[비즈한국] South Korea’s ESG disclosure roadmap has been finalized. The core of the plan involves expanding the number of companies subject to disclosure compared to the initial draft presented by the Financial Services Commission (FSC) last February, and transitioning immediately to statutory disclosure to ensure higher reliability. While the financial investment industry and civil society are welcoming the strengthened standards, they are expressing concerns over provisions such as a three-year deferral for Scope 3 emissions reporting.
The government and the ruling party officially announced the "Final Plan for Institutionalizing Sustainability (ESG) Disclosure" on July 8 following a consultative meeting. This final plan contains forward-looking content that significantly strengthens the binding force and scope of the system compared to the draft released by the FSC last February.
The biggest change is the complete abandonment of the initially proposed "stepped detour" of starting with stock exchange disclosure before transitioning to statutory disclosure. Instead, the plan now moves directly to mandatory statutory disclosure, integrating it into business reports under the Capital Markets Act starting from the first year, 2028 (2027 fiscal year). Furthermore, as it will be implemented immediately as a statutory disclosure, third-party assurance will become mandatory starting in 2030, two years after the disclosure system goes into effect, to ensure the reliability of the information.
Along with this, the threshold for mandatory disclosure companies has been lowered from 30 trillion won in consolidated total assets to 10 trillion won, thereby expanding the number of subject companies. However, Scope 3 disclosure, which refers to greenhouse gas emissions throughout the supply chain, will be deferred by three years for each group to allow for the construction of calculation infrastructure; for companies with 10 trillion won or more in total assets, this will begin in 2031.
"Welcoming" Immediate Statutory Disclosure and Expansion of Target Companies
The financial investment industry and civil society highly evaluated the immediate transition to statutory disclosure. The initial draft had suggested a two-stage plan to begin the system with stock exchange disclosures and transition to statutory disclosures after a certain period, considering the burden on companies. However, the final plan completely scrapped this and agreed to implement it immediately as a business report disclosure under the Capital Markets Act starting in 2028 (2027 fiscal year). The intention is to secure timeliness and utility as investment information by aligning the disclosure channels and timing of sustainability information with the financial statements submitted every March.
Choi Yong-hwan, Head of the ESG Research Team at NH-Amundi Asset Management, assessed, "Stock exchange disclosure lacks reliability and effectiveness, and companies only perceive it as a cost." He added, "It is fortunate that the situation, which could have led to unnecessary social sunk costs, was corrected normally."
Statutory disclosure imposes a stronger sense of responsibility on companies than exchange disclosure because it entails legal penalties and administrative sanctions if the disclosed content contains serious errors or false information. Lee Jong-oh, Director of the Korea Sustainability Investing Forum (KoSIF), noted the significance of the immediate introduction of statutory disclosure: "Statutory disclosure is part of the business report, which is published every March before the annual general meeting and evaluated by investors. Since it is common sense that legal penalties follow when problems arise, companies will look at figures and problematic content more carefully when moving to statutory disclosure compared to stock exchange disclosure."
To reduce the burden on companies following the statutory disclosure, the government has decided to provide a "safe harbor," exempting companies from civil liability, administrative sanctions, and criminal penalties under the Capital Markets Act for all disclosure information, excluding intentional greenwashing, for the first three years of the system's introduction. Additionally, considering the domestic industrial environment where the manufacturing sector holds a high share, items such as internal carbon pricing per ton or industry-specific indicators have been classified as voluntary disclosures rather than mandatory, giving companies some breathing room.
The significant reduction in the asset size threshold for companies subject to disclosure from the draft’s 30 trillion won to 10 trillion won is also considered a progressive achievement of this final plan. The government plans to expand the target to companies with 5 trillion won or more in assets—the threshold for large enterprises—in 2029, starting with KOSPI-listed companies with assets of 10 trillion won or more in 2028.
A phased roadmap has also been finalized to review further expansion to companies with 2 trillion won or more in assets in 2030, after precisely evaluating the implementation status of disclosures in 2028-2029. Based on current standards, the number of companies included in the disclosure scope is expected to reach 291 in 2028 and 3,171 in 2029, including subsidiaries.
With the asset threshold lowered to 10 trillion won, the scope of disclosure perceived by the market has clearly widened. Cho Dae-hyun, Korea Team Lead at the Asia Investor Group on Climate Change (AIGCC), analyzed, "Expanding to 10 trillion won is a clear positive signal. Under the 30 trillion won criteria, only about half of the constituents of the MSCI Korea Index were included, but as it is lowered to 10 trillion won, I estimate that about three-quarters will be covered."
He also explained, "For global investors, Korea is one of many investable markets, and the comparison target is companies in other countries. The fact that the scope is widened in this way is significant in that South Korean companies will be placed on the same level as overseas companies in terms of providing information."
- Scope 3
- Corporate greenhouse gas emissions are categorized into scopes 1, 2, and 3. Scope 1 is direct emissions from the company, like those from factory chimneys. Scope 2 is emissions from the electricity and heat purchased and used by the company. Scope 3 covers everything outside of that—namely, the entire supply chain, including emissions from suppliers, logistics, and the consumer's use and disposal of products. Because the scope is broad, it is difficult to calculate, but since Scope 3 usually accounts for most of a company's total emissions, the company's true carbon footprint cannot be known without it.
- Safe Harbor
- A protection mechanism that exempts one from punishment or lawsuits if certain conditions are met. In this proposal, it means there will be no penalties for the first three years after the system's introduction, provided there is no intentional greenwashing.
- Transition Finance/Green Finance
- Green finance is funding businesses that are already eco-friendly, such as renewable energy. Transition finance is funding that supports industries that emit high levels of carbon, such as steel and chemicals, as they transition to low-carbon operations.
- Internal Carbon Pricing
- The price per ton of carbon set by a company itself. It is an internal standard used when making investment decisions, assuming that "this project will cost this much more because it emits a lot of carbon."
Deferred 'Scope 3' emissions account for 75% of corporate and 99% of financial institution emissions
Despite the overall trend of strengthening the system, the three-year deferral policy for Scope 3 disclosure—which represents greenhouse gas emissions across the entire supply chain—was maintained as per the draft. Consequently, large companies with 10 trillion won or more in assets, the first group subject to disclosure in 2028, will begin disclosing Scope 3 data three years later in 2031; companies to be added later with 5 trillion won will do so in 2032, and companies with 2 trillion won in 2033.
Regarding this deferral decision, the investment industry and civil society are expressing regret, noting that key data essential for fully assessing climate risk will remain absent for a long period. This is because Scope 3 is a critical indicator for verifying a company's actual climate risk and the sincerity of its green transition plan. Scope 3 emissions are known to account for approximately 75% of a typical company's total carbon emissions, and up to 99% for financial institutions.
Jung Young-ju, a researcher at the Green Transition Institute's Economic Transition Team, said, "If third-party assurance only begins in 2030, two years after mandatory disclosure, and a comprehensive exemption is applied for the initial three years, information without verified responsibility will accumulate in the market first. If you add the deferral of Scope 3 disclosure, there is a concern that the point when 'verified, complete' climate information that investors can actually trust and use appears in the market will be pushed back to the mid-2030s, long after the system is implemented."
There is also a strong voice of concern regarding the loss of investment opportunities and weakened international competitiveness. Cho Dae-hyun also pointed out, "In sectors where Scope 3 accounts for a large portion of total emissions, such as steel, chemicals, and transportation, the reliability of a transition plan cannot be verified with Scope 1 and 2 alone. It is regrettable that this data remains a blank space until 2031, as it exactly overlaps with the period when the strengthened 2035 NDC implementation and transition finance execution are most concentrated."
As a complementary measure, Cho suggested, "It could be helpful to mandate Scope 3 disclosure first for companies seeking to utilize transition finance or green finance, or to accelerate the Scope 3 calculation guidelines for each export industry that the government has promised to prepare by 2028."
The government and the ruling party have agreed to swiftly propose an amendment to the Capital Markets Act within July based on the finalized plan. Financial Services Commission Chairman Lee Eog-won stated, "As the direction and goals have become clear with the announcement of the disclosure roadmap, we will proceed with measures to implement the roadmap, such as revising the Capital Markets Act, with speed. We will also prepare comprehensive support measures in cooperation with relevant ministries to enable reliable disclosure."