Samjong KPMG calls for financial-report-level rigor in sustainability disclosures

South Korea's sustainability disclosure regime is set to shift decisively from voluntary environmental, social and governance (ESG) reporting to a statutory framework demanding the same level of reliability as financial statements. Companies will need to overhaul their disclosure processes, data management and internal control systems in response, according to a new analysis.

Samjong KPMG published a report Thursday titled "How Will Corporate Disclosures Change in the Era of Mandatory Sustainability Reporting?" outlining corporate response strategies in light of the introduction of the Korean Sustainability Standards Board (KSSB) framework and the Financial Services Commission's finalized roadmap.

Under the FSC's final sustainability disclosure plan announced Wednesday, mandatory disclosure will be phased in starting with Kospi-listed companies with consolidated assets of 10 trillion won ($6.62 billion) or more, beginning with the 2027 fiscal year.

The most significant changes concern the format and timing of disclosure. Sustainability disclosures will be incorporated into statutory business reports, with the submission deadline unified to the end of March — the same deadline as annual business reports. Companies that previously published sustainability reports by the end of June will no longer be able to meet the statutory deadline under that schedule. Scope 3 emissions disclosure, however, will be deferred for a set period, and third-party assurance will become mandatory from 2030, two years after the disclosure obligation takes effect.

The report noted that the statutory disclosure regime demands higher levels of data accuracy, appropriateness and verifiability than voluntary reporting. It said companies must go beyond simply listing ESG information and build management systems that encompass organizational structures, processes and internal controls.

Samjong KPMG identified "consolidated-entity reporting scope and materiality-centered disclosure" as a defining feature of the KSSB framework. Companies must identify information on a consolidated basis — covering all subsidiaries, as with financial statements — but whether to disclose specific items should be determined by their materiality to investor decision-making, the report said. It added that companies should move away from arbitrarily excluding certain subsidiaries and instead build systems to identify and manage material information across the entire value chain.

The report said climate disclosures in particular require data management capabilities beyond those of conventional financial reporting, given the complexity of forward-looking information, estimate- and scenario-based data, and Scope 3 emissions figures.

To that end, Samjong KPMG identified five immediate priorities for companies: standardizing disclosure indicator definitions and calculation criteria, building data collection systems for subsidiaries, establishing data verification and internal control frameworks, reorganizing governance based on clearly defined roles and responsibilities, and constructing systems centered on an ESG data platform.

The firm also advised companies to build documentation and evidence systems with auditability in mind from the initial design stage, in preparation for a more stringent assurance environment ahead.

Hwang Jae-nam, deputy chief and ESG disclosure and assurance leader at Samjong KPMG, said the introduction of the KSSB framework requires companies to bring their sustainability reporting systems up to the standard of financial reporting. "Companies subject to mandatory disclosure should not focus solely on expanding their reporting scope," he said. "They need to proactively build an enterprise-wide execution framework — from identifying material information on a consolidated basis to data management, internal controls and assurance readiness."

He added that while mandatory disclosure will be phased in according to company size, building sound disclosure processes, systems and governance takes considerable time. "To respond stably to regulatory changes, companies must begin preparing immediately," he said.

Meanwhile, Samjong KPMG, which operates on a March fiscal year, posted operating revenue of 905.6 billion won for the fiscal year running from April 2025 to March 2026 — a roughly 3.4 percent increase from the previous year — crossing the 900 billion won threshold for the first time.