A Company's Sustainable Growth Becomes Everyone's Sustainable Life, 'Yuhan Corporation'

ESG management carried on from the founding spirit of Dr. Ilhan New

The start of a sound corporate governance in which ownership and management are separated

The year 1926, when Yuhan Corporation was established, was under Japanese colonial rule—a time when it was difficult even to grow a company, let alone imagine the kind of active ESG management activities of today. Yet, on the basis of the founding ideal to "make the best products and be of help to the nation and its people," it laid the cornerstone of social-contribution activities. Ahead of its 100th anniversary in 2026, Yuhan Corporation newly established a dedicated organization reporting directly to the CEO, the "ESG Management Office," in 2022 for more strategic ESG management. Not only does the CEO directly oversee ESG management, but the company also published its first sustainability report containing its management achievements to date, communicating with numerous stakeholders. As a result, it took first place as the "Most Respected Company by Koreans" for 20 consecutive years, and in 2022 it also received the Minister's Award for the bio- and healthcare sector at the "Korea ESG Company of the Year Awards" hosted by the Environmental Foundation.

Yuhan's Sustainable Management 1. Human Health, a Better 100 Years

[The joint declaration ceremony for the practice of ESG management, held at Yuhan Corporation's headquarters in Daebang-dong, Seoul, in April 2023 ©Yuhan Corporation]

For Yuhan Corporation, ESG management is not a new management activity. From its establishment in 1926 to the present, it has found the reason a company must exist in advancing the interests of our society, and on the basis of the spirit of its founder, Dr. Ilhan New—that "a company's profits must be returned to the society that raised it"—it led the beginning of ESG management in Korea. Yuhan's social contribution takes place within a social-return system centered on ▲Yuhan Corporation ▲the Yuhan Foundation ▲the Yuhan School Foundation. This is a system unique to Yuhan, created when founder Dr. Ilhan New donated his entire fortune to the Yuhan Foundation and the Yuhan School Foundation in 1971: when the company's profits are delivered through dividends to the public-interest foundations that are its largest shareholders, they are used as funds for the foundations' purpose projects, such as social welfare and education. Through this structure, a certain portion of the profits Yuhan generates can be returned to our society, and it created the framework for strategically operating social-contribution activities that make the most of the nature of its business.

Yuhan's social-contribution activities are also grounded in the active participation of its employees. The message "A Healthy Tomorrow, Yuhan Together," which reveals Yuhan's aspiration, was selected through an in-house CSR contest in March 2023. Talent-donation-based volunteer corps by employees are also active for the development of local communities. All expenses needed for volunteer-corps activities are borne by the company, and it promotes active employee participation by giving awards to outstanding volunteers each year. In addition, at year-end it converts employees' volunteer hours into monetary value and makes donations for local communities and patient support.

Volunteer-corps activity is pursued as an important social-contribution activity to the extent that, when volunteer-corps activities were suspended due to COVID-19, employees voluntarily carried out volunteer work centered on non-face-to-face online education. And by communicating continuously with 48 local social-welfare institutions and NGOs, it actively seeks project evaluation and directions for development. The volunteer corps runs a variety of programs, such as the Happy Home Repair Volunteer Corps, which directly repairs homes or makes furniture for families with members who have disabilities, and the Beodeul Science Career Camp, which cultivates future talent for the bio-pharmaceutical industry among young people.

Yuhan's Sustainable Management 2. Sound Corporate Governance

Yuhan Corporation is counted as an exemplary company in the area of governance. Yuhan's largest shareholder is the public-interest corporation the Yuhan Foundation; as of the end of 2022, the public-interest corporation's stake in Yuhan was 38.2%. The biggest reason Yuhan was able to have this unique social-contribution system, with a public-interest corporation as its largest shareholder, is the result of founder Dr. Ilhan New donating all of his shareholdings to ▲the Yuhan Foundation ▲the Yuhan School Foundation ▲Yonsei University ▲the Health Scholarship Association before he passed away in 1971. Furthermore, to put into practice the founding spirit that a company belongs to society, it introduced a professional-management system in 1969 so that the founding family does not directly participate in company management, thereby preemptively blocking the arbitrariness of an owner. It had major management decisions determined through consultation between the board of directors and the management, encouraging rational and responsible management by professional managers, and it granted independence so that oversight of management could be carried out efficiently by composing more than a majority of the board with outside directors. The form in which dividends are paid to shareholders is also carried out through a board resolution and shareholders'-meeting approval, and over the past seven years it has conducted a 5% bonus issue each year. In addition, to enhance shareholder value, in February 2022 it newly signed a treasury-stock acquisition trust contract worth 20 billion won, and through continuous treasury-stock acquisition, Yuhan's treasury-stock holding ratio as of the end of 2022 reached about 8.5% (*on a treasury-stock basis).

Yuhan Corporation also obtained certification for an anti-bribery management system (ISO 37001) in March 2018, because it prepared measures to control the company's potential corruption risks with the goal of spreading an anti-corruption culture and creating a sustainable management environment to root out corrupt practices company-wide. Beyond this, through the operation of internal consultative bodies, it continuously operates the YCPM (Yuhan Compliance Program Meeting)* and the Clinical Trial Review Committee to respond to compliance risks company-wide.

*YCPM: an internal consultative body in which the heads of the sales, marketing, and compliance-management teams review and discuss compliance issues across sales activities as a whole, such as the Pharmaceutical Affairs Act, the Fair Trade Act, and the Fair Competition Code.

** Clinical Trial Review Committee: an internal consultative body in which review members, including the head of the compliance-management team, review the academic purpose, research funding, appropriateness of the scope of drug support, and plans for using research results for individual clinical projects, in order to mitigate risks that may arise during clinical-trial support activities.

Yuhan Corporation is preparing for certification of ISO 22301, a business-continuity management system. Aiming to obtain certification in the second half of 2023, it has formed a company-wide TFT to carry out the related work; in addition, to build a stable management foundation, it has established a company-wide risk-management organization and a risk-management framework by type, continuously monitoring potential risks and thereby establishing and managing response measures.

ESG is not expressed merely in numbers. The non-financial, intangible value that Yuhan creates has kept it at the top in sales among traditional pharmaceutical companies and is becoming the driving force of a 100-year company. Its sustainability report may have started late, but the beginning of ESG management in Korea came faster for Yuhan than for anyone; we look forward to Yuhan's good influence being as sustainable as ESG itself.