KWDI Korean Women’s Development Institute

Abstract

Study on Ways to Improve Gender Equality in Businesses through ESG Management

Seung-hyun Lee

Minjung Kang

Kyung-ju Kang

Sangil Kim

Heejeong Yim

 

 

Ⅰ. Introduction

 

1. Necessity and Purpose of the Research

1) Necessity of the Research

With the recent emphasis on the assessment of corporate ‘sustainability’ by measuring the intangible assets of businesses through ESG indicators when investing in them, ESG management has emerged as a global topic of conversation. The effects of ESG management have been proven through empirical studies, and the COVID-19 pandemic has had an impact on the spread of ESG management.

The governments in a good number of countries have already prepared policies and systems to encourage ESG management. For example, the UK, Australia, Sweden, Germany, France, Norway, Belgium, Italy, Canada, the Republic of South Africa, and Brazil have adopted the mandatory ESG information disclosure system as a policy. In South Korea, the National Pension Fund introduced the Stewardship Code in 2017 to encourage businesses to carry out ESG management activities, but the code system brought insignificant tangible effects due to its limitation of being a voluntary system.

ESG management refers to management that values socially responsible investment and sustainability in combination with the environment, social, and governance. Gender issues, including gender equality, are closely connected to social (S) and corporate governance(G) among the three elements, and they have emerged as an important topic of ESG management.

ESG management was definitely the biggest topic of conversation in the regular general meetings of shareholders in March 2021 in Korea. Major businesses established new ESG committees or organizations, and submitted a number of agendas on appointing ESG experts or female outside directors to the general shareholders’ meetings. With the amendment of the Capital Market Act and the introduction of the Stewardship Code in Korea, domestic enterprises began to adopt ESG management.

Domestic enterprises that initiated ESG management concentrated on recruiting female outside directors because the biggest problem to resolve in order to join ESG was nothing other than the gender equality issue. Though global organizations have already pointed out the issues of women’s representation and gender pay gaps in Korean companies for a long time, these issues are not resolved yet.

Being aware of these situations, the Korea Corporate Governance Service (KCGS) contends that evaluation indicators related to women’s participation should be included in ESG management assessment models. Korea Exchange as well announced its plan to develop and include ‘women index’ in ESG indices.

In cooperation with related ministries, the Korean government prepared measures for expanding ESG infrastructure in August 2021, then announced K-ESG Guidelines in December of the same year. However, it turned out that K-ESG Guidelines had a very passive response to gender equality and other gender issues in its main items and detailed indicators.

 

2) Purpose of the Research

This study has largely three purposes as follows:

First, the study aims to identify current practices and methods of ESG management ideology in relation to the resolution of gender issues in the organization by reviewing the development of ESG management and theoretical discussions in the present situation.

Second, it aims to develop role models and analyze domestic and overseas trends by reviewing the cases of leading overseas enterprises and also domestic enterprises that implement ESG management.

Third, it aims to present policy suggestions that can contribute to enhancing gender equality in the company through the government’s ESG support by reviewing policy projects related to K-ESG Guidelines and ESG management.

 

2. Research Contents and Methods

Through literature review, we discussed and examined ESG management to solve gender issues in businesses. Specifically, we discussed theoretical and conceptual definitions, identified gender issues related to ESG management, and conducted a study of social (S) and governance (G) sectors, in which ESG management is particularly weak in Korea.

Through analyses of quantitative data and cases, we analyzed domestic ESG management focusing on gender issues. Specifically, we identified overall perceptions and tendencies of ESG management in Korean enterprises, then analyzed corporate cases that can be positively evaluated, with a focus on their problem awareness of gender issues and responses to the issues. Encompassing large, medium, and small-sized enterprises for the analysis, we examined the ESG management practices of Korean businesses by size.

Through advisory meetings, in-depth interview, focus group interview (FGI), workshop on the development of policy agenda, we conducted assessment of domestic ESG management and presented policy suggestions. Through the working level staff of ESG assessment institutions, and the relevant department staff of Korean businesses which introduced ESG management, we assessed the current conditions and impacts of implementing ESG management in Korea. We reviewed the Korean government’s K-ESG Guidelines and related policy projects, then presented policy suggestions.

 

Ⅱ. ESG Management and Gender Equality

 

1. Definitions of ESG Management

1) Composition and concepts of ESG management

As initials of environment (E), social (S), and governance (G), ESG means that it is possible to achieve sustainable growth when businesses protect the environment, attach great importance to social value, and practice transparent and ethical governance. As the world has gone through the crisis of global climate change and the COVID-19 pandemic, there has emerged a discourse on social responsibilities of enterprises. Accordingly, when investors and consumers evaluate businesses, they put stress on non-financial value rather than financial value.

 

2) Development of ESG management

The concept of ESG started to be discussed two decades ago, but ESG emerged in full swing as a global management paradigm in 2020 due to the spread of the pandemic. At present, it is a global trend to make ESG information disclosure mandatory. Korea too had active discussion about the establishment of ESG concept and its necessity in 2021. The discussion still goes on in 2022 regarding the dissemination of ESG management not only to large enterprises but also to small and medium-sized enterprises.

 

2. Discussions on Gender Equality in ESG Management

1) ESG management and gender & diversity management

ESG consists of three elements, namely environment (E), social (S), and governance (G). Though attention has been paid mostly to environment until now, more importance is currently attached to gender issues in social and governance sectors of ESG management, including securing gender equality and diversity, and representation in forming the board of directors. As backgrounds to placing emphasis on gender equality indicators in ESG management, global standards related to ESG management have been established and developed. In addition, changes in legal and institutional environments and social pressure have acted as main driving forces. The high financial performance of enterprises which actively advocated gender equality and the particular circumstances of the pandemic worked in combination to raise the importance of gender equality indicators. Overseas countries have already been using indicators that can identify gender equality in ESG-related disclosure data. Specifically, they have introduced i) gender diversity in the board of directors, ii) gender equal human resource management in recruitment, placement, education and training, and promotion, iii) the proportion of women’s basic pay and remuneration compared to men’s, and iv) policies and practices to prevent and eradicate sexual harassment and gender-based discrimination.

 

2) ESG management and gender lens investing

Gender-lens investing refers to including gender issues in financial analysis when evaluating a corporate value to use them as indicators for investment decision. Gender lens investing is regarded as important because of the expectation that enterprises pursuing social changes will have high sustainability in the long term by granting opportunities to women and by improving unfairness of employment. Pension funds in major countries are actively introducing gender lens investing strategies, including Norway’s Sovereign Wealth Fund and Canada Pension Plan. Leading investment management companies and investment institutions, such as State Street Global Advisors (SSGA), Bloomberg, and Morgan Stanley Capital International (MSCI) developed various gender lens investment indices, and have been using the indices.

 

3) ESG management and gender equality-related achievements

Empirical studies show that improving gender diversity in the company is connected to high return on investment, but there are not many studies that directly analyze ESG management and gender equality-related achievements. Because ESG management began to be earnestly discussed in 2020, related data have not been sufficiently accumulated yet.

 

3.Gender Equal Employment Systems and ESG Management

Gender issues and gender equality indicators assessed in ESG are highly similar to existing gender equal employment systems and various related policies and systems. Affirmative action system, gender wage disclosure system, and gender work disclosure system, to name a few, have similarities and differences as summarized below.

 

1) Affirmative action (AA) system

The affirmative action system is similar to ESG management in that it manages gender employment equality indicators, including women’s employment rate and the proportion of female managers. But the system is different from ESG management in that it does not disclose the current status of workers by gender in each business place, for it is not a disclosure system.

 

2) Gender wage disclosure system

The gender wage disclosure system is similar to ESG management in that it discloses wage data, but the system is different in that it does not specifically disclose current wage data by composition, by position, etc.

 

3) Gender work disclosure system

The gender work disclosure system introduced by the new Yoon administration is the most advanced form of its kind as the system encourages businesses to disclose gender ratio not only from the recruitment stage but also to work and retirement stages. However, the system leaves out ‘wage’ information and plans to expand participating enterprises by encouraging voluntary participation beginning with businesses with 500 employees or more. As such, the problem is how to secure effectiveness of the system.

 

Ⅲ. Global ESG Status and Indicators

 

1. Trends in the Adoption of ESG in Major Countries

When we examined the global ESG status, the biggest trend was that major countries adopted ESG as a sustainable investment strategy. According to the Global Sustainable Investment Alliance (2020), the ESG integration strategy attracted the largest investment amounting to 25 trillion dollars as of 2020. By country, the United States attracted 16 trillion dollars, Europe 4.1 trillion dollars, Canada 1.2 trillion dollars, and Japan 1.9 trillion dollars in that order.

 

2. ESG Status by Country

The common feature of overseas countries that take the lead in ESG assessment is that they legislated the practice of ESG. Led by Europe and the U.S., they have already introduced ESG-related bills, and have been implementing ESG.

 

1) Europe

Europe has active legislation to lay a basis for building ESG infrastructure. Specifically, Europe passed the sustainable corporate disclosure guidelines and the Business Supply Network Inspection Bill in 2021. According to our review of the French case of Amazon France Logistique as a private sector example, the company provides all supply chain information on its website in the form of map. Regarding the lack of diversity in the organization of its trading companies as a risk factor, Logistique discloses the proportion of women in its trading companies.

 

2) The United States

Since the launch of the Biden administration, the U. S. has continually put stress on coping with climate changes. Accordingly, the country announced the retirement pension amendment bill stipulating that ESG risks should be considered in operating retirement pensions. Due to the amendment bill, retirement pensions should be operated by assessing risk factors, including the environment of the investment market, social and governance elements when operating the retirement pensions. According to the review of the Netflix case as a private sector example, the company seeks diversity in all three areas of organizational members, outsourcing producers, and content characters. As of 2020, around half of the Netflix workers across the world were women. As of 2021, the proportion of women managers exceeded half of all managers. The works of outsourcing female producers were about 20% of all content made in the U.S., and a total of 52 works that sought diversity by gender and race of characters were nominated for related 2021 awards

 

3) Japan

Japan has no ESG-related responsibility or policy imposed mandatorily on enterprises by the government. But related ministries such as the Ministry of Economy, Trade and Industry and the Ministry of Environment provide detailed guidelines for ESG response.

The most recently released guideline for the social sector is the Diversity 2.0 Action Guideline. Published in 2017 by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange, this guideline includes measures to select and give a reward to outstanding enterprises that encourage women employees to be successful in careers.

According to the review of the Mitsubishi Corporation case as a private sector example, the corporation has implemented various personnel management systems to prevent women’s career interruption, including leave for sick child care, leave for participating in child’s school events, shorter working hour system for childcare, remote work system, and paid half—day leave. These systems apply not only to maternity but also to paternity.

 

4) Vietnam

Major supply chains of global companies are located in Vietnam, and the Vietnamese government is highly interested in ESG. For the reasons of coping with high reliance on trade, severe environmental destruction and climate change, the country makes efforts to actively comply with ESG at the government level. Vietnam supports women’s economic activity that falls under the social sector of ESG by stipulating matters related to diversity and maternity protection in the workplace in the Labor Relations Act and its ordinance. According to the review of the Novaland Group case as a company example, the group publishes sustainable management annual reports to present indicators related to sustainable management at work. Of the indicators, the group presents the proportion of women executives and employees and the rate of return from childcare leave as gender equality-related indicators. As of 2020, the proportion of women executives and employees stood at 49%, and rates of return to work after maternity was high at 95%.

 

3.Global ESG Information Disclosure Guidelines and Evaluation Indicators

It is difficult to evaluate a company’s overall effort to achieve sustainable development. In particular, evaluating all the sectors of environment, social, and governance is equal to evaluating all the management activity of the company. As such, there is currently no unified standard for evaluating ESG management because a great variety of evaluation methods are developed.

1) Global Reporting Initiative (GRI)

The Global Reporting Initiative is most widely used across the world as a standard for ESG information disclosure. In GRI400, that is, in the social (S) sector, the Initiative clearly states diversity-related indicators, specifically disclosing the number of discrimination cases and remedies, the gender ratio of basic wage and remuneration, and so on.

 

2) Sustainability Accounting Standards Board (SASB)

Of late, the International Sustainability Standards Board (ISSB) has referred to the information disclosure standards of the Sustainability Accounting Standards Board (SASB) as sustainability accounting standards. Seeing these standards, SASB developed and disclosed indicators for diversity, equity and inclusion (DEI) by industry type.

 

3) DJSI, MSCI ESG Indexes, Sustainalytics

Dow Jones Sustainability Indices (DJSI), Morgan Stanley Capital International (MSCI) ESG Indexes, and Sustainalytics are mainly used in the global market as representative ESG evaluation indicators. Similarly to the GRI requirements for gender-related indicators, these three indexes assess the diversity level of enterprises as a sub-element of DEI by checking the ‘system’, ‘implementation’, and ‘monitoring of performance’ that are established to reduce gender-based discrimination.

 

Ⅳ. ESG Status and Limitations in Korea

 

1. The Government’s ESG Implementation

1) Background to the development of K-ESG Guidelines

With the continued increase of ESG evaluation institutions and assessment indicators, Korean enterprises have encountered largely three difficulties: First, as ESG evaluation methods become many and varied, huge personnel, resources, and time are required of them to prepare for the evaluation. Second, it is difficult for the businesses to establish active response strategies because details of evaluation indicators and methods are not disclosed. Third, it is difficult to cope with the ESG-related issues because socio-cultural understanding of and approach to the issues are different at home and abroad. Therefore, the Korean government developed K-ESG Guidelines as a guideline for domestic enterprises to use when preparing ESG evaluation and responding to related issues.

 

2) Characteristics of K-ESG Guidelines

With the initiative of the Ministry of Trade, Industry and Energy, K-ESG Guidelines v1.0 was made by extracting commonly-used indicators from major domestic and overseas ESG disclosure standards and evaluation. Then, its assessment items were designed by taking Korean specificity into consideration.

K-ESG Guidelines faithfully reflects the purpose of providing detailed information as a reference for Korean businesses to perform ESG management, rather than the purpose of evaluating their ESG levels.

3)Current reflection of gender equality elements in K-ESG Guidelines

K-ESG Guidelines includes assessment items regarding the proportion of female members and the ratio of women’s wage. Regrettably, however, it does not present more diverse contents related to gender equality as assessment items.

 

4) Current K-ESG support policies

The government made public its policy directions to support ESG management of industries and businesses through the “Measures for Expanding ESG Infrastructure” in August 2021. The main contents of the support policy include the following three measures: First, it is to ‘promote ESG management disclosure.’ The government developed K-ESG Guidelines, made the disclosure system mandatory, and expanded connected support systems so that various interested parties may know the current state of corporate ESG management and use the systems.

Second, it is to ‘reinforce ESG competencies of small and medium-sized enterprises.’ The government will conduct various surveys to identify the present state of ESG management, develop self-assessment tools to enable enterprises to assess their levels for themselves, and develop and operate various forms of education programs for empowerment. Also, incentive programs will be expanded for excellent ESG enterprises at the government level.

Third, it is to have the ‘public institutions’ take the lead in ESG management. The government’s setting new policy directions and implementing the policies generally begin with public institutions before the policies are disseminated. Given this, it is presumed that demand for ESG management will be stronger with public institutions. ESG elements are currently reflected in the reinforcement of ESG management information disclosure and in the evaluation of public institutions. This will lead to call for more specific and practical implementation of ESG management.

The government policy directions are concentrated in the fundamental area to establish a basic system for corporate ESG management at the level of upgrading the overall infrastructure. For this reason, the directions still do not reveal policies by specific issue to consider and promote gender equality or diversity. Regarding the government’s support for ESG management, it is believed that gender equality issues can be resolved with policies by relevant institution in the future.

 

2. Analysis of Corporate ESG Status

1) Analysis of ESG-related questionnaire surveys

We analyzed three ESG-related questionnaire surveys, and summed up the results of the analyses as below.

First, to examine public awareness of ESG, we reviewed the ‘Survey of Social Issues Seen by Korean People.’ According to the results of the survey, Korean people were rather highly interested in social issues, but had a very low awareness or understanding of ESG. As the pandemic and economic recession continued, the social issues that the people wanted to be resolved at once included income, housing, and labor problems. They counted environmental pollution and climate change among social issues that they wanted to be resolved the next. This shows that they will take more interest in the environment (E) of ESG in the future. As the people perceive that domestic large companies do not actively respond to social issues and do wrong about greenhouse emissions, businesses are required to make efforts in that regard. It is also found that the people intend to participate in proactive actions, voting to solve social problems, boycott goods from companies, and purchase products of enterprises that undertake social responsibilities. Therefore, being aware of this tendency, businesses should feel the necessity for ESG management.

Second, we reviewed ‘the Survey on the ESG Preparation and Awareness of Top 500 Enterprises,’ which are leading Korean companies in terms of domestic sales. According to the results of the survey, most of these enterprises have already established or will establish ESG-related organizations or dedicated departments because they can actually take the lead in ESG management as Korea’s representative large enterprises. However, there was a concern about the lack of expertise about ESG job duties because ESG was recently adopted. A majority of the enterprises answered that they increased the budget for ESG projects this year, hence implementation of the ESG strategy is expected to be expanded in the future. It was found that businesses still regarded the disclosure of non-financial information as fairly burdensome. Of the ESG sectors, they attached importance to the environment sector, and, first of all, plan to reduce carbon emissions and use new and renewable energy. Regrettably, even the top 500 enterprises paid almost no attention to gender issues such as gender equality or diversity. As such, it seems a long way to go for gender issues to emerge in ESG for the time being.

Third, we reviewed the awareness and preparation of ESG by companies with 100 employees or more through the ‘2020 Korean Women Manager Panel’ survey. Compared to the beforementioned top 500 enterprises in sales, these companies were far less prepared for ESG. Even CEOs took less interest in ESG, but viewed ESG management as necessary for raising corporate images. In other words, while large enterprises face disadvantage against sales outlets unless they implement ESG, businesses with 100 employees or more are not required to adopt ESG yet. Businesses with 100 employees or more were more interested in the social sector (workers) of ESG than in the environment sector. This shows that these businesses were not directly related to regulations in the environment sector yet. Unlike the top large enterprises that were sensitive to the environment sector, businesses with 100 employees or more were likely to stress diversity management because they were relatively more interested in diversity of the board of directors and members in the governance sector.

However, these enterprises had various difficulties in introducing ESG. That is, they did not feel the need for introducing ESG right now because ESG was not closely related to their business operation. Their awareness of ESG was low and they perceived ESG as the issue of cost. As a consequence, half of the enterprises had no organization in charge of ESG, and will not establish one in the future. Therefore it will take a lot of time to disseminate ESG. In other words, it is believed that ESG management in Korea will proceed with large enterprises on the lead.

 

2)Case analysis of the ESG status of enterprises participating in the Women's Empowerment Principles (WEPs)

We attempted to analyze cases to examine the current conditions of gender issues including gender equality or diversity of enterprises that adopted ESG management in Korea. But as the existing disclosed cases have strong character of corporate promotional materials, we reviewed inside data of the UN Global Compact (UNGC) Network Korea.

These data are the outcomes of evaluating gender gaps of leading nine enterprises selected by the type and form of business using the WEBs Tool. According to the results of reviewing the disclosed data, these nine enterprises included a foreign-affiliated firm, five large enterprises, a medium-sized enterprise, a small-sized enterprise, and a public institution that declared ESG.

According to the results of reviewing the data, the most gender equal company, overall, was the foreign-affiliated large enterprise, and except for the financial holding company, all the enterprises did not satisfy half of the indicators. In other words, the gender gaps in the companies turned out to be wider than expected. Of course, though the WEPs Tool is a mere assessment tool for global standards, the results are regrettable, considering that these enterprises are representative ESG practicing companies and most of them are large enterprises at that.

Save the public institution, the proportions of female regular workers were between 10 to 20%, and the proportion of women to all fixed-term workers sharply increased. For wage, all women’s pay was lower than men’s, and about half of the enterprises did not have measures for anti-discrimination in competency development and promotion. Also, enterprises with fewer women were found to have given relatively low consideration to women or maternity because they received low points in many indicators due to the characteristics of their business type. As small and medium-sized enterprises scored low points in most indicators even if they claimed to advocate ESG, they could not catch up with the ESG response level of large enterprises. Most surprisingly, however, even the majority of large companies did not consider consumers or women in the community or what impact their products or services may have on gender. That is to say, ESG of domestic companies still remains at issues about women and female workers in the company, and revealed its limitations that could not extend to consumers and communities. But as there are many enterprises that have plans to integrate gender issues to various corporate activities, their interest in ESG is expected to further increase from now on.

 

3)Analysis of the ESG Status of 500 Small and Medium-
Sized Enterprises

Because almost no ESG was implemented in Korean small and medium-sized enterprises, it was difficult to collect quantitative data that could be called ‘ESG data’ of small and medium-sized enterprises. For this reason, we obtained the results of ESG assessment of 500 small and medium-sized enterprises from the inside data of Korea Rating & Data (Ltd.), then analyzed the data related to gender issues. Through this analysis, we identified the current status, that is, how these small and medium-sized enterprises responded to gender equality or diversity.

The evaluation items of Korea Rating & Data (Ltd.) were developed specifically for domestic small and medium-sized enterprises. According to the results of reviewing the evaluation items in detail, only six indicators of the 60 detailed indicators or so were related to gender issues, including the guarantee of human rights, childcare leave system, flexible work arrangements, gender ratio of workers, partner companies in the social (S) sector, and the board of directors and audit body in the governance (G) sector. In other words, considering the current situation of small and medium-sized enterprises, it is believed that it is actually difficult to stress gender issues in ESG. The 500 small and medium-sized enterprises scored low points in most indicators, and only the indicator for the guarantee of human rights received average points or above. Despite all this, as the size of the 500 small and medium-sized enterprises became larger, the scores for each indicator consistently tended to become higher. That is, we reconfirmed that ESG management in Korea was realistically possible with large-sized companies.

 

3.Domestic ESG Information Disclosure Guidelines and Evaluation Indicators

1) Responsible investment of the National Pension Fund

National pension reflects ESG ratings of target investment companies considering their non-financial elements. The National Pension Service prepared its own ESG evaluation system and conducted ESG rating evaluation of enterprises bi-annually. But we could not find contents related to gender equality and diversity from the ESG evaluation indicators used by the National Pension Service.

 

2) Sustinvest

Sustinvest evaluates the ESG performance of domestic listed companies using its self-developed ESG evaluation model called E.S.G. Value. Indicators related to gender equality and diversity is evaluated in ‘employment equality and diversity’ in the social sector. We could not identify detailed indicators because they were not disclosed.

3) Korea ESG Research Institute

The Korea ESG Research Institute evaluates its target evaluation enterprises bi-annually using its own evaluation model, but we could not identify indicators related to gender equality because evaluation indicators, etc. were not disclosed.

 

4) Korea Corporate Governance Service (KCGS)

The Korea Corporate Governance Service assesses ESG performance using the KCGS ESG best practices, various laws and systems, and international norms. However, we could not identify the composition of detailed indicators because evaluation indicators, etc. were not disclosed.

 

4. Assessment of Domestic ESG Status

1) Results of FGI with the staff at ESG evaluation bodies

We conducted focus group interview (FGI) with the staff at evaluation bodies that assess ESG management of domestic enterprises. Focusing on the current status and characteristics of domestic ESG management, and gender issues, the interview aimed to identify points to complement and improve domestic ESG evaluation indicators, and the future directions for developing ESG management in Korea. The results of the FGI can be summed up as below.

First, interest in ESG management is still centered on large companies, and particularly it is concentrated in the environment (E) sector of ESG. This is because the governance (G) sector is related to the unique management style of the companies, so that this sector causes a great sense of resistance to evaluation. Also, the social (S) sector encompasses so wide and diverse a category that it is not easy to manage the evaluation of the sector. As gender equality-related indicators are included in the social (S) sector, they cannot help being handled with low weights and therefore businesses take less interest in them.

Second, it is more important to point out and improve the causes of the score or the problems of the process rather than the score of the indicators in ESG evaluation. As such, evaluation experts focus on this when conducting evaluation and consulting. Because businesses do not have positive perceptions of gender equality-related issues, it is concerned if they approach the issues in a direct or burdensome manner. In other words, it is necessary to manage the issues in an indirect way, such as helping women maintain their careers without leaving their company and giving equal opportunities to women rather than strongly demand using the indicators.

Third, because small and medium-sized enterprises except for large enterprises are still not much interested in ESG management, they may not be proper subjects of the survey in this study. Nevertheless, it is significant to examine the differences of ESG management according to the corporate characteristics considering the size of the enterprises through the review of the corporate cases.

 

2) Results of workshop for the ESG staff at the enterprises by size

We conducted workshop for the ESG staff at domestic enterprises by size. The goals of the workshop were to examine how they implement ESG management and to identify related gender equality issues, response measures, and future policy demands that they consider. Participants in the workshop included a total of 8 persons: a manager in charge of ESG at the affiliated company of a large enterprise, a deputy manager in charge of ESG at the financial holding company, an employee at public institution with an ESG department, an employee at social enterprise established with social value, two experts in charge of ESG evaluation of domestic enterprises including small and medium-sized enterprises at Korea Rating & Data (Ltd.), and two workers at the UN Global Compact (UNGC) Network Korea--which is an NGO in charge of facilitating and presenting ESG to be implemented as a corporate management strategy. The results of the workshop can be summarized as below.

First, ESG management of domestic companies was mostly practiced by large companies and public agencies. Small and medium-sized enterprises had very low awareness of ESG management, and did not recognize it as an impending issue unlike large companies and public agencies. Large enterprises have already disclosed most of their data through the disclosure system, and they have no other choice than to disclose the corporate data for investments or transactions. Public institutions as well disclose their data through the public management information disclosure system called ALIO (All Public Information In-One) for the government policies. But the corporate information disclosure system of this kind does not apply to small and medium-sized enterprises.

Second, the difference from management policies that were implemented similarly to ESG management was ‘to turn indicators into data.’ Because these indicators were directly connected to the sustainability of businesses, the enterprises could not but make institutional and policy efforts to solve problems or to accomplish the indicators. Major domestic large companies already managed ESG indicators effectively, aiming to reach the global level. In particular, gender issues or generational conflict management already became important keywords in personnel management in the organization, positioning in the overall human resource management or personnel policy as an important issue to be managed. Large enterprises already recognized ESG management as an important agenda, and thought over how to convey the value of ESG and the meaning of indicators to organization members and how to foster empathy in them.

Third, social enterprises cannot maintain their business based on profits from their products, and thus policy incentives or investments are absolutely important to social enterprises. Therefore, it is necessary to provide policy support for social enterprises that are operated with the goal of practicing social value as well as for enterprises at large that implement ESG management.

 

Ⅴ. Conclusions and Policy Suggestions

 

1. Summary of Main Research Results

This study was conducted in four phases. In the first phase, we identified through literature review the beginning of the ESG concept and the present trends and tendencies of ESG, relations between ESG and gender issues, including gender equality, and global and domestic ESG trends. In the second phase, we reviewed the awareness and current status of ESG in Korea using the quantitative data from the surveys of the general public, top 500 large enterprises, enterprises with 100 employees and more, and small and medium-sized enterprises, In the third phase, we reviewed through case analysis nine cases of representative enterprises that implemented ESG. In the fourth and last phase, we conducted FGI with the staff in domestic ESG evaluation institutions as well as workshop for the ESG staff in the enterprises by size. As we conducted this study in phase, we could understand various people involved in ESG management, and identified a number of cases in which the value of ESG and limitations of reality were in conflict. Therefore, suggestions for policy agendas start from the discussion about the original meaning of ESG that researchers kept questioning while conducting the study.

 

2. Suggestions of Policy Agendas

1) Original point of view looking at ESG management

Because ESG management is basically a corporate response activity to cope with ESG investment, we, while conducting this study, often encountered cases where businesses took a technical approach to ESG management. In particular, a majority of listed companies claimed to advocate ESG management to meet the ESG standards in the direction where shareholders want to smoothly attract investments. However, the background to the creation of the concept of ESG is far from such technical approach. That is, more fundamental value exists in the background to ‘resolve the most important issues that our society presently faces.’ This concept originated from the awareness of crisis that businesses, the government, and members of a society should solve three issues of E, S and G, each initial standing for environment, social and governance. However, businesses were not much interested in the original meaning of ESG though they should become the main agents of ESG management.

ESG investment emerged at the global level, and ESG management became trend among enterprises in Korea as well, because social confusion and distrust brought from the pandemic were added to the problems of long standing, including the crisis of climate change, environment destruction, and aggravated inequality. Because these problems as the world’s common issues reached the point of doubting our sustainability, we set sustainable management as the long-term vision and goal of enterprises, and came to invest in businesses that adopted socially appropriate and sustainable operation. That is, the value and indicators advocated by ESG are urgent prescriptions necessary for us to achieve sustainability.

Enterprises whose ESG management is evaluated may concentrate on what points they can receive for ESG indicators from evaluation organizations. However, if they think about fundamental reasons for implementing ESG management, the enterprises need to go beyond these superficial indicators and further think over how to solve these problems that they should resolve without fail, including environmental problems, social problems and governance problems.

 

2)Suggestions of policy agenda for the genuine practice of ESG management and gender equality

If ESG management is practiced simply with a purpose to satisfy shareholders or avoid social criticisms through attainment of indicators, it is clear that this practice is far from the genuine meaning of ESG management. Also, such meaningless practice of ESG management is not only waste of corporate resources but also will have an impact on the members of the company and stakeholders as well. Therefore, in order for enterprises to implement ESG management in a genuine sense, the government, businesses, and members of a society, including consumers should play their roles as participants in realizing the value of ESG. This study presents suggestions for each player to enhance gender equality and resolve gender issues through ESG management.

 

A. Suggestions of agenda for businesses

First, it is necessary for businesses to view ESG management as a process of realizing profits or diverse stakeholders. Of course, the purpose of business management is to seek profits, but it is necessary for them to have a broader point of view that they pursue profits for various stakeholders. The environmental, social, and governance issues are closely related to various interested parties, including shareholders, investors, workers, partner companies, consumers and the communities. For this reason, If businesses seek profits considering this, their practice of ESG will get closer to the original purpose of ESG.

Second, enterprises should set specific numeric goals and introduce methods to attain the numeric goals to solve problems related to gender equality and diversity in the company through ESG management. We found that ESG management is different from existing ways of addressing social issues in that it elaborately compiles numeric values. Therefore, it is important to set accurate data-based goals and present specific action plans to attain the goals through ESG management.

Third, changes of perceptions in the companies are needed to resolve occupational gender segregation. Large enterprises or public institutions have already established basic gender equality systems, and they are in a situation where there emerges a controversy over reverse discrimination against men due to the commonly used work-life balance systems. However, there was still fairly severe occupational gender segregation in the businesses, and even the ESG Officer could not perceive occupational gender segregation as a problem detrimental to gender equality or diversity in the organization. Therefore, the gender equality-related indicator to be addressed as an important issue in ESG management in the future should be the ‘current status of occupational gender segregation.’

If an environment is created in which people can work in diverse areas according to their abilities regardless of their gender without separating women’s job or men’s job, businesses will be able to raise gender equality through ESG.

 

B. Suggestions of policy agenda for the government

First, it is necessary to establish a new value concerning gender equality and restructure existing systems. With increasing gender and generational conflicts in recent years, fairness is important to resolve the conflicts among the members of a society, but it is not an easy issue to apply ‘fairness with regard to gender issues. As existing systems of preferential treatment of women and maternity protection are now recognized as privileges, it is difficult to get empathy or consent from the members of a society. Therefore, the methods and contents of persuading them and having them understand should now be completely different. In other words, the government should think over a new value of ‘gender equality’ and standards for the value, and aim to regularly change strategic policies rather than maintain existing policies and systems. In particular, because social demands or tendencies rapidly change year by year regarding the overall policies related to women workers that have been based on marriage, pregnancy, childbirth, and childcare, the government should improve policies considering this change to manage conflict in Korean society.

Second, it is necessary to disseminate ESG management using the information disclosure system. By making the most of the corporate information disclosure system through the policies, the government should disseminate ESG management, first of all, led by large companies and public agencies, and include items related to partner companies in the information disclosure items to disclose the items all together. The government developed and provided K-ESG indicators and guidelines, but it is just a recommendation, not a mandatory requirement. As such, in the present domestic situation, it is most realistic to expand ESG management to small and medium-sized enterprises through large enterprises. On one hand, the government needs to disseminate ESG management to small and medium-sized enterprises through ESG indicators related to partner companies of large enterprises and disclose this situation through the information disclosure system. On the other hand, the government needs to prepare and support incentives or benefits for large enterprises through policies to expand ESG management to small and medium-sized enterprises.

Third, it is necessary to integrate gender equality issue items to the indicators of three leading organizations related to ESG management in Korea. Specifically, the Financial Services Commission should include items of gender equality issues in its ESG Guidance. The Financial Services Commission announced its plans to present the ESG Guidance by 2025, promoting autonomous disclosure, making ESG information disclosure mandatory for businesses of a certain size by 2030, and requiring all the companies listed in KOSPI to disclose their ESG information after 2030 and onward. It is believed that the Commission will prescribe the scope of corporate information disclosure through the ESG Guidance by then. Because this ESG Guidance will become a standard for domestic enterprises to actively use it as a reference, reflecting detailed contents including the current state and performance related to gender equality of the enterprises will act as a pressure to disclose the current status of their gender equality to the public and naturally lead to enhance the gender equality.

Next, the Public Procurement Service should include gender equality and diversity in the evaluation items of social responsibility in its public procurement process. The Public Procurement Service plans to ‘expand basic scores and reflect extra points’ to the evaluation of social responsibility in its public procurement process. But we could not find yet that such extra points were separately reflected in the relevant enforcement ordinance. Therefore, it is important to include elements related to gender equality and diversity in the detailed standards as elements of extra points when evaluating the level of socially responsible management of the enterprises in the procurement process. By phase, if the government reflects the elements of gender equality and diversity as plus or minus points in the early phase, then includes gender equality items as basic elements of ESG evaluation of the procurement process, this will have a positive impact on promoting gender equality of all supply chains encompassing domestic enterprises of various sizes. Lastly, the National Pension Service should expand items related to gender equality and diversity in its ESG evaluation model. The National Pension Service currently applies the ESG evaluation outcomes to its investment, and the size of investment is big enough to lead the domestic capital market. However, its ESG assessment model does not sufficiently reflect contents related to gender equality. As it revised principles for operating its funds, the National Pension Service added the principle of ‘sustainability’ to the existing five principles. In the Guidelines for Exercise of the National Pension Shareholder’s Right that was conclusively decided in 2019, the National Pension Service can exercise its shareholder’s right i) ‘where ESG ratings fall two or more levels to Grade C in the socially responsible investment (SRI of ESG) or ii) where there arise concerns about unexpected damage to its corporate value or infringements on the shareholder’s right regarding responsible investment.’ In other words, various issues of ESG are expected to be gradually expanded and reflected in the present ESG evaluation model. At this time, it is necessary to make effort to reflect detailed items related to gender equality and diversity.

Fourth, the government should strengthen support for social enterprises that are established to realize social value. Though there are existing systems to support social enterprises, the reality is that there are not enough policy support for those enterprises that pursues the value of gender equality and diversity. For instance, the current tax deduction system upon employing career-interrupted women deducts 30% of labor cost from the taxes of the enterprises that employ career-interrupted women according to the Restriction of Special Taxation Act. But almost no enterprise benefits from the system due to its various terms and requirements that career-interrupted women’s reemployment is limited to the same type of business and the employment contract should be one year or longer. Therefore, if the use of the existing system is low, its requirements should be eased, or it is necessary to increase incentives of the enterprises by making a reward or incentive system for social enterprises with high attainment of gender equality-related indicators among ESG indicators.

 

C. Suggestions for practice tasks for workers in the businesses

Even female workers in ‘decent’ enterprises, including large and medium-sized enterprises, have poor working conditions and positions compared to male workers. As such, the present situation is not desirable because only female workers in ‘decent’ enterprises are subject to ESG management. At present, most small and medium-sized enterprises pay almost no attention to ESG management. Though ESG management cannot be directly forced to small and medium-sized enterprises, it is necessary to disseminate the value of ESG management to female workers at small and medium-sized enterprises, considering the fundamental purpose of ESG management. Therefore, it is suggested as practice tasks for workers that they perform the role of inside watchers of the companies through workers’ alliance. This is a suggestion for indirect spread of ESG through participation of inside workers of large companies or original contractors in ESG management. This will be more effective if they have a labor union.

If there is a labor union consisting of workers at large companies or original contractors, the labor union should actively participate in the practice of corporate ESG management, and in this process, the union should look with a sense of solidarity at the improvement of working conditions for workers at suppliers and partner companies, which are mostly small and medium-sized enterprises. To practice the important proposition called the alliance of all workers held by the labor union, the union may request to the original contractors for solving problems of female workers hired by relatively small and medium-sized non-union suppliers. In other words, the labor union comprising workers should perform the role of a watcher who monitors ESG activity of enterprises from the whole perspective of workers by independently participating in the ESG management process, instead of entrusting ESG management to enterprises only.

 

D. Suggestions for practice agenda/tasks for consumers and the people

Consumers are one of the main players in ESG management because the concept of value pursued by ESG management is not an issue of individual enterprises but that of solving key problems of the whole society. Therefore, consumers can select enterprises that implement gender equality through ESG management when they purchase goods or services primarily as individual consumers. Furthermore, they can have a greater impact on the genuine practice of ESG management of enterprises by watching and criticizing their ESG management and activity to solve gender equality and social issues as a consumer group.

The people, save investors or shareholders, may think that ESG has nothing to do with them or their business because ESG management is the operation policy and value of companies. However, the backgrounds to the emergence of ESG included environmental pollution and climate crisis, wider inequality, and the collapse of social balance. These problems are common issues to us all that threaten the survival and sustainability of us all. Unless we solve the issues now, it is difficult to achieve future prosperity. As entrepreneurs, as workers, as consumers, and member of the community, all of us have the duty to contribute to solving the problems through ESG management. We should also urgently recognize the duty as the right for ‘me’ as well.

 

Research areas: labor and employment

Keywords: ESG, gender equality, women’s representation, gender diversity, sustainability