Too Much Too Fast

Ahead of the start of a mandatory environmental, social, and governance (ESG) disclosure system in Korea, the Korean business community has called for a slowdown in the pace of the introduction of the system. They argue that if the mandatory ESG disclosure system scheduled for 2025 is pushed forward too quickly it will end up only increasing the burdens on companies. In particular, they pointed out that Scope 3 is a level that even big Korean companies cannot afford, as Scope 3 indirect emissions cover all non-direct sources that come from peripheral activities related to a company.

The Korea Chamber of Commerce and Industry (KCCI) held the third meeting of its ESG Agenda Group at its headquarters in Seoul on May 9. Launched last year, the ESG Agenda Group is comprised of 19 major conglomerates, including SK hynix, LG Display, Hyundai Motor Group, and Samsung SDI, as well as financial companies such as Shinhan Financial Group and Hana Bank. The meeting was attended by 14 executives in charge of ESG from Korea's top 20 conglomerates and major banks.

At the meeting, which was held for the first time this year, companies called for a delay in the introduction of the mandatory ESG disclosure system, saying it should be supported by more government support policies, the need to train specialized personnel, and the transparency of the ESG evaluation market. The obligatory ESG disclosure system is set to begin in 2025 for companies with a total capitalization of more than 2 trillion won on the KOSPI stock market and will be expanded to KOSPI listings beginning from 2030.

“We need to adjust the timing in consideration of situations in Korea,” said an executive in charge of ESG at a large Korean company who attended the meeting. “If we rush the mandatory ESG disclosure system, it will put a lot of pressure on companies, so we need to give companies enough time to prepare for the system.”

“There is a shortage of ESG experts,” another executive said, “Government support policies are needed to foster ESG experts in Korea.”

In particular, they were very concerned about the introduction of Scope 3, which extends the GHG emissions standard as far as to suppliers. Even large companies are unlikely to meet the standard if GHG emissions from suppliers are included.

The Korean government has pledged support for the stable diffusion of ESG management, including disclosure obligations and securing specialized personnel. “The global ESG institutionalization movement is progressing rapidly,” said Yoon Tae-soo, head of the Sustainable Economy Support Team at the Korean Ministry of Strategy and Finance. “The Korean government plans to promote supporting and infrastructure-building policies to rev up private sector-centered ESG ecosystems.”

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