Corporate governance in South Africa has evolved significantly over the past three decades, with the King Code playing a central role in shaping responsible and sustainable business practices. In an era where environmental, social, and governance (ESG) and business and human rights (BHR) considerations are no longer optional, but fundamental to corporate success, the release of the draft King V Code on Corporate Governance by the Institute of Directors in South Africa (IoDSA) on 24 February 2025 for public comment marks a pivotal moment.
This article briefly examines some of the key changes proposed in King V, particularly from an ESG and BHR perspective. It also acknowledges that the King Codes have, over the years, come under scrutiny, including the current draft, with concerns raised around their utility and effectiveness.
King V refines corporate governance by incorporating modern sustainability principles, streamlining its structure, and making governance guidance more accessible. Most notably, the inclusion of key terms such as “impact," “impact materiality," “Ubuntu," and the updated definitions of “sustainability" and “value creation" signal a shift towards embedding ESG and BHR considerations into South Africa's corporate governance framework.
The emphasis on impact and impact materiality reflects a move towards requiring businesses to assess not only how external factors affect their financial performance, but also how their operations affect society and the environment. The explicit recognition of Ubuntu—a philosophy centred on interconnectedness and human-centric values, including ethical responsibility—introduces a uniquely South African dimension to governance, reinforcing stakeholder accountability, and social cohesion as core business principles.
Meanwhile, the refined definitions of sustainability and value creation underscore that corporate success is no longer measured solely in financial terms, but also in broader contributions to social, environmental, and economic well-being.
These updates bring King V in closer alignment with global governance trends, while ensuring South African businesses prioritise human rights, ethical leadership, and long-term sustainability as part of strategic decision-making. This evolution marks a departure from traditional compliance-based governance, placing ESG and BHR firmly at the heart of corporate responsibility and value creation.
King V's evolution: A streamlined and impact-focused governance framework
Since its inception, the King Code has shaped South African corporate governance through progressive updates that reflect global trends, while remaining tailored to the country's constitutional values and socio-economic context. A defining feature of King IV (2016) was its introduction of the "apply and explain" principle, requiring companies to demonstrate how they apply governance principles rather than merely confirming compliance. How this principle will be interpreted and whether substantive explanations will be required remains to be seen.
King V builds on this principle with several refinements:
Simplified structure – The number of principles has been reduced from 17 to 12, enhancing clarity and ease of application.
Enhanced accessibility – The Code is now presented as a single, stand-alone document, reducing the need for extensive cross-referencing.
Greater emphasis on transparency – The Code encourages proportionality and adaptability to ensure governance practices align with an organisation's size, structure, and complexity.
The inclusion of a formal glossary in King V underscores its commitment to clarity, transparency, and accountability, particularly regarding ESG and BHR considerations.
The executive summary of fundamental concepts, published with the draft King V Code, notes:
"King V advocates integrated thinking which takes account of the combination, connectivity, and interdependencies between the range of factors that affect an organisation's ability to create value over time. The necessity for integrated thinking is apparent when one acknowledges that all organisations function as integral and embedded components of the economy and society in which they exist. In turn, organisations and the economy, as well as other social systems, are integrated and embedded parts of the natural environment upon which these entirely depend. As a consequence of this integration or embeddedness, organisations affect and are affected by the health of society and the planet".
It further states:
"Integrated thinking operates as a thematic strand across the diverse domains or subject matter of governance that the Code encompasses: ethics and corporate citizenship, strategy and performance, reporting, governing body composition, governing body committees, delegation, risk and compliance, information and technology, remuneration, assurance, and stakeholder relationships. Where principles and practice recommendations in the Code refer to the economic, social, and environmental context within which the organisation operates or, from a more granular perspective, to the relationships and resources that organisations utilise and influence, these denote integration."
What this means for businesses
King V aligns with the global shift towards recognising that companies can no longer focus solely on shareholder value. They must assess, disclose, and manage their broader societal and environmental impacts. Sustainability is no longer a "nice-to-have"—it is a governance imperative.
Businesses must integrate sustainability into strategy, risk management, and operations, rather than treating it as a separate compliance function. The inclusion of ubuntu localises corporate governance within South Africa's cultural and ethical framework. Companies are encouraged to adopt stakeholder-centred decision-making, reinforcing values such as community, respect, and ethical leadership.
Value creation must now be holistic, considering financial, social, and environmental returns. Organisations must define and measure success not only by profits, but by their positive contribution to society and the planet.
That said, the balancing act between profitability and operationalising ESG and BHR should not be underestimated. Business is a key driver of economic growth, and regulatory changes must not result in undue bureaucratic burdens. How these proposed changes will be implemented remains to be seen. It will also be important to monitor how the business sector responds and how ESG and BHR considerations are practically embedded in governance.
Why King V matters for South African business
The draft King V Code represents a potentially transformative step in South Africa's corporate governance journey, though not without criticism, including claims that the Code serves as a political placeholder to signal compliance without necessarily driving change. By refining governance principles, emphasising impact-focused strategies, and embedding sustainability and ethical responsibility into its framework, King V aims to ensure that South African businesses remain globally competitive and accountable to their local communities and stakeholders – futureproofing their operations as a result. King V attempts to bridge the gap between traditional governance and modern ESG and BHR expectations, helping South African businesses become more resilient, responsible, and relevant. As King V remains open for public comment, organisations should actively engage with the draft Code to ensure the final version reflects international best practice, the unique governance needs of South Africa, and importantly, is practical and implementable.
The King Code had long set the benchmark for corporate governance in South Africa. With King V, the country has an opportunity to lead globally by balancing financial success with ethical, social, and environmental responsibility. Businesses that embrace this evolution will not only future proof their operations, but also build stronger stakeholder relationships and drive long-term, sustainable value.
