Public Disclosure of Environmental Violations in the Republic of Korea

Since 1989, environmental authorities of the Republic of Korea have published on a monthly basis a list of enterprises violating the country's environmental rules and regulations. This may be the longest environmental public disclosure program currently in existence. Over the period 1993-2001 in excess of 7,000 violations have been recorded in these monthly violation lists, involving more than 3,400 different companies. In this paper, Hong, Laplante, and Meisner provide a comprehensive descriptive analysis of this dataset. Results suggest that the news media have given an important, though perhaps declining coverage, to the violation lists, with a focus on publicly traded companies, failures to operate pollution abatement equipment, and prosecutions. This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to analyze the role of public disclosure as an environmental policy tool.


INTRODUCTION
IT has long been recognized that the implementation of environmental laws, regulations, and standards has suffered from a lack of resources to undertake appropriate monitoring activities, and reluctance to use stringent enforcement actions toward those recalcitrant polluters. In view of those difficulties, an increasing number of environmental regulators around the world have sought to complement or supplement traditional enforcement actions (fines and penalties) with the adoption of structured information programs (or While this may not be as well-known, South Korea (henceforth Korea) has developed its own extensive experience with the public disclosure of environmental performance of regulated facilities. Since 1989, Korea has published on a monthly basis a list of facilities in violation with existing Korean environmental laws and regulations.
Over the period 1993 to 2001, more than 7,000 violations have been reported on those lists, involving in excess of 3,400 facilities. As such, the Korean experience with a structured public disclosure program may very well be one of the most extensive experiences of this nature in the world. 2 In the next section, the history of the public disclosure program in Korea is briefly described. In Section III, we provide a detailed description of the events that have appeared on the Korean monthly violation lists. Section IV briefly concludes.

II. HISTORY OF THE KOREAN PUBLIC DISCLOSURE PROGRAM
Over the past 40 years, Korea has risen out of the depths of poverty as it has embarked on aggressive economic development. Throughout the 60's and 70's, the Korean government has adopted a series of growth-oriented economic policies including establishing industrial complexes and promoting heavy and chemical industries. Over the period 1960 to 1980, per capita income increased from 380 USD to 2,740 USD. It continued to increase to reach 6,160 USD in 1990 (Song, 1997). Over the same period of time, industry increased its share of overall economic activity from approximately 12% to more than 30%. This was accompanied with a rapid rate of urbanization from 28% in 1960 to more than 70% by the mid 1980's.
This rapid industrialization, urbanization, and mass production gave rise to environmental degradation on an unprecedented scale with ambient air and water quality standards being repeatedly violated. Until the early 80's however, the Korean government did not place a high priority on environmental conservation policy.
Environmental problems, which were already becoming prevalent in many parts of 2 While it covers a larger number of years and facilities, the US TRI does not, by its very nature, focus on facilities in violation of existing laws and regulations.  aims to publicize the name of firms that either do not comply with the existing regulation or whose environmental performance is of concern to the MOE. 3 In the next section, we provide a comprehensive description of the violation events published by the Ministry over the period 1993-2002. 4 III.

DESCRIPTION OF VIOLATION EVENTS
A.

Overall description
Over the period 1993-2002, 5 a total of 7,073 violation events appeared on a total of 113 violation lists published on a monthly basis. As indicated in Table II, the number of reported events remains relatively constant over that period of time at around 800. Over this period of observation, a total of 3,455 different facilities have appeared on the monthly violation lists, some more than once (hence the number 6,976 in Table II).
The number of events and facilities indicate that on average, over the entire period of time, each facility appeared 2.5 times on the violation lists. However, as shown in Table   5 While we shall refer to the period 1993-2002, it should be understood that this dataset includes data for the month of December 1992, and covers only the period of January to April 2002. A complete dataset for the year 2002 was not yet available at the time the data used in this paper was collected.
III, 1,981 facilities (57%) appeared only once on the lists over that period of time, while a number of facilities appeared a much larger number of times: 253 facilities appeared between 5 and 10 times, 4 facilities appeared more than 15 times, and 1 facility, the Daesan company, even appeared a total of 43 times on the violation lists.

B. Sectors
Given the nature of the monthly violation lists, it may be expected that a large percentage of events would involve facilities in the manufacturing sector. As indicated in Table IV, indeed approximately 85% of the events do involve the manufacturing sector. It is of further interest to note that approximately 17% of the reported events (Table V) and a similar percentage of the facilities in these events (Table VI)

C. Location
In terms of location, the surrounding area of the capital city, Gyeonggi Province represents the largest number of events (27%) appearing on the monthly violation lists (   Location 1992Location 1993Location 1994Location 1995Location 1996Location 1997Location 1998Location 1999Location 2000Location 2001   When the nature of violation is examined among traded and non-traded facilities, there does not appear to be significant differences between these two groups of facilities. For example, as shown in Table IX  Insofar as government actions are concerned, the largest number (61%) are government orders, followed by warnings and prosecutions (Table X). Orders include orders to change equipment, and to appoint personnel to environmental management.
Once again, there does not appear to be significant differences in terms of government actions between traded and non-traded facilities (Table XI).     Newspapers appear to be particularly interested by violations pertaining to the failure of pollution abatement equipment (Table XVI). While this type of violation represents only 18.0% of the total number of events, it represents more than 25% of the events covered by newspapers. On the other hand, while the failure to report and failure of the monitoring system represent 9.2% of the total number of violations, these two types of violation represent only 5.5% of the events covered by the newspapers. Finally, we may examine the nature of government actions that appear to be of particular interest to newspapers (Table XVII). Orders and warnings appear to receive less interest from the newspapers than their weight as a percentage of the total number of violation events. However, while prosecutions represent only 9.9% of the total violation events, they represent almost 16% of the violation events reported in the newspapers.
Similarly, shutdowns (temporary or complete) and bans are more widely covered in the newspapers (7.5% of all events in the newspapers) than their overall importance in the monthly violation lists (11.8% of all violation events).

IV. CONCLUSION
The Government of Korea has developed a long experience with the systematic public disclosure of information pertaining to firms' environmental performance, perhaps the longest of all such disclosure programs currently in existence. Over the period 1993 -2001, thousands of violation events have been reported, involving thousands of both publicly traded and non-traded companies. The news media has given an important, though perhaps declining coverage to the violation lists, with a focus on publicly traded companies, failures to operate pollution abatement equipment, and prosecutions.
Up to now, there has not been detailed analyses of the potential impact of Korean's MVR. Numerous questions emerge, including: Did investors react to such environmental news by pulling resources away from companies involved in such news?
Did companies improve their environmental performance following the public disclosure of their violation of environmental laws? These, among others, are subject to on-going research.