Easing ‘Corporate Governance Disclosure’ Burden
As financial authorities announced a one-year delay in the mandatory implementation of Environmental, Social, and Governance (ESG) disclosure, originally targeted for 2025, the business sector breathed a sigh of relief, stating that this extra time would allow them to better prepare for the regulations.
On Oct. 16, the business sector expressed relief as the Financial Services Commission (FSC) convened the “3rd ESG Financial Promotion Council meeting” and decided to postpone the introduction of ESG disclosure to 2026 or later. It stated, “South Korea has avoided becoming the global testing ground for ESG disclosure.” Originally, the authorities had aimed to make ESG disclosure mandatory for KOSPI-listed companies with assets of more than 2 trillion won (US$1.48 billion) from 2025 but changed their direction toward a postponement considering the interests of domestic companies.
On Oct. 16, the reasons cited by the FSC for the postponement included delays in the mandatory implementation of ESG disclosure in major countries such as the United States, the confirmation of standards by the International Sustainability Standards Board (ISSB) under the International Financial Reporting Standards (IFRS) in June, and requests from businesses for a sufficient preparation period. The authorities have decided to create a comprehensive road map by considering the unique characteristics of the domestic industry and the timing and standards for ESG disclosure in major countries.
While the business sector welcomed the government’s decision to postpone the mandatory ESG disclosure, it also pointed out that the option of implementing the system right away in 2026 should be considered carefully. It maintained that it would not be too late to finalize the mandatory schedule after observing the ESG implementation status in major countries.
The Federation of Korean Industries issued a report titled “Challenges and Improvements for Early Implementation of Mandatory ESG Disclosure” on Oct. 15. It highlighted five reasons making immediate implementation difficult, including lack of clear standards and guidelines, tight preparation time for disclosure, insufficient manpower and infrastructure for disclosure, increased legal risks, and unfavorable industry structures for disclosure. It also cited the difficulty of collecting consolidated standard data within a limited time frame, especially for major companies of the four conglomerates, including Samsung Electronics, Hyundai Motor, and SK hynix, with an average of 140 subsidiaries across 42 countries.
The authorities are also planning to address these concerns from the business sector comprehensively and establish a new ESG disclosure system road map. The FSC also intends to provide support to companies in preparing for mandatory ESG disclosure through measures such as issuing disclosure guidelines and offering incentives for the widespread adoption of voluntary ESG disclosure.