The South Korean government is expediting the mandatory disclosure of environmental, social, and governance (ESG) information, raising concerns among listed companies. The scope of companies required to disclose has expanded significantly from those with consolidated assets of over 30 trillion won to those with over 10 trillion won. Additionally, the government plans to implement legal disclosures through business reports without going through the exchange disclosure process, increasing legal responsibilities for companies.
On July 7, six major economic organizations issued a joint statement acknowledging the necessity of the ESG disclosure system. However, they expressed concern that implementing legal disclosures without a preliminary voluntary disclosure phase would not adequately consider companies' capacity to adapt and comply.
One of the primary concerns for businesses is the weight of responsibility associated with legal disclosures. While exchange disclosures allow for corrections through amended filings, legal disclosures included in business reports can lead to liability under the Capital Markets Act for false disclosures. A business representative noted, "If exchange disclosures are like practice exams, legal disclosures are akin to the final exam," emphasizing the shift to legal accountability without prior practice. They added that if false disclosures are recognized, the potential for fines or criminal liability could extend to corporate executives and employees, creating a significantly different burden.
Moreover, ESG disclosures often rely on predictive and estimated information, such as future climate risks, carbon emission forecasts, and supply chain data, rather than confirmed figures. The most challenging aspect is Scope 3 emissions, which encompass total emissions across the entire supply chain, including overseas raw material suppliers and partners. Companies face difficulties in obtaining carbon emission data due to varying calculation methods by country and the lack of available data in certain regions.
In response, the government plans to grant a three-year grace period for Scope 3 disclosures and introduce a safe harbor that broadly exempts companies from liability under the Capital Markets Act, including damages, administrative sanctions, and criminal penalties during the initial three years of the system's implementation. However, intentional greenwashing will not be exempt from liability. Despite this, the business community argues that the current exemptions are insufficient. A representative from an economic organization stated, "We need broader legal safeguards unless there is intentional false disclosure."
Concerns have also been raised about the tight preparation timeline. Disclosures for 2028 must be based on data from the 2027 fiscal year, meaning companies need to start accumulating relevant data as early as next year. However, the government has announced that the Korean climate risk platform, supply chain ESG platform, and industry-specific Scope 3 guidelines will be gradually established by 2028.
Additionally, there are calls to consider the evolving global regulatory environment, which is shifting to alleviate corporate burdens. The European Union has not withdrawn its ESG disclosure requirements but is pursuing an "Omnibus Package" in 2026 to adjust the scope, timing, and some obligations to ease the burden on companies. In the United States, while some state governments and global corporations continue to disclose, the federal SEC's climate disclosure rules have effectively stalled.
Song Jae-hyung, head of the Sustainable Management Division at the Korea Economic Association, stated, "Building a system for collecting climate and environmental data, training professionals, and establishing internal verification systems will require significant time and resources, so realistic discussions for further adjustments must continue."
* This article has been translated by AI.
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