Corporate Transparency and Sustainability Reporting: The South Korean Case

Corporate Transparency and Sustainability Reporting: The South Korean Case

As sustainability reporting becomes an increasingly mainstream phenomenon, the extent to which reporting is mandated for non-financial performance indicators like corporate social responsibility, societal and environmental performance has become a hotly contested issue.  Indeed, under voluntary disclosure systems, companies can chose to disclose – or not disclose – information and data related to their environmental and societal performance as they see fit.

What role should governments play at this critical intersection between organizations and society? Our findings in South Korea suggest increased governmental involvement would be a step in the right direction.

South Korea is one of the world’s wealthiest nations and a major global economy whose government has historically put emphasis on economic development above all else. Taking this into consideration, one might expect corporate environmental disclosure to fall in line with what we see in the other developed nations like the US where reporting scores are relatively weak. Not so.

As far back as 1999, the Korean Ministry of the Environment (MOE) has been annually updating formal voluntary disclosure guidelines. These guidelines lay out specific recommendations for corporate environmental reporting.

Looking at the extensiveness of environmental disclosure in stand-alone reports for a sample of 34 South Korean companies, our research found that the percentage of companies making disclosure across six different areas specifically recommended in the South Korean MOE guidance is substantially higher than the percentages of disclosing firms reported in other recent studies for samples of companies drawn specifically from the US. These results are consistent with Ho and Taylor’s (2007) suggestion that greater governmental guidance might lead to more extensive environmental reporting.

Unfortunately, more extensive disclosure does not necessarily signify higher quality, or necessarily more transparent or meaningful disclosure. However, based on our findings, we still contend that calls for more governmental involvement with respect to corporate sustainability reporting may indeed be warranted. Governments might indeed be able to play a role in regulating, monitoring and most importantly, enforcing such reporting practices. With help and guidance from other major stakeholders, we would hope that governmental involvement might lead to improvements in the quality of corporate sustainability disclosure – and ultimately in sustainability as a whole.

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