[Asia Exclusive] "SME ESG Management Starts with Win-Win Cooperation with Large Corporations"

Kim Soon-cheol, Secretary General of the Korea Foundation for Cooperation between Large, Small and Medium Enterprises and Agriculture and Fisheries
Supporting 24 projects promoting environmental management cooperation with 161 SMEs and 9 large companies
Extension of tax benefit deadline for Win-Win Payment System to "Create a Safe Payment Environment"
365 billion KRW contributed to Win-Win Cooperation Fund, supporting smart factory construction for 1,404 SMEs
Accelerating expansion of the Win-Win Growth Mall business

Kim Soon-chul, Secretary General of the Foundation for Cooperation between Large, Small and Medium Enterprises and Agriculture and Fisheries, is being interviewed on the 20th at the Foundation for Cooperation between Large, Small and Medium Enterprises and Agriculture and Fisheries in Guro-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Interview = Kim Minjin, Head of Small and Medium Venture Business Department at Asia Economy, Edited by Kim Heeyoon] “The adoption of ESG management by small and medium-sized enterprises (SMEs) can start from win-win cooperation with large corporations. Since nearly half of SMEs, about 47%, are supply companies producing products on order from large corporations, it is more important than ever to discover and establish various cooperation models through ESG management performance management at the supply chain level.”

‘ESG (Environmental, Social, Governance) management’ is now an essential task not only for large corporations but also for SMEs. As companies worldwide rush to adopt ESG management, domestic export companies are being required to manage ESG factors, but the reality for SMEs is challenging. According to the Federation of Korean Industries, the ESG response level of domestic companies scores 7 out of 10 for large corporations but only 4 for SMEs. More than 8 out of 10 SMEs are considering carbon neutrality responses, but only 15% have actually started proper preparations, according to a report by the Small and Medium Business Corporation. Therefore, the role of the Foundation for Large, Small, and Medium Enterprises and Agriculture, Forestry and Fisheries Cooperation (hereafter Cooperation Foundation), which is in charge of win-win cooperation projects between large and small enterprises, is becoming increasingly important.

Secretary-General Kim Sooncheol emphasized in an interview on the 21st at his office in Kicox Tower, Guro-gu, Seoul, that the Cooperation Foundation has long shared know-how and supported SMEs in the Environmental and Social fields.

Secretary-General Kim said, “Since 2014, the Foundation has promoted projects to facilitate environmental management cooperation between large and small enterprises, supporting eco-friendly management cases by carrying out 24 projects with 161 SMEs and 9 large corporations. Recently, we have been organizing technical research groups in fields such as electric vehicles and eco-friendly biodegradable plastics to jointly discover new projects.”

He added, “LG Chem and Hyundai Steel continuously provide consulting and equipment support to reduce energy consumption for their partner companies, and Emart participates in environmental certifications and the development of eco-friendly packaging for its partners, which are representative cases.”

The Cooperation Foundation is also considering ideas such as reflecting the achievements of large corporations’ active support for SMEs’ ESG management adoption in the win-win growth index.

Below is a Q&A with Secretary-General Kim.

- After taking office, you presented the vision of the Cooperation Foundation as a ‘think tank.’ How much do you think the policy planning function of the Cooperation Foundation has been strengthened?

▲ First, we established the Win-Win Policy Support Department and assigned it to the policy task of domesticating materials, parts, and equipment due to the then-controversial Japanese export restrictions. Through this, we achieved results by discovering suitable domestic items first and strengthening the internal investigation and research functions to improve regulations related to the independence of materials, parts, and equipment needed on-site. Recently, we have been intensively researching and discovering projects such as functional equipment manufacturing modularization based on the cooperation network between materials, parts, and equipment and SMEs, and eco-friendly projects to realize carbon neutrality by 2050. Additionally, we plan to analyze the activities and achievements of voluntarily cooperative companies through the ‘Caring Companies 2.0’ initiative promoted by the Ministry of SMEs and Startups and use them for future policy establishment.

- What policies and programs is the Foundation promoting for SMEs facing management crises due to COVID-19?

▲ We are focusing on two major activities. First, through the win-win cooperation fund’s crisis overcoming activities, we expanded fund support, which had mainly targeted large corporations’ partner companies, to non-partner companies and small business owners. In particular, we invested 13.9 billion KRW in the fund for management stabilization support such as emergency financing, labor costs, and rent support to provide prompt assistance. Also, through a 22.5 billion KRW fund contributed by eight large corporations in the automobile, aviation, and construction machinery sectors, we supported win-win special guarantees for 302 automobile parts partner companies facing management crises due to COVID-19. Furthermore, as new industries such as distribution and platform companies rapidly grow after COVID-19, conflicts with old industries have begun. To address this, we are piloting the ‘New and Old Industry Conflict Mediation Council’ to mediate conflicts between industrial sectors and prepare win-win plans.

Kim Soon-chul, Secretary General of the Foundation for Cooperation between Large, Small and Medium Enterprises and Agriculture and Fisheries, is being interviewed on the 20th at the Foundation for Cooperation between Large, Small and Medium Enterprises and Agriculture and Fisheries in Guro-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

- I am curious about the introduction status and achievements of the win-win payment system.

▲ To directly verify compliance with the mandatory ratio of win-win payments, we conducted implementation checks with local offices of the Ministry of SMEs and Startups, and the compliance rate increased by 24% from 70.4% in fiscal year 2018 to 94.6% in 2019. The win-win payment system guarantees partner companies cash payment on the payment date and allows early cashing at low interest rates. It operates by separately holding payment amounts in the Cooperation Foundation’s escrow account and directly paying partner companies on the payment date, so even if the purchasing company goes bankrupt, payments can be safely recovered. Also, when early cashing occurs, the low interest rates applied to purchasing companies such as large corporations and public institutions are extended to lower-tier partner companies, helping secure cash liquidity. Accordingly, the sunset period for tax benefits during win-win payments will be extended until 2022 to create a safe payment environment for SMEs and mid-sized companies.

- You have ambitiously promoted win-win smart factories between large and small enterprises.

▲ Until last year, 21 large and public enterprises contributed 36.5 billion KRW of win-win cooperation funds to support the establishment of smart factories for 1,404 SMEs. This year, the number of participating large and public enterprises is expected to increase, expanding the scale of supported SMEs. Notably, during last year’s mask shortage, Samsung Electronics supported even non-partner companies by providing smart solutions to SMEs manufacturing protective masks and diagnostic kits, increasing production and achieving the smartification of K-quarantine manufacturing companies. To expand such private-led smart factories, we plan to encourage participation from large and public enterprises and expand post-management support. We are also preparing measures to support follow-up operational management, such as solution replacement or phased advancement, according to the operational level of SMEs.

- The expansion of the win-win distribution platform, Dongbanseongjang Mall, is accelerating.

▲ Dongbanseongjang Mall is an online shopping mall where welfare points (win-win growth points) given to employees of large corporations and partner companies can be used to purchase SME products. Currently, 30 large corporations including LG Group and Hyundai Motor Company, 98 public institutions, and 9 local governments operate Dongbanseongjang Mall. Since it supports SMEs’ sales channels and provides incentives to partner companies, creating a double win-win effect, we are preparing various collaborations to expand the number of operators.

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