Report on ESG Policy Direction of the Lee Jaemyung Administration Released
As the new administration recognizes ESG (Environmental, Social, and Governance) as a core strategy for national competitiveness and pursues initiatives such as mandatory ESG disclosures, strengthening corporate environmental responsibility, and governance reform, there is an urgent need for companies to establish proactive response strategies, according to a recent analysis.
On July 10, Samil PwC announced the publication of its report, "ESG Policy Direction of the Lee Jaemyung Administration: Strategic Transformation for a Sustainable Future." The report examines the new administration's ESG policy direction from the perspectives of environment, society, and governance, and aims to present corporate response strategies accordingly.
The report identifies five specific directions for the Lee Jaemyung administration's ESG policies, based on its presidential campaign pledges: early implementation of mandatory ESG disclosures; strengthening ESG evaluations and creating an investment environment; reinforcing corporate environmental responsibility; establishing a Ministry of Climate and Energy; and founding a Green Finance Corporation. In particular, the report forecasts a high likelihood that the government will actively push forward with mandatory ESG disclosures, which had stalled over the past three years, and expects that a roadmap and final standards for mandatory disclosures will be announced within the year. The report also notes, "The government is positioning ESG as a central pillar of national strategy through energy transition, expansion of green finance, and the establishment of a Ministry of Climate and Energy," adding, "These changes are expected to require substantial shifts in corporate strategy development."
The report goes on to analyze the new administration's policy directions for each ESG component in detail. In the environmental sector, policies are being designed around the transition to a low-carbon economy and fostering eco-friendly industries. These changes are expected to increase companies' cost burdens in the short term due to investment required for renewable energy transition and adoption of low-carbon technologies, as well as pressure to restructure business models centered on high-carbon industries. However, in the medium to long term, these policies could serve as opportunities for sustainable growth and enhanced global competitiveness by expanding new business opportunities based on green technology and revitalizing investment.
In the social sector, the report expects policies to be designed to institutionally strengthen corporate social responsibility, focusing on creating a fair labor environment, reducing inequality, protecting supply chains, and enhancing safety and health. As a result, companies are likely to face increased labor and employment-related costs, higher expenses for supply chain management and win-win support, and the burden of establishing safety management systems. However, in the medium to long term, these efforts are projected to contribute to establishing a foundation for sustainable management by securing social trust, attracting talent, and strengthening supply chain stability.
The report assesses that governance reform is progressing most rapidly. A prime example is the passage of amendments to the Commercial Act through bipartisan agreement just one month after the new administration took office. These legal changes are accelerating corporate governance reforms by expanding the scope of directors' fiduciary duties, mandating electronic general meetings of shareholders, and limiting the voting rights of major shareholders (the 3% rule) in appointing audit committee members. Consequently, companies are expected to face increased costs associated with upgrading board-centered decision-making systems, managing business risks due to strengthened regulations against unfair trade, and responding to regulations through legal counsel and external audits. However, in the medium to long term, these reforms could enhance investor trust and corporate value and serve as an opportunity to address weaknesses in Korean corporate governance, according to the report.
Finally, the report emphasizes that, amid global macro-level issues such as artificial intelligence (AI), climate change, and geopolitical risks, ESG is functioning as a key tool for companies to secure competitiveness by entering new markets, raising sustainable capital, and strengthening supply chain resilience. Accordingly, the report suggests that companies should recognize ESG as a strategic opportunity and establish ESG strategies focused on three key areas: analyzing and utilizing regulations and disclosure standards that directly affect their business; innovating business models and creating external opportunities; and ensuring leadership and engagement from top decision-makers.
Steven Kang, Sustainability Platform Leader at Samil PwC, stated, "With the launch of the new administration, uncertainty regarding the direction of ESG policy has been resolved, and ESG has now become a core factor that determines corporate strategy and competitiveness, going beyond simple disclosure or regulatory compliance." He emphasized, "Rather than passively responding to government policy changes, companies need a strategic approach that integrates ESG across their entire business, turning these changes into opportunities."
Details of the report are available on the Samil PwC website.
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