KLRI : KOREA LEGISLATION RESEARCH INSTITUTE

Ⅰ. Backgrounds and Purposes

▶ Need to review the possibility of using K-ESG guideline

○At the present time when both positive expectations and negative concerns about the K-ESG guideline coexist, it is necessary to analyze the results through the application of the K-ESG guideline and review the appropriateness of the guideline and indicators, along with fundamental discussions on the need for guideline that meets international standards and are applicable to domestic companies. 

 

Ⅱ. Major Content 

▶ Overview and Analysis of K-ESG Guideline

○The K-ESG Guideline is characterized by setting the disclosure (P) area for the form, content, and verification of ESG information disclosure.

-  Companies are awarded points by classifying the stages for each item, such as whether or not to disclose information, the frequency and scope of information disclosure, and the disclosure of materiality evaluation results.

○ In the environment (E) area, except for the establishment of environmental management goals and the environmental management promotion system, evaluation items are generally composed of the use of resources and energy, the rate of reuse and recycling, and the emission of greenhouse gases, pollutants and wastes.

- It is necessary to develop it into a practical evaluation in connection with the current system, such as achieving goals according to the greenhouse gas target management system rather than simply limiting emissions and usage.

○ Social (S) area includes new recruitment, employment retention, education and training, welfare benefits, guarantee of freedom of association, ratio of women and disabled persons, industrial safety, human rights, shared growth with suppliers, contribution to the local community, protection of personal information, etc. It consists of a fairly wide range of evaluation items.

- A wide range of Social area can be an advantage in that the proportion to be considered in ESG management, but there is also a disadvantage that it is difficult to specify evaluation items.

○ The governance (G) area is composed of evaluation items to confirm the achievement of objectives such as the economy for management and controlling shareholders, enhancement of corporate management transparency, and protection of rights of minority shareholders.

▶ Application of K-ESG guideline and analysis of results

○ A credible data source that can be used for performance inspection using this guideline is needed.

- Disclosure on ESG has not yet been mandated. Sustainability reports, which companies self-published information-related data, are inevitably the clearest source of data, but they need to be equipped with an integrated basis such as national statistics and industry statistics stipulated by each law and regulation.

○ In ESG evaluation, it is necessary to distinguish between ‘common evaluation items’ that each organization can identify equally regardless of industry and ‘evaluation items by industry’ that can be identified more specifically for each industry.

○ Data sources include items for self-disclosure through the homepage, sustainability report, business report, other publications, and electronic disclosure system. In the current situation where ESG disclosure is not institutionalized, there are items that cannot be accessed with only the items listed.

○ There are the following problems in relation to the diagnostic items of the K-ESG guidelines: When the diagnostic items and the contents of the definition do not match; In case of inconsistency between the diagnosis definition and the additional description; When most of the check alternatives for the diagnostic items suggested in the further explanation of the guideline are not available; If additional explanations unrelated to the diagnostic items are described.

- In accordance with the purpose of the K-ESG Guideline, it is necessary to seek alternatives that enable actual inspections that do not undermine the purpose of performance inspections so that not only corporate users but also third-party evaluations and stake-holders can use them.

 

Ⅲ. Expected Effects

▶ Improved utilization of K-ESG guideline

○ In this study, the K-ESG guideline was analyzed, and the diagnosis items presented through the guidelines were analyzed for corporate E.S.G. By actually applying it to the evaluation, the appropriateness of the K-ESG guideline will be reviewed, and supplementary points will be discovered to increase the usability of the guidelines in the future.

○ While clarifying its intention to support the expansion of autonomous ESG management by providing core elements of ESG management, the government proposes follow-up plans to revise these guidelines every one to two years and additionally prepare guidelines for each industry and size. This study can provide implications for the preparation of this follow-up plan.