"Corporate Sustainability Metrics"... ESG Gaining Attention Due to 'Coupang Fire', Will It Determine Corporate Fate?

ESG Investment Exceeds $40 Trillion
Strengthening Social Responsibility Such as Environmental Protection and Improvement of Working Conditions
Growing Consumer and Investor Expectations for Companies
E-commerce Companies Like Coupang Must Intensify ESG Efforts

Coupang Deokpyeong Logistics Center Revealed Its Framework After the Fire / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] As consumer perception of the e-commerce company 'Coupang' has worsened following a recent large-scale fire at its logistics center, corporate ESG management is once again drawing attention.

ESG, an acronym for Environment, Social, and Governance, refers to a management approach where companies comprehensively focus not only on financial performance but also on social contribution, environmental improvement, and sustainability.

Today's investors and consumers are sensitive not only to product price and quality but also to ethical aspects such as worker treatment and environmental pollution. As a result, whether a company fully adopts ESG management is seen as a factor that could determine its future.

◆Consumer Backlash Erupts After Coupang's Large Fire

On the 17th, a large fire broke out at Coupang's Deokpyeong Logistics Center in Icheon, Gyeonggi Province, resulting in the death of one firefighter during the extinguishing efforts.

According to police and fire authorities' investigations, the fire is presumed to have started from a power strip connected to a fan. Additionally, suspicions arose that the sprinklers did not function properly immediately after the fire, prompting the police to launch an investigation.

After the incident became known, strong backlash against Coupang erupted on social media platforms (SNS) and online communities. Some claimed that Coupang had inadequately addressed safety issues at its logistics centers. Some consumers shared posts with the hashtag '#CoupangWithdrawal,' spreading a movement to cancel Coupang memberships.

On the 18th, Coupang issued a statement under CEO Kang Hanseung's name, saying, "We deeply apologize for causing concern to many people due to this fire," and expressed regret. However, consumer anger does not seem to subside easily.

◆High Expectations from Investors and Consumers... Emphasis on ESG Management

There is a view that ESG management may be further emphasized in the e-commerce industry following the Coupang fire. ESG is a concept that places significant weight on non-financial performance such as environmental impact, social influence, and transparent governance beyond simple financial indicators when managing or investing in companies.

BlackRock, a leading asset management company in the United States, is already engaged in ESG business.
Photo by BlackRock website capture

ESG has already become a massive investment sector in the U.S., Europe, and other regions. According to data from the Federation of Korean Industries, the global ESG investment asset size reached approximately $40.5 trillion (46,020.15 trillion KRW) last year, more than tripling since 2012. Europe and the U.S. account for 46% and 39% respectively, occupying 85% of global investments.

Institutional investors, the 'big players' in the investment market, are actively engaging in ESG investments. The world's largest asset management firms, such as BlackRock and Vanguard in the U.S., already operate ESG divisions, and domestically, the National Pension Service is accelerating efforts. Previously, Kim Yongjin, chairman of the National Pension Service, announced last year plans to incorporate ESG into about 50% of total assets within two years.

In other words, companies that fail to meet ESG standards demanded by investors risk gradually losing appeal in the market.

Coupang has not been neglectful of ESG. CEO Kang Hanseung previously emphasized Coupang's safety management efforts, stating, "The Deokpyeong Logistics Center completed a detailed inspection by a professional fire safety company over four months starting in February."

Over the past year, Coupang has hired hundreds of safety specialists, and the Deokpyeong Logistics Center used fire-resistant materials such as glass wool to prevent rapid fire spread. Thanks to this, all 248 workers were able to evacuate without casualties.

Coupang logo and the Taegeukgi flag displayed on the New York Stock Exchange building in the United States ahead of the listing. / Photo by Coupang

However, considering the high expectations of consumers and investors regarding corporate social responsibility, there are calls for e-commerce companies like Coupang to put more effort into improving working conditions and facility safety.

The British financial media 'Financial Times' (FT) recently covered Coupang's working environment, stating, "Coupang says ESG issues are 'important,'" but criticized the company for avoiding responsibility regarding worker health and safety issues.

In response, BlackRock, which holds some shares in Coupang, told FT, "We will continue to engage with the companies we invest in to reduce negative impacts on workers."

◆UK's Boohoo Shaken by ESG Risks... "Not Just a Fad but a Megatrend"

ESG risks are increasingly becoming a major issue in corporate management. A representative case is the UK fast-fashion company 'Boohoo.' Boohoo, a fashion brand that grew rapidly through influencer-centered SNS marketing, was criticized last year as a 'modern slavery system' after it was revealed that factory workers in Leicester, UK, were paid only about half the minimum wage.

At that time, a member of the UK Labour Party urged Boohoo's investors to "demand a CEO replacement." Since then, Boohoo is considering high-intensity reforms, such as linking executives' bonuses to the company's ESG and worker protection performance.

Experts suggest that domestic companies need to properly understand and respond to the importance of ESG.

Professor Lee Jaehyuk of Korea University’s Business Administration Department recently stated at a lecture held at the Federation of Korean Industries building in Yeouido, Seoul, "ESG is already a mature issue in North America and Europe, with significant impact across politics, economy, and society," emphasizing, "It is not a mere trend but essentially a megatrend."

He added, "An example is when BlackRock, the world's largest asset manager, sent warning letters to major investment companies demanding management of climate change performance. Currently, ESG in Korea is still at a passing fad level, but ESG is a key point to gauge future corporate survival and sustainability. It is time to seriously consider and respond to the impact of ESG."