Companies call for delay of mandatory ESG disclosure

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By Anna J. Park

Companies with a capital size of over two trillion won ($1.5 billion) will be obligated to publish disclosures on their environmental, social and corporate governance (ESG) activities from 2025. However, a recent survey shows even large conglomerates find the timeline too hasty.

According to the survey conducted by the Korea Chamber of Commerce and Industry (KCCI) on 100 member companies' ESG executives and staff, 56 percent of the respondents said they think it would be appropriate to postpone the mandatory ESG disclosure deadline for at least one more year. They also said a grace period of two to three years of responsibility exemption should be introduced.

Most of the companies surveyed, or 88 percent of the respondents, acknowledged the importance of ESG disclosure. They cited reasons such as providing important information to stakeholders and identifying risks and opportunity factors for investment decision-making, as rationale behind mandatory disclosure.

However, 90.6 percent of companies that currently engage in voluntary ESG disclosure said that they utilize external professional organizations for publishing ESG information. Only 9.4 percent of them said they rely solely on internal staff and resources. In addition, only 14 percent of the companies had their own ESG information system set up for disclosure.

Currently, 53 percent of the 100 companies are engaging in voluntary ESG disclosure, while 26 percent are in their preparation stage and 21 percent have not yet started. The current voluntary disclosure system differs from mandatory disclosure in that the firms are free from accountability for the disclosed information.

The cost of investing in ESG disclosures reportedly ranges between 100 million won ($75,358) to 200 million, according to 50.9 percent of the respondents. Another 28.3 percent of respondents reported that the costs exceed 200 million won.

Forty-four percent of respondents said they do not disclose Scope 3 greenhouse gas emissions which are those that result from assets not owned or controlled by the reporting organization but that the organization indirectly affects in its value chain of business activities. Another 24 percent said they were in the preparation stage. The remaining 32 percent of the respondent companies said they were currently disclosing the information.

Companies identified the most common challenges in ESG disclosure as the difficulty in measuring and collecting data from partner companies (63 percent in multiple responses) and the lack of specific detailed guidelines (60 percent). Other challenges mentioned include a shortage of internal expertise, the cost burden associated with utilizing external experts and the absence of IT and specialized systems for disclosure.