[키워드로 보는 2021 산업]⑤Establishment of ‘ESG Committee’ to compete in the business world… “Actually, we stay at the stage of recognizing the importance”

Groups in their 30s exceed 153 trillion in investment plans
Substantial activities ’68’ out of 110 committees
Management evaluation questionnaire for 300 companies
2.9 out of 5, “less than average”

This year, the key management keyword of domestic companies was ‘ESG’ (environmental, social, governance). Amid the global economic uncertainty brought on by the COVID-19 pandemic and the strengthening of global eco-friendly regulations, non-financial factors such as corporate environment protection, social responsibility, and governance transparency have emerged as important evaluation criteria for investment decisions. .

The sense of crisis that a company cannot survive by pursuing only profit grew and ‘ESG management’ spread rapidly in the business world, but there were also criticisms of using it 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. It accelerated to lay the foundation for ESG management by creating a dedicated organization and expanding the scale and scope of related investments.

As a result of a survey of 820 KOSPI listed companies by CEO Score, a company evaluation site, as of last October, 123 companies had an ESG committee under the board of directors. Among KOSPI-listed companies with assets of 2 trillion won or more, more than half 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 ESG-related investment plans in the environmental sector announced this year by the top 30 domestic groups will reach a total of 153.2 trillion won by 2030. Global mergers and acquisitions to expand eco-friendly business centering on large companies stood out, 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. According to SK Securities’ analysis, the amount 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 years of achieving carbon neutrality targets for major companies are LG Electronics in 2030, SK Corporation in 2040, Hyundai Motor/Kia in 2045, and Hanwha Solutions in 2050. Naver announced its plan to pursue a ‘carbon negative’ (going negative beyond carbon neutrality) by 2040.

Controversy over the effectiveness of ‘only pattern ESG’

Establishment of 'ESG Committee' to compete in the business world...  “Actually, we stay at the stage of recognizing the importance”

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

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 many voices concerned about ‘ESG washing’, in which ESG is used as a marketing tool by companies. Although the governance structure and business ethics of domestic ‘chaebol’ conglomerates such as inappropriate management succession and owner risk, private misappropriation of company assets, and driving work are still becoming social problems, ESG can be used as a means of overlaying an exemplary image. It was pointed out that strict monitoring of this was necessary.

Next year, society (S) and governance (G) are expected to stand out. With the implementation of the Fair Trade Act and the Serious Disaster Punishment Act, the standards for evaluating corporate governance transparency and social responsibility become stricter. If the ESG management actions 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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