Must small and medium-sized enterprises also respond to ESG issues?

ESG issues have become a factor that directly affects legal risks and business relationships.

In particular, cases requiring compliance with ESG standards, not only from large corporations but also from partner companies and small and medium-sized enterprises, have recently been increasing rapidly.

ESG stands for Environment, Social, and Governance, and each encompasses various areas, such as compliance with environmental regulations, protection of the working environment and human rights, and internal control and ethical management.

In the past, it was often perceived as an area of voluntary management, but it is now changing into a factor that is essentially verified in contract conditions and due diligence processes.

As in the situation you asked about, where a client requests the submission of ESG-related materials, this is highly likely to be used as a criterion for judging whether to continue the transaction.

In fact, there are cases where failing to meet ESG standards leads to consequences such as suspension of transactions, restrictions on new contracts, and exclusion from supply.

In addition, if matters such as violations of environmental regulations, industrial safety problems, violations of the Labor Standards Act, or internal misconduct occur, they can lead not only to a lower ESG rating but also to administrative dispositions or criminal liability.

Therefore, small and medium-sized enterprises are no exception. In particular, where a company has a business relationship with a large corporation, as the responsibility for ESG management of partner companies expands, a structure is being formed in which they become indirect targets of regulation.

Accordingly, if you do not have even the basic standards in place, the very opportunity to do business may be restricted.

First, it is necessary to check whether your company's current operating structure meets the statutory standards in terms of the environment, labor, and internal control.

After that, it is common to take an approach of organizing the relevant materials in line with the level required by the client and establishing improvement plans for the areas that are lacking.

In particular, an ESG response is not something completed in a short time; the key is to establish a continuous management system.

It may feel burdensome at first, but in the long term it acts as a factor that enhances a company's legal stability and transactional credibility.

Therefore, it is important to structurally examine, based on your current situation, up to what level preparation is needed.

Daeryun, ranked ninth among law firms in Korea (based on 2025 National Tax Service value-added tax filings), provides company-tailored response strategies, such as ESG-related legal advice, the establishment of compliance, and the review of environmental, labor, and governance risks.

If there is a client requirement or a need for internal review, we encourage you to examine the legal standards in advance.