A Study on ESG Disclosure of SMEs

Globally, ESG disclosure is shifting from voluntary to mandatory disclosure, emphasizing supply chain due diligence. ESG disclosure is prioritized for large corporations, so it may not seem urgent for SMEs. Still, SMEs are the target of large corporations' supply chain management, so there is an urgent need for SME ESG disclosure. Therefore, this paper aims to discuss from a practical perspective what issues and problems are currently overlooked in the ESG discussion of SMEs, what legal systems are covered in the existing ESG disclosure discussion, and what legal systems hinder measuring and disclosing SMEs' ESG performance. In the environment (E) area, SMEs are characterized by using integrated facilities and groundwater and are subject to life cycle assessment. Concentrated facilities for fostering SMEs are a major obstacle to environmental disclosure because it is impossible to accurately identify the amount of energy and water used by individual tenants and the amount of waste discharged. Groundwater is only regulated for installation, but there is no practical regulation on its management unless it is an industry or facility that may pollute the environment, and environmental life cycle assessment is impossible to implement due to practical conflicts between the two laws. Therefore, it is necessary to revise and supplement the relevant laws. In the social (S) area, Korea requires labor-management councils to be established by law, which is an advantage in global ESG disclosure. In supply chain management, companies are required to provide relevant information to their suppliers and subcontractors, but existing laws make it difficult to obtain such information, so laws need to be supplemented. In the area of governance (G), it is difficult to apply general discussions to SMEs because ownership and management are not separated. Therefore, unlike the environment and society, it is necessary to limit the discussion to the minimum scope, such as ethical management and violations of laws and regulations.