Only 13% of local firms ready for immediate ESG disclosure: EY Korea

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Nearly 60 percent of accounting managers at Korean businesses support the need to adopt mandatory ESG disclosures in line with the global trend, according to a recent survey. But only 13 percent of the respondents said their companies have completed relevant preparations.

This is according to EY Korea's latest survey on accounting transparency that posed questions to 164 accounting managers ― including outside directors, audit committee members, executives or heads of accounting and finance departments ― of domestic companies.

Among the approximately 60 percent of respondents who agree on the adoption of mandatory ESG disclosure in the country in line with the global trend, some half of them responded that the mandatory disclosure criteria should be somewhat eased, although the introductory timeline should keep pace with other major foreign countries.

About 34 percent of thsoe surveyed said that the mandatory ESG disclosure schedule should be postponed considering the reality of domestic companies, even if it means the local regulations' timeline falls behind that of the global trend.

The European Union plans to apply obligatory ESG disclosure rules, depending on company size starting, in 2025, and the U.S. also aims to gradually mandate climate-related disclosures starting from 2024.

Financial Services Commission (FSC), Korea's top financial regulator, meanwhile, announced earlier this week that it decided to postpone the introduction of the mandatory ESG disclosure rule until 2026 or later, due to local firms' need of a preparation period. Initially, the financial authorities planned to gradually apply ESG disclosure obligations starting from 2025 to companies with asset sizes of over 2 trillion won ($1.47 billion), and to all KOSPI-listed companies by 2030.

When asked about their company's realistic timeline for the adoption of the mandatory ESG disclosures, only 13 percent of the respondents said an immediate implementation of the disclosure obligation is possible while 39 percent said it would take more than 3 years. The remaining 48 percent said it will take one or two years.

“As ESG disclosure regulations at home and abroad are being strengthened, domestic companies need to proactively look for ways to strengthen their capabilities to respond to ESG disclosure regulations, as such obligations of major foreign countries could also affect local companies that are not only doing business in those countries, but also the subsidiaries or companies impacted by the global supply chain related to such firms,” an official from EY Korea stressed.