"Europe Also Takes It Slow" Business Sector Requests Slower Pace for Sustainability Disclosure Implementation

The business community expressed the opinion that sustainability disclosure standards should be introduced cautiously. They judged that while climate-related regulations are not properly established overseas, our companies alone could suffer damage.

Son Kyung-sik, Chairman of the Korea Employers Federation, said at the 2nd ESG Management Committee held on the 13th, "The sharp interests of each country surrounding the supply chain, combined with geopolitical security risks, are creating new and complex patterns," adding, "High energy transition costs and supply uncertainties go beyond the simple issue of 'carbon leakage' and can cause industrial hollowing out of a country."

Carbon leakage refers to the phenomenon where industries with high carbon emissions, such as steel and electricity, move from countries with strict emission regulations to those with weaker ones. Since manufacturing accounts for a large portion of Korea's overall industry, and labor costs have increased, strengthening environmental regulations could lead to domestic businesses shutting down.

Professor Moon Cheol-woo of Sungkyunkwan University Business School attended the "Joint Seminar of the Business Community for Rational Sustainability Disclosure" held last September at the Press Center in Jung-gu, Seoul, and gave a presentation on the topic "What is the Problem with Sustainability Disclosure Standards?" Photo by Kang Jin-hyung aymsdream@

The Korea Sustainability Standards Board under the Korean Accounting Standards Board announced a draft of domestic sustainability disclosure standards last April. After collecting opinions, the final standards will be confirmed soon. The industry is concerned that these standards might inadvertently function as regulations. On this day, major member companies' ESG committee members held a closed meeting and then invited Lee Han-sang, President of the Korean Accounting Standards Board, to discuss the upcoming disclosure standards.

Chairman Son mentioned that environmental regulations are facing setbacks worldwide. He said, "The European Union (EU)'s sustainability reporting directive was supposed to be legislated by all EU member states by last July, but currently, only 13 countries have completed it, which is less than half," adding, "The EU Commission has sent warning letters to lagging member states, but countries with a high proportion of advanced technology and manufacturing, such as Germany, Spain, and Poland, are expected to take quite a long time to legislate."

The EU's Carbon Border Adjustment Mechanism (CBAM) is also facing opposition from major trading partners such as Russia, India, and China. While the Biden administration in the United States is taking a cautious stance, there are forecasts that the Trump administration could strengthen its response measures. Chairman Son said, "It is necessary to closely monitor the situation with a long-term perspective."

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The industry is concerned about the disclosure of greenhouse gas emissions within the supply chain (Scope 3). Manufacturing has a complex supply chain with multiple stages and partners, and small and medium-sized partners lack the capacity to respond. There is also criticism that if the 'additional disclosure items for policy objective achievement' presented in Standard No. 101 are included in the final draft, companies might feel burdened by domestic listing requirements.

Lee Dong-geun, Vice Chairman of the Korea Employers Federation, said, "It is a priority to present a utilization guide containing specific detailed standards and methods and to sufficiently verify them in the field." President Lee Han-sang said, "We will devise support measures to enhance the disclosure compliance capacity of domestic companies."

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