As regulators from the European Union to Australia ramp up measures against corporate greenwashing, South Korea has broken ground as the first country in Asia to seek to hand out fines for false environmental claims in advertising.

Under a draft law, a financial penalty of 3 million won ($2,270) will be handed out to companies by South Korea’s Ministry of Environment that are deemed to have misled the public about their environmental impacts and green credentials. The law falls under a series of proposed environmental reforms to be made this year.

Jihyeon Ha, head of legal at Seoul-based nonprofit Solutions for Our Climate, said the draft law should “signal to companies that they should be shifting their business practices to truly decarbonize, rather than putting their efforts into greenwashing marketing.”

In September 2022, South Korea’s largest private gas supplier, SK E&S, removed a statement that an Australia-based project would be carbon dioxide free, under the Environment Ministry’s guidance. Solutions by Our Climate had earlier taken legal action over the project, in what was South Korea’s first legal challenge over greenwashing.

While South Korea currently penalizes greenwashing under the Development and Support for Environmental Technology Act, this requires a complex calculation around the profits garnered from the violation, and as a result, says Ha, no fines have ever been imposed under that mechanism.

Yonghee Yoon, an expert on legal issues pertaining to environmental, social and corporate governance (ESG) at law firm Yulchon, said the draft law was brought in to strengthen current rules in order to more effectively regulate greenwashing cases.

But against this backdrop, “there are questions about how effective the newly introduced administrative fine provision is or how different they are compared to existing regulations,” Yoon said.

“What you need to be careful about is that there are already provisions in Korea that can regulate greenwashing advertisements,” he said.

Environmental advocates are quick to note the financial penalty of the draft law is small. Still, the scrutiny its imposition garners may be a more effective deterrent.

While the law is currently in draft form and its prospects for passage remain unclear, the Ministry of Environment has told domestic media it is actively pursuing greenwashing prevention and monitoring and that a joint working group of experts, industries and civic groups will prepare guidelines for greenwashing by October.

Globally, pressure from consumers and lawmakers is growing on companies to meet environmental targets, and scrutiny of ESG claims has risen. In recent years, regulators across Asia have sought to define reporting mechanisms to push for greater transparency.

In June 2022, China released voluntary disclosure guidelines in a bid to develop a more uniform reporting framework while the country mulls mandatory rules. The same year, the Monetary Authority of Singapore along with the Singapore Exchange launched a digital disclosure portal for companies to report ESG data in a structured “comparable” format.

The director of Japan’s Financial Services Agency, meanwhile, said in February that “regulatory action” will be undertaken against ESG greenwashing, heightening the scrutiny placed on asset managers.

Although rights groups say more needs to be done, environmental issues have nonetheless become increasingly prominent on the South Korean government’s agenda. In January this year, the country’s financial regulator announced guidelines with the aim of enhancing transparency around ESG bond certification, while the annual work plans of the Ministry of Environment's Climate Change and Carbon Neutral Policy Office for this year detailed a strategy ranging from education to autos.

Yoon said since the South Korean government is introducing public regulations on environmental issues like greenwashing and companies are under such pressure from their customers, “it seems that Korean companies have no choice but to make changes.”

Increasingly, individuals and rights groups are adding to that pressure. On March 21, after officials announced they were maintaining a national goal to cut emissions but would revise down certain 2030 targets, a collective of citizens and renewable energy firms sued the government in response to modified energy targets.

Ha said that while South Korean society is growing sensitive to climate change as an issue, “We often see fossil fuel companies continuing to pollute communities and emit massive amounts of greenhouse gases while projecting a climate-friendly image.”

“Without ... shifting toward renewables, the country’s climate policy is fundamentally incomplete. We’re continuing to work towards those goals,” Ha said.