[키워드로 보는 2021 산업]⑤ ‘ESG’ mania blown in the business world, soaring environmental investment… Controversy over ‘ESG only with patterns’

This year, the key management keyword of domestic companies was ‘ESG’ (environmental, social, governance). Amidst the global economic uncertainty brought on by the COVID-19 pandemic and the strengthening of global eco-friendly regulations, non-financial performance such as corporate environmental protection, social responsibility, and governance transparency has emerged as an important evaluation criterion that determines investment. . The sense of crisis that a company could not survive by pursuing only profit grew, and ‘ESG management’ spread rapidly in the business world, but there was also criticism that it was used as a marketing tool.

ESG management ‘first year’, active investment in the environment field

Earlier this year, business leaders brought up ESG management, which focuses on eco-friendly businesses and pursuit of social values, as their main task. By establishing an ESG-only organization and expanding the scale and scope of related investments, the company accelerated the preparation of the ESG management foundation.

According to the results of a survey of 820 KOSPI-listed companies by CEO Score, a company evaluation site, as of October, 123 companies have established an ESG committee under the board of directors. In particular, more than half of KOSPI listed companies with assets of 2 trillion won or more have completed the establishment of the ESG committee. The ESG committee is an essential organization for ESG management that establishes ESG strategies and plans within a company and checks related activities.

Among ESG investments, the most active area is the environment (E) sector.

The total ESG-related investment plans in the environment sector announced this year by the 30 largest groups in Korea amount to 153.2 trillion won by 2030. Global mergers and acquisitions for the expansion of eco-friendly businesses, centered on large companies, were prominent, and ‘renewable energy’, ‘hydrogen economy’, ‘battery (electric vehicle)’, and ‘circular economy’ emerged as keywords for major group business restructuring.

This year is also the year when private companies started issuing green procurement funds, that is, ESG bonds. This year, ESG bonds began to be issued mainly by 10 major groups such as Hyundai Motor, SK, LG, Lotte, Hanwha, POSCO, GS, and Hyundai Heavy Industries. According to SK Securities’ analysis, the size of green bonds issued in Korea increased nearly eightfold from 600 billion won in 2018 to 4.5 trillion won at the end of March this year.

Corporate declarations of ‘carbon neutrality’ (Net Zero) followed one after another. The target year for achieving carbon neutrality by major companies is 2030 for LG Electronics, 2040 for SK Corporation, 2045 for Hyundai/Kia Motors, and 2050 for Hanwha Solutions. Naver announced its plan to pursue a ‘carbon negative’ (going negative beyond carbon neutrality) by 2040.

Controversy over the effectiveness of ‘only pattern ESG’

Controversy also arose over the effectiveness of ESG management, which spread like a fad.

According to the ‘2021 ESG Committee Establishment and Operation Status’ report released by the Korea Corporate Governance Service (KCGS) last month, 68 of the 110 companies (110) that set up an ESG committee from last year to June this year are actually active. was investigated as There were only 40 committees that proposed ESG strategy-related items (ESG strategy/plan establishment). It is said that there are not many cases where an ESG-only organization was created, but it was just a show-off.

'ESG' mania in the business world, soaring environmental investment... Controversy over 'only pattern ESG'

A survey result showed that although companies generally had a high level of awareness of the importance of ESG, the actual management level was still low.

As a result of conducting a survey of 300 domestic companies jointly by the Korea Chamber of Commerce and Industry and the Korea Productivity Center, the level of ESG management evaluated by the companies was 2.9 out of 5, which was below average (3 points).

Professor Jang Dae-cheol of KAIST analyzed, “As the period in which ESG started to be introduced in earnest in Korea is not long compared to overseas, it seems that the importance of ESG is still recognized, except for some exporting companies and large corporations.”

There are also many voices concerned about ‘ESG washing’, in which ESG is used as a marketing tool by companies. Despite the fact that the governance and management ethics of domestic ‘chaebol’ conglomerates are still emerging as social problems, such as inappropriate management succession and owner risk, private use of company assets, and driving work, ESG will be used as a means of overlaying an exemplary image. It has been pointed out that strict monitoring is necessary.

ESG, Society (S), Governance (G) Emphasis in 2022

If the focus of ESG management this year was the environment, next year, society (S) and governance (G) are expected to stand out. This is because the standards for evaluating transparency and social responsibility of corporate governance have become stricter as the Fair Trade Act and the Serious Accident Punishment Act come into effect. In the amendment to the Fair Trade Act, the scope of regulations on extortion of private interests, such as driving work within the group, is greatly expanded, and the Severe Accident Punishment Act strengthens the responsibility of managers for personal injury that occurs in the workplace.

If the ESG management activities of major companies this year were at the level of establishing the overall management direction and vision of the group companies, there is also a forecast that next year, they will be materialized and advanced by business sector.

Reference-www.khan.co.kr

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