The LNG Plans For Samsung’s New Megaproject Threaten Its Reputation

September 15 marks the 1st anniversary of Samsung joining RE100, a global initiative advocating for 100% renewable energy. At the time, the company was subject to criticism that its decision came way too late and that its targets needed to be more ambitious than its competitors.

A year later, Samsung hasn’t lived up to its climate commitments. Moreover, its latest plans for potential investments in liquefied natural gas (LNG) risk further eroding its reputation.

A Year After Joining RE100: Examining the Samsung Sustainability Report 2023 

After a thorough analysis of Samsung’s 2023 Sustainability Report and public documentation from 2022, the Corporate Climate Responsibility Monitor (CCRM) study by the NewClimate Institute rated the transparency of its climate strategy as “low,” with its integrity receiving a “very low” rating. 

According to the CCRM, due to covering scope 1 and scope 2 only, Samsung’s 2050 net-zero target is a commitment to reduce just 20% of its 2019 emissions. The 2030 net-zero target is also insufficient. It covers only specific divisions and emission scopes, accounting for just 2% of the company’s 2019 emissions. 

Scope 3 emissions, which accounted for 86% of Samsung’s total in 2021, were absent from its sustainability reports. While the 2023 edition is the first to disclose them, it lacks a clear reduction plan.

“Samsung has revealed the information on scope 3 emissions for the first time in its sustainability report, which is meaningful, but they failed to reveal how they were estimated, which makes it impossible to verify,“ explains Kyungrak Kwon, renewable energy expert at Plan 1.5, a non-profit organisation.

The analysis concludes that aiming for 100% renewable electricity by 2050 puts Samsung far behind its competitors. Furthermore, the company hasn’t even advanced on the unambitious target. Currently, Samsung procures a low volume of clean energy and relies extensively on low-quality renewable energy certificates (RECs). 

Misleading Communication

According to the CCRM analysis in its 2023 Sustainability Report, Samsung is exaggerating its progress and even misleading the public. 

For example, the company claims it has “completed the transition to renewable energy.” However, the authors of the CCRM report consider Samsung’s transition to clean electricity still in its infancy. As of 2022, just 31% of its electricity came from clean sources. Most of the procurement came from low-impact RECs, even in markets with better options. While the authors of the CCRM analysis recognise the market-specific challenges that Samsung faces in decarbonising its electricity, they warn that its absolute assertions mislead the public. They also advise the company to communicate more honestly and transparently.

Kwon shares a similar view. “The problem is that Samsung relies extensively on purchasing RECs, and details of their share in the use of renewable energy in different countries aren’t available. Samsung has to share such information,” he notes.

Another claim Samsung makes is that it has “reduced its emissions by 59% in one year.” However, according to NewClimate Institute, the company’s scope 1 and 2 emissions in 2022 represented, at best, a 13% reduction in 2021 emission levels. On top of that, the company’s overall emission footprint has increased between 2021 and 2022 by approximately 1%.

NewClimate Institute’s analysis warns that Samsung’s 2030 and 2050 net-zero targets can mislead consumers and investors. The claims can lead the public to believe that the company aims for deep decarbonisation. However, in reality, Samsung has only committed to decarbonising just a minor share of its emissions footprint.

Is Samsung on Track to Achieve Its Targets, and Can It Do Better? 

According to Thomas Day from NewClimate Institute, Samsung should have no problem meeting its targets. 

“The targets are likely to require very little meaningful action from Samsung’s side. A target for 100% renewable electricity by 2050 is highly unambitious for a major corporate player, even in a country with a complex regulatory environment for renewable electricity procurement,” notes Day. “Considering South Korea’s weak climate pledges, Samsung can simply wait for the grid around it to decarbonise to achieve its targets,” he adds. 

However, doing so will only increase the gap with its competitors like Google, Microsoft, Apple and TSMC. So far, those companies besides TSMC have demonstrated leadership in promoting and accelerating rather than impeding the energy transition.

LNG Likely to Power the New Megaproject By Samsung Heavy Industries Co. 

Samsung recently announced plans to invest USD 230 billion to build the world’s biggest chip cluster in South Korea’s Gyeonggi Province.

As per Samsung’s estimations, the plant will need 400 MW of electricity by 2029 and another 7 GW by 2042. The Ministry of Trade, Industry and Energy predicts that, by 2050, the facility’s energy needs will top 10 GW.

The government intends to lay out a roadmap for the cluster’s power generation and water supply options. In the mid-and long-term, there are plans for using nuclear and renewable energy to satisfy the facility’s power demand. However, there are calls for building onsite LNG carriers in the short term.

Considering South Korea’s reluctance to pursue a renewables-led energy transition, such a scenario is plausible.

Although its current climate targets and policies are found to be “highly insufficient”, the country further slashed industrial sector emission reduction targets. 

South Korea has the lowest clean energy adoption rate in the G20, with just 5.4% compared to the 12% average. On top of that, its 10th Basic Plan further reduced the previously unambitious 30% renewable energy target to just 21.6% by 2030.

Recently, the government announced the CF100 programme, which prioritises nuclear, hydrogen and other power sources instead of renewables. The leadership considers it a more “realistic” alternative to RE100. This came as a blow to the prospects of accelerated clean energy adoption in the country and the increasing number of companies joining RE100. Samsung is among the businesses backing the government’s efforts to promote the CF100 programme. 

More Ambitious Samsung Means More Ambitious Korea

The company has previously used the lack of renewable energy infrastructure across Asia as an excuse for its sluggish progress. NewClimate Institute’s analysis confirms that the weak clean energy policies in South Korea do, indeed, hold the company back. However, it also notes that it isn’t reasonable for Samsung to hide behind such excuses. The analysts stress that many clean energy policy developments in other countries have come after years of public advocacy campaigns from leading corporations. The CRRM report’s authors add that they couldn’t identify such initiatives from Samsung.

The company has massive historical influence over Korean policymakers. It can singlehandedly determine the country’s decarbonisation and clean energy adoption progress. 

Doing so isn’t just a question of moral responsibility but a matter of business and reputational risk. 

Pressure From Investors and the Public

Being associated with any initiatives promoting fossil fuels or proposing questionable technologies won’t be taken lightly by investors. Recently, Samsung joined the CA100+, the world’s biggest investor coalition, trying to curb corporate emissions. The organisation recently urged its members to cut their emissions rather than talk about it. It also promised to hold them accountable for their actions.

Investment analysts warn that the increasing pressure on Samsung over its inaction on fossil fuels and GHG emissions poses systemic risks to its future. Experts warn that the company risks losing investors’ interest without a change in course.

Environmentalists also echo a similar view. “Apple, one of Samsung Electronics’ largest clients, has committed to sourcing 100% renewable energy across its supply chain by 2030. As a key supplier, Samsung must meet Apple’s requirements or risk major losses,” warns Yeon Ho Yang, climate and energy campaigner at Greenpeace East Asia.

The public is also voicing their concerns against Samsung’s unambitious clean energy targets and the continued reliance on fossil fuels.

“There is a very weak case for any self-proclaimed climate leader to make new investments in fossil fuel-based power generation. If the new manufacturing facilities are powered by LNG, this indeed significantly undermines Samsung’s climate credentials,” warns Thomas Day from NewClimate Institute.

Changing Course: Opposing the LNG Plans Key For Samsung

There are signs that Samsung has acknowledged its responsibility in driving a regional change. The company has co-founded the Asia Clean Energy Coalition to promote dialogue between influential industry actors and address system-level issues in renewable electricity development in Asia. Through such initiatives, Samsung aims to tackle its procurement challenges in different markets, including South Korea.

While positive, this is just a small development. The company has the resources and influence to achieve way more.

Samsung is perfectly positioned to request a renewable energy-led roadmap from the government for powering the new chipmaking complex. This can be a good starting point for easing the integration of renewables in Korea’s long-term energy plan. It will also improve Samsung’s reputation in front of investors. 

“The electricity for the complex should come from renewables, not LNG power plants, but this doesn’t seem to be considered at all,” warns Kyungrak Kwon, renewable energy expert at Plan 1.5, a non-profit organisation. “If Samsung uses electricity from fossil fuels, their progress on the targets they highlighted in the sustainability report will diminish,” he adds.

The enabled Power Purchase Agreements on the South Korean market are another positive development, giving Samsung a perfect tool for replacing the low-quality RECs it relies on.

Now, it is in the hands of the company to decide whether the “greenwashing stain” will continue spreading over its brand or get wiped out once and for all.