Insights

Global Capitalism is Changing. What About Korean Corporations? (Pressian)

Global capitalism is changing. What is the current status of Korean corporations? We share an interview with Karl Chun Seung Yang, Executive Director of the Korea Sustainability Investing Forum (KoSIF), conducted on the theme of Corporate Social Responsibility (CSR). The interview was led by Jeon Hong-ki-hye, Chairperson of Pressian.

    There is No Capitalism Where You Pocket Every Cent You Earn

Executive Director Yang emphasizes that domestic corporations must transform to avoid falling behind international trends, stating: "Global capitalism is demanding fundamental changes. However, people in our country seem to be desensitized to this. In fact, even in a country like the United States, which walks at the absolute vanguard of capitalism, a 'New Capitalism Act' has emerged. It is a proposal to reinforce workers' rights, such as having labor representatives participate in corporate boards."

He added, "This is not merely a global trend. Questioning a corporation's CSR is a pro-business action. This is because it is the very method for corporations to survive. If a company wants to survive, it has no choice but to walk this path (CSR)."

    Does "CF100" Help the Industrial Competitiveness of Domestic Corporations?

"Today, the social responsibility demanded of corporations does not linger at a one-dimensional level like volunteer work or disaster relief donations. It holds companies accountable for the climate change caused by their production activities, and is far more concrete and direct, leveraging management pressure through public funds and investments."

The exact term for 'CF100 (Carbon Free 100%)', which the current administration put forward as an implementation plan for carbon neutrality, is '24/7 CFE, Carbon Free Energy'. This is a concept that supplies 100% of electricity through carbon-free energy sources. Unlike RE100, which mandates the exclusive use of renewable energy like solar and wind, CFE includes not only renewable energy but also nuclear power, hydrogen, and Carbon Capture and Storage (CCS) technologies.

However, contrary to the government's intention of introducing CF100 as an alternative to RE100, a recent research report commissioned by the Ministry of Trade, Industry and Energy (Investigation and Analysis of International Initiatives for Carbon Neutrality) pointed out that CFE is a relatively strict initiative that demands high costs compared to RE100, making it difficult to replace RE100. It also noted that a carbon-free energy policy not recognized by the international community could instead trigger domestic confusion.

Regarding this, Executive Director Yang pointed out: "RE100 is executed thoroughly through transactions between

private entities. It is requested by the buyers. However, there are no buyers requesting CF100. In that case, from a corporation's point of view, which one would they choose? Wouldn't they choose the opinion of the side that buys their goods? The government's CF100 approach is flawed."

    The Reason Why Pension Reform is Sluggish

"The reform of the National Pension Service (NPS) can also be viewed as an extension of CSR. The NPS must manage the money of its subscribers—the public—effectively to steer clear of the risk of fiscal depletion, while simultaneously guiding corporations in the right direction through pension-backed investments."

Executive Director Yang, who served as a member of the NPS Fiduciary Duty Committee, remarked on the core of pension reform: "The nature of the National Pension consists largely of two dimensions. One is distributing the pension on time to the people who paid into it, and the other is how to manage the pooled capital. These two are completely different realms. Yet, South Korea is executing both within a single organization. In the case of Japan, they placed a young CEO in his 40s at the forefront and completely overhauled their management style."

He argued that as long as the National Pension remains under the influence of political wind, fiscal depletion is unavoidable, stating: "Managing the money of investors (the public) must strictly follow the logic of finance. We need to contemplate how to generate better investment performance and how to ensure those investments stand in a publicly upright direction. However, the atmosphere in South Korea prioritizes political logic. It is structurally engineered that way as well. While the NPS Board of Directors is under the Chief Executive Officer, the National Pension Fund Management Committee is chaired by the Minister of Health and Welfare."

    The Biodiversity Sector Will Become a Crucial Investment Factor

Executive Director Yang foresaw that within CSR, the field of biodiversity will emerge as a massive issue moving forward. According to a report published on December 5 last year by the investment research firm Morningstar, there were only 14 funds that mapped out investment strategies considering biodiversity, whereas there were approximately 1,100 funds that integrated climate change into their strategies. The global investment bank Jefferies also warned investors last January, stating, "Do not overlook biodiversity preservation factors when investing."

Furthermore, Executive Director Yang requested continuous attention toward labor and human rights. Among Environmental, Social, and Governance (ESG) issues, which serve as corporate evaluation factors, the emphasis has been placed on 'E' (Environmental) thus far, but he expects that the significance of 'S' (Social) will grow much larger in the future.

Currently in South Korea, for Governance (G), mandatory disclosure began with large listed companies (assets of 2 trillion KRW or more) among KOSPI-listed firms in 2019, and the government plans to mandate the disclosure of core governance information for all KOSPI-listed companies in 2026. Meanwhile, for Environment (E) and Social (S), mandatory disclosure starts with large corporations with assets of 2 trillion KRW or more among KOSPI-listed firms from 2025, and will expand to all KOSPI-listed companies in 2030, making the disclosure of corporate environmental and social information mandatory (Financial Services Commission’s 2021 Comprehensive Improvement Plan for the Corporate Disclosure System).

He stated, "Until now, a large portion of the narrative has been buried under right-wing propaganda regarding workers. While there is substantial critical public opinion toward the Korean Confederation of Trade Unions and some of those issues raised are valid to a certain extent, we must look at the plight of workers with cold objectivity. They contributed heavily to economic development, but the share returned to them was relatively small compared to entrepreneurs. We need to bring these issues into public discourse. Furthermore, the issue of human rights violations at labor sites still remains in a blind spot."

Reporter Lee Myung-seon (overview@pressian.com)