K-pop and ESG: Can the music industry act for sustainable development? | In Principle

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K-pop and ESG: Can the music industry act for sustainable development?

The number of Korean ventures in Poland is growing. It is worth taking a look at Korean culture, including its most famous element at the moment—K-pop, a global musical phenomenon. This industry is also notable for its largely-voluntary ESG initiatives.

K-pop generates revenue of about USD 10 billion a year for South Korea. Artists and the entertainment agencies behind them, such as HYBE, SM Entertainment, JYP Entertainment and YG Entertainment, have a huge impact on young people.

As they reach more and more new markets with their creations, entertainment agencies must adapt to ESG and sustainable development goals. On the surface, it might seem that businesses in the music industry have little to do in this area. But ESG can (and should) be pursued by all businesses, regardless of the industry. It is also worth keeping in mind that some Korean entities operating in the European Union will be indirectly subject to reporting obligations under EU regulations.

Social responsibility

“Seven,” “Dynamite,” “Kill This Love,” “God’s Menu,” “TT,” and—back in the day—“Gangnam Style” are songs that have conquered the world charts. Groups such as BTS, Blackpink, Twice, Stray Kids, Exo, Seventeen and Shinee have sky-high recognition and fill arenas all over the world. K-pop groups open major music festivals in the United States, top the charts, are nominated for Grammys, and win awards such as the MTV VMAs. Their concert tickets and albums sell out in no time. K-pop is also gaining popularity in Poland, as evidenced by the KPOP Nation festival in September 2023 at the National Stadium in Warsaw, attracting fans from all over Europe.

The growing popularity of K-pop means that artists and, indirectly, agencies have a significant social responsibility due to the enormous impact that K-pop groups and singers can have on young fans in particular. Indeed, the K-pop group BTS opened the UN General Assembly with a performance in 2021. The artists, as special envoys of the then President of South Korea for future generations and culture, played “Permission to Dance” and gave a speech on the need to fight climate change and achieve the UN’s Sustainable Development Goals. At the UN in 2022, the Korean girl group æspa also encouraged listeners to implement the SDGs, including protection of ecosystems. Another chart-topping band, Blackpink, acted as a UN ambassador at the COP26 climate summit in Glasgow in 2021.

K-pop’s role in the economy and promotion of Korean culture

The rise in global popularity of Korean culture is known as the Korean Wave (Hallyu, 한류). It’s not just K-pop, but also Korean film and K-drama TV series. All this has a considerable impact on the economy and promotion of South Korea. According to estimates, the final three concerts in BTS’s 2019 tour contributed about KRW 923 billion (USD 690 million) to the Korean economy, accounting for 0.3% of the country’s annual GDP. BTS’s first English-language song may have generated KRW 1.7 trillion (USD 1.43 billion) in economic value and created about 8,000 new jobs, according to the Korea Culture & Tourism Institute.

Sustainability initiatives of the music industry

South Korean entertainment agencies seem to be fully aware of their influence. While the music industry might seem to have little to do with sustainability, leading K-pop entertainment agencies are already publishing ESG reports describing the actions they are taking. For example:

  • Since 2020, JYP Entertainment has been running the Love Earth campaign, encouraging fans to use reusable cups and bags, prevent food waste, and use public transport.
  • SM Entertainment has significantly increased the number of women in top management in 2023, and the agency has also pledged its support for emerging and local artists.
  • YG Entertainment presented its 2040 Carbon Neutrality Roadmap for achieving that target.
  • Some agencies are setting up sustainability committees to ensure that agencies meet their environmental and social commitments and contribute to the SDGs.
  • Since 2017, a HYBE subsidiary and the BTS group have supported the #ENDviolence campaign initiated by the UN Secretary-General to stop violence against children and teens.
  • Agencies are joining the K-RE100 initiative, which commits to switching to 100% renewable electricity.
  • As part of the promotion of a low-emissions diet among employees, approximately 86% of the food served in JYP Entertainment’s canteen comes from organic, pesticide-free crops.
  • Agencies are also striving to ensure that their products are made from recycled materials, and to reduce the generation of waste. For example, one version of BTS member J-Hope’s album released by a HYBE subsidiary contained not a physical CD, but a QR code providing digital access to the music.

These examples show that making commitments and taking action for sustainable development is possible and necessary, regardless of the industry in which a business operates. More examples of the activities mentioned in sustainability reports published by selected entertainment agencies in South Korea is available here.

ESG in South Korea

In February 2023, the Federation of Korean Industries published a survey on this year’s ESG trends among the top 100 Korean companies (by sales value). In the survey, 93% of respondents indicated that the importance of ESG in the management of their business will increase compared to last year. Environmental activities were the most important for these companies (82%), with about half of them developing strategies to respond to climate change and about 58% setting specific targets for reducing carbon dioxide emissions.

South Korea is currently working on its own sustainability reporting standards and a timeline for gradual rollout of mandatory sustainability reporting for Korean companies, which is expected to be announced at the end of 2023. Reporting is to become mandatory from 2025 for companies listed on the KOSPI market of the Korea Exchange with assets exceeding KRW 2 trillion (about USD 1.5 billion), and from 2030 also for other listed companies.

(Indirect) sustainability reporting obligations for non-EU entities

The EU’s Corporate Sustainability Reporting Directive (CSRD) imposes an obligation to conduct sustainability reporting on a number of EU entities (the first group of companies will report according to the new rules for the first financial year starting on or after 1 January 2024).

However, non-EU entities which are the ultimate parent entity of the group will also be indirectly required to conduct sustainability reporting for years starting from 1 January 2028 (report in 2029) at the group level if these entities (i) have a large subsidiary or a small/medium-sized public-interest subsidiary or branch in the EU, which had net turnover of more than EUR 40 million in the previous financial year, and (ii) at the group or individual level have turnover in the EU in excess of EUR 150 million for each of the last two consecutive financial years.

The CSRD imposes a specific obligation on the aforementioned EU subsidiaries of such entities that are subject to reporting obligations under the CSRD. They must publish sustainability reports of the ultimate third-country parent company. If EU subsidiaries do not receive such reporting from the parent company, they will have to prepare and publish the information themselves to the extent that they have it or have obtained it, together with a statement that the ultimate third-country parent company has not provided the relevant reporting. The CSRD also imposes similar requirements on large branches established by entities from a third country.

The sustainability report should be produced at the group level by non-EU entities in accordance with the sustainability reporting standards for third-country undertakings that are to be adopted by the European Commission by 30 June 2024 or, by way of derogation, in accordance with the European Sustainability Reporting Standards (ESRS) or standards recognised as equivalent.

Weronika Nalbert, adwokat, Tomasz Kisiel, adwokat trainee, Competition & Consumer Protection practice, ESG & Sustainability practice, Korean Desk, Wardyński & Partners