Political importance
Amid a growing global focus on environmental and social issues, South Korea has positioned itself as a leader in ESG policy. With a strategy designed to enhance private sector competitiveness and foster a sustainable economy, South Korea has introduced several impactful measures. One example is the ESG Infrastructure Expansion Plan, launched by the government in August 2021. This plan focuses on seven core areas: promoting public ESG disclosures, strengthening ESG capabilities among SMEs, integrating ESG practices within public institutions, encouraging ESG investments, developing a market-driven regulatory framework, expanding public sector ESG investments, and establishing a national ESG information platform. The K-ESG Guidelines and a K-Taxonomy have also been introduced to provide further support and guidance, especially for SMEs. In 2023, the government also reinforced its ESG commitment by establishing the Private-Public Joint ESG Policy Council, a collaborative body uniting government agencies and private organizations to coordinate ESG strategies across industries. Moreover, mandatory ESG disclosure requirements were introduced the same year for large KOSPI-listed companies, set to take effect in 2025, with all listed companies expected to comply by 2030.
To combat greenwashing, the Fair-Trade Commission updated its guidelines in 2023 to ensure accuracy in environmental claims, while the Ministry of Environment proposed fines for misleading claims. The recent draft of the ESG Framework Act also incentivizes companies to integrate ESG principles in partnership with the government. Through these measures, South Korea demonstrates a strong commitment to building a robust national ESG framework that aligns with international standards.
Corporate attention
In South Korea, companies can voluntarily submit sustainable management reports, while those with assets exceeding KRW 1 trillion are mandated to disclose corporate governance reports annually. Along with these requirements, awareness of ESG issues in the corporate sector is rising, especially among top companies. Major listed corporations, such as Samsung and SK, have started publishing ESG reports, and as of 2021, eighty companies in Korea have released sustainability reports.
The Federation of Korean Industries found that in 2023 there was a strong interest in implementing mandatory ESG disclosures among the top 100 of Korea’s largest 500 companies. The same companies also emphasized enhancing ESG evaluations and aligning their ESG implementations with the EU’s Corporate Sustainability Due Diligence Directive. Additionally, other market analyses indicate that based on an examined period from 2022 to 2023, Korean companies are increasingly proactively working to align their ESG practices with global standards. Many companies have restructured to establish ESG committees that better support sustainability efforts. These rankings were based on key performance indicators from corporate annual and ESG reports, as well as Korean consumers’ perceptions of specific companies’ sustainability initiatives. The analyses also show a continuously growing commitment among Korean companies to advance ESG practices, mirroring the global shift toward prioritizing long-term sustainability. This trend aligns with increasing demands from corporate boards and government leaders to actively pursue ESG goals.
Trends
South Korea has made significant strides in integrating Environmental, Social, and Governance considerations into its corporate, regulatory, and investment frameworks. With increasing emphasis on sustainability, transparency, and governance, the nation is positioning itself as a leader in ESG practices in Asia. Several emerging trends are shaping South Korea’s ESG landscape, driven by both regulatory advancements and shifting market expectations.
One of the most significant changes in South Korea’s ESG landscape is the growing focus on Scope 3 emissions, which requires companies to disclose emissions across their entire supply chains. This initiative reflects a broader trend toward supply chain transparency and accountability. However, reporting on Scope 3 emissions can be challenging, particularly in obtaining reliable data from external suppliers. To address these challenges, companies are leveraging advanced reporting and data collection platforms like Dasseti ESG. This ensures comprehensive and accurate reporting on emissions, helping companies meet regulatory requirements while supporting their sustainability goals.
As South Korea’s regulatory environment becomes more robust, there has been a marked increase in ESG-linked financial products. The country has seen significant growth in the issuance of green bonds, which are used to finance environmentally friendly projects. In addition to green bonds, sustainability-linked bonds are also gaining popularity, with companies offering bonds where the interest rates are tied to the achievement of sustainability targets. These instruments are attracting both domestic and international investors, reflecting the growing demand for sustainable investment options.
Threats and opportunities
South Korea’s ESG initiatives have had both positive and challenging impacts. On the positive side, the Ministry of Trade, Industry, and Energy issued the K-ESG Guidelines in 2022, along with the Supply Chain Due Diligence Guidelines, to help SMEs align with ESG standards. This support is crucial, as South Korea has over 7 million SMEs, many of which serve as suppliers to large corporations with global footprints. However, a lack of clear, comprehensive guidance remains a barrier, particularly for SMEs involved in international supply chains. South Korean companies currently score below global averages in managing supply chain risks, especially regarding labor rights, working conditions, and compliance procedures for these standards. Nevertheless, as global pressure for sustainable supply chains grows, SMEs have an opportunity to enhance resilience, meet international standards, reduce compliance risks, and improve competitiveness.
As of April 2024, the Korean Sustainability Standards Board (KSSB) published sustainability-related disclosure standards based on the ISSB’s global standards, IFRS S1 and IFRS S2, with adjustments tailored to the South Korean market. Additionally, KSSB introduced KSSB 101, a voluntary, country-specific standard that allows companies to selectively disclose further sustainability-related information as required by domestic laws or to meet specific sustainability policy objectives. Notable differences from ISSB standards include mandatory reporting on Scope 3 emissions, covering emissions throughout a company’s supply chain.
These proposals represent South Korea’s efforts to align with standards developed by the International Sustainability Standards Board (ISSB), signaling the country’s increasing influence on the global sustainability agenda. However, keeping pace with ongoing regulatory updates has become a significant challenge for businesses and investors. Though, through the KSSB’s draft standards, South Korea is reshaping sustainability practices across industries and jurisdictions, underscoring the country’s commitment to advancing ESG disclosure and compliance.
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ESG in other Asian countries
ESG varies all across Asia. We have gathered the most important information about politics, trends, opportunities, and threats in the different Asian countries.
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