On June 13, 2025, the Democratic Party of Korea introduced the “Legislative Bill for the Act on the Protection of Human Rights and the Environment for Sustainable Business Management” (the “Bill”), which imposes mandatory human rights and environmental due diligence obligations on companies and their supply chains. While it remains uncertain whether the Bill will pass the National Assembly in its current form, it is worthwhile to closely monitor the legislative process as developments unfold.
As you are likely aware, several countries, including the European Union, have already enacted, or intend to enact, similar mandatory due diligence regulations for companies and their supply chains. In Korea, the President previously indicated during the election campaign an intention to implement and expand sustainability disclosure obligations, starting with listed companies having assets of KRW 2 trillion or more. Against this backdrop, understanding the main contents of the newly proposed Bill will be particularly useful.
The key provisions of the Bill are summarized below. If enacted, its impact is expected to be considerable (please refer to the table below for more details):
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Broad Applicability: The Bill applies to companies with 500 or more regular employees or those with annual revenue of at least KRW 200 billion.
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Board Reporting and Supervisory Duties: Company representatives are obligated to report to the board and oversee due diligence activities.
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Mandatory Due Diligence and Reporting: Companies must conduct human rights and environmental due diligence at least annually and prepare corresponding reports.
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Stakeholder Engagement and Information Disclosure: Obligations to communicate with stakeholders and disclose relevant information.
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Sanctions: Criminal penalties may apply for non-compliance, as enforced by the Human Rights and Environmental Corporate Committee under the Ministry of Economy and Finance.
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Reversal of the Burden of Proof: In cases where harm is caused to third parties, causality is presumed, and the company bears the burden of proof.
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No |
Topic |
Details |
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1 |
Scope of Application |
Applies to companies (except SMEs) employing 500 or more regular employees (including dispatched workers), or those with revenue of at least KRW 200 billion in the previous fiscal year (including revenue of subsidiaries and any entities effectively controlled by the company). |
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2 |
Due Diligence Governance |
Companies must: (i) establish due diligence policies, (ii) assign responsible officers, (iii) create a relevant board committee, and (iv) establish and operate a grievance mechanism. |
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3 |
Representatives’ Duty of Care |
The representative must (i) annually report and obtain board approval for due diligence implementation plans and (ii) supervise due diligence implementation, results report, and public disclosure. Failure to fulfill these duties, resulting in harm to third parties, will result in joint and several liability with the company. |
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4 |
Due Diligence Obligations |
Companies must at least annually identify negative impacts related to human rights, labor rights, and the environment involving their operations, controlled entities, and other entities in their supply chains. They must (i) establish, implement, and regularly review remedial action plans concerning identified negative impacts, and (ii) prepare and publicly disclose due diligence reports covering the process for identifying negative impacts and identified negative impacts, mitigation measures and implementation outcomes, and evaluations of those measures and outcomes. |
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5 |
Stakeholder Engagement |
Companies are required to engage and cooperate with stakeholders throughout the due diligence process. They must also disclose certain information upon stakeholder request. “Stakeholders” include any individuals or organizations adversely affected by corporate activities, as well as advocacy groups. |
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6 |
Human Rights and Environmental Corporate Committee |
This committee, under the authority of the Minister of Economy and Finance, will have authority to order corrective actions for violations of the Bill. |
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7 |
Sanctions |
Non-compliance with corrective orders may result in up to five years of imprisonment or fines of up to KRW 50 million, including joint liability for both companies and individuals. The Committee may also request restrictions on public tender participation. |
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8 |
Administrative Fines |
Other violations of the Bill may result in fines of up to KRW 50 million. |
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9 |
Liability for Damages |
Where a company’s activities, including those of controlled entities or entities in supply chains, cause harm to third parties, violation of the Bill and causal connection to the harm is presumed, and the burden of disproving liability rests with the company. |
The Bill thus introduces significant new requirements for in-scope companies to establish and operate human rights and environmental due diligence frameworks. It also imposes direct supervisory and liability obligations on company representatives, including potential criminal penalties, highlighting the need for thorough compliance readiness.
Opinions on the Bill remain divided. Some argue (i) that aligning domestic requirements with global trends will ultimately enhance corporate competitiveness and should be supported. Others contend (ii) that the Bill imposes excessive burdens on businesses and that further scrutiny of global developments and their domestic impact is required before enactment. Notably, a similar bill was proposed in 2023 but was not passed amid opposing views from key government ministries and prioritization of other legislative agendas. However, with the Democratic Party now in power and a President more receptive to ESG policies, attention should be paid to the Bill’s legislative development.
In addition, a recent amendment to the Korean Commercial Act-which strengthens directors’ fiduciary duties to shareholders-has passed the National Assembly. It is anticipated that due diligence obligations related to supply chains will increasingly be recognized as part of directors’ fiduciary duties. Many domestic and global companies are already proactively advancing their supply chain due diligence frameworks and risk management, while foreign judicial bodies are also increasingly holding companies accountable for supply chain-related liabilities. Accordingly, now is a particularly important time for companies to review and strengthen their internal due diligence systems and risk management practices, both domestically and internationally.
