Fostering long-term ESG performance among businesses: an interview with Hwang Kyung-mo

With the growing importance for businesses to uphold ESG values, there is also an increasing reliance and collaboration made with consulting firms that assist businesses in maintaining ESG reports. Hwang Kyung-mo at PwC Finance Transformation department is one of many consultants who work with several businesses from manufacturing to service-based. In this interview, Hwang discussed his experience creating efficient systems for companies to adopt to better achieve higher ESG ratings, the challenges presented by unclear ESG regulations, and ways for new policies to resolve such challenges.

Firstly, could you please introduce the work you're currently doing in your department?

I am responsible for ESG-related work at PwC Consulting. Currently, I primarily handle consulting work to help many Korean companies comply with ESG disclosure regulations in various countries.

You must work with many companies. Could you briefly describe the types of projects you're currently handling?

Sure. To give an example of a recent client, it was a domestic manufacturing company selling products to the global market. We provided consulting advisory services to help this manufacturing company comply with ESG disclosure regulations in Korea, the EU, and the US. Previously, companies manually collected data for ESG disclosure responses. They aggregated data via email, calculated it in Excel spreadsheets gathered in emails, and then consolidated it again via email. This process of condensing data from various global locations was extremely time-consuming and prone to errors. 

Our recent work involves supporting companies in improving these processes through consulting and building systems for formal compliance. Essentially, we created systems to systematically collect, manage, and measure the indicators companies need for ESG disclosure—things like greenhouse gas emissions, water consumption, and human resources data that were previously calculated manually.

Looking back on your consulting cases with many companies, can you share how you've helped them reduce carbon emissions?

That's quite a tough question. In fact, many companies now recognize greenhouse gas emissions as a crucial ESG aspect, as you mentioned. They are grappling with how to accurately measure this and are reviewing their approaches. We review whether companies are accurately calculating their greenhouse gas emissions according to global standards like the IPCC or GHG Protocol, checking for any missing inventory from a third-party perspective, and provide advice. Companies then apply that advice to measure their emissions more accurately and monitor them periodically. I believe we've provided significant help in that area.

You must have communicated extensively with companies. In your view, what do you see as the most challenging aspect for companies when they try to pursue carbon reduction or ESG?

The challenging part, off the top of my head, is that ESG disclosure regulations are still in their infancy. Korea actually doesn't have ESG disclosure regulations yet. The EU has the EU CSR Directive, but even that frequently changes its legislation, regulations, and disclosure items. And in the US, California recently decided to require disclosure, but it's been delayed. So, the ESG regulations themselves are not yet clear. Since each country is discussing and establishing numerous standards, companies must provide individual and varying responses. They are trying to manage internally based on standards that aren't even clear yet, so corporate managers are facing difficulties in that regard.

Could you share any specific examples of companies undertaking eco-friendly projects?

Yes, manufacturing companies in Korea are now installing extremely expensive reduction equipment in their production facilities and regularly conducting activities to reduce greenhouse gases. This is despite the fact that the mandatory allocation of emission permits under the emissions trading system in Korea isn't very high, so the immediate need to reduce greenhouse gases isn't actually that great. Therefore, I believe Korean manufacturing companies are doing well with such eco-friendly projects.

Looking ahead, if companies continue to push forward with such eco-friendly projects or goals like carbon neutrality and ESG, how do you see your current work playing a more crucial role in helping companies achieve carbon neutrality?

That's right. As mentioned earlier, the work we're doing now addresses the fact that, until now, there were no clear standards for companies to measure and report ESG data, and ensuring the reliability of that data wasn't a priority. However, by leveraging our experience working with numerous domestic companies and our deep knowledge of global disclosure standards like the GHG Protocol and GRI, I believe we can help companies measure and disclose more standardized and accurate ESG data.

Regarding the regulatory challenges for companies, you mentioned earlier that the lack of precise ESG regulations is a major issue. What kind of policy support do you think could further address such problems?

Well, in terms of policy support, Korea is currently working to legislate ESG disclosure regulations. However, progress is being delayed due to the need to reconcile opinions among various stakeholders. Therefore, if the state establishes a clearer timeline and roadmap, specifying when ESG regulations will be implemented and what guidelines will apply, it would be helpful for companies and consulting firms preparing to comply with such regulations.

When many companies strive to achieve ESG performance, how should their perspective on ESG change to ensure sustained, long-term implementation?

Internally, a corporation is an organization representing shareholders to achieve corporate profits. Therefore, many view ESG aspects as factors that actually hinder maximizing corporate profits. However, take greenhouse gas emissions as an example. If an emissions trading system becomes active, it could become a cost burden for companies. While installing reduction facilities for greenhouse gas cuts requires significant investment in the short term, wouldn't it be highly beneficial for environmental aspects in the long run? 

Therefore, internally within companies, rather than focusing solely on short-term corporate performance, it would be beneficial to establish a management system that simultaneously considers long-term ESG performance and the company's role as a member of society that contributes to the broader community. This approach would allow for a balanced view of both profit-driven objectives and ESG considerations.