The Financial Services Commission is moving to exempt companies outside high-carbon-emitting industries from disclosing Scope 3 greenhouse gas emissions as it pushes ahead with mandatory sustainability, or ESG, reporting. The exemption, initially limited to small businesses, could be extended to all low-carbon industries regardless of company size.
Kwon Dae-young, former FSC vice chairman and now first vice minister of the Ministry of Economy and Finance, told the first legislative review subcommittee of the National Assembly's National Policy Committee recently that he intends to exclude Scope 3 from the scope of disclosure for industries that are not high-carbon emitters, according to the committee on the 2nd. "In particular, we have put safeguards in place for small businesses," he said.
Under the ESG disclosure framework the FSC announced in July, small businesses that do not belong to high-carbon-emitting industries are exempt from Scope 3 reporting. Kwon's remarks are read as signaling that the government is also weighing an expansion of the exemption to mid-sized and large companies across low-carbon industries. Content, software and service industries are seen as possible candidates for the exemption.
Scope 3 refers to indirect greenhouse gas emissions generated across a company's entire value chain, including raw material sourcing, logistics, business travel and the use and disposal of products sold. Because it requires companies to account for emissions not only within their own operations but also across suppliers and the broader supply chain, measurement and calculation are considered costly and time-consuming. The government's review of ways to ease the disclosure burden on low-carbon industries is seen as reflecting that reality.
Mandatory ESG disclosure is set to begin in 2028 for KOSPI-listed companies with consolidated assets of 10 trillion won or more. The FSC plans to expand the scope to companies with consolidated assets of 5 trillion won or more in 2029, and then in stages to those with 2 trillion won or more.
On the scope of mandatory disclosure, Kwon said 107 listed companies, or 184 on a consolidated basis, are subject to the rules. The National Pension Service is also taking part in the FSC's discussions on setting the disclosure standards. "Institutional investors are making the case very strongly that around 200 to 250 companies would be sufficient for portfolio management," Kwon said.
