[In-Depth Review] Management Focused on Basics Before ESG Management

Baek Juseon, Chief Attorney at Law Firm Yungpyeong

The term ‘ESG’ management first appeared in 2005, introduced by the International Finance Corporation (IFC), an international financial institution established to invest in private companies in developing countries. IFC presented ESG as an investment guide to enhance the sustainability of capital markets to investors. Investors responded positively, and companies declared ESG management and sought to implement it, sparking a wave of enthusiasm in South Korea as well. In the early 2000s, South Korean companies emphasized Corporate Social Responsibility (CSR), declaring environmental management, ethical management, and social contributions. Today’s ESG management can be seen as following the same trajectory. Prior to this, Yuhan-Kimberly’s forest cultivation project called ‘Uri Gangsan Pureuge Pureuge’ (Our Rivers and Mountains Greener and Greener), which began in 1984 and expanded globally, is considered part of this trend. Many people remember this company that produces tissue paper and feminine hygiene products.

Now, many large, medium, and small enterprises in South Korea are actively exploring ESG management, and the National Pension Service has announced that about half of its operating funds will be invested based on ESG evaluations of companies. They are entering the solar power business and supporting waste and pollutant cleanup projects. They pledge to support startups and to make corporate governance legal and transparent. Large corporations also commit to fair dealings with small and medium-sized partner companies, avoiding unfair price cuts or technology theft, in accordance with ESG management standards. In January this year, the Financial Services Commission announced that South Korea will mandate ESG disclosures for listed companies on the Korea Exchange with total assets exceeding 2 trillion won starting in 2025, expanding to all KOSPI-listed companies by 2030.

It is welcome that companies are fulfilling social responsibilities beyond financial activities through non-financial activities. However, many people worry that corporate ESG management might be merely a promotional tool or a superficial gesture to conform to social trends. To dispel these concerns, it is necessary to listen to diverse opinions from experts and citizens and to translate them into effective and sustainable actions. Adequate corporate budget allocation for ESG management is also essential.

Above all, companies must be more faithful to their fundamental roles. There is a saying that companies deceive customers upfront and exploit them behind their backs. Though exaggerated, it is a sharp critique. To overcome this, companies must supply good products, including services, to consumers at reasonable prices, avoid deceiving consumers, and implement policies that faithfully protect them. To protect consumer rights, punitive damages and class action systems should be introduced so consumers can defend their rights themselves. Even before such systems are implemented, companies should proactively strive for customer satisfaction. On the other hand, in labor relations, while introducing systems like labor directors to foster higher cooperation is necessary, first and foremost, the three fundamental labor rights must be legally guaranteed, and in practice, labor and management should establish a responsive relationship where workers can express their opinions and negotiate. If companies manage their businesses faithfully and strive to fulfill higher levels of social responsibility to cover any shortcomings, it will lead to beneficial outcomes for companies, consumers, and the nation.

Baek Juseon, Chief Attorney, Law Firm Yungpyeong

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