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  • EU Keeps Introducing EGS Regulations... KITA “Need to Take It as New Opportunity not Entry Barrier”
    2021-04-28 hit 384

    EU Keeps Introducing EGS Regulations...

    KITA “Need to Take It as New Opportunity not Entry Barrier”

     

    - It is forecast that EU supply chains will be restructured centering on the companies that comply with ESG regulations...

    Need to seize the opportunity by building data that can verify compliance with ESG regulations -

     

    While the European Union (EU) is introducing ESG-related regulations one after another, some argue that Korean companies needs to take this as an opportunity to make inroads into the EU.

     

    According to a report titled, “Trends and Implication in ESG-related Regulations in EU” issued on April 27th by the Brussels branch of the Korea International Trade Association (Chairman: Christopher Koo), the EU is establishing policies and accelerating legislation to strengthen corporate obligations on ESG (environmental protection, social responsibility, and governance improvement) based on the principles of sustainability.

     

    Related policies include △'Sustainable Financial Disclosure Regulation (SFDR)', which imposes mandatory disclosure obligation for financial institutions on sustainability of investment products, △Non-Financial Reporting Directive (NFRD), which discloses the social and environmental impact of companies' activities in non-financial statements', △'Taxonomy', which defines environmentally sustainable economic activities and presents criteria for judgment, and △'Supply Chain Due Diligence system, which requires companies to monitor  the status of environmental and human rights protection practices across the supply chain'.

     

    According to the report, global companies in the EU are already preparing for ESG legislation by establishing their own regulations on non-financial disclosures, environmental and human rights protection supervision of supply chains, and developing an ESG information tracking system for supply chain companies utilizing blockchain technology. At the same time, it appears that ESG compliance is being used as a differentiating strategy from competitors.

     

    The report forecast that if the supply chain due diligence system is implemented, it will enable monitoring of the environmental and human right protection situations and the value chain will be restructured, centering on companies that can comply with EU standards. In addition, the report analyzed that ESG legislation might act as a barrier when entring into the EU market, but if Korean companies establish management activities that comply with ESG regulations and a system to verify them, there will be higher possibility to participate in the supply chain of the EU, which currently is dominated by China, and it can serve as a new opportunity.

     

    Cho Bit-na, head of Brussels Branch of the Korea International Trade Association, said, “Korean companies looking to make inroads into the EU needs to take ESG issues as business opportunity, not regulations,” and added, “The EU is the first in the world to pay attention to 'sustainability' and make it a reality through concrete legislation. Korean companies need to keep an eye on these movemens of the EU and figure out whether they meet the EU's standards of the environment, hazardous substances, labor, etc. and be  thoroughly prepared by building data.”

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