ESG
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What is the ESG?
ESG is an acronym for Environment, Social, and Governance, which are non-financial factors of a company. It contains the philosophy that sustainable development can only be achieved by considering transparent management such as eco-friendly, social responsibility management, and improved governance in corporate activities. In other words, not only short-term financial performance but also long-term corporate social responsibility is being emphasized, and as ESG rating spreads internationally and establishes itself as a new management paradigm, it is becoming a necessity for companies in Korea as well.
< ESG >
Domestic ESG rating agency & categories
The Korea Corporate Governance Service (KCGS) is the most representative ESG rating agency in Korea, encourages sustainable management of companies and provides judgment information to stakeholders. Also, the rating results and individual grades are used to organize KRX social responsibility investment index on the Korea Exchange.
KSGC ESG rating categories
| Environment | Environmental management certification, environmental information disclosure, participation in international initiative, environmental management organization, environmental education, environmental performance evaluation, greenhouse gas emissions, energy usage, hazardous chemical emissions, water consumption/recycling, waste discharge/recycling |
|---|---|
| Social | Proportion of fixed-term workers, operation of human rights protection programs, share of female workers, partner support, fair trade program, anti-bribery program, product and service safety certification, social contribution expenditure |
| Governance | General meeting of shareholders, allocation, social governance disclosure, board independence, performance of the board of directors, expert committees within the board, surveillance, status of operation of audit committee, independence as an external auditor, disclosure of the board of director’s operation regulations, etc., ESG grade disclosure |
Overseas ESG rating agency & categories
Dow Jones and MSCI are representative global rating agencies that measure the ESC management performance of companies. Among them, MSCI evaluates 35 categories that focus on the intersection between the company's core business and industry-specific issues that can create significant risks and opportunities.
MSCI ESG rating categories
| Environment | Climate Change | Carbon emissions, Product carbon footprint, Financing environment impact, Climate change vulnerability |
|---|---|---|
| Natural Capital | Water stress, Biodiversity & land use, Raw material sourcing | |
| Pollution & waste | Toxic emissions & waste, Packaging material & Waste, Electronic waste | |
| Env. Opportunities | Clean tech, Green building, Renewable energy | |
| Social | Human Capital | Labor management, Health & safety, Human Capital development, Supply chain labor standards |
| Product Liability | Product safety & quality, Chemical safety, Consumer financial protection, Privacy & data security, Responsible investment, Insuring health & demographic risk | |
| Stakeholder Opposition | Controversial sourcing, Community relations | |
| Social Opportunities | Access to communication, Access to finance, Access to health care, Opportunities in nutrition & health | |
| Governance | Cooperate Governance | Board, Pay, Ownership, Accounting |
| Cooperate Behavior | Business ethics, Tax transparency |
* MSCI data: https://www.msci.com/our-solutions/esg-investing/esg-ratings/esg-ratings-key-issue-framework
ISO Certification related to ESG
| Environment | ISO 14001(Environmental Management System) |
|---|---|
| Social | ISO 26000 (Guidance on Social Responsibility), ISO 45001 (Occupational Health and Safety Management System) |
| Governance | ISO 37001 (Anti-bribery Management System), ISO 37301 (Compliance Management System) |
Currently, more than 600 institutions at home and abroad have different ratings depending on which institution is evaluated due to different methods and reference materials in evaluating a company's ESG, causing much confusion. Therefore, the ISO international standard, established as an international consensus, is a good guide in securing objectivity and reliability.
- PrevISO/IEC 27001 Information Security Management System 21.10.22
- NextISO 50001 Energy Management System 21.09.27
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