This file photo shows the buildings of South Korea’s major companies in Seoul. (Yonhap)
SEOUL, March 9 (Korea Bizwire) — To create stronger incentives for environmental, social and governance (ESG) management that relies on non-financial factors, an increasing number of domestic and foreign firms are developing their own ESG indicators and reflecting them in the assessment of rewards for top management and executives.
According to a report from the Federation of Korean Industries, Hyundai Motor Co. started reflecting an ESG grade calculated by quantifying non-financial factors in its management performance indicator from 2019.
SK Group has also reflected the creation of social value up to 50 percent of CEO KPI (Key Performance Indicator) starting from 2019. The group is now reviewing the idea of associating climate change response performance directly to CEO assessment and rewards.
Lotte Group developed its own sustainable growth evaluation indicator after announcing in December 2015 that it will reflect ESG performance in its CEO evaluation. It has been reflecting ESG performance in the assessment of its CEO KPI.
There is also an increase in the number of cases in which companies have developed their own evaluation indices to complement the weakness of ESG methodology, which is difficult to use to measure performance.
A good example of this is the Semiconductor Environmental Performance Index developed by Samsung Electronics Co.
This index is measured by giving weighted values of 40 percent, 20 percent and 40 percent to semiconductor contribution to the environment, environmental management of partner companies and workplace environmental performance.
Ashley Song (ashley@koreabizwire.com)
