prioritize and first focus on the relevant issues. It is important to understand what is material and what is not. Through stakeholder dialogue and self-assessments, Hanon Systems supports the principle that

an organization should focus its efforts on areas relevant to the company and where an impact can be made.

Hanon Systems supports and promotes the protection of internationally recognized human rights. Measures are in place to ensure these rights are not breached and assessed annually. The company also recognizes the universality of human rights and that, irrespective of location, culture or

situation, they are globally applicable.

Eight Guiding Principles of Social Responsibility

Accountabilityand

Transparency


EthicalBehavior

Compliance

Respect forStakeholder

Interests

Respect forInternational

Norms ofBehavior

Focus onRelevant Issues

Respect forHuman Rights

Just as important as communication and operating with speed, is the need to be accountable and transparent. It is important to assess and monitor, and be responsible for the impact those decisions and actions have on the environment, society, the economy and stakeholders.

Aligned with this is an openness to disclose operational details, policies and progress in a transparent, comprehensive and timely way. The company encourages active dialogue with stakeholders, realizing a collective voice provides invaluable feedback that is key component of this corporate responsibility journey.

As a company with global reach, Hanon Systems impacts a multitude of stakeholders around the world. Through open dialogue, active listening and transparency, the company aims to build and maintain relationships that are rooted in trust, and address stakeholder concerns

and interests. Engagement of this level and honest consideration of the stakeholder’s voice can provide the necessary platform to strengthen relationships and bolster a company’s corporate responsibility position.

Hanon Systems respects international norms of behavior. In situations where regional or local laws fail to satisfy, or are indeed in conflict with international norms, Hanon Systems will review its relationships and initiatives in that geographic area.

The company also is proactive in seeking ways to influence stakeholders where such conflicts arise.




EnvironmenalRequirements

Econom

ic

RequirementsSocial

Requirements

EquitableBearable

Sustainable

Planet

Pro�t

People

Companies are taking a more active effort to embrace the “triple bottom line” framework of performance – social, environmental and financial – also known as the 3Ps (people, planet and profits)

Today, consumers are more likely to make a purchase decision based on companies that promote a sustainable environment (aka “green” products and processes), and promote social responsibility by operating in a transparent and ethical manner.

With the knowledge these consumers come from all walks of life, including corporate executives and shareholders, it is no surprise companies are taking a more active effort to embrace the “triple bottom line” framework of performance – social, environmental and financial – also known as the 3Ps (people, planet and profits).

This notion may be one reason automakers are actively seeking ways to increase and improve brand recognition by promoting their own “sustainability,” which includes ensuring the supply base aligns with the same philosophies and requirements.

Customers, Sustainability and QuestionnairesAs companies take action to increase transparency with stakeholders, requests from automakers for insight into the company’s corporate responsibility efforts are becoming more frequent and detailed in terms of the information being requested. Some automakers leverage a common third-party online platform to collect supplier feedback, while others request entries using Microsoft Excel. The scope of input also varies, ranging from a corporate to site specific responses. The common thread surrounding these questionnaires involves providing input and/or evidence on the topics surrounding:

– Human Rights

– Environment

– Compliance and Ethics

– Diversity

– Health and Safety

– Supplier Sustainability

Hanon Systems regards the feedback of automakers in all its forms, including assessements from annual corporate responsiblity questionnaires. This input helps shape the continuous improvement actions and prioritization of efforts to improve the company’s overall corporate responsibility framework.

2018 Achievements – Reporting23 CSR-Related

Customer Surveys Completed


Sustainability in Automotive


Conflict Mineral ReportingHanon Systems recognizes the use of conflict minerals in the manufacture of products is a significant global social concern that surrounds the abuse of human rights, and the illegal mining and trade that has been linked to financing the armed conflict in the Democratic Republic of Congo (DRC) and neighboring states. These minerals deemed as “conflict” are defined as cassiterite, columbite-tantalite, wolframite and gold, as well as their derivatives tin, tantalum and tungsten and gold (3TG).

As part of the company’s commitment to building socially responsible and sustainable business practices, Hanon Systems supports international efforts to address this social issue impacting human rights by helping to reduce the trade of such conflict resources. To aid in this effort, the U.S. passed legislation that requires companies across many industries, including automotive, to report whether conflict minerals are contained within the products manufactured, or are contracted to be manufactured, originate from the DRC or an adjoining country. In 2017, the European Union passed a similar law that will become effective in January 2021 that mandates any import of 3TG minerals must originate from responsible sources.

Another common request from automakers is the annual disclosure surrounding “conflict minerals” in the products supplied. Hanon Systems fully supports each request to disclose annual information on the source of conflict minerals contained within its products.

Due diligence in this area requires coordination and transparency throughout the supply chain. To do so requires an understanding of the materials procured and the composition of these end products. As such, work continues with supplier partners to act on the same requirements and propagate this due diligence throughout the supply chain in an effort to identify the smelter-level processing the minerals.

Hanon Systems follows the conflict mineral reporting template (CMRT) as its reporting mechanism, developed by the Responsible Minerals Initiative (RMI), which was formerly known as the Conflict-Free Sourcing Initiative (CFSI). This standardized template is used across the auto industry as a means to facilitate the transfer of information in a consistent manner throughout the supply chain.

2018 Achievements – Reporting25 Conflict MineralReports Submitted


Sustainability in Automotive


International Standard Certification (IATF 16949) In 2017, the International Automotive Task Force (IATF) introduced a new automotive standard IATF 16949 that replaces the legacy ISO/TS 16949 standard with the mandate that requires all organizations to transition to the new standard (IATF 16949) by September 2018.

The IATF standard includes specific requirements related to corporate responsibility (section 5.1.1.1) to address increasing market and governmental expectations for improved integrity in social and environmental matters, including ethical integrity.

In 2018, 37 Hanon Systems sites – previously governed under the legacy standard – transitioned to the new standard and are IATF 16949 certified.

CommitmentQuality


Hanon Systems commits to delivering the highest level of quality and support at all time with principles that surround

Product, Processes, People and Innovation


Product

Process

People

Innovation

Translated to multiple languages and displayed in plain view in every manufacturing site, the company’s quality vision and policy represents an enterprise wide aligned commitment.

Vision

We will partner with our customers to design and build the best automotive thermal and energy management solutions in the world through our commitment to operational excellence in safety, quality, delivery and efficiency.

We will empower our employees to provide solutions for our customers and build a network of sustainable, mutually beneficial business relationships.

Our commitment to continuous improvement will be demonstrated in our actions and the effectiveness of our operating systems and processes.

Policy

Hanon Systems will be the global leader in quality and reliability of automotive thermal and energy management solutions.

We will achieve total customer satisfaction through the application of robust designs, standardized work, fast response and continuous improvement.

Our ultimate quality goal is zero defect performance.



Hanon Systems considers its supply base to be valued business partners and a critical component to the company’s long-term success. By entering into this partnership, the company expects its suppliers to commit to a relationship based on responsible and sustainable business practices, and to adopt the same principles, attitudes and policies as Hanon Systems within the supplier’s own organization.

Supplier PerformanceTo ensure Hanon Systems provides automakers with a consistent flow of high quality products, it is critical the supply base continually performs at its best. Routine evaluations of supplier performance are conducted to assess, monitor and identify risk factors within the supply chain. Using a rating scale, which is shared with suppliers, the company is better equipped to make decisions, predict performance and identify suppliers at risk of reduced performance.

In a demonstration of the importance to the business, Hanon Systems has two teams dedicated to supplier development and performance that work with low performing companies to “level-up” and to support those that perform well to improve. These teams also work to address production quality issues at the supplier and act as a liaison to the business to ensure the timely sourcing of tooling to support forward-model programs.

Hanon Systems – Procurement StrategyHanon Systems is sharply focused on creating sustain-able value by working in close collaboration with its supplier partners, and building long-term relationships founded on mutual cooperation and respect.

Supplier Code of ConductHanon Systems published its initial supplier sustainability code of conduct in 2017. It was posted to the supplier section of the company’s website and supplier portal.

In 2018, Hanon Systems bolstered its sustainability expectations of suppliers by introducing the Supplier Code of Business Conduct.

This Code intends to promote supplier sustainability and clarifies the company’s expectations of its global supply base in the areas of compliance with the law; treatment of people with dignity and respect; promoting a safe and healthy work environment; protecting information, technology and intellectual property; and maintaining accurate records and reporting.

It continues to complement the company’s set of Ethics Policies, which suppliers are expected to adhere; and applies to all vendors, contractors, consultants, agents and other providers of goods and services that conduct business with Hanon Systems and its affiliates.

Strengthen Partnerships

Increase Cost Competitiveness

Promote a Win-Win Infrastructure

Supplier Partnerships

Strategic

Collaborative

Transactional

Focus on New Innovation/Technology

Support Revenue Growth

Strengthen Global Competitiveness

Improve Value Stream Capability

Increase Process/Part Performance

Continual Learning /Problem Solving

Competitive Bid Sourcing

Quality/Delivery Ratings

Risk Avoidance

Approach to Supporting Supplier Partners

Approach and Philosophy

Hanon Systems Citizen2018 Corporate Responsibility Report


About Hanon Systems CitizenIn an effort to achieve sustainable economic growth, Hanon Systems commits to creating positive impacts economically, environmentally and socially in communities where it operates.

Through the company’s global social program, Hanon Systems Citizen, the company reaches out to parts of society that need support focusing on three distinct areas:

Environment

Community and

Education

With more than 16,500 employees worldwide in 2018, the company aims to make a far reaching impact. By involving the families of employees in activities and special events, the company aims to strengthen local communities and reinforce a team spirit. Activities globally include child at work days, national children day events, and promoting science-related subjects with future generations.

Hanon Systems Citizen is the company’s social contribution scheme that aims to make a difference for as many people as possible. Active involvement in Hanon Systems Citizen is supported and encouraged by the company across all of its locations; local guidelines for volunteerism are subject to guidelines managed by human resources. All social contribution activities – corporate or facility-level, or as an employee fundraising or volunteer-based event – are required to align with the company’s vision and corporate strategy, and with one or more of the following areas:

Environment

Tied closely with the company’s focus to provide eco-friendly and efficient solutions, Hanon Systems Citizen activities focus on improving the environment within local communities and raising the level of awareness of environmental issues among stakeholders including employees and students. Volunteer activities focus on the mitigation of pollution and restoration of natural habitats.

Community

The company is committed to delivering thermal energy and management solutions that bring comfort and well-being to the automaker’s end consumers. As a corporate citizen, Hanon Systems also is committed to activities that positively impact the welfare of the local communities. Areas of support include:

• child welfare • disaster relief • economically challenged groups • involvement with local and regional cultural programs • medical and health supportEducation Hanon Systems relies heavily on the skills and expertise of its employees. From a long term perspective, it is imperative the company contributes externally to the promotion, development and training of future generations. Such education-based activities include: • encouraging students to follow science, technology, engineering and mathematics (STEM) subjects • participating in events that introduce students to the science around managing thermal energy • partnerships with universities and student bodies such as the Formula 1 “Formula Student” program• partnerships with affiliations and industry consortiums that can influence future requirements and set standards for a better tomorrow• internship programs, mock interviews and work placement efforts for university and college students

Hanon Systems Citizen2018 Corporate Responsibility Report

Corporate Responsibility in IndiaSince 2014, corporate responsibility activities in India are mandatory in accordance with the Companies Act 2013, which applies to companies with a net worth greater than or equal to Rs. 500 crores ($81 million); or with turnover greater than or equal to Rs. 1000 crores ($162 million); or generating a net profit greater than or equal to Rs. 5 crores ($800,000).

To comply, companies must spend a minimum of two-percent each year based on the average of preceding three year profits on corporate responsibly activities and report these publicly. Activities that qualify under this law involve promoting health care, sanitation, education, environment sustainability; or contributions to technology incubators within recognized academic institutions.

With operations located in India, Hanon Systems aims to comply by focusing on activities that qualify under this law while at the same time supporting the corporate Hanon Systems Citizen guidelines.


Hanon Systems Citizen



Activities in 2018

Employees at the Daejeon and Pyeongtaek plants donated monies to benefit low-income youths with admission fees to junior high schools.

Korea: Donation to Support Low-Income Youths The Europe Innovation Center in Kerpen

installed two electric vehicle charging stations in a demonstration of the company’s commitment to environmental protection and preserving natural resources.

Germany: EV Charging Stations

The Alba plant in Hungary held its 19th annual environmental competition for local elementary school pupils aged 13-14 designed to promote environmental thinking among youth.

Hungary: Youth Environmental Competition

Donated books and medical expenses to the Healthy Families Multicultural Center in Daejeon.

Korea: Donations Support Multicultural Center

Air conditioning free inspection service for social welfare facility vehicles in Daejeon.

Korea: Employees Volunteer to Help Welfare Facility Employees at the Alba plant joined the municipal

government and about 20 local companies that aim to generate solutions that will achieve sustainability for the local community through support to various children institutions in Székesfehérvár.

Hungary: Local Community Support

The Palmela plant participated in the 2018 magic firefly campaign, an initiative aimed at gathering financial resources for organizations that focus on social integration of people with mental or combined disabilities.

Portugal: Campaign Supports Disabled Citizens Michigan-based employees volunteered at Forgotten

Harvest to repackage more than 1,700 pounds (about 770 kilograms) of cereal to help feed the needy in Metro Detroit. In addition, a check was presented to the organization from employee donations and proceeds from candy bars sold at the Americas Innovation Center.

U.S.: Employees Team to Fight Hunger

Hanon Systems and its supplier partner association jointly organized a donation charity event to support local welfare facilities for the disabled, underprivileged and single mothers.

Korea: Partner Charity EventEmployees at Hanon Systems Pune Plant in India volunteered to donate blood in commemoration of the festival of Lord Ganesh and as part of their corporate social responsibility activities. The event also was utilized to spread awareness about donating blood to save lives.

India: Pune Plant Organizes Blood Donation Camp

14 employees from the Gebze plant in Turkey participated in the 40th Istanbul Marathon. By joining, participants also support Turkish charity organizations that provide services to people in need. At the same time, employees collected donations for the Koruncuk Foundation.

Turkey: Employees Race to Help People in Need

Employees supported two charities. 1) Operation Good Cheer, a gift giving program supporting infants, children, teenagers and adults with disabilities who reside in Michigan foster care, group homes and residential facilities. 2) the Salvation Army Red Kettle Campaign collecting money to support: food for the hungry, relief for disaster victims, assistance for the disabled, outreach to the elderly and ill, clothing and shelter for the homeless and opportunities for underprivileged children.

U.S.: Employees Support Holiday Volunteer Efforts

Hanon Systems UK Ltd participated in a Christmas Jumper day to help raise money for the “Save the Children” Charity. The team donated 2 GBP for each Christmas jumper worn. The charity helps children not only to survive but to thrive.

UK: Employees Support “Save the Children” Charity

A team of employees from the Coclisa campus in Juarez, Mexico, visited the oncology unit of the local Children’s Hospital Specialties to bring gifts to hospitalized children. This gesture of goodwill and teamwork is an annual event where employees at Coclisa collect toys and donations to provide holiday gifts to needy children.

Mexico: Employees Support Local Children’s Hospital


Approach to Environmental, Health and Safety2018 Corporate Responsibility Report

Hanon Systems embraces the PDCA methodology to continuously improve performance

The company as a whole focuses on continuous learning and embraces the industry-wide systematic approach that embodies the four-step PDCA methodology to improve performance.

Using this approach, the environmental, health and safety team is sharply focused on industry-wide and local environmental and health issues, which leverages the team’s collective global expertise. This collaboration results in leading global practices, and the enhancement of the team’s overall competency and acumen to better serve the company and its stakeholders.

Goals within this team are established based on broad benchmarking. Through disciplined management system operation, training, professional techniques and best practices of global production plants, the company is committed to achieving its goals:

• Zero fatalities, permanent impairments, fire incidents or remediation incidents

• Transparent reporting – lost time case (LTC), reportable case (RC) or significant near misses

• Third-party audit with 10 sites at zero major non-conformances

• EH&S Assessment (EHSAT) score > 66 percent

• Year-over-year energy usage savings (kwh) of 5 percent

• Year-over-year reduction in waste/water usage of 3 percent

• 100% completion of regulatory requirements and customer requests

Integrated Management System (IMS)The company’s integrated management system (IMS) conforms to the recognized standards of ISO 14001 and OHSAS 18001 and contains the key elements, processes and procedures to implement and maintain the EH&S system.

This IMS helps to identify, assess and control critical environmental issues and safety-related risks. This is used at all company sites and in product development as a framework for continuous improvement, which is measured through target performance, including:

• Apply the principle of non-observance of dangerous acts and situations for the safe workplace of all employees

• Achieve EH&S excellence through systematic and rigorous processes in product design, development and production

• Reduction, reuse and recycling of waste, water, and packaging materials

• Reduce air pollutant emissions and prevent pollution

• Conserving energy and natural resources and improving efficiency

Occupational Health and Safety ManagementEnsuring an adequate health and safety management system is a critical element in demonstrating a commitment to employee safety. It is this reason all Hanon Systems sites were certified to OHSAS 18001 standards.

In 2018, the new international standard – ISO 45001 – was introduced, which is compatible with other ISO standards. Hanon Systems transitioned its sites to comply with the new standard.

What is ISO 45001?ISO 45001 is the international standard for management systems of occupational health and safety. Informed by its predecessor OHSAS 18001, it provides a framework for an organization to identify and control its health and safety risks, reduce the potential for accidents, comply with legislation and improve operational performance.

Continuous Learning and IMS



Environmental, Health and Safety Policy Hanon Systems has established this policy as a public declaration of its commitment to create and maintain a healthy and safe work environment, and to act in an environmentally friendly manner to protect and preserve nature. This pledge includes a commitment to foster a culture focused on the safety and well-being of employees and others, and to protect and preserve nature by operating in an environmentally friendly manner in the design and manufacture of automotive products supplied to its customers.

This policy is a demonstration of the company’s commitment to social responsibility through transparent reporting in accordance with disclosure requirements, and to adhering to all laws and regulations surrounding environmental, health and safety protocols and practices in all jurisdictions where the company operates. Whenever possible, the company commits to exceeding such requirements in an effort to create a sustainable and environmentally-friendly workplace.

This policy outlines the expectations for all employees, which includes anyone operating on behalf of Hanon Systems or visitors to any of the company’s locations:EnvironmentA focus on the environment is the catalyst to help create a world for future generations. A commitment in this area applies to all business and operations where any laws, regulations, customer requirements and other compliance concerning environmental issues. Hanon Systems works to establish environmental excellence in its operations in environmental matters through efforts to improve the efficiency of energy use, reducing waste and pollution, and protecting natural resources. This also encompasses promoting company activities to preserve nature. Aligned with the company’s customers, all sites are certified to ISO 14001according to the international standard for environmental management systems. Efforts are underway to transition and certify these sites to comply with the new standard ISO 14001:2015, which take effect in September 2018. Health and SafetyCreating a safe and healthy operating environment includes an unwavering and collective commitment to adopt safe practices at all times, and mindset focused on a zero tolerance for unsafe actions and conditions. This commitment set forth in this policy reflects the enterprise-wide responsibility of employees, at all levels, to ensure adherence to safety rules and regulations, and to avoid unsafe acts and quickly address unsafe conditions at all times. All sites are certified to OHSAS 18001, the standard for occupational health and safety management systems that provides a framework for companies to identify and control its health and safety risks, reduce the potential for accidents, comply with legislation and improve operational performance. A new international standard – ISO 45001 – is being introduced in early-2018, which the company intends to transition its sites to comply with the new standard.Integrated Management System (IMS)The company’s integrated management system (IMS) conforms to the recognized standards of ISO 14001 and OHSAS 18001, and contains the key elements, processes and procedures necessary to implement and maintain the EH&S system. With the transition to ISO14001:2015 and ISO 45001, this system also will migrate to confirm to the new standards.

Through his signature, the chief executive officer endorses this policy on behalf of himself and the executive leadership team of Hanon Systems.

In-Young LeePresident and Chief Executive Officer

The following statement outlines the company’s environmental, health and safety policy for calendar year 2018. It was endorsed by the former CEO, who retired at year end 2018. It applies to all facilities and individuals representing Hanon Systems and its affiliates, and is posted at each location.

Green Company DesignationIn 2018, the Korea Ministry of Environment designated the Daejeon plant with the “green company,” a designation the plant has held since 1999. The term “green company” is defined by the Ministry as one that significantly contributes to improving the environment by remarkably reducing pollutants, natural resources and energy, as well as improving environmentally friendly features in products and establishing of green management system in Korea.

The Daejeon plant was evaluated for its energy saving capacity, environmental improvement features at the Asia Pacific Innovation Center and technological innovations supporting environmentally friendly vehicles.

EH&S PolicyApproach to Environmental, Health and Safety


What is ISO 14001?ISO 14001 is the standard developed by the International Standards Organization – also known as ISO – that outlines the requirements for an effective environmental management system (EMS) through a framework that organizations can follow in a consistent manner.


Environmental Compliance and DisclosuresApproach to Environmental, Health and SafetyA focus on the environment – across all aspects of the business – is the catalyst to creating a better world for future generations. At Hanon Systems, this basic premise is at the heart of the company’s environmental management principles, which is realized through the individual talent and personal conviction of employees.

For the company, declaring a commitment to the environment is not a directive; instead, it is a mindset that is manifesting itself in many ways – whether it is developing solutions to support eco-friendly vehicles to making manufacturing operations more energy efficient to organizing employee volunteer outings to plant trees in a local schoolyard.

Environmental ComplianceThe company asserts it will continue efforts to act in an environmentally friendly manner and participate in activities to preserve nature. At the same time, the company will comply with and work to exceed the minimum level of requirements where any laws, regulations, customer requirements or other compliance obligations exist concerning environmental matters.

Aligned with the major automakers that are customers of Hanon Systems, all manufacturing sites are certified to ISO 14001:2015 in accordance with the international standard for environmental management systems.

Environmental DisclosuresHanon Systems is committed to adhering to all laws and regulations surrounding environmental, health and safety, and is working to exceed these requirements whenever possible in an effort to create a sustainable and environmentally-friendly workplace.

In a demonstration of the company’s commitment to social responsibility, transparency through disclosures is critical element in this journey. As a company headquartered in Korea, the company complies with environmental disclosure requirements as outlined in the Environmental Technology and Environmental Industry Support Act. Information required as part of this disclosure includes an enterprise overview; details related to the company’s environmental management system; data related to energy, greenhouse gas emissions and pollution; and eco-friendly products and services.

2018 Target vs ActualsEnergy – 5 percent (kwh) savings (year-over-year )2016 2017 2018581 584 608

2016 2017 201833,599 37,926 39,240

2016 2017 20181,189 1,006 978

Water – 3 percent reduction (year-over-year)

Waste – 3 percent reduction (year-over-year )



Korea Environmental DisclosureApproach to Environmental, Health and SafetyIn a demonstration of the company’s commitment to social responsibility, transparency through disclosures is critical element in this journey. As a company headquartered in Korea, the company complies with environmental disclosure requirements as outlined in the Environmental Technology and Environmental Industry Support Act. Information required as part of this disclosure includes an enterprise overview; details related to the company’s environmental management system; data related to energy, greenhouse gas emissions and pollution; and eco-friendly products and services.

Enterprise Overview of Korea OperationsDaejeon Plant

Size: Land –184,507 m2 Building – 100,483 m2

Products:Heating, ventilation and air conditioning (HVAC) units; evaporator and heater cores;

radiators; condensers; cooling modules; and fan and shrouds

Address: 95 Sinilseo-ro, Daedeok-gu, DaejeonYear Established: 1986

Pyeongtaek Plant Size: Land – 57,331 m2 Building – 59,615 m2

Products: Compressors: variable swashplate; rotary suction; fixed swashplate; electric scroll

and clutch

Address: 32-1 Hamanho-gil Poseung-eup, Pyeongtaek-si, Gyeonggi-doYear Established: 1991

Ulsan Plant

Size: Land – 28,943 m2 Building – 22,580 m2

Products: Front end module (FEM) assembly; and carrier injection molding

Address: 110, Napdo-ro, Nam-gu, Ulsan, KoreaYear Established: 2001

Seoul Office

Functions: corporate planning, finance, sales and marketing, legal, general affairs, human resources

Address: 19, Eulji-ro 5-gil, Jung-gu, Seoul (10th Floor, Ferrum Tower), Seoul

Seoul

Pyeongtaek

Daejeon

Ulsan

Seoul Office



Korea Environmental DisclosureApproach to Environmental, Health and SafetyHistory of Environmental Recognition and Certification

March 1986: Halla Climate Control Corp. formed as a joint venture between Ford Motor Co. and Mando Machinery Corp.

1989: Established first R&D center in Daejeon, Korea

1996: Pyeongtaek plant designated as eco-friendly business

1997: Daejeon, Pyeongtaek and Ulsan plants earn ISO 14001 certification

1999: Daejeon plant designated as eco-friendly business

2002: Daejeon and Pyeongtaek plants re-designated as eco-friendly businesses

2003: ISO/TS 16949 certification acquired

2004: Green Company Designation in Korea

2005: Green Company Continuance Grand Prize (second consecutive year)

2006: Green Company Continuance Grand Prize (third consecutive year)

2006: IR52 Jang Young-shil Award – variable swashplate compressor

2007: Green Company Continuance Grand Prize (fourth consecutive year)

2008: Green Company Continuance Grand Prize (fifth consecutive year)

2008: E11 Mark from Automotive Certification Bureau of E.U. for environmental agreement compliance

2009: IR52 Jang Young-shil Award – cluster ion air purifier

2010: IR52 Jang Young-shil Award – rotary suction compressor

2010: OHSAS 18001 certification for Safety and Health Management System

2010: NET* Certification – high-voltage PTC heater for electric vehicle

2011: 1st Green Corporate Award from the Korea Ministry of Environment

2012: Named Outstanding Company with Climate Change Competitiveness by the Korean Chamber of Commerce and Industry

2013: Integrated with Visteon’s climate business to form Halla Visteon Climate Control Corp.

2013: Named for Exemplary Cases of Greenhouse Gas Reduction from the Geum River Basin Environmental Office

2014: ISO 14001 and OHSAS 18001 certifications (24 worksites in 14 countries simultaneously)

2014: Pyeongtaek plant – outstanding business for climate change competitiveness by the Korean Chamber of Commerce and Industry

2015: IR52 Jang Young-shil Award – high-efficiency heat pump system for electric vehicles

July 2015: Hanon Systems formed following change of major shareholder to Hahn & Co. Auto Holdings

2016: IR52 Jang Young-shil Award – smart independent control heating and air conditioning system

2016: NET* Certification – vehicle deodorizing system

2017: IR52 Jang Young-shil Awards (two) – water-air cooled condenser and vehicle carbon dioxide sensing solution

2017: ISO 22301 certification for business continuity management (BCM)

2018: IATF 16949 certification

2018: ISO 45001 certification for occupational health and safety management system

2018: IR52 Jang Young-shil Award – centrifugal air compressor for hydrogen fuel cell electric vehicle

2018: NET* Certification – compressor new oil

2018: Hyundai Kia Motors – R&D excellence award

2018: ISO 14001:2015 certification for environmental management system

* NET (New Excellent Technology) certificate is awardded from the Korean Ministry of Trade, Industry and Energy. It aims to facilitate the commercialization of new technologies by confirming their superiority and the likelihood they will contribute positively to the Korean economy



Approach to Environmental, Health and SafetyAudit: Environmental Health and Safety Management SystemHanon Systems regularly conducts structured examinations of the company’s environmental, health and safety management system. The purpose is to ensure systematic management, efficiency and continuous improvement of the system. In parallel there is sharing of leading practices between business sites and external examinations are performed by certification agencies to improve the overall environmental health and safety management system.

All matters found to be inappropriate or subject to recommendations based on such examinations are corrected through the publication of a report on examination findings, and continuous improvements are made based on a review of examination reports and recommendations for corrective actions by the company’s executive leadership team.

Training: Environmental, Health and Safety Management SystemHanon Systems operates regular training programs to improve the awareness and management competency on environmental health and safety of employees at all levels of the company. Such training is facilitated through the environmental, health and safety team through promotional materials, and training for internal auditors and personnel who personally operate the system are delivered annually.

Korea Environmental Disclosure

Audit PerformanceSubject Site Subject to Examination Examination Agency DateInternal examination greenhouse gas

All business sites in Korea EH&S Team February 2018

External validation greenhouse gas

All business sites in Korea Korea Foundation for Quality

March 2018

Internal examination ISO 14001 first-half

Daejeon/Pyeongtaek/Ulsan plants Internal Examination May 2018

Examination: IMS renewal Daejeon/Pyeongtaek/Ulsan plants DNV.GL May 2018

Internal examination ISO 14001 second-half

Daejeon/Pyeongtaek/Ulsan plants EH&S Team October 2018

Target Content Frequency FacilitatorIntroductory training: new employees

Necessity for green management On-boarding EH&S team

Environmental management personnel

ISO 14001 requirements; trends in green management; responsiblities

Annual EH&S team

Company-wide training materials

Key environmental issues and training programs at Hanon Systems

Monthly EH&S team

Posting: carbon letter Info on greenhouse gas policies/trends and climate changes compared to targets

Monthly EH&S team

Specialized environmental training

Identify programs based on team duties and implement training for teams

8 times a year Environmental management officer

Training Summary

Chemical ManagementHanon Systems maintains a chemical substance management directory and material safety data sheet (MSDS) for every site and product manufactured by the company. This database of information includes the specific use, place of use, composition and properties, precautions, and first aid measures in case of an accident for every chemical used in the manufacturing process or composition of products. Before the introduction of a new chemical substance into the Hanon Systems environment, MSDS training is conducted on the new substance, which includes preliminary environmental safety reviews.

Soil Contamination ManagementThe company works to prevent soil pollution caused by oil or chemical leaks, or other such contaminants. Actions including the installation of an interception facility and disaster prevention tools help to enable an immediate response in the event of an incident. In addition, soil contamination tests and dangerous goods storage locations are in place for facilities subject to specific soil pollution control, with preventive inspections conducted regularly.

Waste Management and Recycling Creating industrial waste lowers operating efficiency. At the same time, it represents an opportunity to improve overall efficiency. At Hanon Systems, aluminum, iron, waste oil, general waste and plastic accounts for the majority of waste in terms of raw materials. Targets for each manufacturing process are set with the intent to reduce waste as well as to minimize any defect rate to aid in the efficient use of material resources. Waste factors are monitored daily and tracked across all manufacturing sites. The company firmly commits to complying with all applicable laws and regulations, and to reduce the amount of waste directed toward landfills.

Beyond manufacturing, a heightened focus on waste management is encouraged at all of the company’s locations around the world. To keep this top-of-mind, the company encourages reduction in paper waste and offers instructions related to the proper disposal of items such as batteries, printers cartridges, plastics and other recyclable materials.

Water Pollution Management Hanon Systems collects data related water usage at its production facilities every month, which includes the wastewater generated. Goals are set for each site in an effort to reduce the amount of wastewater discharge. By applying more stringent emission standards to water management, the environmental impact on the water system is expected to diminish.

Air Pollution Management To support the well-being of employees and the communities where the company operates, the company is continuously monitoring the source of air pollutants and taking proactive measures to improve the air quality at its sites. The company has strict targets for pollutants generated in the production process, and efficiency is monitored by managing, measuring and analyzing the incidence rate of pollutants. Dust is one source that is a major contributor to air pollution. Hanon Systems takes a proactive approach to the collection and removal dust particles, as well as to minimize or eliminate air pollutants generating from manufacturing areas and processes such as drying facilities, desalination facilities, coating processes, etc. Such approaches include the implementation of activated carbon adsorption towers and filtration type dust collectors, which are subject to strict management standards.


With a focus on the impact of climate change, the company set targets in 2014 to reduce and greenhouse gas emissions across all its sites by 20 percent over a five year period, as well as to reduce energy and water consumption and waste. These activities are actively monitored and analyzed in real time through the company’s Hanon Energy Management System (HEMS), which also is used to set unique goals for each site. These goals are verified through internal and external sources that align with ISO 14001 standards. Careful monitoring of progress is conducted monthly.


Environmental Areas of FocusApproach to Environmental, Health and Safety



Korea Environmental DisclosureApproach to Environmental, Health and SafetyResponse to Climate ChangeThe established goals and accomplishments secure reliability through internal/external verification, and are monitored on monthly basis and reflected in the plan to deliver to the ISO 14001 environmental management system.

Daejeon Plant:

Pyeongtaek Plant:

Greenhouse Gas Reporting 2016 2017 2018AL. Infusion (AL-kg) 18,194,284 18,388,955 17,639,236Greenhouse gas (tCO2e)By KRW (tCO2e/AL-ton)

32,672 33,541 35,2651.796 1.829 1.999

Greenhouse Gas Reporting 2016 2017 2018Production (Unit) 5,915,254 6,096,673 6,381,623Greenhouse gas (tCO2e)By KRW (tCO2e/1,000 unit)

25,901 26,038 27,2784.379 4.270 4.274

Air Pollutant Reporting 2016 2017 2018Gross emissions (kg) 4,677 5,266 4,245By KRW (kg/AL-Ton)

Dust (mg/Sm3)

0.258 0.286 0.241

40 7.15 5.95HF (ppm) 3 0.17 0.13

ConcentrationStatuatory Standards Maximum Average

Air Pollutant Reporting 2016 2017 2018Gross emissions (kg) 16,204 15,651 15,964By KRW (kg/1,000 unit)

Dust (mg/Sm3)

2.74 2.57 2.50

40 9.11 9.10


Wastewater Pollutant Reporting 2016 2017 2018Wastewater Emissions (ton) 41,332 43,065 39,571By KRW (ton/AL-Ton) 2.27 2.34 2.24Water Pollutant Emissions (kg) 4,917 7,233 6,133By KRW (kg/AL-Ton) 0.27 0.39 0.35

Wastewater Pollutant Reporting 2016 2017 2018Wastewater Emissions (ton) 38,970 43,088 – By KRW (ton/1,000 units) 2.27 2.34 – Water Pollutant Emissions (kg) 1,716 1,913 1,984By KRW (kg/1,000 units) 0.29 0.31 0.31

BOD 400 179.60 61.65COD 300 142.25 65.88


SS 300 2.25 1.41F 15 10.61 2.79TN 60 11.81 8.73TP 8 0.05 0.02

BOD 120 2.20 2.15COD 130 17.3 17.2


SS 120 1.0 1.0TN 60 8.1 8.0TP 8 0.2 0.2

Waste Management and Recycling Reporting 2016 2017 2018General Waste Emissions (ton) By KRW (ton/AL-Ton)Designated Waste Emissions (ton)By KRW (ton/AL-Ton)

1,874103.01

764.161

1,924104.65

603.279

1,73898.53

23613.374

Waste Management and Recycling Reporting 2016 2017 2018General Waste Emissions (ton) By KRW (ton/1,000 units)Designated Waste Emissions (ton)By KRW (ton/1,000 units)

2,2360.378

4770.08

2,2910.376

5040.08

2,2510.353

4940.08



2018 Environmental PerformanceApproach to Environmental, Health and Safety

Following high water usage in 2016, the company launched a water consumption optimization project in 2017, which has yielded a year-over-year decrease. Monitoring is ongoing and actions are planned to further reduce water usage.

Hanon Systems initiated a number of site expansions in 2018, which included the transfer of equipment to new locations that were the primary contributors to the increase in waste. However, the company recorded a 6 percent improvement compared with 2017 (normalized with revenue) by monitoring and managing scrap generation.

Despite expansion and equipment transfer actions in 2018, which were necessary to support business growth, overall energy usage increased slightly compared to prior years.

While greenhouse gas emissions (CO2) increased in 2018, there was a 3 percent improvement in overall efficiency normalized to revenue. Actions to reduce greenhouse gas emissions continue across the global sites implementing such programs as implementing high efficiency air nozzles to optimize air compressor pressure, equipment that uses less energy for brazing and recovery of waste heat.

33,599 37,926 39,240

0

10,000

20,000

30,000

40,000

2016 2017 2018

Waste(Metric Tons)

581 584 608

0

100

200

300

400

500

600

2016 2017 2018

Energy(mil KWH)

37 35 37

203 204 210

0

50

100

150

200

250

2016 2017 2018

CO2 Emissions(1000t CO2eq)

Direct Indirect

Global efforts to drive efficiency and reduce the generation of scrap in 2018 resulted in improvements in the overall recycle rate as shown by a decrease compared to 2017.

25,33975%

29,78379% 27,658

70%

-

10,000

20,000

30,000

40,000

2016 2017 2018

Recycled Material(Metric Tons)

1,189

1,006 978

0

300

600

900

1,200

2016 2017 2018

Water(1000 Cubic Meter)

2018 Target vs ActualsLost Time Case Rate (LTCR): 0.07 2016 2017 20180.10 0.07 0.09

2016 2017 20183.58 2.03 2.6

2016 2017 2018- 70.9 70.6

Proactive Action Reporting (PAR): >45

Severity Rate (SR): 2.50

Safety Achievements in 2018

Americas (5)Americas Innovation Center (Novi, U.S.); Atibaia (Brazil); Carey (Ohio); and Monterrey, Querétaro (Mexico)

China (5)Dalian, Nanjing, New Chongqing, Shanghai and Yancheng

Europe (8)Alba (Hungary); Autopal Services (Czech Republic); Europe Innovation Center (Kerpen, Germany); Heerlen (Netherlands); Ilava (Slovakia); Waghäusel (Southern Germany); Gebze (Turkey); and Chelmsford (UK)

Korea (2)Pyeongtaek and Ulsan

South Asia (4)Bhiwadi, Gujarat, Pune (India); and Thailand

1,000 Days or More Without a Safety Incident Americas (2)Atibaia (Brazil) and Querétaro (Mexico)

China (2)Nanjing and Yancheng

Europe (6)Alba (Hungary); Autopal Services and Hluk (Czech Republic); Europe Innovation Center (Kerpen, Germany); Ilava (Slovakia); and Gebze (Turkey)

South Asia (4)Bhiwadi, Gujarat, Pune (India); and Thailand

Zero Lost Time CasesAt Hanon Systems, the safety and well-being of employees is a top priority, which is why employees are deliberately listed as a core value and noted as “the strength of our company” in the corporate direction as a public testament to this fact.

Creating a safe and healthy operating environment includes an unwavering and collective commitment to adopt safe practices at all times, and mindset focused on a zero tolerance for unsafe actions and conditions. The company’s policy on environmental, health and safety outlines the expectations for all employees, which includes anyone operating on behalf of Hanon Systems or visitors to any of the company’s locations.

Hanon Systems continues to operate at world-class levels in safety performance. Despite the company’s on-going and impressive safety performance, one incident is too many when it involves the well-being of employees. Executive leadership unanimously supports frequent reinforcement with employees to keep safety top-of-mind, and a mindset focused on continuous improvement to pursue and sustain a culture where the only acceptable objective is zero incidents, whether it is in the workplace or during the employee’s personal time.



Health and Safety MindsetApproach to Environmental, Health and Safety

Proactive Action Rate (PAR)A Key Performance Indicator (KPI)

How is PAR Calculated?Number of proactive actions (PA) x 200000

total hours worked

Safety Behavior Triangle Hanon Systems uses the safety behavior

triangle to reduce safety incidents by focusing on unsafe conditions and unsafe actions

SeriousInjury

Injury

First Aid

Near Miss

Unsafe Conditions

Unsafe Acts

Design for Health & Safety Behavior Safety

Walk

Safety Training

Risk Assessment Safety Standards

Leadership Commitment

Employee Commitment

Zero Tolerance

Consequences

Causes

Preventative Strategies

Safety Walks

To reinforce a strong safety-focused culture, plant leadership conducts regular safety inspections alongside plant supervisors and the local safety and health manager. The purpose is to walk the entire plant to identify potential hazards, check for safety issues and to listen to employee feedback. This action also demonstrates the company’s commitment to workplace safety in a visual way.

Audits

Internal audits are conducted annually or as deemed necessary to check the adequacy of the system and implementation at each site. Any non-conformances or recommendations identified through these audits are captured in a report for follow-up, and all results are reported to the executive team. Through this evaluation, leading practices are shared across the enterprise that improves the company’s level of preparedness when third-party audits are conducted by a certification body.

Incident Response System

In an effort to effectively address and work toward the prevention of accidents, each location prepares an emergency preparedness plan and conducts regular response training simulations. More detailed training is conducted at locations deemed to have a high probability of occurrence based on impact assessments and risk evaluations. Continuous education and training exercises are conducted according to the scenarios established for each situation in an effort to minimize physical and environmental damage. This approach intends to ensure there is proper documentation in place, which is accompanied by broad-based learning to act quickly in the event of an incident.

Proactive Reporting

It is recognized the key to mitigating safety related issues is to adopt a proactive approach to drive continuous safety performance across the company.

A new key performance indicator (KPI) was introduced in 2017 to encourage a proactive mindset. This KPI intends to more strongly focus on the proactive safety performance of each plant. This KPI joins the existing safety metrics of Lost Time Case Rate (LTCR) and Severity Rate (SR).

Proactive actions or (PA) refers to the number of tracked and closed actions identified as unsafe conditions. This PA also includes the total number of closed unsafe conditions identified from lost time cases, recordable concerns, near misses and safety walks in a given month. The number of PAs are tracked in the EH&S online data card, which is analyzed by the corporate EH&S team and is reviewed at the executive level each month. PAR refers to proactive action rate, a mathematical calculation that assesses the level of plant maturity in proactively identifying safety actions. The company has established a grading system by which each plant is assessed.

Health and Safety ToolsApproach to Environmental, Health and Safety




Korea Environmental DisclosureApproach to Environmental, Health and SafetyHealth and Safety ManagementHanon Systems places a high value on health and safety for all business activities. The company’s health and safety management system operates in compliance with KOSHA∙OHSAS 18001 and aims to ensure zero-incidents for employees at all levels as well as interested parties.

Safety ManagementLeadership Safety Inspection

The company conducts monthly safety inspections to foster a safety culture. Conducted as onsite inspections, the inspection team is composed of

plant management, health and safety manager and plant floor workers. These inspections focus on identifying potential risks, reviewing any prior findings and engaging with workers to solicit opportunities for improvement. Safety Culture Events and PromotionAwareness campaigns promote a culture rooted in a safety mindset. The company actively sponsors promotional activities to keep safety top-of-mind including monthly focused safety campaigns; an annual signature drive for zero-incidents; and celebration events for zero incidents.Symbiotic Cooperation ProgramThe company works to improve the health and safety of partner companies by conducting risk assessments and providing technical support through its Safety and Health Symbiotic Cooperation Program with a goal to ensure partner companies have protocols in place that can contribute to the prevention of occupational accidents at these sites.Health ManagementWork Environment MonitoringThe company performs measurements of working conditions twice a month. Findings are used to develop improvement activities to ensure Hanon Systems is protecting worker health from harmful factors (e.g., dust, noise and organic compounds) and building pleasant working environment.

Actions to Prevent Cerebral-Cardiovascular DiseasesCases of cerebral-cardiovascular disease continue to rise across the world and one contributing factor is an increase in the average age of workers. Hanon Systems provides comprehensive medical coverage and encourages employees to receive regular examinations, and offers preventive management through education and consultation provided by medical professionals once a month. In addition, the company offers CPR training to improve response capabilities in the event of a medical emergency.Preventive Management of Musculoskeletal DiseasesThrough the application of ergonomic principles, Hanon Systems focuses on improving working conditions to prevent musculoskeletal diseases. Programs are in place to help prevent the disease, and enhance muscle strength through operation of in-house physical therapy, wellness education and exercise. Wellness ProgramsIn an effort to support the health and well-being of employees, programs are in place to promote a healthy lifestyle. The company offers a diet fund program for overweight workers and anti-smoking clinics to help smokers quit smoking. Since 2016, the company offers a Precision Physical Strength Assessment and Tailored Exercise Prescription program in cooperation with the Occupational Safety and Health Agency for the purpose of helping workers maintain proper exercise routines.Mental Health ManagementThe company operates a program where professional services are offered through full-time psychologists to support mental health management of workers.



Korea Environmental DisclosureApproach to Environmental, Health and SafetyEnvironmental ManagementAs a company headquartered in Korea, it is an important priority to take action to improve the world for future generations by educating employees and interested parties, and sponsoring programs to improve the environment. The company internally utilizes carbon letters and materials on environmental management to educate its workforce and exercises transparency by sharing information through the Environmental Information Disclosure System of the Ministry of Environment. The company also encourages volunteerism to improve the environment along with activities with business partners, which are an essential element for win-win growth. Eco-system Conservation ActivitiesThe company conducts periodic environmental conservation campaigns that encourage employee and family member involvement. Such campaigns include the Purification of One River by One Company, Purification of Dulesan-gil and Purification of One Coastal Water by One Company.

Annual Environmental Information Disclosure SystemThe Environmental Information Disclosure System operates in accordance with the Environmental Technology and Industry Support Act. Hanon Systems fulfills its social responsibilities by disclosing its company information, green management system, natural resource/energy, greenhouse gas/ environmental contamination, green products/ services and social/ethical responsibilities through the system, which is accessible to the public.


Monthly Carbon Letter The company encourages employees to take an active interest in the environment. The monthly carbon letter includes insights related to greenhouse gas-related policies, industry trends and company results by location. This publication is posted to the company’s employee intranet and message boards. Monthly Educational Materials on Environmental Management Relevant materials on monthly topics that surround environmental management are available for download by employees from the company’s intranet. Green Corporate Cooperation CenterSince 2015, Hanon Systems has established a green corporate cooperation center by entering into voluntary agreements with green companies nested at Daedeok Industrial Complex and other business sites interested in environment. Each quarter, the green corporate cooperation center conducts legal compliance assessments, and shares findings for environmental improvement from a diverse set of perspectives. Another benefit of this cooperative arrangement is to allow mentee companies to adopt a proven environmental management system from green mentor companies and business sites interested in environment.Mentoring Local Talent DevelopmentHanon Systems supports a mentoring program to help develop local talents (college students) in conjunction with the City of Daejeon and Geum River Basin Environmental Office. The company helps students learn about wastewater treatment facilities, air protection facilities and resource circulation facilities.

Campaign Location Schedule Participants

Purification of One River by One Company

Quarterly 44

Quarterly 253Purification of One Coastal Water by One Company

Geum River near Daejeon Business Site

Coastal Water near Pyeongtaek Business Site



Hanon Systems maintains that operating with integrity surrounds doing what is right, and being truthful in words and actions. The company’s ability to build customer trust and succeed in this competitive industry is rooted in operating in this manner across every aspect of the business.

For this reason, the company strives to maintain a corporate culture based on firm ethical principles and compliance with all applicable laws, rules and obligations. This pledge encompasses many business aspects, but none is more important than maintaining the highest degree of ethical integrity based on mutual respect, honesty and compliance with legal standards at all times.

To reflect this commitment, the company developed its Ethics Charter and Policies, which was unveiled in September 2017. It is composed of an Ethics Charter, Global Ethics Policy, Anti-bribery and Corruption Policy, and Economic Sanctions Policy.

Each year employees of Hanon Systems receive an electronic message from executive leadership to read and renew a commitment to adherence. Its purpose is to outline the basic principles of ethical behavior expected of each employee and is in no way intended to be a comprehensive guide to all responsibilities under the law. These also outlines

the protocol in place to resolve ethical and legal issues employees may face in business dealings and the core values to help employees keep ethical integrity top-of-mind.

To ensure understanding and clarity, these policies are made available in multiple languages and posted to the company's external website. This action intends to serve as a public declaration of the company’s commitment to ethical management. Mandatory online training sessions for global salaried employees gives guidance on the most essential elements of these policies to ensure a full understanding and collective ownership of these ethical principles.

The company also operates a confidential and anonymous “whistleblower” service that enables anyone to report concerns relating to the lawful and ethical conduct of business. This service is available (24 hours a day, 7 days a week) through an independent external provider to employees and external stakeholders to report any concerns or failures in compliance.

Corporate GovernanceEthics Management

Core Ethical Values of Hanon Systems

Respect, Duties and Responsibilities to

Customers and Shareholders

Accuracy in Accounting and

Financial Reporting

Respect for Individual and Human Resource

Development

Fair Dealings and Respect of Vendors

Contribution to the Community

Compliance with Applicable Trade and

Competition Laws

Respect for Confidential and

Proprietary Information of the

Company and Business Partners

Pursuit and Establishment of

Transparent Business

Relationships

Corporate GovernanceIntegrated Risk Management


Hanon Systems defines integrated risk management as an essential element to the corporate strategy, which focuses on the identification, assessment and preparedness for any disruptions that may interfere with a company's operations and objectives.

Risk management is an essential means to ensure business continuity. It is through these proactive planning and mitigation efforts that a company can insulate itself from any disruption or negative impact. Efforts in this area are critical to the success of any business and of increasing interest to stakeholders, to protect their investments and to ensure their own business continuity in the case of customers and supplier partners.

Executive leadership fully agrees an effective risk management approach and strategy will minimize the potential or impact for a crisis situation. Accountability for this robust integrated risk management strategy at Hanon Systems is with the company’s chief planning officer. However, in no way does the full responsibly lie with one person or function. Success in this area can only be attained when there is active input, collaboration and alignment across key functional areas. This also requires shared ownership and a commitment to take action in the role each function plays in the implementation of any plan, should the need arise.

Risk management protocols for specific types of events currently exist within certain functions of the company. In 2018, the company bolstered its focus on developing a robust corporate-wide and integrated risk management approach.

Business continuity and associated level of preparedness plans of suppliers is a topic of high importance with automakers. The intent is to ensure a robust supply chain and the continuous flow of goods to support vehicle production. ISO 22301 is the standard that specifies the requirements for a management system that will protect against, reduce the likelihood of, and ensure business recovery from disruptive incidents. Hanon Systems has taken action to better understand and prioritize potential business threats by leveraging these operational standards for business continuity.

While third-party certification for Hanon Systems manufacturing sites in Korea took effect in 2017, the company continues its effort to propagate the ISO 22301 standard across all of the company’s global sites.

What is ISO 22301?ISO 22301 is a management system standard developed by the International Standards Organization – also known as ISO – that aims to ensure business continuity by confirming businesses are prepared and can recover from disruptive incidents.


269,569,000 50.50%

104,031,000 19.49%

Major ShareholdersThe following outlines the major shareholders and ownership status of Hanon Systems as of Dec. 31, 2018:

Major Shareholders Number of Shares Ownership (%)

Hahn and Company Auto Holdings Co. Ltd.

Hankook Tire Co.

National Pension Service 30,410,014 5.70%


Corporate GovernanceFramework and Operating Cadence


Hanon Systems operates under a corporate governance framework that embodies accountability and transparency as the foundation that underpins the prudent management of company affairs.

In 2018, the company took further actions to enhance the speed of decision-making, and to leverage synergies and drive efficiencies throughout the organization.

Executive Leadership Team – a six-member C-suite body focused on driving high-level alignment among a limited leadership group to enable swift decisions on business-related topics.

Operational Steering Committee – composed as members of the executive leadership team and select executives, depending on the topic.

Together, this extended leadership team met regularly in a structured cadence to focus on business performance, strategic/business plan reviews, cross-functional benchmark sharing, and resource optimization.

Annual Meeting of ShareholdersAn annual meeting of shareholders is held the last business day of March each year at the company’s headquarters in Daejeon, South Korea.

Committees of the Board of DirectorsHanon Systems has three committees that operate under the Board of Directors, which meet on a regular and ad-hoc basis. These committees are: the Audit Committee, Finance and Strategy Committee and Compensation Committee.

Committee Composition Meeting Cadence

AuditCommittee

Finance andStrategy Committee

CompensationCommittee

Three members: all outside directors

Three members: Two outside directors and one executive director

Three members: Two outside director and one executive director

4 regular and one ad-hoc

12 regular and 18 ad-hoc

20 ad-hoc meetings

2018 Composition and Status

Board of Directors The Board of Directors of Hanon Systems is composed of a nine member non-executive team that meets regularly to discuss business matters. As a company with respect for stakeholder interests, feedback from the Board of Directors is deemed to be valuable counsel, which is openly sought and taken into consideration in the decision-making of executive leadership.

Board of Directors MeetingsThe company held 4 regular and 3 ad-hoc board meetings in 2018

Board Meetings Regular Meetings Ad-Hoc Meetings

2017

2018

Historic snapshot of meetings held

4 2

4 3

Leadership – 20182018 Corporate Responsibility Report

Executive Leadership Team (ELT)of Hanon Systems

Executive Leadership TeamIn-Young Lee

President and Chief Executive Officer (retired at year-end 2018)

Jeong Won (Jay) SonPresident and Chief Operating Officer

Nurdal KücükkayaPresident and Chief Commercial Officer

Chang Ho ParkVice President and Chief Technology Officer

Ramachandran (Subu) NagasubramonyVice President – Chief Planning Officer

Min Suk SungVice President – Product Groups


Pictured Left to Right: Ramachandran (Subu) Nagasubramony; Chang Ho Park; Jeong Won (Jay) Son; In-Young Lee; Nurdal Kücükkaya and Min Suk Sung

Committed to driving positive change that brings value to people, customers,

communities and the environment

[email protected]

hanonsystems.com

95, Sinilseo-ro, Daedeok-gu, Daejeon, South Korea

Documents

Corporate Responsibility 2018 Report › Eng › Files › Downloads › ... · 2019-09-19 · corporate citizen and recognize the efforts we make today ... centers, one technical