What is pushing Samsung to invest $5 billion in green initiatives?

South Korea’s biggest company aims to switch overseas factories to renewable electricity within five years

Samsung, the world’s largest memory-chip maker has seen its climate footprint increase in recent years as it expanded its energy-intensive manufacturing lines. Bloomberg

Samsung Electronics will invest 7 trillion won ($5 billion) in green initiatives and call on South Korea to tackle high costs of clean energy as the electronics giant looks to reverse a rise in emissions and zero out direct pollution by the middle of the century.

The world’s largest memory-chip maker, which has witnessed its climate footprint increase in recent years as it expanded energy-intensive manufacturing lines, plans to eliminate Scope 1 and 2 carbon emissions. Samsung has not developed goals to reduce Scope 3 pollution like some peers, though it intends to set targets in the future.

South Korea’s biggest company also aims to switch overseas factories entirely to renewable electricity within five years, although it argues it cannot yet pursue a similar target for its most energy-hungry domestic plants — which account for the majority of production — because of constraints on the availability of clean power in the fossil fuel-reliant nation.

Samsung has long been criticised by investors and activists over a slower approach to climate action than industry peers such as Apple, which said in October it had cut emissions by 40 per cent over the past five years and is pressing suppliers to use only renewable energy.

“Addressing climate risks has been particularly challenging with our complex business portfolio,” Soo Jin Kim, head of ESG strategy group at Samsung Electronics, said in an interview. The company's status as a manufacturer of a wide range of electronics and its extensive supply chains mean “the environmental pressure on our shoulders has been extremely heavy,” she said.

A new strategy announced on Thursday includes spending on carbon capture and storage, measures to reduce water consumption and the release of gases during semiconductor manufacturing, work to boost the energy efficiency of its products and improvements to the collection of electronic waste for recycling.

While cutting direct emissions is a priority, Samsung will also consider the use of offsets in voluntary carbon markets, the Samsung executive said.

As the biggest electricity user in South Korea, Samsung’s key challenge remains the country’s grid. Fossil fuels accounted for more than 65 per cent of electricity generation in 2021 and plans are being studied to scale back proposals for more renewables as President Yoon Suk-yeol’s government touts a potential longer-term build out of nuclear power.

Samsung’s operations consumed 32,322 gigawatt-hours of energy in 2021, including 25,767 GWh of electric power, the company said in its most recent sustainability report.

That compares with South Korea’s wind, solar and hydro power generation of 31,323 GWh in the same year, according to data compiled by BloombergNEF. The company’s emissions have risen in recent years as a direct result of the installation of new semiconductor manufacturing lines, according to its report.

Competition for renewable electricity is also likely to rise with all of South Korea’s key conglomerates now pledging to run their operations using solely clean energy. Coal and gas remain cheaper in the nation than new solar or wind generation, according to BNEF data.

Samsung will ask Mr Yoon’s administration for more help. “We’re planning to voice industry-wide concerns over higher cost of renewable energy, and ask for the government’s policy support for the development of various climate-related innovations,” Ms Kim said.

Under its new climate strategy, the company will also join RE100, a global initiative in which members commit to eventually use 100 per cent renewable energy.

“Samsung signing up for declarations like this might be a step in the right direction, but a vague 2050 target leaves shareholders with more questions than answers,” said Kiran Aziz, head of responsible investment at KLP, Norway’s largest pension fund, which holds Samsung shares and has about $80bn of assets under management.

“Scope 3 emissions are crucial and having them missing from a target points to another obvious weakness in this announcement.”

Samsung declined as much as 1.1 per cent in Thursday trading.

Local plants for consumer electronics will move to 100 per cent renewables by 2027, Samsung said in its statement. The company aims to run its semiconductor operations entirely on clean sources by 2050, according to Ms Kim.

“The Korean government isn’t doing much to support companies, putting the entire economy at risk of losing its industrial competitiveness,” said Hong Jong-ho, a professor at Seoul National University Graduate School of Environmental Studies.

“With Samsung’s enormous influence, it should be the one playing an advocacy role in enforcing the government for policy changes.”