The mandatory disclosure of environmental, social, and governance (ESG) standards originally planned for this year has been postponed until next year, causing delays in the government's roadmap announcement. Although the timing for the mandatory disclosure has been delayed, corporations that have been assigned tasks are expressing concerns that the delayed roadmap announcement makes it difficult to respond to global regulations.
According to the business community on the 3rd, the demand from corporations for the swift preparation of disclosure standards related to the mandatory ESG disclosure is growing. Authorities need to quickly establish guidelines related to the disclosure items and implementation schedule.
Mandatory ESG disclosure is a system that requires corporations to publicly disclose indicators such as carbon emissions and social contributions. In an environment where there is increasing demand for social responsibility from corporations, the intention is for corporations to provide relevant information directly to investors. Major countries, including the United States, European Union (EU), and Japan, are also working on setting standards ahead of mandatory ESG disclosures for corporations.
Korea had pursued the implementation of mandatory ESG disclosures starting in 2023, but postponed the deadline to after 2026 due to concerns over the management burden on corporations. Consequently, the announcement of the roadmap for mandatory disclosure, originally scheduled for the second half of 2023, has also been postponed to the first half of this year. However, as of the end of July, no announcements related to ESG have been made by the financial authorities.
A source in the business community said, "Most corporations may find ESG disclosure burdensome, but for large companies operating overseas, they have no choice but to prepare disclosures in accordance with the standards of the respective countries. Since the mandatory ESG disclosure will eventually be implemented, we need to finalize the disclosure items and schedule so that we can also prepare for overseas disclosures."
While the business community, which had called for a slowdown asserting that ESG disclosure could place burdens on management, is now requesting the government to swiftly prepare a roadmap alongside regulatory relief. The Federation of Korean Industries submitted a proposal titled 'Suggestions from the Business Sector for Establishing Carbon Neutrality and Sustainability Policies' to the National Assembly and the Presidential Committee on Policy Planning on the 23rd. As global standards are rapidly being established, they request that a roadmap applicable to domestic corporations be quickly finalized, enabling them to have sufficient time to respond.
The FKI noted that "amid the expanding uncertainty of global ESG disclosure trends, there are delays in the roadmap for mandatory disclosures and the confirmation of detailed standards by the financial authorities," and added, "Due to the lack of announcements regarding disclosure items, scope, and schedules, corporations are facing difficulties in preparing for medium- and long-term investments, system construction, and personnel allocation."
Individual corporations are taking the initiative to release their own sustainability management reports as a self-help measure. Unlike mandatory disclosures, sustainability management reports are not obligatory but serve as documents for corporations to voluntarily inform about their ESG activities. Last year, around 200 listed companies published sustainability management reports, and this year, dozens of companies, including Yuhan Corporation, Dong-A ST, PharmaResearch, Hanwha Aerospace, and others, are also publishing reports.
Another source in the business community said, "Once the ESG disclosure items are determined, it will allow for not only reflecting them in sustainability management reports prior to the mandatory disclosure but also preparing data collection and necessary infrastructure expansions in advance."
The government is expected to accelerate the preparation of the ESG disclosure roadmap. President Lee Jae-myung has pledged to swiftly promote ESG disclosure as part of his presidential campaign, and discussions are accelerating in the National Assembly following the proposal of the 'Human Rights and Environmental Due Diligence Act,' which includes mandatory ESG disclosures, in June.
A financial authority official noted, "Given the significant uncertainty regarding overseas regulatory circumstances, it is necessary to make decisions while monitoring trends," and added, "We will establish standards that alleviate the burdens on corporations while ensuring that sufficient information for investment is included."