Coupang asks Sustinvest to correct 'factual errors' in ESG assessment

Coupang's fulfillment center in Bupyeong District, Incheon / Korea Times file

Sustinvest assesses Coupang's ESG policies as 'passive'

By Kim Yoo-chul

Coupang is countering recent claims by a local proxy advisor saying it remains passive in terms of articulating and moving forward with strong environmental, social and corporate governance (ESG) policies and practices.

In a recent report released by the domestic proxy advisory firm, Sustinvest, Coupang was found to be weaker in terms of the social index of its ESG rating, due to a series of employee deaths and the higher rate of industrial accident cases filed by its employees to government agencies.

The report added its rationale for Coupang being weaker in its "S" index is also based on the domestic e-commerce giant's alleged involvement in various types of unfair business practices, such as partner companies in its supply chain structure having disputes over copyright issues, and its demands for preferential treatment.

Institutional investors are actively embracing updated ESG ratings as rationale when advising shareholders on investments. Major proxy advisory firms are paying attention to the significance of ESG performance, which is increasingly scrutinized by stakeholders and investors, clients and even rating agencies.

The proxy asked Coupang to pay more attention to how its ESG performance affects one of its core stakeholder groups: its employees. Coupang, which completed a very successful initial public offering (IPO) earlier this year on the NYSE, has been seeking to improve workplace safety.

Flags raised ahead of Coupang's IPO in front of the New York Stock Exchange building on March 12 (EST) of this year. Yonhap

The report advised Coupang's top management to introduce a system that "guarantees" an independent managerial decision-making process, which it believes is central to protecting the best interests of general shareholders and interested parties. It cited an ongoing inspection by the Korea Fair Trade Commission (KFTC) into the company, as well as the proposed enactment of a law aimed at preventing and addressing unfair and deceptive business practices.

Since the very beginning, Coupang has been actively taking advantage of the logistics boom started by Amazon. It expanded its logistics network aggressively, to the point that more than 70 percent of Korea's population is now within a 10-kilometer radius of one of its fulfillment centers.

Coupang was edging towards a crisis as it put more emphasis on corporate growth rather than on pursuing external growth. But SoftBank's massive financial backing was the hidden force that helped it widen its services here, such as early-morning and late-night deliveries, which also raised debates over its labor policies.

The Sustinvest report pointed out the differences between Korea and the U.S.'s retail industries, pointing out that competition is tougher in Korea, and thus Coupang must consider the estimated impact of calls for more principled ESG policies on its corporate sustainability.

Plus, the report asked Coupang to produce better results for the organization by taking prompt actions in terms of improving occupational health and safety conditions and labor relations. In South Korea, local driver and delivery worker unions are calling upon the National Assembly to legislate their work status as actual employees, not independent contractors.

Regarding Sustinvest's assessment, Coupang countered that the proxy advisory firm's rationale in the report is far from the facts and that it underestimated the company's ESG policies.

"The Sustinvest report cited the causes of overwork (nine employee deaths since 2020) as one of its reasons for underestimating Coupang's level of ESG management practices. But only one case has been acknowledged as an actual industrial accident. Regarding Coupang's labor relations policies, Coupang is trying to address and handle issues raised by labor representatives through an internal committee," Coupang said.

Coupang refuted Sustinvest's claim over the possible unnecessary establishment of a dual-class share system, enabling its founder Kim Beom-seok to retain control of the company, by saying, "The introduction of the dual-class system is an issue actively being reviewed in the country's legislative body, as the system has positive factors in terms of helping local venture companies invest in related ecosystems."

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