Setting the scene: from voluntary to mandatory sustainability reporting in Korea

Sammanfattning: Sustainability Reporting (SR) has hitherto been discretionary in most Asian countries; however, a new paradigm – mandatory SR – is emerging in South Korea, provoked by the EU’s SR regulation, Non-Financial Reporting Directive (NFRD) and Corporate Sustainability Reporting Directive (CSRD). The Korean government plans to enforce SR legislation in 2025, targeting large firms. However, little is known about changing regulatory landscape in Korea. While Korean firms’ lower sustainability performance compared to EU firms and limitations in SR have been pointed out, what and how should be improved are underinvestigated. Thus, this research explored Korean companies’ SR quality in comparison with Scandinavian – consistent SR leader in EU – best practices through a content analysis of 14 sustainability reports in the two regions. Further, 13 online interviews with sustainability professionals, mainly in the Nordic region, were conducted to learn lessons from best practices. The study revealed no regional difference in report structure and 39 reporting components; however, Korean companies’ disclosure level was lower overall than Scandinavia’s. Moreover, three significant deficiencies in Korean reports were identified: 1) lack of measurable targets and ambiguous goals, 2) tendency to highlight positive performance and lack of negative information, and 3) sharp focus on environmental dimensions than social and governance. Interestingly, interviewees mentioned these limitations as a “Not-To-Do List” to produce high- quality reports. On top of attributes of good SR, interviews uncovered SR improvement measures by SR personnel and the sustainability departments. This study concluded that Korean firms have opportunities to enhance reporting quality further. The primary practical implication of this research lies in recommendations for Korean firms, collating with current SR limitations and challenges in Korea. From an academic perspective, this research contributes to the methodological development for reporting quality assessment. The existing assessment criteria – reporting quality principles – were revised based on the findings of this study. The more detailed yet straightforward criteria can serve as an analytical framework for SR quality evaluation in future research.