FKCCI Conveys Opposition to IFRS on Establishing "Sustainability Reporting Standards"

[Asia Economy Reporter Jeong Hyunjin] The Federation of Korean Industries (FKI) announced on the 30th that it has submitted an objection to the International Financial Reporting Standards (IFRS) Foundation's development of ESG (Environmental, Social, and Governance) sustainability reporting standards.

The IFRS Foundation is promoting the establishment of international sustainability reporting standards, citing the lack of a unified global ESG disclosure standard, which results in poor comparability and consistency of ESG information.

In response, the FKI stated, "The Korean business community fully recognizes the seriousness of climate change and sympathizes with the international community's active efforts and Korea's willingness to participate," but expressed opposition due to concerns companies would face if such standards are established. In particular, it pointed out that the financialization of non-financial information related to climate response and carbon neutrality requires significant assumptions or estimates, and since companies cannot perfectly predict the future, disclosures could be used as a pretext for companies to bear unreasonable and severe litigation risks.

The FKI also argued, "Since sustainability information falls within the realm of qualitative evaluation, it is undesirable to forcibly create quantitative standards and control them," and insisted, "If companies deem it necessary, they should be allowed to voluntarily disclose relevant risks, leaving it to the companies themselves."

Furthermore, the FKI proposed that if the standards are to be developed despite these concerns, the number of committee members should be significantly increased to allow participation by corporate representatives. It suggested that the World Business Council (WBC), composed of major economic organizations worldwide, recommend committee members.

Meanwhile, the IFRS plans to officially announce the establishment of the ISSB at the United Nations Climate Change Conference (COP26) to be held in Glasgow, UK, this November, aiming to publish ESG climate-related sustainability standards developed by the ISSB in the first half of next year.