{"id":2202131,"date":"2023-09-01T19:24:50","date_gmt":"2023-09-01T10:24:50","guid":{"rendered":"https:\/\/koreapro.org\/?p=2202131"},"modified":"2023-09-04T17:00:49","modified_gmt":"2023-09-04T08:00:49","slug":"how-south-korea-can-take-the-lead-in-promoting-sustainability-disclosure-goals","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/09\/how-south-korea-can-take-the-lead-in-promoting-sustainability-disclosure-goals\/","title":{"rendered":"How South Korea can take the lead in promoting sustainability disclosure goals"},"content":{"rendered":"
In a recent meeting about the future of the Indo-Pacific Economic Framework (IPEF), South Korea\u2019s trade ministry resolved to enhance environmental, social and governance (ESG) standards for its domestic corporations.<\/span><\/p>\n IPEF member states have been consistently looking at the possibility of harmonizing ESG disclosure standards. And while the endeavor is ambitious, South Korea is uniquely positioned to lead IPEF in charting the course for this ESG disclosure agenda.<\/span><\/p>\n CHALLENGES TO ESG DISCLOSURE HARMONIZATION<\/b><\/p>\n IPEF is an economic powerhouse, even while still in its negotiation phase. Its members include Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the ROK, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the U.S. and Vietnam. Together, they represent a staggering 40% of the world\u2019s gross domestic product.<\/span><\/p>\n Cooperation within IPEF is centered around four foundational pillars: trade, supply chains, clean energy combined with decarbonization and infrastructure and tax and anti-corruption.<\/span><\/p>\n But even as IPEF aspires to address the pressing concerns surrounding ESG standards, especially in its trade pillar, it is presented with five primary challenges.<\/span><\/p>\n First, the countries within the Association of Southeast Asian Nations (ASEAN) bring to the table a wide variety of economic strategies and <\/span>stability levels<\/span><\/a>. This diversity has led to what ASEAN calls the \u201c<\/span>ASEAN minus X approach<\/span><\/a>,\u201d which could serve as a bottleneck in efforts to <\/span>synchronize disclosures<\/span><\/a> across member countries.<\/span><\/p>\n Second, in the U.S., Republican politicians have been vocal in their <\/span>criticism<\/span><\/a> of ESG, often citing the <\/span>considerable financial burdens<\/span><\/a> it places on businesses. This added burden has the unintended consequence of introducing regulatory risks for companies that are keen on ESG activities, potentially making it less attractive for prospective investors.<\/span><\/p>\n Third, India\u2019s reliance on corporate social responsibility (CSR) mechanisms for its <\/span>disclosure system<\/span><\/a> has seen it restrict its use to only the country\u2019s most significant market cap companies. This approach meant that only a fraction \u2014 <\/span>less than 200<\/span><\/a> out of 1,000 eligible companies \u2014 have reported.<\/span><\/p>\n The fourth challenge emerges from Japan. The country\u2019s Financial Service Agency and Ministry of Environment are tackling greenwashing \u2014 misleading or untrue claims made by an organization about the positive impact its product or service has on the environment \u2014 with a focus on <\/span>consumer protection<\/span><\/a>, but there\u2019s ambiguity surrounding the application of these measures to Japanese enterprises operating outside its shores.<\/span><\/p>\n Lastly, South Korea is navigating its way through the creation of a taxonomy system, <\/span>which seems to be in sync<\/span><\/a> with the world\u2019s leading sustainable finance disclosure frameworks. However, the inception of the K-ESG initiative, championed mainly by South Korea\u2019s dominant conglomerates, began with promise but soon lost its momentum. Skeptics began to view it as potentially just a public relations exercise rather than evolving into a substantive initiative.<\/span><\/p>\n NEED FOR CHANGE<\/b><\/p>\n A comprehensive and progressive economic agreement could mark a monumental step not only for the participating countries but also as a global testament to prioritizing sustainability. Such an agreement would extend beyond economic activities like trade and investment. Instead, it would consider how these activities affect and draw influence from sustainable development. This perspective would stand in contrast to older agreements that primarily aimed to enhance only trade and investment.<\/span><\/p>\n At this juncture, IPEF appears more as an ambitious introductory statement with lofty goals than a concrete legal document. However, the provisions outlined in <\/span>Pillar One<\/span><\/a>, shaped through a multilateral process, can still set the stage for future economic agreements. This represents a positive albeit small step forward in integrating these critical economies, a process that has historically seen its fair share of challenges.<\/span><\/p>\n For instance, the outcomes of the Regional Comprehensive Economic Partnership (RCEP), which involved a similar group of countries, have been less than stellar. Additionally, the U.S. decision to exit the Trans-Pacific Partnership did not help to improve matters.<\/span><\/p>\n While IPEF has had a promising beginning, its path forward remains fraught with uncertainties and challenges.<\/span><\/p>\n