8 out of 10 Domestic Companies Say Supply Chain ESG Management Is Important

KCCI Conducts Survey on Corporate Status Regarding 'Supply Chain ESG'
Only 18% Report Actually Receiving ESG Collaboration Requests

[Asia Economy Reporter Hwang Yoon-joo] Amid growing interest in ESG (Environmental, Social, and Governance) management, it has been found that 8 out of 10 domestic companies recognize the importance of ‘supply chain ESG’ cooperation, which goes beyond individual companies to include suppliers and partners.

According to a recent survey conducted by the Korea Chamber of Commerce and Industry targeting 193 large and small-to-medium domestic companies on their awareness and cooperation status regarding ‘supply chain ESG,’ 78.8% of companies responded that cooperation on ‘supply chain ESG’ is important (27.5% very important, 51.3% relatively important).

‘Supply chain ESG’ involves requiring human rights and other standards up to suppliers and partners and imposing sanctions in case of violations. Following laws such as the 2012 California Transparency in Supply Chains Act and the 2015 UK Modern Slavery Act, the EU is currently pushing legislation to mandate ‘corporate supply chain due diligence’ this year. Apple’s demand that its partners replace 100% of their electricity with renewable energy under the ‘RE100’ initiative is also part of ‘supply chain ESG.’

Importance by ESG Cooperation Area: Industrial Safety, Health, Compliance & Transparent Management, Eco-friendly Production Process, Human Rights & Labor in Order

Companies responding to the survey cited ‘strengthening product and service competitiveness’ (3.51 points) and ‘maintaining business relationships and increasing sales and profits’ (3.50 points) as the main reasons why ‘supply chain ESG’ cooperation is necessary, followed by ‘enhancing corporate brand and reputation’ (3.46 points), ‘preventing and managing business risks’ (3.46 points), and ‘demands from clients or investors’ (3.33 points).

When asked about the importance of specific areas related to ‘supply chain ESG,’ ‘industrial safety and health’ (3.63 points) and ‘compliance and transparent management’ (3.61 points) were rated relatively high, followed by ‘eco-friendly production processes’ (3.49 points), ‘human rights and labor’ (3.45 points), and ‘eco-friendly product development’ (3.41 points).

Professor Lee Jae-hyuk of Korea University advised, “The European Commission recently submitted legislation on supply chain due diligence to the European Parliament, and it is scheduled to be enforced from 2024. Therefore, not only companies with business sites in the EU but also domestic companies exporting goods and services to the EU are expected to be directly affected, so attention is required.”

Only 2 out of 10 Companies Have Actually Received ‘Supply Chain ESG’ Cooperation Requests

Despite the high awareness of ‘supply chain ESG’ cooperation, the rate of actual implementation remains low. In this survey, 81.9% of respondents answered ‘no’ when asked if they had ever received cooperation requests related to supply chain ESG from clients or investors, while only 18.1% answered ‘yes.’

However, among companies that had received such requests, 37.1% felt the ESG cooperation demand was ‘strong,’ and 45.7% said it was ‘average,’ which is significantly higher than the 17.2% who said it was ‘weak,’ suggesting that leading companies have begun actively engaging in ESG management including their supply chains.

Regarding the burden of supply chain ESG management activities, 41.5% of respondents said it was ‘burdensome,’ 52.8% said ‘average,’ and only 3.6% said ‘not burdensome,’ indicating that many companies have yet to actively embrace supply chain ESG. When asked about difficulties by item in cooperating on supply chain ESG, ‘cost burden’ (2.99 points) was cited as the highest concern.

Government Policy Tasks: Industry-specific Guidelines, Tax and Financial Support for ESG Cooperation, Education and Consulting, etc.

When asked about support measures desired from parent companies to strengthen ESG management, partner companies most frequently chose ‘support for facility investment’ (28.6%). This was followed by ‘customized consulting’ (21.9%), ‘ESG education’ (15.2%), and ‘support for guidelines and evaluation models’ (8.6%).

As policy tasks to activate supply chain ESG cooperation, the highest necessity was placed on ‘providing industry-specific guidelines’ (3.34 points), followed by ‘tax support for ESG cooperation’ (3.33 points), ‘financial support for ESG cooperation’ (3.25 points), ‘ESG education and consulting’ (3.22 points), ‘provision of ESG trend information’ (3.18 points), and ‘certification of excellent ESG partner companies’ (3.13 points).

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