In early July, the government and ruling party announced a plan for the "institutionalization of sustainability disclosure." This final proposal followed consultations with financial institutions, investors, businesses, and economic organizations after an initial draft was released in February.
The initial draft suggested that the regulation would apply to KOSPI-listed companies with consolidated assets exceeding 30 trillion won in the first year, but the scope was significantly expanded to include companies with consolidated assets of 10 trillion won or more. Additionally, the method of disclosure was strengthened, shifting from a requirement for announcements through the stock exchange to mandatory disclosures under the Capital Markets Act, which will now include legal disclosures. The government plans to prepare a revision of the Capital Markets Act and finalize it within the year.
Companies required to disclose by 2028 will need to prepare for the 2027 fiscal year, leaving them with only about six months to get ready. KOSPI-listed companies with consolidated assets between 30 trillion and 10 trillion won will now have their first disclosures moved up from 2029 to 2028. Furthermore, as the disclosures will be legally mandated, administrative sanctions, damages, and criminal penalties under the Capital Markets Act will comprehensively apply to non-compliance. Although a three-year grace period is planned, the burden on companies subject to disclosure has significantly increased. In particular, strong measures will be taken against so-called "greenwashing," which is expected to greatly heighten corporate management risks.
The final proposal, which is more stringent than the initial draft, has put pressure on companies to prepare for sustainability disclosures quickly. While a three-year grace period and the postponement of third-party certification and Scope 3 requirements have been established, considering the current state of corporate readiness and the voluntary implementation of sustainability disclosures, companies that are currently subject to disclosure, as well as those expected to be included in the future, will face significant operational burdens.
Therefore, the government needs to adequately consider the circumstances of businesses during the revision of the Capital Markets Act and support companies by establishing systems and frameworks that encourage practical implementation, thereby contributing to enhancing global competitiveness and establishing a sound capital market.
Sustainability disclosure is not limited to providing information related to sustainability. With the mandatory nature of sustainability disclosures, companies' responsibilities and roles in aligning with global ESG (Environmental, Social, Governance) standards have been significantly strengthened. This reflects a necessary shift in management paradigms and the creation of a business environment that demands practical implementation, emphasizing corporate responsibilities in areas such as climate change response, human rights, and supply chain management, as well as the establishment of future-oriented governance systems.
Companies are now required to systematically identify climate, social, and governance risks and opportunities and incorporate them into their management strategies, investment plans, risk management, and financial reporting. This necessitates substantial improvements and innovations across all aspects of corporate management. To meet the global standards for environmental, social, and governance management systems, companies must pursue significant changes to their existing practices and establish data collection, management, and verification systems for current and future opportunities and risks, necessitating innovative improvements in ESG-related management systems.
The same applies to companies that are not subject to mandatory disclosure. With the implementation of mandatory disclosures both domestically and internationally, the demands from stakeholders, including financial institutions and institutional investors, for ESG management that meets global standards are expected to grow. As ESG capabilities emerge as a key factor in enhancing global competitiveness, companies not subject to mandatory disclosure must actively respond to changes in the business environment through ESG management, considering their size and the nature of their operations, to secure external competitiveness.
* This article has been translated by AI.
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