'In Europe, ESG Due Diligence Extends to Parts, Raw Materials, and Partners'... Only 2 out of 10 Companies Prepare Responses

KCCI and KPC Announce Comprehensive Report on ESG Management Practices of Domestic Companies

[Asia Economy Reporter Hwang Yoon-joo] Ahead of the mandatory supply chain due diligence being promoted by the European Union (EU), half of the companies recognize the importance of 'supply chain ESG (Environmental, Social, Governance) risk management,' but only 2 out of 10 companies are actually responding. It is interpreted that domestic companies recognize the importance of ESG but their actual management level is still low.

The Korea Chamber of Commerce and Industry (KCCI), jointly with the Korea Productivity Center, announced on the 29th that only about 21.0% of companies are actually responding to the EU's mandatory supply chain due diligence, according to a survey of 300 domestic companies titled ‘Corporate Survey for the Spread and Establishment of ESG.’ While 50.4% of companies recognize the importance of risk management related to 'EU supply chain due diligence obligation,' actual responses are lagging behind.

Looking at the responses in detail, 2.0% said ‘very well prepared,’ 19.0% said ‘somewhat prepared,’ 33.0% said ‘average,’ 28.0% said ‘not very prepared,’ and 18.0% said ‘not prepared at all.’

'Supply chain due diligence obligation' is a regulation where public authorities inspect whether a company's supply chain is sustainable in terms of human rights and the environment, and the EU is expected to disclose specific measures in March next year.

Regarding the most important global issues in the ESG field in the future, 37.0% of respondent companies chose ‘Green Taxonomy’ (environmentally friendly business classification system). Next, 28.3% selected ‘resource circulation,’ followed by ‘mandatory ESG information disclosure’ (13.0%), ‘human rights protection and diversity’ (9.0%), ‘biodiversity’ (6.7%), and ‘supply chain due diligence’ (6.0%).

Also, 7 out of 10 companies (70.0%) judged ESG to be important in corporate management, but the actual ESG management level self-assessed by companies was below average (3 points). The ESG management level of companies was 2.9 points on a 5-point scale, below average (3 points). Specifically, responses were ‘average’ (40.3%), ‘somewhat high’ (23.0%), ‘somewhat low’ (19.0%), ‘very low’ (11.7%), and ‘very high’ (6.0%) in order.

Professor Jang Dae-cheol of KAIST analyzed, "Since the period during which ESG has been actively introduced domestically is not long compared to overseas, except for some export companies and large corporations, it seems that most are still at the stage of recognizing its importance."

Meanwhile, when asked which among Environment (E), Social (S), and Governance (G) is considered the most important, the majority of companies chose ‘Environment (E)’ (60.0%), followed by ‘Social (S)’ (23.3%) and ‘Governance (G)’ (16.7%).

When asked about the most important activities in each field, in the Environment (E) field, the most common response was ‘improving energy efficiency and reducing carbon emissions’ (49.7%). In the Social (S) field, the majority of companies chose ‘improving workplace safety and health’ (43.0%) as the top priority, and in the Governance (G) field, companies considered ‘protecting shareholder rights’ (44.0%) the most important. Strengthening dividend policies was only 3.7%.

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