Business Community: "Measuring Greenhouse Gas Emissions of Partners is Difficult... Sustainability Disclosure Standards Must Be Realistic"

KCCI Submits Draft Comments on Sustainability Disclosure Standards to KASB

Regarding the establishment of mandatory sustainability disclosure standards for companies, the business community viewed the currently released draft as lacking practicality. They argued that the standards are unclear and impose significant cost burdens on individual companies, necessitating a complete revision.

The Korea Employers Federation (KEF) submitted an opinion letter containing these views on the 28th. Earlier, the Korea Accounting Standards Board’s Sustainability Standards Committee had planned to collect opinions on the draft sustainability disclosure standards by the end of this month. KEF stated, "It is reasonable to promote disclosures starting with the climate sector, where international consensus has been formed following the Paris Agreement, while allowing companies to selectively disclose other sectors by topic."

In particular, KEF clearly opposed the disclosure of greenhouse gas emissions within the supply chain, known as Scope 3 disclosures, which is considered a contentious issue. This method calculates emissions not only from the direct production process but also from the entire value chain within the supply chain, including partners and transportation companies. KEF diagnosed that "in a situation where there are clear technical limitations that make the data unreliable, the entire industry is exposed to excessive cost burdens and ‘greenwashing risks’ without any safeguards."

[Photo by Yonhap News]

The business community points out that the lack of internationally established standards for calculating Scope 3 emissions leads to inconsistent criteria. The widely used international GHG Protocol presents up to 15 emission calculation scopes from raw material procurement to product disposal. However, the scope applied varies depending on individual company interpretations, and even within the same scope, emission values differ based on calculation methods.

Moreover, realistically, small and medium-sized enterprises find it difficult to measure emissions individually, and even if they do, there are limitations in fully trusting those values. Most companies disclose estimates using emission factors provided by the government, raising questions about the appropriateness of providing information based on estimates.

According to KEF, it is tentatively estimated that companies ranked 20th to 30th in the business community would need to spend over 3 billion KRW annually on internal preparations for Scope 3 emissions disclosure. This excludes costs for verification and certification, as well as data collection costs for life cycle assessment (LCA) of raw materials. KEF anticipates that depending on the number of raw material items, LCA data measurement alone could cost over 60 billion KRW separately.

KEF also requested the withdrawal of additional disclosure items included in the draft standards that aim to achieve policy objectives. Since there are already corporate information disclosure systems by ministries, this would only increase overlapping burdens, and it cannot be assumed that all information requested by the government falls within the sustainability category.

Regarding the schedule for mandatory disclosure, KEF conveyed that applying exchange disclosures from the 2028 fiscal year is realistic, considering that it will take considerable time to establish the system after setting the standards. They also judged that regulations prohibiting management interference, such as the Subcontracting Act, which could act as obstacles in supply chain management, need to be revised.

Lee Dong-geun, KEF’s Executive Vice Chairman, emphasized, "While international trends should be considered, the government must exercise greater caution to establish ‘Korean-style sustainability disclosure standards’ that fit domestic realities."

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