ESG Management: All Talk, No Action?... Committees Meet Only Four Times a Year

ESG Happy Economy Research Institute Analysis
Only Seven More Listed Companies Disclose Information Compared to Last Year
Companies Appointing Outside Directors with ESG Expertise Remain at 7%

The growth in ESG (Environmental, Social Responsibility, and Corporate Governance Improvement) disclosures among major domestic companies has slowed. The average number of ESG committee meetings remains at around four per year,and most of the agenda items are simple reports, leading to criticism that these efforts are largely superficial or merely for show.

According to the ESG Happy Economy Research Institute’s report, "Analysis and Implications of Sustainability Reports by the Top 250 Domestic Companies by Market Capitalization," released on August 5, the situation is as follows. As of the end of July, 190 companies (170 listed on the KOSPI and 20 on the KOSDAQ), representing 76% of the top 250 companies by market capitalization, had published sustainability reports. This is an increase of only 7 companies (2.8%) compared to the previous year’s 183 companies.

This slowdown is also evident in ESG statistics from the Korea Exchange. The number of KOSPI-listed companies publishing sustainability reports increased significantly each year: from 38 in 2020, to 78 in 2021, 131 in 2022, 162 in 2023, and 204 in 2024. However, as of the end of July this year, only 202 companies had published such reports.

The report stated, "The sharp increase seen in previous years has not continued," and analyzed that, despite the finalization of the three major global ESG disclosure standards (ISSB, ESRS, SEC Climate Disclosure Rule), the slowdown is due to several independent factors: ▲the absence of a mandatory domestic disclosure system, ▲the cost and personnel burden associated with preparing and verifying reports, and ▲the limited increase in new issuers as major conglomerates have already completed proactive disclosures.

According to the report, by industry, the construction and shipbuilding, financial holding, insurance, entertainment and professional services, and auto parts sectors all achieved a 100% disclosure rate. In contrast, IT and semiconductors (69.6%), steel and machinery (66.7%), non-financial holding companies (55.6%), and pharmaceuticals and bio (54.5%) all fell below the average disclosure rate of 76.0%.

There was also criticism that the operation of ESG committees by companies is somewhat formalistic. Of the 250 companies surveyed, 187 had established ESG committees under their boards of directors or within their organizations, but these committees held an average of only 3.8 meetings per year.Most of the agenda items were simple "reports" rather than "deliberations" or "resolutions." The report pointed out, "This suggests that ESG committees are still being operated in a formal manner rather than serving as strategic decision-making bodies for sustainable management."

Both expertise and performance systems related to ESG also remained insufficient. Only 18 companies (7.2%) out of 250 had appointed outside directors with expertise in ESG, and only 32 companies (12.8%) had introduced incentive systems linking ESG performance to executive compensation. The report noted, "Although companies are presenting ESG as a core pillar of their management strategy, it is not being sufficiently reflected in actual board operations or personnel policies."

However, in terms of governance (G), the expansion of female executives was evaluated as a positive development. Among the top 250 companies by market capitalization, 183 companies (73.2%) had appointed female registered directors. Current capital market law prohibits listed companies with assets of 2 trillion won or more from having boards composed of a single gender and requires the appointment of at least one female registered executive.

The report emphasized, "ESG management is no longer a choice but an essential strategy for corporate survival and growth," and added, "Companies should avoid formalistic or declarative disclosures and strengthen their strategic response by integrating and aligning ESG disclosures with existing management strategies, moving beyond mere regulatory compliance."

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