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Evening ESG news and briefings to wrap up your day.
The pandemic that swept across the globe accustomed office workers to remote work—performing their jobs from locations other than the office. However, as more companies like Amazon, Meta, and IBM have brought all employees back to the office following the end of the pandemic, debate has intensified over whether remote work benefits a company's long-term ESG strategy. According to Forbes, as of 2023, 12.7% of full-time employees work remotely, while 28.2% utilize a hybrid model that combines both office and remote work. Analysis from video conferencing technology company Owl Labs also indicates that 16% of companies globally operate entirely remotely without a physical office. Freelance platform Upwork has even predicted that if the current trend actively encouraging remote work continues, approximately 32.6 million Americans—22% of the entire U.S. workforce—will choose remote work by 2025.[Future of Remote Work Report 2020 ⓒUpwork]Fewer Commutes, Smaller Carbon FootprintDuring the pandemic period when remote work was actively encouraged, positive assessments emerged that it supported corporate ESG strategies. From an environmental perspective, remote work can reduce a company's carbon footprint by cutting down on time spent commuting via car or public transportation, as well as reducing the fixed office space required. According to Spain's Institute of Environmental Science and Technology, remote work can reduce nitrogen dioxide—a major air pollutant emitted by transportation—by approximately 10%. Between 2020 and 2022, numerous San Francisco-based IT companies reportedly transitioned to remote work or downsized their operations and relocated offices. As a result, San Francisco's office vacancy rate surged to 34% in the third quarter of last year.[San Francisco Office Vacancy Rate Graph ⓒCBRE Research]There are also benefits from social and governance perspectives. 35% of remote workers reported improved productivity, while 71% indicated that remote work helps maintain work-life balance. Moreover, the ability to work without being physically gathered in one location broadens recruitment diversity and can increase organizational inclusivity and flexibility. Hiring employees from various regions also expands the talent pool and increases the potential to provide more jobs. Tom Wilson, CEO of U.S. insurance company Allstate, stated that after adopting remote work, Allstate saw a 30% increase in hiring diversity. The U.S. Department of Labor also noted that compared to February 2020 when the pandemic began, the number of employed workers with disabilities nationwide increased by approximately 28%, reaching about 1.8 million, as commuting became unnecessary.Hidden Carbon Emissions from Remote WorkOn the other hand, there is criticism that many ESG values have been lost with the introduction of remote work. This is because individual employees cannot consider their own environmental impact, making it impossible for companies to manage pollution levels in an integrated manner. Harvard Business Review raised the possibility that while commuting to a fixed office allows measurement and management of carbon emissions based on consistent travel distances, remote work makes it difficult to manage the pollution levels generated by individuals moving between workspaces or producing waste, potentially resulting in higher overall environmental pollution. Opinions also point to risks in the social and governance dimensions. With communication taking place remotely, there has been an increase in isolated employees feeling a lack of belonging and experiencing loneliness. Burnout resulting from conducting work solely through video conferences and messaging apps has also been cited as a downside of remote work. Additionally, alongside analysis linking a 238% increase in cyberattacks during the pandemic to remote work, management has expressed concerns about security risks arising when information is exchanged outside internal networks.Companies Pursuing Hybrid Work to Reduce Direct and Indirect Carbon EmissionsOwl Labs' "2023 State of Hybrid Work Report" analyzed that 54% of companies still require fully on-site work. As more companies adopt hybrid work or mandate in-office attendance, discussions on how closely work models and ESG strategies interact are expected to become even more active. The EU's recently expanded Sustainable Finance Disclosure Regulation (SFDR) now includes both direct and indirect emission sources in carbon footprint calculations for companies. Going forward, companies based in or operating within the EU market will need to calculate both direct and indirect carbon emissions according to their work models and focus on reducing their total carbon footprint. The CEO and CTO of UK office management software company Kadence, together with a Vice President at real estate firm CBRE, published the "Hybrid Manifesto for Sustainability." Through this manifesto, they expressed their ambition to find ways to achieve ESG strategy without being tied to a single fixed office, by combining both remote work and commuting. Just like the goals of the companies joining this manifesto, businesses of the future are expected to focus more on creating work environments that can simultaneously achieve improved work efficiency and the pursuit of ESG values, rather than maintaining traditional work systems.by Editor N
The term 'greenwashing' has been used since the 1980s with the same meaning it holds today. Now, with the expansion of ESG, greenwashing is once again drawing attention. Greenwashing refers to the practice of making a product or service appear environmentally friendly through advertising, promotion, or packaging when it has little to no actual environmental benefit. It also includes communicating corporate strategies or activities as purely environmental initiatives when their true purpose is closer to profit generation.Why Companies GreenwashIt is not difficult to imagine why companies engage in greenwashing. They seek to gain favor from customers and society, increase investment from shareholders and institutions, and reduce government sanctions. Of course, there may also be genuine corporate concern for the environment and future generations. However, when communicating these "intentions" and "outcomes" to consumers, careful attention is essential.Regulatory Crackdown on Greenwashing BeginsAs corporate sustainability communications, particularly those centered on the environment, have increased, regulations against greenwashing have also strengthened worldwide. In the UK, the Advertising Standards Authority (ASA) has identified and banned over 20 cases of greenwashing advertisements since 2022. The issue lay in specific words or expressions used in advertising and promotional copy.For example, in June 2022, German airline Lufthansa released a digital poster featuring the slogan "Connecting the World. Protecting its Future." as part of its #MakeChangeFly campaign promoting environmental efforts. This slogan—meaning to connect the world and protect its future—is the type of expression one might have encountered somewhere before, even outside of Lufthansa's advertising. Nevertheless, the ASA raised concerns that the slogan could "give consumers a misleading impression of Lufthansa's environmental impact." In particular, the phrase "Protecting its Future" was seen as an "absolute promise" regarding the environment. Lufthansa countered that the poster was clearly linked to website content detailing the airline's efforts in carbon emission mitigation and waste reduction. They also added that if the first part of the phrase—"Connecting the World"—was not viewed as an absolute promise, then treating only the second part—"Protecting its Future"—as an absolute promise represented an inconsistent standard.However, the UK's CAP Code requires a high level of substantiation for environmental claims such as "protecting the environment." Ultimately, the ASA ruled that the advertisement could not be displayed in the UK because Lufthansa's environmental targets would take years or even decades to verify, and considering the aviation industry as a whole—which has a significant impact on climate change—there existed no plan or commercially viable technology sufficient to say they are protecting the environment.[Lufthansa #MakeChangeFly Campaign Poster ⓒ lufthansagroup]South Korea Also Establishes Advertising Guidelines to Combat GreenwashingThe South Korean government has also created greenwashing prevention guidelines for domestic companies. On October 31, the Ministry of Environment, together with the Korea Environmental Industry & Technology Institute (KEITI), published the "Guidelines for Labeling and Advertising of Eco-Friendly Management Activities." Based on the principles of truthfulness in labeling and advertising, clarity of expression, specificity of subject, and completeness of information, the guidelines categorize corporate environmental activities into eight types and provide case studies and self-assessment checklists for each.Sanctions against greenwashing ask companies to reflect on whether they have repeated exaggerations and falsehoods, not only to consumers but to themselves. As social concern over the climate crisis grows, companies have faced pressure to act immediately. However, messages that deceive consumers and society cannot be allowed to continue indefinitely. While it may be difficult to change the inertia shaped by circumstances overnight, the time has come to communicate objectively and based on substance.by Editor N
Of course, ESG may not be the single most critical topic in the 2024 US presidential election. However, ESG remains a hot potato over which the Democratic and Republican parties hold starkly contrasting views. Depending on who becomes president and which party leads Congress, the way the US responds to the climate crisis and the fate of clean energy policies will inevitably shift. Republican PositionRepublican politicians express negative views on ESG, claiming that it is 'merely weaponizing financial strategy to promote progressive political goals.' They argue that those responsible for managing American finances are prioritizing ideological goals over financial returns, potentially violating fiduciary duties.Florida Governor Ronald Dion DeSantis, a prominent Republican primary candidate, claimed that 'ESG prioritizes liberal goals over investor returns, causing financial harm to American companies and the economy.' Former US President Donald Trump, another leading Republican candidate, also fiercely opposes ESG policies against the Biden administration. Trump even produced campaign videos attacking ESG investing, stating that Wall Street banks and employers are utilizing 'radical left garbage' for retirement pension investments.Biden Administration PositionOn the other hand, the Biden administration passed the 'Inflation Reduction Act (IRA)' in 2022, driving vitality into the renewable energy industry and so-called 'clean industries.' Last March, Biden exercised his veto against anti-ESG legislation that aimed to prevent pension funds from considering ESG factors during investment. This bill was led by Republicans, holding symbolic significance as the first veto exercised during President Biden's term.The Fundamental Cause of Conflict: 'Shareholder Capitalism vs. Stakeholder Capitalism'The conflict surrounding ESG can also be viewed as a clash between shareholder capitalism, where companies only need to focus on shareholder profit, and stakeholder capitalism, where companies must also consider the interests of stakeholders. Larry Fink, CEO of BlackRock who sparked the momentum around ESG, explained that "stakeholder capitalism is not a social or political ideology; it is capitalism driven by mutual interests among a company and its employees, customers, suppliers, and communities who form the foundation of its growth." However, the opposing camp maintains that stakeholder capitalism ruins the free market and politicizes capital allocation.Corporate PerspectivesWhat about companies that are practically required to conduct ESG-based management and disclose related information? According to a survey released by Bloomberg, European companies perceive ESG as an opportunity (56%) rather than a risk (13%), whereas US companies view ESG more as a risk (34%) than an opportunity (30%). While the global average stands at 25% risk and 40% opportunity, US corporate perceptions of ESG remain sharply divided between pros and cons.Whether ESG's position in the US—currently rising as a major political agenda—can expand will be decided by American voters in November 2024.by Editor N
ESG international disclosure standard proposals were announced this year by the International Sustainability Standards Board (ISSB) under the International Financial Reporting Standards (IFRS). The exact title is ‘IFRS Sustainability Disclosure Standards.’ Established at the 26th UN Climate Change Conference (COP26) held in Glasgow, UK in 2021, ISSB has been working to establish sustainability disclosure standards. As ESG-conscious management and investment have gained importance, information disclosure criteria proposed by organizations such as the Global Reporting Initiative (GRI) and the Task Force on Climate-Related Financial Disclosures (TCFD) have attracted attention. The ISSB stated that it established the standard based on these existing mixed frameworks. Notably, it stands out that the TCFD recommendations, which companies were already using, were fully integrated and unified into the standard. Why are efforts being made around the world to create sustainability disclosure standards? First, it is necessary to examine why companies disclose information.Why Do Companies Disclose Information?Disclosure is a system that regularly or occasionally reveals information such as a company's operational performance, financial condition, and governance, allowing stakeholders such as employees, shareholders, creditors, and general investors to accurately understand the reality of the enterprise. The types and scope of information to be disclosed are defined under the 'Capital Markets Act'. Ultimately, it is a protective system established institutionally by the state so that members of society can support and invest in companies based on accurate judgments. However, while traditional disclosure focused on the financial performance of corporate activities, 'ESG disclosure' requires companies to reveal metrics showing their impact on the environment and society leading up to those financial outcomes. The ESG disclosure standard aims to standardize the indicators used in this process. Of course, these indicators will only shine if they are effectively put into practice.Must the IFRS Sustainability Disclosure Standards Be Followed?Not necessarily. Standards are just standards, and actual adoption and implementation are decided independently by each country. Therefore, ISSB formulated the disclosure standards with 'inter-operability' in mind. This means they made effort to align as closely as possible with existing disclosure systems established or used by major countries. On July 31, the EU officially adopted the European Sustainability Reporting Standards (ESRS), which are 'aligned at a very high level' with ISSB disclosure standards, and will apply them to EU-listed companies and companies with over 500 employees starting January 1, 2024. The U.S. Securities and Exchange Commission (SEC) is also scheduled to finalize its climate disclosure standards by April 2024.When Will South Korea Adopt It?Relatively late. For all companies listed on the KOSPI market, full adoption begins in 2030. Large corporations were initially scheduled to start mandatory disclosure earlier in 2025, but this was delayed by one year at the request of industry, postponing it to 2026. Consequently, opinions exist that South Korea is lagging behind other developed nations. As explained earlier, disclosure systems exist to help stakeholders make informed decisions. We need to reflect on whether disclosure systems should be considered primarily around stakeholders or around companies.by Editor N
The intense focus gathered on ESG, which originally started with 'BlackRock', the world's largest asset manager, may now fade away due to BlackRock itself. Larry Fink, CEO of BlackRock, announced that he will completely stop using the term ESG. In his 2020 annual letter to investors, Larry Fink included a commitment to make environmental sustainability a core goal when making investment decisions. He also stated that BlackRock would no longer invest in companies with 'high risk' to the environment, including coal producers. Afterwards, business executives, legal professionals, professors, and other management and investment experts agreed that ESG was not a temporary trend, but a massive wave of global change. Indeed, numerous companies worldwide joined the ESG momentum, and even the International Financial Reporting Standards (IFRS) moved to standardize indicators showing ESG performance alongside financial results.So Why?Why did the CEO of BlackRock, who moved the world with a single letter, suddenly declare that he would stop using the term ESG? In fact, public opinion regarding ESG within the United States, where BlackRock is headquartered, has not been entirely positive. In the US, where companies do not hesitate to show political leanings and where lobbying is legal, ESG became a political issue. Which Political Camp Opposed ESG?It was the Republican Party. Fossil fuel companies provide substantial funding to the Republicans. US corporations can engage in lobbying under the guise of donations to shift policy in their favor—or to prevent unwanted policy shifts. While the Democratic Party also receives lobbying funds, the difference in scale is significant. In 2020, during the 46th US presidential election, the Republican Party received $63.7 million (approx. 85 billion KRW) from fossil fuel companies. In the same year, lobbying funds received by the Democratic Party from fossil fuel companies amounted to around $12.3 million (approx. 16 billion KRW). Current Status of Lobbying Expenditures by US Oil & Gas Companies by Political Party (Unit: USD Millions)ⓒStatisticsFollowing his announcements on ESG, BlackRock and Larry Fink became targets of political attacks from the Republican Party. Larry Fink confessed that Republican attacks went beyond criticism of business decisions into personal attacks and threats. He eventually declared that he would no longer mention the overly politicized term ESG. However, he explained that dropping the term ESG does not mean stopping ESG investments, leaving open the room by stating, “We will continue to communicate with companies working to address issues related to the environment and corporate governance.” What Lies Ahead?It is highly likely that we won't see Larry Fink mention ESG again. Regardless of the outcome, however, it is true that his annual letter encouraged reflection from many companies and pushed them to care more about social responsibility. Attention is now focused on whether companies that actively supported ESG values and joined their voices will continue to uphold those values moving forward.by Editor N