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Evening ESG news and briefings to wrap up your day.
On the 13th, the U.S. House of Representatives passed a bill banning "TikTok"—the Chinese short-form platform—citing national-security concerns based on personal-data leakage. It contained the requirement that TikTok's parent company, ByteDance, sell TikTok's U.S. business rights within 165 days, and that if the sale fails, the app must be pushed out so it cannot be downloaded from app stores. As this bill passed by agreement of the Democratic and Republican parties just 8 days after its introduction, along with the assessment that the U.S.-China conflict has spread online, it brought the personal-information-protection obligation from an ESG standpoint to the surface.The TikTok ban bill contained content that, citing national-security concerns, makes illegal the distribution, maintenance, and updating of the Chinese TikTok parent company ByteDance, as well as TikTok and its subsidiary apps. The U.S. government has continuously raised concerns that the data of U.S. TikTok users could be handed over to the Chinese government, and this past May, in the U.S. state of Montana, a bill that actually fully banned TikTok downloads and uploads passed. Former President Trump had announced an executive order banning TikTok use within the U.S., and President Biden banned TikTok downloads on official communication devices.[A TikTok banner celebrating reaching 150 million TikTok users in the U.S. ©TikTok]According to The Wall Street Journal (WSJ), the number of TikTok users in the U.S.—which was 150 million last year—recorded 170 million this year, so the scale of TikTok users in the U.S. has grown so large that more than half of the U.S. population can be seen as using it. The reason the U.S. government is trying to intervene so much in TikTok's method of handling personal information does not consist only of the U.S.-China conflict structure. Recently, as the personal-information-protection obligation among corporate social responsibilities has drawn attention, the fact that users' personal information must be managed safely and used only for its original purpose is being emphasized.Corporate personal-information protection—also called "data privacy"—is closely related to the ESG framework, and this TikTok bill issue is connected to the S (Society) sector among these—that is, to the content that a company, in obtaining personal information from users, must (1) seek explicit consent, (2) use it only for the specific purpose the user permitted, and (3) restrict who can access the information. The U.S. government is questioning TikTok's social responsibility, raising the suspicion that TikTok could share personal information with a third party, the Chinese government.Korea, too, is on a trend of emphasizing personal-information protection from an ESG standpoint. The Ministry of Science and ICT required the disclosure of information-protection status (hereafter the information-disclosure system) to be made mandatory for 603 companies in 2022. The information-disclosure system refers to a disclosure system that discloses companies' information-protection status for the purpose of service users' safe internet use and the activation of information-protection investment. Last year, the government also raised the fines it imposes on companies with poor disclosure. Foreign companies such as Google and Meta also have precedents of being fined for violating information-protection statutes in the past, so they are known to have actively taken part in the information-disclosure system, which was reorganized last year.With opinions that it violates the First Amendment, which stipulates freedom of expression, it is uncertain whether the TikTok ban bill will pass the Senate, but this measure by the U.S. House can be interpreted as a signal that TikTok is not sufficiently fulfilling corporate social responsibility. The TikTok ban bill is an opportunity to think once again about the corporate social responsibility of data privacy. by Editor N
On the 6th (local time), the U.S. Securities and Exchange Commission (SEC) voted to adopt a rule mandating corporate climate disclosure. A total of five commissioners took part in the vote, with three Democratic-leaning commissioners—including SEC Chair Gary Gensler—voting in favor, and two Republican-leaning commissioners voting against. The crux of the decision was determining the scope of corporate greenhouse gas emission disclosures, which are divided into Scope 1 through 3. The result landed in a middle ground that satisfied neither camp: companies will only be required to disclose Scope 1 and Scope 2 emissions, while Scope 3 emissions will not need to be disclosed. Scope 1 refers to greenhouse gases emitted directly by companies through the use of fuel to manufacture and sell products, while Scope 2 refers to greenhouse gases indirectly emitted through the use of electricity or thermal energy. Scope 3 refers to greenhouse gases emitted directly and indirectly across a company's supply chain. The mandate applies to large listed companies (market capitalization of $700 million or more) and medium-sized companies (market capitalization of $250 million or more), with disclosure required starting in 2026.[SEC Chair Gary Gensler explaining the climate disclosure proposal at a 2022 hearing ©Reuters]Environmental Groups Say "It's Not Enough"As soon as it was announced that Scope 3 would be excluded from the climate disclosure rule, U.S. environmental groups immediately launched criticism. They argue that the regulation has been excessively watered down and lacks any real effectiveness. In fact, Scope 3 accounts for approximately 70% of total greenhouse gas emissions for the majority of companies. However, the SEC accepted companies' arguments that identifying greenhouse gas emissions across their supply chains is too difficult. Companies appear to have made strong and persistent demands of the SEC. The SEC disclosed that since first announcing the climate disclosure regulation in March 2022, it received over 24,000 comment letters, which it took into consideration before finalizing the rule.Republicans Say "It's Overreach"Republicans argue that the climate disclosure rule itself is unjustified and that the SEC is overstepping its mandate and authority to engage in environmental activism. According to Reuters, ten states where Republicans hold the advantage—including Georgia, Alabama, and Alaska—have already filed lawsuits against the SEC. The U.S. Chamber of Commerce has also mentioned the possibility of pursuing legal action on the grounds that the rule imposes an excessive burden on companies. The Chamber of Commerce has previously filed a lawsuit challenging California's climate disclosure law, arguing that it exceeds the state government's authority.The SEC Says "Remember Roosevelt"In announcing the adoption of the climate disclosure rule, the SEC invoked the 32nd U.S. President, Franklin Roosevelt. The SEC was established under the Roosevelt administration. It was a measure to protect investors in response to the 1929 Wall Street crash, which triggered the Great Depression. The Wall Street crash was an event in which a bubble of indiscriminate investment—built on blind faith in the market—burst. During the process of establishing the SEC, President Roosevelt emphasized the "complete and truthful disclosure" of corporate information. By invoking Roosevelt's words as the climate disclosure rule was adopted, the SEC Chair was reminding everyone of the agency's founding principles.What Was the SEC's Role?The SEC's core intent in adopting this rule was not to protect the environment or corporations, but to protect investors. The SEC stated that the background for discussing the rule was investor demand for companies to disclose more transparent and reliable information regarding climate risks. Indeed, under this rule, companies must disclose not only their greenhouse gas emissions but also the costs they incur to mitigate climate risks and the financial impacts. The SEC is not an environmental authority. It determined purely from a market perspective that climate risks are already affecting corporate operations and finances, and that investors therefore need to know about them. The decision that satisfied neither camp may, in the end, have been a decision made for the majority—or in the majority's interest.by Editor N
A directive guiding companies to take responsibility for the environmental and human rights impacts of their entire supply chain is expected to take effect in Europe soon. The Council of the European Union* and the European Parliament** have reached a provisional agreement on the Corporate Sustainability Due Diligence Directive (CSDDD). Discussions on this directive began when the European Commission*** first proposed it to the Council and Parliament in March 2022. After nearly two years of extensive negotiations, an agreement was reached on December 14. The Council stated that this directive aims to protect the environment and human rights not only within the EU but around the world.* The Council of the European Union is the upper legislative body of the European Union (EU), representing the governments of each Member State. ** The European Parliament is also a legislative body of the European Union (EU), representing the citizens of each Member State and elected through direct elections.*** The European Commission is the executive body of the European Union, representing the general interests of Europe and initiating relevant legislation. Content and Scope of the DirectiveOnce this due diligence directive takes effect, large companies of a certain size and their subsidiaries and partners will have legal obligations to protect the environment and human rights in their business operations. Notably, the directive includes provisions requiring that corporate business models and strategies align with the Paris Agreement. Companies will also bear responsibility for preventing ecosystem and biodiversity degradation. Regarding human rights, companies will be held accountable for unfair labor practices such as forced labor, child labor, and wage exploitation, as well as worker health protection issues including employee health and occupational safety.The agreement also clarified the implementation timeline and the scope of companies covered. For EU-based companies, it applies to large enterprises with 500 or more employees and a global net turnover of at least €150 million. For non-EU companies, they will be subject to the directive if their net turnover exceeds €150 million after a three-year grace period from the effective date. Of course, South Korean companies that are subsidiaries or partners of EU-based companies would be included without a grace period.Legal Binding Force of the DirectiveThe directive also includes provisions on penalties and civil liability for companies that violate their obligations. Through this agreement, the Council and Parliament announced that they have finalized the scope of the directive, corporate duties, penalty levels, and the rights and prohibitions that companies must respect.In particular, the Council emphasized that if a company is found to be adversely affecting the environment or human rights through its business partners, and cannot prevent or stop such activities, it must sever business relationships with those partners. If companies violate these guidelines and fail to pay the imposed fines, additional penalties proportional to company turnover (e.g., 5% of revenue) will be levied.Impact on South Korean CompaniesOnce the directive is announced, South Korean companies exporting to the EU will need to shoulder not only the workforce and costs required for due diligence but also the costs and personnel needed for potential litigation. According to research by the Industrial Bank of Korea (IBK), export sectors such as textiles, agriculture and fisheries, raw materials, and steel are relatively vulnerable to environmental and human rights issues, falling under ‘high-impact sectors,’ making thorough preparation all the more critical.Of course, the CSDDD has not yet come into effect. Technical meetings to examine whether there are any loopholes or issues in the agreement, as well as the final adoption process by the Council and Parliament through voting, remain. However, given the provisional agreement between the two institutions, it is highly likely to take effect in the near future. The European Coalition for Corporate Justice (ECCJ), a civil society organization, expects the relevant vote to take place in March of this year.by Editor N
Every January, leaders from governments and businesses around the world gather in Davos, Switzerland to participate in the World Economic Forum. The 2024 WEF takes place over four days through January 19, and as in previous years, participants will discuss solutions to global challenges. This year's theme is "Rebuilding Trust."[European Commission President Ursula von der Leyen (left) speaking about the severity of disinformation. ©WEF]Ongoing Efforts to Overcome Crises at the World Economic ForumLast year's World Economic Forum focused heavily on "how to overcome the Polycrisis." There was a mountain of crises to address—COVID-19, the Ukraine-Russia war, economic recession and inflation, environmental issues, and more. This year's forum will once again explore ways to resolve global-scale crises. The polycrisis that persisted throughout 2023 remains unresolved, and has in fact led to prolonged economic recession and a severe climate crisis. This year, the WEF has dubbed this situation a "Permacrisis" and plans to seek both short-term strategies and long-term plans to overcome it.The four key agenda items put forward by this year's WEF are: ① Achieving security and cooperation in a fragmented world, ② Creating growth and jobs for a new era, ③ Harnessing AI to drive the economy and society, and ④ Designing strategies for climate, nature, and energy. Among these, let us take a closer look at the WEF's "Centre for Nature and Climate," which corresponds to the fourth agenda item.From Conference to Action: The Role of the Centre for Nature and ClimateThe World Economic Forum takes place just once a year, for only five days. So how are the collaboration strategies discussed at the forum actually implemented? If the execution of decisions made at the forum were left solely to individual governments and corporations, global-scale economic cooperation would likely end up as mere words, and collaborative relationships would come to nothing. To prevent this and ensure substantive economic cooperation takes place, the WEF operates various centers. In other words, the WEF holds its annual meeting each January, and then continues to execute the matters discussed through its centers throughout the year.If the forum is where government and business leaders gather to discuss agenda items, the centers are where the public and private sectors join forces to create synergies. The WEF operates ten centers (*) related to forum discussion topics. Among these, the Centre for Nature and Climate advances projects in which diverse stakeholders manage natural resources with the goal of achieving carbon neutrality. It encourages responsible use of land and oceans, and manages resources critical to us, such as food, water, and raw materials.* The ten centers are: Centre for Advanced Manufacturing and Supply Chains, Centre for Cybersecurity, Centre for Energy and Materials, Center for Financial and Monetary Systems, Centre for Health and Healthcare, Centre for Regions, Trade and Geopolitics, Centre for the Fourth Industrial Revolution, Centre for the New Economy and Society, Centre for Urban Transformation, Centre for Nature and ClimateThe Centre for Nature and Climate first established three solution goals: decarbonizing industry to achieve carbon neutrality, preparing for systemic transformation to protect nature, and managing resources for a better life. Core initiatives were also formed to execute each goal.[The World Economic Forum's Centre for Nature and Climate webpage ©WEF]The best-known initiative of the Centre for Nature and Climate in Korea is the "First Movers Coalition"—a coalition of companies that lead and pioneer on the world stage. As the initiative responsible for the Centre's first goal of industrial decarbonization, the companies belonging to the First Movers Coalition aim to halve carbon emissions by 2050. Starting with 35 member companies at its launch, the First Movers Coalition has grown into a major initiative of 95 companies in just two years. The WEF estimates that the efforts of its current member companies alone could reduce CO2-equivalent emissions by 29 million tons by 2030.There is also a Korean company that has joined the coalition. "Hanwha Ocean" is a member, actively participating alongside familiar global names such as Apple, Coca-Cola, Microsoft, and General Motors. Hanwha Ocean was the first Korean company to join the First Movers Coalition, and Hanwha Vice Chairman Kim Dong-kwan is participating as a speaker at this year's WEF.Another noteworthy initiative in the nature protection category is "1t.org." Named with the ambition to protect, restore, and grow one trillion trees by 2030. Trees and forests are vital resources that preserve biodiversity and combat the climate crisis. 1t.org encourages corporate participation to create a "forest restoration community" that everyone can join, and helps forge partnerships among local governments, businesses, and civil society. It also devotes efforts to fostering eco-preneurship so that companies can incorporate environmental considerations into their business activities. Over the past year, 85 companies across 65 countries have invested in 1t.org to preserve forests and committed to protecting eight billion trees.[Marine plastic waste filtered from a beach in Indonesia ©WEF]According to the World Economic Forum, ocean plastic pollution is another critical issue requiring attention. Each year, 11 million tons of plastic waste flow into the world's oceans, and some projections suggest that by 2050, there could be more plastic than fish in the sea. The WEF operates the "Global Plastic Action Partnership" as one of its resource management initiatives. Launched in 2018, it seeks to break away from the take-make-waste model and find ways to turn plastic into a circulating resource. Currently, over 400 organizations participate in the initiative, and 13 countries have committed to joining the plastic action effort. Indonesia, which generates 6.8 million tons of plastic waste annually, has pledged to reduce ocean-bound plastic pollution by 70% by 2025. Vietnam has committed to a 75% reduction by 2030, and Ghana has pledged to eliminate ocean-bound plastic pollution entirely.The Path Toward Inclusive Stakeholder CapitalismTo realize "inclusive stakeholder capitalism," the World Economic Forum demands that the governments and businesses partnered with each center "demonstrate real, tangible impact." While there are no explicit penalties for failing to keep promises, stakeholders share goals and actively participate by publishing their achievement rates each year. Let us look forward to seeing what direction of cooperation the World Economic Forum—which generates active collaboration among nations and corporations to solve vast global challenges—will propose this year.by Editor N
Fossil fuels have long been denounced as the main culprit of the climate crisis. In fact, the U.S. petroleum industry is said to have known since 1968 that carbon emissions from fossil fuels could cause global climate change, as revealed in a report submitted by Stanford University. Over the 50-plus years since, humanity and fossil fuels have become a relationship that is not easily broken. Too much binds them together. Power generation, transmission and distribution infrastructure relying on fossil fuels is already densely built across many nations. Moreover, the global economy frequently turns to recession, wavering under the fatal temptation of fossil fuels’ low generation costs. Despite knowing the risks inherent in the continued use of fossil fuels, overcoming this inertia is difficult. To overcome it requires stronger decision-making, but that is no easy task. Even when decisions are made, there may be regression for various reasons. Nuclear energy experienced this. After the Fukushima disaster, nuclear power was pushed to the brink of ‘global phase-out,’ only to return under the banner of carbon-free green energy in response to the climate crisis.Late last year, global leaders gathered in the United Arab Emirates to corner fossil fuels. One of the goals of the 28th UN Climate Change Conference (COP28) was to issue a joint declaration on the ‘phase-out of fossil fuels.’ It seemed contradictory that they gathered in an oil-producing nation boasting the world’s sixth-largest oil reserves. But it could have been meaningful — if they had declared a phase-out. [Group photo of world leaders attending COP28 ©COP28UAE]The COP28 joint declaration stopped short of a fossil fuel ‘phase-out.’ Instead it was replaced with the softened expression ‘transitioning away from fossil fuels.’ In effect, they left room for ambiguity. The joint declaration at the Conference of the Parties must be determined unanimously, and opposition from oil-producing nations was fierce. Underdeveloped countries such as those in Africa also expressed opposition.There may be meaning in the fact that since the first COP in Berlin, Germany in 1995, ‘fossil fuels’ was mentioned in a joint declaration for the very first time. However, after the oil industry became aware of the climate crisis in 1968, it took 30 years before the first COP convened, and then another 30 years for fossil fuels to appear in a joint declaration. Thirty years from now, the year 2050 — by which the international community, including South Korea, has declared it will achieve carbon neutrality — will already have passed.The COP has been held annually since 1995. Yet fossil fuel and coal consumption has also hit record highs each year. The bigger problem is that advances in technology are also increasing the amount of recoverable fossil fuels. It seems that humanity will not be able to say goodbye to cheap, warm fossil fuels for quite some time.by Editor L
Major countries are successively postponing the mandatory implementation dates for ESG disclosures. First, South Korea delayed the mandatory disclosure deadline for listed large corporations, originally set for 2025, by one year. The EU will proceed with cross-industry common ESG disclosures as scheduled starting this January, but industry-specific ESG disclosure implementation has been postponed by two years from the originally planned June of this year to 2026. The U.S. Securities and Exchange Commission (SEC) has also delayed the release of its final climate disclosure rule multiple times, now scheduling it for April of this year. Of course, even this may be further delayed.Why ESG Disclosure Keeps Getting PostponedWhile there are various reasons, the biggest is widely considered to be the burden felt by companies. Unlike conventional disclosures that contain financial information such as income statements and financial statements, ESG disclosures must include fragmented non-financial information. It is not an easy task to quickly identify and organize information that previously had no legal disclosure obligation — such as greenhouse gas emissions and reduction plans.According to a survey by the Korea Chamber of Commerce and Industry, over 90% of companies conducting voluntary ESG disclosures rely on external professional agencies. Only 14.0% of companies had their own in-house ESG IT systems. Due to these difficulties, the Korea Employers Federation requested relevant government bodies, including the Financial Services Commission, to postpone the mandatory ESG disclosure deadline by one year, and the government accepted. The EU's disclosure delay was also aimed at reducing the burden on businesses.The Emergence of Disclosure Support SolutionsIn the meantime, solutions to reduce the burden of ESG disclosure for companies have emerged. Accounting firms, which already serve as financial disclosure advisors to companies, and SI (System Integrator) firms with strengths in data management have taken the lead in launching platforms that support ESG disclosure. These platforms assist obligated companies with tasks such as identifying the data they need to collect, efficiently managing that data, and processing it in accordance with international reporting frameworks like the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), and the Global Reporting Initiative (GRI).Accounting firms, in particular, emphasize their consulting expertise, going beyond ESG disclosure support to assist with overall ESG management. PwC Samil Accounting Corporation highlights that through its 'ESG Platform' service, it can help with 'redefining Vision for transitioning to an ESG management system,' 'establishing business strategies that integrate ESG value,' and 'building a monitoring system for strategy execution and performance.'In the SI sector, IBM, a leading company, acquired the Australian sustainability data analytics company 'Envisi' and integrated it with its own AI software to complete the IBM Envizi ESG Suite (hereafter 'Envizi Suite'). The Envizi Suite automates the collection of ESG and greenhouse gas emission data and structures and standardizes the data to create the foundation for reports. IBM emphasizes that the Envizi Suite can reduce the time companies spend on ESG disclosure by 50% and highlights a case where it saved a company 20 million dollars in energy and water usage costs.[Envizi Suite Carbon Emission Management Dashboard Demo ©IBM]Will Platforms Solve the Disclosure Burden?Of course, introducing a platform alone cannot eliminate the ESG disclosure burden in one stroke, because the absence of systems is not the only problem. According to a 2023 survey by the Federation of Korean Industries, 61.1% of domestic companies cited 'ambiguous disclosure concepts and lack of clear standards' as the biggest challenge in ESG disclosure. Export companies, moreover, struggle because disclosure standards differ from country to country. The disclosure standards of the International Sustainability Standards Board (ISSB), which will serve as the basis for South Korea's ESG disclosure, were also unveiled six months later than planned in June of last year after repeated coordination. The official Korean translation was only released just two weeks ago, in December.Nevertheless, some argue that there is no real benefit in continuing to postpone ESG disclosure. Even if South Korea delays its disclosure timeline, export companies will still have to disclose anyway, and beginning disclosure will allow businesses to adapt to the system sooner and enhance their global competitiveness. Since some companies are already voluntarily making disclosures, it is not an impossible task. Professional disclosure support solutions from specialized firms are also beginning full-scale service operations. What matters most is the will of the obligated companies. Where there is a will, there is a way.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