Korean Firms Seek ESG Disclosure System Delay
Mandatory ESG disclosures are on the horizon for Korean companies possessing assets exceeding 2 trillion won, set to commence in 2025. Yet even larger enterprises find themselves grappling with readiness.
Recently, the Korea Chamber of Commerce and Industry (KCCI) conducted a survey encompassing 100 Korean companies. Among these, 59 were considered large corporations, while 41 were of mid-sized stature.
The survey took place from July 7 to July 14, with ESG executives participating to express their viewpoints on the forthcoming Korean ESG disclosure framework.
Within this survey, a notable 56.0 per cent indicated that postponing the obligatory ESG disclosure timetable for a minimum of one year could be appropriate. Additionally, they advocated for the establishment of an exemption period lasting 2 to 3 years to alleviate liability pressures.
The exemption period would temporarily absolve companies from ESG disclosure responsibilities until a coherent set of criteria for measuring and validating emissions is devised.
In terms of the implementation schedule, 27.0 per cent of respondents suggested that mandating ESG disclosures for companies with assets surpassing 2 trillion won should commence in 2025, while other listed entities should follow suit from 2030 onwards.
KOSDAQ companies, however, were recommended for exclusion. Conversely, only 14.0 per cent supported accelerating the system to 2027, encompassing firms with assets exceeding 1 trillion won and integrating KOSDAQ companies possessing more than 500 billion won in assets.
A significant majority, 88.0 per cent of companies, acknowledged the importance of ESG disclosures. The top reasons for engaging in ESG disclosures were identified as furnishing critical information to stakeholders (46.6 per cent) and identifying investment decision risk and opportunity factors (30.7 per cent).
At present, 53.0 per cent of companies undertake autonomous ESG disclosures, 26.0 per cent are in the preparatory stages, and 21.0 per cent are not engaged in preparations at all. Unlike mandatory disclosures, current voluntary ESG disclosures via sustainability reports allow companies to choose which aspects to disclose without assuming liability for the shared information.
The survey unveiled inadequacies in the groundwork for ESG disclosures. Among firms presently partaking in voluntary ESG disclosures, a considerable 90.6 per cent reported their reliance on external professional organisations, with only 9.4 per cent relying solely on internal staff. Only 14.0 per cent of companies had established their own computerised ESG systems for disclosures.
The financial distribution towards ESG disclosures showcased that 50.9 per cent of companies allocated between 100 million won and less than 200 million won. Meanwhile, 28.3 per cent allocated more than 200 million won.
Regarding SCOPE 3 greenhouse gas emissions, numerous companies expressed resource limitations. Approximately 44.0 per cent refrained from disclosing their SCOPE 3 emissions, with 32.0 per cent currently disclosing them and 24.0 per cent in the process of preparing to disclose.
Of all the surveyed companies, 61.0 per cent advocated for a delay in the overall timeline. Larger corporations particularly emphasised the challenge of SCOPE 3 disclosures, even within their ranks.
Among respondents, 30.0 per cent indicated that all aspects should become mandatory starting in 2027. Conversely, 8.0 per cent proposed commencing with two or three non-burdensome items and progressively expanding disclosures.
While experts foresee the establishment of a domestic ESG disclosure system in Korea based on ISSB disclosure standards, a considerable 74.0 per cent of respondents favoured adapting to domestic conditions to ease corporate burdens rather than fully adopting ISSB standards. In contrast, a minority of 26.0 per cent insisted on the complete adoption of ISSB standards for listed companies.
Noteworthy concerns were raised by companies about consolidated disclosures encompassing all ESG information, including subsidiary details. A striking 77.0 per cent advocated for the exclusive disclosure of individual company information, with the expansion of such disclosures to be contemplated later.
This stance greatly exceeded the 22.0 per cent of respondents advocating for the inclusion of all subsidiaries. Additionally, a significant 65.0 per cent believed companies should have the latitude to formulate climate risk scenarios in line with ISSB disclosure standards.
An overwhelming 63.0 per cent of surveyed companies identified challenges in measuring and aggregating data from partners and subcontractors. Similarly, 60.0 per cent cited a lack of detailed guidelines as a prevalent obstacle in their ESG disclosures.
Additional challenges included a shortage of internal experts (52.0 per cent), the financial burden of employing external experts (46.0 per cent), and the absence of suitable IT and specialised systems for disclosure (37.0 per cent).
Woo Tae-hee, Vice Chairman of the KCCI, stated, "Mandatory ESG disclosures are a policy crucial for enhancing the global competitiveness of Korean enterprises." He underscored that for ESG disclosures to promote sustainable growth rather than hinder it through regulations, a substantial grace period and clear, uncomplicated standards must be established.
To view and compare company ESG Ratings and Sustainability Reports, visit our Company ESG Profiles page.
Source: Business Korea