Editorials
Don't overburden businesses with ESG disclosures
As Korea moves to mandate environmental, social and governance (ESG) disclosures, critics warn the rules may outpace corporate governance reforms and companies' ability to comply.
The headquarters of SK hynix
BLOOMBERG
The biggest topic in Korea’s investment community on Wednesday was a formal shareholder letter that Heungkuk Asset Management sent to SK hynix’s board. The asset manager criticized the decision-making process behind the massive investment plan announced late last month by SK Group Chairman Chey Tae-won and the government. According to the letter, announcing such a major investment before obtaining formal board approval falls short of the global standard of board-centered corporate governance.
The criticism is difficult to dismiss. Although Chey effectively controls SK Group, he is not a registered executive or board member of SK hynix. Rather, he is the largest shareholder of SK Inc., which in turn is the largest shareholder of SK Square, the controlling shareholder of SK hynix.
Likewise, Samsung Electronics Executive Chairman Lee Jae-yong, who also announced a large-scale investment plan, serves as the designated head of Samsung Group under the Monopoly Regulation and Fair Trade Act but is not a member of Samsung Electronics’ board. If Korea’s leading companies are governed this way, it is only natural that questions about corporate governance continue to be raised.
Environmental, social and governance (ESG) management has already become a global standard. ESG disclosures, including greenhouse gas emissions, are now an important benchmark for international institutional investors. The government and the ruling Democratic Party unveiled their final plan to institutionalize ESG disclosure requirements this week, with the goal of strengthening confidence in Korea’s capital markets. Beginning in 2028, Kospi-listed companies with assets exceeding 10 trillion won ($6.6 billion) will be required to disclose ESG information.
Even so, critics argue that the proposal imposes excessive regulation without adequately reflecting current business realities. Compared to the draft released in February, the scope of mandatory disclosure has expanded.
The government plans to introduce a three-year temporary safe harbor, but it remains uncertain whether that will be enough. Basic infrastructure needed to ensure reliable disclosures, including accurate greenhouse gas accounting and verification of suppliers’ data, remains insufficient. Meanwhile, the European Union has begun scaling back mandatory disclosure requirements, and the United States has paused implementation of its own rules.
The purpose of ESG disclosure is commendable. As Korea’s six major business organizations have argued, however, regulation must also take account of companies’ ability to comply. Businesses are already being asked to shoulder major investment commitments for balanced regional development while facing labor policies, including the “Yellow Envelope” act, that many view as increasingly burdensome. ESG disclosure should strengthen market credibility, not become another obstacle to corporate competitiveness.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
