"If Carbon Emissions Aren't Reduced, Clients Will Turn Away"... Climate Response Critical for Survival [Climate Risks Hitting Businesses]

Climate Abnormalities Becoming Reality... Strengthening International Climate Standards for Companies
US SEC to Introduce Climate Disclosure... Domestic Efforts Underway
Clear Scope and Targets Must Be Set, and Database Established

"If you fail to respond to climate change, you will not be chosen by clients."

As abnormal climate becomes a reality, climate risk management has become an unavoidable task. Without establishing a climate change response strategy, even managing the current situation is becoming difficult. To survive in the competition, it is a critical time for the government to set standards and systems, and for the private sector to actively participate in a simultaneous approach.

Abnormal Climate Approaching... No Longer Someone Else's Problem

Abnormal climate phenomena such as heatwaves, heavy snowfall, droughts, and earthquakes are spreading worldwide. Not only leading overseas research institutions but also the Korea Meteorological Administration (KMA) have expressed concerns about a bleak future.

Recently, the KMA used greenhouse gas concentration and climate change numerical models to produce climate change scenarios. Under the 'high carbon scenario,' which assumes greenhouse gas emissions remain at current levels, the average number of heatwave days in Seoul between 2081 and 2100 is expected to increase to 109.8 days. A heatwave day is defined as a day when the daily maximum temperature exceeds 33 degrees Celsius. The number of summer days in Seoul is projected to rise to 194.3 days, more than two months longer than the 127.7 days averaged from 2000 to 2019. This means more than half the year will be summer. The number of tropical night days is also predicted to increase 8.5 times to 96.1 days compared to the present.

Not only heat but also precipitation is expected to increase. Under the high carbon scenario, the average annual precipitation in Seoul between 2081 and 2100 is projected to be 1,521.9 mm, about 20% higher than current levels. The number of heavy rainfall days with over 80 mm of precipitation per day is also expected to rise by 37%, from 2.7 days per year currently to 3.7 days.

A Global Common Challenge... 'Essential' in Competition

In March, the U.S. Securities and Exchange Commission (SEC) adopted the final rule on climate disclosure. All publicly listed companies in the U.S. are now required to disclose information related to climate risks, financial impacts, and greenhouse gas emissions. Disclosure requirements will be phased in according to market capitalization. Despite intense debates, the SEC decided this was the right direction.

In South Korea, a draft sustainability disclosure system was released at the end of April. The draft allows companies to choose other sustainability topics for financial information disclosure, but climate-related topics are mandatory. The Financial Services Commission plans to decide the specific implementation timeline after consultations with related ministries, assuming it will be after 2026. Whether domestically or internationally, climate response capability and planning have become essential to demonstrate corporate value in capital markets.

In the shipping industry, which consumes massive amounts of fossil fuels, climate risk is a matter of survival. Environmental regulations for the shipping industry are being significantly tightened in line with eco-friendly trends, forcing shipping companies to achieve challenging carbon neutrality targets. The International Maritime Organization (IMO) has set a goal to reduce average carbon dioxide emissions per transport work by 40% compared to 2008 levels by 2030. Competitiveness is being reshaped based on whether companies own eco-friendly vessels.

Expanding Climate Risks... Urgent Need for 'Standard Establishment'

Companies unanimously called for the government to organize related systems and build a national database (DB) so that they can comply well with climate-related disclosure standards. They emphasized the need for tailored support starting with small and medium-sized enterprises (SMEs) and companies participating in RE100 (Renewable Energy 100%) that lack disclosure capacity.

Countries such as the European Union (EU) are strengthening carbon-related disclosure regulations for export companies under the pretext of the climate crisis. Companies feel a heavy burden from the 'Scope 3' disclosure system, which requires accurate measurement of carbon emissions throughout the entire lifecycle of their products, including production processes, suppliers, and distribution. If companies fail to comply with the EU's Carbon Border Adjustment Mechanism (CBAM) and Digital Product Passport (DPP), which will be implemented from 2026, they may face export restrictions. However, data measurement is not easy. The DPP, which the EU plans to introduce as early as 2026, is a system that digitally collects, stores, and shares lifecycle information (production, distribution, sales, use, recycling, etc.) of all products distributed within the EU.

The industry argues that the government should take responsibility and build a national climate disclosure and EU DPP-related data platform. A representative from the Korea Chamber of Commerce and Industry said, "While Scope 1 and 2 ESG (Environmental, Social, and Governance) disclosures are managed by the state, producing reliable data, the disclosure methodology for Scope 3 has not been finalized, resulting in high uncertainty in corporate data. While it is important for companies to quickly develop disclosure capabilities, it is more urgent for the government to introduce disclosure tools (systems) tailored to corporate circumstances."