South Korea

There is a voluntary disclosure regulation on the publication of sustainability reports by listed companies. Under Article 8, Paragraph 7(e) of the Enforcement Rules of KOSPI Market Disclosure Regulation of the Korea Exchange (KRX), sustainability reports are included as voluntary disclosure items. Accordingly, listed companies are currently publishing sustainability reports voluntarily. In 2021, KRX released the “ESG Disclosure Guidelines” to encourage companies to voluntarily disclose ESG information.

Korea Composite Stock Price Index (KOSPI) constituents are required to issue corporate governance reports covering 10 core principles of corporate governance.

As major economies enhance their ESG disclosure requirements, the South Korean government is also developing disclosure requirements to assist domestic companies in complying with the escalating global ESG standards.

The Korea Sustainability Standards Board (KSSB) released draft ESG disclosure standards (KSSB Disclosure Standards) in April 2024. Although the announcement of details of the ESG disclosure system and the timeline for its introduction have been delayed, the final KSSB Disclosure Standards are expected to be released by the end of 2025 and implemented after 2026.

The corporate governance report mentioned above adopts a comply-or-explain approach. Other than this, there are currently no ESG-related disclosure requirements that apply on a mandatory or comply-or-explain basis.

The “ESG Disclosure Guidelines” released by KRX require disclosure of environmental, social and governance aspects.

The draft KSSB Disclosure Standards consist of three parts:

1. No. 1 (General Requirements for Sustainability-related Financial Information Disclosures);
2. No. 2 (Climate-related Disclosures); and
3. No. 101 (Additional Disclosures for Policy Purposes).

The first two standards are mandatory for companies, while the third is optional. Under standard No. 2, companies are required to prioritise and disclose climate-related information among ESG factors.

Companies may select and disclose information about sustainability-related risks and opportunities other than climate-related information.

The “ESG Disclosure Guidelines” published by KRX summarise and provide companies with key ESG factors based on GRI.

The draft KSSB Disclosure Standards are based on IFRS S1 and S2 and have been modified to reflect the circumstances of domestic companies. The KSSB has stated that it established these disclosure standards to provide useful information to investors, taking into consideration international harmonization and acceptability to companies.

In addition, many companies voluntarily adopt a variety of international reporting standards, such as GRI, SASB, TCFD, and others.

The draft KSSB Disclosure Standards are based on the ISSB Standards and therefore adopt a single materiality approach, requiring disclosure of information for investors.

The definition of “material information” in the KSSB Disclosure Standards is consistent with the definition in K-IFRS, the accounting standards aligned with IFRS by the Korea Accounting Standards Board. Accordingly, the KSSB Disclosure Standards state that information is material if omitting, misstating or obscuring such information could reasonably be expected to influence decisions that primary users of reports make on the basis of those reports.

Given that sustainability reporting is currently voluntary, disclosure of GHG emissions is not mandatory.

Additionally, in accordance with Article 16-8 of the Environmental Technology and Industry Support Act, all central administrative agencies, local governments, public institutions, national and public universities, local public corporations, regional public corporations, local medical centers, management companies under Article 27, Paragraph 1 of the Framework Act on Carbon Neutrality and Green Growth for Coping with Climate Crisis, listed companies with total assets of KRW 2 trillion or more on a consolidated basis, and green companies (as designated by the Minister of Environment for their efforts in reducing pollutants, saving resources and energy, and improving environmental performance) are required to register and submit environmental information through the Environmental Information Disclosure System. The system categorises disclosures into mandatory and voluntary topics, and disclosure of GHG emissions (Scope 1, 2, and 3) is voluntary. However, according to an announcement in October 2023, Scope 1 and 2 will become mandatory disclosures in the future, whilst Scope 3 will be phased in gradually. See expected enhancements to the system mentioned in section A.12 below.

There are no national laws or regulations that directly require third-party verification or assurance of the content of ESG disclosures; however, most companies choose to pay for third-party assurance at their own expense.

Yes, many companies voluntarily disclose their ESG information using various global initiatives and guidelines (GRI, SASB, TCFD, etc.), and the number of companies publishing sustainability reports has increased significantly. According to the KRX ESG portal, 131 companies had published sustainability reports in 2022, and this number increased to 161 in 2023 and to 204 in 2024.

In April 2021, the Ministry of Environment established the Korean Green Taxonomy (K-taxonomy) under the Environmental Technology and Environmental Industry Support Act. In December 2021, the Ministry released the “The Korean Green Taxonomy (K-Taxonomy) Guideline”, which outlines principles and criteria for categorizing green economic activities within the K-taxonomy framework. Whilst this guideline is not legally binding, it sets out the standards for identifying green economic activities.

The guidelines were revised in December 2022, adding nuclear power and climate change adaptation-related economic activities to the list of green economic activities, and a detailed K-Taxonomy explanation document was released.

In December 2024, the guidelines were further updated to include 10 new green economic activities and revise 21 existing ones, particularly in areas such as water conservation, circular economy, pollution control, and biodiversity. With 25 new and 6 updated technical criteria introduced, the updated taxonomy is expected to play a key role in green bond issuance and serve as a foundational reference for green lending guidelines starting in 2025.

As mentioned above, the draft KSSB Disclosure Standards are based on IFRS S1 and S2 and are currently in draft form. The draft KSSB Disclosure Standards focus on interoperability with the ISSB framework, adopting consistent disclosure elements such as governance, strategy, risk management, and metrics and targets. General Requirements (No. 1) and Climate-related Disclosures (No. 2), which correspond to IFRS S1 and S2 respectively, are mandatory disclosure standards, while Additional Disclosures (No. 101) is voluntary.

Regarding the scope and timeline, in January 2021, the Financial Services Commission announced plans to implement ESG disclosure requirements in a phased manner. Specifically, it stated that these requirements would apply to listed companies of a certain size (e.g., more than KRW 2 trillion in assets) starting in 2025, and to all listed companies on the KOSPI from 2030. However, in October 2023, mandatory ESG disclosure requirements under the KSSB Disclosure Standards were postponed to 2026 onward, and the asset size classification of applicable companies and the specific timing of the introduction will be determined later.

1. The Environmental Information Disclosure System Reorganization was scheduled to be released in October 2023, but has been delayed and is currently on hold. Key revisions include:
   
   (i) changing the reporting entity from a site-by-site basis to a corporate entity to align with global ESG standards;
   
   (ii) enhancing the provision of environmentally responsible investment information based on the K-taxonomy; and
   
   (iii) mandatory disclosure of essential items such as GHG emissions (Scope 1 and 2 only; Scope 3 will be phased in), with non-core information excluded or consolidated.
2. A mandatory human rights and environmental due diligence bill (that was first tabled in 2023) has been revised and reintroduced to the legislative body in June 2025. The due diligence obligation (under the legislative bill for the Act on the Protection of Human Rights and the Environment for Sustainable Business Management) would apply to companies with 500 or more employees or annual revenue of KRW 200 billion or more, excluding SMEs. Covered companies would be required to establish a due diligence framework, assess actual or potential adverse impacts across their operations and supply chains, and publish annual reports. Non-compliance may lead to penalties, including fines, procurement bans, or imprisonment. It is still early days to predict the likelihood of the bill’s passage.