Major Listed Companies United on ESG Challenges: "Expand Tax Credit Support and Establish Institutional Qualification Standards"

[Asia Economy Reporter Lee Seon-ae] Listed companies are united in calling for active government support regarding the mandatory disclosure of ESG (Environmental, Social, and Governance). The Korea Listed Companies Association, which represents listed companies, submitted opinions related to the "Partial Amendment to the Restriction of Special Taxation Act" proposed by Representative Kim Jeong-ho to the National Assembly's Planning and Finance Committee and the Ministry of Strategy and Finance, urging support.

According to the Korea Listed Companies Association on the 1st, as responsible investment considering ESG is spreading worldwide, a plan is underway to provide a 30% tax credit on ESG consulting costs to support small and medium-sized enterprises (SMEs) in establishing ESG management strategies. Representative Kim Jeong-ho officially proposed an amendment to the Restriction of Special Taxation Act on February 22 with this content. The amendment stipulates that when SMEs conduct consulting for establishing and implementing management strategies considering ESG and for reporting and disclosing related reports, 30% of the consulting expenses incurred will be deducted from income tax (only income tax on business income) or corporate tax for the relevant tax year. It also includes provisions allowing the Minister of Strategy and Finance to provide necessary administrative and financial support to consulting institutions.

However, listed companies emphasize that the scope of support for tax credits needs to be expanded, and that consulting institutions require careful review and the establishment of qualification standards. The phased mandatory disclosure of sustainability management reports for KOSPI-listed companies is expected, which implies an increased need for ESG management consulting. However, due to the lack of internationally unified disclosure standards, listed companies find it difficult to independently establish and promote ESG management strategies and disclose information.

The Listed Companies Association pointed out, "To prepare and disclose sustainability management reports, it is essential first to build an ESG management system and establish strategies. Specifically, significant costs and personnel burdens will arise from assigning dedicated personnel, collecting information, building related systems, strategy formulation, obtaining certifications (such as ISO), report preparation, and third-party verification."

In fact, according to a survey conducted by the Listed Companies Association in November last year targeting 797 KOSPI-listed companies, 83.7% of companies with total assets exceeding 2 trillion won have dedicated departments or temporary task forces, whereas 67.8% of companies with assets below 2 trillion won lack dedicated departments. The association emphasized, "To encourage listed companies to voluntarily disclose ESG information before the mandatory disclosure deadline, appropriate support targets and application periods must be set," adding, "Since disclosure will be mandatory for companies above a certain size from 2025 and for all KOSPI-listed companies from 2030, the application should be expanded to include small and medium-sized enterprises by 2030."

Furthermore, the association holds a cautious stance on institutional support. Consulting institutions are for-profit entities providing support services and generating revenue during companies' ESG management processes. Although ESG consulting institutions' businesses do not fall under new technologies requiring government support, the necessity of establishing grounds for administrative and financial support is questionable. Therefore, to ensure efficient consulting and stakeholder trust, it is necessary to establish qualification criteria for consulting institutions and to register and manage them.

The association stressed, "If unqualified consulting firms proliferate without qualification standards, companies will suffer from bearing double or triple consulting costs again," and added, "It is essential to verify whether consulting services can be provided at a level that secures the trust of global investors and various stakeholders."

This content was produced with the assistance of AI translation services.