244 ESG Bill Provisions Pending in National Assembly... 80% Focused on Strengthening Regulations and Penalties

[Asia Economy Reporter Woo Su-yeon] There are 244 clauses related to ESG (Environment, Social, Governance) bills pending in the 21st National Assembly, with over 80% of them being provisions for new regulations, strengthened regulations, or penalties. The business community is strongly opposing these, fearing that ESG legislation could infringe on corporate management autonomy.

According to a survey conducted by the Federation of Korean Industries (FKI) as of August this year, based on IMF classification criteria, there are currently 97 ESG-related bills pending in the 21st National Assembly, comprising 244 related clauses. Among the 97 bills, 14 (14.4%) pertain to the environment, 71 (73.2%) to social issues, and 12 (12.4%) to governance, with social-related bills being the most numerous.

Analyzing the 244 clauses by type, 130 (53.3%) involve the establishment or strengthening of regulations, and 66 (27.0%) involve the establishment or strengthening of penalties, meaning bills aimed at tightening regulations account for 80.3% of the total. Among these, support provisions number only 18 (7.4%), showing that regulatory and penalty provisions outnumber support provisions by more than tenfold.

ESG-related bills pending in the 21st National Assembly (National Assembly Legislative Information System, as of August 13, 2021) / Data provided by the Federation of Korean Industries

In the environmental sector, 14 bills are pending, with climate change-related bills being the most common at 6 (42.9%). Bills related to natural resources (energy efficiency, land use) number 3, opportunity and policy (renewable energy, clean energy, etc.) bills also number 3, followed by 2 bills on environmental pollution and waste. There are a total of 47 clauses, with 16 (34.0%) establishing or strengthening regulations that impose burdens on companies, 1 (2.1%) establishing penalties, and 6 (12.8%) providing support.

In the social sector, a total of 71 bills are pending, with 149 related clauses. When analyzed by bill, those related to human capital (labor environment, working conditions, etc.) are the most numerous at 38 (53.5%), followed by relationship (socially responsible investment) at 25 (35.2%), and production responsibility (product safety, personal information protection, etc.) at 8 (11.3%).

By clause, provisions establishing or strengthening regulations account for 89 (59.7%), more than half, and provisions establishing or strengthening penalties such as fines or imprisonment for regulatory violations number 43 (28.9%), meaning regulatory and penalty provisions together make up 88.6%. In contrast, support provisions are only 12 (8.1%), showing that regulatory and penalty provisions outnumber support provisions by more than tenfold.

In governance, a total of 12 bills are pending, with 8 (66.7%) being amendments to the Fair Trade Act, 3 (25.0%) amendments to the Commercial Act, and 1 (8.3%) to the Capital Market Act. Despite the passage of three corporate regulation laws last year, many amendments have been proposed to strengthen ownership and governance regulations on companies, such as tougher penalties for related parties and increased fines. There are a total of 48 clauses, with 23 (48.0%) establishing or strengthening regulations, 22 (45.8%) establishing or strengthening penalties, and no support provisions.

Yoo Hwan-ik, head of corporate policy at FKI, emphasized, "Since there is no one-size-fits-all answer for corporate governance, uniform regulations should be avoided. In the social and environmental sectors, support policies should be strengthened to encourage companies to voluntarily adopt ESG, such as relaxing rigid labor regulations, providing tax credits for investments in carbon reduction facilities, and financial support for R&D related to low-carbon technologies."

This content was produced with the assistance of AI translation services.