[Interview] "ESG is a Growth Opportunity... Supporting Differentiation Strategies"

Lee Dong-seok, Deputy Head and Leader of Samjong KPMG ESG Business Group
Mandatory ESG Information Disclosure... Gradual Implementation from Disclosure Response Strategies to System Development

"Standardized global ESG (Environmental, Social, and Governance) disclosure criteria have made unified data management increasingly important. Since ESG disclosure requirements are very detailed and complex for each specific indicator, an integrated strategy and response are necessary."

A platform has emerged for the first time in the industry that not only responds to ESG-related regulations and disclosure systems but also helps create corporate management value through financial judgment. It is Samjong KPMG's 'ESG Link (LINC).' This IT platform supports the mandatory ESG disclosure environment and unified ESG strategies for companies. The name Link (LINC) combines the meaning of connection (Link) and Corporate Sustainability.

ESG Strategy Support Platform 'Link'

Lee Dong-seok, Deputy Head and ESG Business Group Leader at Samjong KPMG, recently told Asia Economy, "With the mandatory ESG information disclosure, companies must collect and manage vast ESG data by industry, business site, and value chain stages, and disclose not only this data but also analyze the financial impact of ESG-related risks and opportunities." He explained that IT systems are necessary for this purpose. Since global ESG disclosure standards require ESG information to be disclosed simultaneously with financial statements, timely collection and disclosure of ESG information require IT system-based management. Lee added, "If incorrect information or errors from manual input are included in disclosures, legal liabilities and greenwashing issues may arise, so IT system-based management is crucial to ensure the objectivity and reliability of ESG data." The expected benefits of ESG Link include ▲establishing an audit-ready system ▲supporting financial review of ESG risks ▲and supporting practical improvements in ESG management.

It is important to have a system capable of error-free short-term collection of vast ESG-related data and to establish internal control guidelines related to data generation, aggregation, and approval. Link has an embedded ESG data hub and an approval process supporting data governance, which fundamentally prevents greenwashing issues, according to Lee. He emphasized, "Furthermore, it enables financial impact simulations of risks and financial analysis of eco-friendly management activities, which were previously unaddressed, supporting analysis-based ESG decision-making. It is expected to guide practical innovation by setting ESG indicator-specific issues and improvement goals and monitoring performance on related tasks."

Since 2008, Samjong KPMG has pioneered the domestic ESG market by establishing the first dedicated ESG organization among Korean accounting and consulting firms. Currently operating under the name ESG Business Group, it has built a one-stop service covering management strategy, information disclosure and certification, financial risk, and IT consulting. Over 150 experts provide customized ESG advisory services tailored to corporate situations. To date, they have conducted over 500 ESG advisory projects for more than 100 domestic companies, including SK Group, Samsung Electronics, Naver, KB Financial Group, Hana Financial Group, and Lotte Group. Lee explained, "Samjong KPMG ESG Business Group is the first in Korea to have been preparing ESG information disclosure response strategies with SK since March, and recently provided ESG information disclosure advisory services to KB Financial Group, the first in the domestic financial sector."

Competitiveness in Opportunity Creation is Low... Prioritizing Investment

He evaluated that domestic companies are establishing ESG management systems. Lee said, "Although it was difficult to understand what ESG is and what specific ESG requirements capital markets demand, I believe that evaluation agencies' required ESG management systems have been somewhat established within a short period."

However, he pointed out that while companies are relatively good at managing ESG risks based on experience and capabilities in responding to existing regulations, their competitiveness is lacking in new opportunity creation areas such as eco-friendly new businesses and new technologies. Lee said, "Considering that ESG-related investments are accelerating and the transition to a carbon-neutral society is underway, this is a very unfortunate situation. Although disclosure standards can be very complex and difficult, their essence is to identify important ESG issues that affect corporate value and manage them strategically."

He said that companies need confidence in disclosure response stages and promotion strategies to respond well to the future ESG disclosure environment. It is necessary to understand what is required for disclosure response and establish plans considering the types, contents, and timelines of regulations companies will face.

Lee emphasized, "New disclosure standards require extensive information collection and advanced financial impact identification compared to before, so establishing an organization including all related departments, subsidiaries, finance teams, and CFOs is essential. Additionally, IT system support should be considered to ensure the timeliness and accuracy of disclosure information."

He advised that to seize growth opportunities in ESG management, companies must proactively select and focus. Lee said, "The direction of various ESG-related tasks should be planned based on which ESG risks and opportunities help corporate value. To achieve the best results with limited resources, core risks and opportunities must be selected and focused on." From this year, responding to mandatory ESG information disclosure from a regulatory perspective must be pursued, and simultaneously, efforts to create ESG business opportunities should be considered.

Lee said, "The ESG-centered management environment change can be a burden for companies in terms of risk management but also represents a huge growth opportunity unimaginable in the existing management environment." He added, "For domestic companies, the scale of green revenue related to eco-friendliness is expected to be significantly lower than global companies, so improvement is urgent. Companies should actively reflect ESG perspectives to reassess their business portfolios, redefine new business models based on this, and prioritize investments considering ESG."