[Column-Maeil Business News Korea]
Sustainability Compass - ESG
Administrator Kim ChungwooPublic Procurement ServiceApril 21st, 2021
Due to the devastating pandemic combined with a series of extreme weather conditions, calls for consolidating communities and safeguarding the environment have been growing. Against this backdrop, ESG which emphasizes corporate social responsibility, has increasingly drown attention as a core strategy for corporate management to realize sustainability. To break down the word, the letter E signifies ‘Environment’, S means ‘Social’ and G stands for ‘Governance.’ Corporate management has long put its emphasis on short-term and quantitative results on financial statements. However, social responsibility and the capabilities for fulfilling it are now expected to take root as core strategies for the long-term prosperity and even survival for businesses. That is why multinationals are busy getting onto this global trend. Amazon, the world’s biggest online shopping mall, made a pledge for achieving ‘Net Zero Carbon’ by 2040, 10 years ahead of the Paris Agreement. Microsoft also deploys $1billion of its own capital in a new Climate Innovation Fund, setting a goal of attaining ‘Carbon Negative’ by 2030. ‘Carbon Negative’ refers to a situation where carbon removals are greater than carbon emissions.
Corporate social responsibility is no longer an option, but a necessity. ‘Ethical consumption’ - making a purchase decision considering social and environmental impacts caused by the consumption concerned, coupled with digital technologies allowing consumers to make an almost real-time check on every move by the manufacturer is creating greater synergy effects. Lately, ESG has rapidly emerged as corporate investment criteria.
Last January, Larry Fink, CEO of BlackRock, a global asset manager said in his 2020 letter that BlackRock will put top priorities for investment on ‘climate change’ and ‘sustainability,’ sparking huge attention to ESG. With the letter, he sent a strong message to businesses that they should march towards long-term growth by fulfilling their social and environmental responsibilities, not focusing only on short-term gains.
As for the public commitment to sustainability for the next generation, procurement should also be part of the efforts. Public procurement tuned to social responsibility has already taken root as one of the pillars of government procurement. Cases in point are Britain’s Social Value Model with a 10% weighting placed on social value criteria, Germany’s Sustainability Compass, a sustainable procurement platform and the CO2 Performance Ladder in the Netherlands, which links procurement with carbon-reducing efforts.
In 2019, Korea spent 135 trillion KRW (around 7% of its GDP, 120 billion USD) on public procurement. The Public Procurement Service(PPS) has reinforced social responsibility in government procurement by capitalizing on the nation’s great procurement capabilities. It has expanded preferential measures for the suppliers meeting social responsibilities, creating jobs and backing technological innovation. In addition, the procurement agency has continued to scale up the purchase of energy-efficient and green products.
PPS will continue to do its utmost in strategically utilizing public procurement and overhauling procurement systems so that government procurement can play a pivotal role in fulfilling sustainability for the next generation.