"SMEs ESG, Now an Essential Era Not a Choice"

Interview with Seo Jeong-tae, Head of ESG Promotion Team at Korea Management Technology Guidance Association
Policy Support and Incentives Needed for Introducing Customized ESG Management for SMEs

The Korea Management Technology Guidance Association announced on the 10th that it held the 'SME ESG Management Support Declaration Ceremony' to promote sustainable growth of small and medium-sized enterprises, realization of social value, and enhancement of corporate value. Chairman Kim Oh-yeon (fifth from the left in the photo), Seo Jeong-tae, Head of the ESG Promotion Team (sixth from the left in the photo), and members of the Management Support Team are posing together. Photo by Korea Management Technology Guidance Association

[Asia Economy Reporter Kim Heeyoon] As the global ESG (Environmental, Social, and Governance) management trend driven by COVID-19 sweeps across industries, especially among the top 10 companies, small and medium-sized enterprises (SMEs) are facing increasing challenges. Although ESG management adoption is being demanded starting with export-oriented SMEs, they lack the necessary knowledge and capabilities. Seo Jeongtae, head of the ESG Management Support Group at the Korea Management Technology Guidance Association and an expert active in the field of management consulting, pointed out, “There are about 600 different evaluation indicators for domestic ESG management, but they are all inconsistent, so SMEs have to respond differently each time or prepare in a makeshift manner. ESG is perceived as a burden and another regulation for SMEs struggling with management difficulties due to COVID-19.”

With ESG element disclosure becoming mandatory for listed companies and the National Pension Service planning to establish an ESG evaluation system from next year to apply responsible investment to half of its assets, ESG adoption has become a necessity rather than an option for SMEs. Seo said, “There is a flood of inquiries about ESG management adoption from SMEs in the field, but there are no concrete guidelines, so we are promoting a training program to cultivate guidance personnel who conduct consulting on the front lines first. Previously, the Guidance Association trained CSR (Corporate Social Responsibility) consultants and secured about 500 experts, so we plan to nurture ESG consulting experts based on them and deploy them to the field.”

In the SME sector, voices are emerging that for ESG management to be distinguished from regulations, government support or benefits through ESG must be established. Seo stated, “A CEO of an SME I met in the field, with about 10 employees, expressed frustration about what governance means and how they can contribute socially when sales have plummeted due to the COVID-19 impact, highlighting the need for clear standards for ESG management in SMEs. Through laws such as the ESG Management Support Act for SMEs and Venture Companies, recently proposed by Representative Kang Hunsik of the Democratic Party last month, legal grounds should be established, and support measures such as tax benefits or additional points for expanding ESG management in SMEs should be guaranteed so that more SMEs can adopt ESG.”

According to a survey released by the Federation of Korean Industries in February on the impact of the global ESG expansion trend on domestic industries and companies, the ESG response level of domestic companies scored 7 out of 10 for large companies and 4 for SMEs, compared to advanced countries. In response, the Ministry of SMEs and Startups has also begun preparing comprehensive measures for SME ESG management. Earlier, it announced that it would select companies prioritizing ESG in the ‘Caring Companies 2.0’ program, a win-win cooperation initiative with large companies, signaling its intention to promote the transition of SMEs to ESG management.

Seo said, “If transparent evaluation indicators that can keep pace with global ESG standards are established, along with policy support and incentives for SMEs that proactively adopt ESG, the results will naturally spread and the number of adopting companies will increase. The Korea Management Technology Guidance Association will take the lead in resolving the ESG difficulties faced by SMEs.”

This content was produced with the assistance of AI translation services.