Insights

“Corporate Disclosure Is the Starting Point for Climate Action” [Think Tank Report ③]

ㅣTaehan Kim, COO of KoSIFㅣ

The 2024 CDP Korea Report, jointly published by the Korea Sustainability Investing Forum (KoSIF) and CDP, provides a data-based assessment of how Korean companies are responding to climate change.

At the heart of the report is a fundamental question: Are Korean companies truly unprepared for mandatory climate disclosure?

In this interview, Taehan Kim discusses the report’s central findings, its assessment of corporate climate readiness, and the policy measures needed to translate disclosure into meaningful action.

     Q. What concerns shaped the report, and what was the main message you wanted readers to take away?

CDP is the world’s largest environmental disclosure platform and publishes analytical reports based on data reported directly by companies. It also produces annual country-level reports.

The 2024 CDP Korea Report analyzes data disclosed by Korean companies in 2024 on climate change, water security, biodiversity, and other environmental issues. The data mainly cover the 2023 reporting year.

The central question we wanted to raise was: Are Korean companies really unprepared for climate disclosure?

There have recently been growing calls in Korea to delay the introduction of mandatory climate disclosure. The Financial Services Commission, the authority responsible for developing the disclosure roadmap, has also repeatedly postponed its publication.

The most common argument is that the policy should reflect the reality that companies are not yet ready. However, there has been relatively little evidence-based analysis of how prepared Korean companies actually are. Much of the debate appears to be based on the assumption that companies must be unprepared simply because a new disclosure regime is being introduced.

CDP is a global initiative established in 2000. Its work helped inform the recommendations of the Task Force on Climate-related Financial Disclosures, or TCFD. The Climate Disclosure Standards Board, which was created by CDP, was later consolidated into the IFRS Foundation and contributed directly to the development of global sustainability disclosure standards.

More recently, CDP and the IFRS Foundation signed a memorandum of understanding to strengthen alignment between the CDP questionnaire and IFRS sustainability disclosure standards. The CDP questionnaire already covers the information required under the IFRS standards, making CDP data particularly useful for assessing corporate readiness for IFRS-aligned climate disclosure.

The report analyzed data disclosed by 239 Korean companies across governance, strategy, risk management, metrics, and targets. Our objective was to provide an evidence base for a more informed public discussion about climate disclosure in Korea.

     Q. The report refers to both the structural limitations facing Korean companies and opportunities for climate leadership. What do these mean in practice?

Before discussing structural limitations, it is important to emphasize that Korean companies have established relatively advanced formal systems for responding to climate change.

For example, 92% of Korean companies reported having climate-related governance structures, while 87% said they had processes in place to identify climate risks. The proportion of companies measuring and verifying greenhouse gas emissions was also comparable to, or in some cases higher than, the global average.

At the same time, there are still several areas requiring improvement. Some can be addressed through action by individual companies, while others will require a broader national response.

For instance, 92% of Korean companies reported that climate governance had been established at the board or senior executive level. This is a very high proportion.

However, only 52% said that at least one member of the board or senior management had climate-related expertise, compared with 87% of global companies. This is an area where companies themselves can take action.

Renewable energy, by contrast, is an area where individual companies cannot overcome the barriers alone.

Renewable electricity accounted for only 11% of total electricity consumption among Korean companies. Even among Korean RE100 members, the figure was only 24%.

RE100 companies are required to report their annual progress through CDP, and the report also analyzes their implementation performance.

When the figures are divided between domestic and overseas operations, the structural challenge becomes clearer. Renewable electricity accounted for only 5% of consumption at Korean companies’ domestic sites, compared with 39% at their overseas sites. Among RE100 members, the figures were 12% in Korea and 59% overseas.

This indicates that the problem is not simply a lack of corporate commitment. Progress will remain difficult unless structural constraints are addressed, including high renewable energy prices in Korea and the limited availability of generation capacity suitable for corporate power purchase agreements.

However, I do not agree with the argument that Korea should delay disclosure until companies have achieved a certain level of climate performance because the country has limited renewable resources and a large manufacturing sector.

CDP’s analysis shows that companies disclosing through CDP reduced their direct emissions by 7–10% within two years. This suggests that transparent disclosure itself can drive performance.

Among the Korean companies responding to CDP this year, 125 reported net-zero targets. Given the domestic operating environment, this is a meaningful number and further evidence that disclosure can encourage companies to take more active steps.

     Q. Beyond CDP data, what domestic or international benchmarks informed the analysis? How were the report’s main quantitative indicators selected?

CDP holds an extensive volume of corporate environmental data, so we do not generally rely heavily on external datasets when preparing the report.

However, one of the main objectives of this report was to assess corporate readiness for mandatory climate disclosure. We therefore used IFRS S2, the climate-related disclosure standard, as a major reference point.

We also referred to the IPCC Sixth Assessment Report and materials developed by the Science Based Targets initiative when assessing the ambition of corporate emissions reduction targets.

The report uses a broad range of quantitative indicators.

Some were selected for their practical relevance to companies preparing for climate disclosure, including organizational boundary-setting methods, emissions accounting methodologies, and the use of global warming potential values.

Others were selected because they provide insight into a company’s actual capacity to implement climate action and address issues of material interest to investors and other stakeholders.

Indicators that show whether corporate action is aligned with a 1.5°C pathway are particularly important. These include whether companies have established and validated emissions reduction targets, the extent to which Scope 3 emissions have been verified, renewable energy consumption and procurement methods, and whether board members or senior executives have climate expertise.

     Q. The report found that Korean companies’ climate performance remains relatively weak compared with global peers. What are the main reasons, and what policy measures are needed?

As noted earlier, Korean companies have generally established strong formal systems for climate governance and risk management.

However, actual performance remains limited in areas such as emissions reductions and renewable energy use.

For example, Korean RE100 members reported that renewable electricity accounted for 59% of consumption at their overseas operations but only 12% at their domestic sites. This demonstrates that institutional and market constraints are limiting implementation despite companies’ voluntary efforts.

Scope 3 emissions accounting and supply chain management must also be strengthened.

Sector-specific guidance and data-based support will be needed to ensure that the capacity to calculate and verify supply chain emissions spreads beyond large corporations to small and medium-sized enterprises.

Before discussing additional policy measures, however, Korean companies must also engage more actively in policy discussions.

Companies in every country face difficulty responding to climate risk on their own. This is why global companies actively call on governments to introduce policies that enable them to manage climate-related risks.

Korean companies should likewise be more active in calling for policies that expand renewable energy and accelerate the transition to electric vehicles.

Policy is not something companies should simply wait for. Those who need the policy must clearly articulate that demand.

     Q. You have described CDP as evolving from a reporting platform into one that encourages implementation. What policies or infrastructure does KoSIF recommend to strengthen this function in Korea?

As mentioned earlier, companies disclosing through CDP reduced their direct emissions by 7–10% within two years. This provides evidence that transparent disclosure can encourage implementation.

At the same time, disclosure imposes additional costs and operational burdens on companies. Unless companies that take climate disclosure and climate action seriously receive tangible benefits, it will be difficult for them to sustain or strengthen these activities over time.

CDP not only collects disclosures but also assesses corporate performance based on the information provided.

CDP scores are used in investment decision-making by more than 700 financial institutions participating as CDP signatories. They are also incorporated into financial indices and made available to investors through data providers such as MSCI and Bloomberg.

CDP is therefore working to ensure that corporate disclosure does not end with transparency alone, but can also influence the allocation of capital.

KoSIF likewise calls for stronger corporate climate disclosure and action while also working to build policies and market infrastructure that allow companies with stronger performance to access capital on better terms and gain recognition in the market.

In 2015, for example, KoSIF provided legislative support to the office of National Assembly member Lee Mok-hee of the Democratic Party of Korea for an amendment to the National Pension Act. The amendment enabled the National Pension Service, one of the world’s largest public pension funds, to consider environmental, social, and governance factors in its investment decisions.

As ESG and climate finance expand, companies with stronger climate performance should be able to attract capital under more favorable conditions. KoSIF is now also calling on the National Pension Service to make a net-zero commitment.

In the same year, KoSIF supported the office of National Assembly member Hong Il-pyo of the Saenuri Party in advancing an amendment to Korea’s public procurement legislation. The amendment allowed environmental and social factors to be considered when selecting government suppliers.

During the Biden administration, the United States also pursued federal procurement requirements under which major suppliers would disclose climate information through CDP. Korea could consider applying a similar model to public procurement.

More recently, KoSIF has been working with the National Assembly ESG Public-Private Policy Forum to advance a framework act on ESG. The objective is to create an economic structure in which companies with stronger climate and ESG performance are more likely to be selected and rewarded by the market.

     Q. What were the main challenges in preparing the report? Were there limitations in the data or concerns about reliability?

Although corporate participation in disclosure increased from the previous year, the number of responding companies in Korea remains lower than in Japan or Europe.

This limited the statistical representativeness of some comparisons with global companies. In certain sector-level analyses, the number of companies was too small to produce meaningful averages or median values.

The limitations were particularly pronounced in the water security data.

For some questions, fewer than five companies in a sector submitted responses. We therefore had to supplement the analysis by identifying representative companies and using their disclosures to provide an indication of broader sector-level conditions.

Only 20 companies, for example, reported using an internal price for water. In some industries, only one company responded. This created clear limitations in interpreting the figures and comparing performance across sectors.

     Q. Are there any ESG issues you would like future reports to address in greater depth?

In addition to climate change, CDP requests corporate disclosure on water security, forests, biodiversity, and plastics.

Future reports should examine environmental issues beyond climate change in greater depth, particularly areas such as biodiversity and plastics, where disclosure remains limited but the level of financial and policy interest is increasing.

We would also like to analyze alignment with evolving international disclosure standards, including the recommendations of the Taskforce on Nature-related Financial Disclosures and IFRS S2.

By doing so, we hope to provide companies with clearer guidance on how they can respond to multiple and increasingly interconnected disclosure frameworks.

     About KoSIF

The Korea Sustainability Investing Forum, or KoSIF, is a nonprofit organization established in 2007 to advance a sustainable society by promoting socially responsible investment and strengthening corporate responsibility through the integration of environmental, social, and governance factors.

Since its establishment, KoSIF has played a leading role in developing the institutional foundation for sustainable finance and corporate sustainability in Korea. Its work has included supporting ESG-related legislation and policy frameworks, advancing responsible investment by the National Pension Service, and encouraging financial institutions to adopt coal phase-out policies.

KoSIF also serves as the secretariat of the CDP Korea Committee and supports the implementation of CDP, the global environmental disclosure platform, in Korea.

In 2008, KoSIF began requesting climate-related information from Korea’s 50 largest listed companies by market capitalization. Since then, the scope of its work has expanded to include water security, forests, biodiversity, and other environmental issues.

CDP reports published annually using corporate disclosure data are used by financial institutions around the world and by companies seeking to strengthen strategy, risk management, and climate competitiveness. More than 24,000 companies globally currently disclose environmental information through CDP.

KoSIF also works with major global initiatives, including the Partnership for Carbon Accounting Financials, the Science Based Targets initiative, RE100, EV100, and the Glasgow Financial Alliance for Net Zero.

Through these partnerships, KoSIF supports Korean companies and financial institutions in developing and implementing sustainability strategies aligned with international standards.

Its work includes producing data-driven reports and policy analysis, supporting corporate environmental disclosure, strengthening financed-emissions accounting, expanding access to renewable energy, advancing science-based target setting, and contributing to policy and legislative discussions.

KoSIF’s ongoing objective is to ensure that transparent disclosure and credible climate action are reflected in financial decisions, public procurement, corporate competitiveness, and the broader allocation of capital in Korea.