Samsung Electronics' Dilemma Including 'Employee Working Conditions' in ESG Report

Analysis of Impact on Corporate Finance
Additional Insights Through 'Double Materiality Assessment'
Reflecting Solutions to Various Issues Like Executives Working 6 Days a Week and Union Strikes
'Labor-Management Relations' Also in Hyundai Motor Report
Companies Express Concerns Over Mandatory Implementation

Samsung Electronics, which has attracted attention from the business community due to executives working six days a week and labor union strikes following failed wage negotiations, has selected ‘working conditions of employees’ as one of the eight material topics in its 2024 Sustainability (ESG) Management Report, drawing interest.

Seoul Samsung Electronics Seocho Building. Photo by Jinhyung Kang aymsdream@

According to the ‘2024 Sustainability Management Report’ published on June 2 on the Financial Supervisory Service’s electronic disclosure system and Samsung Electronics’ official website, the company finalized eight topics through a ‘double materiality assessment’: three environmental (E), four social (S), and one governance (G) topic. Among the social topics, ‘working conditions of employees’ was selected. This is the first time Samsung Electronics has designated employee labor issues as a key focus in its ESG management report.

Samsung Electronics applied the ‘double materiality assessment’ again this year to determine its material topics in the ESG management report. The double materiality assessment is a method that analyzes both the impact of external environmental and social factors on a company’s finances and the impact of internal management activities on external stakeholders.

From a pool of 115 issues, Samsung Electronics identified 13 primary top topics, including working conditions of employees, equal treatment and opportunities for employees, and forced labor of employees, then evaluated their materiality to narrow them down to eight. Regarding ‘working conditions of employees,’ Samsung Electronics introduced its strategy, stating, “We will continue improvement activities to respect human rights and create a safe working environment, fostering a workplace culture where it is good to work.”

Within the business community, this move is seen as a sign that Samsung Electronics is deeply considering the working system of its employees. Analysts also interpret that behind the company’s recommendation for executives to work six days a week under an emergency management system and the nationwide Samsung Electronics labor union strike scheduled for June 8-10, the company is actively seeking solutions to resolve these issues.

Other companies such as Hyundai Motor Company, Kakao, and HYBE also reveal their current challenges in their ESG management reports. Hyundai Motor Company included ‘labor-management relations’ among its eight material topics. Hyundai’s labor union, affiliated with the Korean Metal Workers’ Union, is known as a ‘strong union’ in the business community. This year, as wage negotiations have stalled, Hyundai’s union has secured the right to strike, raising tensions. Union members plan to refuse weekend overtime starting June 6 while continuing negotiations with the company.

Kakao, which faced difficulties due to a data center fire and stock price manipulation incidents, selected 12 material topics, newly including ‘management of water use at data centers’ and ‘ensuring sound governance.’ HYBE, which was embroiled in legal disputes with Min Hee-jin, the CEO of ADOR, added ‘ethical management and compliance’ to its material topics this year.

Some view these changes in companies as a natural evolution following the adoption of the ‘double materiality assessment’ in ESG management reports. As companies begin to place greater importance on environmental and social factors that affect their finances, they have included socially significant challenges as material issues.

The double materiality assessment was first introduced last year when the international standard for ESG management reports, the Global Reporting Initiative (GRI), was revised. Previously, companies mainly used the ‘single materiality assessment,’ which focused on economic value and profits generated internally and treated external environmental and social factors as secondary, resulting in a narrower perspective than the double materiality assessment. This approach was often criticized as insufficient for evaluating corporate ESG management and identifying appropriate goals. Song Jae-hyung, head of the CSV team at the Korea Economic Association, said, “The number of companies disclosing reports has significantly increased compared to last year, and as the double materiality assessment is utilized, the content of reports is gradually evolving. We expect that as new guidelines are developed and applied by organizations such as the Sustainability Accounting Standards Board (SASB), corporate reports will become more detailed and refined.”

However, companies reportedly have significant concerns about the mandatory disclosure of ESG management reports. In April, the Financial Services Commission, together with the Korea Sustainability Standards Board (KSSB), released a draft of ESG disclosure standards and postponed the mandatory disclosure to after 2026. Currently, companies disclose voluntarily. In May and June, many companies released ESG management reports as they were required to newly disclose ESG management information aligned with the Environmental Agency’s greenhouse gas emissions data collection and digitization by the end of May.

Within the business community, there is a prevailing opinion that the mandatory disclosure deadline should be delayed as much as possible, citing the considerable manpower, time, and resources consumed during internal review processes such as the double materiality assessment. According to a survey conducted by the Korea Economic Association in March targeting 103 listed companies with assets exceeding 2 trillion KRW, 27.2% of companies said the mandatory ESG disclosure should be implemented ‘after 2029.’ Song emphasized, “Once disclosure becomes mandatory, not only the company itself but the entire supply chain related to the company must coordinate and conduct related investigations and data collection, which creates a significant burden. Adequate time and effort are needed to establish the necessary infrastructure.”