KSSB published the Exposure Draft of the Sustainability Disclosure Standards

Background

The Korea Sustainability Standards Board (KSSB) of the Korea Accounting Institute (KAI) has published the Exposure Draft of the ‘Korean Sustainability Disclosure Standards’ applicable to domestic companies.

With the growing global focus on sustainable growth, major countries including the EU, the US, and Japan are actively developing and implementing sustainability disclosure standards with promoting the establishment of related disclosure systems. To maintain and enhance sustainability competitiveness in the global capital markets, it is crucial for domestic companies to effectively respond to these trends. Accordingly, on 30 April 2024, the KSSB officially announced the Exposure Draft of the Korean Sustainability Disclosure Standards, aiming to enable domestic companies to effectively navigate the evolving global ESG regulations while ensuring these standards do not impose excessive burdens on companies.

Principles for the Establishment of the Standards

The KSSB, while considering international alignment and corporate acceptability, aims to establish disclosure standards that provide investors with comparable and reliable sustainability-related financial information. Achieving interoperability and consistency with international sustainability standards is essential for domestic companies to compete in global capital markets and to respond effectively to sustainability-related regulations in major countries. To this end, the KSSB has used the IFRS Sustainability Disclosure Standards established by the International Sustainability Standards Board (ISSB) as the foundation for these domestic standards. Moreover, the KSSB has taken into account country-specific circumstances and preparedness of domestic companies and industries. This has been reflected by making certain disclosure requirements from the IFRS Sustainability Disclosure Standards as optional provisions, thus allowing domestic companies to apply these disclosure standards at their own pace.

Structure of the Standards

The Korean Sustainability Disclosure Standards consist of two mandatory disclosure standards (KSSB 1and KSSB 2) and one non-mandatory disclosure standards (KSSB 101).
-    Sustainability Disclosure Standard 1 (KSSB 1): General Requirements for Disclosure of Sustainability-related Financial Information (based on IFRS S1)
-    Sustainability Disclosure Standard 2 (KSSB 2): Climate-related Disclosure (based on IFRS S2)
-    Sustainability Disclosure Standard 101 (KSSB 101): Additional Disclosure aligned with Policy Objectives
Entities applying the Korean Sustainability Disclosure Standards must comply with the mandatory disclosure standards, KSSB 1 and KSSB 2, which are established based on IFRS Sustainability Disclosure Standard. KSSB 101 is a unique country-specific standard that allows companies to selectively disclose additional sustainability-related information as required by domestic laws or to meet the sustainability-related policy objectives.

Key Contents of the Standards

(1) KSSB 1 and KSSB 2

a. Climate-first approach 

The Korean Sustainability Disclosure Standard prioritizes mandatory disclosure of climate-related issues due to their direct impact on entities' financial reporting and their importance in the global capital market. Climate-related issues are relatively easier to quantify than other sustainability topics, reducing ’the disclosure burden on entities.

Furthermore, if entities wish to disclose sustainability-related issues other than climate, they can choose to disclose them according to Appendix E, "Disclosure requirements for core content," of KSSB 1, allowing more sustainability related information to be provided to the capital market according to the entities’ readiness level. 

b. Industry-based metrics

Climate-related risks and opportunities vary depending on activities or industries of entities, enhancing comparability between industries when information reflecting industry characteristics is disclosed, thus providing useful information to investors. However, given the current situation where industry-specific disclosure information is unclear due to the absence of common industry standards, KSSB 2 allows entities to choose to disclose industry-based metrics. The obligation and timing of mandatory disclosure of industry-based metrics will be determined by taking into comprehensive consideration the development of international industry standards and domestic readiness.

c. Internal carbon prices

Internal carbon prices serve as crucial metrics of how entities manage climate risks and can assist in evaluating the vulnerability of specific business models to such risks. However, given the immaturity of the method of determining internal carbon prices, KSSB 2 requires the disclosure of whether and how entities apply internal carbon prices, while also allowing entities to choose to disclose the price per metric tonne of greenhouse gas emissions. The obligation and timing of mandatory disclosure of internal carbon prices will be determined through comprehensive consideration of international trends and domestic situations.

d. Greenhouse gas emissions

The Exposure Draft requires entities to disclose their absolute gross Scope 1, 2, and 3 greenhouse gas emissions generated, expressed as metric tonnes of CO2 equivalent. While entities measure their greenhouse gas emissions in accordance with the “Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004)” (the GHG Protocol (2004)), they are also allowed to use measurement methods required by jurisdictional authorities. 

However, the obligation and timing of mandatory disclosure of Scope 3 greenhouse gas emissions will be determined based on the feedback received on the Exposure Draft and consultations with relevant authorities.

(2) KSSB 101

KSSB 101 aims to enhance the usefulness of information for users by requiring the disclosure of various pieces of information, which are scattered across various locations according to domestic sustainability-related laws or regulations, along with sustainability financial information. Additionally, it aims to promote the implementation of government policies through sustainability-related disclosures, such as childcare-friendly management, industrial safety, human rights management, and employment of people with disabilities. Entities have the option to apply KSSB 101 and may selectively disclose the required information item by item.

Mandatory Sustainability Disclosure System

The mandatory disclosure timeline within the legal framework or listing rules will be determined by the Korean government following extensive discussions with domestic stakeholders. Consequently, the effective dates of the standards and the specific location for information will also be established in conjunction with the development of the mandatory sustainability disclosure system.

Future Plan

The KSSB will conduct a four-month public consultation period, ending on August 31, 2024, to gather stakeholders' opinions on the Exposure Draft. During the consultation period, extensive outreach activities, including seminars and forums, will be conducted to help stakeholders better understand the standards.



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About the KAI

The Korea Accounting Institute (KAI) is an independent private organization established on 1 September 1999. It is an umbrella organization of both the KASB and the KSSB. 

About the KSSB

Since its establishment on 25 November 2022, the KSSB has been mandated to support setting and revising of sustainability disclosure standards in Korea. The KSSB consists of 9 board members (2 of whom are full-time) who are professionals from the private sector.


Press enquiries:
Eun-kyung Kim
Executive Director
Korea Sustainability Standards Board
Tel: +82-2-6050-0158
Fax: +82-2-6050-0170
E-mail: kimek@kasb.or.kr  

Ha-eun Yoo
Senior Technical Manager
Korea Sustainability Standards Board
Tel: +82-2-6050-0184
Fax: +82-2-6050-0170
E-mail: ha-eun.yoo@kasb.or.kr