Korea’s Financial Services Commission (FSC) announced the release of its finalized roadmap for sustainability (ESG) disclosure, significantly expanding the number of companies that will be required to provide ISSB-aligned sustainability reporting compared to its initial plan.
According to the FSC, the decision to increase the number of companies under its mandatory sustainability reporting regime followed requests from institutional investors to expand the scope of the requirements, “considering the usefulness of sustainability disclosure data for investment purposes.” The FSC’s decision contrasts sharply with recent moves in Europe to reduce the number of companies covered by the EU’s CSRD sustainability reporting regulation, and in the U.S. to scrap climate-related reporting altogether.
The announcement follows the release earlier this year by the FSC of its draft roadmap, which proposed requiring companies listed on Korea’s benchmark KOSPI Index with assets greater than KRW 30 trillion (USD$20 billion) to begin sustainability reporting in line with the new standards in 2028, based on 2027 data, with the possibility of expanding the sustainability reporting regime to companies with more than KRW 10 trillion (USD$6.7 billion) in assets a year later, and to add smaller companies in the future.
Under the new finalized roadmap, however, mandatory sustainability reporting requirements will initially apply to companies with more than KRW 10 trillion in assets in 2028, and then expand one year later to companies with KRW 5 trillion (USD$3.4 billion). The FSC added that after reviewing disclosure practices and conditions in 2028-2029, authorities will consider further lowering the threshold to KRW2 trillion from 2030.
While only a handful of the largest companies would have been included in the initial plan’s KRW 30 trillion coverage, under the new plan, more than 290 companies will be required to begin sustainability reporting in 2028, expanding to more than 3,100 companies the following year. Lowering the threshold to KRW 2 trillion as proposed would likely expand the number of reporting companies dramatically.
Korea’s Sustainability Standards Board (KSSB) released finalized sustainability reporting standards underlying the new reporting requirements earlier this year, which broadly align with those of the IFRS Foundation’s International Sustainability Standards Board (ISSB). The KSSB standards include Standard No. 1: General Requirements for Sustainability-related Financial Disclosures, and Standard No. 2: Climate-related Disclosures, which correspond to the ISSB’s IFRS S1 (sustainability-related) and IFRS S2 (climate-related) standards.
The FSC’s finalized roadmap includes a series of transitional reporting reliefs aimed at easing the implementation reporting for companies, including postponing requirements for Scope 3 disclosures for all companies for three years after the start of reporting “to provide time to establish necessary infrastructures for calculating and producing GHG emissions,” and allowing small businesses that are not considered as high-carbon emitters to be exempted from scope 3 disclosure.
Additionally, in the first three years companies will be exempted from damage compensations, administrative sanctions, or criminal punishments regard to the content of the sustainability disclosure information that they provide, although the FSC added that “authorities will make sure to strictly deal with intentional greenwashing activities through damage compensations and administrative sanctions.”
The FSC also said that third-party verification will be required for sustainability reporting, but will only take affect from 2030.
Prior to the implementation of mandatory requirements, the FSC said that companies will be encouraged to file sustainability disclosures on a voluntary basis with the Korea Exchange (KRX), “considering various demands from businesses and investors,” adding that the KRX’s voluntary disclosure system will be updated to facilitate filing of KSSB-aligned sustainability reports by companies not yet covered by the new requirements.
In addition the release of the roadmap, the FSC also highlighted a series of initiatives by various government authorities aimed at helping companies to improve their sustainability reporting capacity and prepare for global climate and environment related regulations, including plans by the Ministry of Climate, Energy and Environment (MCEE) to develop an integrated platform on climate risks and to develop sector-by-sector guidelines on scope 3 emissions for 15 key export industries, as well as plans by the government to provide consulting programs on ESG management and relevant disclosure processes.
