Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
'COVID-19 pandemic accelerating shift to ESG'
Participants to the 2021 Korea Times Global ESG Forum's second discussion session pose at the KCCI building in Seoul, Thursday. From left are KCCI Executive Vice Chairman Woo Tae-hee, American Chamber of Commerce in Korea Chairman James Kim, P&G Korea CEO Balaka Niyazee and IKEA Korea Country Retail Manager Fredrik Johansson. Korea Times photo by Shim Hyun-chul
By Baek Byung-yeul
Panelists say pursuing ESG efforts is imperative
By Baek Byung-yeul
Panelists taking part in The Korea Times Global ESG Forum said Thursday that the COVID-19 pandemic has made companies aware of the need to improve their environmental, social and corporate governance (ESG) performance as these factors have become keys to overcoming climate change and other crises that have shaken global society.
The Korea Times hosted its inaugural Global ESG Forum at a time when corporations are being urged to incorporate a high level of ESG in their operations. During a discussion session, panelists shared their thoughts on the importance of the issue.
The panelists were Korea Chamber of Commerce and Industry (KCCI) Executive Vice Chairman Woo Tae-hee; BlackRock Investment Stewardship Team Director Won Shin-bo; IKEA Korea Country Retail Manager Fredrik Johansson; and P&G Korea CEO Balaka Niyazee, and the session was moderated by American Chamber of Commerce in Korea Chairman James Kim.
KCCI Executive Vice Chairman Woo Tae-hee, left, speaks during a 2021 Korea Times Global ESG Forum discussion session at the KCCI building in Seoul, Thursday. From left are Woo, session moderator and AMCHAM Korea Chairman James Kim, P&G Korea CEO Balaka Niyazee and IKEA Korea CEO Fredrik Johansson. The screen shows BlackRock Investment Stewardship Team Director Won Shin-bo, who joined the meeting virtually. Korea Times photo by Shim Hyun-chul
The participants all agreed that various challenges such as growing inequality, climate change and supply chain issues have been highlighted by the COVID-19 outbreak, and how well they manage these risks is becoming ever more important.
The KCCI executive vice chairman said businesses rushing to pursue ESG principles is not just a fad and every company is required to improve their ESG efforts for sustainable growth.
“Unlike the CSR or transparent management of the past, ESG is vital for the survival of companies. Not only the financial and investment sectors demand ESG but also legislation is being passed. Customers also consider companies' ESG activities in their products and services purchase, and KCCI data show they deliberately did not purchase products from companies that were not engaging in ESG, and were willing to pay more for the best ESG companies' products,” he said.
BlackRock's investment stewardship team director said, “Stronger ESG management is the new normal for management.”
“We have seen strong outperformances by companies that manage not only climate-related risk but broader sustainability issues, and sustainable funds that capture this subset of companies have shown strong outperformances during the thick of COVID-19 in 2020,” Won said.
“From an investor's perspective, we see a strong relationship between good ESG performers and good management quality. Companies with robust risk management practices help future-proof their business and hence provide sustainable long-term returns to investors,” he added.
P&G Korea's CEO said the virus pandemic has brought a profound impact on inequality, especially for women. Citing McKinsey's data that one in four women was considering leaving the workforce or downshifting their careers versus one in five men, the CEO emphasized that governments and corporations are urged to support them to continue to play important roles both at home and in society.
“Women have shouldered disproportionate household responsibility during this time, simply because of the burden of sharing more household chores. As a result of this, we need to figure out how we support women so that we can continue to accelerate their representation, and we can continue to support them to have a meaningful role in this society,” Niyazee said.
The participants also stressed the need for a unified ESG evaluation tool due to complaints that too many standards and indices make it difficult for companies to embrace ESG values.
“There are more than 600 confusing indices all over the world. In order to reduce confusion, K-ESG has been developed,” the KCCI executive vice chairman said adding that companies are asking the government to offer funding and other financial benefits so that they can pursue ESG management more quickly and effectively.
The BlackRock Investment stewardship team director welcomed the Korean government's recent decision to force companies listed on the benchmark KOSPI with total assets valued over 2 trillion won ($1.8 billion) or more to begin reporting their ESG data starting from 2025.
“We welcome the recent decision of the Korean regulators to make ESG reporting mandatory by 2025. Rather than re-inventing the wheel, providing guidance to companies to align their reporting with those widely used by global investors would lead to a more powerful result, as companies selected for inclusion in any local index would align with those in global indices.
The IKEA Korea chief cited an example of the Swedish government saying Sweden “has been working on the ESG topic for many years to secure good environment and equal and trustful society and this initiative enables the private sector including companies to make their priority for sustainable business.”
With firms being urged to improve ESG efforts, concerns have risen that small- and mid-sized companies will have a tough time integrating ESG into their operations. Also, poor ESG scores at small businesses may pose a risk to large businesses, because ESG now affects the entire supply chain.
On this concern, participants agreed that support from large companies should be included their ESG efforts.
“We at IKEA will continue to work together with our co-workers, all partners, our customers, other stakeholders across government, local business, NGOs and citizen movements to raise our voice to influence positive change. We believe that together, we can tackle the challenges of unsustainable consumption, climate change and growing inequality. No one can do everything, but everyone can do something, especially when we work together,” the IKEA Korea country retail manager said.
P&G Korea's CEO also said, “Conglomerates can use their supplier and agency network to start with as many of those may be SMEs. We as a big company have a very large group of suppliers, P&G is working on is 'supply diversity program,'” the CEO said.
“Even in Korea, we have an objective to have 8 percent of business routed through suppliers with women leaders and we have been working very closely with them and we are very open to share our learning. We've offered women entrepreneurship development programs in many countries in Asia and we hope to bring this program to Korea for women entrepreneurship development,” she added.