Experts Welcome ESG Disclosure Introduction... Call for Faster Transition to Statutory Disclosure

Sustainability Disclosure Roadmap Seminar
Differing Opinions on the Three-Year Scope 3 Grace Period

As the financial authorities have released the ESG (Environmental, Social, and Governance) disclosure roadmap, experts from various fields have welcomed the long-awaited adoption plan, which had been stalled for years. However, they pointed out that to ensure legal protection when using estimates and to improve the quality of disclosures, the transition to statutory disclosure needs to accelerate.

On the morning of March 4, Assemblyman Sanghyuk Park from the Democratic Party of Korea and the Seoul National University Environmental Energy Law Policy Center held a seminar titled "Sustainability Disclosure Roadmap, Improvement Plans for Korea Premium and International Consistency" at the National Assembly Members' Office Building in Yeouido, Seoul.

On the morning of the 4th, Representative Sanghyuk Park of the Democratic Party of Korea and the Seoul National University Center for Environmental Energy Law and Policy held a seminar titled "Sustainability Disclosure Roadmap: Improvement Measures for Korea Premium and International Compatibility" at the National Assembly Members' Office Building in Yeouido, Seoul. Photo by Seungwook Park

On February 25, the Financial Services Commission announced a plan to institutionalize ESG disclosure, making it mandatory from 2028 for KOSPI-listed companies with total consolidated assets of at least 30 trillion won. The plan also includes a three-year grace period for applying 'Scope 3' (total value chain emissions), which imposes a significant burden on companies.

"The ESG Disclosure Roadmap, Absent for Years, Has Finally Arrived"

On this day, experts unanimously agreed on the necessity of introducing ESG disclosure. Junghwan Hwang, Head of the Sustainability Disclosure Advisory Center at Kim & Chang, said, "The mere announcement of the roadmap is meaningful in that it eliminates uncertainty in the market. Over the past four years, delays in releasing the roadmap have caused fatigue in the market, so now it is crucial to find a compromise and implement the roadmap."

Minkyung Lee, Professor at Sungshin Women's University School of Law, also stated, "Advancing ESG disclosure legislation through the roadmap aligns with international standards. Not only financial information but also non-financial elements such as climate and environment influence investment decisions, and overseas, there has been long-term preparation for ESG disclosure legislation."

"Accelerate the Transition from Exchange Disclosure to Statutory Disclosure"

However, experts emphasized that the transition to statutory disclosure should occur more quickly to ensure legal protection. The ESG disclosure institutionalization plan states that the disclosure channel will initially operate through exchange disclosure, but will transition to statutory disclosure after the system is established. It also allows exemptions for predictive disclosures.

Woonghee Lee, Standing Commissioner of the Korea Accounting Standards Board, said, "From the perspective of legal protection, we must move toward statutory disclosure. Unlike exchange disclosures, which are not legislated, statutory disclosures under the Capital Markets Act must include exemption clauses to resolve issues of civil and criminal liability."

Yoonjae Jeon, Head of ESG Strategy at KB Financial Group, also stressed the need for statutory disclosure, stating, "Because climate disclosures involve scenario analysis and other estimates about the future, civil and criminal liability issues may arise, so exemption clauses are necessary for companies to actively participate in disclosure."

There are also concerns that exchange disclosure may reduce the quality of disclosures. Yonghwan Choi, Head of ESG Research at NH-Amundi Asset Management, pointed out, "If the channel is operated through exchange disclosure, the disclosure content is likely to become a checkbox exercise. Instead of providing information that investors can understand and accept, disclosures could become a simple matter of checking yes or no, leading to diminished disclosure capabilities."

Daewoong Lim, CEO of BNZ Partners, added, "The emergence of a billionaire like Elon Musk was made possible by a variety of stories, from eco-friendly cars addressing climate issues to the migration to Mars. From an investor's perspective, these stories must be seen, but if the ESG disclosure channel is limited to exchange disclosure, it will be difficult to capture such narratives."

Diverging Views on the Scope 3 Grace Period

Opinions were divided over the three-year grace period for Scope 3. Hoontae Kim, Head of the ESG Office at POSCO Holdings, explained, "Scope 3 is fundamentally different from Scope 1 (direct emissions) and Scope 2 (indirect emissions such as energy consumption), so companies need more time to adapt. Even at POSCO, in some subsidiaries, emissions account for most of the total, and there are still risks when not all are calculated accurately on a consolidated basis."

On the other hand, Hwang, Head of the Center, questioned the effectiveness of the Scope 3 grace period, stating, "In reality, companies will voluntarily report Scope 3 in sustainability management reports, but for investors, the absence of mandatory disclosure could only add to the confusion."

There was also a request to provide incentives for companies that excel in ESG disclosure. Insik Yoo, Department Head at IBK Industrial Bank of Korea, suggested, "Although Scope 3 has been deferred, the sooner it is implemented, the better. If the government prepares incentives, companies will also participate more actively."

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