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The Transition of Korea’s ESG Regulatory Framework from Guidance to Enforcement: What Global Businesses Should Watch for in 2026

2026.02.02

<span style="font-size:18px;"><span style="color:#c0392b;"><strong>Introduction</strong></span></span>
<div><br />
<span style="font-size:18px;">For several years, Korea’s ESG framework has largely operated through policy guidance, and so-called obligations were based on a combination of market expectations and a mix of voluntary and sector-specific disclosures.  Mandatory ESG compliance did not exist.  Rather, it was deferred to allow preparation and alignment with international standards.  Recently, however, regulatory, policy, and legislative developments signal that Korea is entering a transition phase from regulatory guidance to a phase-based compliance regime in which ESG compliance is being structurally integrated into enforceable regulatory and governance frameworks.<sup><span style="color:#c0392b;">1)</span></sup><br />
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For global businesses operating in Korea, this means, among other things, a need to develop ESG-related practices and policies for the Korean market and meet the evolving mandatory compliance landscape.  Key areas of attention include climate-related disclosures, prioritized for phased rollout starting 2026, and human rights and environmental due diligence obligations, as they are re-entering the legislative agenda, and regulators are signaling selective but meaningful enforcement.<sup><span style="color:#c0392b;">2)</span></sup>  The result is not merely a single sweeping compliance requirement, but a convergence of regulatory signals that materially change how ESG risk should be assessed, governed, and budgeted.<br />
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This article examines how Korea’s ESG framework is shifting from policy guidance to enforceable compliance, and highlights the regulatory, governance, and enforcement developments that will shape compliance risk for global businesses operating in or exposed to Korea as 2026 approaches.</span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>1. Delayed Sustainability Disclosure</strong></span></span>

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<span style="font-size:18px;">Korea’s decision to defer mandatory sustainability-related disclosure standards is largely viewed as a delay in timing rather than substance.  The government emphasizes the need to allow companies additional preparation time while aligning domestic standards with international frameworks, particularly in sustainability reporting.  This policy direction is reflected in ongoing discussions led by financial authorities regarding phased disclosure requirements and standard-setting processes rather than any abandonment of the move toward mandatory sustainability‑related reporting.<sup><span style="color:#c0392b;">3)</span></sup><br />
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At the same time, Korean companies have consistently raised concerns about unclear disclosure items, data availability, and system readiness, particularly for non-financial and supply-chain-related metrics.<sup><span style="color:#c0392b;">4)</span></sup>  These concerns have been widely reported in domestic legal and business media and have influenced the government’s decision to adopt a phased approach.  ESG-related expectations and compliance drivers are increasingly being addressed through targeted regulatory channels rather than a single omnibus disclosure rule.<sup><span style="color:#c0392b;">5)</span></sup>  However, regulatory agencies have also indicated that postponement should not be equated with regulatory leniency.<br />
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The table below summarizes how Korea’s ESG framework is expected to evolve from current market practice toward a phased, enforcement-oriented compliance model by 2026.</span><br />
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<table cellpadding="8px" style="width:100%; text-align:center; border:1px solid #bbb; border-collapse:collapse;" width="100%">
	<tbody style="line-height: 16px;">
		<tr>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: center;" width="20%"><span style="font-size:15px;"><strong>Area</strong></span></td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: top;" width="35%"><span style="font-size:15px;"><strong>Current Framework (under the Market Understanding)</strong></span></td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: center;" width="45%"><span style="font-size:15px;"><strong>Emerging/Proposed Framework toward 2026</strong></span></td>
		</tr>
		<tr>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px"><strong>ESG Disclosure Status</strong></div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Largely voluntary; encouraged through policy guidance and market pressure rather than enforceable rules</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Mandatory ESG disclosure postponed but structurally planned; phased implementation expected, starting with selected areas rather than full ESG reporting</div>
			</td>
		</tr>
		<tr>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px"><strong>Environmental/Climate Disclosure</strong></div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Climate information disclosed inconsistently, often aligned with global group reporting standards</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Climate and carbon-related disclosures prioritized as the first enforceable ESG component, showing a gradual expansion</div>
			</td>
		</tr>
		<tr>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px"><strong>Scope of Application</strong></div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">No formally codified differentiation by company size or listing status, despite higher de facto expectations for listed and large companies</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Initial focus on large companies and listed entities through pilot programs and phased application</div>
			</td>
		</tr>
		<tr>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px"><strong>Regulatory Approach</strong></div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Principle-based guidance with limited direct enforcement; ESG treated primarily as a best-practice or Investor Relations matter</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: top">
			<div style="line-height: 25px; font-size: 15px">Selective and staged regulatory enforcement model; ESG obligations embedded through existing regulatory tools rather than a single comprehensive statute.  <strong style="line-height: 25px;">ESG is increasingly treated as a compliance, enforcement, and transaction risk with possible administrative sanctions and indirect criminal exposure through existing disclosure, safety, and environmental enforcement regimes</strong></div>
			</td>
		</tr>
	</tbody>
</table>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>2. Environmental and Climate Disclosure as an Early Focus of Regulatory Scrutiny</strong></span></span>

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<span style="font-size:18px;">Before comprehensive sustainability disclosure standards are formally adopted, climate and environmental information is being discussed as an early focus area for enhanced reporting and regulatory scrutiny, such as the prioritization of climate-related disclosure under FSC (Financial Services Commission) and KSSB (Korea Sustainability Standards Board) sustainability standards.<sup><span style="color:#c0392b;">6)</span></sup><br />
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For foreign companies, this shift from predominantly voluntary, group-level climate reporting to jurisdiction-specific, enforceable disclosure obligations in Korea has immediate operational implications.  Climate disclosure obligations may apply at the subsidiary level even when group-level reporting is already conducted under international standards.<sup><span style="color:#c0392b;">7)</span></sup>  Moreover, inconsistencies between global reporting assumptions and Korea-specific regulatory expectations can create reconciliation risks and additional compliance costs. </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>3. Legislative Momentum Toward Mandatory Human Rights and Environmental Due Diligence</strong></span></span>

<div><br />
<span style="font-size:18px;">Beyond disclosure, Korea is revisiting the possibility of introducing statutory due diligence requirements in human rights and environmental responsibility as part of its ESG-related policy discussions.  The reintroduction of proposed legislation on corporate human rights and environmental responsibility reflects a broader policy debate about moving from voluntary ESG commitments to legally mandated risk management systems. Legislative tracking portals and policy announcements confirm renewed discussion of statutory due diligence duties covering both domestic operations and supply chains.<sup><span style="color:#c0392b;">8)</span></sup><br />
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The core concept under consideration is not disclosure alone, but the establishment of internal systems for identifying, preventing, and remedying human rights and environmental risks.  Proposed frameworks emphasize board-level oversight, formalized risk assessments, public reporting, and corrective action mechanisms.  Although the legislative outcome remains uncertain, current discussions increasingly frame ESG as a governance obligation rather than merely a reputational initiative.<br />
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Importantly for foreign stakeholders, such legislation could affect non-Korean companies operating outside of Korea but working through Korean subsidiaries or supply-chain relationships.  This does not mean that Korean law applies directly outside Korea, but rather that indirect exposure may arise from local compliance obligations. </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>4. Business Reality: Limited Readiness, Increasing Liability</strong></span></span>

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<span style="font-size:18px;">Despite increasingly clear regulatory signals, many companies operating in Korea remain underprepared.  Legal commentary and practitioner analysis highlight persistent uncertainty regarding disclosure scope, implementation timelines, and enforcement thresholds.<sup><span style="color:#c0392b;">9)</span></sup>  However, regulatory risk is no longer merely hypothetical.  Climate-related misstatements, supply-chain oversight failures, and ESG-related misrepresentations are increasingly intersecting with existing enforcement tools, including securities regulation, consumer protection, and administrative sanctions.<sup><span style="color:#c0392b;">10)</span></sup><br />
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From a risk perspective, ESG exposure is becoming multi-layered.  It now encompasses not only reporting accuracy but also governance processes, internal controls, and decision-making accountability.  This is particularly significant in Korea, where administrative sanctions may coexist with criminal exposure under related laws. </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>5. Implications for Foreign Companies Operating in Korea</strong></span></span>

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<span style="font-size:18px;">For foreign companies, the key challenge is that global ESG compliance frameworks may not fully meet Korea’s developing approach to ESG-related enforcement under existing regulatory regimes.  Korea’s approach places particular emphasis on regulatory supervision, board-level responsibility, and the credibility of internal governance processes, with limited tolerance for procedural deficiencies once ESG-related obligations are formalized.  Reliance solely on group-level ESG policies or international reporting standards may leave gaps at the local compliance level.<br />
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Operationally, companies should anticipate increased demands for Korea-specific data, localized governance structures, and more precise documentation of ESG-related decision-making.  Transactionally, ESG risk is becoming a more prominent factor in M&A, investment due diligence, and valuation discussions involving Korean assets. </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>6. ESG as a Legal Risk Function in Korea</strong></span></span>

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<span style="font-size:18px;">In 2026, ESG in Korea will be operationalized through enforceable regulatory regimes, with tangible legal, financial, and governance consequences.  Delayed disclosure timelines should be understood as a transition mechanism rather than a signal of regulatory retreat.  For global businesses, early alignment of ESG governance with Korea-specific legal obligations will be critical to managing risk, controlling compliance costs, and maintaining operational resilience in the Korean market.  Stakeholders should closely monitor forthcoming developments and seek legal counsel before proceeding with any investment or transaction decisions.</span></div>

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<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">1) </span><a href="https://www.responsible-investor.com/korea-delays-corporate-sustainability-disclosure-rules-to-after-2026/" target="_blank"><span style="color:#2980b9;">https://www.responsible-investor.com/korea-delays-corporate-sustainability-disclosure-rules-to-after-2026/</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000;">2) </span><a href="https://www.koreatimes.co.kr/economy/20241008/35-tril-investor-group-pushes-koreas-fsc-for-mandatory-sustainability-disclosures-by-2026" target="_blank"><span style="color:#2980b9;">https://www.koreatimes.co.kr/economy/20241008/35-tril-investor-group-pushes-koreas-fsc-for-mandatory-sustainability-disclosures-by-2026</span></a>, <a href="https://www.kimchang.com/en/insights/detail.kc?sch_section=4&idx=29797" target="_blank"> <span style="color:#2980b9;">https://www.kimchang.com/en/insights/detail.kc?sch_section=4&idx=29797</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">3) </span><a href="https://www.kedglobal.com/esg/newsView/ked202310160022" target="_blank"><span style="color:#2980b9;">https://www.kedglobal.com/esg/newsView/ked202310160022</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">4) </span><a href="https://www.koreatimes.co.kr/economy/20230827/companies-call-for-delay-of-mandatory-esg-disclosure" target="_blank"><span style="color:#2980b9;">https://www.koreatimes.co.kr/economy/20230827/companies-call-for-delay-of-mandatory-esg-disclosure</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">5) </span>Legislative Bill for the Act on the Protection of Human Rights and the Environment for Sustainable Business Management, Bill No. 2213897, National Assembly of the Republic of Korea (2025).</div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">6) </span>The climate disclosures would be reported by covered companies, such as publicly listed entities subject to the adopted sustainability disclosure standards, as part of their sustainability reporting to meet investor information needs and capital markets expectations, rather than to a separate regulatory database as an isolated requirement. <a href="https://www.shinkim.com/eng/media/newsletter/2697" target="_blank"><span style="color:#2980b9;">https://www.shinkim.com/eng/media/newsletter/2697</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">7) </span><a href="https://news.sustainability-directory.com/esg/south-korea-adopts-global-esg-rules-but-delays-mandatory-supply-chain-emissions/" target="_blank"><span style="color:#2980b9;">https://news.sustainability-directory.com/esg/south-korea-adopts-global-esg-rules-but-delays-mandatory-supply-chain-emissions/</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">8) </span><a href="https://ktncwatch.org/news/south-korean-lawmakers-propose-asia-first-bill-mandatory-human-rights-and-enviro/" target="_blank"><span style="color:#2980b9;">https://ktncwatch.org/news/south-korean-lawmakers-propose-asia-first-bill-mandatory-human-rights-and-enviro/</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">9) </span><a href="https://thecodit.com/blog/esg-disclosure-trends-korea" target="_blank"><span style="color:#2980b9;">https://thecodit.com/blog/esg-disclosure-trends-korea</span></a></div>

<div style="margin-bottom: 8px; font-size: 16px; line-height: normal;"><span style="color:#cc0000; line-height:10px">10) </span><a href="https://www.fsc.go.kr/eng/pr010101/85417" target="_blank"><span style="color:#2980b9;">https://www.fsc.go.kr/eng/pr010101/85417</span></a></div>

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