Korean Institute of Certified Public Accountants Holds the 16th Sustainability Certification Forum

Introduction of a Study on Financial Materiality Assessment through Empirical Analysis

The Korean Institute of Certified Public Accountants (KICPA) announced on the 14th that it held the 16th Sustainability Assurance Forum on the 11th under the theme of "Empirical Analysis of Financial Materiality of Domestic Sustainability Information and Utilization Measures."

The Korean Institute of Certified Public Accountants held the 16th Sustainability Certification Forum on the 11th, with the theme "Empirical Analysis of Financial Materiality of Domestic Sustainability Information and Utilization Measures." Photo by the Korean Institute of Certified Public Accountants

The Sustainability Assurance Forum has been operated by KICPA, an expert organization in audit assurance, since 2022 with the purpose of enhancing the transparency and reliability of sustainability information. Through this, it widely shares the accounting industry's expertise on sustainability assurance with the general public.

At this webinar-based assurance forum, Ryu Hojung, team leader at Sustainvest, shared research results on financial materiality assessment methods using empirical analysis. Analyzing 5,335 companies listed on the KOSPI and KOSDAQ markets from 2016 to 2023, the study found that in the environmental category, "greenhouse gas emission management"; in the social capital category, "product quality and safety," "sales practices and product labeling"; in the human capital category, "labor-management relations"; in the business model and innovation category, "business model resilience," "supply chain management," "procurement and efficiency"; and in the leadership and governance category, "systematic risk management" showed financial materiality.

Team leader Ryu said, "This study is the first in Korea to examine the relationship between sustainability information and corporate performance at the SASB issue level," adding, "Sustainability issues that significantly affect corporate performance can be interpreted as having financial materiality, so we expect that the results of this study can be utilized in companies' materiality assessments."

The industry highly evaluated the materiality assessment using statistical models. Kwon Seongsik, head of the Standards Association Center, said, "This is a meaningful study in a situation where objective materiality assessment methodologies are lacking," and added, "It will be a good reference for companies when conducting materiality assessments." Kim Huntae, executive director at POSCO Holdings, also said, "I hope the financial materiality assessment method will be developed and used as a guideline to present financially material issues by company size or industry." Park Jungeun, director at Daishin Economic Research Institute, suggested, "If sustainability information is reflected in financial statements, the impact of such information on financial performance will be evaluated more objectively," and added, "If sustainability-related expenditures are classified as investments rather than costs, it could reduce the burden on companies."

Choi Unyeol, chairman of KICPA, said, "Selecting sustainability information that affects corporate outlook through materiality assessment is an essential task to support efficient decision-making by information users," and added, "The materiality assessment method using statistical models discussed at this forum is expected to help companies in preparing sustainability reports."

Meanwhile, KICPA is conducting various sustainability-related projects, including operating the Sustainability Assurance Forum, introducing international assurance standards, running an Environmental, Social, and Governance (ESG) academy, and publishing booklets.