On April 13, 2021, the amended Environmental Technology and Industry Support Act (the “Amended Act”) took effect.  The Amended Act is of particular importance, as it is closely related to ESG (Environmental, Social and Governance) which has recently become a key area of interest for businesses.  The Amended Act is also designed to contribute to the Korean government’s goal of achieving carbon neutrality by 2050.  Please see below for major highlights of the Amended Act. 
 

1.   Established “Green Grade System” and Standardized Evaluation System to Support Environment-Conscious Investment (to become effective on October 14, 2021)

To support and promote environment-conscious investment, or investment decisions that take into account environmental friendliness of the impact of the investment, the Amended Act provides the legal basis for the following:

1. Establishment of a “Green Grade System” which evaluates whether a certain business activity is sustainable and environmentally friendly.

2. Establishment of a standardized evaluation system to assess companies’ performance and outcomes in the area of environment protection.

3. Designation of institutions such as Korea Environmental Industry & Technology Institute as a dedicated agency to support promotion of policies regarding environment-conscious investment, conduct assessment of environment-friendliness based on the standardized evaluation system, and collect and manage the information necessary for such assessment.

Currently, the Ministry of Environment (the “MOE”) is in the process of conducting research to establish a Green Grade System that is customized to the Korean economy and environment, and plans to complete establishing the system by the end of 2021 in consideration of practices in other jurisdictions such as the European Union.  The MOE is also planning to put together a standardized evaluation guideline of the environmental aspect of ESG performance based on analyses of private institutions’ performance indicators and methodologies, and launch pilot projects with relevant institutions.  
 

2.   Broadened Scope of Companies Subject to Disclosure Requirement on Certain Environment-Related Information (to become effective on October 14, 2021)

The Amended Act extends the scope of entities subject to the disclosure requirement associated with environment-related information (consisting of 27 items including water usage, energy consumption, chemicals and waste generation).  Prior to the Amended Act, only public institutions and certain companies and organizations that have a large environmental impact were subject to this requirement.¹  However, under the Amended Act, all companies having assets of a certain size will be subject to the disclosure requirement.  While the specific threshold amount of the asset is yet to be decided, it will be determined based on comments from the relevant industries.  Companies that will be newly subject to the disclosure requirement under the Amended Act will be obligated to disclose the relevant environment-related information starting from 2022. 
 

3.   Added “Upcycling Industry” to Definition of Environmental Industry  

The Amended Act added upcycling industry to the definition of the term “Environmental Industry”².  Upcycling (i.e., upgrade + recycling) as provided in the Amended Act refers to activities that create new values by adding new ideas or designs to wastes that were already discarded but later picked up or recollected, or used products that were going to be discarded.  Promoting and supporting upcycling activities is one of the important goals of the Amended Act.