Shaping Sustainability in APAC: Key regulatory updates in climate, worker protection, and ESG compliance
Unpack how new regulations and amendments in the APAC region are contributing to environmental, social, and governance topics.
As part of our Global Outlook webinar series, Subject Matter Expert in Sustainability and ESG, Jin Wang, outlined the current sustainability landscape in the Asia Pacific region. In this summary, we highlight the key regulatory updates under the environmental, social, and governance (ESG) pillars affecting the APAC region.
Watch the full recording for a detailed analysis of how these regulations continue to impact companies across Asia-Pacific.
Increasing IFRS interests across APAC
There has, in recent years, been a significant increase in adoptions of sustainability reporting regulations across the Asia-Pacific region. Additionally, regional regulators have emphasized a strong interest in aligning local disclosure frameworks with IFRS’s International Sustainability Standards (IFRS Standards).
Most countries are beginning their legislative journey with climate disclosures, but the scope continues to expand to include additional environmental and social domains. With reporting, companies may have different starting positions — for example, companies with global exposure may have more experience in reporting. But most companies will need to improve their access to data to ensure they meet demanding reporting requirements.
Jurisdictional implementations
Australia, Bangladesh, and New Zealand have already implemented IFRS standards into their local regulations. More recently, Singapore announced a phased implementation of IFRS-aligned climate-related disclosures, targeting both listed companies and large non-listed companies from the 2025 financial year.
Jurisdictional proposals
Major economies in Asia, such as China, Japan, India, and South Korea, have all proposed local drafts to mandate IFRS-aligned disclosure frameworks, with proposed effective dates and early adoption possibilities potentially from 2025. Hong Kong, Malaysia, and Taiwan continue the trend of proposing these frameworks into local regulations.
Regulatory updates in APAC — Environment
The most pressing environmental concern in the APAC region is climate change, and many countries are paving the path to mitigate the negative impacts of climate change, as well as encourage the implementation of adaptation policies.
Japan
Japan introduced three regulations on climate change mitigation and adaptation in May and June 2024 alone.
Act on the Promotion of the Supply and Use of Low Carbon Hydrogen and Other Resources for a Smooth Transition to a Decarbonized Growth-Oriented Economic Structure
The Hydrogen Society Promotion Act (Act No. 37 of 24 May 2024) provides fiscal incentives for companies who work with low carbon hydrogen and its derivatives, as either raw materials or energy sources. This includes manufacturers, importers, suppliers and users. The Act encourages these companies to actively contribute to promoting low hydrogen carbon through investing or direct business activities.
Carbon Dioxide Capture and Storage Business Act
The CCS Business Act (Act No. 38 of 24 May 2024) establishes regulatory frameworks around CCS business in Japan. It requires CCS business operators to obtain a business license and adhere to several operational requirements. For example:
- Developing an implementation plan for carbon dioxide capture and storage
- Monitoring carbon dioxide storage
- Establishing and adhering to relevant security rules
Act for Partial Revision of the Act on Promotion of Global Warming Countermeasures
The Amendment to Act on Promotion of Global Warming Countermeasures (Act No. 56 of 19 June 2024) encourages product manufacturers to produce consumer products with lower greenhouse gas emissions throughout the products’ lifecycle. The Act also establishes an implementation system of the Joint Crediting Mechanism and emphasizes the importance of providing accurate information regarding the GHG emissions from a product’s entire lifecycle, from the raw materials to product disposal at the end.
Vietnam
In Vietnam, Direction No. 13/CT-TTg was adopted on 2 May 2024 on strengthening the management of carbon credits to implement the Nationally Determined Contribution (NDC). Although the Direction doesn’t introduce any new requirements for companies, it focuses on tightening supervision and law enforcement of carbon credits management. Consequently, the Direction will lead to heavy sanctions on companies who are found to be non-compliant with the existing regulations.
China
The current regulatory focus has been on standardizing carbon emissions calculations. The Chinese government recently announced a series of policy initiatives, published as the Workplan for Accelerating the Establishment of a Dual Carbon Emission Control System, to tighten carbon emission and carbon intensity control — the dual control system. The policy initiatives include both short and long-term ones, such as incorporating the carbon emission assessment into energy conservation and environmental impact assessments.
Regulatory updates in APAC — Social
Under the social pillar, regulations on protecting workers in the workplace has soared in Asia-Pacific, with Australia, Taiwan, and Malaysia all recently announcing legislations on right to disconnect and combating workplace harassment.
Over the last years, the APAC region has seen growing legal requirements on employers’ social responsibilities, especially those in relation to the workplace.
Australia — Right to disconnect
In Australia, the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 mandates the right to disconnect policy in the country to promote a healthy work-life balance. The legislation entitles employees the legal right to reasonably refuse work-related contact outside of their designated working hours. Employers, in response, aren’t allowed to take adverse actions against employees who exercise this right.
The legislation comes into effect differently depending on the size of the company:
- Employers with 15 or more employees — 26 August 2024
- Employers with less than 15 employees — 26 August 2025
Taiwan — Preventing workplace harassment
Recently, Taiwan amended its existing legal framework around preventing workplace harassment. The Gender Equality in Employment Act and Regulations for Establishing Measures on the Prevention of Sexual Harassment in the Workplace stand to protect all workers from being harassed at work.
Under the amendments, employers are responsible for the following obligations:
- Taking measures to prevent sexual harassment
- Establishing a sexual harassment complaint channel (applicable to companies with 10 or more, but less than 30 employees)
- Adopting internal regulations for preventing sexual harassment (applicable to companies with over 30 employees)
- Taking rectification and remedial measures when becoming aware of sexual harassment
The last point shows a significant change in the concept of when companies are mandated to take action against a workplace sexual harassment incident — that is, when they become aware of a harassment case (through means such as overhearing, seeing a post online, or anonymous complaints) rather than waiting for a report or complaint to come forward, for example.
Malaysia – Strengthening anti-harassment
In Malaysia, similar policies on workplace harassment have been ongoing. In 2022, the Employment Act was amended, obligating that employees take additional precautions to avoid workplace sexual harassment. The Anti-Sexual Harassment Act 2022 functions more as a method of raising awareness to prevent the occurrence of workplace sexual harassment, allowing victims to report cases.
In 2023, it was proposed to establish a tribunal for anti-sexual harassment to hear and address complaints. Although the tribunal is not specifically made to address harassment in a workplace environment, it would have wide powers to administer the proceedings in reported cases.
It’s important, therefore, for companies operating in the country to have robust internal systems to prevent and address workplace harassment, even though it’s not mandatory in Malaysia as of yet.
Regulatory updates in APAC — Governance
Though topics that fell into the governance pillar haven’t been scrutinized and regulated for as long as environmental and social topics, focus on this sector is steadily increasing. In Asia-Pacific, South Korea and China are turning their regulatory focus on managing supply chain through human rights and environmental due diligence measures.
It’s true that governance topics were traditionally not the focus of regulatory compliance, but this has been changing in recent years.
New Zealand
A Modern Slavery Reporting Bill — which is currently on hold as of the time of writing — was announced in 2022 to manage supply chain due diligence and reiterate the country’s intention to establish additional legal obligations to address modern slavery in 2023.
If work on modern slavery supply chain legislation progresses in the future, companies would have to disclose how they carry out due diligence to prevent, mitigate, and remedy incidents of modern slavery and worker exploitation in their supply chain.
South Korea
In South Korea, a 2023 proposal Act on Human Rights and Environmental Protection for Sustainable Business Management mirrors the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) and marks the first of its kind in Asia.
The proposal includes requirements for companies to:
- Establish internal human rights commitments
- Carry out human rights and environmental impact assessments on their suppliers
- Implement a risk monitoring and management system
- Make relevant disclosures regarding due diligence practices
China
China has issued guidelines for improving supply chain management across manufacturing companies. Some of the recommendations include:
- Establishing a green procurement management system
- Conducting green procurement training for suppliers
- Establishing an evaluation system to assess supplier risks
As shown in these updates, there’s a continued focus on climate change and product sustainability in Asia Pacific, alongside a growing importance in supply chain management. Businesses should stay informed on amendments, develop policies and strategies to meet compliance in these areas, and remain vigilant to the risk of non-compliance.
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