State-led carbon data value chain development: a case study of the Republic of Korea

ABSTRACT

Introduction: This study investigates the state-led development and management of the value chain for corporate carbon performance data. By tracing the progression path of the carbon data value chain in the Republic of Korea, we aim to assess the functionality of a state-led system.

Discussion:The state-driven value chain development provides structured support, particularly in the early development phases. However, it also presents limitations and inefficiencies, including a mismatch between the expansive role of the public sector and the constrained market activities in the downstream segments of the value chain. These dynamics are significantly influenced by country-specific elements such as economic and industrial policies, market receptivity to the net-zero transition, and the decarbonization strategies of both the state and corporations.

Conclusion: To advance the carbon data value chain towards greater maturity, we recommend enhancing capacity building, fostering private sector engagement, and improving data transparency, accessibility, and usability.

Key policy insights

• State-led carbon data value chains are effective in early development stages; however, they must transition to facilitate market-driven mechanisms as the system matures.

• Policymakers need to navigate the dual pressures of domestic and global agendas, ensuring firms’ adherence to regulations while promoting proactive alignment with global benchmarks.

• The public sector’s role should evolve to enhance the depth and breadth of data through diversified sources and criteria, fostering a more dynamic and responsive system.

• Global integration of the carbon data value chain demands a reconceptualization of geographical roles to ensure effective international alignment and local relevance.

KEYWORDS:

• Corporate carbon performance
• carbon disclosure
• carbon reporting
• carbon data value chain
• carbon market development
• state-led decarbonization policies

1. Introduction

As the global decarbonization agenda accelerates, corporate carbon performance has become a focal interest for diverse stakeholders, including international, national, and private sectors. Data on corporate carbon performance increasingly informs public policy, corporate strategies, investment decisions, and consumer choices (Busch et al., 2022; Griffin et al., 2017; Hahn et al., 2015; In et al., 2019). Accordingly, numerous carbon disclosure and reporting standards, measurement instruments, governing bodies, data providers, and other entities related to carbon management have emerged, collectively forming the ‘carbon data value chain’. Herein, carbon data encompasses not only entity-level greenhouse gas (GHG) emissions but also qualitative measures such as firm-wide carbon management strategy, decarbonization or net-zero targets, progress in achieving such targets, and exposure to carbon-related risks (In et al., 2020).

On the global scene, two major shifts are visible in recent carbon data value chain development and management practices. First, the value chain has become interconnected on a global scale. Companies pay closer attention to their Scope 3 emissions, which extend beyond their direct operations and electricity use to include supply chain operations and end-product use by customers (Hertwich & Wood, 2018; WRI/WBCSD, 2004). Concurrently, the value chain is becoming decentralized. While the formation of the carbon data value chain has been initially driven by state regulations (Lederer, 2012), the private sector’s role is rapidly expanding, becoming as important as, if not more so than, the public sector (Lund, 2013; Mol, 2012). Consequently, governance of the carbon data value chain is transitioning from centralized government structures to more distributed regimes, as critical stakeholders now encompass financial institutions, corporations, and other non-state actors (Hahn et al., 2020).

However, the implications of these global trends for domestic carbon data value chains are not fully understood. Previous studies have examined the operational dynamics and organizational structure of carbon markets, but there is little understanding of the role of geography in the generation, transaction, and use of carbon data. Hence, there is a growing recognition of the need to explore geography’s multifaceted roles within these value chains, extending to the dynamics among domestic institutions, societal norms, and ecosystems. For instance, countries with state-led decarbonization regimes might have a different approach to coordinating and institutionalizing their domestic carbon data value chain compared to market-led countries (Bataineh et al., 2019). When integrated into global value chains, countries face dual pressures from domestic and international demands. Without a nuanced understanding of domestic specificities within the global context, the development and global scaling of a robust carbon data value chain may be compromised, potentially impeding investments and trade to facilitate the net-zero transition (Schumacher et al., 2022).

This study aims to identify key stakeholders within domestic carbon data value chains, understand their evolving interconnections, and analyze how these relationships position the domestic value chain within the global context. Specifically, we investigate the development and management of the carbon data value chain in countries that follow state-led decarbonization policies, using the Republic of Korea (ROK) as a case study. The ROK has actively pursued climate action through legislative measures and the introduction of an emissions trading system (the Korean ETS or K-ETS) despite being one of the top ten global carbon emitters. With a well-developed financial system and relatively mature private markets, the ROK is becoming increasingly alert to climate-related regulations. In this context, the ROK offers a distinctive lens to understand how an advanced economy navigates state-led decarbonization (Kim & Thurborn, 2015). Moreover, our conceptualization of the carbon data value chain and insights from the ROK’s progression paths can inform other countries with similar policies, clarifying the current structure of their carbon data value chains and navigating paths for their advancement.

The rest of the paper is structured as follows. Section 2 reviews studies on the carbon data value chain. Section 3 explains the case study design and qualitative analysis approach. Section 4 examines the ROK’s carbon data value chain. Section 5 provides implications relevant to the countries with state-led decarbonization regimes. Study conclusions follow in Section 6.

2. Literature review

The literature on the carbon data value chain has predominantly focused on two main areas: instrumental and organizational studies. Instrumental studies dissect carbon pricing mechanisms, focusing on refining decarbonization tools and scrutinizing market functions like pricing mechanisms, allowance allocations (Carton, 2014; Michaelowa et al., 2019; Spaargaren & Mol, 2013; Wara, 2007), and the governance structures required to standardize disclosure and accounting methods (Griffin, 2013; MacKenzie, 2009; Mete et al., 2010). Organizational studies explore the interplay among stakeholders, society, and the environmental implications of climate change (Nyberg et al., 2022). Environmental economic geography expands this analysis to a geographical scale, highlighting the relationship between global networks and the environment (Bridge, 2008; Coe & Yeung, 2019; He et al., 2022; MacKinnon et al., 2019). Some studies further examine the environment-business-society interplay narrative, emphasizing the pivotal role of time and space (Mazutis et al., 2021; McKnight & Linnenluecke, 2019; Slawinski et al., 2017). Research by economic and financial geographers, such as Knox-Hayes and Wójcik (2022), builds on the spatiotemporal influence of finance, applying this perspective to climate change issues. Exploring carbon markets, for instance, Bansal and Knox-Hayes (2013) demonstrate that carbon offsetting creates attributes severed from the physical, material properties of carbon emissions and transfers them into financial values associated with carbon to transcend boundaries, fostering global market efficiencies. However, this deterritorialization also opens up vulnerabilities to manipulation and a dilution of geographically contextual information, which become increasingly significant as the carbon data value chain becomes more globalized.

Global integration of the carbon data value chain necessitates a reconceptualization of ‘geography’. Geographic research can thus enhance our understanding of the carbon data value chain’s development within the broad spectrum of geographical contexts, offering a comprehensive view of geography’s role in the socio-material landscape of climate change. Georgallis et al. (2022) demonstrate the relevance of geographic research in identifying and managing multiple stakeholders within sustainability by defining four roles of place. In our view, these roles can be applied to conceptualize the evolving dynamics of the carbon data value chain, which we term ‘grounding’, ‘co-evolving’, ‘going beyond’, and ‘going across’ phases (as illustrated in Figure 1). This framework assists in mapping the carbon data value chain’s development and its progression towards global integration, recognizing the distinct trajectories countries may take under state – or market-led decarbonization strategies.

Figure 1. Stage of developing a carbon data value chain.

Note: This figure illustrates the dynamic progress of developing a carbon data value chain, which consists of grounding, co-evolving, going beyond, and going across phases. As the value chain is created at the local level, the progress can be led by the state (see the blue arrow) or the market (see the orange arrow). Today, regardless of their decarbonization regimes, most countries aim to eventually develop and manage a globally integrated value chain. The authors created this conceptual illustration with reference to Georgallis et al. (2022).

The grounding phase is characterized by the influence of the domestic environment on firms, encouraging them to align their operations with sustainability initiatives. This stage sees firms responding to regional sustainability commitments, propelling them to participate in a value-based market and adhere to these environmental standards (Georgallis & Lee, 2020; Vedula et al., 2019). In the co-evolving phase, the interaction between firms and society becomes reciprocal, as both parties collaborate to develop and implement solutions for sustainability challenges. The approach expands beyond the corporate sphere to include a wider array of stakeholders, recognizing that the complexities of sustainability demand collective action (Barnett et al., 2018). This phase marks a shift from examining solely the environmental impact of individual firms to understanding the multifaceted stakeholder interactions (Grewatsch et al., 2023).

The going beyond phase signals a transition where organizations scale their sustainability initiatives to a global level. While domestic policies remain pivotal, there is an emergent need for global coordination to address the broader implications of sustainability challenges. Stakeholders are therefore tasked with navigating and integrating policies from various regions, as exemplified by the EU’s move towards a border carbon adjustment (BCA) mechanism for foreign producers (Cosbey et al., 2019). Concurrently, the international community is working towards establishing a universal sustainability disclosure standard that aligns corporate actions worldwide (Basu, 2022). The going across phase denotes the integration of the domestic carbon data value chain into the global chain through transactions and data flows. This phase addresses the need to align the national carbon data value chain with international standards, acknowledging the unique policy landscapes and market designs of individual countries. Countries such as the ROK and China have distinct market designs and policies despite geographical proximity (Li & Zhang, 2018), which highlights the importance of understanding the specificities of each country’s context in the global sustainability effort.

Most countries, even those leading the charge of decarbonization, find themselves in the preparatory (going beyond) phase, striving to balance their national economic development with the global decarbonization agenda. Meanwhile, many developing countries are in the nascent (grounding) phase. Nonetheless, their domestic carbon data value chains do not exist in isolation; they are influenced by the global carbon data value chain through international supply chain connections. One of the significant challenges lies in aligning the carbon accounting practices of state and non-state actors with the requirements of regional and global decarbonization agendas.

In and Schumacher (2021) map the carbon data value chain, structuring it by categories of stakeholders, each with distinct roles and objectives throughout the value chain. As illustrated in Figure 2, the process begins with carbon data originators – corporate entities disclosing carbon data under mandatory and voluntary reporting mechanisms and external non-corporate entities that originate raw carbon data from other sources. The data then progresses to primary and secondary aggregators, with the latter primarily functioning as environmental, social, and governance (ESG) rating providers. Ultimately, the data reaches end-users who utilize it for investment decisions or to inform asset owners and managers. As the value chain develops, it expands in both the scope and depth of stakeholder engagement. This expansion can be evaluated by the coverage of the stakeholder map. The value chain can also be characterized by the degree to which certain stakeholder groups dominate or influence particular segments of the value chain map. For instance, the value chain could feature public regulatory oversight shaping or even hindering private market activities (Figure 2(b) depicts a state-driven carbon data value chain). On the other hand, the value chain could be characterized by minimal or ineffective public regulator activity or by an abundance of end-users whose demands for carbon data (or lack thereof) drive the actions of regulatory and aggregator stakeholders (Figure 2(a) depicts a market-driven carbon data value chain). The manifestations and implications of these carbon data value chain stakeholder dynamics largely depend on the socio-geographic context surrounding which the value chain originates and develops.

Figure 2. Comparative structure of carbon data value chain.

Note: This figure shows comparative stakeholder interactions in the market-driven (Panel a) and state-driven (Panel b) carbon data value chains. The colour represents whether the public sector (in blue) or the private sector (in orange) dominates the stakeholder group.

3. Research methodology

3.1. Case selection

In selecting the geographic context for this study, Asia was prioritized due to its high contribution to global emissions and its relevance to the upstream emissions footprint of many multinational corporations with global supply chains. Other research criteria aiding in the purposeful selection of the geographic context included absolute and per-capita carbon emissions, the existence of data value chain structures, degree of financial system maturity, connection with global supply chains, and public awareness of decarbonization. Based on these criteria, the ROK was selected.

Positioned within the top 10 and top 20 in absolute and per-capita carbon emissions, respectively (World Bank, 2022a, 2022b), the ROK government demonstrates a strong commitment to decarbonization. In 2009, the ROK government set a voluntary emissions reduction target of 30% below business-as-usual (BAU) levels by 2020. The Framework Act on Low Carbon, Green Growth was enacted in 2010, outlining policy targets and governance structure. In 2012, the ROK became the first Asian country to pass an ETS law, the Act on the Allocation and Trading of Greenhouse Gas Emission Permits, which took effect in 2015. In 2021, the Ministry of Foreign Affairs (2021) announced a more ambitious Nationally Determined Contribution (NDC), raising the reduction target from 26.3% to 40% compared to 2018. Concurrently, the nation functions as an industrial hub, integral to the supply chains of global corporations, and has a relatively mature private market and a well-developed financial system with diverse private actors. In this context, the ROK is a unique case of a developed nation adopting a state-led decarbonization strategy, providing invaluable insights for emerging economies, particularly those in Asia.

3.2. Interviewee selection

Our key stakeholder pillars are (1) government institutions and policymakers, (2) domestic and global non-profit organizations, (3) private companies, (4) ESG data providers, (5) ESG data end-users, and (6) other miscellaneous stakeholders. Our sample comprised 21 interviews: two from government institutions and policymakers, four from non-profit organizations, four from private companies, five from ESG data providers, three from ESG data end-users, and three other miscellaneous stakeholders. We adapted In and Schumacher’s (2021) stakeholder mapping of the carbon data value chain noted in Section 2 to guide our interview participant selection and coding processes. By using this conceptual framework, we ensured comprehensive coverage of all actors in the carbon data value chain, minimizing the risk of bias toward any single segment. The limited sample size inhibits our ability to take an inductive approach. Instead, we use a deductive approach to assess alignment with the conceptual framework noted in Figure 1 from Section 2. Identifying information about the interviewees or their affiliated organizations was not disclosed, as interviewees did not formally represent their institutions.

3.3. Interview design

We designed the semi-structured interviews to explore five primary themes from the unique perspective of each interviewee. These included (1) the stakeholders originating, exchanging, or using carbon data, (2) key steps of the carbon data value chain, (3) the region over which carbon data value chain activity is occurring, (4) motivations and drivers of disclosure and other carbon data value chain-related actions, and (5) how or why carbon data is processed or restructured by ESG data agencies. These exploratory themes formed the core line of our interview questions and were the primary themes for post-interview qualitative coding.

Follow-on questions varied by stakeholder type, intended to elucidate a more nuanced view from the interviewee's position in the carbon data value chain. For government institutions and policymakers, such follow-up questions were related to how top-down regulation and pressure influence the existence, structure, and operation of carbon data value chains and the activities of other players in the carbon data value chain. For non-profit organizations, we explored how local and international standard-setting initiatives or players affect or engage with the domestic carbon data value chain structure and operation. For private companies, we were interested in what drives carbon data collection, how and why carbon data is collected and processed, and with whom that carbon data is shared. With ESG data providers, we focused on how providers and raters process raw carbon data and share it with other agents. In the case of end-users, we explored how carbon data influences capital allocation decisions. Follow-on questions for other miscellaneous stakeholders were intended to reveal domestic value chain nuances with respect to granular steps of data collection, processing, validation, and information sharing.

3.4. Interview execution

When executing interviews, we prioritized consistency and neutrality using standardized phrasing and avoiding potential interviewer biases. Interviewees were encouraged to respond without restraint. We also took care not to make assumptions or reveal any predetermined expectations. Interviews were conducted between 2021 and 2022, lasted around 30 min, and were held via video conferencing. Verbal consent for audio recording was secured to supplement notetaking and enable post-interview processing and cross-referencing. Each interview had a minimum of two interviewers present, one leading the conversation and the other validating the findings. Interviews were primarily in English, but Korean was used when preferable or necessary. We occasionally followed up with interviewees for clarity or to connect with additional interviewees. Individual interviewee details were kept confidential, with findings aggregated to ensure anonymity.

3.5. Transcripts and coding

Upon concluding the interviews, we examined the transcribed notes and coded the responses using the conceptual themes discussed above. We used a combination of a priori and emergent codes in qualitative coding. Stakeholder categories and data process steps comprised the a priori codes. After initial coding, iterative discussions refined our understanding and highlighted patterns among stakeholder categories, leading to the addition of emergent themes to our coding scheme. The codebook can be found in Appendix 1.

4. Case study findings and analysis

This section presents findings and analyses categorized by the key steps within the value chain: data measurement, disclosure and reporting, aggregation and validation, and end usage. We first explore the stakeholders and local (i.e. domestic) contexts that shaped our interviews, subsequently presenting our insights regarding the process-level functionality of the carbon data value chain in the ROK.

4.1. Key stakeholders

4.1.1. Government institutions and policymakers

Given that mandatory disclosure regimes are generally enforced by a public authority, it was essential to include the Ministry of Environment (MOE) in our study, specifically its ancillary institutes such as the Greenhouse Gas Inventory & Research Center of Korea (GIR), which manages the national GHG inventory. This category encompasses public and quasi-public entities setting standards, overseeing data collection, and supervising corporate disclosure activities.

4.1.2. Non-profit organizations

Global non-profits primarily establish benchmarks and standards for ESG disclosure, including taxonomies. While global and domestic non-profits often align, domestic entities also independently set local disclosure standards. This category includes non-profits impacting or adjacent to carbon data collection, structuring, or disclosure with domestic or Asia-oriented operations.

4.1.3. Private companies

Internal and external forces, including governmental regulations, investor expectations, and customer demands, pressure companies to disclose carbon emissions and management approaches. These forces prompt private companies to engage in voluntary and mandatory disclosure in the ROK. Disclosure dynamics are impacted by firm size, particularly among industrial conglomerates or ‘chaebols’ such as Samsung, LG, Hyundai, and SK Group, ten of which account for nearly 68% of the ROK’s GDP (Korean Statistical Information Service [KOSIS], 2022). Consequently, publicly disclosed carbon data is skewed towards large entities. Conversely, Small – and Medium-sized Enterprises (SMEs) tend to be underrepresented, stemming from capability gaps and relatively less regulator or investor pressure to lower emissions.

4.1.4. ESG data providers

The carbon data market in the ROK blurs the lines between specialized corporate decarbonization and overall ESG performance. Therefore, this study adopts a broad approach, considering ESG data providers as agencies that deal with both raw and processed carbon data. The budding ESG market in the ROK is spearheaded by the ‘big three’ providers: the Korean Corporate Governance Service (KCGS), the Daishin Economic Research Institute (DERI), and Sustinvest. Emerging domestic startups are entering the value chain, utilizing alternative data and innovative analytical techniques. Furthermore, global ESG data providers, such as S&P Trucost and CDP, offer a blend of country-specific and global ESG data insights despite limitations in direct data access of government platforms. These firms work with domestic ESG providers or use proprietary imputation methodologies to estimate data otherwise not publicly available.

4.1.5. ESG data end-users

While the ROK boasts a robust financial sector comprising diverse ESG data end-users, ESG integration and green finance products have not yet become mainstream. With the banking sector dominating the financial sector due to the ROK’s historically debt-fueled industrial development, uptake of ESG integration across the entire sector has been limited. Despite investor pressure for portfolio-level carbon intensity data, asset managers often confront data availability challenges.

4.1.6. Other miscellaneous stakeholders

Our interview insights reveal the necessity to encompass actors unique to the ROK’s context or common in the global data value chain. Within the ROK, verifiers (or auditors) provide audit services to validate corporate emission disclosures and reports. These entities can be quasi-public in the ROK’s centralized structure and play a crucial role in ensuring independent verifier activity.

4.2. Value chain steps

4.2.1. Measurement

In the ROK, measurement requirements are primarily set by the MOE through its emission trading system, focusing on a specific type of carbon data. However, technology – and big data-enabled measurement methods are increasing carbon data availability, and the measurement mode is expanding from MOE-based mandatory drivers to voluntary drivers. While MOE’s measurement requirements primarily involve backward-looking carbon footprint measurement, there is a shift toward forward-looking disclosures detailing company management plans for future decarbonization.

The ROK’s disclosure system weakly aligns with global standards such as the Taskforce on Climate-related Financial Disclosures (TCFD) or the International Sustainability Standards Board (ISSB). TCFD recommends Scope 3 disclosures and targets to assess progress criteria that are out of scope in the MOE’s disclosure system. Nonetheless, Korean regulators point toward future TCFD alignment, with the Financial Services Commission (FSC) and thirteen relevant Korean institutions declaring support for TCFD in 2021.

Downstream from company-originated measurement, other actors may re-engineer and re-organize company-originated data. Still, there is little to no activity by domestic actors generating new data not disclosed by the companies themselves, as is beginning to happen in other markets. Our interviews revealed a few exceptions where downstream players introduce new measurement methods that widen carbon data availability. Who’s Good is an upstart Korean firm challenging the ‘big three’ ESG data providers in the ROK. They offer an automated ESG performance service for public companies in the ROK using verified data from the MOE. Their AI-enabled ESG incident analysis product assesses ESG risk from over 200 information categories across media sources. Their approach generates a differentiated view of quantitative data-based ESG performance. In another exception to regulator-facing, company-originated data, the SK group established a Center for Social Value Enhancement Studies (CSES) division to advance frameworks for evaluating social value at the business level. CSES criteria assess the monetary value of social ventures that benefit consumers and society, including emissions mitigation. CSES is piloting this framework with SK Group subsidiaries through the Social Value Management System, complementing the SK Group’s ESG standard compliance.

As the methods of measuring carbon data expand, so too does the mode of measurement. Companies are increasingly aligning with voluntary mechanisms beyond the MOE’s purview, joining movements such as the Science Based Targets initiative (SBTi), the Renewable Energy 100 (RE100) initiative, Korean RE100 (K-RE100), and others. These voluntary initiatives are more forward-looking and oriented toward carbon management. One case is the RE100 initiative, established in 2014 by the Climate Group in partnership with CDP to track large energy users with a publicly declared target year for using 100% renewable energy in operations. Several of the ROK’s largest conglomerates have joined RE100. To enable tracking of progress in RE100 and facilitate participation for smaller energy users, the ROK’s Ministry of Trade, Industry, and Energy (MOTIE) established a K-RE100 system in 2021. The system allows SMEs using more than 1 MWh of energy to certify progress toward renewable energy usage annually. Participants can report energy procured through various mechanisms. K-RE100 does not require participants to have a target year for 100% renewable energy use, as required in the global RE100.

4.2.2. Disclosure and reporting

The MOE has a two-tiered public sector-driven GHG emission disclosure system. There is a mandatory public sector-driven disclosure regime under the K-ETS featuring the GIR platform and a voluntary disclosure regime with the environmental information disclosure system (ENV-INFO) and the Korean Exchange (KRX).

The GIR was established under the Low Carbon Green Growth Law of 2010 for transparent operation and data collection of both the ETS and the target management system (TMS) established under the same law. The K-ETS covers over 70% of national emissions across almost 70 industries. The law strictly defines the GIR’s scope as Scope 1 emissions for government agencies and, under the ETS, Scope 1 and Scope 2 emissions across six greenhouse gases if annual GHG emissions exceed a threshold of 125,000 tonnes of CO2-equivalent per year (tCO2e/year) at the company level or 25,000 tCO2e/year at the level of a single facility. Over six hundred entities are subject to allocations and reduction targets, and over four hundred such facilities are subject to a ‘management objective’ to reduce emissions (managed by the TMS). Any expansion of the type of data collection would require an amendment to the original law. Only a portion of K-ETS’s disclosures is publicly available through the ROK’s GIR platform, specifically tCO2e emissions and energy usage in terajoules. Additional data not required under the law is collected but unavailable for public access.

Any entity can voluntarily participate in ETS regardless of emissions level, but SMEs generally lack the resources and capability to do so. Voluntary carbon disclosure activity is more typical of large entities disclosing data through the ENV-INFO system. The ENV-INFO system was established under the 2011 Environmental Technology and Environmental Industry Support Act, and as of 2020, over 3,000 entities reported data on materials use, emissions, and environmental management activities. Voluntary sustainability reports are aggregated and available publicly on the ENV-INFO platform. However, the depth and coverage of those disclosures range widely, and discrepancies can conflict with the MOE’s GIR or among the different forms of voluntary disclosure. There is a sense that voluntary disclosure is more likely for companies with foreign shareholders or National Pension Service (NPS) investments due to an expectation that disclosure can attract investment.

In addition to the ENV-INFO-based voluntary disclosures, the KRX, the sole securities exchange operator in the ROK, has established an integrated ESG platform to facilitate data flows to investors and the public. Only a small portion of listed companies have reports available. The KRX has mandated ESG disclosure for specific large companies starting in 2025, widening to all KRX-listed companies in 2030. In the intermediary period, the KRX will develop guidelines for listed company disclosure, influenced heavily by the criteria of the KCGS.

4.2.3. Aggregation and validation

In the aggregation and validation phase, carbon data is processed and re-engineered to provide practical data products to end users. Four domestic ESG data providers are active in the ROK carbon data value chain: KCGS, DERI, Sustinvest (i.e. the ‘big three’), and Who’s Good, a relative newcomer. Global ESG data providers also have coverage of the ROK, to a limited extent. There is significant overlap in the source of data used in ratings among the four players. Profiles of each player’s historical origin and approach are included in Appendix 2.

In addition to the four domestic ESG data providers, the MOE serves a unique multi-purpose aggregation role. It acts as a primary data aggregator by collecting company-level carbon disclosures, a data distributor through its various public platforms, and an ESG data provider for SMEs. This aggregation and distribution are mostly limited to large companies, with most SME-based raw data never being available. The MOE cannot legally disclose the voluntarily disclosed raw emissions, water usage, and energy usage data that underpin the MOE’s SME ratings, which are provided to banks in environment-focused SME lending programmes. Government-approved external verifiers ensure the data flowing into the MOE’s systems is of sufficient quality.

4.2.4. End usage

In the final end-usage step of the carbon data value chain, ESG data providers transform raw data from the aggregation and validation phase to serve a range of end-users. In the ROK, ESG data providers tend to serve financial industry end-users seeking to understand the carbon impact of their investment holdings. Generally, international financial institutions seeking information on large Korean companies will work with global ESG data providers, who often have coverage of the ROK’s largest companies. In contrast, large domestic financial institutions will work with domestic ESG data providers or do an in-house analysis of their investment portfolios.

4.3. Analysis of the ROK carbon data value chain

Using an a priori coding process, we characterize the relative activity of key stakeholders at each stage of the carbon data value chain and the strength of linkages between key stakeholder groups. The ROK’s carbon data value chain is predominantly influenced by public sector-driven activities. These activities are focused on measurement and reporting, overshadowing the upstream carbon data origination and downstream aggregation, validation, and usage activities. Current carbon performance measurement practices are primarily retrospective, operating under the centralized guidance and supervision of the MOE. There are emerging practices that utilize big data-driven technologies for forward-looking carbon management, but such advancements are limited to large-cap companies. Market-wide demand for these advanced measurement practices remains limited. Corporate carbon reporting in the ROK is still in its development phase, with most activities designated to meet regulatory requirements set forth by public sector governing bodies.

In the ROK, the MOE primarily oversees the aggregation and validation of carbon data, which marks a clear difference from market-driven systems observed in other countries. In the US, for example, the federal Environmental Protection Agency (EPA) plays a significant role in setting reporting standards and enforcement. Still, it is the private sector and third-party auditors hired by non-state actors that play a substantial role in aggregation and validation processes (Salinas et al., 2010). This contrasts with the ROK, where the public entities bring third-party auditors. In addition, while domestic private and quasi-public ESG data providers exist and are beginning to diversify their approaches, their reliance on public MOE data platforms is still considerable. The EPA in the US, while setting standards, does not act as a data platform intermediary for the rest of the value chain. Global ratings agencies’ imputation approaches lower their reliance on MOE data but do not have as extensive coverage as domestic providers. This discrepancy between upstream data origination activity and downstream aggregation and rating activity is characterized as a ‘thin market’ problem (Gupta et al., 2022). Depth could be added to the value chain's data aggregation and rating segment if the stream of data sources expanded, for instance, by broadening the criteria used for disclosure or introducing more alternative methods of generating carbon data.

The a priori coding analysis showed that government institutions and policymakers appear as focal points throughout the ROK’s value chain, with linkages with every stakeholder type and at every step of the value chain. However, other stakeholders tend to have strong linkages only with stakeholder groups adjacent to their position in the value chain. There is an apparent disconnect between upstream and downstream value chain activity, reflected in the qualitative linkages between stakeholders at each end of the value chain. For example, ESG end-user activity concentrated on interactions with ESG data providers and non-profit organizations, reflecting domestic end-users broadening from the local level to align with global standards. Qualitative linkages between ESG data end-users at one end of the value chain and government institutions, policymakers, and private companies at the opposite end were lacking in our coding of this study’s interviews. Moreover, there was a strong qualitative linkage between private companies, government institutions, and policymakers, reflecting the clustered dynamic of carbon data value chain interactions.

5. Policy implications

5.1. Characteristics and challenges of a state-led system

Qualitative coding of interview transcripts gave rise to an emergent theme worthy of deeper discussion: the motivation for participating in the value chain through disclosure and other actions. Compliance with mandatory state-driven disclosure regimes emerged as an important motivator, while voluntary and quasi-voluntary pressures of both domestic and global origins were also discussed. Drivers to participate in the carbon data chain ranged from reputational to monetary. Pressures are broadly from state – or market-based origins, as noted in Table 1.

Table 1. Origins and types of pressure to participate in the carbon data value chain in the ROK, with interview quotes.

Illustrative interview quote	Type of pressure	Origin of pressure
‘The Korean government, through its center, is now managing greenhouse gases holistically […] Through analysis of a large amount of [disclosed] data, the greenhouse gas reduction target in Korea is set’.	Compliance	State
‘All the information that is being submitted by […] companies is legally stipulated […] Right now, the only thing that's legally [mandated] is Scope 1 emissions’.
‘Country – and workplace-level greenhouse gas data are coming into the system, and management and disclosure [of that data] is done in accordance with the law’.
‘In Korea, we have [a different disclosure system] that is a legal duty to disclose[…] and there is legal authority to give legal sanctions if they didn’t disclose according to the law’.
‘We can say that [company disclosure] is mandatory, but the [decision] to open that information [to the public] is from the Ministry of Environment […] So in that sense, the [public] disclosing duty is voluntary [except for legally stipulated emissions values]’.
‘The social movement is trending toward ESG and all stakeholders are in particular trying to get more information about ESG things from companies’.	Reputation and social norms	Market
‘The main motivation, you know, in terms of large companies right now is that carbon disclosures are often being done as kind of a more reputational program’.
‘all of these initiatives that are at different levels, at different parts of the world, they would somehow converge […] We are already seeing that now’.	Global initiatives and standards
‘If they provide their sustainability report to the market, they might have some sort of reputation from the outside investors in financial markets’.	Access to capital
‘The companies are expecting that the National Pension Service will increase their investment in companies that have better ESG performance’.

As this source of pressure is largely divided into state and market drivers, it lends to the notion of the state’s decarbonization regime influencing the development of the carbon data value chain. We term this theme ‘state-led’ or ‘top-down’ carbon data market development. Under the top-down orientation, the public sector is the focal point of the system, with multiple roles in the value chain. In the ROK, the MOE spans several roles in the carbon data value chain beyond driving disclosure and reporting activity. As an aggregator and data gatekeeper, the MOE is the source of truth on which nearly all domestic carbon rating activity down the value chain depends. Despite its central role, the MOE’s data repository is not made transparently accessible to domestic or international users, nor is the collected data released in its entirety. Meanwhile, data discrepancies exist between the mandatory and voluntary reporting regimes. The top-down orientation has created a many-functioned focal point that, so far, neglects crucial elements of the carbon data value chain.

A carbon data value chain developing from the top downward becomes bound by dissonant objectives. On the one hand, the public sector strives to drive economic development. On the other hand, governments are increasingly pledging commitments to reduce carbon emissions in line with international agreements. This dual mandate is in tension with itself. Delivering on emission reduction targets entails disclosure, tracking, and enforcement, potentially requiring additional expenses that may undermine any company’s short-term growth. These tensions are especially stark in the ROK, where the large companies targeted for decarbonization drive much of GDP. Concern over decarbonization-driven economic shocks can inhibit pressure to disclose, track, and reduce emissions and undermine more ambitious or comprehensive carbon pricing policies (e.g. carbon tax). These tensions could manifest in the carbon data value chain as limitations on data transparency and accessibility.

A consequence is that the ROK’s top-down approach is one-sided in prioritizing more prominent economic players with high emissions. These large entities must submit data to the ETS platform defined and guided by the MOE. Meanwhile, SMEs submit only voluntarily to the ETS and, in the case of the ENV-INFO, have less guidance. Although large companies generate the bulk of the ROK’s national emissions, without a broader collection of and access to the well-defined project – and SME-level carbon data, the market will continue to be one-sided and limited in its maturity. Shifting the focus of regulation to capacity building for tracking and reporting relevant data for all market players, especially for SMEs, would widen market participation, lessen the inherent tensions between the state’s dual mandate for growth and decarbonization, and enable the public sector to be more focused in its role, all of which could improve the carbon data value chain’s efficiency and depth.

The state-driven approach to developing the carbon data value chain may face challenges due to a misalignment between public and private-sector interests, which can impede the maturation of the value chain. Unlike global carbon data value chains, where primary and secondary data aggregators typically operate independently, the state-driven value chain in the ROK case exhibits a lack of secondary aggregation, typical of more market-driven environments (refer to Figure 2). The public sector’s extensive responsibilities, covering numerous areas, result in a broad yet superficial capacity. Integrating market-driven elements, such as diminishing the public sector’s gatekeeper role of data and encouraging private sector engagement, could accelerate market development. While the public sector effectively enforces accounting and reporting regulations for large emitters, downstream participants do not have sufficient access to fully leverage the collected data. In the ROK case, this limitation affects domestic ESG data providers relying on the MOE for data clarification and global aggregators relying on local rating providers to access relevant local data.

5.2. Evolving role of the public sector along the development paths

The role of the public sector in the development of a state-led carbon data value chain is pivotal yet subject to debate. While some may posit that market-led systems, exemplified by regions like the EU and the US, are superior to state-led ones because they are in the advanced phases, this requires a more nuanced examination. Carbon data value chain development is still an ongoing process across all countries, and perceived superiority is often tied to the level of institutional maturity and early implementation of decarbonization initiatives.

Institutional maturity of the carbon data value chain precedes progression to the next stage of development in the carbon data value chain. Nonetheless, escalating global pressures are likely to hasten this transition. The intensifying impacts of climate change and global discussions around bolstering carbon monitoring along the carbon data value chain suggest that domestic chains will integrate into the global chain in an abbreviated timeline. Latecomers might have relatively less time to align their institutions with global standards. The pressing question becomes identifying pathways that enable timely institutional transition to prepare for the quick progression to the going beyond phase. Each development phase presents unique challenges intertwined with the specific national context, notably the dynamic between private and public sectors. And the approach to addressing these challenges should be tailored to these distinctive contexts.

The in-depth examination of the ROK’s case suggests an evolving role for the public sector as the country progresses. In the meantime, as discussed in Section 5.1., our analysis reveals common challenges faced by state-led decarbonization countries transitioning into the co-evolving phase and progressing towards the going beyond phase. The ROK has successfully navigated the grounding phase, evidenced by the introduction of environmental laws, the implementation of a carbon market (K-ETS), the establishment of a data collection platform (ENV-INFO), and other environmental initiatives like K-RE100 and K-Taxonomy. The grounding phase in the ROK is centred around state-led initiatives, with MOE incentivizing mandatory and voluntary corporate behaviours. Progressing through the co-evolving phase, the ROK has witnessed increased corporate initiatives and stakeholder involvement. Large conglomerates have actively embraced carbon disclosure initiatives and joined decarbonizing industry collations, signifying their commitment to climate actions. Domestic ESG data providers have begun to play a role in the carbon data value chain. However, the ROK’s value chain has not matured enough to fully progress to the next phase, with stakeholders maintaining a domestic focus and SMEs not fully integrated into the carbon data value chain. Global ESG providers operate in the ROK but primarily cater to large-cap companies.

The state-led system could benchmark against market-led best practices to address the noted challenges. For instance, in a bottom-up scenario, the public sector would not need to be at the centre of all activities of the data value chain. As the carbon data value chain matures, the public sector can adapt its role to suit its needs, shifting from a standard-setter to a protector of data transparency and a catalyst of downstream value chain activity. Encouraging diverse stakeholders to assume data aggregation responsibilities would improve data transparency, availability, and usability. This could be done without compromising data integrity by maintaining or strengthening external verification requirements. With the public sector focusing more exclusively on the market’s guiding standards, the carbon data value chain can develop from the bottom up with more balanced activity.

6. Conclusion

The research on carbon markets has primarily focused on activities within specific segments of the value chain, practices of particular countries, and the evaluation of related policies. Yet, developing and managing the carbon data value chain in geographical contexts, especially in countries advocating for state-led decarbonization, remains underexplored. This study contextualizes these challenges by examining development processes and key stakeholders, particularly the dynamics within a state-led system. Addressing this knowledge gap is vital as the carbon data value chain becomes increasingly globalized.

Drawing on the literature, this study conceptualizes the development of the carbon data value chain through four main phases: ‘grounding’, ‘co-evolving’, ‘going beyond’, and ‘going across’. It takes an in-depth examination of the Republic of Korea (ROK)’s progress within the value chain development to understand the distinct challenges a system-led system may encounter along this pathway. While the ROK’s top-down approach has successfully prompted companies to adhere to state regulations, which is advantageous in the initial stages of the carbon data value chain’s evolution, the ROK exhibits certain inefficiencies and limitations. These include a discrepancy between the scope and depth of roles the public sector assumes and limited market activity in the downstream value chain. While public mandates secure comprehensive data collection, they might inadvertently prioritize corporate compliance over adopting innovative monitoring, reporting, and verification (MRV) methods. Concurrently, escalating global pressures are accelerating the integration of carbon data value chains, challenging slower-adapting institutions to swiftly align with evolving global standards. Policymakers should navigate these dual dynamics, ensuring firms not only adhere to regulations but also proactively align with changing global benchmarks. We recommend enhancing capacity building, fostering private sector engagement, and improving data transparency, accessibility, and usability.

This study provides insights into countries pursuing state-led decarbonization by characterizing a state-led system, identifying its challenges, and suggesting pathways for advancement. These regional elements also influence cross-border carbon data flows, extending their implications to the global carbon data value chain. Our findings are valuable for governments considering the most effective approaches to implementing carbon accounting mandates and fostering a robust carbon data value chain in pursuit of decarbonization and meeting national emissions reduction goals.

However, this study is not without limitations, which pave the way for further research and subsequent investigations. While the ROK is chosen as a case study due to its distinctive trajectory within the carbon data value chain, its specific institutions and stakeholders might not be analogous with other state-led decarbonization countries. Thus, future research could benefit from juxtaposing case studies to solidify the arguments. In addition, the ROK’s case study is limited in examining the interplay between local and global value chains, which complicates the thorough exploration of the ‘going beyond’ phase. In the ROK, only a handful of major conglomerates engage on a global scale. This constraint is inherent for countries in the grounding and co-evolving stages, where the institutions are still maturing and may not be fully equipped to engage global stakeholders robustly. Studying countries in the EU, currently in the ‘going beyond’ stage, might enhance our comprehension of the entire carbon data value chain.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Appendices

Appendix 1. Codebook

Table

Code	Category	Category definition	Second-order theme	Second-order theme definition	Includes	Excludes
A priori	Stakeholder	Stakeholders originating, exchanging, or using carbon data	Private Companies	Mention of or reference to firms being the source of carbon data	Specific companies	Generic references to private companies originating or using carbon data
			Government Institutions and Policymakers	Mention of or reference to regulators, policymakers, or government institution-based carbon data systems	Specific government institutions	Generic references of state-level oversight or mandates
			ESG Data Agencies	Mention of or reference to ESG data agencies of carbon data	Specific ESG Data Agencies	Generic references to broad ESG Data Agency activity
			Non-Profit Organizations	Mention of or reference to global or local non-profit organizations	Specific global or local non-profit organizations	Generic references to global or local non-profit organizations
			ESG Data End-Users	Mention of or reference to end-users using carbon data (like investors)	Specific companies	Generic references to private companies originating or using carbon data
	Value chain steps	Key steps of the carbon data value chain	Measurement	Mention of or reference to measurement / origination of carbon data / disclosures	Phrases such as ‘measurement standards’, ‘protocols’, in-house vs. external measurement, or quantifying scope 1, 2, or 3	Reporting requirements for the different scopes
			Disclosure and Reporting	Mention of or reference to disclosure / reporting steps and tools	Phrases such as ‘report to’, ‘submit’, ‘requirements’, ‘disclose’, ‘is available through’	Measurement techniques for the different scopes
			Aggregation and Validation	Mention of or reference to accessing disclosed data or other forms of data for processing/transformation/reuse	Phrases such as ‘restructured’, ‘collect’, ‘integrate’ multiple forms of data, ‘based on’ other sources of data, ‘validating’ or confirming the ‘quality’ of data	Company-level validation / quality checks during measurement step
			End Usage	Mention of or reference to usage of carbon data for investment decisions	Phrases such as ‘decision criteria’, ‘final end usage’, ‘used by investors’	End-usage at an intermediate step of the value chain (e.g. an aggregator being an end-user for raw data)
	Locality	The region over which carbon data activity is occurring	Local	Mention of or reference to carbon data value chain activity explicitly occurring locally	Reference to ‘Korean’ or ‘domestic’ players, ‘local’ entities, national priorities & industries	Mention of international firms operating locally in the ROK (i.e. with regional branches). Also excludes that is assumed or understood to be happening locally with no explicit reference to the local or local/global distinction
			Global	Mention of or reference to linkages with the global carbon data value chain, e.g. end-users	Reference to ‘global’, ‘international’, partnerships or relationships with ‘foreign’ entities	Mention of international conglomerates operating in the ROK. Also excludes activity that is assumed or understood to be happening with global linkages, but with no explicit reference to the global or local/global distinction
Emergent	Motivation	Motivation and drivers of disclosure and other carbon data value chain-related actions	Reputation and Social Norms	Mention of or reference to consumer/societal/public pressure to decarbonize, disclose environmental impact, or demonstrate alignment with climate	Phrases such as ‘consumer’, ‘conscience’, ‘public eye’, or ‘reputation’	Government pressure or requirements
			Global Initiatives and Standards	Mention of or reference to voluntary reporting initiatives or systems	Phrases such as ‘voluntary targets’ or initiatives, corporate objectives, annual reports. Use of words like PCAF, TCFD, SASB, FASB, GHG Protocol, CDP and other local or global	Korea-based mandatory reporting requirements
			Compliance	Mention of or reference to government/policy-linked disclosure motivations or mandatory reporting requirements	Phrases such as Ministry of Environment requirements, ‘duties’, ‘mandatory’, ‘defined by law,' or ‘sanction’	Government's voluntary reporting platform/system
			Access to Capital	Mention of or reference to motivation to demonstrate climate alignment to capital markets	Mention of market (investor) appetite/preference	Company-level investment in tools / programmes / teams to do measurement of the different scopes
	Processing	How or why carbon data is processed by ESG data agencies	Restructuring	Mention of or reference to how carbon data is processed or restructured before moving to a different step in the value chain.	Phrases such as ‘proprietary rating’, ‘restructured’, ‘corrected’, ‘index’, ‘industry ranking’ or ‘rating’, ‘machine learning’ or ‘AI’, ‘own analysis’	Filling data gaps, ‘imputation’
			Gap Filling	Mention of or reference to efforts to fill gaps for missing data, deal with data quality issues, or other methods of handling data gaps	Phrases confirming the ‘quality’ of other data, ‘dealing with’ ‘data gaps’ or ‘no data’, ‘requesting more data’, ‘imputation’	Otherwise restructuring data when not related to data gaps

Appendix 2. Local ESG data providers in the ROK

Table

Company name	Stakeholder type	Locality (Local vs. global)	Description
Korean Corporate Governance Service (KCGS)	ESG Data Provider	Local	The KCGS has been evaluating corporate governance performance in the ROK since 2003. KCGS provides ratings for over nine hundred publicly listed Korean companies based on nearly 300 evaluation criteria across 18 categories. Though it is a quasi-governmental organization in that it has a limited commercial mandate, it receives its funding mostly through the KRX, which includes fees paid to the KRX by industries that KCGS evaluates for ESG ratings, as well as through donations from external parties. Its quasi-governmental status gives it unique linkages to other government bodies, as seen in its heavy influence on developing the ESG disclosure frameworks of listed companies on the KRX. Data for the ESG rating calculation is primarily sourced from the government’s public disclosure systems, but additional data is derived from alternative sources such as raw data from sustainability reports, media coverage, and occasionally CDP reports in the case of some of the ROK’s largest companies. When necessary, KCGS engages directly with companies to collect otherwise undisclosed information. There is a perception of KCGS having a more open dialogue than other rating providers in terms of back-and-forth conversation and feedback provided to companies to enable them to improve their scores.
Daishin Economic Research Institute (DERI)	ESG Data Provider	Local	The DERI is private economic research and ESG data provider established in 1984 out of the Daishin Financial Group, a large asset management company. DERI provides the full spectrum of ESG-related consultancy services, ranging from market trends, company and industry evaluation (including supply chain due diligence), and ESG strategy and implementation. In recent years it has expanded its corporate governance coverage to include environmental considerations and carbon data, given market trends and customer interest.
Sustinvest	ESG Data Provider	Local	Sustinvest is a fully private large ESG data provider founded in 2007 with coverage of over 1,150 Korean companies. Most companies in its coverage are large publicly listed companies, as Sustinvest was the first firm to collect ESG data on listed companies when it was first formed. Sustinvest uses raw data from both voluntary and mandatory carbon data disclosure regimes to calculate its ratings. Priority is given to the government-validated data where possible due to perceived discrepancies in the calculation methodologies that underly voluntary disclosures. In addition to backward-looking emissions footprint criteria, Sustinvest’s criteria include the presence of policies on carbon reduction or carbon neutrality and evidence of past implementation of decarbonization initiatives. Certain criteria are rated on a binary basis (zero to one), and others are rated on a scale. If data is absent for a certain criterion, Sunsinvest does not employ an imputation methodology to estimate the missing data, although increased client interest in avoiding rating gaps has prompted Sustinvest to consider and test an imputation methodology. Sustinvest differentiates itself from other Korean ESG data providers by using a separate evaluation framework to apply to larger companies with more human and financial resources to do ESG risk management, referred to as the ‘market cap’ framework. This scoring framework uses criteria that are wholly separate from the standard framework for smaller companies, referred to as the ‘universal’ framework. Like KCGS, Sustinvest provides feedback to rated companies on an annual basis to check for errors and to account for ESG programmes or policies that are otherwise undisclosed, although lack of initial public disclosure negatively impacts that rating. Unlike KCGS, Sustinvest appears to refrain from directly assisting company efforts to improve their ratings, limiting communications to sharing of the weight system and categories and a general message that increased disclosure could improve the score.
Who’s Good	ESG Data Provider	Local	Who’s Good is a newer player in the Korean ESG market, providing both ratings on ESG performance and ESG risk. Who’s Good bases its ESG performance ratings on the target company’s relative carbon efficiency weighting compared to its sector. Due to discrepancies often found between MOE data and company-published sustainability reports and the lack of verification for the latter, Who’s Good does not use company sustainability reports in generating its ESG ratings. In instances where not enough data is disclosed for any given criteria, Who’s Good will not score the company on that criterion. In those cases, Who’s Good relies on the MOE as an intermediary through which it can request missing data from companies. The use of third-party data in its machine learning – and artificial intelligence-based ESG risk product offering enables Who’s Good to broaden its data coverage beyond that provided by the MOE, but that data is not externally validated by the same verifiers built into the MOE’s aggregation function.